Moneybox
A blog about business and economics.

June 24 2016 4:18 PM

People Are Figuring Out Ways to Blame Obama for Brexit, Because of Course They Are

In a development that should surprise nobody, Donald Trump has found a way to blame President Obama for Thursday night's Brexit vote.

Or maybe blame is the wrong word. Trump is happy with the United Kingdom’s decision to bail on the EU, after all. Rather, the Republican candidate seems to think the referendum result proves that Obama is both incompetent and globally despised. Back in April, you see, the president visited 10 Downing St. and delivered a speech urging the British to vote “Remain.” “I was actually very surprised that President Obama were to come over here and he were to be so bold as to tell the people over here what to do," Trump said during a press conference Friday in Scotland, where he was visiting one of his golf courses. "If he had not said it, I think your result might have been different."

One could interpret this as a subtle dig at the British electorate. Given that Trump believes the U.K. made a wise choice Thursday night, he is implicitly suggesting that its people would have voted against their own best interests had Obama not clumsily intervened. Insulting as that idea may be, Trump isn't alone in believing it. Nigel Farage of the the far-right U.K. Independence Party has suggested pretty much the same thing. I'll leave it up to you whether this makes the theory that Brits cut off their noses in order to spite Obama's face more credible or less.

Interestingly, Trump isn't the only American who has tried to lay the Brexit vote at Obama's feet. Another theory comes to us from columnist and CNN talking head Josh Rogin:

Let us leave aside any arguments about Obama's handling of Syria. Like Trump's, this hot take has the advantage of being unverifiable, given that there was no official exit polling Thursday night. Moreover, it sounds at least vaguely plausible: Immigration was a driving force behind the Brexit movement, and some politicians, like Farage, did try to fan fears about refugees. But Britain's concerns about migrants predate the Syrian crisis, and much of the discussion about immigration during the campaign focused not on Middle Easterners but on the arrival of central Europeans, like the Polish. When the “Leave” campaign wanted to tap into anxieties about Muslims, meanwhile, its go-to move was to fearmonger about Turkey's possible accession into the EU. Tempting as it is to blame Obama as the root of all the world's misfortune, Rogin needs to work a little harder to prove it here.

June 24 2016 12:00 PM

David Cameron Has Secured His Place as One of the Worst Prime Ministers Ever

David Cameron may be the worst prime minister in modern British history. That dishonor is typically bestowed upon Neville Chamberlain, who ceded Czechoslovakia to the Nazis in 1938 and will forever be bound to the word appeasement. But poor Neville’s defenders can at least argue the man didn’t have many better options, since Britain wasn’t necessarily ready to take on Hitler’s forces in a war, and the time gained by sacrificing the Czechs allowed it to arm up. On the other hand, Cameron’s calamitous decision to allow a referendum on whether the U.K. should remain in the European Union—which unexpectedly ended in a vote to leave Thursday night—was a blunder entirely of his own making.

Cameron, who announced Friday that he will resign, did not want to leave the EU. For a long time, he didn’t even truly want a referendum on the issue. He felt compelled, however, to appease his party’s angry Eurosceptic faction in order to keep a firm hold on power. “At the 2015 general election Europe seldom featured in the top 10 of issues listed by voters among their principal concerns; Mr Cameron’s problem was that for some of his MPs it was the main reason they went into politics,” the Financial Times writes. And so Cameron promised to renegotiate the terms of Britain’s membership in the EU, and then put the question of whether to remain to a popular vote. Some of his fellow Tories, like Chancellor of the Exchequer George Osborne, thought it was an absurd gamble.* But the prime minister assumed that the British people would choose to stay and that he could put to rest the idea of secession once and for all.

Instead, the Brexit campaign became an outlet for the angry nativism of England’s aging working-class voters, impervious to fact or reasoned judgment. Now the world has to live with its consequences. And, as the terror in the markets and plunging value of the British pound should tell you, not many people outside England’s obscure suburbs and villages think the effects will be worth cheering. The U.K. is about to sever itself from a massive trade bloc, calling into question its own economic future, all while creating the specter that energized anti-European parties in other countries will push for their own secessionist referenda. The far right in the Netherlands and France are already celebrating. Nobody knows what the future holds, of course, but Europe’s tomorrow looks a lot bleaker than it did before this completely unnecessary vote.

