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The UK Elections: A Union Divided

The UK Parliamentary elections are being held today and it's one of the most interesting UK elections I can recall in my lifetime. It's one of the more difficult elections to predict, as well; the increasing elements of regionalism are pushing the UK towards a coalition system.

Some thoughts on the election and contemporary currents in the UK:

(1) David Cameron has arguably had one of the more successful terms as Prime Minister. The UK economy has fared much better than its continental peers and Cameron's coalition deserves some of the credit. Nevertheless, Cameron faces a significant chance he'll lose re-election as Prime Minister.

(2) The Scots are set to overwhelming vote for the Scottish Nationalist Party. It's main mission is Scottish independence. This is strange because the Scots just rejected Scottish independence a few months ago. Ultimately, I feel like the UK would be better off without Scotland. Scottish socialism is a significant drag on England and London. I say this as a man with deep Scottish heritage and whose family celebrated its "Scottishness." I love Scotland but its contemporary politics are delusional and dysfunctional.

(3) There's a possibility that this election leads to no governing coalition. The Conservatives are unlikely to have a majority and most of the minor parties are more likely to align with Labour. Labour is reluctant to align itself with the SNP, which will alienate its core English constituencies. The Liberal Democrats will likely be king-makers, but it's possible that even they are unable to create a majority with either party.

(4) The left-leaning, but free market-oriented, Economist endorsed David Cameron for re-election. This speaks volumes on the direction of Labour. The Economist almost always favor center-left politicians. Their Conservative endorsement is a rebuke of Labour's creeping shift back towards socialism.

(5) A Labour victory would have negative repercussions in my view. The UK and France have taken divergent paths since the election of Margaret Thatcher and the UK has been the clear winner. In the 1990s, Labour shifted to become a more middle-of-the-road party. Now, it's moving back towards its socialist brethren in continental Europe. Moreover, any coalition with the SNP would likely include calls for very radical economic reforms that could weaken the UK economy.

(6) FiveThirtyEight has made its predictions on the UK election. It currently shows the Conservatives as likely to win a plurality of the seats. However, it also shows that a potential Labour-SNP coalition would hold more seats than a Conservative-Liberal Democrat coalition. If FiveThirtyEight is right, I have to think that Ed Milliband will be the UK's next Prime Minister.

(7) Personally, I think the best solution to a "divided union" in the UK is further devolution. Not only should we see more devolution in Scotland, but England, Wales, and Northern Ireland, as well. But as most of us know, what's "best" is rarely what happens.

That's I have on the UK. As to whether it will impact the markets, my answer is that it always does in the long-term, but the short-term impact is normally small. However, there is a possibility that a Labour-SNP alliance could result in a bit of a short-term hit, as well.