Many people are writing to comment on Brexit or the exit of Britain from the European Union. Many say that it won’t matter right away, but it does. To understand the importance of Britain in finance, recall The Big Bang. In 1986, The Big Bang in London, accelerated the global deregulation of banks. In 1983 Margaret Thatcher began supporting legal changes that would eventually lead to the Big Bang. She wanted to make sure that London could compete successfully with Wall Street and other foreign financial markets. The Big Bang changed the stock market in London from trading by open outcry to electronic trading and that alone was a big change. It also brought other changes and an overall deregulation of banks that allowed them to trade freely across national borders. It increased the number of financial transactions in London and brought traders from around the world, including a lot of American traders, to trade there.
In 2010, according to Wikipedia, Nigel Lawson, the Chancellor who had served under Prime Minister Margaret Thatcher, said that the Big Bang had contributed to the Global Recession from 2007-2012 by making banks more interconnected. The Great Recession was an unintended consequence. Later, Lawson supported the Leave campaign that has now voted Britain out of the European Union. According to Lawson, a longtime Conservative, the European Union has failed to achieve economic success. He also believes that Britain’s right to self-government indicates that Brexit is the right choice. Lawson thinks that Britain will negotiate favorable trade agreements with the rest of Europe, much as Switzerland has, without giving up its sovereignty in managing its agreements. Because Britain is Germany’s largest trading partner, he is confident that Britain will continue to have substantial influence. What Brexit may indicate is that the interconnectedness of banks has proved unfavorable to maintaining a healthy economy that supports social prosperity. Deregulation has accommodated too much mal-investment that has wasted economic resources. Now, change is underway.
Wikipedia, “Big Bang (financial markets), enwikipedia.org/wiki/ Big_Bang_(financial_markets), accessed 27 June 2016.
Decca Aitkenhead, The Guardian, “Nigel Lawson on Brexit: ‘I love Europe! That’s Why I Live in France. But the EU Has No Purpose.”, Saturday, 2 April, 2016.
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