So Britain (well, really, England and Wales), voted to leave the European Union Thursday. As the English would put it, this decision has created a small spot of bother in global financial markets and political capitals. Off the top of my head, the knock-on effects will include:
- A downward revision of British and global economic growth;
- Scotland holding a second referendum on independence;
- Other E.U. countries holding referendums on exiting the E.U. as well;
- The U.S. trade deficit worsening as the dollar’s strength increases even further;
- A lot of commentators freaking out even more about the possibility of a President Trump.
Lest one think I’m overstating that last point, here’s my Post colleague Anne Applebaum Friday:
I do realize that it’s facile to talk about the impact on a U.S. election which is still many months away, that it’s too simple to say “first Brexit, then Trump.” But there is a way in which this election has to be seen, at the very least, as a possible harbinger of the future. This referendum campaign, as I wrote a few days ago, was not fought on the issues that are normally central to British elections. Identity politics trumped economics; arguments about “independence” and “sovereignty” defeated arguments about British influence and importance. The advice of once-trusted institutions was ignored. Elected leaders were swept aside. If that kind of transformation can take place in the U.K., then it can happen in the United States, too. We have been warned.
It’s not just commentators making the Brexit-Trump parallel — it’s Trump himself:
So let’s focus on that last point, because as one considers how Brexit might impact the 2016 election, there are three possible answers. The first and most likely one is pretty simple:
It’s true, most Americans have paid zero attention to Brexit. As Spoiler Alerts has pointed out repeatedly, when it comes to elections most Americans pay zero attention to most things outside the United States. So it’s entirely probable that, four months from now, Brexit will not be a factor at all in the U.S. general election.
But just because Americans haven’t paid attention to Brexit until now doesn’t mean they won’t notice the effects of the Brexit vote. The second possibility is that Brexit’s effects on the global economy are pretty severe — which in turn triggers a U.S. recession. Pre-vote analysis after pre-vote analysis was pretty dour on what would happen as a result of Brexit, and Friday’s market turmoil will reinforce those analyses. Surely, financial markets will stabilize at some point, but as the Wall Street Journal’s Greg Ip notes, the new normal will not be good for global economic growth:
Brexit would be the starkest repudiation yet of the postwar consensus favoring ever-deeper global integration. That consensus is already fraying in the face of growing protectionism and anti-immigrant sentiment world-wide. A further unraveling would undermine global growth prospects already clouded by aging populations and miserable productivity.
Political Science 101 says that a weak economy hurts the incumbent party. So if U.S. economic growth continues to slow, it will be easy for voters to conclude that the system is not working and usher in President Trump.
There is one last possibility, however. During this doom-and-gloom moment it seems far-fetched, but I want to put it out there just to be contrarian. The final way U.S. voters might think of Brexit is as a preview of what would happen under a President Trump.
As Trump himself notes, the issues that dominated the Brexit campaign and his own campaign are similar: hostility to immigration, resentment at cosmopolitan elites, frustration with unelected officials telling ordinary citizens how to live, and a persistent perception that the status quo favors
minorities layabouts over white ordinary, Anglo-Saxon decent , Christian hard-working citizens.
So the question now is: What happens to Britain now that “leave” has won? Most voters never have the opportunity to know the counterfactual — what would happen if the other guy or the other idea won. On occasion, however, this happens. In September 2008, when the House of Representatives voted down the first TARP proposal, markets reacted very negatively. This response helped to ensure TARP’s passage the second time around.
Brexit allows Americans to witness what Trump-like policies will produce over the next four months. If the effects are not that great, then I would agree with Bremmer and conclude that Brexit won’t matter in November. If the effects are strongly negative, however, then the Clinton campaign will have a strong incentive to tether Trump to all of the bad things happening in Britain. And Trump has just made that connection very easy for her campaign to make.
So if Brexit’s negative effects over the next four months are severe, it creates some very odd dynamics. On the one hand, worsening U.S. economic prospects will benefit Trump. On the other hand, those same bad outcomes can help Clinton point out the policy disaster that a Trump administration would create. Either way, it puts U.S. politicians in the very odd and uncomfortable position of rooting against Britain’s near-term economic prospects.
Welcome to electoral politics in 2016.