Henry Williams

History teaches us the Chancellor’s Doomsday warning over Brexit is nothing to be scared of

George Osborne’s doomsday warning over Brexit has an odd historical echo to it. Take James Rothschild’s letter to his brother in 1831, just months before the Great Reform Act was passed the following year. He warned about how ‘the infamous liberal spirit’ could affect markets. ‘Let us get down to the nitty gritty,’ he said. ‘We fell some 30 per cent (in Paris) and I hope To God this will not be repeated this time in England.’ It turns out that historically international financiers have not been the hugest fans of popular revolts.

The parallels with the stark predictions regarding Brexit from the Treasury, the OECD, and bankers willing to lend their names to open letters 180 years later are striking. To be fair to Rothschild, his gloomy predictions were at least vaguely realistic. However, the similarities echoing through the ages can still tell us something. It seems that for a certain, rentier class, a neat, predictable market is preferable to messy freedom. And this, it seems, applies even when something badly needs reform: such as in the case of the British Parliament in the 1830’s. Or the European Union today.

So was it just Rothschild who warned of an economic bloodbath if the Great Reform Act was passed? No, if this Harvard study is anything to go on. According to the research, the bond markets echoed these dire warnings of what might happen if the 1832 Act’s modest proposals of abolishing rotten boroughs and providing some of Britain’s growing middle class with the vote, were passed. Bond yields skyrocketed on Britain’s three per cent consol bond as popular unrest and political deadlock on the Reform Bill caused markets to perceive a greater political risk on British government debt. On 12 May 1832, the Times referred to the bond market as a ‘barometer of the agitation which is working the public mind.’

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