Satyajit Das: What will history make of Brexit?

Chaitanya Dinesh Surpur
Image: Chaitanya Dinesh Surpur

The prospects of meaningful reform within the EU seem remote, but it will take time to see whether there are major casualties and to assess the economic and political effects of the referendum

Asked what was the most difficult thing about his job, former British Prime Minister Harold Macmillan is reputed to have replied: “Events, dear boy, events.” Brexit may be one such event.

The only known fact is that a majority of those who voted want Great Britain to leave the European Union (EU). Everything else is conjecture.

Few political analysts, super-forecasters, pollsters, betting shops and financial markets anticipated the result. Undaunted, the same people are now confidently outlining the consequences and likely outcomes. The word ‘historic’ is exhausted. The new trite adjective of choice is ‘uncertain’. Putative prophets may benefit from the advice of William Goldman in Adventures in the Screen Trade: “Nobody knows anything… Not one person… knows for certainty what’s going to work. Every time out, it’s a guess and if you’re lucky, an educated one.”

Perhaps the most interesting observation after the vote was the gallows humour of one trader: “Brexit could be followed by Grexit, Departugal, Italeave, Czechout, Oustria, Finish, Slovakout, Latervia and Byegium. Looks like only Remania will stay.”
When they sit down to provide the final verdict, future generations will ponder six issues.

First, the fact that the referendum was called will be a cause of bafflement. Conservative Party leader David Cameron pledged to hold the referendum to placate anti-EU sections of his own party and outflank a perceived challenge from the UK Independence Party. He even advanced the timing by a year. Given his frequent mention of the risks of Brexit, the wisdom of calling the referendum in the first place remains puzzling.

Cameron, who did much to make the Tories electable and won a famous victory, has said he will step down as prime minister by October, leaving behind a divided Conservative Party. The Labour Party too is damaged and may acquire a new leader. Its support of the Remain campaign put it at odds with its core constituencies. The episode has also left behind a divided country, which will prove difficult to unite or even hold together.

Second, the unedifying debate will merit careful analysis. The tone was shrill and lacked civility. The shooting of one MP was a symptom of the febrile atmosphere.

The participation of respected analysts, commentators and supposedly non-political public officials brought them no credit. Facts were water-boarded to support partisan positions. A future of economic damnation and a revival of Empire outside the EU are equally illusory. A debate about immigration policy is not automatically racist in nature.

Foreign plenipotentiaries, including the US president, weighed in with advice on how the British should vote. One European government took out newspaper ads seeking to influence the vote. Only the Queen refrained from providing unsolicited advice to her subjects. There will be speculation on the effects of these unprecedented interventions on the result of the referendum.

Third, the surprise at the result among those who voted to remain will be scrutinised. The wilful ignorance of the affluent, educated and cosmopolitan on how divided and polarised British society has become is striking. The voting patterns mirrored divisions along the lines of class, economic standing, education, age, residence and ethnicity. The debate was always between economics and sovereignty (in the guise of immigration and border control). Exaggerated claims of economic losses, based on macroeconomic models which have failed repeatedly over recent years, to engender fear were rejected. Interestingly, some UK regions reliant on exports to the European Union voted strongly to leave. 

For the disenfranchised, the fruits of growth, investment and international trade remain unattainable. Threats, perceived or real, to jobs and uncertainty about nationality are powerful. The inconvenience of the non-EU line at immigration, freedom of movement or ability to own a holiday retreat does not concern those who do not have those opportunities. As one voter told The Guardian with stunning simplicity: “If you’ve got money, you vote in… if you haven’t got money, you vote out.”

Fourth, the significance of the ultimate decision on core beliefs will be eagerly studied. The failure of economic arguments to sway the vote may spell the end of economic rationalism, which began with Margaret Thatcher and Ronald Reagan. It may be that the vote against the EU was in part a protest vote against the long-term changes in the economic structure of the UK economy, which has destroyed many working- and middle-class lives.

Insofar as the decision represents a retreat to economic nationalism and closed borders, it may highlight the diminishing appeal of globalisation. Free movement of goods and services, lowering of trade barriers and cheaper foreign labour has not benefited everybody. 

Conservative American politician Pat Buchanan’s observation in the Pittsburgh Post-Gazette on January 3, 1994, remains uncomfortably accurate: “…it is blue-collar Americans whose jobs are lost when trade barriers fall, working class kids who bleed and die in Mogadishu… the best and brightest tend to escape the worst consequences of the policies they promote… This may explain… why national surveys show repeatedly that the best and wealthiest Americans are the staunchest internationalists on both security and economic issues…”

Increasing scepticism about experts and expert advice may also be one longer-term effect. The views of the governor of the Bank of England and the Archbishop of Canterbury were disregarded equally.

In a pivotal moment in the campaign, challenged to name a single expert who thought that Brexit would economically benefit Britain, Justice Secretary Michael Gove’s defiant response was: “I think people in this country have had enough of experts.” Attacked for being anti-intellectual, Gove’s position highlighted the fact that over-reaching and arrogant experts have been often incorrect, especially on economic matters, sometimes disastrously.

