Brexit, the End of Civilisation and the Changing, Unsettling International Order

Mr Tusk, the president of the European Council, has warned in the German newspaper Bild that a UK vote to leave the EU could mean ‘the end of Western civilisation’. Not even Mr Cameron, in his increasingly anxious attempts to win a Remain decision from the UK electorate, has gone quite as far as that. We might well ask why, if a Leave victory in the referendum will have the dire consequences Mr Tusk predicts, EU leaders did not make strenuous efforts to keep the UK on board by meeting more of Mr Cameron’s demands during his pre-referendum negotiations. Mr Tusk, to be sure, was not the principal player in those talks; perhaps Mrs Merkel and Mr Hollande did not see the issue in such apocalyptic terms. Then again, even if they had believed the UK’s leaving the EU would in some sense be terminal, they might have been daunted by the difficulties of bringing about the changes in EU treaty arrangements that would have been needed to accommodate Mr Cameron’s pleas. Most likely, as a historian, Mr Tusk has a clearer view than most European leaders of characteristic patterns of events and where they lead. Before his Bild intervention, he had already sounded a note of urgency in taking European leaders to task for pursuing unrealistic visions of integration while neglecting the growing dissatisfaction of European populations with the direction in which the EU was moving. Above all, he is expressing a mood that has come to pervade a ruling elite whose confidence has been shaken, not least by the 2007-09 financial crisis and its aftermath.

Still, that Western civilisation is in danger is a large claim to make. By ‘civilisation’ is generally meant the range of values and the culture that underpin a society. That the nature of one nation-state’s relations with a supra-national organisation could be critical to the values and culture of the Western world is, on the face of it, hard to believe. Why the result of a democratic vote in one nation-state on 23 June should be transforming for the values and culture of many other nations is not immediately obvious. However, Mr Tusk probably looks at the UK referendum in the context of a stream of events he sees heading towards an inevitable destination. In his thinking, it seems to bear a parallel relation to ‘the end of Western civilisation’ as, say, Japan’s 1931 invasion of Manchuria bore to the outbreak of World War II. It would be a signal event on the road to destruction.

For the Western political classes, nothing seems to have been going right recently. The economies over which they preside appear to have lost the buoyancy that, during the so-called Great Moderation, had ensured growth in global output of more than 3% per annum. It is not that global growth has been all that weak in recent years but less of it has been generated in the advanced Western economies, in some of which unemployment remains relatively high. More perplexing still for Western policymakers has been the stubbornly weak inflation they have faced since the financial crisis. Given their rooted belief that the economic system cannot work optimally without inflation that sees the general price-level doubling every thirty-odd years, this has been a serious concern. They have failed to adjust to changed conditions in which prices are no longer determined primaril within their own economies but rather by pressures elsewhere. One result of the globalisation of production, otherwise welcomed by the ruling elite, is that the Western economies are nowadays more price-takers than price-makers.

there have been the setbacks to the European integration agenda

It is, doubtless, disorienting for Western leaders to find they can no longer assume they set the agenda for action on economic issues. Their discomfort is evident in their changing attitudes to the various international policymaking forums. The G7 was once unquestionably supreme. But, first, they expanded the G7 to a G8, to include Russia. Then, at the height of the financial crisis, when they were looking for support from non-Western countries, they promoted the G20 as the proper setting for joint discussion of the economic challenges facing the world. That phase did not last long, however. While the G20 meetings of 2009 took decisions that were important in containing the consequences of the financial turbulence, subsequent gatherings have established agreement only at a minimal level of common understanding. The Western powers have reverted to the G7 as their principal channel for discussions, as witness last month’s Shima meeting where significant conclusions were reached regarding macro-economic policies and foreign exchange intervention.

Even more worrying for Western leaders, perhaps, have been the frequent reminders latterly that the ‘end of history’ did not come with the uncontested triumph of liberal democracy and the collapse of communism. It turns out that the rivalry been nations before 1990 is unlikely to have been wholly ideologically-based. The nations, Russia and China, that then presented the chief challenge to the political domination of the West (that is, the USA and its allies) still present a threat, and seemingly an increasingly potent one. Russia demonstrated its military might in Ukraine in 2014 while Chinese output is displacing that of the West in one industry after another. It may well seem to Western leaders that they have recently been losing all along the line.

Then again, there have been the setbacks to the European integration agenda. A growing sense that a single monetary policy for the whole of the euro zone condemns the region to sub-optimal economic conditions in perpetuity, while any retreat from the euro could only incur enormous costs, leaves EU political leaders feeling the best they can do is manage events in what is ultimately a no-win situation. Reinforcing their pessimistic mood, the migration crisis is creating conflicts of interest between EU member-states. Since economists are agreed that the demographics of most European economies would be strengthened by an influx of potential workers from abroad, the crisis really relates to the survival of European culture. This is probably not the ‘civilisation’ to which Mr Tusk referred, however. He appeared to be thinking more in terms of the values and practices of liberal democracy and financial capitalism, that is, the continuing sway of American culture over Europe. It is, indeed, difficult to foretell what Mr Trump’s success in the Republican primaries will entail for ‘civilisation’ in that sense.