Theoretically, Britain does not have to go through with this idiocy. The referendum is not legally binding. David Cameron doesn’t have to push his country off a cliff, just because voters thought it might be fun.

But he seems determined to do so anyway. “The will of the British people is an instruction that must be delivered,” he said during his resignation speech Friday. He might as well have quoted H.L. Mencken, who wrote, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

But then again, there’s a reason developed democracies don’t typically make world-historic decisions by referendum. Voters are fickle. They make decisions in the heat of the moment and change their minds quickly. Twitter has been filled on Friday with stories of regretful “Leave” voters waking to realize that they’d made a mistake, that they’d never believed Brexit would actually prevail. The final count in a single election can be influenced by freak accidents or the weather; on Thursday, storms flooded much of southeast England and turned London’s evening commute into an unholy mess as trains were delayed and canceled, which surely cost the “Remain” side some votes. If the result of the Brexit goes poorly, there isn’t necessarily anybody to hold accountable—a country can’t vote itself out of office. That’s all fine if the results of a popular vote are reversible, if you’re deciding on whether to legalize marijuana or cap property taxes. But when they’re not? Perhaps its better to leave the decision-making to the people elected to do so. You wouldn’t put a war up to a popular up or down vote, since you can’t unfire the first shot. The decision to leave Europe forevermore shouldn’t have been any different.

You also have to ask: Whose will is being represented? The “Leave” campaign relied largely on the votes of aging English people—those younger than 50 generally preferred to remain in the EU. Of course, older people are typically more enthusiastic about voting. But should the rash decision-making of Britain’s senior citizens really be the factor that decides whether a child born today will get to be a citizen of Europe, whether someone who graduates college in a couple years can work in 27 other countries, or just one?

According to Cameron, it should. Which is why historians will throttle him.

*Correction, June 24, 2016: This post originally misidentified George Osborne as the counselor of the exchequer. He is the chancellor of the exchequer.

June 24 2016 9:27 AM

The Brexit Just Gave Us Global Financial Turmoil, Just as “Remain” Supporters Warned

A political gambit dreamed up by David Cameron in a pizza place at Chicago-O’Hare Airport is producing one of the worst days in the history of financial markets.

A narrow victory for Brexit will see the United Kingdom out of the European Union, ending a fifty-year period characterized by progressive steps towards financial and political union on the continent.

June 24 2016 8:23 AM

Will Texas Law Trip up a $10 Billion High-Speed Rail Project?

In the heady days of his first term, President Obama dreamed of a series of high-speed rail lines in the US, and included $8 billion in the 2009 stimulus package for that purpose. Seven years later, GOP governors in Wisconsin, Ohio and Florida have all rejected the money. Only California seems poised to develop public high-speed rail, which won’t be complete for more than a decade. Florida has a private passenger rail line under construction, but its 125 mph max speed does not hold up to global HSR standards.

The best hope for true high-speed rail in the United States is in Texas, between two cities where hardly anyone travels without a car.

June 24 2016 12:15 AM

The U.K. Voted “Leave,” and We Are Truly in Uncharted Waters

And the Brexit campaign has won. Both the BBC and ITV have called the United Kingdom’s referendum on whether to secede from the European Union in favor of the “Leave” campaign, defying early polls that suggested the country would choose to stay and sending financial markets into tumult.

We are truly in uncharted waters. No country has ever left the EU before. Already, some are questioning whether members of Parliament will even approve the vote since, as the BBC has noted, it is technically nonbinding. At the moment, however, most seem to be working from the assumption that the British government will honor the referendum’s results and begin the process of withdrawing from the union. Investors have reacted harshly; the value of the pound has already collapsed by about 10 percent to lows not seen in more than 30 years. U.S. stock futures are falling fast.

