Markets hate surprises. So do I. But markets will sort out their level in due course and the economic impact outside of Britain may not be as bad as today.
What bothers me is the social trends that led to this – they still exist. Left-behinds is the term. Those for whom capitalism over the last, say, 10 years has simply not delivered. They have no houses on the monopoly board, have not passed “Go”, did not pick up $200. Why not turn it over and storm out of the room?
Call it distrust of experts: politicians, economists. A feeling that banks and corporations no longer care about their employees.
The poor in England have increased by 64% from 1980 to 2010; the rich by 36% and the middle-class has declined by 26%.
In the US, the Federal Reserve conducts an annual survey to gauge economic health. It found 47% of Americans would either have to borrow, sell something or simply had no means of coming up with $400 to cover an emergency.
Existential questions of human rights, gender rights, fiscal union, EU free trade and movement of goods, the EU project of combining into a larger sovereign negotiating block, preventing the fractures and disputes that led to a millennium of wars and conflict do not matter if you are stressed about living paycheck to paycheck. Brecht said, in the Threepenny Opera, “First comes a full stomach, then comes ethics.”
Why am I sad? I am sad because the arc of history is supposed to bend towards progress: education and the advancement of knowledge should lead to better ideas, more productivity, better stewardship of our resources, better economic outcomes for more or the world’s population, more understanding, better relationships – international, national, group and individual. Sometimes it’s not so obvious it does.
A friend explained today his view of Brexit and the rise of Trump in the US as a repudiation of bureaucratic liberalism in favor of populism/nationalism. He concluded that, since people “hate having sanctimonious liberalism” rammed down their throat, they are prepared to make impulsive decisions to register their anger and frustration.”
Since 1980, non-financial corporations have returned an average of $376 billion per annum in dividends and share buybacks to the stock market. In the decade 2003-2012, the 449 companies in the S&P 500 Index in January 2013 that were public listed in 2003 expended 54% of net income ($2.4 trillion), on stock buybacks and another 37% of net income on dividends. That left 9% for new investment in productive capabilities (such as R&D), or profit sharing with employees through increased remuneration.
This financialization of the economy has been profoundly damaging, has led to an increase in debt capital and that has become associated with higher risks of cyclical financial shocks.
I am sad because I have not informed myself about this until recently. Have I been asleep?
I am sad because this is messy to fix. There is a wall of special interest money standing in the way of change. Maybe it takes the zealotry of an Elizabeth Warren to make this change.
I am sad because this is a world we are bequeathing to our children and we have not been good stewards.
I am sad because Brexit reminds me, sitting in the US, a dual US-UK citizen, that a democracy much older than the US, is struggling; that maybe, Fukuyama’s vision in the End of History of the eventual global triumph of political and economic liberalism is not as certain as I would have liked.
It may be that the tendency of liberal democracies is to reach a point where the accommodation and recognition of the equal needs of all leads to a kind of impotence to act because meeting the interests of so many becomes too complex and too entangled.
It may also be that we are just on a bumpy patch and that the culprit is inequality – our failure to harness technology and innovation to increase the well being of all. If we can fix this, the vision will be restored.
Combatting inequality as we experience it today in America and Great Britain will require politicians of vision prepared to work together to achieve a common goal. Who are they?
And here is the final reason for Brexit sadness. I had thought the quality of leadership in Great Britain to be superior to that we are currently suffering in the US. Evidently not.
A sad day – at least for me.