An anthropologist looks at Brexit: The World Changed Overnight

Summary: Anthropologist Maximilian Forte looks at aspects of Brexit seldom mentioned by the news media, and its long-term significance (beyond the immediate tantrums by institutional investors and traders). This is a follow-up to yesterday’s Brexit was logical, neither racist nor irrational.

EU flag burned


The World Changed Overnight

By Maximilian C. Forte
From Zero Anthropology
Posted with his generous permission.

The European Union is now to be written as a postscript. Thanks to British voters, who were given an extremely rare chance to have a say on one of the biggest issues affecting their lives, who were allowed a rare vote on the fate of globalization and neoliberal practice, we are treated to the celebration of a world where sovereignty still matters. Far from a thing of the past, self-determination will now remake the world of the immediate future. The stern advice, dire warnings, commanding lectures, and even threats offered by a plethora of financial elites, economists, a whole range of academic experts and European and US political leaders, came to naught.

When it comes to taking back local control, for citizens to decide on which systems should be allowed to determine their life chances, when it comes to self-determination the UK has now gone to the front of the queue.

The status quo is the status quit. The key words are: out, leave, exit. Globalization’s tense is increasingly becoming past tense.

Convention has been up ended, and what was deemed unlikely, even impossible, just a few short months ago has instead come to pass. Elites, experts, commanders, and opinion-shapers of the ruling strata have all failed. They have been rejected. What was presumed to be inevitable about a global future, has now been proven false. The distrust and disdain of disillusioned voters, long sold false promises and told to suck it up when bitter reality struck, has finally taken the form of a decisive counter punch.

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Brexit was logical, neither racist nor irrational

Summary: The campaign against Brexit featured fantastic predictions of doom (but seldom with much supporting fact or logic) and assertions that it was racist and irrational. Europe’s elites resorted to these barrages of fear for good reason: the EU does so much for them. Here’s a look at the costs to Europe’s people, which journalists seldom report.

“Simple Brexit lesson: When people are pissed off about mass immigration address their concerns — don’t call them racists.”
Mickey Kaus (conservative gadfly).

The voice of the ruling elites in the US & EU, united.
But too much of a good thing is disruptive.

Obama on Immigration

Will Brexit begin the End Times? While the result will not be a box of candy for Europe, I doubt the results will match the hysterical anti-Brexit propaganda of UK (& US) elites. But the responses of most journalists and columnists, as usual, faithfully parrot the establishment’s views.

“With a single vote, England just screwed us all. …The result is that we are now entering a world in retreat from progress…”
— Felix Salmon (financial journalist), boldly speaking for UK and US elites. He lividly fantasizes about the horrors in the future if we dare to disobey.

Slate’s headlines today provided a full suite of elitist anti-democratic advocacy. Elections & courts are good only when they endorse elite opinion! This is the dumbest (as if investors are the global economy, and their happiness is the top goal of public policy: “The Brexit Just Gave Us Global Financial Turmoil, Just as “Remain” Supporters Warned” by Henry Grabar (a hysterical reaction to one day’s market action — which wasn’t extraordinary).

A close second is “Old England’s Overthrow” by Gabriel Roth — “The doughty British establishment conspired with voters to bring about its own destruction.” Any bets on UK elites still in the saddle next month? Next year? In 20 years?

Seldom mentioned in the news were calculations of Brexit that contradicted the narrative of doom. For example, in Au Revoir, Europe: What if Britain left the EU? David Charter (a Times journalist) reported that if the UK and EU negotiated a bilateral trade treaty (likely, the medium-term effects would be small. Despite the confident predictions of certain catastrophe, the overall effect depends on the speed of the Brexit and how the UK and EU implement it.

Massive immigration is a box of candy for a nation’s elites. It forces wages down (supply and demand). It boosts aggregate economic growth, although not necessarily per capita growth (nor does it usually “trickle down” to the average Jane and Joe). The combination of these two factors boosts profits. If done on a large scale, it can destabilize a society — making organization against its elites less likely (e.g., unions).

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The mystery of the US economy at stall speed

Summary: Since 2012 the idea of a “stall speed” to the economy played a prominent role the almost incessant predictions of an imminent recession. Since then the US has cruised at or below stall speed without a downturn. This is rich with lessons for us — about the danger of believing untested theories, about overconfident forecasts, and the big one: That we’re indeed living in the transition from the post-WWII era to a different economic regime. Much that we relied upon no longer works; we need to find the rules that govern this new world.

Forecasting recessions, the key to managing the economy.

Forecasting with models

In April 2011 Fed economist Jeremy J. Nalewaik published “Forecasting Recessions Using Stall Speeds”, showing that the economy tends to slow at the end of expansions before falling into a recession, that gross domestic income (GDI) provides a better measure of output growth than gross domestic product (GDP, the other side of the ledger), that these stalls are more visible in GDI than GDP, and that two quarters of GDI real growth below 2% (seasonally-adjusted annual rate, SAAR) “could serve as a moderately useful warning sign that the economy is in danger of falling into recession.”

The concept of stall speed is intuitively appealing. Like an airplane, if the economy slows too much it no longer generates enough life to overcome gravity (the drag of interest on its debt). I have often used the concept. This idea caught people’s imaginations, playing a big role in the almost monthly predictions by bears since 2012 of a recession really soon: from “Economy Close to Stall Speed May Signal Renewed U.S. Recession” (Peter Coy at Bloomberg, August 2011) to “The Global Economy’s At Stall Speed, Rapidly Loosing Lift” (David Stockman, May 2, 2016).

The data shows that this predictive tool worked until the 2008 crash, but no longer. As this graph from the Economic Cycle Research Institute (ECRI) shows, this measure has been below 2% in 10 of the past 14 quarters — but no recession yet (the Atlanta Fed’s GDPnow model predicts 2.8% growth in Q2 GDP, similar to the Blue Chip consensus).

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