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Globalisation is Increasing the Trend to Nationalism

Updated: May 2, 2018

The exit of Great Britain from the European Union reflects a nationalistic trend occurring round the globe resulting from globalisation. Arguably, the rise of Donald Trump reflects this trend, as he has accessed the discontent within certain sections of US society while filling the political vacuum in the moderate areas of the Republican Party caused by the rise of the Tea Party

Great Britain may become fully independent, but from an economic perspective the trend to globalisation is unstoppable, so there will continue to be some level of economic integration, the form of which is unknown, as it’s also in the European Union’s interest to continue with some level of integration. 

The economic impact on Great Britain will be a lot less if there had been monetary union, i.e. Great Britain had never adopted the Euro. If Germany was to leave the European Union then the European Union would collapse and the economic consequences for all would be significantly greater than the current Brexit situation. For example, following the move to a single currency (Euro), Germany has had the benefit of a lower “notional” Deutsche Mark, because of the dilution effect of the other countries’ lower valued currencies that make up the Euro.

The current financial market volatility is being magnified by program trading, rather than investors making decisions to unwind their exposure to Great Britain economy. History shows that financial markets both over sell during periods of uncertainty and over buy when the outlook is considered very positive. Either way investors should understand that volatility smooths in the long run.

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