Could Theresa May Actually Lose to This Guy?

The Weekly Standard, June 7, 2017

When British Prime Minister Theresa May called a snap general election back in April (the vote will be held this Thursday) the governing Conservatives were seen as a shoo-in. They were roughly 20 points ahead in the polls, May was liked and the Labour leader Jeremy Corbyn—seen as dangerous, dimwitted, or both—was not.

That was then. It was to be expected that the gap between the two parties would narrow. It was not to be expected that the most notable feature in the Conservative Party's manifesto would be an idea—the now-deservedly notorious " dementia tax"—that for all intents and purposes took aim at people over the age of 65, a group that leans fairly heavily Tory and votes in large numbers. Coupled with a scheme to reduce spending on free school meals for young children, it did a lot to revive the caricature of the Tories as the "nasty party," a caricature that Brits are all too willing to believe.

May partially backtracked on the dementia tax. The retreat was not quite enough to reassure the nervous, but it was enough to undermine her already weakened reputation as a strong leader. (There had been a reversal over taxes some months before.) This was a harsh blow to a campaign which revolves to a remarkable degree around the person of May, who is a politician with neither the record nor the personality capable of sustaining a cult.

These Tory missteps were bad in themselves, but they also drew the public's attention away from where it belonged—on the extremism of a Labour leadership that at times (most notably—but not only— when it came to its association with Irish Republican terror) was strikingly at odds with much of Labour tradition. The result was that the election's inevitable tribal pull looks stronger than had been anticipated. Disaffected Labour voters appear to be returning to the fold, their ranks swollen by young voters, many of whom are either unaware, indifferent, or willfully ignorant of Corbyn's poisonous past.

In England, at least (Scotland, Wales and Northern Ireland play by different rules) the political battle has returned to a traditional two party contest, Labour versus Conservative—of a sort not seen for some time. Earlier talk of a fragmented left now looks overdone. The center-left Liberal Democrats, (the standard-bearers of the E.U. cause) may be boosted by Tory defectors still pining for Brussels. But they are not luring over enough Labour Party voters appalled by their party's hard left turn to make a difference. Meanwhile the collapse of support for the euroskeptic UKIP, a party widely regarded as having fulfilled its purpose, is seeing its voters returning from whence they came. Those on UKIP's right are going back to the Conservatives, those on its left to Labour. Tory hopes of gains in the Midlands and the North were based partly on the expectation that many of those 'patriotic old Labour' voters (as UKIP liked to describe them) would be marching their way. That migration doesn't seem to be going as planned.

The sense, fed by the Tories' shrinking lead in the polls, is that momentum has been moving in Labour's direction. This has led John McDonnell, Corbyn's closest ally, to boast of "a subterranean shift" in the electorate's mood, much of it due, he argues, to younger voters. There was indeed an impressive last-minute surge in voter registrations among the under-25s, although their turnout (traditionally underwhelming) remains uncertain.

After Brexit, few are prepared to rule out how far subterranean shifts might go, and worried Conservatives will have noted that betting on the election is following the pattern witnessed ahead of the E.U. referendum. The amount being wagered is encouraging for the Tories, as it was for those who wanted to stick with Brussels, but the volume of bets (typically in much smaller amounts) favors Labour, just as it did Brexit. On the other hand, the well-chronicled phenomenon of " shy Tories" means that, despite pollsters' best efforts, the likely Conservative vote is probably being undercounted. Perhaps even more so in a year when many previously loyal Labour voters may be contemplating a switch to the old enemy, thanks to Corbyn.

And then there is the wild card introduced by the horrific terrorist mass-murders in Manchester and London. Will those killings rally voters around May, particularly given Corbyn's past artful equivocation on terrorist violence—not to mention his former opposition to the shoot-to-kill policy that allowed the police to deal with the London Bridge terrorists in only eight minutes? Or will May be blamed for the attacks taking place on her watch, a theme which Labour has played up by emphasizing the substantial cuts in police numbers presided over by May while she was Home secretary.

So who's going to win? That Labour has closed much of the initial gap seems beyond dispute, despite anecdotal evidence " on the doorstep" that the party's recovery has been overestimated. Beyond that, pollsters are divided, with some raising the possibility of a "hung" parliament in which the Tories would, at best, be able to struggle on as a minority government. Others suggest that the Conservatives will obtain a decent, even relatively comfortable majority. For my part, I can report that two Tory friends have told me that they have had nightmares about a Corbyn win. So there's that.

If I had to guess (full disclosure: I was wrong about Trump, Brexit and the UK's 2015 general election) May will secure an overall majority of 20 to 30 seats. That's more than David Cameron managed, but not enough to restore the damage done to her prestige by a badly bungled campaign. To achieve that, she would (and calculating this is not a precise science) need a majority of 80 or more. It's worth adding that the lower May's majority, the more difficult her already treacherous path to a Brexit that works will be, and if she fails to land an overall majority . . .

Which brings us to the possibility of a "coalition of chaos" created by Labour winning sufficient seats to form a government with the Scottish National Party (tacitly backed maybe by the Liberal Democrats and other minor parties). If that's the outcome, jump to one side as the pound plummets past you.

Voting will end at 10:00 p.m. London time (5:00 p.m. EST) after which the exit polls will be released. The first concrete result will be announced about an hour later, probably from Houghton and Sunderland South in the industrial northeast. Labour will retain this safe seat, but this is Brexit country (UKIP came in second here in 2015) and the numbers may give some useful clues as to where UKIP votes are going.

Two to three hours after that, the results will start to pile up. If May improves her position in the North and the Midlands, then she's well on her way to a comfortable victory. By 11:00 p.m. EST it ought to be pretty clear who will form the next government. If it's still up in the air at that point, that will be bad news for May.

Six-hundred and fifty parliamentary seats are being contested on Thursday. The Conservatives held 330 at the time the election was called. Of the other major parties, Labour held 229 and the SNP 54. To secure the sort of majority that would repair her reputation, May needs the Tory haul to be into the 360s. As for the coalition of chaos, if Labour's total goes much beyond 260, pour yourself a very stiff drink.

Hubris in the U.K.

The Weekly Standard, May 26, 2017

Special advisers to political leaders need to get out more. Prime Minister Theresa May's decision to sneak what was quickly labeled a "dementia tax" into the Conservative party's general election manifesto (the British general election will be held on June 8) was reportedly heavily influenced by Nick Timothy, a Rasputin (with beard to match) in the court of a prime minister with few confidants. It was inserted into the manifesto at the last minute absent, reportedly, much consultation to speak of with those who would be actually facing the voters. That was a mistake.

Within days of the manifesto's release, one poll showed that the Tory lead had dropped by 5 percentage points to (a still immensely comfortable) 12 percent. This was almost certainly due, in no small part, to the dementia tax (or, to describe the culprit more politely, one of the new proposals for the funding of "social care").

