Thoughts on Brexit

Brexit should trigger soul searching within Britain, however unlikely it is to do so. It is the culmination of a broken economy and broken society that is unable to cope with the pressures of globalisation. In that world, systems are strained and the weakest buckles.

This is partly due to the arrogance and incompetence of EU bureaucrats and UK politicians, in their failure to understand the effects of immigration on wages of the low skilled. But this begs the question of the existing structure of the economy. Years of socialism, followed by Thatcherism, hollowed out the manufacturing economy and created an underclass of low wage service workers. This was ripe for disruption by an influx of migrant workers that brought real wages in this sector down. And it will continue to be ripe for disruption by automation and other technological developments.

Brexit was also the result of a contentious political culture that could no longer generate a national consensus partly as a result of the accumulation of economic mismanagement over decades. This polarisation is supported by a toxic class culture which normalizes inequalities, not just economic but social and between communities, which would be unacceptable elsewhere in Europe. The breakdown of social trust and the political centre is evident, and is a repeat of the 1930s.

In this case, democracy has become a destabilising force which reflects the polarisation of society - south vs north, rich vs poor. Political groups have been talking past each other for decades. This is not new, and similar problems occurred in the 1930s. Yet only monetary economics has seemed to learn much from that episode, and no new policy innovations, in Britain or elsewhere, have been made in the last 20 years to deal with the distributional effects of globalisation on individuals and communities which theory clearly predicts. Hence the only solution is to limit migration. This is partly due to the failure of supranational institutions and the state of international policy coordination, which are inadequate to the tasks at hand.

At the more immediate level, Brexit was the result of an alliance of centre right and far right British nationalists, who are unable or unwilling to define a British cosmopolitanism that includes a role for European foreigners. Some believe that the gains from policy flexibility and sovereignty outweigh the loss of access to Europe, brain drains and the diminished reach of its institutions. This has a long history in a culture which defines itself against Europe. However, in the Darwinian race, culture itself is a shackle, and Britain will pay for its inflexibility in dollars and influence.