The UK’s stunning vote to leave the EU was driven by much of the same sentiment that fueled Donald Trump’s insurgent march toward the US Republican presidential nod: A rejection of economic globalization and the elites who favor it by those who feel left behind.
Many economists warn that the British vote to leave the EU, dubbed “Brexit,” could cripple that nation’s economy — just as many say Trump’s ideas would stifle US growth or even trigger another recession.
Millions of voters have defied those concerns. The Brexit vote and Trump’s widespread support reflect a sweeping rejection of expert opinion in advanced countries. Yet that rejection itself could raise the likelihood of further economic harm, some economists warn.
“At some level it is a cry of frustration, but one that could end up hurting an already economically harmed part of the population,” said Eswar Prasad, an economics professor at Cornell University and former official at the IMF. “That is the remarkable irony here.”
At first glance, the UK and US economies look comparatively healthy. Both have low unemployment rates. Both have recovered from the Great Recession better than either continental Europe or Japan. Yet in both countries, those figures conceal underlying weaknesses.
David Blanchflower, an economics professor at Dartmouth University and a former policymaker at the Bank of England, said average weekly pay in the UK, adjusted for inflation, remains 7 percent below its most recent peak, reached in 2008.
Stark regional differences are also evident in both countries. London has boomed in recent years along with its thriving financial sector and home prices in the city have soared. By contrast, steel plants and coal mines have closed in Northern England and Wales.
A similar economic divergence is visible in the US: Thriving technology start-ups have invigorated a handful of cities such as San Francisco, Seattle and Denver. However, jobs and incomes have grown more slowly in other metro areas and in rural areas.
“It’s like Trump going to West Virginia and saying it’s all going to be great,” Blanchflower said. “Trump can’t help them. But you can see why they would want change.”
Colin Montgomerie, 54, who lives in Maybole, Scotland, and voted to leave the EU, says stagnant pay was a driving factor for many voters like him.
“I work at the NHS [National Health Services] and I received a 1 percent raise last year,” he said. “Before that, my last raise was so long ago I don’t remember when it was.”
In the US, paychecks have recovered from the recession, but have risen much more slowly than they did beforehand. And both countries took much longer to recover from the downturn than they did after past recessions.
William Galston, a senior fellow at the Brookings Institution, said Brexit voters were “startlingly” similar to Trump’s coalition: More likely to be older, with less education and more likely to oppose immigration.
Listening to British television coverage of the vote, “I could have shut my eyes and altered the accents, and I would have thought they were talking about the American election,” he said.
The “leave” supporters argued that Britain’s economy would improve once it threw off excess regulation imposed by Europe and was no longer yoked to continental Europe’s moribund growth.
“We have two governments and we are being told what to do effectively by someone who doesn’t understand us at all,” said Matthew Corby, a 40-year-old software developer in London. “We have very little influence over this.”
Yet many economists say UK companies might face new barriers to their exports in Europe after they leave.
The EU is likely to want to negotiate tough terms with Britain to discourage other countries from leaving the union. Many companies, particularly international banks, which have a huge presence in London, could shift thousands of employees from London to Paris or other cities on the continent.
“Why would you locate in the UK?” asked Desmond Lachman, resident fellow at the American Enterprise Institute and former IMF official. “You don’t know what kind of access you’ll have to the [EU]. Why not just wait?”
The British pound fell about 7 percent in value against the US dollar by Friday afternoon. Such a decline raises the price of imports and could spark inflation.
Fred Bergsten, founding director of the Peterson Institute for International Economics, said the UK’s economy is likely to slip into recession next year.
Economists have raised similar concerns about Trump, who has threatened to slap huge tariffs on imports from China and Mexico.
Those tariffs would likely raise costs for US consumers, economists said, and are unlikely to return many factory jobs to the US.
Instead, many factories would shift to other low-cost countries.
Trump and Brexit supporters express eagerness for change, regardless of experts’ warnings.
“There’s a trust issue here,” Galston said. “A lot of the pro-leave people said, ‘Why are they so confident that if we put “Britain first,” it’s going to be worse than what has happened to us when international treaties and laws and regulations have shaped our economy?’”
Bob Johnson, 70, discussed the vote on Friday at a pub in Maybole, Scotland. Unlike most Scots, he supported Brexit.
“For a lot of folks this was a protest vote,” he said. “Protesting being taken for granted, protesting not having their voices heard.”
Associated Press writers Jonathan Lemire in Maybole, Scotland, and Leonora Beck in London contributed to this report.
Could Asia be on the verge of a new wave of nuclear proliferation? A look back at the early history of the North Atlantic Treaty Organization (NATO), which recently celebrated its 75th anniversary, illuminates some reasons for concern in the Indo-Pacific today. US Secretary of Defense Lloyd Austin recently described NATO as “the most powerful and successful alliance in history,” but the organization’s early years were not without challenges. At its inception, the signing of the North Atlantic Treaty marked a sea change in American strategic thinking. The United States had been intent on withdrawing from Europe in the years following
My wife and I spent the week in the interior of Taiwan where Shuyuan spent her childhood. In that town there is a street that functions as an open farmer’s market. Walk along that street, as Shuyuan did yesterday, and it is next to impossible to come home empty-handed. Some mangoes that looked vaguely like others we had seen around here ended up on our table. Shuyuan told how she had bought them from a little old farmer woman from the countryside who said the mangoes were from a very old tree she had on her property. The big surprise
The issue of China’s overcapacity has drawn greater global attention recently, with US Secretary of the Treasury Janet Yellen urging Beijing to address its excess production in key industries during her visit to China last week. Meanwhile in Brussels, European Commission President Ursula von der Leyen last week said that Europe must have a tough talk with China on its perceived overcapacity and unfair trade practices. The remarks by Yellen and Von der Leyen come as China’s economy is undergoing a painful transition. Beijing is trying to steer the world’s second-largest economy out of a COVID-19 slump, the property crisis and
As former president Ma Ying-jeou (馬英九) wrapped up his visit to the People’s Republic of China, he received his share of attention. Certainly, the trip must be seen within the full context of Ma’s life, that is, his eight-year presidency, the Sunflower movement and his failed Economic Cooperation Framework Agreement, as well as his eight years as Taipei mayor with its posturing, accusations of money laundering, and ups and downs. Through all that, basic questions stand out: “What drives Ma? What is his end game?” Having observed and commented on Ma for decades, it is all ironically reminiscent of former US president Harry