Medical progress is uneven. Life­spans have been extended, but bodies and minds have struggled to keep up. There has been rapid growth in the number of the elderly who find it difficult or impossible to cope on their own, and there has been a corresponding growth in the expense of caring for them. In the U.K., government will pay for nursing-home care, but only after the person staying there is down to his or her last £23,250 in assets (roughly $30,000). If Methuselah is looked after in his own home, however (something that saves the state money), the value of his residence is not counted in that total: He gets to hang onto his house and pass it on to his heirs. Responding to the widespread perception that the system was too harsh, David Cameron's coalition government had earlier brought in reforms that included the introduction (delayed until 2020) of a porous and less than comprehensive "cap" of £72,000 on what anyone could be charged for social care.

May's idea was very different. Instead of a cap there would be a floor. To put it far too simply, the last £100,000 in assets would be shielded. Apart from that, there would be no limit on how much Methuselah could be asked to pay. Turning the screw still tighter, the old boy would no longer be doing his heirs much of a favor by staying on at home. Under May's rules, the value of the house could be used to defray the cost of his care, although (if he preferred) only after his death: Compassionate conservatism lives on.

People with Alzheimer's and other forms of dementia can be relatively physically fit, at least initially. They can live on for quite a while, and the bill for looking after them can rise accordingly: A lifetime (or lifetimes) of savings could thus be wiped out by bad luck or a bad gene. On the other hand, be fortunate enough to be killed off, say, by cancer or a kindly coronary, and the state will still pick up the tab. The thought that some diseases were to be rendered more equal than others obviously didn't worry May's team overmuch. And the prospect of draining wealth from the wealthier they considered a feature, not a bug. May intends to drag the Conservative party to the left. A further slice of redistribution would not come amiss.

To believe this was either good politics or good policy was nuts. Voting turnout among the over-65s (some three-quarters of whom are home-owners) is high, and, at the time the election was called, they strongly favored the Conservatives. Well, they did: The "dementia tax" (which could hit millions of people) has triggered some of their deepest anxieties about what lies ahead in what's left of their lives.

Mrs. May might not have much time for Mrs. Thatcher, but she would have done well to remember the Iron Lady's reluctance—fueled both by fear of punishment at the polls and of damage to the country—to do anything that could hurt "our people." Our people save, our people own their homes, our people want to pass something onto the next generation. These were qualities that Thatcher rightly believed were good for the social and economic health of the nation, qualities that, as she also understood, attracted such people, our people, to her version of Conservatism.

And our people have already paid a disproportionate amount of tax to fund a welfare state that, if May got her way, might stick them—at a time when they were essentially helpless—with another, possibly monstrous bill, a dying-too-slowly tax, lest the death tax itself (Britain's inheritance tax) was not enough to do the trick. The richest could, in all likelihood, weather the costs. As is so often the case with redistributive taxation, those who would be hurt the most would be the aspirational, the middling successful: Our people.

The private sector can do only so much to defray the costs of long-term home care. It would be a challenge for insurers to offer affordable coverage against a risk that is so unpredictable and, potentially, so large, even to the young. Those foolish enough to have entered middle age (let alone anything grayer) by now would have a vanishingly small chance of finding the insurance they might need. Risks of this type are best very widely pooled. In Britain that means either extra funding by the taxpayer or cutbacks in government spending elsewhere: Whatever some may claim, there are places to look for the latter.

The last time that May's government took aim at our people (by attempting to increase FICA-style charges on the self-employed), it had to back down. And despite dishonest denials in recent days of a U-turn, that looks to be how it will go with the dementia tax. There will be a cap, although, significantly and cynically, May has not yet said how high it will be.

That evasion may be one reason to suspect that the majority she seems on course to win will not be too big. Which may be for the best. May's opponent, Labour's far-left Jeremy Corbyn, cannot be trusted with any degree of power. But the dementia tax is a reminder that the over-promoted Theresa May cannot be trusted with too much.

The End of the Beginning

The Weekly Standard, July 22, 2016

It was the mayhem that made Theresa May. Britain’s unexpected vote to leave the EU crushed financial markets and plunged some Remainers into angry, unhinged, and tellingly snobbish mourning: It was, one author explained, "the revenge of the Brownshirts, a dictatorship of the illiterate and the opportunistic." The political class went into shock. Prime Minister David Cameron decided to quit, as, confusingly, did the leader of the Euroskeptic United Kingdom Independence Party (UKIP). The Labour party resumed its civil war, and the Tory contest to succeed David Cameron veered wildly off course, culminating in the defeat of a lightweight Leaver by May, Cameron's long-serving home secretary. May was a Remainer but widely credited with the safe pair of hands a nervous nation craved.

Dour and quiet, a gradualist, Theresa May shouldn't be underestimated. An effective bureaucratic in-fighter, she celebrated her appointment as prime minister with the most brutal ministerial reshuffle in recent British political history. Scores were settled, and not without—Britain being Britain—a hint of class warfare. Most important, May signaled this was her government, not Cameron 2.0.

She won't be Maggie 2.0 either. Mrs. Thatcher was more pragmatic than the legend goes, but at her core she was a classical liberal wrapped in patriotic, traditionalist guise. May's views are hard to pin down, but they are possibly rather closer to continental Christian Democracy. Her response to enthusiasm for Brexit amongst Britain's blue-collar "left behinds" included talk of an "industrial strategy," hardly the language of laissez-faire.

More generally, May is less fussed with the sovereign individual or, for that matter, the sovereign nation. She struck a blow against both when she corralled the U.K. into the EU's notorious arrest warrant regime. But she's no Eurofundamentalist: Her (understated) role in the Remain campaign owed more to political calculation and risk aversion than any embrace of the European ideal.

If May resembles any prominent female leader in method, ideology, and personality, it's Angela Merkel, another undemonstrative and authoritarian clergyman's daughter with no great fondness for boys' club politics. That might help Britain cut a decent deal with the EU, the decent deal on which the success of the May premiership will depend, the decent deal that has yet to be defined.

A Remainer needing to reassure Leavers, May has promised that "Brexit means Brexit," whatever that means. Forced into the referendum's crude binary, Britons chose to quit the EU, nothing more, nothing less. Their vote said nothing about how. The best way out, if it's available (and in the end, it probably would be), is some variant of the much-misunderstood status known as the "Norway option." This would allow continued participation in the EU's "single market," via membership (like that enjoyed by Norway) in the European Free Trade Association. As a reminder, the EU takes over 40 percent of the U.K.'s exports in goods and services, including those of Britain's vital financial sector.

