The Folly of Brexit

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In 2012 the Nobel Peace Prize was given to the European Union to remind people that peace made it a success, even if Greece was in economic meltdown. Ninety-eight million human beings, 50% more than there are British people, died in two apocalyptic world wars whose epicenter was Europe.

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Dresden after the firestorm.

Ninety-eight million is a very big number. Imagine waking every day, switching on the TV to jets crashing into the World Trade Center and exploding, again and again. A 911 every 24 hours, Groundhog Day terror. Now imagine the same, but as a 90 year old. This is how bad WW1 &WW2 were, a 911 every, single, day for almost a century.

Disruption from American technological innovation and Asian dynamism makes the idea of a united Europe a good thing. Resurgent tribalism makes it a necessity.

Tribeless

I’ve lived and worked in seven countries, grew up as a Scottish Presbyterian atheist in North London, often pretending to be Jewish and don’t support any team in any sport. My son has three passports while my daughter is the second generation to be born in a country she has no right to be a citizen of. As a cross border worker and Green Card holder I pay taxes in three countries but am not allowed to vote for the leader of any of them. I’m not even allowed to vote in my own country, the UK, having lived abroad for more than 15 years. So I have no right to vote on June 23 2016, to decide whether I will even remain a member of the continent I live in — Europe.

I have no vote, no identity, no tribe, but I am a committed European. And although I can’t elect someone to represent what I believe in, I can write about it, and maybe my unusual tribelessness helps give me some clarity.

European Naked Lunch

One of the benefits of being tribeless, as a member of species that is violently so, is that I think I can sometimes see tribalism for what it is and how it is threatening Europe.

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“Naked Lunch — a frozen moment when everyone sees what is on the end of every fork” William S. Burroughs

I can see that there are no absolute separations between Republicans and Democrats, Muslims and Christians, Right and Left, when it comes to values, or people wouldn’t divide into these camps by accident of birth rather than personal choice. The most successful ideologies have no ideology. An eye for an eye and turn the other cheek, the messages cancel each other out, mirrors for whatever you want to believe and so capable of serving anyone. People rarely choose a different religion or political party compared to their family or peers, based upon what they mean, any more than they choose what football team to support based on the way they play.

Similarly, it’s obvious to me that the fact that really big political choices are often only available as one of two alternatives, even in a democracy, and that the principal way of describing them comes from what side a room you were sitting on (right or left of the French National Assembly) suggests they are often arbitrary and non-comprehensive.

I can see that brand values and identities have no intrinsic qualities, only illusory ones — or Koenig and Krone’s summary of the rebranding of the Beetle as “selling a Nazi car in a Jewish town” would not have been possible let alone palatable.

I can see from personal experience that people get irrationally tribal about a game, having been punched in the face, as a child, by a West Ham supporter that thought the logo on my sweater was a Chelsea emblem.

I can see that it’s ironic when people who feed one mammal that happens to be a pet, another one of equal capacity for suffering, describe themselves as animal lovers, as long as the animal is part of their clan.

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In tribe or out — pets or meat from Roger and Me.

If being European is the only identity I can cling to, then what is that? As Kissinger (a person of such tribal instinct that he thought it fine to rain bombs on civilians abroad for the sake of pragmatism at home) pointed out: “Who do I call if I want to speak to Europe?”.

Maybe it’s easier, as is often the case, to define Europe by what it’s not, but here too Europe falls short. There is no common enemy for Europe and even the recent xenophobia about muslims has had the effect of further dividing rather than unifying Europe, creating the biggest threat to the Schengen single border zone since its creation. Rather than rising to the occasion of refugees from the other side of the Mediterranean, from Libya to Syria, where the number of people drowned this year surpasses the losses on the Titanic by more than 60%, Europe has bribed Turkey with unsustainable promises, so that it will park a million refugees within its borders to stop them coming to Europe.

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1000 more refugees have drowned this year than perished on the Titanic.

So what is it that binds Europe?

It’s certainly not culture, as witnessed by the preposterous Eurovision Song Contest, a multi-state music election organised by civil servants, which feels like a government run technology incubator — more politburo than rock and roll.

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Lordi (quite), Finland’s execrable, winning Eurovision Entry

It obviously can’t be language, but similarly that can’t be a showstopper for identity, as Switzerland proves.

It isn’t the rule of law, as I don’t know anyone from any European member country that’s a fan of the red tape that largely unelected EU bureaucrats have constructed.

