Waking Up on the Wrong Side of History

David Drexler /​/​Flickr Waking Up on the Wrong Side of History
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On Friday morning, June 24, 2016, the entire Euro-​American establishment woke up to find that, contrary to their strict instructions, the British had voted to leave the EU.

In an effort to ensure that the “Remain” camp would prevail, the establishment had actually threatened voters. UK Chancellor Osborne menacingly warned that if the “Leave” camp won, he would impose a “Brexit Budget,” an austere £30 billion program of spending cuts and tax hikes. (Nobody believed him and he has since backpedaled completely, merely noting that it might now be harder to generate a budget surplus by 2020.) President Obama, who should have kept his nose out of it, threatened that if the Leave camp prevailed, “The UK is going to be in the back of the queue” when it came to trade deals. Nobody believed him, either.

Despite unanimous establishment support for Remain (all global CEOs, every leader of a main political party in Europe and Britain, all the university professors and think tank economists, every journalist in the UK and the US), the Leave vote was actually overwhelming. The only voters in England – the core of the UK – who gave a majority to Remain were Londoners (and people in a few other large cities), where 60% voted to stay in the EU. Well, of course they did. Those folks all had overpaid, cushy jobs in the financial sector, and they were voting in their own narrow, economic self-​interest. Can’t blame them for that, but let’s stop pretending that these were the enlightened voters who had the long-​term best interests of their country at heart. Meanwhile, keep in mind that the citizens who could look at the situation more objectively voted almost 80% to Leave.

You might suppose that the elites, self-​styled adults-​in-​the-​room as they are, would immediately have begun to reconsider their hoary views about an increasingly federalized Europe. Instead, they responded like 11-​year-​olds who’d just found out Santa Claus isn’t real. There were only two kinds of reactions among the now-​former elites: denial and rage.

In the denial category were folks like Gideon Rachman, a columnist for the Financial Times. GR penned a column telling his fellow establishmentarians not to fret, that this would all blow over. Either there would be another referendum that would overrule the first one, or Parliament would simply ignore the vote. (Sorry, GR, that train has left the station. You need to get your head out of your you-​know-​what and face the fact that there is no Santa Claus.)

More common was the “rage” reaction, epitomized by folks like Tony Blair in the UK and Thomas Friedman in the US, who fulminated that the Leave voters were ignorant, stupid coal miners and such, who’d been easily swayed by unscrupulous backers of the Leave campaign. But as I just noted, it was actually the Londoners voting to Remain whose votes were narrow, selfish and short-​sighted.

Taking the long view, Brexit’s Leave voters were focused on issues that are crucial to the UK’s long-​term prosperity. Personally, I have no idea – or opinion – whether these issues might be better dealt with as part of the EU or alone, but certainly the issues are momentous. And those issues deserved better than they got from the Remain advocates, who basically argued that voters should shut up and do whatever the establishment said, because “We’re so much smarter than you are.”

The issues on the voters’ minds were these: democracy (or, more precisely, the lack of it in the EU); the bizarre and ever-​increasing financialization of the UK economy; the gigantic mountain of debt that had piled up in the UK and, especially, in the EU, and that was still growing like kudzu; and, finally, economic and social inequality that was already in the process of creating “Two UKs.” All these trends had been fueled by UK and EU elites who claimed to have special insight, but who, in fact, now find themselves on the wrong side of history.

Note that I didn’t mention immigration. Clearly, the vast rise in immigration into the UK had voters worried, and elite opinion immediately seized on this to claim that the Leave vote was animated by xenophobia or outright racism. But in fact the immigration issue was simply a sub-​issue that falls under the lack-​of-​democracy concern. It wasn’t just the large numbers of immigrants arriving in the UK that alarmed voters. No, it was the fact that they – and the UK in general – had no control over immigration because those decisions were being made in Brussels – in fact, by Angela Merkel. Imagine how Americans would feel if all decisions about immigration across our southern border were being made in Mexico.

We’ll take a closer look at democracy, financialization, debt and inequality in my next few posts.

Next up: Waking Up on the Wrong Side of History, Part II


Greg Curtis

Gregory Curtis is the founder and Chairman of Greycourt & Co., Inc., a wealth management firm. He is the author of three investment books, including his most recent, Family Capital. He can be reached at . Please note that this post is intended to provide interested persons with an insight on the capital markets and is not intended to promote any manager or firm, nor does it intend to advertise their performance. All opinions expressed are those of Gregory Curtis and do not necessarily represent the views of Greycourt & Co., Inc., the wealth management firm with which he is associated. The information in this report is not intended to address the needs of any particular investor.

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