It’s been interesting watching the commentary about the British electorate’s choice to Leave the European Union. In many ways it reflects the pre-Brexit arguments of the Remain camp, which was essentially, that all right-thinking people should vote remain, and those who didn’t were just racists and nationalists. That sort of analysis has even leaked into supposedly non-political outlets like Jalopnik, one of whose stories about Boris Johnson’s checkered career as an automotive journalist began with this:
Boris Johnson, the flop-haired ex-mayor of London, has been an outspoken supporter of Brexit, or however you call the thing where old scared racist people in the UK want to keep brown people out of their country and think that ditching the shitshow that is the EU is going to help them with that.
Well, there you go. A perfectly condescending dismissal of any idea that leaving the European Union had any intellectual support at all.
Less blunt was the New York Times, who began an article about the residents of Sunderland, a strongly Labour constituency in northern England, who voted overwhelmingly for Leave, thusly:
Sunderland stunned the country when voters overwhelmingly opted to leave Europe in Thursday’s referendum, by 61 percent to 39 percent. It was a far higher vote for Britain’s exit than pollsters had predicted, and it was the first sign that Prime Minister David Cameron’s gamble on staying in the bloc had lost.
Sunderland’s citizens seem to have voted against their own interests. Not only has the city been a big recipient of European money, it is also the home of a Nissan car factory, Britain’s largest, and automobiles produced there are exported, duty free, to Europe.
The citizens of Sunderland seemed not to have been impressed by this, or other advantages, such as:
They can swim at the Sunderland Aquatic Center, a £20 million project with an Olympic-size pool that the European Union helped finance. They can send their children to the sleek, modern Sunderland University campus, which also received union financing.
European Union money also helped establish Sunderland Software City, a business center that offers support and advice to aspiring software entrepreneurs.
Sounds great, except…
However splashy these projects may be, they remain largely inaccessible to Sunderland’s working class. Many cannot afford the £30 monthly fees at the Aquatic Center, and people in the nearby Washington neighborhood said they had never set foot inside.
As for Sunderland University, the tuition, which the government recently raised, is too much for many young people.
The article goes on to note that Sunderland has one of the highest unemployment rates in the UK.
So, how is voting Leave a vote against their interests? Well, let’s hand wave our way past that question, which, really, no right-thinking person would ask.
No, on second thought, let’s not, though, to properly unpack this, we have to consider many things.
There’s a growing sense, not only in Great Britain, but in the US as well, that the elites, or the political class, or whatever you’d like to call them, are incompetent, and have been leading us astray. And the response from elites is to call those criticisms illegitimate. Those doing the carping are assumed to be racists or nationalists, both of which, of course, are unpleasant, dirty types of people. Both the UK’s Leavers and the US’s Trumpers share some commonalities. Among them are skepticism over free trade and free immigration; concerns that elites dismiss as foolish and uneducated. And, of course racist.
But perhaps the Leavers weren’t so concerned with brown people because they were brown, but because they were concerned at seeing buses being blown up in London, British soldiers being beheaded in broad daylight in the High Street, and dozens of children being raped for years in Rotherham. Perhaps, the British people have come to wonder about immigration because many immigrants seem less interested in becoming British than they are in making Britain more like the Middle East. And, maybe, just maybe, they’d prefer to live in Britain, in the free and modern culture that has developed over the last 1,500 years than go back to live in the year 692. Maybe they wouldn’t be any more interested in living in the 13th-century culture of Richard the Lion-Hearted any more than they are in living in the Dark Age culture of Middle Eastern immigrants.
When people come into your country from elsewhere, they don’t do so simply as fungible economic units, but as real people, who bring along cultural and political ideas that may conflict those that are traditional in your country. It is almost at the point where elites cannot even conceive of an argument that implies the superiority of one culture over another, so they dismiss this argument as nationalism and nativism. But, the thing is, a free society that continually imports immigrants who have no interest in individual liberty, religious freedom, and political pluralism, will, eventually, have none of those things. The problem isn’t race. It’s culture.
