It has been three years since the Brexit vote and the global rise of Trumpism in its various forms, and Britain has reached a stage of absolute political dysfunction which I don’t pretend to comprehend in the slightest. Nonetheless, nothing has changed since economist Mark Blyth made the following clear-eyed assessment of the situation in June 2016. In spite of people’s fears of short-term disruption or threats to their privileges, they easily lost sight of the fact that the Eurozone and the EU are undemocratic disasters that are destined to end badly. The inescapable reality is that there are regional and national disparities that only worsen under the economic austerity policies required by the EU and the Eurozone. Mark Blyth comes down on the side of Brexit saying, “I don’t see that [the EU] ending well, so perhaps it’s better to nip it in the bud when you’ve got the chance.”


mark blyth-2016-06

(See the video here).

Well, here’s the thing. I’m very pro-European, but I’m against the euro, so if I still lived in the United Kingdom, I would have an interesting choice. Larry Elliot in The Guardian has said that he thinks he should vote for exit because this might be the existential crisis that blows up the euro. Now why would you want to blow up the euro because that will be terrible etc.? Because the long-run effect of the euro is going to be to drive Western European wages down to Eastern European levels in global competition for export share with the Chinese. That’s one interpretation as to where this all goes, and that’s going to be fine for the Eastern Europeans coming up. It’s going to be great for very efficient exporters in the north. It’s going to be an absolute disaster for France and parts of Italy, if not all of Italy, and certainly for Greece.

Now if you have a system in which one side is running a surplus and the other side isn’t allowed to run a deficit, because of the rules, the only thing the other side can do is permanently contract their economies to allow someone else to make money selling BMWs. I don’t see that ending well, so perhaps it’s better to nip it in the bud when you’ve got the chance. Now the thing with Brexit is I don’t think that’s what the debate is all about. This is Trumpism. Everybody’s got a version of it. Trumpism! Remember Donald Trump?

So, well, here’s what I mean by Trumpism. For the past 25 years, particularly the center-left has told the bottom 60% of the income distribution in their countries the following story: Globalization is good for you. It’s awesome. It’s really great. We’re going to sign these trade agreements. Don’t worry. There will be compensation. You’ll be fine. You’ll end up as computer programmers. It will be fantastic, right? And by the way, we don’t really care because we’re all going to move to the middle because that’s where the voters are, and they’re the people with money, and they’re the ones that we really care about. So you get this shift under Schroeder [in Germany]. You get the same thing under Blair with New Labour, whatever, and you make that move.

And you basically take the bottom 30% the income distribution and say, “We don’t care what happens to you. You’re now something to be policed. You’re now something to have your behaviors change. We’re going to ‘nudge you into better patterns,’” as the Americans like to say. It’s a very paternal and very patronizing relationship. This is no longer the warm embrace of social democracy, arm-in-arm in solidarity with the working classes. They’re there to be policed and excluded in their housing estates so that you feel safe in your neighborhoods, so that you can have your private schools while they have their public schools, which you don’t really want to pay taxes for anymore.

So once this has evolved over 20 years, you have this revolt, not just against Brexit. It’s not about the EU. It’s about the elites. It’s about the 1%. It’s about the fact that your parties that were meant to serve your interests have sold you down the river. So UKIP, Le Pen… they’re all the same.

Think about how ridiculous this thing is. Think of this Scottish independence thing, right? So these guys vote to stay in [the UK] because the entire British establishment links arm and arm and says, “Don’t do it.” You’ve got to wonder why because ultimately who’s going to get hurt if they do it? People with money. So they’re saying, “Don’t do this.” So they say, “All right then, we won’t do it.” So then the SNP, the anti-austerity party, say, “Well we didn’t win, but we’re still in power. Great. On you go.” So what happens next? If, apparently, there’s going to be a Brexit vote to get out [of the EU], then the Scots are going to vote to [separate and] get back in [the EU]. This is fun, right? So you’re going to give up George Osborne, who is an austerity chancellor for who? Dr. Shäuble?* So your nice little Scottish welfare state is going to be really well protected by the tender embrace of the Germans? How’s that working out for the Greeks? People aren’t thinking this one through.

This is basically a revolt against technocracy. It is a revolt against governments by unrepresentative, unelected undemocratic elites, and against having had a government where every single district in your country says “no chance”… 61% say “no chance”, and then the result is “We’re going to do it anyway.” You’re basically proving to people that democracy is irrelevant. So this is global Trumpism. It’s a no-win scenario until basically elites figure out that at the end of the day, as I like to say to my American hedge fund friends, the Hamptons is not a defensible position. The Hamptons are a very rich area on Long Island that lies on low-lying beaches. It’s very hard to defend a low-lying beach. Eventually people will come for you.


*At the time of the interview Wolfgang Shäuble was German Minister of Finance, (2009-2017). He has been described by The Economist as “Europe’s foremost ayatollah of austerity.”