And it certainly isn’t financial ‘representation without taxation’ in the form of the Euro, which has prevented Southern European countries from spending and devaluing rather than cutting and preserving, while at the same time having the European Central Bank print money on a massive scale, harming German savers.

But there is one thing that does bind Europe together. If you were to draw a circle around Europe on a globe and point inside it, you could say that within that line was the largest number of people on the planet with access to free healthcare and education, retirement support and widespread public transportation and infrastructure within market economies.

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Since the second world war, the people in this bit of the globe have generally had free healthcare and education.

The former protects you if you have bad luck and the latter allows for the upside that creates innovation. At its best, Europe is an attempt to pay for past sins with moderation through a well tempered society, balancing economic and social freedom with a state safety net. Both are extremely important and both are being threatened, as is the European ‘project’ itself.

The European style welfare state was the reward of war, what the state had to give people in exchange for demanding they line up in front of machine guns. Today it is challenged by the demographics of aging societies that are polarised by immigration. The market economies that fund it are threatened by an unwillingness to move beyond the industrial age, as evidenced by the inability to create global scale Internet platforms. The moderating balance between the two is being threatened by the rise of extremist parties on the right and left.

When I grew up, it would have been unthinkable that Sweden, the country of Abba and nicely designed modernist houseware would become the world capital of fascist literature. Europe at the moment is fragile, it needs help.

Demographics

People are living longer, so health and retirement costs cannot be met with current investment, across most of Europe. To demonstrate how unsustainable this is, for all of the past 20 years, for every hour a man lived (women less so) beyond the age of 65, his life expectancy would increase by 15 minutes. Yet, in countries like France, people aren’t working longer. The majority of French don’t work after the age of 55 and state pensions are a percentage of final salaries, where that percentage is up to 80% for state workers that represent one in five employees.

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The product of a nation where 1 in 5 workers are civil servants, the French Labor Code, three times longer than the bible.

With Interest rates at their lowest level in human recorded history, the money required to service these pensions has amplified how absurdly unaffordable they are. A UK member of parliament (not exactly at the bottom of the employee ladder) would have to see a 50% pay rise to be able to afford a first time buyer mortgage on the average London property. On the other hand, the pension based on that salary is worth more than 1.6 million pounds ($2.3 million) if you were to consider the savings required to purchase an equivalent annuity. A state salary that doesn’t allow you to buy a home makes you automatically a millionaire as a pensioner.

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Even when interest rates do return to normal, the pension system in Europe is unsustainable, and it needs to change to preserve the remainder of the welfare state from collapsing under the same pressures of an aging population.

Market Economies

The European economy is being threatened by an inability to acknowledge that the Internet is replacing the hierarchical 20th century, Fordist manufacturing economy with a network based, information one. France with its high speed trains, pristine freeways and chains of functionaries radiating control and movement out of Paris is a perfect machine for a hierarchical age, not a network one. Its unions, with 7% membership dictating the stance of the majority are fighting an undemocratic, imaginary, us-and-them battle of owners vs workers, where the enemy has moved on in an era of robots and stock options. Its politicians, who come from the same schools, right or left, and have no work experience in the private sector, are creating swathes of irrelevant and obsolete, proscriptive regulation, as if to outlaw slide rules in an age of computers.

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European Riots against Internet platforms.

As Internet based platforms start to move from obviously technological areas like search engines, to seemingly unrelated areas such as taxis and space rockets, the response has been to criminalise Uber (France) and ban Airbnb (Berlin). Existing giants like Google have had their offices in Paris raided by police and are under investigation in for tax fraud, and although going after multinationals for parking money in island tax havens, albeit to satisfy legal obligations to shareholders, has some justification, the reaction is extreme and the alternative of a European Google non-existent. A Franco-German, government run attempt to create a European Google, called Quaero, never managed to launch and Investment in platform companies dried up as even modest exits such as Dailymotion were blocked at government level. Taxes on unrealised gains and tax relief on chattel meant that in France, angel investing in a successful company that didn’t exit could bankrupt you, while owning an antique painting was tax exempt. The past was being valued more than the future, a seemingly innocuous but devastatingly conservative stance in a land of supposedly radical socialism.

The Internet style economy marches on, and the Silicon Valley model is now producing electric cars and space rockets. Tesla is a startup, but it is worth half as much as BMW, and the Germans are worried. SpaceX aims to be able to launch into space something weighing the same as a iphone for half what it costs ($300 for 5 ounces), creating an existential threat to the European Space Agency.