Such access would come at a price, including, critically, the U.K.'s commitment to the EU's rules on free movement of people within the European Economic Area (EEA), the territory in which the single market applies. That's a highly sensitive topic, given the degree to which alarm over immigration boosted the Brexit cause. The Norway option does, however, provide for an "emergency brake" on inflows of people from elsewhere in the EEA, which might, properly sold and properly applied, soothe voter concern.

It's a solution, polling suggests, that would win the support of a plurality of Brits, if not most Brexiteers. It would play well in restless Scotland (where 62 percent voted to stick with the EU). As a package deal, "Norway" is reasonably straightforward and, crucially, can be implemented relatively quickly, minimizing any Brexit-related hit to investment in the U.K. It could be either a final destination or a convenient way-station along the route to a more definitive break with the EU.

But when May's team talks about winning access to the single market, it does so in a way implying a tougher line on immigration. That will be a difficult deal to secure. To be sure, mutual self-interest argues for a compromise (the U.K. is a large market for the EU), but, as the Swiss (who have their own separate arrangement with the EU) are learning, the EU is reluctant to give ground on free movement, a principle central to its sense of itself. There are also fears that too gentle a divorce might tempt other less enthusiastic EU member-states to follow Britannia's lead.

There are other alternatives, such as a bespoke "customs union" with the EU, and one better surely than Turkey's, if still far short of the single market. David Davis, May's Brexit minister, seems remarkably sanguine. He has even argued that "in the improbable event of the EU taking a dog in the manger attitude" to British access to the single market, he could live with a "hard Brexit"—trade with the EU under World Trade Organization rules. I'll spare you the technicalities, but let's just say that those rules are less favorable for exporters than usually understood. Even then, it will not be as easy for Britain, which currently dwells in the WTO under the EU umbrella, to take advantage of WTO rules as many Brexiteers believe.

It's true that, once out of the EU, Britain will be able to conclude its own trade deals with the rest of the world, but such agreements typically take years to finalize. And the U.K. has to quit the EU before it can sign (or, strictly speaking, even talk about signing) anything. So far it hasn't even initiated the exit procedure. That involves giving notice under Article 50 of the EU treaty. The U.K. and EU will then have two years to agree on the technical details of their separation. If it intends to avoid the hardest of hard Brexits, Britain will also have to agree on its new trading arrangements with the EU at the same time, a tall order, and one not provided for in Article 50—something else that points to Norway, at least as an interim measure.

Keen to end the uncertainty and, doubtless, to exploit the edge that a fixed timetable brings, the EU wants to start the clock. It won't agree to formal discussions beforehand . Britain, however, insists that it has to decide what it wants from Brexit first. This stalemate could quickly turn nasty. Nevertheless, London won't trigger Article 50 before 2017. Elections in France and Germany that year won't make matters any easier.

No one really knows what comes next, but May's team has begun to take soundings abroad and, I assume, is calling in the experts (to the extent that they exist) at home. The need for the former is obvious; the need for the latter is pressing. The Cameron government blocked the civil service from considering any serious contingency plans for Brexit, and, with some notable exceptions in think-tank land and, yes, the blogosphere, most leading Brexiteers, including Davis, have been just about as cavalier. There is no plan. To pull a Melania on Otto von Bismarck, putting one together will be a matter of "the art of the possible .  .  . the art of the next best." Discovering the possible may be a rude awakening for some Brexiteers. The "next best" might even turn out to be located somewhere near Oslo, particularly if there are signs of sustained economic weakness.

The domestic politics of Brexit should be easier to navigate for now, despite May's narrow parliamentary majority. The next general election is not due until 2020. Helpfully for May, Labour is still preoccupied with a probably doomed attempt to unseat its leader, Jeremy Corbyn, a man almost certainly too left-wing and too strange to make it to 10 Downing Street. Meanwhile, with Brexit underway, the Conservatives need fret less about UKIP, their bugbear of the last decade: Busily reinventing itself as the party of the "left behinds," UKIP is increasingly focusing on Labour.

Wisely, May is courting the independence-minded Scots, though it's far from a given that Brexit means Scexit. To start with, Spain (worried about secessionist Catalonia) will block Edinburgh's path to Brussels. And even if it didn't, the EU would be a less attractive safe haven for mutinous Scots than is often imagined, involving as it would the prospect of austerity (low oil prices haven't helped Scotland's shaky finances), the euro, and tariff barriers with the rest of the U.K. But Scotland is not the only place where the U.K.'s Celtic fringe may be fraying. In Northern Ireland, somewhere that no British prime minister can comfortably ignore, nearly 56 percent voted for Remain.

British voters rejected Brussels for any number of reasons but, above all, they wanted their country back. The difficulties (many more than I have mentioned) associated with Brexit are the result of over 40 years of entanglement in an "ever closer union," an entanglement that was only going to get worse. They are confirmation that Britain is leaving not a moment too soon. But that will be cold comfort if the consequences drag the economy down for any length of time. If the mechanics of exit are mishandled, they will. Britons have voted for Brexit, but the intricate, painful, and dangerous job of carrying out their wishes has barely begun.

Friends Let Friends Brexit

The Weekly Standard, March 21, 2016

Complacency, laziness, or a simple failure to keep up can reduce foreign policy to a habit, unexamined and out of date. The United States traditionally smiled on the idea of tighter European integration. Binding the nations of Western Europe more closely together would bolster them against Soviet expansionism and render them less likely to fall out (yet again) among themselves, the latter a pastime that tended to cost American lives. British membership in what became the European Union (the U.K. joined in 1973) was supported by Uncle Sam, not least because the Brits could be expected to push the nascent bloc in a more Atlanticist direction, politically and economically.

Against that historical backdrop, there is nothing surprising about the increasingly tough line taken by the Obama administration against "Brexit"— a vote by the British people to exit the EU in a referendum to be held on June 23. The president has long made known his preference for "a strong U.K. in a strong European Union." And preference may be too weak a word. In 2013 the State Department's Philip Gordon explained that British membership in the EU was "essential and critical to the United States." It's neither.

As referendum day approaches, the administration's tone has become a tad menacing. Speaking last October, America's senior trade diplomat, Michael Froman (who worked as a trainee at the European Commission years before), warned that Washington would not put much priority on a free trade deal with a post-Brexit Britain. Being one of America's closest allies and the fifth-largest economy in the world apparently doesn't count for much.

Meanwhile, according to the chairman of the Senate Foreign Relations Committee, President Obama is planning a "big, public reach-out" to mutinous Brits in the near future. Some tact might be worth a try.

Again, seen against the historical background, there's nothing very unusual about all this. Seen against contemporary reality, however, it looks overwrought. The administration's starting point, one must assume, is concern that Brexit would do serious harm to the rest of the EU. That's not likely, but even if it were a real risk, a glance at the calendar should avert panic. It is not 1914 and, despite its vanity and that nutty Nobel Prize, the EU is not the guarantor of European peace. Nor is it 1980: The Soviet threat is history.

