NEW YORK—The conventional wisdom is that the British exit from the European Union, also referred to as Brexit, would be bad for everyone: the British people, the United Kingdom, the European Union, and even the United States. While that may be true, in the age of Trump—the unconventional presumptive Republican nominee for U.S. president—every bit of such received wisdom needs to be examined carefully to determine if, as with American politics, the stars might have realigned.
Arguably, Brexit needs to be judged against—and may well turn out to be a referendum on—the state and prospects of the European Union. Unfortunately, by almost any measure, the state of Europe is forlorn and the prospects grim. Perhaps, the shock of Britain leaving the Union could be exactly what’s needed to jumpstart Europe out of its near catatonic state.
From an economic perspective, Europe is stuck in a slow-growth, deflationary scenario; the E.U.’s total GDP only recovered to its 2008 level during the first quarter of 2016. Even that sad performance conceals dramatic differences: From 2008 to 2014, disposable income for the average household—essentially, take-home pay—shrank 6 percent in Ireland, 4 percent in Italy, and 1 percent in Spain, while Greek households lost almost one-quarter of their income.
Across much of Europe unemployment remains high: Spain (20.4 percent), Italy (11.2 percent), and France (10.2 percent) explain most of Europe’s overall unemployment rate in excess of 10 percent. The combination of stagnation and weak labor markets has resulted in a sustained increase in income inequality in these countries and others.