Mr Tusk’s Polish background possibly renders him more sensitive than politicians in Western Europe to threats to ‘civilisation’. From his viewpoint, liberal democracy and financial capitalism are recent innovations that have to be nurtured. He may also be relatively sensitive, for historical and geographical reasons, to signs of Russian expansionism. Already, it is clear, EU memberstates will face difficulties reaching a joint position on what is to follow the sanctions imposed on Russia in 2014. As things stand, these are due to expire on 31 July. On 27 May, Mr Putin declared that Poland and Romania were now in Russia’s ‘crosshairs’. These are countries where the USA is deploying a missile shield that the Russian President feels is upsetting security arrangements in the region. Since then, NATO has launched its Anakonda-16 military exercise in Poland, which Mr Putin has seized on as further provocation. Mr Tusk has reason to be concerned that in his part of the world ‘Western civilisation’ is in deadly peril. It is, then, not altogether fanciful to suppose that such a setback for the West might, at a time when popular confidence in Western leaders has hardly been lower, lead to extreme political instability in many Western nation-states.

The economic and financial implications of a rapidly-changing political environment would be hard to fathom

In any case, a vote for Brexit in the UK could well lead to similar demands in other EU states. While there is a widespread assumption this would give EU leaders reason to ‘punish’ the UK to set a salutary example to others, the scenario may unfold too rapidly for any ‘punishment’ to have taken effect before EU dissolution sets in. This week, 500 UK troops were committed to the defence of Estonia, as by far the largest part of a ‘trip-wire’ force aimed at deterring Russian aggression, For EU countries to attempt the ’punishment’ of the UK is such circumstances would incur serious strategic risks. Furthermore, the impact of ‘punishment’ would presumably be felt most keenly only after the conclusion of the two-year negotiating period, stipulated in the Lisbon Treaty. While negotiations were under way, the UK would remain an EU member and existing rules would govern its relations with other member-states.

Yet early in that two-year period, in April/May 2017, a presidential election is due to take place in France. As things have stood, a victory for the centre-right has seemed the most likely outcome. The latest opinion polls show M Hollande and his Socialists with only 14% support. Leading, on the assumption that M Juppè is its standard-bearer, is the UMP/LR with 35% support; Ms Le Pen’s avowedly eurosceptic Front Nationale (FN) is in second place, with 28%. Under the French electoral system, these two would go into a head-to-head contest next May, which on current reckoning M Juppè would win easily. However, certain events might upset this settled outlook. If M Sarkozy, who is currently president of the UMP and who is developing an understanding with Mr Putin, were to emerge as the candidate of the centre-right, Ms Le Pen’s chances of ultimate victory would be rather stronger. The polls suggest that, in a two-way run-off between Sarkozy and Le Pen, the former would win by 56%-44%, a margin that Ms Le Pen might realistically hope to close if French voters have before them the example of a UK referendum victory for Brexit.

It is not as if French voters are any longer enthusiastic about their country’s EU membership. A study published by the prestigious Pew Research earlier this month surveyed opinion on the EU between 4 April and 12 May. It found that, in the UK, there was a 48%-44% split between those regarding the EU unfavourably and those taking a favourable view of it; that, more or less, tallies with recent readings in Brexit polls conducted by UK polling agencies. In France, however, the net unfavourability balance in attitudes to the EU was much wider than in the UK, at 61%-38%. Potentially, a Brexit might find many French voters who would wish their country to follow the UK out of the EU. Without French participation, it would be hard to see what future the EU could have. It is not as if public opinion in Germany is any longer strongly pro-EU. Pew Research found a net favourable balance there, but only by 50%-49%, an eight percentage point drop in support for the EU over the past year.

Possibly the largest effect outside the UK of a vote for Brexit would be seen in the USA. It would confirm for leading US political circles that the world was changing in ways they had not previously envisaged. It would increase their sense of unease and bring into sharper relief the gravity of the Trump challenge to their own settled order. This could stiffen their resolve in resisting the Trump onslaught but, were there any loss of nerve on their part, it might raise the chances of a Trump victory. That might very well seem like ‘the end of Western civilisation’ as the transatlantic political elites understand it. The economic and financial implications of a rapidly-changing political environment would be hard to fathom. Consequently, it is surprising how little of these concerns financial markets are currently discounting. That is probably a puzzle to central bankers also, who are waiting apprehensively for the first cracks to appear in market confidence in the politico-economic order. What they cannot know for sure is the extent to which, largely through central bank actions, the markets’ responsiveness to changes in the fundamentals has been flattened. The extreme measures to which monetary policymakers have felt driven in recent years is, in their eyes, further evidence that ‘the end of civilisation’ may be nigh. Amidst such talk, though, they can hardly be surprised that companies are reluctant to step up their capital investment, despite ever more energetic monetary stimulus.

 

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About the author

Stephen’s career spanning five decades has made him one of the most respected and unique voices in the City of London. Disclaimer regularly publishes a selection of his elegant and thoughtful essays on the global economy, which he has been writing regularly since he founded Fifth Horseman Publications in the late 1980s. As well as an economist, Stephen serves as Treasurer of the Forum for European Philosophy and was elected to the Royal Institute of Philosophy.

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