And nasty Vlad Putin? Well, pushing the EU's "ever closer union" far beyond where it was prudent to go, whether with the euro or recklessly loose immigration policies, has created the conditions in which extremism can thrive, conditions the Kremlin has not been slow to exploit. Old ghosts are stirring across the continent and Putin, getting pally with a Le Pen and chummy with a Syriza, is only too pleased to rile them up. In this respect, the EU has been a problem, not a solution.

For all the troubles set in motion by the EU's surfeit of ambition, there are few signs that it is prepared to change course. The default answer, whether in Brussels or Berlin, to the union's mainly self-inflicted woes continues to be "more Europe" — at the Greek border, in the finance ministries of the eurozone, everywhere. The dream of a new kind of "empire" (to borrow the word used by former European Commission president José Manuel Barroso) is alive if not well. And — let's not forget — in this dream the EU stars as a challenger to the colossus across the ocean, both in the way it runs itself (no Anglo-Saxon capitalism, merci!) and internationally.

This goal matters more than it once did, and much more than the U.S. foreign policy establishment seems willing to recognize. Despite its current difficulties, the EU is far more formidable than two or three decades ago: Its reach has stretched both within its borders and beyond. There is already an EU "foreign minister." Angela Merkel has in the past expressed interest in a European army. That could evolve into a curb on the ability of more confident powers (Britain and France, say) to take independent action and in any event would be an unwelcome distraction from NATO.

The best guess is that Brexit would leave the EU somewhat shrunk but essentially unscathed. There will be no great unraveling. For Washington to oppose Brexit for fear it might dent the (now destabilizing and destructive) progress of "ever closer union" makes no sense. Such an outcome is improbable, but it would be a feature, not a bug.

And the argument that the United States should encourage the U.K. to stay in to act as a brake on the EU's long march towards Barroso's empire overlooks the fact that the time when the U.K. could alter the EU's trajectory has passed. In the 1980s the EU turned towards economic liberalization in a manner unthinkable to its dirigiste founders, largely thanks to the U.K. and more specifically the influence of Thatcherism, then at its peak. A decade or so later, British pressure played a significant part in the EU's expansion into lands that Moscow once controlled. That helped anchor much of Eastern Europe in the West, a development that Washington had every reason to celebrate.

But these successes were the product of a specific time and—in those halcyon days between the collapse of communism and the collapse of Lehman Brothers—a specific ideological moment. Mrs. Thatcher is no more, and the behavior of some of her successors is a reminder that Washington cannot assume a British government will be as in tune with American economic and political thinking as was the case during the Reagan years. What's more, Britain now represents a smaller part of a larger union from which the wise decision to keep clear of the euro has left it semi-detached, although not detached enough. Its ability to nudge the EU along a more America-friendly path is not what it was.

While the U.K. finds it more difficult to influence the EU, the EU is busy reshaping the U.K. This is more than the cumulative effect of all the powers that have been transferred from London to Brussels over the years. It also reflects the passing of time, shifting demographics, and what people have become used to: 1973 was an eon ago. Younger Brits feel more "European" than their elders. June 23 may well be the Brexiteers' last chance to get their country out — and back. A recent YouGov poll showed 63 percent of those between the ages of 18 and 29 wanting to remain in the EU; 56 percent of those over 60 thought the U.K. should quit. The understanding of what it means to be British is changing, a transformation that is eroding the old instinctive, if sometimes patchy, Atlanticism of this country's closest and most reliable European ally. That's a transformation that will gather pace if Britain remains in the EU, and it's a transformation that the United States should not want to see.

By contrast, the possibility of a very different transformation in the way the British Isles are run may offer a sounder basis for American opposition to Brexit. There is an obvious danger that the U.K.'s departure from the EU might provoke the departure of (relatively Europhile) Scotland from the U.K. The broader consequences of that are as misty as a Highland glen, but the prospect of the Scottish National party— a party only reluctantly committed to NATO — running an independent Scotland won't thrill the Pentagon. On the other hand, even if Britain remains in the EU, the chances of Scotland's eventually going its own way — particularly if oil prices revive — already appear to be high. In that event, all that Brexit will do is speed things up. That said, the uncertainty that will inevitably follow Britain's break with Brussels might persuade nervous Scots that they would rather stick with the auld devil they know, especially as a tartan return to the European fold is far from guaranteed. Spain, mindful of restless Catalonia, would not endorse a precedent that made it easy for secessionist states to "rejoin" the EU.

Then there's the economy. If the U.K. opts for Brexit (still unlikely, I reckon), it will make for a choppy June 24 in the financial markets. And not just June 24.

But hysteria is what markets do. Britain could flourish outside the EU. It could not, however, afford to ignore its ex over the water. The U.K. may have to accept a closer relationship with the EU (perhaps something akin to the status enjoyed by Norway in the European Economic Area) than many Brexiteers would like. For its part, Brussels will need to remember how good a market Britain is for the EU's exporters. It will have to rein in a natural inclination to "punish" the Brits, an inclination sharpened by paranoia that too smooth a separation might tempt others to stray. But the alternative would damage both the U.K. and its former EU partners.

Encouraging the two sides to agree to a velvet divorce might be the next occasion on which Washington has to rescue Europe from itself.

Fear Is The Key

The Weekly Standard, February 19, 2016

Voters in the United Kingdom will be choosing — in a referendum to be held by the end of next year, and perhaps as early as June — whether or not to stay in the European Union. Barack Obama wants the U.K. to stay put and is reportedly planning "a big, public reach-out" to persuade Brits to stick with the EU.

It's not the first time the American president has weighed in on this most British (or European) of questions, but the timing was telling. It came immediately after EU "president" (it's complicated, but that designation will have to do) Donald Tusk unveiled the draft settlement intended to bring David Cameron's attempt to "renegotiate" Britain's position in the EU to a satisfactory conclusion. What was unveiled was underwhelming; the derision with which it was greeted was anything but. It's not hard to guess why Obama believes that Cameron could use a helping hand.

Britain's prime minister cannot be entirely surprised that it has come to this. An unimaginative politician without much feel for what truly matters, Cameron has never wanted Britain to exit ("Brexit," as such a departure is unattractively known) the European Union. He agreed to the planned referendum reluctantly and only as a device to head off the Euroskeptic challenge to his Conservative party ahead of the 2015 general election.

Cameron's idea was, when reelected, to recommend that Britain remain in the EU on the basis of a new deal negotiated with its European partners: a deal he must have realized would not— could not — amount to very much. The EU rests on a set of fundamental principles. These include "ever closer union" (the ratchet that provides that integration must forever move forward), the "four freedoms" (the free movement of goods, capital, services, and people within the union), and the primacy of EU law. Abandoning or even diluting any of those principles, even for just one country, would risk unraveling the whole European project: It was never going to happen.

