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Brexit, Trump and superstates: When economics isn’t enough

Written By | Jul 3, 2016

BOSTON, July 3, 2016 – The initial shock over “Brexit” sent the British pound, global markets and political commentators into chaos. The commentary has been widely negative, with British voters mocked as uninformed, parochial and stupid. They’ve been called evidence that the American voters, who are entertaining the idea of President Trump, aren’t the stupidest in the developed world.

More than 50,000 protesters gathered in London early Saturday morning to join in a #F**kBrexit rally, seemingly bound by the belief that when the majority wins only 52 percent of the vote, the minority, if it is sufficiently passionate and young, should prevail.

Brexit has been described as a disaster, a crisis and even a “clusterf*ck.” I respectfully demur.

Global progressives unhinged by Brexit, Donald Trump

Of course the British exit from the European Union is problematic, and not just for the U.K. The security issues it raises for the United States are serious.

Brexit piles new risk onto an already risky Europe, with its immigration crisis, floundering southern states, and Russia resurgent and aggressive. It makes it harder to form a European consensus to stand up to Russia and could even leave the U.K., until now America’s strongest European ally against Russia, more susceptible to Russian pressure. Brexit may persuade Scotland to leave the U.K. and take with it important submarine bases.

Brexit will undoubtedly interfere with the flow of goods and services between the U.K. and the continent. The EU has failed to keep the national economies of all its member states vibrant and healthy, but overall the U.K. has not done badly in the EU. Economic theory suggests—strongly—that it will do less well outside the common market.

But economic theory and economic reality sometimes collide, and even when they don’t, other factors matter more to voters.

In any event, for whatever successes it has achieved until now, the EU and the euro may be doomed to failure. The efficiency gains of a European superstate may not be worth the costs to Europeans, and they may benefit only those with the wealth and education to take full advantage of them. That excludes the large majorities who are not young, polyglot and skilled professionals.

According to Stephen Marche of Esquire, “Brexit is the first case since the Second World War of a major global economy choosing, of its own free will, to leave the international system.” Nonsense. The “international system” is not the EU. The United States, Canada and Japan all do quite well outside the EU, at the same time operating within the international system created by the World Trade Organization (WTO) and related treaties.

Critics argue that the global trend since World War II has been to closer associations between states in the direction of larger states, not smaller. The collapse of the USSR almost 25 years ago shows that this is not true.

The creation of Ukraine, Estonia and the other former Soviet republics as independent nations may have been a predictable consequence of the Soviet collapse, but there were powerful forces within Russia and its former vassal states pushing for further division. Chechnya was the most famous, but Ossetia, Buryatia and Transnistria all pushed for greater autonomy from their post-Soviet masters.

Without the USSR keeping it together, Czechoslovakia split in two. After Tito, Yugoslavia fell into brutal civil war until finally dividing into new states on ethnic lines.

Even outside the former Soviet empire, there have been pressures to divide. Belgium is divided on linguistic grounds between its French-speaking Walloons and its Flemish speakers in the north, and since 2007 it has been frequently on the verge of partition. Scotland and the Basque and Catalan regions of Spain all have strong separatist movements.

Yugoslavia made more economic sense than Serbia, Croatia, Bosnia-Herzegovina and the rest. Chechens would have been richer had they peacefully remained Russian. Slovakians would be better off in Czechoslovakia. But national, linguistic and ethnic identities trump economics, and they always have.

People don’t mind being ruled by other people if they have a say, see the benefits and are allowed to be themselves. If you threaten their identity and stifle their voices, they’ll rebel even if you make them richer.

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Jim Picht

James Picht is the Senior Editor for Communities Politics. He teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years doing economic development work in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He has also worked in Latin America, the former USSR and the Balkans as an educator, teaching courses in economics and law at universities in Ukraine and at finance ministries throughout the region. He has been writing at the Communities since 2009.