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A Brexit Would Be a 'Massively Complicated Exercise,' Rachman Says

  • By Ira Apfel
  • Published: 8/11/2016

AN16-Rachman-PgHdrAsk Gideon Rachman for his thoughts on the Brexit vote and he’ll give you an earful. The London-based journalist also has plenty to say about Donald Trump, geopolitical risk and more. That should come as no surprise, given that Rachman is chief foreign affairs commentator for the Financial Times. Rachman will speak at the AFP Executive Breakfast in Orlando, Florida, in October. Learn more about the AFP Executive Breakfast and be sure to register by September 16 to save $200.

[Ed. Note: This interview was edited for clarity.]

AFP: I was struck by how the day after the Brexit referendum, you wrote a column that declared, “I do not believe that Brexit will happen.” Now that’s a pretty bold statement. Do you still believe that?

Gideon Rachman: To be honest, I’m less confident than I was at the time, but partly because of the way politics have developed. I don’t think it’s at all certain that Brexit will happen. Look, because I think it’s a massively complicated exercise. I think both sides could back off as they begin to understand the complexities of it. But a lot will depend on the development of politics both here in the UK and in Europe. The reason I wrote that then was partly because of the previous precedents that we’ve seen in Europe where you’d have these political shocks and everyone said, oh, my God, the world is ending. In fact, they put it back together again.

But also, because at the time it looked like Boris Johnson would be our next prime minister. From what I know of him, he didn’t really believe in Brexit. It was a sort of political stratagem. However, he even promised because things changed and saying it looks like the people who really believed in getting us out of the EU are apparently in control of the political process. So that I think makes it more likely than what I wrote, but we’ll see. As I said to a lot of people at the time and ever since I wrote that, various people emailed me and said, no, look at what’s happening now, how can he probably say this? It doesn’t look great, but we’re also at the beginning of a process that could take four or five years. It will look very different in a year’s time, three years’ time, partly because of external events, and we’ll have new prime ministers in Germany and France and so on. The EU itself will change. I don’t think it’s a foregone conclusion at all.

AFP: Where do you stand right now? There hasn’t been a whole lot of news lately.

Gideon Rachman: I think one of the things that’s happened is that she has deliberately decided to go slow. That is partly because it was very unclear even in the campaign amongst those who were campaigning for us to leave, what they meant by leave. They didn’t really define it. They just said, look, the EU is a terrible place, let’s get out, and then we’ll be fine. Now we have to make some choices. There’s one particularly important choice that needs to be made, which she haven’t yet made clear which side of the fence she’s going to come down on. Because I think a lot of folks who voted for us to leave did it essentially because they want to control immigration. This is in fact, I think, a parallel with the politics in the U.S. at the moment where obviously that’s one of the driving forces of Trump. People here said, okay, that’s what we got to stop - the free movement of people from Europe into the UK.

However, all the business interest that’s behind the Tory Party want us to remain part of EU internal market even if we aren’t part of the kind of legal structure of the EU and we don’t have votes and we don’t add to the budget. Unfortunately for Britain, if you’re going to be part of the internal market, as European law is currently configured and there’s no sign they’re going to change it, you have to accept free movement of people.

So May has a very difficult choice. Does she say, okay, immigration’s priority, one, and we’ll get out of the internal market? That may mean that we have discrimination against the city and financial services and tariffs on manufactured goods, which business would absolutely detest, but that is what her voters expect. Or does she say, well, I’m going to disappoint the voters on immigration because it’s more important that we stay in the internal market. She was being deliberately ambiguous on that. I think it’s partly because she’s trying to figure out what she wants and whether she can find some sort of middle way between those two courses. But she’s also under pressure both domestically and from Europe to at some point clarify what she wants to do.

AFP: You’ve also written, as you mentioned just briefly, there are parallels between Brexit and Donald Trump. What’s your take on him and what do your fellow Englishmen think about him?

Gideon Rachman: I think that there’s very little support or sympathy for Trump in Europe because obviously the political culture in Europe is to the left of the U.S. Republicans generally are less popular than Democrats. For example, as I’ve said, that Bush was not particularly popular in Europe and Obama was very popular. But I think also that Trump is very Americans Again. Also the whole America First thing get some people in Europe worried because -- just from security grounds. Is America going to withdraw its security guarantee and things like that? That said, although I think Trump is a very American expression of it and one that wouldn’t necessarily go and win in Europe.

In a funny way, I think he is part of a broader political movement which spans the Atlantic, which is a backlash against globalization and in particular a backlash against globalization from the white working class who feel that it’s not worked out well for them. Maybe that backlash has been growing really for 20, 30 years with the accession of China or India and other Asian countries to the global markets, and the pressure that apparently put on wages. But I think then the financial crisis adds an extra layer to it. Again, you know the rhetoric, this idea that the rich has got away with it while the poor suffered. Although, I don’t think that Trump’s style doesn’t go across very well in Europe, but I think that some of these themes that he’s hitting actually are common.

AFP: You write a lot about global risk, and there are risks in every region in the world today. What do you consider the biggest risk—Brexit, North Korea, or something else?

Gideon Rachman: It sounds a little cute, but I think the biggest political risk is usually the one you haven’t thought of because it’s also the one you’re not prepared for. So it is something like 9/11 or Lehman Brothers or whatever. I think that war isn’t necessarily a bad means for financial markets as we have discovered with the Middle East, where hundreds of thousands of people died against the background of rising markets in the West and so on. It has to be something that hits a systemically important part of the economy.

And so I would say you got to look at the big global economies and what could go wrong there. There, I think you’d look in the east, at China; obviously, people went very nervous last summer with the idea of the stock market crash and so on. I think that there are questions both about China’s economic development now I think slightly calmer than we were a year ago. But also, I would look at the politics there where if you go to Beijing, people are very, very nervous because of the anticorruption probe, and Xi Jinping is frankly arresting a lot of powerful people.

AFP: Do you see cause for optimism anywhere?

Gideon Rachman: Let me think. I think India actually although some of the optimism around Modi has been a little bit exaggerated. He was a bit of a savior figure when he came in. I do think that certainly when I was last in India which is now a year ago, the contrast with the sentiment two or three years before was very marked. That was a country that has become much more optimistic in the sense that they kind of got their mojo back. I think oddly enough the fact that China was doing slightly worse had boosted the Indians because they were now the world’s fastest growing large economy. I think they’re also in a position to -- unless robots take all the jobs, which is possible, the Indians are now in a position to finally get a lot of low cost manufacturing because costs are going up in China, and companies like Foxconn are planning to move hundreds of thousands of jobs potentially to South Asia and to India. So I think India can do well.

Even countries in Eastern Europe, if the EU doesn’t go to hell and Russia doesn’t get too dangerous, then there’s still quite a lot of catch-up on growth in places like Poland, Hungary, Czech Republic. In Africa, the Africa story, I think people kind of tend to exaggerate in either direction. Africa is either the hopeless continent as the economists called it I think in 2000 or it’s the new Asia. I don’t think it’s either. But there are up to 70 patches of Africa which are doing well, and again which could benefit from the boom in India because you can have a -- just as you have the Pacific Rim, you can have a kind of Indian Ocean Rim where bits of East Africa or India have cultural and economic ties. So I think there’s optimism there as well.

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