Brexit heralds not just Britain’s exit from the European Union but the decline and maybe fall of the 20th century ideal of a liberal, globalised world. It heralds a 21st century ethos based on ultra-nationalism and racist xenophobia, blaming foreigners and minorities for all ills, and claiming against all logic and humanism that turning your back on the world will somehow bring back a golden past.
Politicians of the centre have failed to deliver ever-rising living standards, and have lost credibility with most Western voters. Leftist and rightist ideologues have filled the vacuum, like Donald Trump and Bernie Sanders in the US and Nigel Farage and Jeremy Corbyn in the UK.
Brexit has caused a crash in stocks and currencies, especially in emerging markets such as India. Billions of dollars will flow out of India into safe havens like the US dollar.
Far more important will be the political repercussions. The Scots voted massively to remain in the EU, and the Scottish Nationalist Party may want a new referendum to split from the UK. Donald Trump’s presidential campaign will be boosted by the very jingoist, racist xenophobia that fuelled Brexit. Prospects of a Trump presidential victory can hit markets much harder than Brexit.
Fears are rising of Frexit, the exit of France from the European Union. France was once the very core of European unity. But the French voted down the proposed EU constitution in 2005. A recent Pew poll found that 61% of French voters had an unfavourable view of the EU, against 48% in the UK. In Italy, the xenophobic Northern League and populist Five Star Movement have got a shot in the arm. Right-wing nationalism is already mainstream in Hungary and Austria. Angela Merkel, once cheered by Germans for welcoming Syrian refugees, is now in political danger.
Middle-East troubles will keep fuelling ultra-nationalist jingoism. The nationalist right will try to stem the inflow of not just immigrants but foreign goods, in a protectionist race to the bottom. During the Great Depression of the 1930s, all countries raised import barriers, hoping to cut imports and raise exports. But since one country’s imports are another’s exports, the net effect was to shrink all international trade. But Western voters increasingly seem uninterested in expert advice against protectionism. They see experts and centrist politicians who promoted globalisation for five decades as villains causing unemployment and stagnant wages who should not be listened to.
In India too, xenophobic jingoism is rising, as exemplified by Subramanian Swamy’s onslaughts on Raghuram Rajan and Arvind Subramanian, trolls on the Internet sneering at liberal goals and “sickularism”. Stormy days lie ahead on the economic and political front.