Populism, nationalism, and xenophobia are all being blamed for the victory of the “Leave” campaign in the United Kingdom’s recent referendum on membership in the European Union. Europhiles and people who naively believe globalism benefits the ordinary people ans if we all join hands and sing Kumbaya all the people of the world will come together (oops, pardon) and live forever in peace and harmony are in denial about the true nature of the European Union and determined to put the blame for the failure of their campaign on anything but the animosity aroused by their arguments beig based on class hate and the contempt of the wannabe elite for ordinary people. But the false arguments of bitter Remnants float only serve to distract from something far more significant, a fundamental change in the relationship between the elites and ordinary people.
Since the birth of modern capitalism, these aspects of human activity have generally been at loggerheads. While the market tends to expand geographically as its participants pursue economic benefits, the state seeks to control everybody and everything within its jurisdiction.
How to reconcile the three way conflict between the people, corporate business and the corporate state is the central concern of politics today, just as it was for Adam Smith in the eighteenth century, Friedrich Engels and Karl Marx in the nineteenth century, and John Maynard Keynes and Friedrich Hayek in their long debate on the topic through the middle decades of the twentieth century.
For economists there are two hypothetical extremes in the state – market relationship and both marginalise the people.
The first is a seamless global market in which corporations can maximize their material benefits without any state intervention. The problem with this scenario is that you may live in a country that is vulnerable to all the negative consequences of no-holds-barred globalization, such as currency devaluation, labor exploitation, the flouting of intellectual property laws, and so forth.
The other extreme is a world comprising entirely isolated collectivist states, where individuals are protected from external economic forces and the state has full autonomy over domestic affairs. In this scenario, you will have to forgo all the well-known economic benefits of global trade.
Between these two extremes lies most of the world as it is, characterized by cross border trade and commerce. In the second Industrial Revolution that followed the Napoleonic Wars the way of trade favoured capitalism and tariff – free markets.
After WWI, the pendulum swung back toward the authority, big government, socialism, the welfare state led to higher taxes that funded vastly improved public services. Financial capital in the West was weakened politically, and an emancipated working class empowered by universal suffrage took the opportunity to demand pay, conditions and social-welfare programs that ran counter to the logic and rules of a globalized market.
In the run-up to World War II, beggar-thy-neighbor policies and rampant protectionism ensued – with Britain leaving the gold standard in 1931 in response to a run on the pound. The Economist declared that Monday, September 21, “the definite end of an epoch in the world’s financial and economic development.” After the passage of Brexit, the same journal warned, “Britain is sailing into a storm with no one at the wheel.”
The 1944 Bretton Woods conference marked another swing back toward the market, but this time allowed for some degree of national autonomy. Until the late 1960s, a harmonious balance of international openness and national autonomy allowed for widespread prosperity.
By the 1970s, however, as the slow growth, high prices, “stagflation” and a global energy crisis pushed the pendulum back toward fully liberalized markets – a shift from the Keynesian to the Hayekian world, helped along by Margaret Thatcher in the UK and Ronald Reagan in the United States.
This brings us to the present. The dotcom bubble and bust of 1999 and economic crisis of 2008, and the global economy’s failure to devise a way for economies to recover, put an end to the project begun by Thatcher and Reagan. As in the post-WWI period, workers came to see themselves as left behind by globalization, with political leaders favoring financiers and big business at their expense as the wealth gap between rich and poor grew at aaccelerating rate. In the case of Brexit, the “Leave” camp voted for more national autonomy, less globalism and more power vested in local government rather than supra national bureaucracies.
An American version of Brexit may not be far behind if the next US president scraps the Trans-Pacific Partnership and Trans Atlantic Trade And Investment Partnershio trade deals with Pacific Rim countries and the European Union respectively. At a time when global trade negotiations are almost dead, and the Baltic Dry Index published by London’s Baltic Exchange showing the amount of goods moving around the world at an all time low for the industrial age, clearly things have gone very wrong for the brave New Workd of globalisation.
That both presumptive US presidential candidates say they oppose the trade treaties, promising what would be tantamount to an “Amexit” from the global trading system may seem counter productive unless you accept that barack Obama has been the most corporate friendly, neo – con US President ever, and his two trade pacts were not really about free trade but a massive transfer of power from democratically elected assemblies to corporate lawyers.
The Brexit referendum, not won by the Leave campaign because working and middle class Britons are xenophobic and racist, but because these social groups feel angry that their concerns and interests have been sidelined, was a symptom of profound political discontent that will continue to manifest itself wherever in the world technocrats and corporatists usurp democratic bodies as has happened in the European Union, until we return the people-government-capital relationship to a healthy equilibrium. The problem is that no one knows how to do this.
Some propose re-harmonizing international markets with national autonomy, but the international economic order was built for the pre-globalization age, and we cannot put the genie back in the bottle, even if it were possible to do so. Brexit marks the beginning of the end of the latest era of globalization. What comes next is anyone’s guess, but we can be certain that it won’t be the final destination.
In conclusion, this comment, made by Steve Hurst, very appropriate…
“Its inevitable the empty wallet movement overcomes the treasure chest party at the ballot box as the number of empty wallets steadily increases driven by inequality mechanisms.
If you aint got nuttin you got nuttin to lose.”
There is a welfare system in place but its effect is emasculating and longterm unemployment is correlated with psychological problems. The longterm and well established trend in growing youth unemployment is a timebomb at so many levels
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