On both sides of the Atlantic, politics have gone wild.
According to Albert Edwards at Societe Generale and a noted economic bear, these are two sides of the same coin.
“The large Brexit vote is part of the same phenomenon that is propelling Donald Trump to the US Republican Presidential nomination and fostered the rejection of establishment parties in recent European elections,” wrote Edwards in a note to clients Thursday.
To Edwards’ mind, the recent political reactions are all a symptom of working-class whites feeling disenfranchised from the economy in their respective countries.
Edwards frames this debate by looking at the economic outcomes in the UK for the native-born population and recent immigrants, and follows on from a note on February 25 in which he highlighted why “the Establishment” in the UK are having trouble coming to grips with the possibility of a Brexit.
I tend to agree with the evidence that high levels of immigration from the EU in recent years has indeed benefited the UK economy overall, most especially for the comfortable middle class. But for the indigenous working class who have been undercut by cheaper, more highly qualified and often harder working young EU migrants, it has been an unmitigated disaster. This disillusion is reflected in the large proportion of working class willing to vote to leave the EU and it is this group of workers that turned to UKIP in strikingly large numbers in Labours northern heartlands in the last General Election.
This, in Edwards’ assessment, is a reflection of the US situation. As with pro-Brexit voters, Trump is a reflection of white working class anger over immigration and economic growth that “the Establishment” is having a hard time handling.
However, Edwards does think the UK stands alone in one regard, and it may explain why Brexit polls show “stay” and “leave” at neck and neck.
In comparison to the US and eurozone, the UK stands alone as the only developed area actually improving its potential GDP, but Edwards’ argues that much of this is due to immigration, especially from non-euro areas.
He points out that nearly half of Britain’s employment growth in the fourth quarter of 2015 came from non-euro area immigrants.
Additionally, Edwards draws from an article from the Economist showing the contrast is particularly striking when comparing the populations for young people not in school, job training or employed in the UK between ages 16 and 29.
“Native-born children are more likely to be unemployed than children of immigrants, another finding not matched in any other European country or the US,” wrote Edwards.
“This again points towards the high quality of UK immigration and explains the UKs rising growth potential. But it also helps explain why a resentful white working class voter might yet take the UK out of the EU.”
There seems to be a particularly troubling situation in the UK, but it is a reflection of a problem that has overtaken all of the developed world.