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Most political commentators had not expected the UK to vote for Brexit…
2016 was the year that a decade of bubbling public discontent over the economy boiled over in two dramatic votes.
Donald Trump defied almost all predictions to become President of the United States. A few months earlier, the UK had turned its back on the club of European nations it joined 43 years ago.
The UK referendum result was a shattering blow to European Union leaders, who were only just beginning to breathe more easily after years of battles to keep the euro currency together.
The decision came as a shock to many, but it didn’t surprise one economic commentator, Roger Bootle, chairman of Capital Economics and best-known for his accurate predictions in his book, The Death of Inflation, published 20 years ago.
Mr Bootle says his reaction to the referendum result has been one of “sheer delight”.
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…or for Donald Trump to win the US election
He says research shows the main motivation for voters ticking the Leave box was encapsulated in the simple phrase “take back control” and believes the decision will help the UK economy.
Voters’ disillusionment
By contrast, a former adviser to the European Commission, Graham Bishop, says he was “appalled and horrified” by the result, but says he wasn’t surprised.
“When you spoke to people you realised the depth of their disillusion with many things, of which the EU is just one.”
The voters’ disillusion was clearly connected with the fact that living standards for the bulk of the British population have continued to decline in recent years, and Leave supporters linked that with the recent wave of immigration from the EU into the UK.
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The terms on which the UK will leave the EU are as yet unclear
High unemployment in the south of Europe, as well as the lack of opportunities in poorer EU countries like Romania and Bulgaria, has led to a constant flow of workers into the UK.
EU leaders had refused to allow the UK to limit that migration, arguing that free movement of workers across the bloc was sacrosanct.
The tide of new workers may well have boosted the total size of the UK economy, but in the past 15 years its population had risen by 10% to 65 million.
Many felt that the new arrivals from poorer countries had forced down wages and property was becoming unaffordable. And given that UK health and education are paid for by taxpayers, those services were left stretched and demanding more from taxpayers.
National debate
Roger Bootle argues that immigration has indeed depressed wages in the UK, and says freedom from European regulations that span everything from loft insulation to working hours will boost the economy.
“The EU is a regulation junkie… and I think it’s extremely damaging. Once we’re out, we’re going to have a national debate and discussion about precisely what rules and regulations we want.
“We’ve got to comply with single market rules in order to sell our goods into the single European market, that’s fair enough.
“That’s not the same thing as having the whole load of everything to do with health and safety, working hours, whatever, for a dry cleaning business in Oswestry set in Brussels. That is madness. And across the whole of Europe, not just Britain, people are fed up with it.”
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The EU is a “regulation junkie”, says Roger Bootle
Graham Mather is a British former Conservative MEP and now president of the European Policy Forum. In view of his contacts in Brussels, I asked him if he thought leaders of the EU now regret taking such a tough line saying the UK could never put quotas on immigration from other EU countries.
“I think they made an offer which was going as far as they could because they are all democracies, the Romanians, the Poles – they answer to their people in elections,” Mr Mather says.
“And if they gave us a deal which allows their people to be discriminated against and pushed out and sent home and so forth, their electors would take revenge on their leaders. So, this is the problem that we are not just a single entity. It’s a game of 28 separate democracies.”
Dramatic pledges
Donald Trump’s election as President of the United States was even more unexpected than the UK referendum result.
Before the vote, Mr Trump had made a series of dramatic pledges. They included building a wall along the southern border with Mexico, a repeal of President Obama’s healthcare reforms and tariffs of 45% on Chinese imports.
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The Dow Jones has surged more than 8% and has posted 17 record closes since Mr Trump’s win
Many voters concluded that free trade had been bad for their prosperity and welcomed Mr Trump’s promise of radical change.
The US stock market has already risen strongly, sniffing more government infrastructure spending and lower taxes.
But the financial reform campaigner, Alexis Goldstein, says Mr Trump “conned voters” and his rhetoric pledging to break with the political elite was “complete and total garbage”.
“He is stacking his transition team with lobbyists, with hedge fund managers, with the very powerful Washington folks,” she says.
Diversifying Nigeria
It was also a year when the plunging price of oil caused huge problems for many oil producers, including Nigeria. The Nigerian economy began to shrink, the currency devalued and inflation soared.
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Falling oil prices have been a problem for many producers, including Nigeria
But many Nigerian businesses remained upbeat. Uzoma Dozie, chief executive of Diamond Bank, says the crisis was “a blessing in disguise” because it will finally force the country to think less about oil and start investing properly in other industries.
“Historically before oil, we were actually an arable country. So there is a lot of drive and initiative to actually build infrastructure around agricultural opportunity,” he says.
“We are now beginning to see entrepreneurs, doctors, highly skilled people coming back to Nigeria where they see the opportunity.”
You can listen to Martin Webber’s review of the world in business in 2016 at 18:32 GMT on 26 December in World Business Report on BBC World Service, or you can download the programme podcast here.
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