‘Brexit’ Vote and Donald Trump’s Surge Reflect Discontent
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Version 0 of 1. Britain may be on the cusp of having its own Donald Trump moment. That is to say the once unthinkable is now thinkable: Britain exiting the European Union is now a real possibility as the result of a wave of populism that has spread across the nation, against the backdrop of a fierce debate about the flood of migrants who have entered the country. The possibility has huge implications for the global economy – just think about the repercussions when Greece almost left the European Union last year. David Cameron, Britain’s prime minister, has set June 23 for a national referendum. He is convinced Britain should remain part of the bloc, but polls show that the establishment, as in the United States, may be out of touch and favor. “In both Middle America and Middle England, among both rednecks and chavs, voters who have had more than they can stomach of being patronized, nudged, nagged and basically treated as diseased bodies to be corrected rather than lively minds to be engaged are now putting their hope into a different kind of politics,” Brendan O’Neill wrote in The Spectator. Britain has remained one of the few members of the 28-country European Union that have not adopted the euro, nor the passport-free approach to borders within Europe. Fifty-five percent of Britain’s laws, however, are governed by the European Union. The nation’s financial institutions, most of which are based in London, want to remain in the European Union, and some have said that they might have to leave the country if Britain were to abandon the bloc. In the face of all the sturm und drang about a Brexit — that’s the too-cute portmanteau for a British exit – I called perhaps the most influential member of Britain’s financial establishment to find out the reality of whether the country will leave and what the implications could be. That person is Mervyn King, the former governor of the Bank of England who, unlike many of his colleagues, can actually speak his mind these days. Mr. King is the equivalent of our Ben Bernanke, having overseen Britain’s central bank during the financial crisis. He has been out of office for a little over two years, which has given him some perspective and the freedom to criticize his establishment brethren. I reached Mr. King at his countryside home in Kent in southeast England. He just finished writing “The End of Alchemy: Money, Banking and the Future of the Global Economy,” which is being released in the United States in about three weeks. Mr. King has been warning about the possibility of another financial crisis, which he has contended is a near certainty, and says that the European Union is set for an “economic political crisis.” In his book, he suggested that the monetary union had created a conflict between a centralized elite and democratic forces at the national level. “This is extraordinarily dangerous,” Mr. King wrote. When he came to the phone, Mr. King was quick to say, “I have no idea what will happen.” But he then offered a sober view of what should happen. “The sensible position would be that all countries ought to be able to agree that there will be two types of member of the E.U. for the foreseeable future — those in the euro area and those outside,” Mr. King wrote. “And the degree of political integration can be quite different for those two categories of members.” If the two categories of E.U. countries were widely accepted, he says he believes that “a lot of the tension underlying the concerns about what emanates from Brussels would disappear.” The problem with that seemingly reasonable view is that many in the European Union believe there needs to be an even larger and greater integration for this economic and political experiment to ultimately succeed. That’s a point Mr. King is quick to acknowledge. “Brussels would be very unhappy about it because they want to have control over every member country and have a single framework that they implement,” he said. Britons in favor of leaving the union want more control over their laws, their economy and the flow of refugees into their country. “I will be advocating Vote Leave — or whatever the team is called; I understand there are many of them — because I want a better deal for the people of this country, to save them money and take back control,” London’s mayor, Boris Johnson, said. Such a view reflects the fragile state of the British economy, but the sense of economic helplessness is global. Mr. King expressed worry over the endless amounts of money that central banks in the United States, Japan and other countries have printed to help goose the economy. He said that the move in some countries toward negative interest rates — in which depositors pay to hold money in bank accounts — was not the answer. “Central banks shouldn’t suddenly withdraw the stimulus they’re giving,” Mr. King said. “But they can’t do much more.” Whatever the outcome on Brexit — the polls have a wide margin and have swung wildly in recent weeks — there is likely to be increasing uncertainty over Britain and the European Union not just in the next several months leading up to the vote, but also in the years ahead, according to Mr. King. He cited China’s weakening economy as one of a number of concerns. “I would be rather pessimistic,” he said. |