Picture Credit: @SteveBloom.com
I am surprised but not shocked at Brexit. As self-defeating as it seems there are underlying economic and social reasons that explain it. While it is a shock that Britain will be less at the center of European affairs, that also has its reasons based on objective reality.
Brexit occurred for reasons both obvious and obscure. It was the consequence of political tensions related to who gained and who lost from economic and social change over the last two decades, including the reemergence of that old economic disease of elite capture of economic gains, changing demographics within Britain, tensions from immigration, and a touch of national chauvinism. It is also a consequence of the continued retreat of Britain as a preeminent economic and political power.
The causes exist also elsewhere in Europe and in the US. In particular, elite capture, where the highest 10% or 1% of society have gained disproportionate control of economic gains and have used command of the politic process to protect or enlarge their advantage. Those who are not the privileged few could only have resented the extravagant indulgence of outsized gains by their domestic elite no less than the impact of predatory elites of other countries that are connected domestically through illicit international financial flows for purposes of tax evasion and money laundering, facilitated by dummy firms, disguised ownership arrangements, banks, legal firms, and political artifice. London banking and real estate, to mention just two examples, grew fat off of Russian oligarchs and others who moved vast amounts of illicit money to highly accommodating safe harbors such as London, while at the same time Britain was seemingly inundated by immigrants following the money flows or escaping economic and political failure by elites in their home countries. These are the reasons for the rise of the Farages and Le Pens and Trumps. To be sure, these centrifugal forces are encouraged by subversive influences, such as Russia, but the fundamental forces are homegrown.
A key feature of Brexit is that it is more than usually difficult to predict the impact. What one predicts depends on which root causes one assigns to Brexit and where these will reverberate. However, some outcomes are certain. The conceits of the Brexit camp that Britain will be better off is an illusion. Britain will be harmed economically and will suffer political turmoil for some time.
The impact on Europe is less obvious. Europe doesn’t need Britain so much as it needs strong and principled leadership. Europe has that leadership in Angela Merkel, who has defined practicable and humanistic responses to, for example, Russia’s threats and the immigration crisis, and her insistence that any EU response to Britain’s exit must be decided collectively by the 27 remaining members, not selectively behind closed doors. Europe has, as well, credible and talented financial leadership in Mario Draghi at the ECB and, for that matter, in London as well as Berlin. With Brexit, the forecast is cloudy, even stormy, but not necessarily negative, as the center of gravity moves even more to Brussels, led by Germany and like-minded countries such as France. Brussels has in fact provided leadership on Russia, Ukraine, immigration, and Greece, even as the debate has been heated. Incompetent leadership in states such as Hungary and recently Poland is Europe’s only real threat.
The impact on Europe is less obvious. Europe doesn’t need Britain so much as it needs strong and principled leadership. Europe has that leadership in Angela Merkel, who has defined practicable and humanistic responses to, for example, Russia’s threats and the immigration crisis, and her insistence that any EU response to Britain’s exit must be decided collectively by the 27 remaining members, not selectively behind closed doors. Europe has, as well, credible and talented financial leadership in Mario Draghi at the ECB and, for that matter, in London as well as Berlin. With Brexit, the forecast is cloudy, even stormy, but not necessarily negative, as the center of gravity moves even more to Brussels, led by Germany and like-minded countries such as France. Brussels has in fact provided leadership on Russia, Ukraine, immigration, and Greece, even as the debate has been heated. Incompetent leadership in states such as Hungary and recently Poland is Europe’s only real threat.
Russia revels in the Brexit vote, but it has nothing to gain. Russia needs a sustainable civic order and economic engine even more so than does Europe. It has neither. It is, like Britain, a weakening empire where further dissolution is all but inevitable as the logic of internal cohesion diminishes. More so than Britain, Russia is pursuing an unrealistic increase in autonomy that will further erode its future prospects.
Smoldering conflicts on Europe’s periphery, the inevitable waves of immigrants, and increased demands on European resources--and now Brexit--cry out for cogent European solutions that strengthen future prospects rather than a retreat into parochialism and xenophobia. A politically open and economically liberal Europe still energizes civil discourse, generates outsized economic advantages and leads global debate on standards and norms for prosperous, equitable and inclusive civil society. The current storm seems ruinous but storms pass and resilient communities recover.
Dirk Mattheisen is a writer and blogger on political economy with a focus on European affairs. He is also an independent consultant on institutional governance of international economic and financial institutions. Dirk Mattheisen is a former Assistant Corporate Secretary of The World Bank Group.
