Muftic: Brexit could backfire on Trump
The United Kingdom’s vote to exit from the European Union (Brexit) will be a learning experience for those of us in the United States. The question becomes if the Brexit vote validates Donald Trump’s strategy of tapping into similar currents in the United States or backfires on him. The answer to that depends upon what happens in the United Kingdom during the next four months and if financial impacts in the United States get anyone’s attention.
It appears that driving the United Kingdom’s vote were same currents that are feeding the support for Donald Trump: “Our nation should control its own destiny, borders, and laws and to heck with international cooperation and trade .We do not like all of those foreigners who are migrating to our own country, especially if they are not people like us.” The demographics of those voting in favor of Brexit in the UK were also similar to the supporters of Donald Trump, less educated, unhappy with the unequal distribution of wealth, and from rural and “rust belt” areas.
If the United Kingdom breaks up as Scotland or Northern Ireland vote to leave the United Kingdom, the lesson for Brexit supporters is that sloganeering of “making our country great again” or “the UK First” had the opposite effect, making “ our country weaker, poorer and smaller again” . Balkanization has never been good for economies or peace and bargaining power belongs to the larger, stronger.
A breakup of the UK is the most likely consequence: The irony is Trump owned golf courses are located in Scotland which voted overwhelmingly to remain in the United Kingdom, not in favor of Brexit. Recently a Scottish referendum to leave the UK was defeated because the winning argument was that the UK was in the European Union which the Scottish concluded they wanted. That has been turned upside down by the Brexit vote and it is highly possible another referendum to leave the UK would win this time since Scottish (and Northern Ireland ) membership in the EU could only be achieved by their independence.
If the UK slips into a recession, and capital flees elsewhere with job loss and a crash of the pound results price inflation, the lesson is that making decisions based on anger, xenophobia, hyper nationalism and immigration policy leads to even greater pain of a bad economy that hurts the most those who voted for Brexit.
The lesson for us in the US is “beware what you wish” Anger and bigotry do not necessarily result in good economic policies in the public interest. The most direct impact on the United States by the Brexit vote would be on holders of 401K’s and retirement accounts if the US financial markets are slow to recover from what appears initially to be very bad news.
Donald Trump’s reaction to the Brexit win was typical of his egocentric, self-serving viewpoint. This may be good for his golf resort business if the pound collapses, he said in the morning after the UK vote, making it cheaper for US tourists to come to the UK to play golf at his Scottish golf courses. That was good business for him, but not for the loss of value of 401k’s or retiree accounts, or anyone else, for that matter.
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