Voters in the United Kingdom have voted for the Brexit, a referendum for Great Britain to leave the European Union. This is a monumental decision, which will have a large impact on the national, continental, and global economies. This vote reflects a new phenomenon: neopopulism.
A Quick History of the European Union
The European Union formed in the wake of World War II. Germany, France, Italy, Belgium, Netherlands, and Luxembourg unified their coal and steel markets — in order to prevent land grabs like the early parts of Nazi German aggression. The economy clicked, which led to more cooperation across the marketplace.
Over time, other European states joined the economic community – integrating their national markets into a larger European marketplace. Great Britain officially joined the community in 1973; voters affirmed the move in 1975 with a two-to-one margin.
Britain joined the EU, but it continued to be fiercely independent. As continental Europeans moved towards a common currency, the British retained their national currency: the Pound. Instead of having French Francs or Italian Lira, both states function off of the Euro. In 1999, the European Union instituted the Euro, a common currency for many of the states, while Britain remained independent – which continued to build a divide between Britain and the rest of the EU.
Populists in Britain used various social prompts (xenophobia, racism, and nationalism) to win support and continue to be a thorn in the “establishment” politicians’ side. In 2012, the British Prime Minister (think executive like a President elected by a legislature Congress) rejected an up-or-down vote to leave the EU, but he left the door open for a referendum to advise Parliament. Fast forward a few years, and the populists held PM David Cameron to his word.
On June 22, the British went to the polls for a nonbinding referendum — but all indications suggest that the British government will follow the will of the people. The election cycle clearly divided the British population. Scottish voters (who recently considered leaving the United Kingdom), those living in cities, and especially Londoners voted strongly to remain in the EU. Others — especially in most likely to respond to nationalist and xenophobic queues – trended towards “leave” in recent days. The UK Independence Party’s leader, Nigel Farage has played into these narratives, arguing that the EU makes Great Britain more vulnerable to several out-groups.
The British Pound lost ten percent of its value within an hour of television stations calling the election for “Leave.” This devaluation is was enough to move the British economy from the world’s fifth largest to sixth largest. The Euro is also falling, while the United States Dollar is winning. In other words, people who own money as an investment are selling Euros and Pounds to buy Dollars.
British politics will likely go into a tailspin. The current Prime Minister has argued that a “Leave” vote would make his position untenable, which may indicate future resignations and early elections for our British friends. Scotland will likely consider another leave-the-UK referendum, especially considering that Scottish voters cast ballots to remain in the EU. Ironically, they will leave the leaving country to stay.
The instability caused by this vote will likely cause increasingly shaky markets to suffer. Nearly every multinational corporation has an office in London or the UK. British lawmakers will create new economic winners and losers as they restructure their marketplace, trade laws, and relationship with many of their largest trading partners.
Long Term Impact
The European Union has never faced a member leaving, and it will put immense pressure on the other members. Treaties that bound the organization always offered an exit strategy, but the departure of one of the largest economies will likely damage the European economy. How much damage will be done remains unmeasured, however it will likely be extremely difficult for a multi-state economic union with many ailing economies.
The global economy will have to adjust to a less neoliberal stance from Britain, one of the most stalwart neoliberal voices in the world. (For neoliberalism, think large corporations and free trade meets life, liberty, property, and rule of law of traditional liberalism.)
British populists scored a victory, which may embolden other populist candidates (see Trump, Donald) in other states. Nationalist and xenophobic tones seem to trump even the most dire economic warnings – including threats that the British Pound could “implode” from experts. For decades, money matters more than racism has been a prevailing school of thought in neoliberal states. The rise of neopopulism in Western culture is an increasingly powerful force — the first to legitimately challenge neoliberalism.
Historically, populism is a political doctrine that appeals to the hopes and fears of the general population. Populist candidates often fail to win higher office, likely because they push too hard against the status quo interests – who already hold power and have deep political roots. Although many would support the populist candidates, technology was unable to adequately unify outsider candidates.
Neopopulism is a remarkably stronger movement than previous waves of populism. Neopopulists believe that they are doing the right thing, do what they think feels best, and trust their gut intuition over data analysis from experts. They feel wronged by policymakers.
In many cases, populist candidates’ messages sound like a mad-lib. “This country would be better if it were not for __________ cheating you by taking advantage of __________ , therefore we should do __________” is a classic example. (For the left-leaning Sanders flair use: big banks, loose finance laws, regulate Wall Street; for the right-leaning Trump flavor use: immigrants, loose immigration policies, build a wall.) In the contemporary world of social communication, new avenues for populist messages to take on additional potency. Instead of reaching a crowd assembled in a physical space, neopopulist leaders can craft entire communities online – creating an echo chamber to reinforces messages into its members. A quick trip into the comments sections on these websites will result in a quick realization that many people disregard observable facts – because they do not match the felt facts or the “common sense” dogma instilled by these communities.
Clash of Ideologies
Neoliberals face challenges from multiple fronts.
The external challenge is no longer from Soviet-style communism or the hybrid economic system in China. From the outside, al-Qaida and the Islamic State provide a violent conservatism response under the guise of Islam. Instead of valuing free trade and liberty, these actors seem more content with imposing social restrictions and tearing down the wanton spoils of neoliberalism’s dirty secret: the exploitation of labor in the developing world.
Internally, neopopulism presents the biggest threat to neoliberalism. By playing on the lowest, most basic fears of less sophisticated voters, neopopulist demagogues can pass laws that undermine neoliberal economic ideals. Neoliberalism is an inherently flawed philosophy that (unfairly?) creates a group of winners and losers, enables a world where the strong can bully the weak, and is responsible for the most remarkable period of economic growth in human history. Neopopulist decisions — like the Brexit — threaten that prosperity. What positives that will result from this philosophy remains to be unseen.
(please pardon the typing errors… this was pieced together in approximately 58 minutes)