Global markets oversold unless Brexit is a sign of something worse: Don Pittis

There are signs that worldmarkets are coming to their senses, realizing thatthe kind of crisis that wouldjustify a financial bloodbath has not yet happened.

However, markets signal the future. That means the wave of selling since the U.K. voted last weektoBrexit shows some traders feared something muchworse was on the way.

• Global markets show signs of life
• Abusecaught on video amid rise in post-Brexit hate crimes

Now the world must pull together to make sure thatsomething worsedoes not arrive, either in Britain or elsewhere.

Britain'sbad patch

There are many voices advising calm, saying that after the currentperiod of turmoil the future is rosy.

• Economists say U.K. could benefit from ending EU ties

There is no reason why Britaincould noteventually return to strength, trading with Europe and the world asan independenteconomy as Norwayand Switzerland do today.

However, there is much to be resolved before that can happen and there is still a chance things will get worse before they get better.

Dangerous global trend

For the sake of the world economy, the greater disaster would beif what has happened in Britain is not just a unique event, but a worldwide anti-foreign and anti-globalization trend of the type warned against by French economist Thomas Piketty in his 2013 book Capital in the 21st Century.

• A Brexit reminder that things fall apart

The Brexit debate appears to haveunleashed something ugly in Britain, as if racists and xenophobeshad taken the vote for the Leave side as permission to act as an entitled majority.

"We voted Leave, it's time for you to leave," Sayeeda Warsiquoted Brexit supporterssaying to people who looked or sounded different from their idea of what a true British person should. Warsi isa British peer and former head of the Conservative Party who switched sidesfrom Leave to Remain once she saw the anti-European rhetoricspill into another kind ofnastiness.

A rise inracist or sectarianviolence is by itself enough to justify market worries, because healthy economies do not operate well in periods of social chaos.

As Churchill said ...

In theBrexit debate both sides invoked the memory of Britain's heroic Second World War leader, WinstonChurchill who famously said, "It has been said that democracy is the worst form of government, except for all the others."

But in political terms this is not Churchill's Britain, where the educated elite believed in the duty of service, an enlightened civil service held a firm grip on power and the working people knew their place.

Years ofalow-tax every-man-for-himself Britain may have helpedbrew up the currentBrexit crisis. Politics was left to the self-interested and self-indulgent.

When Pikettydescribed this very problem and its solution in the hope of saving capitalismhe was labelled a Marxist by some of the same groups that are helping now totear Europeapart.

"At the heart of every major political upheaval lies a fiscal revolution," Pikettywrote.

One of his great concerns was that as wealth, income and education became more unequal there would be an uprising against greater global integration.

Ifa large part of the population begins to feel that only the very rich are getting the benefits, "then the risk is that some countries will choose to turn against globalization," saidPikettyin a CBC interview.

Reports on the breakdown of theBrexitvote show people in favour of staying in Europe were the young, educated andcosmopolitan who have benefited fromglobalization. The Leave side was supported byPiketty'sdisenfranchised,expressing the rage that foreigners and Europeans are getting all the benefits of free trade, imagining they can go back to a mythical time when everyone had a job.

"All signs are that the Scandinavian countries, where wage inequality is more moderate than elsewhere, owe this result in large part to the fact that their educational system is relatively egalitarian and inclusive," Piketty wrote.

It may be that the divisive politics that has begun in Britain has gone too far to be stopped. But there is still hope that the young and successful who have benefited from globalization will take this vote as a warning and as a rallying cry, stepping into the void in British politics, responding to the call for champions.

Follow Don on Twitter@don_pittis

More analysisby Don Pittis