Notes from the Edge
With the BREXIT vote now only days away its worth taking a moment to consider the dramatic political shift that seems to be happening around the globe. Where once left/right politics dominated, or pro-capitalism vs. pro-socialist forces clashed, today the challenge is far more frightening. Today we sit on the brink of the end of the new internationalism and face the rise of old nationalism.
In Jon Ronson’s funny and insightful book THEM: Adventures with Extremists, the author describes his final meeting with a founding member of the Bilderberg Group (yes, that Bilderberg Group) Lord Healy, who explains that at the end of the Second World War a real effort was made to encourage trade and economic growth as a way of deferring future wars. The Bilderberg Group is but one of many, slightly shadowy and often undemocratic, organizations that exist to further those goals, encouraging powerful people to air out their issues and discuss ways to make that vision of the world more likely.
But for millions of people the new internationalism that has been fostered through trade agreements, globalization and corporatism has made the world more hostile to millions of “left behind” voters. It has seemingly given power to cigarette manufactures in Africa, or created unfair and uncompetitive “tax free zones” in South Pacific nations. It has fostered sweatshops in Sri Lanka, dangerous factories in Bangladesh, all at the expense of industrial workers in Western developed nations. In Europe this internationalism is blamed for feckless leadership on humanitarian, fiscal and bureaucratic issues. In America it is blamed for the rust belt through the mid-west.
The response to the growing frustration on all these issues has been a resurgence of nationalism and political “strong-men”. Putin’s Crimea grab was as much about returning pride to Russia as it was about diverting attention from his own domestic issues, reestablishing Russia’s place as a significant regional power. Across Europe there are rumblings, both of renewed regional nationalism from within countries, as well as growing concern that a “leave vote” in Brexit could destabilize the entire EU experiment. In the United States these issues have given power to the Donald Trump populism, but have also fired the Bernie Sanders campaign.
Energy to these issues have undoubtedly been fueled as a result of 2008, a disaster so wide reaching and so disruptive to the Internationalist narrative about the skill set of the political and corporate classes that it shouldn’t be surprising that millions of people seem ready to do irreparable harm to the status quo. The subsequent inability to provide a strong and sustained economic recovery like some recessions of the past has only made matters worse. Every ill, every short coming, every poor decision and every injustice inherent within the structure that we inhabit is now expected to be resolved by setting the whole thing on fire and assuming that the problem is solved.
I am constantly surprised by how little people actually want to see changed by referendums like these. During the Scottish Referendum, the expectation was that Scotland would continue on exactly as it does, but without any association to London. The Leave campaign in Britain is quite sure that while Britain will no longer be part of the common market, a deal can be worked out that will allow free trade to continue unabated and for British people who live in places like Spain and Italy to continue to do so without visas or travel restrictions. Donald Trump is quite convinced that he can have a trade war with China without upsetting American business interests there, and the host of smaller countries like Venezuela or Turkey can slide into despotism without adverse impacts to their international reputation.
We’re at the edge, with the mob pushing for change (any change) with little real understanding of the consequences. It is little surprise that the technocrats and political establishment are so unlikable and so uninspiring in the face of the radicals and revolutionaries that want to see a sizable change that can’t be brought about until everything is torn down. And while it is true that the status quo can’t remain, it is equally unlikely that the end of the EU, or a British exit will stem the tide of migrants from Eritrea, or that tearing up NAFTA will return factories to Michigan, or that Marine Le Pen can turn the clock back on France and bring back the beret.
I expect market volatility over the next while as investors and deal makers try and figure out the correct response to either a leave or remain vote. If Britain does leave, the next 100 days will be telling as pronouncements will be made to try and smooth the troubled waters. But the real work will come in the next 2 years, as negotiations will begin to do all the hard work that the referendum creates. You can’t just burn it all down, you have to build something in its place. How successful the reformers are at the latter will be the real test of the new nationalism.