Brexit: Xenophobia, nationalism — and questions about income distribution

Britain's Brexit referendum was supposed to be about the economic benefits of England remaining in the European Union, but instead it became about immigration, and it adopted a distinctively racist and xenophobic flavour.

It even resulted in the death of a sitting Member of Parliament, Jo Cox, by a man who is said to have links to far-right groups and has given his name in court as "death to traitors, freedom for Britain."

There will be considerable analysis of the results of this vote. There will be no shortage of blame. But most politicians and political parties will resist asking the right questions, and instead will simply blame the racists and the xenophobes. "It is the moment xenophobia won," was how one prominent Canadian journalist and commentator put it.

As an economist, I have often wondered about the relationship between xenophobia and economics

As an economist, I have often wondered about the relationship between xenophobia and economics. Most studies have looked at the economic impact of xenophobia (and many comments over Brexit focused on this link as well), but I am more interested in the economic roots of it. Studies are not unanimous, but there is emerging research that shows what many of us assumed all along: there is a statistically significant relationship between income inequality and poverty, on the one hand, and the rise of political parties on the far right of the ideological spectrum, on the other.

The neoliberal agenda of the past three decades that caused the 2007 financial crisis and today's overall economic mediocrity is at the root of the rise of the far right parties and their xenophobic policies.

Increased income inequality slows down our economies (a fact that has now been recognized by the IMF). If we compare the economic performances of 1945-75 and 1980-2010 with respect to a number of economic indicators, such as unemployment, productivity, wage gains, income distribution, inflation and growth, the later period performs much worse. Citizens are feeling increasingly angry, poorer and marginalized, and more willing to entertain other ideas.

Laying blame

As countries struggle economically, and as unemployment increases and income inequality rises as a result, studies show there is increased nationalism and a desire to blame others for our woes. We have all heard the chants: "foreigners take our jobs," or "America for Americans." When economies are depressed, we search for somewhere to lay blame.

Of course, there will always be segments of the population who will exhibit xenophobic feelings. But around the world, and in Europe in particular, these segments are growing, and far right/populist political parties are reaping the benefits of such fears. 

For instance, in France, Marine Le Pen's Front National is ahead in the polls and there is deep concern she may be strong enough to form the next French government (and she is openly talking of Frexit). Similarly, in the U.S., the Republican-cum-populist party under Donald Trump is playing on those same fears. Trump is well aware that many American workers have lost their jobs as a result of NAFTA and other similar trade treaties, as American jobs have gone overseas. It has resulted in an atmosphere of distrust for foreigners, and of foreigners in our own countries "taking our jobs."  

Far right gaining ground

The far right is gaining ground in many other countries in Europe: the Freedom Party in Austria, the Danish People's Party in Denmark, the Finn's Party in Finland. Far-right parties in Germany, Greece, Hungary, Italy and the Netherlands have all gained in popularity.

I concede that these relationships are more complex than I can discuss here, and there is a need for greater understanding of these social and voting patterns. But there is some evidence that points in the direction of economic causes.

Xenophobia and rising nationalist sentiment are signs that we need to change our policies to improve our economic situation. Near-sighted political parties are playing with fire by ignoring these threats. In the coming few years, as the far right rises in popularity in Europe, we will look back and probably say: "We could have done something."

In light of this, we ourselves will look to play the blame game and we will refuse to look inwards at our economic policies. We will certainly blame other factors, thinking our policies do more good than harm, when in reality, they do more harm than good. We will be told that the solution is to continue austerity policies, but inevitably, they will only exacerbate the problem.

Louis-Philippe Rochon is a professor of economics at Laurentian University and a founding co-editor of the Review of Keynesian Economics.