Late last week 52% of the roughly 33 million British voters in the referendum on whether or not to leave the European Union (EU) demanded exit. The vote favoring a British exit from the EU, or Brexit as it is affectionately referred in the press, has already had some dire consequences wiping a full $4 trillion in notional value off global stock exchanges, signally widespread economic uncertainty and a possible slowdown in economic growth. Chaos has ensued also as a result of new political questions and renewed conflict in the European community prompting one senior American Enterprise Institute analyst to remark, “...it could be 1933 all over again.” Speculation abounds with various experts predicting either gloom or possible future benefits. One thing is certain, however. The thing driving the Brexit is not economics or even nationalist resentment over the perceived unbalanced distribution of EU benefits. It is immigration and the torrent of recent xenophobia “on both sides of the pond” as it were! This is a very frightening portend for the future.
Proper analogies are always difficult but one could call Nigel Farage, a former Tory and the current leader of the UK Independence Party, the British Donald Trump. An arch-conservative, Farage, once a member of the European Parliament himself, is leading a wave of populist nationalism in the UK currently of the variety that drives the Trump campaign in the US. It is this movement, driven by political disappointment and resentment at a “failed” EU system, that has resulted in the Brexit with xenophobic hate being some of the fallout. Globalization has taken its toll on the struggling middle classes of the western world over the past two decades with lost jobs, lower average incomes and overall declines in economic security. But the faux populist leaders that harness middle class resentment to political advantage, like Farage and Trump, have no solutions for those who look to them for leadership and are merely exploiting popular rage in order to pass political agenda that have nothing to do with restoring the middle class.
Leaders like Farage disdain to conceal their views. He once remarked feeling awkward on London commuter trains because he often hears “only foreign languages being spoken” and has said that
"The fact that in scores of our cities and market towns, this country in a short space of time has frankly become unrecognizable...Whether it is the impact on local schools and hospitals, whether it is the fact in many parts of England you don't hear English spoken any more. This is not the kind of community we want to leave to our children and grandchildren."
The populist drift to the far right and the demonization of immigrants and racial minorities has ominous parallels in a time of deep crisis, perhaps echoed in the AEI scholar’s reference to “1933 all over again.” And this is the rub! The concept of European Unity is not new and was seen exactly as a response to a need to avoid the catastrophe of the recent past. One historian notes that in 1957, with the signing of the Treaty of Paris which led to the creation of the European Economic Community (EEC) several nations tacitly validated the widespread belief at the time that nations that are actively engaged in highly integrated trade relations are far less likely to go to war. It was a time of unprecedented income growth and “economic miracles” so what could possibly go wrong? Japan, North America and Western Europe experienced unprecedented economic expansion, mostly in manufactured output. The inflation adjusted size of most of the economies in these areas easily more than doubled (or even tripled) in size in the first three decades after the end of WWII. Rising wages, surges in government spending on infrastructure, social services and income support programs as well as an explosion of consumer spending sustained effective demand from 1945 until the recession of the early 1970s. During this time, most of the income growth went to the lower ninety nine percent of these advanced capitalist societies creating for the first time, a prosperous financially stable middle class majority.
But good times were short lived. The crisis of the 1970s and ‘80s in global capitalism that eventually led to the current decline of the middle class is complex and has been discussed in detail in other forums. So much populist rhetoric resonates with both right and left because globalization is a largely corporate driven phenomenon. True, economic globalization has largely harmed the middle classes everywhere. But right wing populist demagoguery in the US and the UK that threatens to make good on its promises to those in the street calling for autarchy and isolation is ominous to say the least and will only end in disaster for the middle classes as it did in the 1930s. Both Trump and Farage are well established wealthy leaders who are deeply conservative and have no intention of serving any interests but those of the rich.
Trump is a billionaire whose promises to reverse the impact of globalization with better trade agreements is beyond laughable. Manufacturing jobs that have gone overseas in the last twenty years have been significantly replaced by those created by US subsidiaries of foreign corporations. Foreign direct investment often creates better paying jobs as well. Furthermore, tariffs on imports could actually kill more US jobs than they save. The real problem is declining over all real wages, government austerity, growing inequality and economic stagnation. Trump won’t address this but has proposed a tax plan that favors the rich even more than did that of George W. Bush; The top 0.1% of filers would receive as much tax relief as the bottom 60% of households. The Tax Policy Center, which analyzed the Trump plan in detail, reported that the top 0.1% of US households with average incomes of $3.7 million would receive cuts amounting to about 19% of the after tax income while average earners in the middle of the national income scale would receive tax cuts amounting to under 5% of their after tax income. Trump has also opposed raising the federal minimum wage which is well below its inflation adjusted peak in the early 1970s.
Similarly, Farage appeals to the declining white middle class. According to a London School of Economics blog, “...UKIP’s core electorate consists of old white working class men who have been ‘left behind’ by social and political change.” But UKIP’s agenda is hardly pro-middle class. It rails against immigration with angry “their taking our jobs” rhetoric in a deceitful endeavor to promote a kind of identity politics having nothing to do with raising middle class living standards in the UK. A close look at just some of what Farage wants by the UK Independent is instructive. Farage would eliminate the employer tax going to National Insurance and lower the top marginal rate for those in the top income brackets while increasing defense spending by 40%. All this would be paid for by eliminating costs associated with EU membership but most believe no EU costs would cover the revenue losses from lowering the top margin. Worst of all, UKIP would eventually privatize the National Health Service. What is certain, however is that UKIP would almost certainly cut national spending to the NHS while adding copays to users of the health service to finance austerity and tax cuts for the rich. And when it comes to raising the living standards of average citizens, UKIP opposes minimum wage hikes “for fear it will bring more immigrants.” But as Farage once remarked, he’d rather be poorer than see more immigration to Britain. Studies suggest that cutting immigration would lower annual GDP growth, personal income levels and raise debt as a share of GDP all due to immigration’s massive contribution to the UK economy. It is most likely that Farage won’t feel the pinch as much as many of his middle and working class supporters would.
Both Trump and Farage appeal to the white working class by fostering xenophobic hatred. All the while they present solutions that only benefit the rich. Brexit won’t deal with immigration much anyhow since most migrants to the UK come from outside the EU. Although, EU immigration is increasing it is nothing like non-EU migration. Similarly, Trump’s xenophobia won’t lead to agenda that restores the middle class. One study showed that immigrants typically contribute about fifteen percent of total US GDP which is above their thirteen percent share of US population. What the US middle class needs is a massive public investment campaign for full employment not costly policies that target immigrants by building walls. Both right wing populists have similar constituencies on either side of the Atlantic. They use racist rhetoric blaming immigrants and minorities for the prevailing problems of late capitalist crisis. All the while they advocate tax cuts for the rich and austerity for the rest. The working class don’t get that they are once again being duped by demagogues which is what is so ominous about the 1933 comparison. What the working class doesn’t get is that Trump and Farage exhibit signature fascist politics. As one philosopher said, “History repeats itself the first time as tragedy the second time as farce.”