Brexit and austerity: they’re connected

June 27th, 2016 at 9:26 am

As I discuss in today’s WaPo, Brexit was a function of many factors:

–PM David Cameron’s reckless, opportunistic political gambit: calling for the referendum back in 2013 to assuage his far right Euro-skeptics in time for the upcoming election.

–Strong anti-immigration and anti-globalization sentiments. The unleashed xenophobia, surely linked to the refugee crisis, is to my thinking the worst part of all of this. Re globalization, UK voters (and probably US ones as well) finally had enough of elite economists and politicians lecturing them that if they only understood “comparative advantage” (the productivity-enhancing benefits of trade) and shut up about “factor price equalization” (the costs of trading with low-wage countries), they’d realize how great expanded trade has been for them.

–The stark polarization between the urban and economically dynamic parts of Britain (Remainers) and the rest (Leavers).

–Distrust of the EU given their mismanagement of the recession and the recovery, which oftentimes seemed wholly unresponsive to the people on the wrong side of their decisions, people that appeared to have little in the way of voice or democratic recourse.

And a big part of this mismanagement, one that hasn’t gotten enough attention, was fiscal austerity.

Sources: IMF, Eurostat

Sources: IMF, Eurostat

What matters next is, if the UK economy is hard hit by the fallout, whether this destructive fever breaks. Odds are, unfortunately, that it will not.

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12 comments in reply to "Brexit and austerity: they’re connected"

  1. Smith says:

    But, but, it seems Democrats are taking the wrong lessons. They are saying
    1) Brexit was racist, as anti-immigrant sentiment is veiled racism, evil, immoral, country bumpkins voted for it.
    2) Trump is like Brexit, look at the terrible fallout (London bridges, falling pound), don’t let that happen here.
    3) Lets double down on everything the Brexit and Trump voters reject, tell everyone immigration is good and beneficial, we should encourage it, expand it through reform and amnesty, likewise globalization, can’t have trade wars with China, and the foreign policy of the last eight years was the best we could do under the circumstances, expect more of the same.

    The problem with this strategy is “It could have been worse.” is not a winning slogan (meaning not as bad as Bush), and nor is “It could be worse” (spector of Trump). So far, that’s all the Democrats Remain is offering

    “Could have been worse” and “Could be worse” vs “Make America Great Again”

    Ask Brits how that works, luv.

    • Smith says:

      Does anyone think Clinton will win or deserves to win by posing the election as a referendum on immigration? Or foreign policy? Or trade policy? Or economic performance?

      Take a poll or study current results,
      Do you favor less immigration, more immigration, or about the same?
      Is the U.S safer, and/or does it less safe than 4 years ago? Or 8 years ago (pre ISIS)?
      Do you favor more globalization? Do you feel there is nothing that can be done about globalization, currency manipulation, short of a disastrous trade war with China?
      Is the economy great?

      From this blog’s post on WP:
      “To be clear, I’m not letting anyone off the hook for racist xenophobia, but when people are hurting because of reckless finance, imbalanced trade, or spiking immigrant flows, and government and institutional elites could help but choose not to, they too carry a large share of the blame.”

      Yet we are stuck with the candidate of secret Wall Street transcripts, the “Gold Standard of Trade Agreements” characterization of TPP, and expanded temporary worker immigration and exploitation in the guise of immigration reform, and no one more elite, more privileged than a billionaire (hard to do). Even Warren couldn’t erase these vulnerabilities.

    • Smith says:

      Jonathan Chait outlines Clinton and Obama economic view vs. Sanders, rising tide vs. zero sum (win win vs. win lose), which resonates differently after Brexit vote and in light of Trump challenge.
      I would argue both Marx and FDR recognized it’s largely zero sum (has to be except for productivity increase of 1% to 3% per year, which the elite taking all for themselves the past 30 years)
      Spoiler alert: Here is how Chait sums up at the end:
      “In Obama’s telling, his opponents are foolishly greedy, defending their short-term interests at the expense of their long-term interests. In Sanders’s telling, they are shrewdly and correctly greedy.”

      Trump goes back to basics to capitalize on Brexit sentiment:
      Sanders interprets Brexit:

  2. reederbd says:

    Umm, Bullet 3, you seem to have reversed the Leavers and Remainers. It was the urban and dynamic parts of Britain that were the Remainers.

  3. Tom in MN says:

    I’d say it was all austerity to blame, as in, “it’s the economy, stupid.” When people feel threatened by a bad economy it’s very easy to convince them that “those people” are to blame. Continuing the beatings until moral improves just makes people look for someone that they can beat.

  4. Craig Mackenzie says:

    Typo: “The stark polarization between the urban and economically dynamic parts of Britain (Leavers) and the rest (Remainers).” Urban dynamos want to Remain in the EU, like free trade and are relaxed about immigrants. Its the rest who got us into this mess.

  5. Paul Saxe says:

    Nice post, but I think you got the Leavers/Remainers backwards in this:

    –The stark polarization between the urban and economically dynamic parts of Britain (Leavers) and the rest (Remainers).

  6. Jill SH says:

    –The stark polarization between the urban and economically dynamic parts of Britain (Leavers) and the rest (Remainers).

    Don’t you have this backwards? Urban = remain…

  7. Yastreblyansky says:

    Except being outside the euro zone, Britain wasn’t subject to the demands of the EMU, and Cameron’s austerity program (“the age of austerity,” he said in 2009) had nothing to do with EU membership, right? UK government debt as a function of GDP was already a lot lower than Germany’s in 2008 , Brussels would hardly have been hounding them anyway.

  8. neil lopez says:

    It’s understandable. For centuries Britain has been invaded, colonised; we’ve had to hand over our raw materials to countries like India and Barbados; we’ve pleaded and begged, “please stop ordering us about and let us run our own affairs, Mister Gandhi”. At last, our patience has run out. We’ve snapped. We want our country back. The people determined for us to remain in the EU, as Michael Gove explained, are part of an “elite”, an establishment clique he’s determined to oppose. We should be thankful common sorts such as Michael ‘Che Guevara’ Gove, the people’s Lord Chancellor, spokesman for the ordinary peer and Conservative MP for the downtrodden labourers of Surrey Heath, is prepared to confront the elite and only goes to weddings of the voiceless, the humble and the powerless, such as Rupert Murdoch.