Europe owns none of the major Internet platforms, and the value of its major Internet companies lags enormously behind America and Asia. In terms of specific companies, no European Internet related company is worth half of South Africa’s Naspers.

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As the world shifts into the information age, Europe is in a position of total denial and needs a mission of Apollo level ambition to fix it. This is the crux of a recent interview I did for the Guardian and has been the subject of ongoing debate with Berlin and New York based entrepreneur, Alex Diehl who agrees with the severity of the situation and is also a champion of the importance of a united Europe. He likens the two forces of currently unsustainable pension costs and future revenue drain from lack of innovation to being caught in a tightening vice.

It is Berlin that has institutional memory as to the importance of a united Europe, having been the nexus of the evil force of continental destruction after the social and financial upheaval of the 1930s, and having been severed in two by the Iron curtain until the end of the 1980s. Having been brought up in East Germany, where Putin worked for the KGB, Merkel is aware of the tangible threat he poses, as he funds European extremist parties on both right and left. For Putin, a disintegrating Europe postpones a disintegrating Russia. For Germany, Europe was not the price of a unified Germany but the reward for it. As the EU tightened the screws on Greece, the idea that Germany was forcing the rest of Europe to suffer belies what has happened to a nation of savers as money printing and negative Interest rates actively punish the careful.

Little Britain

This brings us to Britain. After the buzz of Scottish-referendum-Russian-roulette, David Cameron decided to offer the Brexit pistol to the British people to dare them to pull the trigger and thus keep his jingoistic, back bench Tories quiet. Boris Johnson, who went to the same high school as David, offered to help pull it since he thought it might help him be Prime Minister too.

Two people from school playing Russian roulette in a room full of explosive for the sake of personal gain and parochial party politics. Unfortunately the pistol has now been handed to a bare-chested, grimacing moron epitomised by the England football hooligan.

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The beautiful game

After a cynical, ‘remain’ campaign based on tapping base emotions like fear of losing money, the ‘leave’ one is based on a much more primal one — fear of other. The tribal trump card has been played, just as an army of pink, sweaty, England fans has descended on France in a display of ritual violence not seen since the notorious ‘firms’ of the 80s. Football, whose Premier League seats cost more than the Royal Opera has had its mask ripped off, and underneath is a beer-addled, bigot, belting such popular arias as: hands up if you hate the French, two world wars, one world cup. Tribalism is back, just as it is being baited, politically.

These people are supposedly in a minority, but it’s a highly visible and terrifying one. In a vote where, when surveyed, the majority do not understand the issues and where several percent don’t even understand the question, being unable to correctly answer if Britain is already in the EU, the minority matters.

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Europe is is trouble and Britain’s response has been what’s in it for us? Like checking an accident victim’s wallet, when the victim is your brother.

Proponents of Brexit point to non members, Norway and Switzerland as the model, however they never joined. Divorce is more destructive than not getting married.

If it isn’t a model for Brexit, ironically Switzerland, which sits outside of the EU is a perfect one for it working well. Switzerland is a working system which is decentralized and federal. Swiss people’s identity is multi-lingual and multi-layered, both regional and local, and central government is ruled by consensus. Switzerland shows how European states could retain their sovereignty within a larger network.

If the world is changing from an industrial era of hierarchical control and owner and worker, to a network age where the owners have control of both the means of production AND the workforce, through robotic automation, then Europe, if it can be made to work, may be the solution not the problem.

This is because if intelligent automation threatens jobs on a large scale there will be even more need for a European style safety net and income distribution than there was in the industrial era. If it doesn’t then, Europe needs new jobs centering around the tech innovation itself, via American style creation of tech platforms and their ecosystem hinterland. And if this new age is defined by networks rather than hierarchies, retaining sovereignty within a network of countries reflects this new model exactly.

However, to adapt to this system, which could actually be more compatible with Europe than its competitors, requires change and looking to the future, the opposite of what voters and governments are doing. A UK which is committed to this vision could help bring it about.

On a fiscal level, the UK will probably not suffer too much in the medium term. In the event of a Brexit, it will be free to pursue the zero sum game of regulatory arbitrage relative to continental Europe. But in zero sum games there is always a loser, and if that loser is the cohesion of a continent, as Brexit spills over into other potential exits, such as France, the European Union will be over. In the longer term this will move from a zero sum game to a losing one, for Britain too.

Written by

Architect: I used to design buildings, now I design companies. http://davidgalbraith.org

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