The polls tightened in the last few days before the vote. The establishment dismissed that as an aberration. While some citizens complained about being forgotten, about increased immigration, and a lack of meaningful jobs, elected officials spoke of the benefits of globalization and trade. When the results came in, this was the general reaction in the capital:
I’m talking, of course, about the U.K.’s vote on June 23 to leave the European Union, a decision that now appears to have striking parallels to Donald Trump’s election as the 45th U.S. president. Although the political establishment and the chattering classes may have dismissed Trump’s chances, the Republican presidential nominee had consistently predicted that he was “going to do something so special.” It will, he said, be “Brexit plus, plus, plus.” He was right.
Much of the support for Brexit came from older voters who complained of living in a Britain they no longer recognized and in places like the Midlands and the north of England, once bastions of the center-left Labour Party. People there, former union workers, believed that globalization, in general, and the EU, in particular, had left them behind. The industries of these areas—steel and coal—had long disappeared and what jobs did remain often went to the citizens of EU countries who had free right of movement and employment anywhere in the bloc under the EU’s rules. Those sentiments, whether accurate or not, translated for a shock result on June 23. Leave won 52 percent to 48 percent.
Trump’s victory in Tuesday’s election mirrors some, but not all, of what happened in the U.K. On Wednesday, he tweeted: “The forgotten man and woman will never be forgotten again.” And indeed many of those people who propelled Trump to victory in the Electoral College, exit-poll data indicate, were from places like Ohio, Pennsylvania, and Michigan—Democratic and labor-union strongholds that have seen jobs leave and immigrants come. Indeed, one of Trump’s biggest champions in the U.K. was the highest-profile advocate for Brexit, Nigel Farage, the leader of the U.K. Independence Party, who even appeared at a campaign event with Trump and other right-wing European leaders.
But the parallels don’t stop there. After all, domestic-political decisions in a world based on international commerce have global consequences. Although some of the most-severe warnings have yet to materialize, there have been high costs: The pound is near three-decade lows, which makes U.K. exports more attractive, but also raises the cost of imported goods and the risk of inflation; the U.K.’s AAA credit rating, the highest possible, has been downgraded, making the government’s borrowing costs higher; and the medium-term economic prospects appear anemic. The instability hinges on uncertainty over the exact nature of the U.K.’s exit from the EU. Talks on what the U.K.’s future relationship with the EU will look like can only begin when the government invokes Article 50 of the EU charter, which it plans to next year despite last week’s legal hurdle. Those talks, which will likely take two years, will decide whether the U.K. will retain its access to the EU’s single market, which U.K. businesses want but EU leaders are unlikely to yield to unless it’s accompanied by the free movement of workers. That demand, in turn, is one to which the U.K. government is unlikely to accede. In the meantime, stocks, which had slumped after the Brexit vote, have stabilized, recovering most of their losses in the nearly six months since.
It might be the same with Trump—and indeed some of signs could be seen Wednesday. When the possibility of a Trump victory began to emerge Tuesday night, stocks across the world began to tank. At one point, Dow futures were down more than 800 points, but since the U.S. markets opened Wednesday, the Dow Jones Industrial Average and the S&P 500 have mostly recovered. The Nasdaq is down. Stocks in Asia were sharply lower, but European markets recovered most of their early losses. What this means for the broader economy is harder to predict. Trump’s actions and policy prescriptions over the coming days and weeks will dictate whether his election was a black-swan event or if it will be business-as-usual for the U.S. and global economies.
What’s next? Brexit, and now Trump’s victory, might have stunned the establishment, but populist right- and left-wing groups have been gaining ground, especially in Western Europe, since the 2008 global recession, warning against job losses, immigration, and free trade. Three Western European countries— France, Germany, and the Netherlands—have elections scheduled for next year. Each has populist right-wing political parties that are gaining support, and each of those parties, no doubt, has taken the successes of Brexit and Trump as good signs.