Cameron's problem was that many of the objections that the British have to the EU flow from those very same principles. "Ever closer union" means what it says: U.K. sovereignty is continuously being eroded, with its democracy going the same way. Britain's laws and its courts are subordinated to those of the European Union. And, most sensitively of all, Brits fear they have lost control of their borders: EU immigration into the U.K. is currently running at a net 180,000 per year, an issue made all the more toxic by the migrant crisis on the Continent.

All the prime minister could do was try to use his renegotiation to change the subject, focusing attention on sideshows, some significant and some not. Thus the proposed agreement would, among other less than glorious "victories," chip away at some "in-work" welfare benefits enjoyed by EU migrants, give the feeblest of boosts to the role of national parliaments, and win the U.K. a degree of protection from eurozone bullying. But, overall, the result is a sad, scaled-back little ragbag of half-measures and trivia that still has yet (as I write) to be finalized. Despite some flummery (it will be filed with the U.N.!), the eventual settlement may well, legally, be nothing more than an agreement to agree, which is to say very little indeed.

Cameron began his efforts to sell this crock on an upbeat note. It would pave the way for a "substantial change" in Britain's relationship with Brussels. (Well, no.) "Hand on heart," he had "delivered" on the "commitments" made in the Conservative manifesto. (Nope, not hardly.) The deal was so good that, if Britain were not already a member of the EU, he would have advised joining on these terms. (Words fail me.)

The reviews were savage. The press coverage that followed the disclosure of the deal's details was some of the worst that Cameron has ever known. And the grumbling in Conservative ranks didn't take long to get going. To one Tory MP, Cameron had been reduced to "polishing poo." Nor was the discontent confined to dissidents in Westminster (at least 20 percent of his parliamentary party at the latest count). Most Conservative activists are Euroskeptics; so too about half of Tory voters. Polls show a swing of support towards Brexit.

A nervous Cameron has turned (again) to "Project Fear" (the name comes from a strategy used successfully and rather more legitimately in the 2014 referendum on Scottish independence), spinning scare stories to frighten Brits away from the Brexit door. This plays on the understandable anxiety that many British voters have about life outside the EU.

Late last year I was discussing, with a leading Brexit advocate, the chances voters would choose to leave the EU. In his view, the country divided roughly into thirds: One-third would opt for Brexit come what may; one-third would always prefer to stay in the EU; the rest are somewhere in the middle and could go either way.

This last group, obviously, will decide the outcome, and its members are likely to be susceptible to bleak warnings of the catastrophes that divorce from Brussels could set in motion. They may not be enthusiastic about the EU, but they will not want to risk too much to escape it. Cameron's grim (and quickly discredited) prediction that, in the event of Brexit, migrant camps in Calais could be relocated to the U.K. was one example of Project Fear at work. There have been plenty of others in recent months (Mass unemployment! No more cheap flights abroad! Goldman Sachs to move an office!) — so many and so absurd that they have given birth to an Internet meme depicting fire-breathing dragons, giant waves, and other horrors that will follow in Brexit's wake.

Uncertainty is one of fear's most effective enablers. Euroskeptics need to paint a clearer picture of what sort of arrangements Britain might have with the EU after a divorce. But the Leave camp is badly divided, not least over what the country's options could include. One alternative would be to sign up for the European Economic Area and "do a Norway." This would give the U.K. access to the EU's single market, and there would be little in the way of immediate, visible change, something wavering voters in the middle may find reassuring. For other Brexiteers, that's too modest: Britain, the fifth-largest economy in the world, ought, they argue, to be able to cut a better bargain. But what if its jilted European partners, angry and worried about the precedent being set, balk at agreeing to anything, Norwegian-style or otherwise, that makes leaving the EU look too easy? At this point, it's impossible to say: awkwardly for the Out crowd there are only so many questions that can be answered in advance.

The final version of the deal between Cameron and the rest of the EU has— as we go to press — yet to be settled. From what's already known, we can be sure that what's in it will not change the minds of the solidly Euroskeptical. But what of the wobbly center? The deal may contain enough to convince some of those who lean Brussels's way, and might even win over some of the genuinely undecided. But what those calling for Brexit should really fear is not Cameron's deal, but fear itself. And most of them aren't taking that threat seriously enough. Yes, the polls may have shown some encouraging signs of movement in Brexit's direction, but their overall message suggests that the dismal status quo will prevail.

These are politically volatile times, but, as things stand now, the best guess is that the British will vote against taking what is all too easily caricatured as a dangerous leap into the dark.

Money Manager

Ben Bernanke: The Courage to Act  - A Memoir of a Crisis and Its Aftermath

The Weekly Standard, February 5, 2016

Georgetown, Washington DC, November 2008 © Andrew Stuttaford

In The Courage to Act, former Federal Reserve chairman Ben Bernanke reveals, a little unexpectedly, that he can tell a taut tale well, and in a manner accessible to someone who wouldn’t know a CDO from an Alt-A mortgage. After a likable autobiographical beginning, the book is centered on the Fed's response to the financial crisis that started to unfold just over a year after Bernanke took office in 2006. Bernanke was right to see that catastrophe threatened to engulf more than Wall Street, and he was right to see that, in the much-mocked phrase, something had to be done.

It's easy to criticize the technical aspects of bailouts based on Depression-era powers usable in "unusual and exigent circumstances" and put together with "chewing gum and baling wire." But that misses the point. Financial panics feed on themselves. What mattered about the rescue packages was not their structure but what they symbolized: Money, a lot of money, was available, and the mechanisms were in place to dole it out. With confidence gone and liquidity evaporating, that was what markets needed to know.

Neither left nor right nor center rejoiced in what was widely characterized as a helping hand for the rich, but there were more explicitly ideological objections to the bailouts, too, most notably from congressional Republicans. They ranged from the nutty—TARP as "Bolshevism," a label that would have surprised Lenin—to a more intellectually coherent insistence on greater respect for the disciplines of laissez faire.

But to argue against the interventionism of 2008-09 on the grounds that markets are best left to sort themselves out was (as the ebbing Bush administration also appreciated) to succumb to a form of fundamentalism with no connection to political reality. From Greece to Spain to France to Italy, economic stagnation, or worse, has shaken the European Union's political order to a degree largely unimaginable a decade or so ago. And not in a way that bodes well for free enterprise.

Over here, the maelstrom on Wall Street did its bit to propel Barack Obama into the White House. The feebleness of the economic recovery that followed has played its part in the rise of Donald Trump and Bernie Sanders. To maintain that America's political center would have held in the event of a collapse in the banking system—empty ATMs and all the rest—is absurd.

