Reflections on Brexit: Plebiscites, Social Media and Economic Impacts

September 7, 2018
Editor(s): Neala Guo
Writer(s): Huishan Feng, Nicholas Bea, Shreya Sharma

Britain’s Sudden 180° turn from Brexit 

A country’s GDP is a very important statistic, being the determinant of economic health and growth and all.

Macroeconomic theory gets complicated, but GDP is easy to comprehend – it is made up of four components: a country’s consumption, investment, government spending and net exports. In relation to Brexit specifically, economists estimate that Britain’s GDP has declined by more than 2%, primarily caused by a 1.4% decline in consumption and a 4% decline in investment.

It’s not surprise then, that if voters were given the option of a second referendum, 54% would choose to stay in the EU. This equates to more than 2.6 million people, which is coincidentally the same number of people who initially voted to leave the EU, meaning many of these voters are now turning their backs on Brexit and opting to stay.

This public pushback against Brexit has triggered contentious debate within the walls of Parliament, with the former Bank of England governor arguing that the government had left Britain with no credible bargaining position against the Euro. Despite this, British Prime Minister Theresa May suggests that holding a second referendum would be a “gross betrayal” of democracy.

Understanding the media’s influence and political dynamics around referendums, as well as unpacking the economic implications voters failed to consider, will unveil the future direction of the UK.

The Problem with the Brexit Plebiscite 

Among those who voted to remain in the EU, a common complaint was that the referendum should have never happened. They argue that the UK is a representative democracy where Parliament is sovereign. Don’t we elect representatives in order to make these complex decisions for us? How can we expect the people to make an informed decision on such a complicated issue?

In fact, the problems with referendums are abundant and well known: they reduce complex questions to binary choices; they bypass elected representatives by submitting a proposed law to a direct popular vote; they are essentially a demagogue’s dream, allowing voters to vent their frustrations with the powerful elites that run their governments.

Nevertheless, referendums are growing in popularity. A couple of months after the Brexit vote, in October 2016, Hungary called a referendum on refugee quota. Later in December, Italian voters were asked whether they approve a constitutional reform that changes the composition of the Italian Parliament. In September 2017, the Catalan Parliament approved a referendum for Catalan’s independence, which was later suspended.

With regard to the Brexit referendum, its central problem was its ad hoc nature. Ad hoc referendums are those that are not legally required, but rather are called for party political reasons. These are used as means to relieve political pressure, rather than democratic tools to allow people to voice their opinions on important issues. The 2016 EU referendum was primarily a political manoeuvre by David Cameron, who wanted to appease the Eurosceptical members of his Conservative Party. The legitimacy of the vote was in doubt from the beginning both because of party political purposes motivating the referendum and because of the failure of the government to formulate in advance what leaving the EU would mean in practice. Essentially, the UK government now has to implement a decision which it did not support or expect, and for which there was no plan set out in advance.

The Brexit outcome is a warning to politicians who might want to turn to referendums under the belief that they are easy solutions to solve political divide. Whilst they may give the impression of popular democracy, direct democracy through plebiscites are ironically anything but direct.

What part does the media play in political decision-making? 

The media’s influence on political decisions and democracy has become a widely debated topic. Lisa Müller with a PhD in Political Science from the University of Zurich found that a higher degree of media performance is positively correlated with political participation and less corruption. They also tend to have a more lively civil society, and elected representatives seem to reflect the preferences of citizens more adequately. This demonstrates how the media can facilitate democratic regimes and how the quality of their information impacts political decisions.

On the other hand, Facebook’s Product Manager of Civic Engagement, Samidh Chakrabarti, has openly discussed the repercussions of social media in the political landscape when used incorrectly. During the US 2016 election, Russian agents created 80,000 posts on fake Facebook pages to influence public sentiment, reaching around 126 million people. Russia used Facebook as an “information weapon” to instigate conflict and divide society.

In relation to Brexit, the media played a powerful long and short term role in influencing the result of the referendum. Before the campaign begun, the public had already been primed by the media to be critical of the European Union, with saturated broadcast reporting of disputes between the EU and UK or domestic political conflict.

Once the campaign begun, social media was used to motivate, persuade, and mobilise millions of people to vote for Brexit. Social media data analysis showed that Brexit supporters had a more powerful and emotional message with more effective use of social media. This is how the active and vocal supporters of Leave influenced fence-sitters to vote for Brexit, whereas the Remain campaign lacked clarity in its messaging and emotional appeals.

Compared with the US 2016 election, it is possible Brexit could have used similar bombardment of false messaging to influence public opinion in order to change the political landscape. This poses the question about whether the media allows for democracy or dominates our thoughts to sway us towards a particular result.

The Economic Impacts Voters Did Not Consider

The decision by British voters, on the 23rd June 2016, to leave the European Union garnered international focus and now, two years on, the economic impacts of such a choice are being strongly felt by the nation. Perhaps most largely affected was the British pound sterling, dropping 11.9% to a record low $1.369 on the day and eventually bottoming out at $1.21 against the dollar, in January 2017. As understood by the principles underpinning the study of macroeconomics, a weak currency such as the one Britain was facing has knock-on effects that threaten the stability of various other factors of the economy.

More specifically, imports for UK firms’ skyrocketed, and this transformed into higher prices of goods for consumers. As prices began to rise, so too did the level of inflation, increasing from an acceptable 0.5% during the time of the vote, to 3% in late 2017. With this rise in inflation, came the drop in living standards and wages. The annual growth in earnings of the British population fell to a low of 1.8% and, as the governor of the Bank of England warned, British households are at a deficit of £900 since the Brexit vote. It is clear, the economy has failed to live up to the expectations stipulated when the vote was first cast. The subsequent slowdown in consumer spending that arose out of a decreased standard of living and growth in wages, has further led to a diminished growth in GDP. Earlier in the year, during the first quarter of 2018, GDP growth in Britain slowed to an alarming 0.1%, and economists from the London School of Economics pose the British economy today is £20bn smaller than what it could have been had the leave vote not been passed. Roughly speaking, this translates to a cost of £300m pounds per week, lost.

Whether or not Britain will bounce back from the impacts of Brexit will remain to be seen, and only time will tell, how well its responses will work to mitigate the economic issues that Brexit has enacted on some aspects of the British economy.


The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Neala Guo

Huishan Feng

Nicholas Bea
Shreya Sharma