Brexit and Europe: Liberalism Lost in Translation

The Brexit campaign has not only illustrated the extent of British resentment against the EU; the array of arguments used in the UK and in the rest of Europe have also revealed the political complexity and the lack of economic debate that typifies the relations among European countries in the context of the EU. While European institutions and most national governments claim to follow an economically “liberal” approach, they do not even seem either to agree on what that notion means or to seek to really find common ground. Although the federal model of integration is widely rejected across Europe, no alternative form of cooperation can prevail due to the deep-rooted misunderstanding of both the diversity of our national economies and their striking interdependence. In the meantime, Europe’s weakened economies are left at the mercy of an unravelling institutional status quo both in the eurozone and in the EU at large. In the face of this political void, Britain seems, beyond the Brexit fault-line, to be devising a cooperation model of its own, minimal and centred on free trade.

European officials are perplexed by Britain’s animosity towards a system which in their view rests on “Anglo-Saxon principles.” Many Britons would dismiss this idea as political nonsense. Yet, when it comes to trade in particular, many campaigners both on the “leave” and “remain” sides have expressed ideas that could, at first sight, seem to match the EU’s institutional approach. For example, many within the UK’s political establishment back the single European market without hesitation and are keen not only to remain part of it in any event but even to help further it and remove “non-tariff barriers” across Europe, particularly in the services sector. Meanwhile, their commercial line of thought actually extends beyond the EU to the world as they consider Europe, although still important, to have lost in relevance in the face of globalisation.

It would be hard for EU-enthusiasts in the rest of Europe to claim that Britain is prone to the very same kind of populism as the US. Many among the leave camp’s grassroots have developed an anti-establishment stance, which rests on a deep-rooted mistrust of the elite at large. In this respect, it is quite similar to the political trend sweeping across Europe and the US. Yet the manifestation and the political implications of this upheaval differ starkly from one country to another. In the UK, a significant part of the “leave” campaign has been led by an elite of Eurosceptics who unreservedly support free trade and are far less critical of immigration than their political base. Despite the focus on this issue in the campaign, many Brexiteers within the political establishment promote the theoretical freedom to control immigration rather than substantial limits.

On the economic front, UKIP’s sometimes protectionist overtones and its anti-immigration stance tend to be overtaken by the liberal approach of the Conservative Party, which as a whole is more supportive of globalisation than any other major political movement on the continent. Some European conservatives like Wolfgang Schäuble and Jean-Claude Juncker advocate a tough response in case of Brexit. They might in reality find it hard to wage a bureaucratic war on an enemy on which they rely not only for their exports but also when they try to legitimise their own approach as a pragmatic and liberal one.

The reception of the Brexit debate in France and in Germany provides a striking example of the intellectual divergence that is developing within continental Europe too. Most German political leaders have explicitly expressed their alarm at the prospect of losing a “like-minded” ally in their “liberal” and fiscally conservative struggle against France’s statist mindset. Meanwhile the French establishment—which proclaims it has converted to economic liberalism after adapting its vocabulary accordingly—has voiced its more general concern about the preservation of the sacrosanct European project. Many French commentators, in a gesture of defiance towards Britain, claim however that Brexit would be a boon to the eurozone and to the EU as a whole, as it would “unleash the forces of European federalism”… and make it possible, at last, to repatriate the bulk of euro trading from London to Paris and Frankfurt.

As the extent of Germany’s leadership in the EU has reached an unprecedented level, it could have been expected that Brexiteers would aim a significant portion of their anti-EU arguments at Berlin. This would have been consistent with their generally harsh view of the way Germany is handling the eurozone’s crisis, its trade surplus (with a current account surplus which stands at 8 per cent of GDP) and what is more broadly seen as a mercantilist approach rather than a genuine commitment to free trade. Germany’s role in the EU has not taken centre stage in the debate however.