As it was, the mayhem triggered by the implosion of Lehman Brothers offered a taste of a larger calamity dodged. Bernanke would have preferred to help out Lehman, too—both the Fed and an essentially helpless Treasury understood that its failure would be an "epic disaster." But the law, he writes, stood in the way: Lehman Brothers was in such bad shape that it wasn't eligible for the emergency financing deployed elsewhere. It's been suggested that this was merely a convenient excuse. Bernanke himself admits that the Fed was reaching the limits of the politically and financially feasible. Market conditions were such that any assessment of Lehman's underlying strength (and eligibility for aid) was more art than science, leaving some wiggle room had the Fed been prepared to take it.

Nevertheless, I'm inclined to believe Bernanke's insistence—his version of events, unsurprisingly, is more or less in line with what Tim Geithner and Hank Paulson have to say in their memoirs—that the law counted. In an age of technocratic excess, that's cause for mild patriotic celebration. In marked contrast to the lawlessness that scarred the defense of the eurozone, the Americans stuck by the rules.

But any celebration is tempered by the knowledge that the Fed's emergency powers have been rewritten in the wake of the Dodd-Frank Act to exclude lending to specific institutions ("broad-based" lending is still permitted), a right Bernanke claims to have been "happy to lose." This change was cheered on by the likes of Elizabeth Warren; the Republican chairman of the House Financial Services Committee, fretting about moral hazard, thought that it did not go far enough. As it is, this restriction will almost certainly make it impossible for the Fed to give the sort of support it gave to smooth J. P. Morgan's takeover of Bear Stearns, let alone to AIG. And that'll be fine—until it's not.

When it comes to moral hazard, Bernanke notes that "no firm would willingly seek Bear's fate." It wasn't insouciance over risk that brought so much ruin, but the failure to understand it.

Drawing the correct line between the necessary independence of the Fed and necessary democratic accountability is (as Bernanke clearly appreciated) not straightforward, particularly during a financial rescue operation when the maintenance of market confidence—and thus, often, secrecy—is of the essence. A couple of years after the bailouts, it emerged that the emergency financing extended to Wall Street's finest was much larger than realized. Congress would not have taken the news well had it known this at the time.

Given the seriousness of the situation—and the fact that the Federal Reserve had to do most of the heavy lifting—Bernanke likely found an acceptable balance between the needs of finance and the demands of Capitol Hill. But occasionally some of his comments ("even the risk of a once-in-a-century economic and financial catastrophe wasn't enough for many members of Congress to rise above ideology and short-run political concerns") betray the impatience of the technocrat with democracy's rougher edges.

There are hints, too, of technocratic bias in Bernanke's analysis of the causes of the crisis. He's unwilling to let interest rate policy take much of the blame and, to be fair, he makes a decent case why it shouldn't. He does admit that the Fed was slow to notice the problems that were developing and slow to fully grasp their significance. He acknowledges that a ludicrously fragmented regulatory system had failed to keep up with rapidly evolving capital markets. But in the end, private sector culprits—including subprime lunacy, the bewilderingly intricate interconnectedness of the modern financial system, and good old-fashioned panic—dominate his perp walk.

Hyman Minsky, the economist who, decades ago, warned that a prolonged period of financial stability could lead to dangerous investor complacency, gets the shout-out he deserves. But did the widespread perception—boosted by heavy, if misdirected, regulation—that markets were well regulated reinforce that overconfidence? There is also the inconvenient fact that capital adequacy rules strongly encouraged banks to favor mortgage lending and, critically, the purchase of mortgage-backed securities—so long as the latter were rated Triple A by the rating agencies that were, themselves, given a privileged position by regulators.

Triple A! What could go wrong?

Bernanke also has little to say on the way that postcrisis regulation has hit the willingness of banks to lend. That's ironic, given his belief that shrunken credit flows made the Great Depression worse; doubly so, as reining in the banks has probably canceled out no small part of the boost that the ultra-low interest rates generated by quantitative easing (QE) were meant to bring.

Bernanke recalls that after QE1 and QE2, he had concluded that the Fed's securities purchases had been "effective" but "not enough, on their own, to achieve an adequate pace of economic growth and job creation." QE3 came next. That began to taper off toward the end of his tenure, by which time Bernanke believed that the economy was in considerably healthier shape.

It was impossible, he concedes, to know how much of the recovery was due to the Fed's work, but Bernanke is convinced that "unconventional monetary policies" promoted growth and reduced the risk of deflation. That could be true. But there may eventually be a harsh price to pay for choosing to put the laws of economics to one side for so long. Years in which interest rates—the cost of money—have been so disconnected from market forces have left a trail of mispriced investment and unwise borrowing that is likely to end up in a nasty bust. What will an already overstretched Fed be able to do then?

Bernanke was not given the benefit of the doubt that Alan Greenspan—the "Maestro"—enjoyed. Tough times will do that. His immediate response to the crisis infuriated many. The measures he took in the years that followed were greeted with another round of jeers by many and crossed fingers by more. Even those who profited from the stock market recovery built on his cheap money seemed suspicious of their friend at the Fed.

Only a few brave contrarians have called Ben Bernanke a maestro. His historical reputation will probably be all the better for that. By detailing what he did and why he did it, this book won't hurt it, either. In the end, the consequences of his grand gamble will count for more. And we still don't really know what those will be.

How Corbyn Wins

The Weekly Standard, December 11, 2015

"Cameron moved so far to the left," a journalist told me in London, "that he pushed Labour into the sea. Then it reemerged as a monster." That's not really why David Cameron's Conservatives won the May general election, but the vivid description of what happened next illustrates how bleak the political landscape looked to Britain's center-left after Jeremy Corbyn became Labour's leader in September. But if those moderates had any consolation, it was their conviction that Corbyn wouldn't last at the top. Dour, dim, and ostentatiously shabby, Corbyn, 66, is a stalwart of the far left with a weakness for ideologically correct thuggery from Belfast to Caracas and beyond. His obvious unelectability would, argued optimists, quickly bring the party to its senses: Corbyn would fall on his sword or be pushed onto someone else's. A more suitable replacement would then take the helm.

Such hopes were knocked on December 3 by a by-election in Labour's deindustrializing northern heartland. Despite the party's advantages—longstanding strength in the constituency, a solid South Asian voting bloc (roughly 25 percent of the electorate), and the selection of Jim McMahon, a likable local moderate, as candidate—there was speculation Labour would be run close by UKIP. The populist Euroskeptic party now focuses much of its attention on the white working class, a strategy that delivered votes, if not parliamentary seats (it only has the one), at the general election and had led to a near miss at a by-election in a nearby Labour stronghold last year.

