There are few things I enjoy more in politics than an election day. It doesn’t matter what the election is about or what the voters are casting their ballot on. I love watching the results come in and seeing new data come in on what voters are thinking, feeling, and acting upon. With the American Presidential primary season over, my attention turned across the Atlantic to the “Brexit” vote in the United Kingdom.
While I was at work I adjusted my Twitter feed to ensure a steady flow of British election returns. I was looking forward to an evening of listening to the BBC and watching UK reporters send out reports on the ground. As soon as the polls closed for the UK referendum vote, I began refreshing Twitter at my work desk incessantly for new updates. Prior to the vote, I was unsure how I would have voted in the referendum myself. I understood both the Leave and Remain campaigns. But secretly, I was hoping Britain would leave the European Union. Being somewhat of a “eurosceptic” and the ever-growing role of the EU in world affairs, I secretly hoped the British would retake their rightful place on the world stage.
The first major news story after the polls closed was disappointing. Polls done the day of the vote were immediately released showing a strong lead for the Remain campaign. The Leave camp even acknowledged as much, saying that it appeared “Remain had edged it.” This was prior to any votes being counted. A Remain victory was somewhat expected in the news media and the American stock market responded by jumping up at the news. Little did anyone know what was coming that evening.
As my work day came to a close, the first returns came in showing a very tight race between the Remain and Leave camps. Commentators everywhere agreed a long night was ahead. Expectations still held stead a Remain victory would occur. Then, just before I left work for the day, one of the first major bellwether results came in: Sunderland. For Americans, think of this like getting the results for a battleground state like Virginia, Florida, or Ohio – whoever wins one of these states is expected to win the night. A dominant win is a telling sign. The Leave campaign was expected to win Sunderland by 6 points. The results shocked everyone: Leave won Sunderland by a dominant 22 points.
The Leave campaign’s domination in Sunderland set the tone for the rest of the night. Sterling prices immediately dropped 3% at the news of the results and world markets reacted accordingly. The Leave campaign over-performed everywhere in Britain. After the Sunderland results, US Banks began reevaluating the situation. JP Morgan released a note predicting Leave to win, their prediction effectively nailed the final results of Leave 51.9% and Remain 48.1%:
JP Morgan says current results point towards a 51.5pc victory for Leave. NB v early projection pic.twitter.com/jIKLkjstlR
— Ed Conway (@EdConwaySky) June 24, 2016
Brexit, the vote for the UK to leave the EU, had won.
My favorite story from the night:
Highland authority Counting Agent escorted from the building for… drinking too much.
— Britain Elects (@britainelects) June 23, 2016
Gotta love the Brits.
I rattled off a number of thoughts on Facebook and Twitter about the Brexit vote. It was late at night and I was exhausted. The following morning my phone buzzed non-stop from friends, family, and social media shocked at the outcome (I left the gym the next morning with half my battery already drained). The questions I kept getting were: Is this a good thing? What happens next? What does this mean for the US? I’m going to answer these questions as best as I can, unlike media members who are freaking out over a country declaring independence.
Is it a good thing for the United Kingdom to leave the European Union?
I would argue, “Yes.”
The primary reason I would argue in favor of the Leave campaign is that they offered sovereignty and local governance. The Remain campaign waged a fear campaign (more on this later) that refused to acknowledge they were arguing Brussels should have ultimate say in British policy. The reason I make this argument: The EU is not a democratic institution responsive to the people. It’s a bureaucratic technocratic institution that has consolidated power in an elite who are unanswerable to voters. As this piece in the Public Discourse puts it (and you should read):
[The EU] is not anti-democratic due to any lack of institutional checks and balances but due to its commitment to separating a notion of citizenry from that of peoplehood, in order to ensure that the legislative process remains ultimately unaccountable.
The EU removes legislative power from the people and gives it to an elite. This elite legislative class does not keep an individual nation’s interests at heart. It keeps the EU at the center of its focus. This centralization of power alienates people from the powers governing them. Similar to the cry of Americans during the Revolution, “No taxation without representation,” the British feel they are being told what they can and cannot legislate in their country without proper representation in the EU. Revolting against this type of power is both natural and a moral right.