In many ways, the vote broke down as expected, with Scotland and the districts in and around London voting to remain, and much of the rest of England voting to leave. Turnout, however, was generally higher in pro-Brexit districts, which seemed to make the difference. As is so often the case in Britain, and so many other parts of the developed world now, the cosmopolitan financial center found itself at odds with working-class districts that have fared poorly in a post-industrial economy. And this time those poorer, working-class cities and towns won out.

What will this mean for Europe? It’s hard to say. For the first time in more than six decades, since France and Germany began a common market for coal and steel, the process of European integration has been thrown significantly into reverse. And it’s thanks to a vote driven in large part by fears over immigration, as well as concerns about national sovereignty. Perhaps this referendum will force the EU to address the issues that have alienated so many working-class Europeans—but it’s hard to imagine how they might. The eurozone has largely failed as a currency bloc during the post-financial crisis years because Europe hasn’t been integrated enough. Now, the world’s fifth-largest economy has declared that it was already integrated too much. And there’s a palpable fear that Eurosceptic forces in other countries will follow the U.K.’s lead and demand their own referendums. Should Brussels push for an even closer union, as its technocrats would like, the backlash could come harder and faster.

Is this the beginning of the end for Europe? Not necessarily. But it’s the end of a chapter—of an uninterrupted move to ever-closer union. And the world is frightened, because nobody knows what that means.

June 23 2016 11:45 PM

The Slate Brexit Live-Blog

On Thursday, the British people are finally voting in their long-awaited referendum on whether to remain in the European Union. And since world-historic exercises in democracy with the potential to shake the Western political order don't come along too often, Slate is here to serve you up some all-day Brexit coverage. Will the Brits stay? Will they go? Britain's about to let us know.

June 23 2016 8:10 PM

The Early Brexit Returns Are a Bad Sign for Remain

Suddenly, tonight’s Brexit referendum results are looking less clear. Polls earlier today suggested the Remain campaign was comfortably leading. But with actual results coming in, that seems less sure—and markets are accordingly throwing a fit.

The first big surprise came to us from Sunderland, where the voters broke in favor of leaving, 61 percent to 39 percent. The working-class city was expected to vote for a Brexit, but not by that margin. Political scientist Chris Hanretty had projected something like a roughly 46-to-40 split (obviously that doesn’t add up to 100, but we’re talking estimates with some built-in error). At max, he foresaw about a 13-point gap—not 22 points. Leave very much outperformed. Meanwhile, the Remain campaign barely squeaked out a win in more heavily educated Newcastle with 50.7 percent of the vote, where it had expected a stronger performance.

In response, the British Pound has started plunging. The currency had been sitting at new highs for the year when it looked as if Remain was heading for a win.

With more regions dribbling in, ITV is reporting the results are consistent with a 50/50 vote. Get ready for a tense night ahead.

June 23 2016 6:15 PM

How the Euro Crisis Helped Fuel Brexit Fever

It’s official: The United Kingdom has voted to leave the EU. This post was written on Thursday before the final results.

Here’s a question historians will probably be debating years from now: If it weren’t for the euro crisis, would Britain have spent Thursday deciding whether to leave the European Union?

The euro generally floated in the background of the Brexit debate, coloring the conversation without starring in it. This isn’t especially surprising, since Britain doesn’t use the currency, and has no plans to. As a result, it has avoided the worst of Europe’s economic calamity, and doesn’t have to worry about whether its monetary policy will one day be dictated by inflation-phobic Germans.

But the eurozone’s struggles strengthened the leave campaign’s arguments in some important ways. If the entire continent were booming, the idea of bidding the EU goodbye would probably seem absurd (Britain’s own economy would likely be growing a bit faster, too, easing some of those anxieties about immigration). But instead, it’s stagnating, with countries like Spain, Greece, and Italy looking like nothing so much as oversized unemployment offices. “The EU is a graveyard of low growth; the only continent with lower growth is currently Antarctica,” Brexit front man Boris Johnson wrote in The Telegraph last month. “That is partly because of the sclerotic one-size-fits-all Brussels approach to regulation; but, worse, in the last decade the EU has been suffering from a self-inflicted economic disaster—the euro.” Of course, even if Europe is growing slowly, it’s still an extremely valuable market for British exports. But many in the UK seem to feel that they’re simply shackled to a corpse, and when politicians like Johnson argue that cutting those ties will free Great Britain to strike trade deals with healthier, faster-growing countries, voters are happy to believe them.