But it was not to be UKIP's day. Labour actually grew its slice of the vote by some 7 percentage points, to 62 percent. Denied its breakthrough yet again, UKIP increased its tally from 20 to 23 percent, while the Conservatives, a vanishing presence in the north of England, saw their share halved, to 9 percent. Yes, Corbyn was a very small presence in McMahon's emphatically local campaign, but it's also a good rule of thumb in U.K. politics that even the best local candidate will only add a thousand or so votes to his party's total. Whatever else can be said about this result—by-elections can be deceptive—it was not the resounding rejection of Corbyn his critics had doubtless (if discreetly) been looking for.

So what now? Corbyn may stumble from controversy to gaffe and back again, but he is appreciated by his party, if not his members of Parliament. A November YouGov poll revealed that two-thirds of Labour voters thought their new leader was doing "well." With this by-election safely behind him, Corbyn is not scheduled to face any potentially embarrassing electoral tests until May, which is bad news for any unhappy Labour MPs praying for a crisis to send him packing.

Thanks to the new voting rules that landed them with Corbyn in the first place, such a crisis could take a long time to arrive. These rules provided that any candidate for the Labour leadership had to be nominated by at least 15 percent of MPs. A (much) wider electoral college made up of party members, "registered supporters" (who had paid a princely ¢3 for this status), and "affiliated supporters" (mainly trade unionists, who did not have to pay anything at all) then chose the leader. Corbyn was held in so little regard by his parliamentary colleagues that he was set to fall at the first hurdle until a few of them—presumably possessed by their inner Menshevik—"lent" their nominating votes to Corbyn, not because they wanted him as leader but, they explained, to broaden the debate. The suckers gave him an even break. The consequences were catastrophic.

Interest in the contest and excitement over the possibility of a previously unthinkable Corbyn victory attracted huge numbers of new members to the Labour party, a surge that continued after Corbyn's triumph. Between May and early October, party membership nearly doubled, to 370,000 (the Conservative party has maybe 150,000 members). Just under half of the full members who voted opted for Corbyn, as did 84 percent of over 100,000 "three pounders," and 58 percent of the 72,000 "affiliated supporters" who voted, generating a majority that comfortably eclipsed his rivals. Corbyn's mandate is about as democratic as it gets. A revolt by MPs—by definition Westminster insiders—to try to reverse it wouldn't look good, and it's hard to imagine it would succeed: Labour's new wider electorate won't be willing to dump Jezza. It's even harder to imagine that enough moderates could be convinced to join the party to secure a change of course.

That means Brits—highly averse to divided parties—will continue to be treated to the spectacle of a leader at odds with much of his parliamentary corps (over a quarter of Labour MPs voted with the Tories to extend British airstrikes against ISIS to Syria, for example) and appealing over their heads to the constituency that gave him the top job (which, incidentally, opposes the bombing). Throw in the fact that Corbyn has yet to resonate with voters outside the Labour camp and the deep suspicion that much of the electorate feels for his attitudes to issues such as defense, terrorism, and immigration, and it's easy to see why the Tories are chuckling. If things don't change, they are forecast to be a shoo-in for the next general election, due in 2020.

That's very probably right, but it ignores the deeper game that Corbyn is playing. Until just a few months ago, opinions such as his were largely kept to the political fringe; now they are center-stage, and there is every chance that the result will be to drag Britain's public debate to the left, something that he would surely count as a win.  

Or consider this: Less than six months ago, Corbyn struggled to persuade more than a handful of MPs to support him as Labour leader. Now, according to recent polls, 30 percent or so of Brits say that they would vote him into 10 Downing Street. That's some 10 percentage points behind the Tories, but it's roughly the same percentage as voted for Corbyn's predecessor in May. The fact that Corbyn now heads one of Britain's two great political tribes matters.

 And his leadership is reshaping that tribe into something more in accord with his views. The inflow of so many new members, many of them younger and including a number of former Greens and Liberal Democrats (both parties are longstanding asylums for the utopian disaffected), must, if they stay, mean the growing Corbynization of Labour, a process that will only be accelerated by the departure of moderates with no taste for a fight. As incompetent as Corbyn and his comrades may sometimes seem (and are), they have the hard left's understanding of power. Corbyn's campaign tapped into popular resentments of a depth that his opponents struggled to deal with, but it was also cleverer and far more effective (trade union backing helped) than they had anticipated.

 After the revolution come the enforcers. Corbyn is inserting his people into the party's structure and, still gingerly (the Corbynista Twitter posse is not so diffident), trying to whip his MPs into line. In doing the latter, he will be assisted by the support of groupings of the pur et dur, such as the one named Momentum, now beginning to move into local parties. The (public) talk is of a broad church; the reality will be rougher. The sword hanging over moderate Labour MPs will be the threat of de-selection by their local party—meaning that they will no long-er be the candidate at the next election—something that would promise not only political disaster, but unemployment too. The fact that there is likely to be a redrawing of constituency boundaries (and a reduction in the overall number of parliamentary seats) before 2020 will only hand more power to the local activists who will decide who gets to stand where. Under the circumstances, many moderate MPs will feel constrained to keep dangerous thoughts to themselves, and as for mounting a challenge to Corbyn's leadership, well .  .  .

  If this is right, the party will change, but it will, more or less, hang together. There will be defections, but the great Labour split that some expect will not happen. And so, by 2020 Britain's principal opposition will be well on the way to becoming a party of the hard left, a transformation that would be yet another win for Corbyn, even if it costs him support for now: Current polling indicates that this radicalized Labour would be extremely unlikely to prevail in 2020, either alone or in conjunction with the leftist Scottish Nationalist party. But if, between now and 2020, some fresh catastrophe hits, say, the economy, or, for that matter, the Tory party, Corbyn's Labour will be there, ready to take advantage of what former Conservative prime minister Harold Macmillan famously described as "events."

 That's not something to chuckle about.

Baltic Dawn

Sigrid Rausing: Everything is Wonderful - Memories of a Collective Farm in Estonia

The Weekly Standard, November 10, 2014

Tallinn-Narva road, February 1996 © Andrew Stuttaford

I first visited Estonia—or more specifically, its capital, Tallinn—in August 1993, two years after the small Baltic state regained its independence after nearly half-a-century of Soviet occupation. Tallinn was in the process of uneasy, edgy transformation. The Soviet past was not yet cleanly past. It was still lurking in the dwindling Russian military bases. It was still visible in the general shabbiness, in the rhythms of everyday life, and, above all, in the presence of the large Russian settler population, a minority that Vladimir Putin now eyes hopefully, if not necessarily realistically, for its troublemaking potential.

Totalitarian colonial rule had been replaced by a national democracy, the ruble had been succeeded by the kroon, and free-market reformers were at the helm; but the new government was operating in the rubble of the command economy. There was no spare cash to smooth the transition to capitalism. Inflation had exceeded 1,000 percent during the course of the previous year, savings had been wiped out, the old Soviet enterprises were dying, and the welfare net was fraying.