The analogy I gave a friend to help explain it went as follows: Imagine the United Nations was more powerful than it is currently. If the US passed any laws within its borders, it would have to clear them by the UN first. If the UN did not like the law, it could stop the US from implementing the law. If the UN made a law contrary to the will of every single American, the US would be forced to follow that law. Further, imagine that the politicians running the UN were failed US politicians who had been voted out of office. The decisions these failed politicians made would all be made far from America’s own borders. This is the growing super-state power of the EU. Brussels makes the decisions everyone else has to live with. The British and French armies do the bidding of the EU while British taxpayers pay for bailouts in Greece, Spain, and Italy, and for the excesses the EU decides to have for itself.
I don’t know about you, but I’d vote to Leave the UN in that hypothetical.
The issue of sovereignty over internal affairs was the #1 issue for those voting Leave
— Paolo Jerome (@pablomatto78) June 26, 2016
The EU is slowly grabbing more power for itself. If it wants to become a European super-state that erases all the countries within its borders, it should say so and have people vote on that instead. Currently, it just takes more legislative and executive power for itself while becoming less accountable. This is rule by bureaucrats, not the consent of the governed. Brexit was decided correctly. The EU needs massive reforms and refuses to undergo those reforms. The UK has retaken its sovereignty and can lead its people again. This is a good thing for the UK.
It’s worth noting the EU’s response:
— EP President (@EP_President) June 24, 2016
This, in a sense, is why we couldn't stay. The EU doesn't do ambiguity. You're either committed or you're outside. https://t.co/XDBFNKEtCK
— Daniel Hannan (@DanHannanMEP) June 24, 2016
The issue of Immigration in the Brexit vote
Immigration was the second big issue animating the vote. The EU removes all member state’s decisions regarding immigration. I’ve read a number of hot-take pieces saying the election was about xenophobia among the British population. I disagree with that brash assessment. It takes the motives of a few and paints them across the entire Leave movement. Remember, turnout was at 72% for this referendum. Higher than even a general election. Painting that large a swath of the voting public as racist/xenophobic hyperbole. But let’s dig into the data for more…
Specifically in the case of the British, the EU’s decision to remove all walls and allow immigrants free reign across all borders without check is the major issue. You can see how, as immigration inflows increase, so does British concern:
Here it is in a picture: British public opinion re: immigration very responsive to ACTUAL immigration. pic.twitter.com/Ps3S8KPdHO
— Lyman Stone (@lymanstoneky) June 24, 2016
The larger the inflow of immigrants, of any race, the more immigration concerns the British. Why? As pointed out about: the EU removed any control the British could have over immigration. The higher the inflows of immigrants, the more concerns persist. Give the British more control over immigration and you’ll likely see a happier populace. Primarily because they will be the ones making the decisions on immigration, not Brussels. If you recall, during the height of the Syrian refugee crisis, the response of the EU to concerns of any country over safety with large numbers of immigrants flowing into the EU was that detractors were racist or xenophobic. The EU has refused to assuage the fundamental concerns people have of refugees flowing into countries and placing increasing burdens on local services.
I’d also disagree that a large segment of the Leave vote on immigration was xenophobic because of how politically diverse the Leave coalition was across the board. As Charles C.W. Cooke notes (emphasis mine):
I have been startled by the condescension, the disdain, and the downright bullying that I have seen from advocates within the Remain camp. That this morning I am seeing precisely the same attitudes on display has left me wondering whether the British chattering classes are capable of learning new tricks. More than 17 million voters opted for Leave yesterday, and yet to take their opponents at face value would be to conclude that this vast and diverse coalition of citizens was little more than a revanchist, hate-filled, antediluvian rump. It is certainly the case that the center-right opted overwhelmingly for exit. But it is notable that the election was won not on the playing fields of Eton or in the leafy gardens of England’s Home Counties, but in the industrial Northeast and the blue-collar Midlands. Indeed, as the Mirror and others have observed, Leave’s margin was provided not by a surfeit of conservatives, but by working-class social democrats who traditionally vote Labour but whose concerns are increasingly out of sync with the rest of their party.
