British voters opted to cut ties with the European Union Thursday, a historic decision that caused turmoil in the markets and forced the resignation of its prime minister.
Prime Minister David Cameron announced plans to step down early Friday morning after leading the campaign to stay in the EU, saying the country would need “fresh leadership” for its transition. Meanwhile, the announcement sent the British pound plunging to its lowest level since 1985. The S&P 500 Index opened down 3 percent Friday in the U.S.
But what further impacts Britain’s decision, coined Brexit, could have in the United States and in New York are not yet clear, according to Larry Bridwell, professor of International Business and chair of the Undergraduate Management Program at Pace University”™s Lubin School of Business in New York.
“This is a classic example of a big-picture story,” Bridwell said.
He noted the trouble on Wall Street in the U.S. and the declining pound as the immediate impacts on the global economy.
“But as far as the American economy as a whole, a lot of activity are exports, imports and that I don’t think is going to be affected that much,” he said.
The vote has elicited concerns of triggering a possible recession in the UK, Europe and worldwide. The Federal Reserve said it was “carefully monitoring developments in global financial markets” and that pressures in global markets “could have adverse implications for the U.S. economy,” the Los Angeles Times reported.
Bridwell cautioned that those concerns might be going too far.
“With the pound declining, if it stays at this, I don’t see a recession because the imports will decrease and the exports will increase,” he said. “The standard of living for Britain as a result of the decline in the British pound may go down. But I think there was scaremongering and the impact on the British economy is overstated.”
But several of the factors that Bridwell said helped drive the push for Brexit ”” slow economic growth and a middle class that felt left behind in the economy and ignored on immigration policy”” could factor into politics in the U.S.
“That’s an underlying force leading to all this discontent among the working and middle classes who voted for Brexit; they voted for Bernie Sanders, they voted for Donald Trump, they are voting for Marine Le Pen in France, the Five Star Movement in Italy,” Bridwell said. “There is an anti-establishment and an anti-elitist movement that is manifesting itself in what voters are doing.”
And that’s likely to carry over into the general election in the U.S. as well, according to Bridwell.
“Even though the establishment believes Hillary Clinton is going to win, I wouldn’t count on it,” Bridwell said. “I think the anger among the working class is strong and if this is put in terms of ‘Make America Great Again’ or vote for the establishment, I’m not sure that Hillary is going to do as great as she thinks.”
Though he added with six months away, there will be many more factor to consider.
“I guess what Brexit is saying is do not underestimate the voting power of the working and middle class,” he said.
