Brexit

Brexit UK leave europeSome of you know that one of my hobbies is geopolitics and probably everybody knows that both Louise and I came to Canada from Europe (Louise still did not loose her English accent). We both have part of our families in England.  A lot of our clients asked us what do we think about BREXIT?

Following is a loose compilations of my thoughts based on our recent personal experiences, our historical roots, talking to well known political scientist from eastern Europe,  CNN program GPS from Farid Zacharia (left of center), Stratfor (right of center),  and some of you who are involved in European trade or live there (my extended family lives in England, Czech Republic, Austria, Switzerland and Germany). I call it a multifaceted view. I stress, it is just my opinion.
Here are few points:
  • After the fall of Berlin wall and liberation of Eastern and Central Europe from Soviet grip, Europeans felt too safe. They concentrated mostly on delivering welfare states in all parts of Europe via the European Union, which is mostly a trade/welfare organization. The EU completely ignored cries for creation of perimeter defenses of the Schengen area of Europe, where internal border controls were abolished.
  • Europe quickly and comfortably forgot its “recent”  history  and lost its self preservation instinct. Economical issues, delivery of wealth was at the top of the agenda. Politically, it meant a classical fight of left against right, where both sides of political spectrum made lots of promises for well being of citizens (handouts or tax cuts). But the Great Recession of 2008-2009 , together with Russian assertive moves in previous satellite states , drop of oil prices, militant environmentalism, movement of population from war and famine devastated areas of Africa and Middle East changed how the majority of population see the world. Many of citizens of developed countries feel betrayed and blame greed of rich and globalization for their stagnated wages and little or no progress in their standard of living. It is a lack of so called “upward mobility” (no progress in your well being, being poorer than previous generation, no advance in careers).
  • It does not help, that millennials believe that they need to live a more “balanced life” to be happier. They are spending money which previous generations saved and reinvested. Mainly on
    brexitgraphic immediate satisfaction items such as holidays, toys and enjoyment of any kind, renting instead of buying houses.
  •  So here comes the paradigm shift : Instead of battles fought along the left/right line, it is now along rich/poor line. Classical weapons in this new conflict do not work so disgruntled masses which consist in Europe also of graduates of Universities are using a new set of tools such as militant environmentalism, religion and nationalism to change the balance of power and they resort to giving their votes to extreme politicians left and/or right…
  • They want change even if it hurts. They vote for Notley in Alberta, Trump in US, right wing nationalistic candidates in France and Hungary, they support the extreme left in Greece and Spain. And here comes BREXIT, the British version of expression of frustrations from all the above.
 The biggest problem I see in the shift is that when masses vote for extreme change, they think “it cannot be worse than it is now”. They believe that default will be better than what they have now.  And they are wrong. The lowest default is not always the democracy or even dictatorship. For developing countries democracy is for sure not the default. See Libya, Syria, Iraq, Afghanistan, Egypt. For developed countries it is a break up of the European Union, economical weakness for all members of European community and increased geopolitical risk toward potential aggression from Russia. Nationalism can quickly turn into other “isms” as we saw in in the first half of 20th century.
Therefore while Brexit will probably not hurt Britain (EU will anyway negotiate some economically bearable compromise), the biggest problem is that it might lead to the disintegration of the EU, if the EU does not start to behave the way it should have in the first place and make some dramatic changes in how it operates. But this is the theme for several more blogs and I will leave it , for now.
As I said this is just my personal opinion and in no way expresses the position of Triview Capital or Cerny and Associates!

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