BERLIN – With Brexit, the United Kingdom, Europe and the world have entered uncharted territory, proving that history is jagged, not linear. No one really knows where to next, let alone the final destination. It will take up to two years for all the ramifications to filter through.
The first requirement is to understand the reasons for Brexit. The British are famously insular and proud of it, as captured in the old joke about the newspaper headline: “Fog over the Channel — continent isolated.”
The economic wreckage of globalization has generated a massive backlash and claimed its first casualty. Those who felt left behind by globalization have decided to leave globalization behind and re-erect political-economic frontiers that were steadily dismantled over decades. The vote validates Harvard University’s Dani Rodrick’s thesis that we can only have two of the three among democracy, sovereignty and globalization. The Brits have rejected the third in reasserting the first two.
Britain is a net contributor to the EU budget, at a time when public services are decaying and social infrastructure fraying. Hence the powerful allure of the false claim that leaving the EU would free up £350 million per week for re-investment in national health.
Europe’s massive migrants crisis could not have been worse timed for the vote. It visually reinforced the sense that Britain was fast losing control of its borders.
The major political parties have lost touch with growing armies of their core supporters. We see this also in the United States and Australia. By contrast Boris Johnson and Michael Gove connected with the voters as the public face of the leave camp.
Another striking feature of the vote is the generational split: Those who will have to live longest with the consequences voted to remain but lost. Younger voters have never known a world without the EU, and without the U.K. in the EU. They will feel cheated and disenfranchised — and that carries grave danger in its own right for the political health of the U.K. and what remains of it in a few years’ time.
In desperation, the “remain” camp engaged in overkill and the tactic backfired. When the warnings became too dire to be credible, people lost trust in the overall judgment of the leaders of the remain camp, including Prime Minister David Cameron. The media joined the political and economic elites in losing touch with everyday reality, the economic pain and swelling anger.
That said, the immediate sense of irrational market panic will give way to more sober assessments. The sky is not going to fall down. The U.K., EU and the world will adjust to the new normal.
Conservatives will choose a new champion — most likely Johnson — to lead negotiations with the EU for the date and pace of exit and new terms of relationship. On the one hand, both sides will want to avoid damaging relations further with a messy and costly divorce. On the other, the EU will be determined to deter a rush to exit by others (Greece, Italy, Spain and — quelle horreur! — France) and so the cost for the U.K. must be seen to be painfully high.
Financier George Soros warns that the disintegration of Europe may now be irreversible. Cross-channel labor mobility will be greatly restricted. London-based businesses with a big presence in Europe will look to relocate to Paris, Frankfurt etc. The pound should recover and house prices fall.
Scotland and Northern Ireland, like London city, voted heavily to remain in the EU. Almost certainly, Scotland will organize a second referendum and this time the pocket book response will be to leave the U.K. and join the EU. For Northern Ireland there will be a greater tussle between heart and pocket. Even if they leave the U.K., they will still face the further choice of independence or reunion with Ireland.
The U.K. has been a troublesome and problematic EU member. It joined very late, stayed out of the eurozone, and negotiated many special exemptions and opt-outs. Thus many Europeans will be relieved and pleased at its departure. It will be in everyone’s interest to complete the separation sooner so as to end uncertainty.
The internal European balance will revert toward social democracy that the continental countries favor. The Eastern newcomers will lose the major free market ally. The anti-Russian balance of sentiment should also moderate. France and Germany will drive the European project and Germany’s dominance will increase, with potential for backlash.
Since the end of the Cold War, the EU has faced repeated choices between enlargement, broadening (extending integration to new sectors), and deepening (complete integration within sectors). It has chosen enlargement, making the union wide and broad, but increasingly shallow. Captured by bureaucrats and technocrats and remote from the people it is meant to serve, it is described as fragile and sclerotic. The 28 members have had fewer and fewer interests and values in common and the “union” has been increasingly transactional, diminishing the sense of community. NATO has made the same mistake, with new members that are liabilities and add no strength. Some multiply risks of war with Russia.
There is another fundamental contradiction at the heart of Europe that they have refused to address: Can one have ever closer economic integration, and a parallel defense alliance structure, without political union? Many doubt this. Since political union is ruled out, at some stage the economic integration project will founder. The EU might have been better off broadening and deepening integration among a smaller and more congenial group. They cannot now go back to, so the EU will continue to suffer episodes of crises that at heart are crises of identity.
Countries beyond Europe will also have to work out separate and parallel arrangements with the U.K. and the EU. Although a bit awkward and cumbersome initially, it will not take long to get used to the new normal. The biggest impact will be felt by the United States. The U.K. was a great ally for them in relations with Europe on the inside, in both security and market ideology. The importance of the U.K. to the U.S. will diminish.
Brexit might put much needed wind in Donald Trump’s sails. The backlash against globalization is not restricted to the U.K. There is a worldwide crisis of international capitalism, and a second worldwide crisis of liberal democracy. The elites — summarized as the snobs and the scolds — have shown a failure to understand the pain and resentment and gradually strengthening anger of the masses. The peasants are revolting and returning the contempt.
In many other countries, too, the people feel they have lost control of their lives and destiny and want to reclaim it. The danger of populist politicians is very high. The patronizing, condescending and preachy media elite have become inner city folks totally disconnected from their own people. And if Western media analysts cannot even get their own politics right, how do we expect them to understand foreign countries?
Ramesh Thakur is a professor in the Crawford School of Public Policy, Australian National University.
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