Rethinking Brexit, via Kilkenny & Oxford

Mark Blyth and I have been arguing that nationalism is a global virus, filling the vacuum created by the erosion of political identity under neo-liberalism. The Cold War era now appears, almost nostalgically, as a unique phase of history when political identity and motivation were rooted in economic ideas. The neo-liberal consensus, the era of technocracy, left everyone demotivated. The financial crisis and the political corruption it revealed, left everyone disillusioned. Various narratives – of inequality, failed globalisation, and deindustrialisation – have been marshalled to explain these trends.

I like to think of the Irish as simultaneously behind the curve and ahead of it. The Irish party political structure largely ignored Cold War constellations. There was no significant right and left in the 1970s and 1980s. Nationalism was the fault-line. Unsurprisingly, this structure remains broadly unscathed by post-crisis global trends. The same two parties, that have always dominated, with names unpronounceable to anyone who is not Irish – Fianna Fail and Fine Gael – continue to alternate in government.

Having grown up with nationalism in 1970s Ireland, its motivational power is self-evident.

So what is happening in Europe? In the last few weeks I attended two fascinating events. Both of which were enhanced by the presence of the FT’s Matthew Klein (more below). The first, run by the peerless CER, an invitation-only meeting of unashamedly expert academics, journalists, private sector analysts, and politicians discussing the future of Europe, in Ditchley, near Oxford. The second the brilliantly open and boisterous festival of economics and comedy organised by the Irish economist, broadcaster, and writer, David McWilliams, in Kilkenny.

Both events helped crystallise my thoughts on Europe and Brexit. The title of the CER gathering focuses the mind, “How to save the EU?”, as did the title of a fascinating debate in Kilkenny, “Old England is dying: the economics of decline.”

I came away from both with the same conclusion: sovereign nations are rejecting Europe, and those within the Euro are disciplined by it. These are not value judgements, they are political facts. Before thinking about reforming reality, let us at least describe it accurately.

In both venues I detected a denial of the death of the EU, or at least the end of Europe as an idealistic symbol of progress, solidarity, peace and social reform. That was the EU I believed in growing up in Dublin in the 1970s and 1980s. The Eurocrisis destroyed that vision. Catastrophic policy errors caused a devastating crisis across Europe, and the response of the EU was to replace modern economic thought, with primitive instincts of retribution, nativism, and bitterness. The devastation of Greece was not just a crime against the Greeks. The hijacking of Irish, Spanish and Italian democratic process, in response to a crisis caused by policy failure, was not just an assault on national standards of living. These events made a nonsense of European claims to modernity, enlightenment, and solidarity. The ideal disappeared, and a nightmarish European version of Peter Sellers’s comedic horror story, Dr Strangelove, replaced it.

I have argued before that Mehreen Khan made the ethical case for Brexit, She was speaking at Kilkenny. But her voice was somewhat drowned out by the noise. The detail of Brexit masks the deeper forces at work. How she voted is not what matters. She explains why the liberal majority in Britain did not turn out and vote for the EU. In a sentence, ‘it was the Eurocrisis, stupid!’ Why were many who voted for staying in the EU ‘reluctant’? This is an era when the liberal centre will only win when its reluctant supporters face an opposition so repugnant that no one bothers to turn out. Hence Macron.

Consider the British left. Opposition to Europe from the Bennite, Corbynist side of the UK’s labour party, viewed European integration as a granting power to capital. ‘Reform’ means labour market deregulation, and fiscal policy means austerity. The Euro would grant greater powers to centralising forces controlling sovereign nations with a financial whip. This perspective looked somewhat hysterical in the 1990s and early 2000s. After the Eurocrisis, it looks prophetic. (Although the ever-perceptive, Matt Klein, sees a way out.)

Witnessing the Brexit debate first hand was depressing. Whatever the relative merits of either side, the debate itself was ill-informed and unpleasant. Why did no one argue for sending the Irish home? I felt discriminated against. But the result reveals a deeper truth: sovereign nations are rejecting the EU. Europe has fundamentally lost its moral authority.

Brexit is not really about Britain. It is the logical consequence of the death of European idealism. For the same reason, Scottish nationalism founders on the choice of currency. Post-Eurocrisis, it is clear that joining the Eurozone entails abandonment of sovereignty, and exposure to cyclical punishment. Subservience to Westminster is relatively benign.

At one level, I struck a pessimistic note in Oxford. How can you reform something that is already lost? But I simultaneously perceive the Eurozone to be profoundly resilient. The test of any political structure is can it survive catastrophic policy error. No country has left the Euro. What Brexit, Scotland, and the predisposition of central and eastern Europe tells you, is that sovereign nations are rejecting Europe. Those in the Eurozone are no longer sovereign. Was this made clear to their populations? I don’t know. But as economists, we should know that control of money is a cornerstone of sovereignty. In one sense, the Eurozone is a state. As a state, without a strong central government, its seems strangely resilient.

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 think most people agree with you. Although, it seems like Europe is ripe for someone to take advantage of it. It could end up being a theater for a proxy war between the US and Russia. The only thing giving Europe respect is the French nuclear arsenal. The Germans only have economic power.

    But clearly keeping one’s own currency is really important, and I don’t think the British want to give that up. The racist aspect of Brexit is not pleasant at all, but saving the currency makes absolute sense.

  2. Leonardo Monteiro

    Sovereignty… what is that? I come from Portugal, with or without the Euro, we are a small open economy. We don’t get to call any major shots (economically), and are financially prejudiced against by “the markets”. At least inside the Euro, we have a say.
    And we also have eyes – people knew that discipline was required getting into the Euro, and staying in. No one lied about this, the issue is that politicians faffed about. And that is they key – The English speaking world loves to blame the Euro, but they never faced up to the fact that the politicians in the crisis affected area also had responsibilities. They had. Most of them, in fact.

  3. David

    While agreeing with a lot of what you say, the assertion, “Brexit is not really about Britain. It is the logical consequence of the death of European idealism”, seems extraordinary. Given your expertise, immersion in economics and the financial world, and what you spend so much time thinking about, maybe it’s understandable that you do not see this: that the whole Brexit debate was not about Europe in any real sense – witness the remarkable ignorance about the workings of the EU among not just the average voter but among Brexit politicians. And do you really think that “the death of European idealism” explains the emotional intensity and hatreds of Brexit enthusiasts?


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