By George Friedman

The British people have voted to leave the European Union. It was not by an overwhelming majority at 52 percent, but it couldn’t have been imagined 10 years ago. We have been seeing this fragmentation throughout Europe, but we now have the first case of a nation deciding to leave. I doubt that it will be the last. But as the first, we should try to understand clearly why the British voted as they did. We should also be thankful that we will never hear the word Brexit again. I really hated that term.

The issue is what prompted this outpouring of votes to leave. There were three reasons, in my view, that drove it.

Economics

The first was simple. Supporters of remaining in the EU made the case that there would be substantial economic costs. Opponents of the EU noted the obvious, which is that the EU is a dysfunctional economic entity that has been unable to address the economic problems that have developed since 2008. It has not addressed the condition of southern Europe, where unemployment has remained at more than 20 percent for years, nor the high unemployment in France. The profound difference between the lives of southern Europeans, including the middle class, and Germans, who enjoy 4.2 percent unemployment, is profound. Europe as a whole has stagnated economically.

The argument for remaining in the EU was that the alternative was economic disaster. It made little sense to the opponents of membership to try to solve British problems through a close link to an organization experiencing regional economic disaster and organization-wide stagnation. These voters were not persuaded by the idea that leaving the EU would lead to economic disaster. Their sense was that remaining in the European Union would force Britain to share Europe’s fate.

Obviously they did not think that Europe would throw up trade barriers against Britain. The U.K. is Germany’s third most important export target; The last thing Germany wants is a trade war with Britain. Similarly, the threat that London’s banks would decamp for Frankfurt is not only logistically implausible, but doesn’t take the banks’ clients into account. Clients from around the world like visiting London and it is the clients that matter in finance. By moving to Frankfurt, New York would become a unique magnet. Frankfurt, not so much. In the end, the Europeans need the financial services London provides. They will not lock it out. The European Union did not create the financial relationships that exist. Britain’s financial role goes back almost two centuries. The EU is a system that aligns with financial reality. It does not create it. The threat of consequences was not persuasive.

Sovereignty

The second reason had to do with a global trend toward nationalism. There is a sense that the multinational financial, trade and defense organizations created after World War II have ceased to function effectively. The EU is an example, but the International Monetary Fund and NATO are other examples. More than not serving any purpose, these institutions do harm in malfunctioning and most important, take control away from the nation. For supporters of remaining, such organizations are self-evidently valuable and may need to be tweaked but not abandoned. For those voting to leave, these organizations take away sovereignty from the nation, and therefore the nation loses control over its own fate. Lacking trust in these entities and fearing the consequences of losing control, nationalism becomes a powerful attraction.

The immigration crisis in Europe was a trigger. While leaders of some countries and of the EU argued that aiding the refugees was a moral obligation, opponents of the EU saw this as a national issue, as it affected the internal life of the country. The attempt to take control of this issue away from Britain was a particularly important driver for the “leave” vote. The EU has trouble understanding the power of nationalism. It attempts to retain nationality as a cultural right, but deprive the nation of power to make many decisions. This strategy was embraced before 2008, but became difficult to accept after.

Political Elitism

Finally, there was a profound loss of the political leadership of Britain, with the leaders of both the Conservative and Labour parties rejected by the “leave” voters. Both parties had endorsed remaining with the EU, and both parties saw many of their members go into opposition on the issue. Indeed, in many ways this was a three-way struggle, with the two established parties wanting to remain in the EU and a third faction, drawn from both parties, opposing it. People in this third group saw both establishment parties as hostile to their interests.

This should be considered in the broader sense. The financial markets panicked at the possibility of an anti-EU vote. They said so loudly. What they did not grasp was the degree to which they had lost legitimacy in 2008. It appeared to this third group that the financial industry’s recklessness and incompetence had created a disaster for many. In addition, many of the voters saw no benefit to themselves in the success of the financial industry or its location in London. While in Britain, the financial industry would have disproportionate influence, that would harm the voters.

The degree to which this was a vote that was directed against the British elite is vital to understand. Politicians, business leaders and intellectuals were all seen as having lost their right to control the system. The elites had contempt for their values – for their nationalism and their interests. This is not a new phenomenon in Europe, but it is one that the EU had thought it had banished.

This is not a British phenomenon by any means. It is something that is sweeping Europe and China. It is also present in the United States, in the figure of Donald Trump whose entire strategy is to attack both the Democratic and Republican leadership and the elite who have contempt for the nationalism and moral principles of those beneath them. It is a general process the West is undergoing, and it came to London yesterday.