Most arguments on key economic issues have remained rather abstract. There have been few mentions of the UK’s breathtaking current account deficit, which reached 5.8 percent of GDP in 2015. The combination of a large trade deficit and a property bubble indicates a more pronounced level of economic imbalance than a large budget deficit alone. The particularly acrimonious Brexit debate has barely touched on this issue. Yet this trait notably results from the broader imbalances within Europe. The eurozone’s woes have fuelled the pound’s overvaluation in recent years in an extraordinary fashion, before its more recent correction.

Despite legitimate talks across the globe of a currency war in which countries seek to depreciate their currencies on competitive grounds, most countries tend to enthusiastically accept an overvalued currency in the first place, as it increases consumers’ purchasing power in the short term. It is typically through a rise in unemployment, financial instability or a sharp decrease in real wages that the trade deficit issue usually comes to the fore and that tensions arise with the country’s main trading partner. It is therefore not particularly surprising at this stage that no such political debate has taken hold in Britain.

Boris Johnson did specifically accuse Germany of “taking over the Italian economy” and “destroying Greece” in a controversial statement in which he also mentioned Hitler… and Napoleon. Many British Eurosceptics nevertheless hold Germany in high esteem and have a fascination for its industrial model . This is far from meaning that they see in Germany a “liberal ally,” but they certainly do not equate it with what they loathe most in the European Union. The bulk of anti-EU attacks have centred on immigration and social benefits as well as more traditional issues such as the UK’s sovereignty in the face of Brussels bureaucracy and the concept of European federalism.

The diverging ways in which liberalism is understood and advocated across Europe prevent the emergence of a genuine economic debate among EU member states and precisely bar the path to a liberal model of economic cooperation. This applies to the eurozone as well as to the UK’s relationship with the bloc. In the eurozone, pro-cyclical austerity measures were implemented across the board in “peripheral” countries, at the height of the euro crisis, in absence of a supportive monetary policy. These relied on shaky ideological grounds that systematically overlooked the level of financial and trade interdependence within the area—a monolithic approach difficult to reconcile with economic liberalism.

More worryingly, in most Mediterranean countries and particularly in France, a paradoxical version of “liberalism” serves the interests of a cast of mandarins eager to personally take over the private sector, even if this means causing its decline. These converts proclaim their pseudo-liberal creed without fear of ridicule while real entrepreneurs increasingly face a Kafkaesque environment of bureaucratic frenzy and punitive taxation, and the country’s scientific elite is left with no choice but emigration.

Although Germany now assumes a dominant role in the EU and is criticised for its lack of benevolence towards its southern partners, the political reasoning behind the current ideal of European integration rests on the ideas of the French political establishment, which sees itself as an enlightened avant-garde. The euro is an example of this. The single currency was imposed by the French government in the early 1990s. Nearly at the same time, it was clear to Scandinavian countries and the UK, after they were forced out of the Exchange Rate Mechanism (ERM) by capital markets in 1992-93, that even a looser form of monetary integration was unachievable in the political context of the EU.

A usual response to the EU’s woes on the part of individual member states consists in seeking to hastily develop partnerships in the rest of the world. During the euro crisis, many German companies reoriented their exports towards China and other emerging markets, whose imbalances were systematically downplayed as these countries were seen as marching towards prosperity. Britain currently seems ready to sacrifice a significant part of its industry, beyond steel, in order to develop a special partnership with China—which would further its role as Europe’s main centre for yuan trading—and to attract much needed investments that would help to finance its current account deficit.

There seems to be no viable solution to the current difficulties but to devise a reasonable and realistic framework of economic cooperation among European countries, whatever its name. The utopia of an “ever closer union” has acted as a deterrent to most countries’ commitment to Europe for decades. A new model of cooperation will have to be found in order to bring all European nations together. The growing awareness of this challenge was recently made clear by Donald Tusk, president of the European Council, when he said that “it is us who today are responsible for confronting reality with all kinds of utopias — a utopia of Europe without nation states, a utopia of Europe without conflicting interests and ambitions.”