• June 27, 2016
  • europe-map-countries-capital-high-resolutionResults of the recent UK referendum on leaving the European Union will be playing out for many months to come. How it plays out, and the shape of the ultimate result, are still very much undecided. Already hypotheses about thwarting the apparent “will of the people” are gaining currency and, as an American with at best tangential understanding of the situation, I am nonetheless willing to offer some ideas.

    Cameron’s duty

    In noble style David Cameron fell on his sword after the vote by announcing his resignation effective possibly by October. This is exactly the wrong course for a bunch of reasons. First, I was surprised to learn that the referendum was non-binding. True believers will no doubt say it’s the will of the people and must be obeyed. But I refer them to my mother who often told me, if everybody else was jumping off the Brooklyn Bridge would you jump too?

    In truth, the referendum was the result of a self-seeking and narcissistic politician who threw the country under the bus to assure party unity and his own re-election. Much of politics today is cynical, and crass and aside Donald Trump’s pronouncements on any given day, Cameron’s Faustian bargain might become the poster child narcissism by a sitting elected official.

    If Cameron was really so dead set against leaving the union then he should realize that at the moment he is playing, or at least could play, with house money. The result of the vote has encouraged factions in at least in France and the Netherlands to seek their own plebiscite. This can’t be good for Europe for if either of these countries were to also fall to the siren song of ditching the EU, it could start a stampede for the exit. At some no far off point all that might be left of the EU would be Portugal, Ireland, Italy, Greece, and Spain plus their banker and not-so-benevolent overlord, Germany. Oh, and I almost forgot, the useless Euro which can be seen as a primary reason for the breakup.

    Cameron’s duty in all this is simply to prevent it by sticking whatever body part is needed into the dyke while emergency repairs are made. With nothing to lose, Cameron should not resign but push as far as possible against implementing Article 50 (all 261 words of it) risking a vote of no confidence. Under the circumstances losing a confidence vote is the only acceptable reason for the Camerons to evacuate 10 Downing Street.

    Fixing it

    The electorate have every reason for being mad at the direction of life under the EU though some of the effects are more closely linked to secular economic fluctuations than bad politics. But the approach is all wrong, it smacks of hyper consumer culture in which fickle consumers ditch perfectly good and useful products in pursuit of the brilliant and coruscating. When did we become a global culture that couldn’t fix anything?

    We became that culture when we stopped listening to the other side, when we began demonizing them in quasi-religious terms. Can an opponent be truly evil? Perhaps but such designations should be reserved for the few times in a century when a Hitler, Mussolini, or Stalin emerges.

    The current tiff over the EU more resembles A Swift essay on Lilliputians, Brobdignagians, Houyhnhnms, Big Endians and Little Endians. The Endians are a particularly interesting dichotomy. According to Swift they fought over whether boiled eggs should be broken from the pointed end or the more blunt end first. It was Swift’s way of showing distain for the polarized politics of his day.

    I don’t know what to do about this dynamic other than to promote a culture of listening, to talk about the problem and to find common ground if in nothing else than in our universal exhaustion with the bickering.

    A parallel

    History does indeed rhyme as Twain observed. Though it never repeats precisely, if you place a large number of humans in relatively similar circumstances you should expect similar results. Consider the American and French Revolutions with their different and for some dire consequences or even Berlin and all of Eastern Europe circa 1989.

    A less bloody but instructive example for today comes from America’s first decade. The Articles of Confederation, America’s first governing document, like the Maastricht Treaty, failed to organize a central government that had the power to be, well, a government. There was no national currency, taxes were a hodgepodge in which states tried to gain revenue from outside through tariffs. This zero-sum game was a real drag on trade. There were other deficiencies too, enough to cause regular people to unite in making changes.

    The articles were created in November 1777 and remained in effect throughout the Revolution until they were replaced by the federal constitution. In 1786 The Virginia Legislature suggested all states send delegates to a convention in Annapolis, MD to discuss ways to reduce interstate conflict and that was the beginning of the process that led to the constitution.

    In the process the delegates determined that a completely new constitution was needed, one with the centralized power to be a government but which still devolved all but essential power back to the people and the states.

    We know how the story ends. By 1789 a constitution was in place and a viable number of states had accepted its terms, albeit with ten of the best amendments one could ask for.

    My point is simply that the various nations of Europe really do have more in common than not but they need a modus vivendi. Dissolution of the current over-built structure was only a matter of time once the European constitution unraveled in successive votes by the French and the Dutch in 2005. Without a constitution there is little more than a trading block with too much overhead so eliminate it.

    Negotiating the UK’s departure (problematic in that Scotland for one is not having it) would look a lot like renegotiating Maastricht anyhow and not a lot different from ditching the Articles for something better.

    While some have suggested that the divorce should be made to look as difficult and painful as possible to discourage others from doing the same, we should keep in mind that some and perhaps many on the EU side of the negotiations might have sympathies with the plaintiffs. That said, a negotiated split might begin to look a lot like a renegotiation of the terms of union anyhow.

    In my last post I suggested that technology could play a role in smoothing some rough edges. I’d go further now to say that a trading union is all that was initially envisioned and all that’s really needed to help prevent another European war, which people in the middle of the twentieth century wanted desperately. There are trading blocks like NAFTA, and the WTO that reduce barriers to trade without entangling themselves in a new currency, a constitution, or an overbuilt bureaucracy. That seems to be enough. There hasn’t been even a battle between the U.S. and Canada since the Revolution, or with Mexico since 1848 (and there won’t be, Trump willing).

