A EUROPEAN UNRAVELLING By Jeremy Kinsman (Article)
Divorces after 43 years of marriage are rare, usually severing unions that had been fraught for years.
Earlier this year, British Prime Minister David Cameron called an unnecessary referendum for June 23 on whether the UK would remain in the EU or leave in order to settle for good an abrasive issue in his Conservative Party that has been fueled by a surge of identity-based nationalism in England. It risks backfiring badly.
With only one week before the vote, every indication is that the result is up for grabs.
My bones tell me that in closing days “remain” will rally, as often happens in separation referenda when most undecided voters opt for the less disruptive option.
Turn-out will be important. The powerful capacity of a referendum to bind the future has created a generational conflict. The over-65s who harken back to a different England are 55 percent in favour of leaving the EU and are 80 percent likely to vote. The under-35s, more comfortable with a European-British identity, are more than 60 percent in favour of remaining but are conventionally believed less likely to vote. However, the danger to millennials that their future will be constrained by retirees may be the motivation young people need.
There is one certainty. The UK is in for a very unsettled time. If “remain” wins a close call, English nationalists will attribute the margin of victory to pro-EU Scots, Welsh, and Northern Irish, deepening tensions within the United Kingdom.
Of course, Britain’s unity will be jolted even more by a “leave” vote, because Scottish nationalists would likely call a second referendum on their own independence from the UK. Surprisingly, not many English people I have talked with in recent months seem to care much about that.
But you would expect them to care a lot about economic consequences of a ”Brexit.” Cameron asks incredulously, “Can we knowingly vote for a recession?”
The economic argument against Brexit is strong. On trade, Britain sends 44 percent of its exports to the EU, and takes eight percent of the EU’s exports in return, an unequal relationship. The terms of the EU’s exit clause, Article 50 of the Treaty on European Union, theoretically enable the UK to negotiate a new trade arrangement to replace its membership in the EU’s single market. But the EU will insist, as it has for Norway and other non-EU partners, on the free movement of labour, relevant EU regulations, and some obligation to contribute to the EU’s budget, all anathemas to the Brexit camp.
If, as is likely, no such agreement is reached in two years (though the time period could be extended by mutual agreement), UK exports to the EU could be governed by WTO tariff norms that average about nine percent for goods. But WTO rules don’t yet cover services which represent 80 percent of the UK’s GDP.
Financial services alone account for 10 percent of GDP. After Brexit, the EU would cease to view UK financial regulations as fully valid for EU banks operating in London. There would be a migration of financial services business and jobs from the City of London.
Estimates vary of the hits the British currency, debt service, stock market, GDP, inward investment, jobs, and household income will take. The UK Treasury expects a GDP loss by 2030 of six percent and a hit to household incomes of between US$6,000 and US$9,000 a year.
"A 'remain' option has to warm the heart as well as sober the head."
Experts and officials I met at a Ditchley Park conference table seemed confident a few months ago that common sense about salient facts would prevail, especially if Britain could negotiate before the vote better membership terms from its EU partners, which it did.
But separation referenda can spiral out of control, propelled by emotional appeals to nativist identity. The electoral commission ruled the question had to be an explicit choice between “remain” or “leave,” not yes or no. This gave the exit option a more affirmative tenor.
We know from our own referendum experience that a “remain” option has to warm the heart as well as sober the head. Until recently, when ex-Prime Ministers Blair, Brown, and Major told a more positive EU story, it failed to do so. Cameron advanced for too long only the tepid argument that staying in was the less bad alternative. Labour leader Jeremy Corbyn has hardly participated in the campaign.
The pro-remain side needed to underline the benefits of the European Union. The British public has serious misperceptions because of years of a jingoistic media drumbeat that the EU is a wasteful failure. The EU’s recent crises over the Euro and refugees have further darkened its reputation, though Britain has not been directly affected by either, given its opt-out from the Euro and from Schengen’s border-less union.
