3 Reasons Brits Voted for Brexit
George Friedman is an old friend of mine and one of the top editors at Mauldin Economics. Hereās a great read from him that I recommend for everyone interested in Brexit.
The British voted to leave the European Union. Even at only 52%, Brexit couldnāt have been imagined 10 years ago.
This fragmentation has been evident throughout Europe (read more in my free special report on Brexit), but itās the first case of a nation actually deciding to leave. I doubt that itās the last.
Now we should try to understand why the majority of Brits favored an exit from the EU and learn lessons. There are three main factors that led to this outpouring of votes to leave.
Opponents of the EU argued that it is a dysfunctional economic entity. The EU failed to address the economic problems that had been developing since 2008ā¦ for example, 20% unemployment in southern Europe.
The difference between the lives of southern Europeans and Germansāwho enjoy 4.2% unemploymentāis profound. Europe as a whole has stagnated economically.
The argument for remaining in the EU was that the alternative was economic disaster. However, staying in a stagnated organization to solve British problems seemed shortsighted and made little sense to opponents.
They believed that remaining in the European Union would make Britain follow Europeās lead.
Obviously, they didnāt think that Europe would throw up trade barriers against Britain. The UK is Germanyās third most important export target. The last thing Germany wants is a trade war with Britain.
Similarly, the threat that Londonās banks would decamp for Frankfurt is logistically implausible. Clients from around the world enjoy visiting London, and in finance, itās the clients that matter.
The European Union didnāt create the existing financial relationships. Britainās financial role goes back almost two centuries. The EU is a system that aligns with financial reality. It does not create it.
If Londonās banks were to move to Frankfurt, New York would become a unique magnet. In the end, the Europeans need a financial center in London. They will not lock it out.
The second reason for Brexit is the rise of nationalism across the world.
Thereās a growing distrust of multinational financial, trade, and defense organizations created after World War II. The EU, the IMF, and NATO are good examples of this.
Many who oppose the EU believe these institutions no longer serve a purpose. Not only that, these organizations take control away from individual nations. Mistrust and fear of losing control made Brexit a reasonable solution to them.
But for the supporters of the EU, such organizations are self-evidently valuable. They may need to be tweaked but not abandoned.
The immigration crisis in Europe was a trigger. Some EU leaders argued that aiding the refugees was a moral obligation. But EU opponents saw immigration as a national issue, as it affected the internal life of the country. Steering clear of this issue was an important driver for the āleaveā vote.
The EU doesnāt understand the power of nationalism. It attempts to retain nationality as a cultural right. On the other hand, it deprives individual nations of the power to make many decisions.
This may have worked before 2008, but it has become increasingly difficult to accept.
Finally, the political leadership of Britain faced a profound loss. The āleaveā voters rejected both the Conservative and Labour parties. Both parties had endorsed remaining with the EU and saw many of their members go into opposition on the issue.
Ultimately, it was a three-way struggle. Two established parties wanted to remain in the EU, and a third faction, drawn from both parties, opposed it. People in this third group saw both of the establishment parties as hostile to their interests.
This should be considered in the broader sense.
The possibility of Brexit frightened financial markets. They said so loudly. What they did not grasp was the degree to which they had lost legitimacy in 2008.
Most āleaveā supporters believed that the financial industryās recklessness and incompetence had created a disaster for many. Besides, they saw no benefit to themselves in the success of the financial industryā¦ even though it wasnāt true.
Itās vital to understand that Brexit was a vote against the British elite. Voters thought politicians, business leaders, and intellectuals had lost their right to control the system.
Voters thought the elite had contempt for their valuesāfor their nationalism and interests.
This is not a new phenomenon in Europe. This is not a British phenomenon, either. It is something that is sweeping Europe and China. And with the rise of Donald Trump, itās also present in the United States.
Trumpās entire strategy is to attack both the Democratic and Republican leadershipā¦ and the elite who have contempt for the nationalism and moral principles of those beneath them.
Itās a shift in politics that the West is undergoing. Now, itās in London.
Free Special Report: How Brexit Will Affect the UK, Europe, and the US
Britainās vote to leave the EU sent shockwaves throughout the world, plunging markets into chaos and Europe into an existential quagmire.
Get this free special report from Geopolitical Futures founder and acclaimed intelligence expert George Friedman to uncover the truth about Brexitāand the devastating fallout we can expect to see worldwide.
