Brexit is Served

When attendees and exhibitors walked onto the show floor at NAMM in Nashville on that Thursday, they saw a summer show that continues to expand and look healthier each year.

By Friday, there was a creeping sense of doom in the room. That’s because the news that the U.K. had voted to pull out of the European Union (EU) – the so-called “Brexit” – had tanked the financial markets. Stock markets were down over four percent in a day, with the British pound hitting a 31-year low. There was more bloodletting to follow on Monday, when markets reopened.

In the wake of the Great Recession, the initial reaction to a market swoon like that was automatic: smartphones were whipped out and apps from Charles Schwab and Vanguard were launched, as people peeked tremulously at their 401ks and other holdings. The novelty of Brexit added its own level of horror – we were entering unknown territory here and no one knew how deeply the implications of this event could reach.

A Bad Dream!?

By Tuesday, however, markets and currencies were already recovering, and by week’s end the broader markets had returned to their pre-Brexit levels and then some. By then there was the sense that Brexit was just an added pressure on an annual financial-markets phenomenon known as “Sell in May and go away,” thereby avoiding the typically volatile May-October seasonal window. In fact, by the time you’re reading this, the U.K. (or what’s left of it – the “leave” vote prompted Scotland and Northern Ireland to consider striking out on their own and staying in the EU) may still not have yet pulled the trigger on the complex set of levers needed to formally end their inclusion in the EU (“buyer’s remorse” was already setting in by Monday), and it may even have found some ways to get around the outcome of the vote, including holding a second referendum.

However this mishigas turns out, it also underscored how globalized the MI industry has become. One of the first things that people thought about were the implications for British brands, like Marshall, Orange and Trace Elliot. One early realization is that there simply aren’t that many of those anymore; of 10,300 members, NAMM lists 219 members based in the U.K.; a quick page-through of manufacturers on the website of MIA, the U.K. counterpart of NAMM, takes less than a minute, and nearly half of its roster are the U.K. outposts of global brands like Yamaha and Korg. Even in pro audio, where U.K. manufacturers like Solid State Logic, Allen & Heath, and Focusrite are still formidable, they’re just a small slice of what’s become a much larger pie that includes a growing number of Japanese, Chinese and European brands. At Summer NAMM, international attendees accounted for 12 percent growth over 2015 (versus one percent overall) and 59 percent growth since 2014, the largest number of international participants at Summer NAMM in over a decade, and an increase in buyers from Asia and Europe.

It’s not to diminish the U.K.’s contributions to the MI universe – thanks to the Beatles, et al. they’re responsible for just about every guitar sold since 1963 – but to put it into perspective: MI has been one of the biggest beneficiaries of globalization: the access to a greater array of more affordable instruments and other products has vastly broadened the choices for retailers and consumers.

Bigger Picture

But let’s also look at what Brexit also represents. The economic arguments for it were skewered pretty early on – as it turns out the U.K. got back nearly as much as it put into the EU – so those advocating for it instead emphasized it as a means to regain sovereignty, to take back legal autonomy from the EU’s capital in Brussels. It’s an argument that’s been made here for years, just replace “Brussels” with “Washington.” In fact, our own imminent referendum in November will turn on similar themes. Put in those terms, the perspective of supporters of a more nativist approach to social issues becomes more understandable. The recovery after the Great Recession here hasn’t been as evenly distributed as one would have hoped or expected. The same anger that was manifest in Brexit – a female member of Parliament was murdered in the street putatively over the contest – is palpable here, as well. It’s possible that its outcome could be one that also reflects the same forces that were behind Brexit.

So it’s worth watching to see how this all turns out. Brexit was in part an argument against relentless globalism, and that genie is not going back into the bottle. The globalization of commerce has helped at least as many people as it’s hurt, even as that’s cold comfort for those who have been damaged by it. Bigger pictures are always harder to see close up, and as Brexit unfolded in the news during Summer NAMM, it might have seemed like the sky was falling. But things were already looking and feeling differently the next morning. What it reminds us is that do-overs are rare at this level of social tectonics, so it’s best to make decisions in such a way as to not have to hope you need them later.