The Lesson in the Brexit Vote

I am re-posting as blog my July newsletter since the recent US election has made it quite prescient. Note in particular the sentence ” Mistrust in the political establishment is at a level not fully appreciated by the mainstream media nor by the major parties” and the last paragraph. 

EK4T July 2016 Newsletter

A drop of 600 points in the Dow on June 24^th following the outcome of the Brexit vote in the UK made people in the US take a passing interest in European affairs.

What is Brexit and why should we pay attention here in the US?

In a popular referendum, the British public voted to leave the EU — to the chagrin and surprise of the political elite.

Both the Labor party and the Conservative party urged the electorate to vote to remain in the EU. David Cameron, who called for the referendum, put his political career at stake and lost.

The EU is a block of European nations that, by joining the union, agreed to allow the free movement of people, goods, and money across their national borders and to abide by EU rules regarding trade, environmental regulation, safety standards, immigration etc.

The EU has its origin in an industrial cartel of coal and steel producers dependent on stable exchange rates to control the price of their commodities.

Business and commercial interests were etched into the DNA of the European project from its inception, which resulted in a monetary union without a political or fiscal union (nor mechanisms for re-balancing the uneven economies of Europe through surplus recycling) and in a deeply undemocratic and opaque set of institutions.

The mainstream media has portrayed the Brexit vote as the result of ignorance and xenophobia.

The influx of refugees into Europe combined with the policy of freedom of movement of people within the EU has resulted in a very large increase in the immigrant population in the UK along with social stress associated with greater demands on public services and competition at the low end of the job market.

Xenophobia and the sense that the UK could no longer control its borders certainly played a part in the Brexit vote.

But an even more important factor has been the deep-seeded frustration of the electorate with a deeply flawed and unfair economic system that rewarded a small minority of the population (mostly concentrated in London and in the financial sector) while relegating the vast majority of the people to a marginal and precarious existence.

The vote was an expression of anger by a majority of people economically decimated by the neo-liberal politics of the last three decades, and frustrated with a political process that is impervious to their concerns and unable to address their legitimate grievances.

We see a similar popular alienation from  the political elites here in the US with the surge of Trump and the unexpected strength of the Bernie Sanders primary campaign. Mistrust in the political establishment is at a level not fully appreciated by the mainstream media nor by the major parties.

As in the UK, neoliberal policies in the US have created tremendous inequality between the financial and economic elites and the vast majority of the population. The former garnered the vast majority of national income and wealth while the latter have been struggling with the effects of globalization, job insecurity and mounting levels of debt.

The Republican Party has already imploded, as demonstrated by its inability to stop the rise of the anti-establishment Trump candidacy. Senator Bernie Sanders has offered a unique opportunity to the Democratic Party to transform society and politics by turning the party into a progressive force able to address the needs of the entire population, rather than catering to business and financial elites.

It seems like the Democratic Party will miss this unique opportunity and head for its own demise as well. The lesson of the Brexit vote is that the traditional parties cannot keep ignoring the popular frustration with and distrust of the political establishment.