The reality is that experts no longer relate to ordinary people. Policy orthodoxy, such as free trade, de-industrialisation and, in the aftermath of the 2008 crisis, austerity and unconventional monetary policy, have not benefited large parts of the population. Ordinary people’s appetite for sacrifice in return for unquantified future benefits promised by experts has waned. The gravitational pull of aspiration, central to Thatcher and Reagan’s brand of conservatism, has faded as trickle-down economics has betrayed many people.

Fifth, the obsession with financial market effects, in the aftermath of the decision, will confound posterity. Markets complacently assumed that Britain would remain an EU member and backed it with other people’s money. There is no guarantee that their highly-changeable views are reliable. Ascribing a 45 percent probability to Britain leaving, in a result which was always binary, is curious. Panic from the masters of the universe at the slightest sign of uncertainty does not support their claims for perspicacity, superiority and understanding of risk.

The immediate effects on currencies and interest rates were significant. But it will take time to see whether there are major casualties as a result of the usual highly-leveraged bets or what the longer-term effects are. The real economy and political effects will take time to emerge and are highly dependent on events not yet known.

The decision to downgrade the UK’s credit rating to a still very strong ‘AA’ was odd. The UK’s ability to meet its obligations has not changed. It was never part of the single currency and has the ability to create pound sterlings to meet its obligations. With rates near zero, the effect of any change in rating is likely to be minimal.

Sixth, history will have to decide whether the vote was simply a mutiny on board HMS Britannia or an influential one on the shape of the modern world, the structure of society and values which resonate and lead to change in other countries. If the latter proves correct, the event will prove truly significant.

The Leave campaign may have won the vote, but there is confusion about reshaping the UK’s relationship with the EU. Maintaining continued special access to European markets would require accepting many policies rejected by a majority of those who voted. The decision by Boris Johnson, an Etonian like David Cameron, and of similar background and leanings, to back the Leave vote showed ruthless calculation and accurate political sensitivities. In an editorial after the vote, Johnson, seized with post Brexit ‘Bre-gret’ or ‘Bre-morse’, suggested that wholesale changes in the relationship between the UK and the EU were now unnecessary.

The prospects of meaningful reform within the EU also seem remote. European Council President Donald Tusk, speaking for a number of Eastern European nations, admitted that the EU’s utopian visions are not shared by ordinary people. 

But other leaders, especially in the European Commission, do not recognise the problem. German Foreign Minister Frank-Walter Steinmeier promised that “we won’t let anyone take Europe from us”. The unfortunate malapropism (about the identity of the ‘us’; whether it was the EU or Germany) highlighted a central, unresolved problem.

The EU is circling the wagons, painting Britain as a reluctant European and seeks to punish her to dissuade other nations from similar actions. European Commission President Jean-Claude Juncker’s tart summary reflects this view: “It’s not an amicable divorce, but it never really was a close love affair anyway.”

The intellectual response is framed by cognitive dissonance. Chris Patten, the last British governor of Hong Kong and a former EU commissioner for external affairs, lamented that the referendum’s outcome was the result of a complex question being reduced to “absurd simplicity”. 

Kenneth Rogoff, professor of economics and public policy at Harvard University, saw it as “Russian roulette for republics”. 
He complained that the simple majority of those who voted (36 percent of eligible voters voted for leaving) was an absurdly low bar, although that level is significantly higher than the average winning vote proportion in recent US presidential elections. Rogoff argued that such a significant decision should not be made without appropriate checks and balances.

In an editorial piece for, American opinionist Josh Barro termed the decision “a tantrum”. British voters made “a bad choice”. It was an “error of direct democracy”. Such major decisions should not be decided by voters, but left to “informed” elected officials.

In essence, for those who believe they are born to rule, democracy should be for those who meet some standard set by them with the proviso that the vote coincides with what they think ought to happen. For this group, Brexit signals the need to limit democracy to ensure that important decisions are left to self-certified experts. 

History may well record that little changed as a result of Brexit. The long-tortured process of withdrawal and negotiation of arrangements regarding trade and other matters with the European Union left the status quo largely unchanged. Those in charge and their attendant retinues continued, as British blogger John Ward wrote in 2015, to ignore the individual, state sovereignty, debt mountains, currency realities, poverty, its responsibilities and every legal and constitutional restraint on their power. 

If the deep-seated economic and social divisions within Britain or other societies cannot be dealt with peacefully and through existing processes, the risk is that they will unleash the furies of nationalism and isolationism in unknown ways and with unpredictable results. 

Satyajit Das is a former banker. His latest book is A Banquet of Consequences (published in North America and India as The Age of Stagnation to avoid confusion as a cookbook). He is also the author of Extreme Money and Traders, Guns & Money

(This story appears in the 22 July, 2016 issue of Forbes India. You can buy our tablet version from To visit our Archives, click here.)

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