Both, Trump's win and Brexit, may seem unrelated but a careful look suggests otherwise. They stem from similar roots of democratic principles write Pravakar Sahoo & Surbhi Bari
First came Brexit and then Donald Trump’s election as the US President. These two events are the most prominent ones in recent times that have come as a turning point for global
geopolitics and the economic foundation of the developed world. On the one hand, Brexit has left the European Union (EU) on the brink of breaking apart. On the other hand, world leaders are skeptical of the policies of the newly elected US President.
The historic referendum was held on June 23, 2016, where 52 per cent of Britain’s voters voted in favour of Brexit. The formal exit from the EU by 2019 would mean that the UK's subsequent relationship with the remaining member countries could take several forms. There are chances that a hard Brexit might hit the UK economy badly. In a hard Brexit agreement, the UK will give up full access to a single market and full access of the custom union along with the EU.
The 2016 US presidential election was quite eventful. Contrary to the exit polls and popular perceptions, Republican candidate Trump won. Hillary Clinton lost despite having massive support from the media, popular fan fare, women sentiment and well-defined economic, social and foreign policies. Trump, on the other hand, was accused of anti-immigrant sentiment, charges of sexual assault, ill-defined policies and controversial speeches. But he built a
hyper-nationalistic campaign and promised easy passage of laws relating to tax cuts for the corporates of America; cuts in welfare programmes funded through taxes on wealthy Americans and the withdrawal from the Trans Pacific Partnership (TPP).
Both, Trump's win and Brexit, may seem unrelated but a careful look suggests otherwise. They stem from similar roots of democratic principles. Although presidential election is a routine process, Brexit was not. However, both these referendums project the strength of their democracy, their freedom to choose what they want, irrespective of international pressure, opinions and its consequences. Trump's provocative speech, closeness to arch rival Russia, undue references to China etc, were against the global vision of an American President. Yet, he was elected.
Both the campaigns — whether it was the leave campaign's ‘Take back control’ or Trump's ‘Make America great again'’ — put forward a message. The slogans contrasted with that of their opponents who struggled to match that clarity. Half of Trump voters were with high school education or less and similarly lesser
educated population chose to leave the EU. Certainly, this brings home the point that globalisation and open market economy, with free movement of goods, services and professionals, have not helped majority natives with limited education and skills in both the US and the UK.
Since the 2008 financial meltdown, both the economies have faced stagnation in growth and employment. Consequently, lack of employment opportunities, shrinking industrial base and a slight grim future ahead made both, the Americans and the Britons, realise the fact that conventional electoral promises and policies are redundant. Perhaps, the leave campaigners and the Trump camp understood this and turned it into electoral advantage.
Both the parties build their models of economic progress around the concept of inward-looking and protectionism. Trump extensively talked about the threat from the Chinese manufacturing sector to the US and even asked the multi-national corporations to shift their production base to the US. On similar lines, the leave campaigners promised to turnaround the economy by tweaking their policies such that outsourcing of jobs is minimal.
Foreign policies, especially with respect to immigrants, were a major highlight of both the campaigns. Since 1965, the number of first generation immigrants living in the US has quadrupled from 9.6 million in 1970 to about 38 million in 2007. Nearly 14 million immigrants entered the US from 2000 to 2010. Almost same successive rate of immigration took place in the UK. Since 1945, UK’s economy has been suffering from this problem. About 70 per cent increase in population between 2001 and 2011 censuses was due to foreign-born immigration. The number of people immigrating to the UK increased between 2012 and 2013 by 28,000.
It is believed that a major cause of unemployment in the UK and the US is due to immigration. This happened because immigrants are more skilled, efficient and cheaply available to industries. The economic, social and political aspects of immigration have raised controversy regarding economic benefits, jobs for non-immigrants, impact on social mobility and crime.
While Trump talked about tweaking laws regarding visa permits to foreign nationals, especially for work, the leave campaigners promised for restrictions on immigration and entry of Syrian refugees. In essence, both sides argued that such rampant immigration was the root cause of socio-economic problems that persisted in their countries. Campaigners were able to instill this fear among the voters and exploited it for electoral gains.
Another problem which increased unemployment was the decline of the manufacturing sector in both the countries since China has become the hub of cheap manufacturing. US manufacturing
sector has been hit hard by nearly two decades of policy failures which damaged its international competitiveness. Manufacturing sector plays an important for job creation. The US lost 5.7 million jobs between 1998 and 2013 in manufacturing. The principal causes of manufacturing job losses were trade deficits, especially with China, Mexico and other low wage nations and the week recovery from the Great Recession since 2009.
Weak growth of domestic demand is also a major contributor to the relatively weak manufacturing recovery. This happened because China was producing the same goods at cheaper cost. Therefore, there is an increasing favour for protectionism in both the US and the UK that helped Trump and Brexit.
Three major countries in the EU (the Netherlands, Germany and France) head for elections this year with security, migration and sovereignty issues looming large. They could well be joined by a fourth founding member, Italy, where the anti-establishment mood is fuelling calls for a snap election.
In fact, the Dutch prime ministerial candidate vowed to call a referendum on Dutch EU membership and to end immigration from Muslim countries. Therefore, these unexpected outcomes so far and movements now have some common ground.
(Pravakar Sahoo is an Associate Professor and Surbhi Bari is Research Intern at the Institute of Economic Growth, Delhi)