Yet in Tallinn there was a discernible sense of purpose, buttressed by memories of the prosperous nation prewar Estonia had been. What people wanted, I was told, was a “normal life.” That was a phrase that could be heard all over the former Eastern Bloc in those days, a phrase that damned the Soviet experience as an unwanted, unnatural interruption and resonated with dreams of that elusive Western future. Life was tough in Tallinn, but there were hints of better times to come. If the country was to be rebuilt, this was where the turnaround was taking shape.

But Sigrid Rausing went somewhere else in 1993, to a place far from the hub of national reconstruction, a place where the inhabitants had little idea of what could or should come next, a bleak place—poor, even by the demanding standards of post-Soviet Estonia—where nationhood was misty and visions of the future were still obscured by the wreckage of an alien utopia. Rausing, a scion of one of Sweden’s richest families, was a doctoral student in social anthropology. To gather material for her thesis, she spent a year on the former V. I. Lenin collective farm on Noarootsi, a remote peninsula on the western Estonian coast.

Noarootsi had once been inhabited by members of the country’s tiny Swedish minority, most of whom had been evacuated to the safety of their ancestral homeland by Estonia’s German occupiers shortly before the Red Army returned in 1944. The final minutes before their departure were caught on film: the exiles-to-be assembled on a beach, Red Cross representatives mingling with smiling SS officers. Baltic history is rarely straightforward.

Rausing’s thesis formed the basis of her History, Memory, and Identity in Post-Soviet Estonia: The End of a Collective Farm, an academic work published by Oxford University Press 10 years ago. This was never a book destined to top the bestseller lists, but for anyone able to weather the clouds of jargon that drift by—“the effect was to emphasize the experience of oppositions in the form of a homology”—it offers a sharp, intriguing, and unexpectedly wry portrait of what Rausing refers to as the “particular post-Soviet culture of 1993-94, the culture of transition and reconstruction,” a culture that no longer exists.

Rausing has now reworked the topic of her time in Noarootsi into Everything Is Wonderful, a personal, intimate account of that year in which she largely dispenses with academic analysis—indeed, there are moments when she pokes gentle fun at its absurdities—and gives her considerable lyrical gifts free rein. Graduate-school prose now finds itself transformed into passages of austere beauty. They describe a landscape that reminds her of Sweden, only “deeper, vaster, and sadder”; more than that, they portray a people adrift. There is something of dreaming in her writing, images that haunt. Spring returns, and

the children were outside again, playing and shouting in the long twilight, until there was an almost deafening din echoing between the blocks of flats. One day someone burnt the old brown grass strewn with rubbish between the blocks, and the children kept up their own private fires deep into the night.

There is a subplot too, tense and awkward, sometimes expressed in not much more than a hint, that surrounds the position of Rausing herself, an attractive thirty-something Swedish heiress inserted into this exhausted husk of a community and, for a while, lodging with the heavy-drinking, possibly/probably lecherous Toivo and his long-suffering wife, Inna. Ingmar Bergman, your agent is on the line.

That’s not to say that Rausing neglects the broad themes of her academic research. As she notes, the two books “overlap to some degree,” and they have to. Without repeating some of the background covered in the first volume, isolated, depopulated Noarootsi—with its Soviet dereliction, abandoned watch-towers (the peninsula had been in a restricted border zone), emptied homesteads, and taciturn, enigmatic inhabitants scarred by alcoholism and worse and speaking a language of a complexity Rausing struggled to grasp—would have seemed like nothing so much as the setting for a piece of post-apocalyptic gothic. So Rausing provides a brief, neatly crafted, and necessary guide to Estonia’s difficult and troubled history, neglecting neither the obvious horrors nor the subtler atrocities, such as the attempted cultural annihilation represented by the wholesale destruction of Estonian literature. Tallinn Central Library lost its entire collection of books—some 150,000 of them—between 1946 and 1950.

Sometimes, traces of that history—forbidden for so long—come crashing through the silence. Ruth, 76, a Seventh-Day Adventist, tipped by tyranny into something more unhinged than eccentricity, hands Rausing a handwritten retelling of her life: “Devilish age, sad age. Schoolchildren also spies .  .  . life as leprosy.” But Everything Is Wonderful is a book in which the story lies mainly beneath the surface. Old ways linger on amid new realities. There is a new cooperative store, but the old Soviet shop hangs on, “selling household stuff as well as some food, pots and pans, exercise books, shoes if they got a consignment, and ancient Russian jars of jams and pickles with rusty lids and falling-off labels.”

Throughout the brutal winter, heating is intermittent. Heating bills are no longer subsidized, but the majority of villagers “patiently” pay them nonetheless. New habits creep in. Empty Western bottles and other packaging are displayed in apartments, demonstrations of “a connection with the West, a way of expressing the new normal”—that word again, that “normal” in which most had yet to find their feet. Meanwhile, Swedes bring hand-me-down help and the suspicion that they might be looking to reclaim a long-lost family home.

Rausing is a participant in this drama. We learn of her fears, her loneliness, of her wondering what she is doing in this distant Baltic corner, and of her small pleasures, too (“the tipsy sweet happiness of strawberry liqueur”). But she is a spectator as well, and a perceptive one, not least when it comes to the profoundly uncomfortable relationship between Estonians and the Russian minority. The latter are resented as colonists, yet caricatured in terms that remind Rausing of the “natives” of the “colonial imagination: happy-go-lucky, hospitable people lacking industry, application, and predictability.” She dines in a restaurant in a nearby town, where “the atmosphere was a little strained between a Russian group of guests and the few Estonians in the room.” Later, Rausing learns that the “only” Russians living in the “comfortable Estonian part of town” are deaf and dumb; they are “outside language,” as she puts it, and thus able (she theorizes) to “assimilate .  .  . through muteness.”

That sounds extreme, but the scars of the past were still very raw back then. Sometime in the mid-1990s, I watched a senior member of the Estonian government bluntly explain the facts of Estonia’s (to borrow a Canadian phrase) twin solitudes to a delegation of Swedish investors. There was, he said, little overt trouble between ethnic Estonians and the country’s Russians, but there was little contact either: “We don’t get on.”

Rausing’s tone is quiet, often wistful, marred only by interludes of limousine liberalism—apparently there was something “liberating” in the way the locals didn’t care too much about their possessions, which is easy enough, I imagine, when those possessions were, for the most part, Soviet junk—including an element of disdain for the market reforms that were to work so well for Estonia. The prim pieties of Western feminism also make an unwelcome appearance. Watching a pole dancer in a rundown resort town summons up concerns over “objectification,” but Rausing’s response to reports of a topless car wash in Tallinn is endearingly puzzled and—so Swedish—practical: “Really strange, particularly given the Estonian climate.”

But this should not detract from Rausing’s wider achievement. Her book is the last harvest yielded up by that old collective farm, and the finest.