In our present climate, it is customary for cosmopolitan sorts to accuse anybody who dissents from the European project of being an unreconstructed “nationalist.” Insofar as this describes the dissenters’ desire to return power to their own parliament and to ensure that their vote matters as much as it should, it is an accurate term. Outside of that, however, it is a slur, and a damnable one at that. George Orwell contended that the difference between patriotism and nationalism was that patriotism involved “devotion to a particular place and a particular way of life, which one believes to be the best in the world but has no wish to force on other people,” while nationalism “is inseparable from the desire for power.” By this definition at least, Britain’s decision to extricate itself from the EU was patriotic, not nationalistic. Indeed, if there is any group within the debate that seeks to impose “a particular way of life . . . on other people,” it is the one that wants ever-closer integration into Europe, and, eventually, a federal super-state.
Notice the point here on immigration: It isn’t that immigrants are bad or evil, as many in the Remain camp alleged Leave was saying. But rather that Britain had little control over who was allowed in. Countries like Canada have a points system to determine who to allow in, other European countries have highly strict immigration policies (see Denmark). The EU removed the power from the people to decide their own path on immigration. Presuming that Britain will automatically pursue the most draconian of immigration policies is the worst form of fear-mongering. Not reality.
It’s a good thing for the UK to Leave the EU
It’s worth remembering, the late Margaret Thatcher argued against the European Union having a strong hold over British politics in 1990.
It’s a good thing for the United Kingdom to leave the EU. As a writer in The Telegraph said:
What happens now? We drink. We be happy. We sing a song. Then we piece back the country and get on with the great project of building the British century. We voted the right way because we’re a nation with a sense of destiny. The world is ours now. Go get it.
What happens now that the British have voted for Brexit?
There’s an old story out of Aesop’s Fables about an Astrologer who was walking along and watching the heavens as he walked. As he continued, head in the air, he suddenly tripped and fell head over heels into a well. A rescuer came along and asked what had happened. After informing the rescuer of the incident, the rescuer scoffed at the Astrologer and said, “No one regards what is before his feet when searching out the regions of the sky.” The moral was meant to convey how Astrologers focused so intently on unknown speculation in the stars that they missed reality on the ground.
In many respects, we have a similar situation here. The Remain campaign spent so much time pushing a negative campaign about all the potential bad things that would befall Britain as a result of Brexit that they have left people unable to discern what will happen next. There is no need to search the sky for what will happen as a result of Brexit. We can’t know everything, but there a number of issues that have to be resolved. Fearing and thinking about WWIII happening as a result of Brexit is a head in the air possibility.
A more grounded view of what will happen and the decision that follow would like something like the following list:
- A new Prime Minister will have to be elected with the resignation of David Cameron. This will happen in a few months.
- New government leadership will have to be arranged across all the parties as the new PM is selected. It’s not just Conservatives who will see a shakeup. The Labour Party is organizing behind a vote of no confidence regarding Jeremy Corbyn (good riddance).
- The UK will have to negotiate new trading agreements with various countries, most notably the EU it just left
- Scotland will have to debate/decide whether or not it wants a second referendum on leaving the UK and re-entering the EU
- Ireland wants new discussions over the reunification of Ireland.
- Once the new government is in place, the UK will have to pass new immigration laws
- The UK will have to decide how to handle the millions of EU citizens in its borders, working and living, who are not UK citizens.
- Conversely, the UK and EU will have to negotiate how to handle UK residents abroad in the EU.
- The UK and Bank of England will have to take measures reassuring investors and reestablishing Sterling’s value
- The UK will have to decide on how to use/deploy its military across Europe. The French and British are the two main armies in the EU. Brexit leaves the French as the main force in the EU. It will be interesting to watch how this shifts French priorities.
- If other Countries leave the EU, as is expected, how will trade with the UK and the EU be affected?
- The nuts and bolts of how these decisions will be handled are covered here.
