The elephant in the room

Escaping the barraging beast of Brexit is one of many refreshing things about being in China.

Either because it’s not happened yet, because it will happen at some point, or because it still isn’t clear what it means, no one in Britain seems happy with the state of Brexit.

Chinese politics may be quite beastly itself, but here I don’t feel surrounded by the same anger and frustration that exists back home.

Bottom line is that the majority of people in Britain are feeling poorer, and feeling poorer is infuriating – especially when you’re working just as hard as you always have been (or seen).

The poorest people in Britain are still among the richest 20% of people in the world, but the fact they are feeling poorer is what is so infuriating for them, and why they voted for the side campaigning for something different in 2016.

This is a sharp contrast to China, where the majority of people are feeling richer…and you can see it on their smiling faces. People here know they are less free than people in Britain, but they are far less angry and frustrated. I see no appetite for change here.

My prediction is that the majority people in the UK are going to continue feeling poorer, and hence are going to continue feeling understandably infuriated. This is because there is an elephant in the room that too few people seem to be aware of:

The room is globalisation, and the elephant is what globalisation has done to the global distribution of income.

The horizontal axis shows wealth by percentile across the global distribution of income, from poorest to richest (so the poorest person in the world would sit at the far left of the axis; the richest person in the world at the far right).
The vertical axis shows the real time percentage change in incomes [taking out inflation] (so the people highest up this axis have seen the biggest percentage increase in their incomes; the people lowest down have seen the smallest).

Screenshot 2019-03-11 at 18.47.17

Original source: Lakner and Milanovic, World Bank Economic Review (2015)

This conveniently elephant-shaped graph is the work of economist Branko Milanovic, and though based on 2008 figures, there is no reason to believe its shape has evened out since then. It shows that as a result of globalisation:

– The majority of people in so-called ‘developing’ countries, though still some of the poorest people in the world, have seen a rise in their incomes (point A). Here sit the majority of people in African countries.
– The majority of people in countries said to be ’emerging economies’ have seen an even bigger rise in their incomes (point B). Here sit the majority of people in China.
– The majority of people in so-called ‘developed’ western countries, though still among the richest 20% of the world, have not seen their incomes rise – some have even seen theirs fall (point C). Here sit the majority of people in Britain, USA, and Western Europe.
– The richest 1% of the world have got even richer (point D). Here sit the CEOs of the worlds biggest companies, who pay for cheaper labour in developing countries at the expense of the majority of people in developed countries.

To summaries, what Milanovic’s graph illustrates to us is that globalisation has been good for a lot of people in the world, but for there to be winners there must be losers – and the losers of globalisation are the majority of people in places like Britain.

These people are increasingly finding themselves lumbering along the hard ground (point C) looking further up at the top of the elephants head behind them (point B) and tip of the trunk in front of them (point D) – feeling angry and frustrated as a result.

I would love to be an optimist and think that Brexit will make the majority of British people happier. But I can’t see it.

The UK Government cannot ‘Take Back Control’, because the game has now changed: It is called Globalisation, there are a bunch of other players (so less control), it is difficult to leave once you’re on the board (globalisation is here to stay), and you are sometimes winning and sometimes losing (but ultimately the greedy banker always wins [point D] because they control the wealth of the other players)…a bit like monopoly I guess…

…and whatever move is played on March 29th – the elephant in the room will remain.

 

 

As ever I could be completely wrong. Maybe Brexit will be a game changer.

…but it in the meantime I recommend visiting China. They seem to be ahead (for now).

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