The people have spoken (or at least 17,410,742 of them). The question is whether the referendum can galvanize change in both the UK and the EU. They both surely need it.
First, we should be clear that the European Project has stalled. The twin targets were to tie down Germany, and to generate decent growth for post-war reconstruction. Brilliantly successful in the post-war boom, both are currently noticeable by their absence, at least since 2008.
Beautiful, cultured Germany has again become the largest and most powerful economy in the EU – and, sadly, also the most damaging: far from boosting the growth of weaker EU countries on the back of German expansion, German growth has been and is at the expense of growth in the rest of Europe. Germany, an export athlete on steroids, benefits from seamless trade with the rest of Europe without any appreciation to its currency. Other countries, less enthusiastic (and admittedly less efficient) about competing on wafer thin margins and driving down wage and welfare costs like Germany, are the victims.
You can overlay on this the fact that trade surpluses are by definition matched by capital exports. Yet Germany’s service sector is not world-class (as in Japan and other countries which get a sense of moral superiority from manufacturing) and its banks are no exception. Inevitably, unsophisticated Landes-bankers made bad loans from the cash mountains they were sitting on, threatening to destroy the EU economy, were it not for the EU bailout.
In the UK, the problem is not economic but political. I applaud Cameron’s decision to hold the referendum in this sense. Albeit for narrow political advantage, the move made sense as a response to the glaring lack of democracy in Britain today. The UK Independence Party obtained a shock 13% of the vote in the 2015 parliamentary election, but only has one representative in parliament. Like in the US or Japan, the incumbent parties have created a system where any outsider is barred from ‘eating at the top table’. The undemocratic aspect of modern Britain is even more apparent when you think that all the parliamentary parties (not to mention every business and cultural institution) in Britain wish to remain in Europe, but 17M people just voted to leave. There seems to be a rather large disconnect between the elites and the electorate. Does anybody notice a ‘democratic deficit’ perhaps – the very charge the Brits love to throw at Brussels?
The question now is whether the referendum is a one-off. My sense is that deeper reform by either party is not on the agenda. It should be. But the result shows that the buffoonish Nigel Farage somehow speaks with more legitimacy about what the people want, than the country’s elected representatives.
This unaccountable system reflects, I suspect, why anti-migration is so popular a topic among the Brexiters. Immigration has become symbolic of how reluctant leaders are to listen to large parts of their electorate. That is why the electorate is using this as a stick to beat the elites with – to show the glaring contrast between democratic aspiration and reality. The rights and wrongs of immigration are irrelevant. People have the right to say ‘no’, just as I frequently choose not to exercise as much as I should!
When did the EU go wrong? Hubris surely drove the pell-mell expansion into Eastern Europe after the collapse of the Soviet Union in 1991, and the introduction of the Euro in 1999 – surely the most disastrous decision in international economics since the 1930 US Smoot Hawley Tariff act triggered a global depression. EU bureaucrats and politicians naturally wanted the EU to grow. And a combination of blind faith in financial markets and technology (remember the tech boom?) made many feel we were on the cusp of a new era. But the EU neatly mirrors, on a smaller scale, precisely what is wrong with globalization as a whole: failures in the institutions of democracy, fairness and accountability which have not kept pace with finance and commerce. The structure in place now – vast amounts of cash being moved around, and wealth being generated without adequate oversight – is a text book situation for black money, influence peddling and organized crime to thrive.
The EU has received a slap in the face. So have all the agenda-setting British institutions. The people have spoken. Now it is for the other people in Europe to makes their voices heard. Don’t forget your umbrellas – the weather could well turn very stormy.
