With the United Kingdom voting to leave the European Union, it is worth considering the impact it might have on the San Antonio economy. This basically translates to how it might affect the U.S. and Texas economies because I don’t think it will have any direct effects on the San Antonio economy since there is not a very strong connection between the San Antonio and United Kingdom economies. However, there is a reasonable chance that the uncertainty and chaos caused by Brexit throws the United Kingdom and European Union economies into recession. The best I think we can hope for it that it has no effect. I can’t envision a scenario where Brexit increases economic growth in the U.K or the E.U.
While the United Kingdom’s economy is not big enough to throw the U.S.into recession, according to The Economist, “…Britain is big enough for a recession there to have a meaningful effect on Europe’s economy. As a rule of thumb, whatever the reduction in Britain’s GDP growth, Europe’s economy will suffer a drop of about half as much.”
If a recession in Britain does drag Europe into a recession, the ripples across the pond could drag the U.S. economy into a period of slower growth possibly leading to a recession because the European Union taken together is the largest economy in the world. GDP in the European Union was $18.51 trillion in 2014 compared to GDP in the United States of $17.42 trillion in 2014.
In 2015, U.S. exports to the European Union amounted to $272 billion which equated to 13.36% of all exports (See Trade data). This makes the European Union the second largest export market for the U.S. behind Canada at $281 billion. Mexico is the third largest export market receiving $236 billion in exports from U.S. companies. Exports to the United Kingdom were $56 billion in 2015 (2.76% of all exports). While Texas has the largest volume of exports among all states (See Exports by state 2015), the United Kingdom accounted for 1.8% of total exports from Texas in 2015. This relatively low volume of trade does not mean Texas and the San Antonio economies will be immune from the effects of Brexit. If growth in the U.S. economy slows, it is likely that growth in the Texas and San Antonio economies will follow suit.
Many people, including myself, have argued that it is important to include an enhanced focus (or even a focus at all) on the arts within a curriculum that is focused on science, technology, engineering, and math (STEM). In other words, the focus on STEM should be expanded to be STEAM. Even with these arguments being made, there has been a relatively recent movement to minimize the importance of a liberal arts education across some states. For example, the governors of both Kentucky and North Carolina have made such proposals.
I think this is a grave mistake. To be upfront, I received my bachelor’s degree from a small liberal arts college, and I am currently an associate professor of economics at a liberal arts university. Thus, I admittedly may be biased. But based on my experience, I know that my liberal arts education allowed me to achieve a deeper understanding and view problems from different perspectives. And in my work with artists on various projects and through my teaching of arts students, I know that they see the world from a different perspective that allows them to approach problems from varied angles.
I think J. Bradford Hipps discusses this very eloquently in his New York Times article, “To Write Software, Read Novels,” published in the May 22 paper edition (published May 21 online under the title “To Write Better Code, Read Virginia Woolf“). In the article, he provides examples where liberal arts graduates working within technology companies applied their abilities to “see” things differently to solve problems that the “techies” were finding to be intractable.
This is not arts for arts sake. This is arts for the economy’s sake.
I am confident that if we continue down this path of gutting liberal arts education from Pre-kindergarten through university, our economy is going to suffer because we will severely diminish the productive abilities of our labor force.
Along with many other economists, I have long argued that entrepreneurial activity is a key driver of economic development, and recently, I completed an economic impact study of LiftFund that provides a bit more evidence in support of this idea. “For more than 21 years, LiftFund, a 502(c)(3) nonprofit organization, has helped individuals achieve the American Dream by providing small business loans to those who do not have access to capital from typical lending sources, such as traditional banks” (Source: http://www.liftfund.com/about/). The study analyzed the impacts across their markets in Texas and Louisiana from 2010 through 2015. Along with the direct effects of the LiftFund lending, the analysis also took into account the multiplier effects, but the impacts for a specific business are only counted in the year in which the new jobs were created (i.e., the impacts were cumulative into the future years).
Here is a summary of the results showing the rather substantial impacts that LiftFund and the small businesses they fund are having on their local economies.
In Texas, LiftFund issued $104 million in loans during this time period, and the loans to these businesses supported 10,758 jobs and earned incomes of $500 million. These businesses produced output valued at $1.4 billion. This means that for each dollar loaned by LiftFund, $13.21 in output was created in the local economy.
In Louisiana, loan volume during this period amounted to $10.6 million. This supported employment of 1,495 earning incomes of $70 million. The businesses impacted by this LiftFund support generated $181 million in output resulting in a return of $17.03 in output per dollar loaned in Louisiana.