Was Brexit just the beginning?

Nick Hubble

Last night, crowds wandered the streets banging on pots and pans outside our window.

Yesterday was even more of a surprise. It felt like a political rally from 1930s Germany. With a bunch of bewildered tourists thrown in.

Flyers rained down into the square from the rooftops. Fists and four-finger symbols were raised to the Catalan national anthem. Crowds chanted “votem”. There were towers of humans standing on each other’s shoulders, up to nine high, as the tourists had hoped to see. But on top of the towers were little children unfurling banners about “Democracia” and “Si”. People chanted “We will vote”.

I’m in Barcelona, which is making Brexit look boring. The Catalan independence movement is pushing for a referendum on 1 October. The Spanish national government has declared this illegal. The crackdown is creating extraordinary scenes.

In Barcelona and other ports nearby, dockworkers are refusing to offload the cruise ships full of national riot police. The local police have refused to cooperate with national authorities despite getting their funding from the national treasury. The head of the police force became a cult hero after the van terror attack here and is now divided between Catalan independence and the law. National police already arrested leading politicians for their support of the referendum and instigating protest. Postal workers are warned not to handle any vote material.

One thing that makes the Catalan vote so interesting is that it has already defined what the state of Catalonia would look like. Part of the referendum is about the proposed set of policies and the pre-prepared constitution, not just independence. This creates all sorts of confusion and divides the camps of voters.

There are people who think the vote is illegitimate, people who want to vote but vote no; people who want independence but don’t support the proposed set of policies as the more extreme sides of the political spectrum designed them while bizarrely working together; and then there are those supporting the package deal.

For Brexit, we found this division out the hard way after the vote. It left Prime Minister Theresa May severely weakened in Parliament after the subsequent election. During the election campaign, she only pitched one of the many versions of Brexit people voted for, a much smaller support base. The Catalans are dealing with this issue in advance.

Spain’s finance minister has delivered an interesting ultimatum to Catalonia. Either the Catalan government backs down or it loses its financial resources, which are regulated at the national level. This is incredibly ironic as one of the few rational reasons for Catalonia to leave, from what I can gather, is that the prosperous region is constantly sending money to other parts of Spain.

Instead of focusing on this financial benefit, the most popular slogan is “Democracia”, which is utterly bizarre given Spain is a democracy already. And the Catalan president is making odd statements such as ”Every day is a Vietnam”.

The whole issue is not just complicated on the politics, but also on the mechanics. What level of participation is needed to legitimise the referendum? This is really the key issue, as those in favour of independence are vastly more likely to bother voting on 1 October.

When 80% of voters were in favour of independence in 2014, it was only of the 37% who voted. This time around, the Catalan parliament’s laws that would set into effect a split didn’t include a minimum required turnout. That’s dangerous.

Why you should watch this one

The specifics of Catalonia’s independence aren’t terribly useful to you. But in the wake of Brexit, movements like these will gain in traction. And there are too many separatist movements to count in Europe.

Each one comes with financial challenges and consequences for its host nation. Which European countries really couldn’t handle right now.

This was fairly obvious in the debate over Scottish independence. The financial position of such a state would be determined by the negotiations, making the whole effort a high-risk bet.

Moody’s downgraded Britain’s credit rating over Brexit to make the same point. The pound tumbled.

With governments posing a huge financial risk already, and reaching the ends of their financial tether, they can no longer deliver on their excessive promises. That will further encourage the separatist movements of the wealthier regions of Europe like Catalonia, Bavaria and northern Italy.

Having the financial sense of wild politicians affect the market is a dangerous game. It could go very terribly wrong.

Akhil Patel argues that political turmoil also creates predictable investment trends. He’s identified nine of them. And they’re full of surprises.

Uber gets what it had coming

Back when Uber was a movement against the absurdity of licensing, restricted supply and government meddleomania, it stood as an example of what the free market could achieve for customers.

But as soon as the company attracted a big enough following, it reversed the strategy of defiance. Instead of working to disrupt stupid government bans, it began complying with them. Even supporting new ones.

Why? To raise barriers to entry for competitors. If Uber has to comply with vast amounts of regulation and their cost, then so too must Uber’s copycats. And it’s far easier for a large, established company to do so.

But now karma has caught up with Uber in London. The city revoked Uber’s licence, opening the doors to competitors to soak up the demand.

If you play with politicians, you get what you deserve.

Unfortunately, it also displays the reality of post-Brexit Britain. We probably won’t become the free-market country that MEP Daniel Hannan had envisioned. At least not if we’re going to ban the likes of Uber.

We’ll see what Hannan says at our conference in just a few weeks’ time.

Until next time,

Nick Hubble,
Capital & Conflict

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Category: Geopolitics

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