Old myths, new problems – interpreting a British referendum

The myth of national identity

One consequence of the end of the Cold War was the re-emergence of nationalism in European politics. It was not the “End of History”, but reversion to the mean.

Nationalism is premised on a myth – a shared identity – but if believed, it is potent and destructive. It is a particular case of a more general and pernicious human instinct – taking sides. The Ireland I grew up in thirty years ago was deeply scarred by nationalism. Perhaps because my mother was Italian, I observed that taking sides was not equivalent to being the same. Within all nations there is extreme heterogeneity – accents, preferred sports, music, and interests vary widely on the basis of location (urban, rural, regional), income, age, religion, and culture. The Irish I grew up with in Dublin had more in common with equivalently-educated Europeans (and British) than with working class unionists in Ulster, or farmers in the West of Ireland. Indeed the deepest irony, was the cultural similarity of the Northern Irish themselves – ethnically homogeneous Christians. Only the Northern Irish could really understand their own animosity – without each other, they seemed to lack meaning. Learning Irish history, I was schooled to recognise that civil war was a logical consequence of independence. Such is the destructiveness of taking sides.[1]

The only virtuous form of unity is around principles. One of the greatest achievements of the United States is to unify a nation around a set of principles from political and moral philosophy – embedded in a constitution. No myth of cultural homogeneity could be sustained in a nation which is so diverse.[2]

The political and economic integration of Europe is a virtuous attempt to counter the trend of nationalism, motivated by the memory of the costs of its most extreme manifestations: terrible warfare and Russian domination.

There is an obvious challenge to any project based on memory – forgetting. The other challenge is economic determinism: if there is one lesson in European history, it is to avoid severe recessions.

Europe’s failure

If there is a single, unelected, technocrat responsible for Europe’s current traumas, it is very clear who he is: Jean Claude Trichet. There was little doubt at the time, but now it is obvious – the Eurocrisis was caused by the failure of Trichet’s ECB to embark on large scale QE in 2009, in a confused divergence from all other central banks. This explains why the Eurozone – uniquely – had a sovereign crisis, and also why Mario Draghi brought it to an end (despite public debt levels being higher).

The financial crisis in 2008 has been the defining force behind politics in the developed world; compounding it with a self-inflicted Eurocrisis, has been disastrous for the Eurozone. The hijacking of democratic process in Ireland, Greece, Italy and Spain could have been avoided. Not to mention the economic and social destruction.

Europe’s future, like its past, will continue to be determined by economics. The great unknown is will the dramatic reversal in course under the Draghi ECB underpin a sustained cyclical recovery which mutes the political tension his predecessor unleashed. Or is it too little, too late as the profoundly thoughtful George Soros has suggested.

A very British referendum

British political structure and culture is idiosyncratic. There are no immediate checks and balances in its structure – making it very vulnerable to minority rule – in contrast to the United States. British political culture has also historically shunned the use of referenda. It is based on representative democracy – constituencies elect members of parliament to represent them. It also uses a first-past-the-post (FPTP) voting system, which delivers dramatically different results to proportional representation.

The case for FPTP is two-fold. It reduces the likelihood of extremist parties obtaining representation, and it tends to produce decisive government. A British lesson from European history is that weak government creates space for demagoguery. But a weakness in the British system has emerged in the post-Cold War era – first-passed-the-post voting strengthens regionalism (nationalism). Left-wing and right-wing extremism have been successfully marginalised – despite receiving the largest increase in votes at the last general election, UKIP won only one seat in Parliament. UKIP’s support is significant but geographically dispersed. The SNP has a smaller share of the popular vote but a regionally concentrated voter base.

Among the many ironies, UKIP only has significant representation in the European parliament because European electoral procedure is based on proportional representation (Nigel Farrage failed to win a seat in the British parliament).

A great deal has been written about interpreting the ‘will of the people’ from the referendum results. Everyone should remember that we all have inconsistent preferences. Dogmatic rejection of renewed votes or elections makes little sense when 37% of the voting population chose to pursue an undefined future.

Coloured maps are similarly misleading representations of binary electoral results. There are clear fault-lines: those in work, the educated, the young and the Scottish were all more likely to vote remain.

There appears to be a consensus that this was a referendum on EU migration. This is curious. There was no discussion of the largest number of European migrants in the UK – the Irish, despite our querulous track-record, occupancy of houses and use of public services. Indeed, the debate focused on migration from outside the EU – from, for example, Turkey, which has no intention of joining. Fictional enemies seem to be electoral winners.