Each of these decisions has a multitude of variables that will affect other decisions. The Remain campaign often went to the absolute worst case scenario with every single one of these questions. Remain claimed it was a choice between the status quo and, practically, the end of the world. It’s difficult to imagine the UK will deal with the worst case scenario in every situation they encounter. The reality of the situation is that there is great uncertainty on how the future will come out, but there exists an equal chance good will happen as well as bad. That is true for every free country and will be true of the UK.
The key is Britain has given itself power to decide its own path now. It is independent to make these decisions and not run them past Brussels. It can seek to push the interests of its own citizens without concerning itself with the issues of Brussels. Even if the worst case scenario happens with the choices above, Britain can choose to reverse course. Or, voters can vote in politicians to change that course. Britain has choice and sovereignty. And that is a very good thing.
“Britons want a revote” is a false media narrative
— Ankit Panda (@nktpnd) June 26, 2016
You may have seen stories running around social media saying people in the UK want another referendum vote to overturn the Leave win. These stories are usually accompanied by a story where a person who voted Leave is shocked to see the country is actually leaving the EU. Here’s the thing… the petition is fake. Internet trolls from the website 4chan used scripts written up to send in names from North Korea, the Vatican City, and other places outside the UK. But networks desperate for a Remain narrative are reporting it as true.
Even if it was true, those stories and petitions focus on such a minor segment of the population, they’re pushing a false narrative. The people signing that petition were mostly for Remain already. Those who voted Leave? They’re actually pretty happy with the results. Actually, that’s an understatement: Leave is universally ecstatic:
Vote split // On the #EUref result (Remain / Leave):
Happy: 4% / 92%
Unhappy: 88% / 1%
Indifferent: 7% / 5%
— Britain Elects (@britainelects) June 25, 2016
If you use happiness as a measure of determining a second referendum, at the same turnout rate, it is likely that the Leave campaign would win by a larger margin than before. It is conceivable that the 4% of Remain voters happy with Leaving would switch their vote. And only 1% of the Leave campaign is unhappy. ONE PERCENT. Compare that to the amount of coverage unhappy Leave voters are getting in the media and you immediately notice the unmistakable stink of media bias. The online petitions floating around change nothing about the EU referendum vote. The vote was democratic and the choice of the people. The same people ranting about how bad direct democracy referendums are, would be cheering the mandate of Remain had they won. How do you think the Remain camp would treat Leave voters with they wanted a revote? Given the stink in the media, the first word that comes to my mind is: contempt.
P.S.: British people were not frantically Googling what the EU was after the vote, as has been widely reported. That was about 1,000 people out of approximately 33 million who voted. Stop the hyperbolic accusations.
Do the Scots and Irish have to give consent for the referendum to have effect?
There is a theory floating around on social media that both the Scottish and North Ireland Parliaments have to give consent for the Brexit referendum to have effect. Zero Hedge provides a summary (emphasis from original piece):
The role of the devolved legislatures in implementing the withdrawal agreement:
We asked Sir David whether he thought the Scottish Parliament would have to give its consent to measures extinguishing the application of EU law in Scotland. He noted that such measures would entail amendment of section 29 of the Scotland Act 1998, which binds the Scottish Parliament to act in a manner compatible with EU law, and he therefore believed that the Scottish Parliament’s consent would be required. He could envisage certain political advantages being drawn from not giving consent.
We note that the European Communities Act is also entrenched in the devolution settlements of Wales and Northern Ireland. Though we have taken no evidence on this specific point, we have no reason to believe that the requirement for legislative consent for its repeal would not apply to all the devolved nations.
To be fair here, this is an interpretation of the law, not the rule. There are certain Scottish and Irish politicians talking about this language. They are the only ones considering this interpretation. So I would take it with a grain of salt. The political firestorm and constitutional crisis that would erupt in the UK if the courts took this stance would be unimaginable. So while there may be some merits to this argument, they aren’t particularly strong. The courts would end up having to rule on such a measure. We wouldn’t know the results for quite some time.
