Globalisation: Is BREXIT the Tipping Point?

Globalisation: Is BREXIT the Tipping Point?

A right stitch-up! Is this the man wot broke it and ran?

The Lesson: Globalization works, but not if it continues to destroy the middle and working classes of the developed world in the process. The Rich must share the gains and bear their share of the costs… or face the music.

The decision when it came was a shock. Surprisingly, to people all over the world, not just to the British and Europeans directly affected. Reactions, depending upon where you stood, ranged from anger to jubilation, sadness to fear, incomprehension to indifference. Whatever the reaction the prevailing feeling was one of ill-defined unease. A sense that the world had changed and not for the better. Something far beyond the affairs of a tiny island set off a small littoral at the extreme Western end of Eurasian landmass was in the offing.

We are entering uncharted waters.

Why? Why on earth would Britain’s exit from the European Union tap into such feelings of global angst?

It seems Britons themselves, whether they wanted Brexit or not, never actually believed it would happen. Nor would it, if anger with politicians had not impelled them to send a message in the only way they felt they could be heard. Britain’s EU partners tended to be angry or impatient, worried that their plans for the European project would be derailed. Meantime their people were more conflicted, recognizing that Britain provided some balance for them against an unresponsive Brussels bureaucracy, of whom increasingly many had doubts. Putin’s Russia was of course over the moon to see an EU own-goal and the major proponent for EU sanctions against them removed from the game.

Americans, experiencing a somewhat similar populist revolt of their own, were concerned what this might mean for a global economy at the tail end of their economic hegemony. The feeling in an up-and-coming Asia was not so much one of concern as bemusement as to why Britain would act against its own economic interest in such a curious way?

The answer I fear is that our unease is well-founded. We live in a time of enormous change whose effects are now coming home to roost. Without wiser, more principled and more inclusive leadership, so conspicuously absent to date, we are entering turbulent times.

The primary cause is globalization. We’ve been talking about it since the 1970’s. It’s nothing new. We knew it could confer enormous benefits but that the accompanying changes would be disruptive and need skillful handling. And it has done exactly that. Globalization has produced the greatest expansion in wealth worldwide in history and the biggest beneficiaries have been the poor in developing countries. Of course, the rich in poor countries benefit most of all but nevertheless wealth filters down. The BRICS, and most particularly China, have benefited the most.

There is one other, very small, group of people that have benefited extraordinarily. They are the world’s very rich, the 1 percent in developed countries who already own most of the world’s wealth.

Oxfam tells us that now just 62 billionaires own more wealth than the bottom half the world’s population, some 3.5 billion people let’s say.wealth.

Consider: in the 20-year period 1988-2008 wealth in the world increased as follows:

  • For BRIC countries incomes increased by 76%
  • For the Super Rich, the 1 percent, it increased by 70%
  • For the ordinarily rich in developed countries, up by 26%
  • For the Upper Middle Class in developed nations, up by 16%
  • For the ‘Wretched of the Earth’ it went up by 12%
  • For Lower Middle Class in developed nations, up by 5%
  • For Working Class in developed nations up by 3%
  • For Working Poor in developed nations up by 1%

Given increasing costs and fall in purchasing power since 1988 even the well-off are actually no richer. As for the middle classes and the poor, their incomes have fallen significantly and in the poorest cases drastically. In the developed world housing is now a massive and destabilising problem.

Properly managed this re-distribution of wealth between the “rich” developed countries and the developing world in a fair and sustainable way is a welcome if not salutary change. In which case globalization is clearly a good thing, leading to a leveling-up not a leveling-down. The operative phrase being well-managed. Clearly, based on human nature and what we are now seeing with BREXIT and the advent of Trump in the US, things are not being well-managed. And it certainly isn’t either fair or sustainable.

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