National sovereignty means something. At the very least, it means that the people of a country have the absolute right to restrict immigration to the sort of people that will, in their judgement, benefit the country, and, once the immigrants arrive, to force them to assimilate to the country’s national culture more than the country accommodates the culture of the immigrant. No obligation exists, in any sense whatsoever, that requires the people of a country to allow entry to immigrants who desire to transform the country into something different. It is entirely legitimate to reject calls for sharia in the UK, just as it’s entirely legitimate to be upset by seeing political protestors in the US waving Mexican flags, or wearing “Make America Mexico Again” hats, explicitly letting us know where their primary political allegiance lies. Nor is it illegitimate to wonder why such people are in this country, and not in the corrupt shithole of a country that they so obviously prefer, yet, so oddly fled.
Even on an economic level, questions of culture and country aside, people know whether they are better off today than they were 20 years ago. That’s true whether you’re an unemployed shipbuilder in Sunderland, or a textile worker in North Carolina, where about 650 textile plants closed between 1997 and 2009. A carpenter in Norwalk, CA, where low wages due to nearly uncontrolled immigration from Mexico and points south have made it impossible to raise a family on a tradesman’s salary, can see it happening, just as a plumber in Lincolnshire can see his wages drop as an influx of Polish tradesmen pour in.
One of the interesting demographic results of the Brexit vote was that people over 50 years of age were overwhelmingly in favor of Leave, while people under 30 just as keenly supported Remain. The standard explanation, as Jalopnik presented it, is simply that older people are reflexively racist against “the brown people”. Conversely, I submit that the older people have a breadth of perspective that enables them to judge what the country was like prior to submitting to the EU, compare it to the country’s situation today, and determine whether the result is an improvement. They’ve seen industry leave the north of England, and an influx of immigrants who either don’t seem all that interested in becoming British, or whose arrival has depressed wages for working people. Apparently, they’ve decided that’s not the Britain they were promised in 1975, or the one they want to leave to their children. Perhaps their children disagree, but those children have never had the opportunity to learn that things could be different. Indeed, they’ve been constantly taught the opposite by an education system and popular culture that characterizes Euroskepticism, as well as skepticism about free trade and unrestricted immigration, as aberrant and racist.
Now, it may be true that free trade is a net benefit. But even in the best of circumstances, such as assuming that NAFTA and the WTO are actually free trade agreements—a dubious assumption1—the benefits of free trade are widespread and diffuse, while the closure of textile plants and steel mills leave highly visible victims and long-term job losses for certain communities. That’s a political problem, not an economic one, and it’s one that elites haven’t addressed well. As a result, it’s biting them in the ass, whether it’s an unexpected Leave win for Brexit, or an unexpected presidential nomination for Donald Trump. Remember the Leave vote won even in the traditionally Labour-voting constituencies of northern England. Either working people don’t understand what’s going on in their own lives, or the promises of the elites haven’t been born out by their actual experience. Which is more likely?
But let’s go even further. Even if you could prove that, on balance, free trade is an unquestionable economic benefit, people might still prefer to be measurably poorer, if that’s the price that must be paid to maintain their traditional social and political cultures. (This has even more relevance in the case of the EU, because the EU actually has power. Imagine if NAFTA had an unelected Commission in Ottowa or Mexico City that could impose laws on the United States.) Perhaps people don’t regard their economic interests as important as their national or cultural interests. It doesn’t matter what elite opinion thinks the people’s most important interests are. In a democratic society, ultimately, it only matters what the people think they are. People get to determine their own priorities, and not have them dictated by elites. The people get to answer for themselves the question, “In what kind of country do I want to live?”
Of course, I would argue that we don’t have truly free trade, or, increasingly, a free economy in the United States. The Progressives always look at the rising income inequality and maintain that it’s the inevitable result of capitalism. That’s hogwash, of course, and Proggies believe it because they’re dolts. But the problem in this country isn’t free trade—we have precious little of it—or unrestricted capitalism, since we have precious little of that as well. The issue behind rising income inequality isn’t capitalism, it’s cronyism. Income isn’t being redirected to the 1% because capitalism has failed, it’s happening because we abandoned capitalism in favor of the regulatory crony state and its de facto collusion between big business/banking interests and a government that directs capital to favored political clients, who become “too big to fail”. It doesn’t matter, for instance, whether the president is a Democrat or Republican, we know the Treasury Secretary will be a former—and future—Goldman Sachs executive.
