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.

Cross-Purposes: The Long Road to Brexit

National Review Online, June 28, 2016

The Red Lion, Whitehall, London, March 2016 ©  Andrew Stuttaford

Last week, Britons voted themselves out of the European Union, but the seeds of Brexit were planted decades ago.

‘Nothing,” wrote the Duke of Wellington, “except a battle lost can be half so melancholy as a battle won.” The vote for Brexit was a necessary victory. And that it was necessary is a tragedy.

Its origins lay in the fact that many Britons never fully grasped the nature of the European project into which they had been enrolled. They saw it as a trading bloc with extra benefits (and, yes, some annoying costs and meddling regulation). It was a misunderstanding encouraged by those who took the United Kingdom into the “Common Market,” a misunderstanding that left a legacy that bedeviled Britain’s domestic politics and soured the country’s relationship with its European partners.   

The entities that evolved into the European Union were inspired by two world wars within a single generation, and they were about a great deal more than trade. Their most important founding fathers (men like Jean Monnet) believed that the nation-state could not be trusted to keep the peace. What was needed was a post-national federation, not exactly the superstate of sometimes fevered euroskeptic imaginations, but something softer, subtler, and, arguably, more insidious. People liked the nation-states they already had; the post-national would have to be built by the post-democratic. As Monnet anticipated, this was a process that would have to be patient, and, often, oblique (“by zig and by zag”), and that’s how it’s turned out. Piece by piece, swaths of domestic policy-making have been transferred to “Brussels,” safely beyond national democratic control.

Monnet recognized that voters in the six founding members (France, West Germany, Holland, Luxemburg, Belgium, and Italy) of what eventually became the EU, countries that had known military defeat and occupation, would be reluctant to jettison their nation-states. What then would be the case with Great Britain, a kingdom comfortable, even too comfortable, with its past?

Well, according to one poll, the most important reason given by 49 percent of those who voted last week to quit the EU was that “decisions about the UK should be taken in the UK.” That thinking shades, I suspect, into the second-most popular (33 percent) first choice (leaving “offered the best chance for the UK to regain control over immigration and its own borders”) and the third (13 percent): Sticking with Brussels would mean being left with no choice “about how the EU expanded its membership or its powers.” The top reasons why Remainers wanted to stay in the EU were primarily economic. Only 9 percent cited “a strong attachment to the EU and its shared history, culture and traditions.” After more than 40 years in the Brussels club, national still trumped post-national.

Some of those who led the U.K. into what were then the European Communities in 1973 understood their true nature. Others convinced themselves that talk of “ever closer union” was grandiloquent continental verbiage, nothing more. The refusal of the English, wrote George Orwell, “to take foreigners seriously, is a folly that has to be paid for very heavily from time to time.”  

Despite the best efforts of more erudite opponents of membership, the debate over whether Britain should join and (after the question was put in a 1975 referendum) then stay in the “Common Market” largely revolved, as that misnomer suggests, around trade and the economy, leaving far too much that needed saying unsaid, an omission with consequences. In the 2013 speech in which he agreed to hold his fateful referendum, David Cameron noted how many Britons were asking “why can’t we just have what we voted to join — a common market?” The problem, of course, was that they had, in reality, voted for something that was very much more than that. Forty years later, the memory of what they thought they had voted for still haunted Britain’s political landscape.

People felt, claimed Cameron, “that the EU is heading in a direction that they never signed up to.” It would have been fair to add (although he didn’t) that British politicians had done their bit to set — or at least go along with — that course. For example, Margaret Thatcher helped push the union toward a greater acceptance of economic liberalism. This led to the EU’s Single Market, a major achievement, but it came with a catch, the Single European Act, a new EU treaty that diluted the veto power of individual member states. Mrs. Thatcher believed that the sacrifice of another slice of sovereignty was worth it. Yet again, economic promise trumped political price. The pace of integration duly picked up: No need to zig or to zag on this occasion.

By the time of her famous speech in Bruges in 1988, the lady was beginning to turn. Brussels was using its expanded powers to pursue an interventionist (and integrationist) agenda that Thatcher did not appreciate. Even so, to reread that speech is to notice that, like so many of her countrymen, she still didn’t get it: “The [European] Community,” she said, was not “an institutional device to be constantly modified according to the dictates of some abstract intellectual concept.” On the contrary, it was, and it always had been — and there was nothing “abstract” about the “intellectual concept” that underpinned it. “Ever closer union” meant what it said.

The Bruges speech (essentially) set in motion the conflict that toppled first Thatcher and, indirectly, her successor, John Major. Trivialized by the media and opposition as an internal squabble, the “Tory Wars” were the result of a serious attempt by some Conservatives to come to grips with where the European project was going. They were at their bloodiest in the aftermath of Major’s signature of the Maastricht Treaty in 1992. Maastricht turned the European Communities into the European Union and paved the way for the introduction of a single currency. Major negotiated an exemption from any obligation on Britain to sign up for what would become the euro, at least. But he didn’t use his veto power to try to force through a deal that might have carved out a niche for the U.K. that was more realistically aligned to the aspirations of its people. It was a missed opportunity.

Instead the ratchet of ever closer union had turned again — and a Tory government had helped out. Frustrated by all this, a small euroskeptic group reinvented itself as the United Kingdom Independence Party. One of UKIP’s founders was a Thatcherite commodities’ broker named Farage. Few noticed and fewer cared.

