Two Core Issues Drive Brexit & Trump

Barack Obama, Angela Merkel, Jean-Claude Juncker, Bill & Hillary Clinton, Paul Ryan, Bush 41 & 43, Tony Blair, Hank Paulson, George Soros, Michael Bloomberg, et al. have talked of globalization as an undirected and unquestionably positive force of human development. They have consistently intimated they have no power over this force. No matter, they are certain it is best for all of us; especially those in fly-over country. They grow frustrated by those who can’t catch up with their intellectual understanding of globalization and instead remain stuck with the washed-up concepts of nationalism and patriotism serving only to complicate the smooth development of this benevolent force that is globalization.

For the better part of the past 45 years globalization, motivated by the C-Suite of multinational corporations chasing cheap labor and pushed along by poorly qualified and compromised politicians who put fundraising above country, slowly and deliberately expanded without the consent of the majority. That all ended on June 23, 2016 in the United Kingdom; the home to some of the original and most powerful globalist voices. Globalization finally met some meaningful pushback. The EU, while originally an idea to maintain peace in Europe and challenge the hegemony of the U.S., had morphed into a globalist champion and nightmare for many citizens in the EU.

The 45 plus years of economic, financial, and political history related to the development of globalization is complicated and criss-crossed with hundreds of correlated issues and would take a semester to teach. However, there are two issues at the core of the debate from which impacts on the economic well-being of most of the western world can no longer be hidden from the average citizen, let alone our more informed citizens or the 1%.

What drove Brexit? What drives the success of Donald Trump? What motivates talk of additional countries wanting their own referendum to leave the EU?

The top two issues that have driven globalization and are responsible for the awakening of populism/nationalism/ patriotism are international trade and immigration.

To be more precise; poorly crafted and ruinous trade and immigration policy led by the U.S., and followed by the UK, most of Western Europe, and the EU.

To be more precise; unilateral free trade with Asia led by China, and one-way open border immigration policies and the accompanying social counterpart’s multiculturalism and political correctness.

For the U.S., we could use a bunch of starting points for bad trade and immigration policy: the Korean War, Vietnam, the oil shocks of the 1970’s related to Israeli-Arab relations, or when Henry Kissinger went to China and began the ruin of the U.S. manufacturing base. Since the 1970’s it has been a slow erosion of the performance of the U.S. economy, the hollowing out of the middle class, a widening income gap, poor wage growth, loss of job opportunities, social and cultural division, and historic levels of private and public debt. America reached her apogee in the 1960’s; poor immigration and trade policy are at the top of the list for her demise since.

Mass legal and illegal immigration has brought unprecedented national security risks, division by culture and language, a cap on wages, displacement of native born workers, excessive burdens on health and education and the national infrastructure and the environment, racial and ethnic tensions, the return of once eradicated diseases, deficit spending at all levels of government, and a massive transfer of wealth from the U.S. to immigrant sending nations.

Unilateral free-trade, led by policies put in place with China since the mid-1970’s, though primarily by Bill Clinton in the 1990’s, has resulted in over $33T in U.S. wealth being transferred overseas for imported goods since the 1970’s. Poorly formulated U.S. trade policy has resulted in a continualy rising U.S. merchandise trade deficit, outsourcing and the ruin of the U.S manufacturing sector, massive job loss, huge wage cuts, an unprecedented reduction in capital spending (investments in things that make other things), and a drop in average labor productivity. Alarmingly U.S. trade policy has been part and parcel of the the creation of a monster that is now the economic powerhouse of China using money earned in unfair trade to buy U.S. trophy assets, and build a powerful modern military to challenge the U.S. and takeover their region of the world and beyond.

The Brexit vote in the UK demonstrates, finally, enough people have caught on to the truth and the failure of their elected officials over the past 45 years. It came down immigration and trade.

What Donald Trump’s rise means is, finally, enough people in the U.S. have caught on to the truth and the failure of their elected officials over the past 45 years. It comes down to immigration and trade.

Globalization is not an uncontrollable force related to the natural development of mankind. Globalization and all the obvious failures associated is the result of deliberate policies, laws, rules, or regulations put in place by elected and appointed officials motivated by donors who grew too big for their own country and pesky national borders only desiring more market share, higher revenues, greater compensation, or some lofty a-national status indicating human sophistication. Economic and financial data, and the reality of life for hundreds of millions are proving them all wrong.

The forces of globalization, from an economic cost-benefit perspective or from a risk-reward perspective, have not worked. Sadly, in today’s political world the focus is only on benefits and rewards, costs and risks are left to those in the future to worry over. The independent sovereign nation state has proven to be the best organizing principle for a successful society, globalization has proved the opposite.

Fair and free trade based on the concepts of reciprocity and competitive advantage, and secure borders with sharply lower levels of legal immigration and the rejection of multiculturalism and political correctness are the simple answers, and a good start.

It boils down to this; which politician is willing to give up max contributions from special interests or PACs? Or, more precisely, it boils down to voters electing candidates based on knowledge and experience, and merit and achievement, rather than who can raise the most money.

The majority of citizens in the UK said at least two things; enough immigration, and we want fair trade.

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