So a majority of citizens of Great Britain have voted to go out if the European Union. Stock and foreign currency markets are in turmoil. Even the Indian Sensex tanked about 1,000 points soon after the verdict was clear. But then, stock markets do behave irrationally in the very short run. Remember how the Sensex had crashed in 2004 when the NDA government was voted out of power? The frenzy surrounding markets will soon subside.
But the Brexit vote sends out a powerful and strong warning to ruling elites across the world. The common man is simply fed up of the games played by ruling elites and pundits. She is revolting across the world and telling pundits to go take a hike. Many "liberals" are in a state of mourning. They lament the rise of nationalism and chauvinism that the Brexit vote reflects. In many ways, it is a revolt against the kind of globalization and fundamentalist capitalism (which is usually cronyism). History does have a cruel way of repeating itself. The golden era of globalization started towards the end of the 19th century and lasted till the end of first decade or so of the 20th century. Back then, it was considered cool for pundits to make triumphal announcements that globalization will defeat nationalism. We saw two world wars and the worst kind of virulent nationalism instead. Another world war does look unlikely at the moment. But it does appear as if pundits are again wrong.
The basic problem is a double whammy for ordinary citizens. Capitalist countries always had high levels of income inequality. However, from the end of the Second World War till the early 1990s, ordinary citizens saw real wages rising and enjoyed improved quality of lives. But since the early 1990s, not only has income inequality has grown to obscene levels, but ordinary workers have seen real wages actually declining. All the while, they are fed jargon of how globalization is actually good for them. All the while, the ruling establishments have games the system so deeply that ordinary citizens in capitalist countries face a bleak future. No wonder they are revolting.
This explains the Brexit vote. This also explains the strong support enjoyed by Donald Trump and Bernie Sanders in the USA. The two represent completely different poles in terms of ideology. But the support they have mustered reflects how tens of millions of Americans are refusing to accept status quo. This reflects the popularity of leaders like Erdogan, Modi and Abe in Turkey, India and Japan. Of course, it also reflects the dangerous rise of nationalism and "identity" politics across the world. When people are frustrated and angry, they do tend to look at "authoritarian" solutions. Liberals can cry hoarse till kingdom come. But do they have limb term solutions for this growing crisis of confidence with the "system"?
More than a century ago, ruling establishments were haunted by the specter of communism. The working class in Europe and North America were no longer willing to subsist on the crumbs thrown at them by industrial tycoons. There was a real danger of Marxism defeating Capitalism. What stemmed the tide as what can be called pragmatic capitalism instead of fundamentalist capitalism. Henry Ford, the founder of Ford Motors was no angel or saint. And yet by manufacturing cars that even the workers in his factories could afford to purchase, Ford did more to save capitalism that pundits of globalization. This was accompanied by waves of welfare measures across what is now known as the developed world ranging from unemployment benefits to minimum wages to subsidized healthcare and education. A mixture of pragmatic capitalism and state delivered welfare measures ensured that ordinary citizens could actually hope for a better economic future for their children.
That system seems to be breaking down since the 1990s. Blaming xenophobia and authoritarian politicians for this grave crisis is lazy and escapist. The hard task is to take concrete measures to restore the confidence and faith of ordinary citizens in the "system".
