The feverish behavior of financial markets ahead of the United Kingdom’s Brexit referendum on June 23 shows that the outcome will influence economic and political conditions around the world far more profoundly than Britain’s roughly 2.4% share of global GDP might suggest. There are three reasons for this outsized impact.
First, the decision on whether to remain in the European Union is part of a global phenomenon: populist revolts against established political parties, predominantly by older, poorer, or less-educated voters angry enough to tear down existing institutions and defy “establishment” politicians and economic experts. Indeed, the demographic profile of potential Brexit voters is strikingly similar to that of American supporters of Donald Trump and French adherents of the National Front.
Opinion polls indicate that British voters back the Leave campaign by a wide margin, 65 to 35 percent, if they did not complete high school, are over 60, or have “D, E” blue-collar occupations. By contrast, university graduates, voters under 40, and members of the “A, B” professional classes plan to vote Remain by similar margins of 60 to 40 percent and higher.
In Britain, the United States and Germany, the populist rebellions are not only fueled by similar perceived grievances and nationalist sentiments, but also are occurring in similar economic conditions. All three countries have returned to more or less full employment, with unemployment rates of around 5 percent. But many of the jobs created pay low wages, and immigrants have recently displaced bankers as scapegoats for all social ills.