What does Brexit mean for the US going forward?
On the one hand, globally, there isn’t much to take away. Comparing the Leave camp and its leaders like Boris Johnson and Nigel Farage to the Donald Trump movement in the United States is wrong. The UK Leave camp has a cohesive message that went beyond the British Conservative Party. People across all parties voted Leave. Trump is appealing to a very narrow section of the American populace, has shown no ability to grow beyond that segment, and lacks a campaign beyond his personality. In other words, there are ideas and a worldview behind Leave, which isn’t true for Trump. Trump has alienated conservatives in America. I also would not go so far as some are of saying that a Leave win predicts a Trump win.
On the other hand, I do believe there are some practical takeaways we can apply to American politics.
Trump support could be getting masked by “The Shy Tory Factor”
Finding Trump supporters in the polls may be difficult, which could be suppressing Trump’s numbers in the polls. In Britain this is called “the Shy Tory Factor.” In 1992, the opinion polls indicated that the British Conservative Party was, depending on the poll, around 1% ahead or behind the Labour Party. Conservatives won the election by 7.5%. Around 2% of the miss was attributed to people hiding their actual beliefs from pollsters.
In the US, polls underestimated Republican support in the 2010 and 2014 elections. In the UK, polls also missed the Conservative Party’s wins since 2010. The polls were mostly accurate in 2012. The last minute Romney “surge” occurred in red states. Given Trump’s historically high un-favorability numbers, it is entirely possible people would vote for Trump, but hide that from friends, family, and pollsters. Approximately 25% of the population is saying they dislike both candidates and don’t want to vote for either. 29% believe Trump is a racist. Unfortunately for those voters, they’ll either stay home or pick one of those two major party candidates (I hold no hope for the Libertarian or Green Party making a major push). If they choose Trump, they can lie about that fact to everyone else.
The campaigning tone/style of Clinton matches Remain, while Trump mildly matches Leave
Remain ran a campaign based almost entirely on fear. The Remain campaign never made a case for “Why” British voters should allow the EU to have such a large say in British affairs. The Remain campaign ran almost exclusively on how “bad” things “would” get if Britain left the EU and attacked Leave supporters as racists. The Remain campaign was led by US consultants. The Leave campaign was a homegrown effort.
Leave’s campaign was far more positive based than Remain. They focused on concepts of sovereignty and empowering the British people and parliament to make decisions. Remain never truly answered these assertions. Faced between a choice between a fear campaign and a more positive message going against the status quo, the people chose the positive message.
In the United States, Hillary Clinton is leading the race with a commanding lead. Her lead over Trump has not been matched in any election this century. She is also running a campaign similar to Remain. The two speeches she has given now on foreign and domestic policy spent the majority of their time attacking Trump. Her message is that American need a steady hand continuing the status quo and spends the rest of her time attacking Trump. She is not giving people a reason to vote for her, but rather trying to scare away Trump voters.
Trump, when he makes cohesive sense, is conducting a steady barrage of attacks while giving people a reason to vote for him: “Make America Great Again.” He appeals to a nostalgia for the past. His attacks on Clinton paint her as dishonest and corrupt. The attacks stick because voters believe both things about Clinton.
I have no idea if either campaign will work. However, for the Clinton camp, this should serve as a warning that they need to provide voters a reason to vote for her, not against Trump.
Who is excited to vote? Excitement and activists pushing a campaign matter
Continuing off the messaging point: something else matters in the election: excitement. You have to drive not just voters to the polls, but activists have to be excited enough for you to push your candidate across the line. Leave had more active activists in the campaign. Remain relied on organizations, endorsements, and names. Leave relied on local activists to push their campaign.
Given the unfavorable numbers with Clinton and Trump, it’s hard to peg who has the better activists currently. Given her money advantage. It’s safe to assume Clinton. Trump hasn’t activated his activists yet. Trump does have an edge in the excitement factor, but he’s done nothing to activate that excitement.
