I readily admit that I was surprised by the Brexit vote. I did not anticipate it nor did I take it seriously enough. Now I have to figure out what it means and what I missed. There is no way I can properly interpret the event today–it will take months before we can properly sort out the dynamics of the vote. But we have to start somewhere and it is important to put down initial reactions so that when we look back we can better understand the chain of thought.
The first thought is that the vote was a repudiation of the process of globalization and an assertion of national autonomy. The EU is a regional manifestation of the idea that national borders impede economic efficiency and that market integration, whether on a regional or global scale, is a desirable objective. The Brexit vote asserts that British people will be better off without institutional commitments to other economies beyond those that are voluntarily self-imposed through national measures.
Second, the vote suggests that the British people believe that the world is a dangerous place and that it is better for Britain to implement self-protection measures against others. This belief raises the more difficult political issues of race, ethnicity, and religion, usually cloaked in more oblique language, in a rather dramatic manner. I suspect that we should prepare ourselves for more xenophobic and “us-them” slogans. I also suspect that anti-German sentiment will become more widespread.
Third, an anti-EU knock-off effect undoubtedly will resonate among other EU states. That sentiment exists at some level in most of the EU countries and those movements will be emboldened by the Brexit vote. There is a national election in Spain on Sunday and we will get our first read on the Brexit effect. France and Germany have national elections next year, and Italy has one the year after.
Fourth, the economic effects of the Brexit are highly uncertain. We had panic in many stock markets today, but that response was simply knee-jerk to greater uncertainty. The most immediate concern has to do with currency values. The British currency fell by 8% today (which is actually good news for British firms and for tourists who wish to visit Great Britain). But other states will regard that degree of devaluation as threatening to their own exporters and we will have to watch China’s response to the drop. If the Chinese allow the Yuan to drop by an appreciable amount, then we will have to worry about other currencies following suit. The medium-term concern has to do with the flow of investments. If it appears as if the new British government does not have a clear plan to exit within the permitted two-year period, then investment decisions will be deferred and the consequent decline in economic activity will likely lead to a recession.
Finally, the Brexit vote seems to be an expression of frustration more than it was a vote for a specific plan of action. It thus parallels other elections in Europe such as in Austria where the two major parties were completely ignored by the voters. It also parallels the primary elections in the US where the greatest enthusiasm was for two outsiders, Trump and Sanders. Trump’s message resonates with many aspects of the vote in Britain and Sanders certainly represented an anti-globalization stance. There is something going on in the world which suggests that there is no longer anything like “business as usual” in politics. Such moments indicate that political authority has been lost and that the social system has become dangerously fragile.
The world continues to evolve in ways that both flummox and delight me. These are puzzles worthy of our intellects. Do not think about them as something necessarily to fear. Not understanding them is what should make us afraid.
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