I’m not convinced that this referendum was really about Europe, at all. The Eurocrisis – a genuine European catastrophe – only marginally impacted the UK. This referendum reveals more about Britain. The Conservative party triggered the referendum because it intended to neuter UKIP – an electoral threat – and end its internal divisions. Many factors have influenced individual voters on all sides, and although there are noble causes for leave and remain, the campaign really focused on two slogans: the remain case, ‘there will be an economic cost’; and the leave case – nationalistic ‘control’. No doubt, there was also a significant protest vote, at the persistent unwillingness of parliamentary representatives to address the interests of constituents. The left, in England in particular, has long abandoned much of its traditional constituency. The right has made them pay for 2008.

Because this referendum was inward-looking, its effects appear more relevant to the UK itself than Europe. This is greatly at odds with much of conventional wisdom and commentary. I am less concerned by contagion, more relevant are the ongoing repercussions of the Eurocrisis.

Everything that the referendum was intended by its advocates to achieve has now been amplified. Membership of the EU suddenly resembles a unifying force containing latent domestic tensions. The probability of a break-up of the UK has risen. The two main political parties may well split. And the Leavers’ bluff has been called – they cannot agree on how to leave, nor is there anything like a national consensus on the form of such a departure. Irish history lessons look apposite.

David Cameron was derided for referencing the lessons of European wars. That is a great shame. Allusion to ‘War’ is of course exaggeration, but that misses the point. The overriding lesson of Europe history is that political instability and division are correlated with recession. Trends of populism and nationalism have accelerated since the financial crisis, and within the Eurozone, since the Eurocrisis. We must now hope that the latent divisions which are emerging in the UK are not heightened by recession.

The myth of sovereignty

There is no perfect solution to the challenges raised by collective decision-making. The dream of self-determination is inevitably broken by two realities: people disagree and interdependence requires cooperation. Britain like all countries struggles with both. So too does Scotland.

There are huge problems with all electoral processes. When a country is deeply and symmetrically divided, there is no simple procedural answer. And if two parties are substantially interdependent (in this case Europe and the UK), independent decision-making is little better than wishful thinking.

Well functioning societies have responded to these challenges with checks and balances. Concentrated power is the real threat to democracy. Britain is a well-functioning society so expect a general election, and perhaps another referendum, to stem the current tide of acrimonious division.

[1]The simplest forms of group association make the distinction between being on the same side and being the same more explicit. Football fans of different clubs in Manchester are culturally almost identical, and yet on opposite sides. Many fans of London clubs have nothing cultural in common with other supporters of the same club, yet they are on the same side. There really is only one benign form of nation-based side-taking – on the football pitch.

[2] We could call this ‘the Trump fallacy’.

About The Author

Eric Lonergan is a macro hedge fund manager, economist, and writer. His most recent book is Supercharge Me, co-authored with Corinne Sawers. He is also author of the international bestseller, Angrynomics, co-written with Mark Blyth, and published by Agenda. It was listed on the Financial Times must reads for Summer 2020. Prior to Angrynomics, he has written Money (2nd ed) published by Routledge. He has written for Foreign AffairsThe Financial Times, and The Economist. He also advises governments and policymakers. He first advocated expanding the tools of central banks to including cash transfers to households in the Financial Times in 2002. In December 2008, he advocated the policy as the most efficient way out of recession post-financial crisis, contributing to a growing debate over the need for ‘helicopter money’.

4 Responses

  1. Gary Anderson

    I support your views, but Empire is not the answer to sovereignty either. Even the Brits found themselves being colonized by Empire, the one that started on their shores! That is the ultimate expression of “what goes around comes around”. From the Aborigines, to the Africans, to the Indians (both continents) to the Palestinians, Empire has subjugated many. But now even the Brits found themselves on the same road of subservience. One could say the ultimate victor in WW2 was ultimately going to be Germany! But the Brits escaped. Yes, sovereignty can be ugly, look at Donald Trump as an example. But the Westfalia Peace of mutual sovereign respect is still the standard for what sovereignty can be, and what it can be is still far better than empire.

  2. Habeas Corpus

    An article packed full – with much to commend and equally much to challenge.

    Let us hope European leaders stumble upon the lessons of Byzantine cooperation and create an internal market for Pax Europa, with the liberty and democratic accountability that John Wilkes embodied and Thomas Jefferson copied.

    • Eric Lonergan

      You would grant ‘nationality’ based on language and cuisine? This proves the point: shared ‘identity’ is only true because it is believed, but once examined, it is premised on myths. Club football fans may be the honest representation – there is no pretence of common ‘culture’, ‘beliefs’ ‘values’, just sides. Identity resides in which side you take.


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