Indeed, what we call “free trade” nowadays isn’t the Theory of Comparative Advantage in action. It’s corporations being allowed to ship jobs to low wage countries overseas to offset the cost of regulatory burdens in the US that restrict competition from new entrants to the market. That works great for large corporations. Not only do they get to offset the regulatory costs by overseas production, but slower job growth in the US flattens domestic wages, too, and sends millions out of the labor force altogether. For working people, the biggest financial rewards from the current “free trade” regime seem mainly reaped by large business and banking interests. Again, people know if their own lives are better or worse than they used to be, and if the promises of elites have been born out by their own experience.
The game is increasingly stacked against small business. We’ve made it harder and harder for working people to start or stay in business, restricted their access to finance and capital, and forced them to knuckle under to onerous regulatory burdens. Even with flat middle class wages, the regulatory burden restricts small business formation. As a result, working people have begun begin to feel trapped. They see no way to improve their lives, and they can see their own incomes stagnating, as middle class incomes have, in fact, been stagnating for at least 20 years.
Add to that the additional downward wage pressure that everyone agrees is the inevitable result of increasing the supply of labor through large-scale immigration. Then top it off with immigrants refusing to assimilate to culture of the host country in seemingly greater numbers, and you have all of the necessary elements for a political revolt by the people the elite see as the rubes and hayseeds in flyover country. Rather than foreseeing and trying to ameliorate the results of these trends, the elite have chosen to ignore them at very least, or dismiss them with contempt at worst.
Most people, most of the time, are perfectly happy to let elites run the country. After all, it seems to make the elites happy to run run things, and, as long as they’re reasonably competent at it, and do it reasonably unobtrusively, no one much seems to care. But when elite competence is compromised by faulty ideology and cronyism, people become unhappy. And when the elite response to complaints is dismissal or insult, political problems begin to bloom. People begin to think about politics. They begin to do things. It is no coincidence, as our Soviet friends used to say, that the last decade has seen the rise of the TEA Party, the Occupy Movement, and the Trump phenomenon. People of all political stripes are becoming unhappy.
I think we’re about to watch the elites start paying a price for that inattention and contempt. Euroskepticism is on the rise elsewhere in Europe. If EU membership were put to a popular vote in the Netherlands, Spain, Sweden, or Norway, there is a good chance that Leave would win there, too. Indeed, it’s possible that a vote to leave the EU might even win in France, the nation for whom creating and strengthening the EU has been the primary policy goal for 60 years.
Perhaps the “Vote Remain, you virulent racist!” PR campaign for staying in the EU needs a bit more thought.
So, too, does the idea that Donald Trump supporters are all rubes and hayseeds. However much we might dislike the messenger, and Trump is certainly dislikable, and however slim his personal characteristics make his chance of winning the current election, the fact is that his message has gained much more ground than most thought possible a year ago. The key elements of that message are the same ones that resulted in a Leave vote in the UK. In the hands of a more astute politician, how much more effective would that message be?
I leave it to you to ponder the answer to that question.
1 By the way, free trade doesn’t require agreements and treaties. It just requires that government not interfere with trade. If there’s a treaty involved, you can be virtually certain that some industry is being protected.
The final estimate for 1st Quarter GDP was for a 1.1% annualized growth rate. The GDP Price index rose 0.4%.
The final estimate for corporate profits indicates that profits fell to a -2.3% year-on-year rate in the 1st Quarter.
The S&P/Case-Shiller home price index rose 0.5% in April, with a year-on-year increase of 5.4%.
The Conference Board’s consumer confidence index jumped 5.8 points to 98.0, the highest reading since October 2015.
The Richmond Fed Manufacturing Index weakened from -1 to -7 in June.
Redbook reports that last week’s retail sales growth fell to 0.5% on a year-ago basis, from the previous week’s 0.9%.
