As global financial markets convulse in response to British citizens voting to leave the European Union, the stunning outcome of the U.K.’s referendum provides more questions than answers. As discussed on Monday, the heightened uncertainty, fueled by sudden institutional instability now compounding long-standing economic fragility and financial fluidity, is likely to cause an unprecedented mix of political turmoil, financial volatility and economic damage in the weeks ahead. It also leaves us with seven lessons whose implications extend well beyond Britain.
Socio-political disconnects are everywhere: The “leave” decision is about much more than a narrow majority of citizens refusing to follow their political leaders. It should be seen as a notable rejection of the political and business elites, as well as “expert opinion.” And it also illustrates the regional divides that prevail following a period of low growth, especially growth that has benefited some groups more than others.
Bitter and divisive campaigns are the new normal in national politics: This bruising campaign fueled and was fed by the broader divisions in the country. As such, for way too many, the Brexit referendum decision ended up boiling down to a gross oversimplification — one that pitted economic wellbeing versus regaining sovereignty over immigration.
Assumptions from history no longer apply to established parties: Just like the U.S. Republican Party, which has taken a step away from free trade, it was the U.K. Conservatives, among the country’s major political parties, that was most deeply divided about the benefits of the world’s largest super-free-trade zone.
Anti-establishment and fringe parties can change politics even when they have no chance of gaining power: Facing the risk of some of his party’s base jumping to the U.K. Independence Party ahead of the last general election, Prime Minister David Cameron felt compelled to promise a referendum in order to secure a re-election of the Conservative Party. Little did he realize the size of the gamble he was taking, one that has split his party. Reacting to Thursday’s vote, he has announced he is stepping down.