Campaigns matter; as do campaigning fundamentals
Campaigns, staff, and a campaign strategy matter. The Leave campaign was outspent and outgunned in every manner, yet they won. It’s worth listening to their strategy. Leave went to where the voters were. They targeted them via polling and social media to find their supporters, activate them, and get them excited to vote. The scale, strategy, and precision of the Leave campaign matches every winning campaign I’ve seen. This is not to say the Remain campaign was bad, it wasn’t. Leave was better.
Which is why it’s important to note what Trump is doing: He’s not running a campaign. Trump has said repeatedly he can win on personality alone. He recently started hiring some staff for the election. But we have no idea whether or not this campaign has a strategy to win and attract voters. Trump has no get-out-the-vote operation, no data operation to find voters, and no grassroots effort to go to the voters.
You have to go to where voters are in an election. You have to find them, activate them, and convince them to vote for you. Trump is running no campaign and does not have the resources available to execute a campaign strategy. Clinton’s camp is doing all the above things in every state, pushing Trump back across the map. Trump wants voters and donors to come to him. Clinton is going to the voters, learning about them, and convincing them to vote for her. Clinton’s message may match Remain, her targeting style is closer to Leave. These things matter and can push vote totals for a candidate. Personality gets you into an election, but campaigning wins an election. It doesn’t matter how angry voters are at the status quo. Trump wants his personality to do all the work. There is scant evidence that plan will work.
Geographic polarization is a growing problem, in the UK and the US
One of the stark things you noticed immediately in the Brexit vote returns were the stark geographical differences between Leave and Remain
— Paul Kirby (@paul1kirby) June 24, 2016
In England, outside London, Brexit overwhelming won. The more urban an area was, the more likely it was to go for Leave. Working class voters also went for Leave. In many respects, this matches the divide you see in America. Especially if you drill down to the county level:
— MilWatch (@MilWatchNews) March 29, 2012
Looking at that map, you would be shocked to know Barack Obama won the election decisively. Likewise, you might be surprised how close the vote totals were with Leave and Remain looking at the Brexit map. Geographical polarization is a growing problem. It’s one of the reasons you can hear reporters based out of major cities say they don’t know anyone opposed to liberal beliefs. In 2016, we see this happening with Trump supporters (RedState noticed this too). Reporters don’t know anyone voting for Trump or for Leave.
Anecdotally, one of the things you notice in 2016 is that you’re likely to find both liberal and conservative media members who do not know a Trump supporter. To my mind, this gives credence to the “Shy Tory” theory regarding Trump voters. At least in regards to the General Election. It can also tell you how insular the America media is in regards to views outside the Beltway. In the primaries, Trump rarely over-performed his polls. It was more likely that Rubio or Cruz would over-perform their polls. Trump either performed on par or below. I suspect the opposite will be true in the General Election because people will be less likely to announce their support for Trump. The question is: will “shy Tory” voters be enough to push Trump to victory?
Geographic polarization is leading to some form of class polarization
I am loathe to discuss class theory distinct as socialists and communists do. I would argue there is more fluidity to classes than there is stasis, both in the United States and in the United Kingdom. But one of the animating factors of geographic polarization is the echo chamber that builds up in large cities. Which leads to those within the cities knowing no one outside their own political circles. In Britain, it’s London versus the rest of the country, as this piece from Dissent Magazine illustrates: “Britain’s EU problem is a London problem”
In recent decades it has felt as if the whole country had been turned upside down and shaken, until most of the wealth and talent had pooled in the capital. One of the most striking features of this period has been the turnaround in London’s educational performance; in the 1990s, it had among the worst educational outcomes in Britain, today it has the best. Some of this is owing to immigration—striving immigrant groups are helping London’s schools to thrive. But some of it is owing to a different kind of migration—talented and ambitious young people from all over the country thronging to London to teach. London’s gain is the rest of the country’s loss.