Just as importantly, the euro crisis has undermined the credibility of experts who are now urging Britain to stay in the EU. Back in the early 2000s, many economists were dead certain that Britain would be better off long term if it adopted the euro. Obviously, they were wrong. And today, much of the public is skeptical when those same tweedy academics say a Brexit would make the UK forever poorer. After all, they were wrong before. Why should anybody trust them now?

June 23 2016 5:05 PM

Volkswagen May Have to Pay Billions to Drivers It Cheated

The Associated Press is reporting that the German automaker Volkswagen will pay $10.2 billion in American settlement claims over its emissions cheating scandal. According to the AP’s anonymous source, 482,000 Volkswagen owners of cars with pollution controls designed to work only during emissions testing will receive $1,000 to $5,000 in payments depending on the age of their vehicles. Volkswagen will also pay penalties to the U.S. government.

The Volkswagen case has been placed under a gag order by a federal judge and the terms reported by the AP’s source could differ from those set to be officially reported by the court on Tuesday. But the AP’s source and other recent reporting suggest that Volkswagen could soon pay heavily for a scandal that has rocked both the company and the auto industry for months.

In April, Volkswagen reached a preliminary agreement with the Justice Department to buy back or fix nearly half a million cars with illegal emissions-cheating systems. The program has yet to be approved by the Environmental Protection Agency or California’s Air Resources Board, but, as Bloomberg reported last week, is likely to be included in the settlement agreement due to be announced, which, according to their own source, allocates $6.5 billion for car owners.

Volkswagen could face additional fines from regulators even after the settlement is announced, and is the subject of a $3.6 billion dollar lawsuit from 300 institutional investors in Germany as well as criminal probes. Volkswagen has committed $18.4 billion to covering the total global costs of the scandal.

Internally, the company is in turmoil. On Wednesday, Volkswagen shareholders slammed the appointment of Volkswagen AG Chairman Hans Dieter Pötsch as head of the board responsible for Volkswagen’s internal investigation of the scandal. Pötsch, who was the company’s chief financial officer when the scandal first broke, was named to the board by a court in September and had his appointment backed by the company’s largest shareholders. But critics at the company’s annual meeting suggested an inherent conflict of interest in Pötsch’s oversight of an investigation into potential wrongdoing by the company’s top executives, including himself.

Volkswagen’s crisis began in September after the EPA ordered the recall of hundreds of thousands of Volkswagen vehicles found to contain systems designed to trigger emissions reductions only during regulatory testing. On the road in normal conditions, some cars were found to emit nearly 40 times the amount of nitrogen oxide legally permitted in the United States. The company soon admitted such systems had been installed in 11 million diesel vehicles worldwide. The company also admitted that the systems violated American laws, but told the New York Times in January that it believed they were not “forbidden” in Europe. Nevertheless, the company will recall 8.5 million European vehicles in addition to the nearly half a million cars slated for recall in the United States.

June 23 2016 4:53 PM

We Tell Ourselves Stories to Leave

Boris Johnson, the former mayor of London and leading Euroskeptic, loves to talk about the European Union's policy on bananas. In his mind, European rules on banana sales—which prohibit bananas with "abnormal curvature"—typify the problem with Brussels calling the shots in Birmingham. He's not always right about the details, but it's been an effective talking point for years.

In fact, the British press has made something of a cottage industry of exaggerating European rules—to the extent that the European Commission keeps a specialwebsite for collecting and debunking the hundreds of false claims that newspapers like the Daily Mail have made. No doubt these have played some role in reinforcing the perception that Brussels is a power-mad bureaucracy that aims to disenfranchise the people of the United Kingdom. Nevertheless, they are hilarious, and if the UK votes to leave, we will be sorry to lose this special genre of journalism.

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