From its birth as the Common Market, the EU project aimed to build binding economic and social ties among European nations that would make wars among them extinct. Britain, whose first line of defence was always on the European Continent, was a central participant in those wars. July 1 is the 100th anniversary of the Battle of the Somme, the costliest day in the history of the British Army. A million British, French, and German soldiers would die on the Somme by November. Still, it would take the further calamity of World War II to bind the nations and end Europe’s murderous wars.
Yet, it’s yesterday’s news, banked as an immutable norm.
Similarly, Europeans take for granted their historically unprecedented levels of freedom, security, health, prosperity, and greenness. National politicians in the EU claim the credit. The “bureaucrats in Brussels” get tagged only with bad news, including the effects of the financial crisis of 2008 that eroded confidence and punished many EU citizens.
Dissatisfaction spans the industrialized world. People resent loss of agency, feeling that decisions affecting their lives are taken by others. They reel from too much change, from technology, and from globalization whose benefits are unequally spread. Despite soaring inequality, social services have been cut back as economies slowed, further marginalizing poorer and older traditional workers.
Europeans seek refuge and protection in national identity and self-reliance, and turn away from principles of universality and solidarity.
"In Britain, 'immigration' is a catch-all label for distress over a number of issues."
The dominant concern has become “immigration.” It is conflated with the issue of “control by Brussels” over national prerogatives. In Denmark and the Netherlands, some historic social victories achieved through generations of struggle – the equality of women, or the separation of religion and politics – seem threatened, especially by newcomers.
In Britain, “immigration” is a catch-all label for distress over a number of issues, starting with belief there are simply too many people in the UK — 62 million — clogging roads and social services. Brexit proponents believe that it is because Britain has insufficient control of its borders.
The EU’s single market obliges free circulation of labour for EU citizens, accounting for two million EU immigrants who are popularly held to be driving down wages and burdening services. Their contribution to the British economy is positive. Being young, they actually draw less on the National Health Service. Indeed, the NHS is 20 percent staffed by EU immigrant professionals. If EU workers left, medical personnel as well as good Polish plumbers would be in short supply. And what would become of the 1.5 million Brits living and working in the EU?
What else do Brexit advocates complain about? They object to paying more in to the EU budget than they get out, even though the transfer amounts to only 1.3 percent of the UK’s national budget.
Until recently, the British economy had been doing better than more sluggish EU partners — which explains the higher budgetary contribution — persuading some smaller British businesses they’d do even better without burdensome EU regulations. But it’s hard to imagine a healthy modern society with a significantly lighter regulatory framework, whether EU or British.
The issue of EU “control” over Britain is exaggerated, fuelled by national self-mythology that Britain flourishes best when on its own. In reality, the British Parliament isn’t subordinated to faceless bureaucrats in Brussels or to diktat from European partners. English identity is as robust as ever. Military, scientific, diplomatic and business leaders have been saying so, but may not carry the day.
It all recalls, in a way, Alfie, the ’60s Michael Caine movie about a self-centred Londoner who has trouble committing to a lasting relationship. He finished up alone, asking “what’s it all about?” That’s not the sad place where the English, with whom we have had so much in common, deserve to be, but it may happen.
Polls show Canadians doing business in Britain overwhelmingly support the UK staying in the EU. Canada’s economic priority will be the US$15 trillion market of the remaining EU. Canadians aren’t indifferent or even unsympathetic, but won’t be part of a Brexit alternative game plan. The notion of some kind of Anglosphere grouping which can absorb English nostalgia for an earlier world is a fantasy.
Meanwhile, for the EU, steps forward and backward lie ahead as it tries to reboot its project with less ambition and more deference to national identities. Germany’s now clearly dominant role would have been balanced by the continuing partnership in the EU of the UK, the next largest economy and most liberal economic voice.
As U.S. Federal Reserve Head Janet Yellen said this week, “We should expect to be surprised in the future as we have been surprised in the past.”
Surprise is the new normal, a worry for skittish investors and everybody else.
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