    While we’re at it, note the differences between the American Constitution adopted to form “a more perfect union” and the bloated promise of Maastricht’s “ever closer union.” How can any sane person agree to that? Were they not aware of the hyperbole involved? The role of asymptotes in math? Ever closer is quantifiable and so gives free license to bureaucrats whereas more perfect is purely subjective.

    If the original premise of a united Europe was that countries that traded together would be hard pressed to take up arms against one another, then let’s have some of that and forget about sitting around the campfire singing Kumbaya. That’s Cameron’s brief for now, not this ridiculous slinking off at the first sign of difficulty. David Cameron, you broke it, now you have a moral obligation to fix it. Get going.

    Published: 8 years ago

    2d7c08db-9d87-43ce-921f-513acca86f7e-2060x1236I was not a fan of the British exit from the European Union (Brexit) but as the returns are broadcast around the world, I think I understand it—at least as well as a man who owns a hammer understands the world’s problems.

    Before the ink was dry on the enabling legislation, the Maastricht Treaty (a.k.a the Treaty on European Union or TEU), it was already obsolete. It was no secret that the idea of a united Europe would serve as a damper on Europe’s repeated bloodletting of which the twentieth century’s two world wars were a mere sample. But this thinking was merely a good example of fighting, or in this case preventing, the last war.

    The big need that Maastricht provided a solution for was commerce. The 28, and soon to be 27, member states each had their own currencies and doing business in such a fractionalized area presented big challenges while wasting significant sums of money, time, and other resources simply to overcome the friction inherent in continental trade. The same was true for moving people around with all the passport and border friction.

    The overhead of having to support all of the functions of a nation-state also represented significant costs especially for smaller countries. For instance, Denmark has a population of about six million, nearly the same as my native Massachusetts yet I can’t imagine how my state could afford a small defense force, its own currency, and border patrol, along with shouldering the significant costs of running embassies around the world. Also, some of the western states have populations in the half million range; though they might be large in area they couldn’t support the functions of a nation-state either. So I empathize especially with smaller European countries, for them joining a larger union made sense.

    A common market serves the original need nicely but the project immediately ran into scope creep, that tendency for a project founded on a good idea to expand until it is more bother than it is worth. Maastricht was like that. On top of a simplified trading system leaders added a political structure and constitution (that was rejected) and a common currency that could only be maintained by micromanaging otherwise sovereign nations’ economies. The common currency worked well in good times but when economics took a nosedive many of the weakest members of the currency union such as Portugal, Ireland, Italy, Greece, and Spain among others found they were like small sea creatures washed up on a beach by high tide.

    “Europe” the designation people like to use to signify the post Maastricht continental outlook, simply took on too much. It was unreasonable to think that the ancient countries that make up the union—many tracing their origins to the Roman Empire—could unite and become what many called a United States of Europe. The union is now foundering on its currency but also on its nonsensical insistence on porous borders that freely enable anyone from one part of the continent to move elsewhere.

    You can’t blame individuals for wanting to find a better life, but it should have been seen that the path of least resistance for people in poor or unstable circumstances is to move instead of attempting to overcome what for many was centuries of mismanagement, corruption, and discrimination. The Syrian diaspora is all the proof you need.

    So what does this have to do with technology?

    Very simply by the time of Maastricht, good, fast, cheap, and reliable technology was already in place helping to sort out some of the thorniest issues in trade and exchange and it has only gotten better. The European solution was and still is not to form a physical union but to form a better virtual one—there should be an app for that.

    For example, there really is no need for the Euro as a circulating currency and frankly the world would be better off if it became a reserve currency only. There are only a few reserve currencies in the world today the U.S. dollar is predominant but there can be room for another. If Europe went back to sovereign currencies like francs and guilders and lira, every country would be free to inflate its currency as needed greatly reducing the real problem of how Portugal or Greece would pay back their Euro debts. Inflation would make a currency less valuable and thus it would purchase fewer Euros but as a matter of practical internal or national economics national currencies could do much to get economies running again if they had their own currencies again. This is not just me talking, it’s based on concepts developed by people like J.M. Keynes.

    There are apps for this and for many other things that Maastricht attempted to fix and if the apps don’t exist they can be made. Purchasing with smartphones and plastic instead of cash would take care of nasty exchange rate issues in that back end servers would do the conversions. Crossing borders could be as simple as implementing national or even international biometric identification systems like those currently used at airports.

    True, the free flow of people across borders would slow but that has not proved to be an unmitigated good thing for the host countries anyhow. Forced to stay home there is no telling what creative solutions local populations and the international community might develop for seemingly intractable problems. If this sounds cruel it is not intended to be, it is simple a realization that moving a population across international borders doesn’t solve that population’s problems, it simply moves them.

    So my point is that Maastricht can be replaced with modern technology and I’d venture that if it had happened ten years later or if technology had matured sooner it might never have been implemented. Applying technology is a market-based solution that, of its nature, would solve some, but not all, of the problems Maastricht tried to undo—remember the scope creep issue.

    Maastricht should not be seen as a failure. It was a bold experiment in self-governance that didn’t work well enough. The United States went through a similar episode after the Revolution. Our first government was organized under the Articles of Confederation, which lasted from 1777 to 1789 when the current constitution went into effect. Maastricht has lasted twice as long.

    In business as in almost any other human endeavor success is measured by how fast and how well you fix your mistakes. Maastricht was a good attempt but it has been overtaken by events and technology’s inexorable march. Time to pivot.

    Published: 8 years ago