When it became clear that the British really had voted to leave the EU, markets around the world dropped to the floor and began twitching. One couldn’t help but be reminded of the collapse of Lehman Brothers almost eight years ago, but perhaps the Brexit vote isn’t so much an echo of Lehman Brothers as a sequel in a long story of economic disappointment.
The 2008 financial crisis shaped the rhetoric of the Brexit debate, of course. Had this vote taken place 10 years ago, the fact that most economists thought that leaving would be an act of awful self-harm would have carried weight. The prospect of investment banks moving their activities to Dublin and Frankfurt would have seemed like a disadvantage, not a two-for-one offer.
There is a good argument that, despite the crisis, both economists and banks have something useful to contribute, but that case was never likely to be heard. It was too much to expect a subtle and well-reasoned public debate on the risks and contributions of London as an international banking centre. The most prominent claim of the Leave side — that the UK spends ￡350m a week on EU membership and could spend that on the National Health Service instead — sailed untouched through the campaigning, despite being simply false.
But some of the seeds of this vote have been growing for much longer in the fertile soil of economic grievance. The UK, like every other major developed economy inside or outside the EU, was growing more quickly per capita before 1973 than afterwards. Slow growth has been the norm across the G7 for four decades. It has been exacerbated in anglophone countries by a sharp increase in top-income inequality in the 1980s and 1990s, which has meant that the benefits of even this modest growth have not been widely felt.
And so we see a desire to upend the status quo: Brexit, of course, but also the rise of radical politicians from Marine Le Pen in France, Donald Trump in the US and Geert Wilders in the Netherlands on the right, to Jeremy Corbyn in the UK, Trump’s opponent Bernie Sanders and Alexis Tsipras in Greece on the left.
But perhaps there are deeper forces too. In 2005, the Harvard University economist Benjamin Friedman published The Moral Consequences of Economic Growth, arguing that times of broad-based economic progress also tended to lead to moral progress, to “greater opportunity, tolerance of diversity, social mobility, commitment to fairness, and dedication to democracy”. Reverse the economic gains and the moral gains may also evaporate.
Friedman argues that we naturally compare ourselves to others. We can compare ourselves to TV celebrities (a recipe for misery, since they are all richer, more famous and better looking than we are) or, as per the platitude, to “those less fortunate than ourselves”.
But, usually, we make one of two simpler comparisons. We can feel happy because we’re doing better than we were last year, or we can feel happy because we’re doing better than our neighbours. In good times, everyone can feel happy for the first reason, but not everyone can feel happy for the second.
When prosperity is broad-based and growing, it’s cheering to look back at how far we have come. We can relax, knowing that we’re earning twice the salary, that we own a larger home, that there are savings and a pension. But in bad times there is little solace to be had by thinking about the past. All we recall is that our younger selves had hair, muscle tone and, above all, a bright future — each of which time has taken away from us.
And so in tough times we resort to the other comparison available to us: are we doing better than our neighbours? When we stop admiring how much the pie has grown, we start fighting each other for a larger slice. Many people who voted to leave did not see EU membership as a joint project for mutual benefit but as a zero-sum game that Britain was losing and Brussels was winning.
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Economists are naturally inclined to see the world as a place where everyone can prosper. The Trumpish rhetoric of winners and losers is alien — and alarming — to us. But that is the world in which we now live. The economics of Brexit are daunting but, with goodwill on all sides, they are manageable. It is the zero-sum politics that worry me.
It would be wrong to suggest that economic suffering inevitably produces a backlash. In the UK, the people who have struggled most since the crisis have been the young — and, in a sadly inspiring act, they were the ones who voted overwhelmingly to stay in the EU.
Still, the economic backdrop clearly matters, both in its own right and because of its political effects. Those of us who are committed to openness and prosperity for everyone, regardless of their nationality, now have a long campaign on our hands. We should start by accepting that, if we cannot bring back broad-based and growing prosperity to the advanced economies, Brexit will not be the last political shock we must face.