July 17th, 2018


The year of living improbably

Niall Ferguson

By Niall Ferguson

Published June 28, 2016

A number of years ago the British apparel chain “French Connection” unveiled a daring and eye-catching new marketing slogan: the initials FCUK. This seems like the mot juste for the British disconnection that happened last week.

Speaking on the BBC, the UKIP leader Nigel Farage called the Brexit result a victory for “ordinary people, decent people.” This offered a revealing insight into the way Farage regards the 48 percent of people who voted to remain inside the EU.

It was certainly a defeat for Prime Minister David Cameron, Chancellor George Osborne, and other members of the government who remained loyal to them. It was also a resounding defeat for bookmakers, political scientists, most media pundits, most pollsters, and the vast majority of investors.

Among these were the same experts who failed to foresee that Donald Trump would win the Republican nomination.

Welcome to the year of living improbably. And it isn’t over.

The arrival of Donald Trump in Scotland just hours after Cameron’s dignified resignation speech was a ghastly harbinger of what may lie ahead.

Friday was also the day Led Zeppelin won a copyright case over their most famous song, “Stairway to Heaven.” Coming soon: Stairway to Hell.

The economic consequences will be dire. In the case of Britain, the size of the current account deficit -- which exceeded 7 percent of GDP in the last quarter of 2015 -- guarantees that the hit to foreign confidence will have a major impact.

This will extend beyond Friday’s sharp depreciation of sterling. The UK has just voted itself into recession. Investment will fall. The benefit to exporters of a weaker pound will not compensate for this shock.

The claim by the Leave campaign that EU membership costs the UK 350 million pounds a week now looks laughable as well as a lie. British investors lost vastly more than that on Friday morning.

The proximate political result of the referendum is to destroy what had promised to be the most effective government in 25 years. Between 2010 and 2015, despite the constraints of governing in coalition with the Liberal Democrats, Cameron and Osborne had dragged the UK economy out of the hole left by Gordon Brown. The government was also taking great strides forward in key areas such as secondary education and the threat of Islamic extremism.

The fact that none of the leading Brexiteers appears in a hurry to seize the reins of power -- indeed on Friday morning they were begging Cameron to stay on for two years -- tells us all we need to do about the fundamental frivolity of the Leave campaign, which assiduously denied that Brexit would have severe economic consequences.

Now they would like someone else to reap their whirlwind.

What about the political consequences? The traditional British two-party system, which from the 1980s until 2015 was more like a three-party system, is now on the brink of complete disintegration.

The old politics of class -- so dominant in the 20th century -- is being overlaid by a more complex politics of age and identity. Among the most striking features of the referendum result is the huge generational divide.

Nearly two thirds of 18-to-24 year olds who turned out voted Remain. There was an equally pronounced ethnic divide. In sum, this was a victory -- a Pyrrhic victory in economic terms -- for older, whiter, English and Welsh provincial working class voters.

A major consequence of the Brexit victory has been to re-open the Scottish question. Within hours of the result, Scottish First Minister Nicola Sturgeon made it clear that she intends to seek another referendum on Scottish independence. She may even seek to avoid another vote to keep Scotland in the EU. In Northern Ireland, too, Sinn Fein leaders lost no time in calling for a referendum on Irish reunification.

The risks of the Leave victory to the stability of the province are already clear. So the vote for Brexit may turn out also to have been a vote for the break-up of Britain.

Meanwhile, Britain’s few remaining overseas possessions -- from Gibraltar to the Falkland Islands -- are now up for grabs. Spain has already opened the bidding for the former.

I warned that any divorce between the UK and the EU would be costly and time-consuming. On Friday EU President Donald Tusk spoke pointedly on behalf of the remaining 27 members of the EU, saying that they would “maintain their unity.” I expect them to play hardball. The reason is clear.

Many EU leaders are under pressure from populist political parties that are Eurosceptic as well as anti-immigration. For these people, the result of the UK referendum is a green light to demand referenda of their own; any lenient treatment of the UK would only encourage them further.

Already on Friday Geert Wilders of the Dutch Freedom Party called for a Dutch referendum and Marine Le Pen of the French National Front called for a French one. “Nexit” and “Frexit” are now on the agenda.

With elections due in both countries next year, there is a danger that we have just witnessed the first installment of the breakup of the EU itself.

For those whose memories extend back to era of “Stairway to Heaven” -- and they were the ones who gave Leave its victory -- this result is a victory from beyond the grave for two of the leading populists of the 1970s.

Enoch Powell was against UK membership of the European Economic Community because he saw it as a grave threat to parliamentary sovereignty. He was also fiercely opposed to immigration, fearing social division and conflict.

The other was Tony Benn, whose Euroscepticism was rooted in his socialist convictions.

Ultimately, it was the aging English working class whose victory this was. It was a revolt against “Brussels,” yes; perhaps also a revolt against “austerity” and stagnant real wages; but mainly a revolt against immigration, and a political elite at Westminster that was fatally deaf to their disgruntlement.

The highest price of all this was paid by the Labour MP Jo Cox, gunned down by a suspect allegedly yelling “Britain First.” David Cameron and George Osborne are paying with their jobs. They will not be the only ones. Everyone else is just going to pay.

FCUK indeed.

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