The gap in the nation’s international trade in goods rose to $-60.6 billion in May, as exports fell -2.0% and imports rose 1.9%.
The Dallas Fed Manufacturing Survey for June rose to -7.0 from -13.1 in May.
The PMI Services Flash for June rose just 0.1 point to 51.3.
Brexit wins, as the 52% of the British electorate who are clearly virulent racist nativists vote to leave the European Union.
This week’s podcast is up on the Podcast page.
New home sales fell -6.0% in May to a 551,000 annual rate.
The Chicago Fed National Activity Index fell to -0.51 in May, from the previous month’s 0.10. The 3-month moving average fell to -0.36.
The PMI Manufacturing Index Flash rose from 50.5 to 51.4 in June.
The Conference Board’s index of leading economic indicators fell -0.2% in May.
The Kansas City Fed Manufacturing Index rose from -5 to 2 in June.
Initial weekly jobless claims fell 18,000 to 259,000. The 4-week average fell 2,250 to 267,000. Continuing claims fell 20,000 to 2.142 million.
The Bloomberg Consumer Comfort Index rose 2.1 points to 44.2 in the latest week.
The Fed’s balance sheet rose $9.2 billion last week, with total assets of $4.482 trillion. Reserve bank credit rose $6.6 billion.
The Fed reports that M2 money supply rose by $40.4 billion in the latest week.
A slow week for economic data begins with Redbook’s weekly retail sales report, which shows year-on-year, same-store sales up slightly better, but still weak at 0.9%, compared to last week’s 0.7%.
Existing home sales rose 1.8% in May, to a 5.530 million annual rate. Sales are up 4.5% on a year-over-year basis.
The FHFA House Price Index rose a smaller than expected 0.2% in April, though the idea is up 5.9% from a year ago.
The MBA reports that mortgage applications rose 2.9% last week, with purchases down -2.0%, but refis up 7.0%.
Brexit looms, or not. Christians and the NRA are responsible for an ISIS-inspired murderer. The Left finally comes clean about wanting to eliminate the 1st, 2nd, 4th, 5th and 14th Amendments. The terrifying reality of firing an AR-15. And, finally, who overturns the Supreme Court?
This week’s podcast is up on the Podcast page.
Consumer prices rose 0.2% in May, at both the headline and core rates. On a year-over year basis, the CPI is up 1.0% overall, but up 2.2% ex-food and -energy.
Despite a raft of negative details in the report, the overall Philadelphia Fed Survey rose from -1.8 to 4.7 in June.
The nation’s current account deficit widened in the 1st Quarter, to $-124.7 billion from an upwardly revised $-113.4 billion in the 4th Quarter.
The NAHB’s Housing Market Index, after holding unchanged for four straight months, those 2 points to 60 in June.
Initial weekly jobless claims rose 13,000 to 277,000. The 4-week average fell 500 to 269,250. Continuing claims rose 45,000 to 2.157 million.
The Bloomberg Consumer Comfort Index fell sharply, down -1.1 points to 42.1 in the latest week.
The Fed’s balance sheet rose $9.3 billion last week, with total assets of $4.472 trillion. Reserve bank credit increased $8.7 billion.
The Fed reports that M2 money supply rose by $12.7 billion in the latest week.
The Federal Open Markets Committee’s newest economic projections show a maximum GDP growth rate of 2.2% until after 2018.
May Producer Prices for Final Demand rose 0.4%, while prices less food and energy rose 0.3%. Less trade services, however, prices fell -0.1%. On a year-over year basis, PPI-FD were down -0.1%, up 1.2% less food and energy, and up 0.8% less trade services.
Industrial production fell -0.4% in May, while capacity utilization in the nation’s factories fell -0.5% to 74.9%.
Foreign demand for long-term U.S. securities in April fell by $-79.6 billion, fully reversing March’s $78.1 billion inflow.
The Empire State Manufacturing Survey rose into positive territory again, rising from -9.02 to 6.01 in June.
The MBA reports that mortgage applications fell -2.4% last week, with purchases down -5.0% and refis down -1.0%.