Brexit is a vote of no confidence in the political and business establishment in Europe, Claude Baumann, editor-in-chief at finews.asia, writes for finews.first.
finews.first is a forum for renowned authors specialized on economic and financial topics. The texts are published in both German and English. The contributions appear in cooperation with Pictet, the Geneva-based private bank. The publishers of finews.ch are responsible for the selection.
Switzerland enjoyed a long period of utmost stability from the 1960s through the end of the last century. Of course, now and again there have been events that upset the balance of power – the crushing of the popular uprising in Prague in 1968 by troops of the Warsaw Pact, the Vietnam war, the invasion of Afghanistan by the Soviet Army in 1979 or nuclear arms race of the 1980s. The last conflict that had the potential to escalate into a world war however was the Cuban Missile Crisis of 1962.
The scarcity of fundamental threats to the peace and stability of Western Europe for four decades has a lot do with our economic system. We always knew that ours was superior to the one enforced by the Soviet Union.
The queues in front of food stores in East Berlin, Prague and Moscow reminded the citizens of the West that they lived in the «better» half of Europe. Which in turn awarded the economy an invaluable sense of goodwill. I would go as far as saying that a tacit bond of trust between citizen and exponents of the economy existed.
«Ironically enough, communism had acted all along as a corrective for the Western system»
Toward the end of last century – ironically enough at the time of the end of communism, which had acted all alongs as a corrective for the Western system – a sense of laisser-faire that had never been seen before spread among many business leaders, a loss of responsibility to society as a whole. The hubris disintegrated again with the subprime crisis in the summer of 2007 and the collapse of Lehman Brothers. The mortgage crisis in the U.S. became a banking, later a currency and a financial crisis – and it ended up as a global crisis of the economic system that today we know as a debt crisis that nobody knows how to solve.
With the crisis mode soon approaching its 10 year anniversary, it is not surprising that credibility and integrity of the business establishment have been swept away – most obviously in banking. The once feted chief executives fell the furthest, and many employees in the banking industry become notable for an unethical and staggeringly fraudulent behavior. No wonder that the banking industry has such a terrible reputation among the general public.
«The political volte-face is an angry and polarizing alternative to the liberal polity»
The reprehensible behavior of a great many managers made the right-of-center parties in the West doubt their purpose and identity – a very good example of which was the Radical Party (Freisinnig-Demokratische Partei (FDP) in Switzerland. Those parties represented the Western economic system, which has discredited itself over the past ten years.
In swept the populist groups, be it the Front National in France, the Alternative für Deutschland (AfD) in Germany or Donald Trump in the U.S. Brexit is also a reaction to this loss of trust in the establishment. The political volte-face is an angry and polarizing alternative to the liberal polity which had taken power after World War II and imploded with the financial crisis in 2007.
«The agitation in reality is a vote in support of less freedom of trade and in favor of protectionism»
The political and business establishment in the West has since lurched from one crisis to the next. There is little to suggest that reasonable politicians and parties will carry the votes in coming years. Instead, we have dubious luminaries dominating, indulging themselves in populist policies that are designed to gather maximum support – and hit the talkshows across the country.
The complicated political balance of power taking hold of more and more countries of Europe is an enormous threat to the economy and entrepreneurship. The agitation in reality is a vote in support of less freedom of trade and in favor of protectionism – and has nothing to do with our free and democratic convictions.
«Extreme views are not the breeding ground for a renaissance of responsible politics»
Business leaders hence should be interested in a political sphere that finds its way back to common sense. But only those who lead by example can support such a return to reason. They seem to have a very long way to go still, judging by the never-ending compensation excesses and embarrassing attempts to explain those away. It is impertinent for a manager to say he did a good job, after the company he leads received a fine amounting to billions of francs, and equally so when top managers take millions in bonuses even though their company is loss-making.
With behavior like this, managers are paving the way for populist blustering taking power. It will not be too surprising if politics becomes even more confrontational in coming years. Extreme views and arguments are catching greater attention. But they are not the breeding ground for a renaissance of responsible politics which so urgently we need.
Claude Baumann is co-founder of finews.ch and finews.asia. He used to write for Weltwoche and Finanz und Wirtschaft. He also co-founded the publishers Nagel & Kimche and launched the business travel magazine Arrivals. He’s the author of several books on the banking industry.
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