The Remain campaign undoubtedly contributed to widening this divide. Rather like the New York Times’ attitude to Trump, Remain thought it could laugh off Leave, or dazzle it with “facts.” A very large part of the Remain campaign was focused on troupes of “experts”—investment experts, science and university experts, fiscal policy experts—signing collective petitions and open letters declaring their loyalties to Europe. This played directly into anti-elitist sentiment. A very telling point late in the EU referendum campaign came when Michael Gove, one of the right-wing Conservative leaders of the Leave side, was quoted as saying that “people in this country have had enough of experts.” Much fun was made of this remark. But it touched a nerve. The next day a leaflet came through my letterbox from Remain. “Find out what trusted experts say”: a range of views from left to right backing Europe, including a trade unionist, a military chief, a scientist, a banker, and a billionaire entrepreneur. All live in London and the southeast except for one Scot and the billionaire, who lives in the tax haven of the British Virgin Islands. That billionaire, Sir Richard Branson, took out full-page ads in all the major papers in the last days of the campaign, extolling Europe. This might have done further damage to the Remain cause.
One of the things I write about often is the power of narratives over people. It is dangerous when a section of a country becomes a narrative echo chamber that is ignorant of the rest of the population. In America, we deal with this in Washington D.C. and in Britain they deal with it in London. The experts all say the same thing because they’re all in the same echo chamber, isolated from the rest of their country. They’re then flabbergasted when the rest of country doesn’t share the same worldview as those inside the echo chamber.
Part of the problem here is that there is a distinct lack of conservative voices in academia and other places. Which is why websites like Heterodox Academy, founded by people like Johnathon Haidt, who wrote The Righteous Mind, are so important. They point out the lack of political diversity in academia. Polarization will continue until echo chambers are popped.
Brexit will make stock markets flutter, but this no market tank or economic collapse
One of the stories after Brexit that bothered me the most was that Brexit would lead to an economic collapse or market meltdown. The Remain campaign perpetuated this idea throughout the campaign. The following day, I watched CNN and other networks that don’t normally cover markets regularly, decided to cover global markets going down throughout the day in response to Brexit. The point being: Brexit is obviously costing the world money. I had a long tweet storm about this on Twitter and I’m going to use some of those same charts here. The short version is this: we don’t know the ultimate impacts of Brexit, but the evidence for an economic collapse purely because of the Brexit vote is scant.
1/ Attached is a year to date chart of the Dow Jones Industrial Average. Note where we are: pic.twitter.com/YnWgTh2bDG
— Daniel Vaughan (@dvaughanesq) June 25, 2016
5/ Far more important is the S&P 500. I've attached same period of time for it as well. pic.twitter.com/zPhIlEGXIs
— Daniel Vaughan (@dvaughanesq) June 25, 2016
The above charts are a Year-to-Date look at the Dow Jones Industrial Average and the S&P 500. You’ll notice the line moves down at the very end of each chart. That is the “bad market day” after Brexit in US markets. A really bad one day plunge. The key: That one day plunge, even if it extends to 3-4 days, does not come close to touching the downturn we witnessed at the beginning of the year when Chinese GDP numbers led to poor performance throughout the globe. And frankly, the state of the market only moved back to a late April/early May outlook.
Back up to 3 years and you can see even more how ridiculous the “Brexit will lead to market turmoil” looks:
8/ Go out further to 3 years and this is barely a blip on S&P 500. Markets are not in turmoil over Brexit pic.twitter.com/EgCTVWse99
— Daniel Vaughan (@dvaughanesq) June 25, 2016
So what did we witness with such a large fall the day after the Brexit vote? Most of the market bet on Remain. They lost that bet. You can see this in the week leading up to the vote. On June 17, the Friday before the vote, markets had recently sunk on bad economic data. People had just started to look at Brexit when a slew of polls came out from June 17-23 showing Remain winning the referendum:
10/ You can see this in both the news stories that were released and the charts during that time period pic.twitter.com/sJMhVBiznw
— Daniel Vaughan (@dvaughanesq) June 25, 2016
The market put in its bets on those polls showing remain was winning. The last 3 days in particular saw a surge towards Remain bets in the market. MarketWatch noted that 75% of the market was going in on Remain winning. So what happened after the vote? 75% of the market lost their bet. Prices readjusted for a Brexit vote. In truth what we ended up seeing was the market settling just below where it was the week prior. Markets could sink even lower for the next few days, I would expect it actually. No one is panicking however, the sell-off that is happening is very orderly. There is little evidence supporting a flat out recession from Brexit in the market. There is evidence global growth could be slowing, but you cannot pin that on Brexit.
