Brexit: the view of the man on the Clapham omnibus*
W&D sees himself as the man on the Clapham omnibus*. And so has had his eye to the keyhole, his ear to the ground and nose to the grindstone, all in the hope of finding out about Brexit.
And with so much of his youthful body active in this quest, W&D can successfully report that there are three key aspects to Brexit.
The first is economic. And that all the fearmongering seems to be misplaced. Before the vote in late June the UK government, the UK Treasury, the UK opposition, in fact the whole known world, were all forecasting an economic Armageddon if there were a Brexit.
Brexit hasn’t yet happened. But already the economists have changed their mind. And averaged things out.
(As they are wont to do. Three economists went into the woods, seeking to shoot a bear. They sighted one. The first economist fired and missed to the left by a metre. The second economist fired and missed to the right by a metre. The third economist shouted, “We hit it.”)
The UK Treasury now says that there will not be a recession. Economists from Morgan Stanley and Credit Suisse (both banks) have lifted their growth forecasts for the UK for both 2016 and 2017, each eliminating a recession in their forecasts.
The second is political. But W&D, like all readers, is fed up with politics and politicians. And so nothing more will be said from this angle.
The third is they-the-UK-people. Why did they vote the way they did?
A multitude of reasons has been propounded: immigration; refugees; Brussels; the French (always a useful target); taking on board Donald Trump’s messianic-rise (readers are encouraged to read Mario and the Magician, by Thomas Mann); etc., etc. W&D views these expressions of dismay as merely symptoms of a problem. And that the problem started some seven years ago.
Work with W&D on this.
The thesis is that since the GFC too many people have seen an elite few, as it were, prosper whilst they have not. And the wrongdoers of the GFC were not and have not been punished. It seems that they have flourished. Economies have grown, markets have grown.
But the reality for many is that their lot in life, as they see it, hasn’t. It’s not that they want equality – just equality of opportunity. And the elite bureaucrats haven’t listened. The politicians haven’t listened. And the media haven’t noticed. The façade of low unemployment and moderate economic growth has hidden the reality of declining real gross national income per capita, to put it in jargon.
And so they-the-UK-people are grumpy. Hence the gift given by former UK PM Cameron to they-the-people of the UK. That gift was a chance to express their unhappiness with the Brexit vote. One too good to refuse. And so they expressed their unhappiness.
So, what now?
Firstly, remember that everything is connected. So consider the recent Jackson Hole Economic Policy Symposium (a boondoggle for central bankers in the US), where it was roundly agreed that monetary policy has failed. Hello.
And hence that fiscal policy should be loosened (i.e. governments spend more money). So expect higher budget deficits and, correspondingly, higher interest rates. Not only in the UK but also in the US and across Europe. And possibly in Australia. This may assuage the grumpiness.
Secondly, European politicians have realised that they went a bridge too far. The eastern European countries want less liberalisation, whilst the western ones want a mechanism to quell the spread of grumpiness that might otherwise be expressed through the ballot box. Witness the absurdity that wearing a burkini has become an issue of national security in France. Germany’s elections next year might see Angela Merkel down at ZentrumLink. France’s presidential election will see a choice even more unattractive than Clinton and Trump. We live in interesting times.
Thirdly, the Eurocrats know that they outlive the politicians. To them, Brexit is but a momentary setback.
* To repeat last week's footnote for those readers who weren't paying attention: The man on the Clapham omnibus is a hypothetical ordinary and reasonable person, much like W&D, used by the courts in English law where it is necessary to decide whether a party has acted as a reasonable person would – for example, in a civil action for negligence. He is a reasonably educated and intelligent but anonymous person, against whom the defendant's conduct can be measured.
The phrase was first put to legal use in a reported judgement by Sir Richard Henn Collins MR in the 1903 English Court of Appeal libel case, McQuire v. Western Morning News.