— Murray Rothbard (@LibertarianView) June 24, 2016
Stock markets weren’t the only ones making bad bets. Actual gamblers bet heavy on Remain winning too. This tilted the odds heavily towards the Remain camp. The markets and gamblers did the same thing: they made big dollar bets that Remain would win. They lost those bets. The Financial Times notes this:
— Paul McClean (@PSMcClean) June 26, 2016
Here are the facts: the United Kingdom has the 5th largest economy in the world. People want to do business with them. Brexit changes how some of those transactions will occur. But it is foolish to think people will simply stop doing business with the UK over Brexit. There is plenty of money to be made between the UK and other countries. The EU may want to try and punish the UK for leaving, but they cannot prevent business from happening. They need the UK’s business more than they want to admit.
A hypothetical on how US foreign policy could have potentially prevented Brexit from winning
Hypothetical: Had Obama intervened in Syria, stopped Assad, and put Syria in a “good enough” position to where refugees did not have the urgent need to flee en-masse for security, it is likely the Brexit vote swings in the opposite direction for Remain.
By the US not intervening in any substantive way, this allowed Assad and Russia to continue to bomb moderate rebels. While radicalized rebels continued growing in the power vacuum. This forced massive flow of Syrian refugees, who did not want to fight, out of Syria and into the EU rapidly. The result was a swamping of local services across multiple EU countries. With an open borders policy in place, once allowed in, refugees were allowed anywhere in the EU. With no way for individual EU states to effectively control their immigration policies, and being faced with the nearly impossible task of assimilating such a large number of immigrants in an expedient manner, this provided ammo to euro-skeptics. And while there certainly is an anti-immigrant feeling in some segments of European society, the refugee crisis also showed Britons and other countries how little the EU cared for them on an individual level. Individual countries were expected to bail out excessive countries like Greece and take in refugees with no question. And it was impossible to change legislative course of the EU through voting in new politicians. The only choice was to accept the EU’s orders.
In other words, the refugee crisis exposed the inherent structural problems of the EU in a way that most Europeans had never seen. Providing fuel for those saying individual countries needed their sovereignty back from the EU.
But the trigger event for uncovering all of this would be US inaction in Syria in 2011-12. The argument against intervening in Syria was that it was another quagmire that would devolve into another Iraq for the US. And I say all this as a person who was against Syrian intervention. I was never convinced admin had a plan on dealing with Syria after watching them handle Libya. But that non-intervention had consequences. It’s impossible to know exactly how history shifts if that intervention happens, but it’s an interesting hypothetical to consider. Our actions in the Middle East have more effects than we care to admit. Non-intervention had as much an impact on the world as non-intervention.
The United Kingdom is leaving the European Union. Britons are regaining their sovereignty. Americans, more than most, should understand and respect this vote. The need for self-governance and throwing off political rule from a land far off is inherent to the United State’s DNA. The UK did it without firing a shot. In the long view of history, this is incredible. Americans should cheer their ancestral land for achieving freedom. I leave you today with the words of The Telegraph’s view in “Britons must make this journey together“:
Thursday’s referendum was a revolution – and we welcome it. The Britons who voted to remain inside a free trade zone in 1975 formed a sizeable proportion of the people who voted to leave an outsized political project in 2016. It was a rational decision and a courageous one. It need not prove tumultuous. Calm and unity should follow.
There is time to take stock. The vote for Brexit was a solid rejection of the status quo – but it also revealed significant divides within the country. Whereas Britain was once politically split between north and south, now we see something more complex – a gulf of cultural understanding that often has much to do with class, region and generation. That said, even if there were dozens of reasons to vote for Brexit the essentials of the debate were universally understood. People rejected the warnings of almost the entire establishment in favour of re-establishing self-governance of these islands.