Making matters more difficult for Major, a modernizing Labour party had embraced the EU both as handy post-democratic bulwark against Tory reform and as a branding device: New Labour not Old, united (unlike certain parties) and forward-looking (unlike certain parties). But what Labour had not done — at least to any significant degree — was buy into the integrationist dream. Its interest in the EU was as a cudgel to batter the Tories.

To be sure, Tony Blair was a genuine europhile (he would have taken Britain into the single currency if he could), so it’s perversely appropriate that he accidentally prepared the ground for Brexit, starting with the decision to give the right to work to migrants from the bloc of formerly Communist countries that joined the EU in 2004. Most EU member-states insisted on a transition period. Blair’s Britain did not. The initial estimate was that there would be a net 5–13,000 new arrivals a year. That’s not how it worked out. The cumulative net total is (conservatively) thought to have exceeded 400,000 people between 2004 and 2012, just part of a huge influx of immigrants from elsewhere in the EU and beyond. This played poorly with the U.K.’s working class, and Brussels took the rap. That was partly (I suspect) because — in an era of political correctness — Brits were wary about criticizing immigration from further afield, and partly because the EU’s freedom-of-movement rules meant that EU migrants could only infrequently be turned away. Their numbers were not only large, but, effectively, uncontrollable.

#share#Immigration was the topic that transformed UKIP from (more or a less) a single-issue euroskeptic party to a far more potent force and propelled it into Labour’s old heartlands, territory where it had hitherto rarely been seen. German chancellor Angela Merkel only fueled the fire, whether bungling the migrant crisis last autumn or refusing to cut Cameron some slack on the EU’s immigration rules during his disastrous “renegotiation” earlier this year. The chickens came home to roost on Thursday: Seventy percent of Britain’s skilled working class supported Brexit.

And it was Merkel who pushed through the Lisbon Treaty as a substitute for the EU constitution that had been rejected by referendums in France and Holland, a brutal reminder that the cause of European integration trumped democracy. Britons had also been promised a referendum on that constitution, but the constitution had been killed off before they could vote. When it was (for all practical purposes) revived in the form of the Lisbon Treaty, Blair’s referendum promise was not. To repeat the message: Ever closer union meant ever less democracy. Walking away from a referendum was also a wasted opportunity: It would have been a relatively (compared with what was to come) low-stakes chance for the U.K. (which could have vetoed the treaty) to consider what it wanted from the EU. Oh well. Blair’s successor, Gordon Brown, signed the treaty, seemingly unconcerned that it reduced Britain’s shrinking ability to block additional integration, a fact that forced more euroskeptics into the “out” camp.

Meanwhile, opposition leader David Cameron had reined in Tory grumbling about the EU. A modernized party had to stop “banging on about Europe,” he said. Divided parties lose. Voters were bored with the issue. Euroskepticism gave a bad impression: It was retrograde, nostalgia tainted with poison. To be sure there was UKIP, but they were “a bunch of fruitcakes, loonies and closet racists, mostly,” Cameron said — cranks who were not to be taken seriously. As a political tactic, Cameron’s approach made some sense, at least in the short-term (he became prime minister in 2010), but it alienated euroskeptics still further. And there were more of them than in the past, their number boosted by the crisis in the euro zone, a crisis accompanied by the insistence that the only solution was more Europe, not less. It was a demand made all the more alarming by the British eurofundamentalists who claimed that there could still come a time when the U.K. might adopt the single currency. Britain had its safeguards against that, but would they survive the election of a europhile government?

In 2012 Jacques Delors, one of the European Union’s most distinguished senior statesmen, appeared to accept that Britain and its partners would never agree on what the EU should be. He floated the suggestion that “if the British cannot support the trend towards more integration in Europe, we can nevertheless remain friends, but on a different basis.” He could imagine, he said, “a form such as a European economic area or a free-trade agreement,” and as Conservative MEP Dan Hannan recalled last week, it was not the only such deal being touted. Finally, Brussels was signaling its willingness to try to solve its “British problem” in a constructive and innovative way.

Cameron should have jumped at the opportunity — a get-out-of-jail-free card if ever there was one — but this surprisingly unimaginative politician still believed he could play the game by the old rules, throwing a few scraps to the euroskeptic rabble at home, while continuing with business as usual in Brussels. He even neglected the chance to wring a few concessions out of Britain’s EU partners in exchange for agreeing to a change in the Lisbon Treaty prompted by the euro-zone crisis.

He was wrong to be so complacent. Euroskeptic attitudes were hardening in Britain and with UKIP on the rise, euroskeptics had somewhere to turn. Indeed, it was to head off the UKIP threat to the Tory vote that Cameron committed to the referendum he had never wanted — a referendum he could quite possibly have junked in the event of a renewed coalition government with the eurofundamentalist Liberal Democrats after the 2015 election. But remarkably, the Conservatives won an outright majority. The referendum couldn’t be dodged.

\Then Cameron blew his last best chance. The threat of a pending in/out referendum ought to have given him the leverage to cut a better EU deal for Britain. After all, he presided over the union’s second-largest economy and the U.K. made the third-largest contribution to the EU budget. But his much-vaunted “renegotiation” failed to secure any significant changes. Perhaps, thinking like almost everyone else (including me) that the Brexiteers had no chance of winning, Cameron didn’t press the EU hard enough. Perhaps the EU’s leadership, confident that they too had little to risk, felt that they could get away with tossing no more than a few crumbs London’s way. Or, perhaps, realizing that the Brits would always stand in the way of ever closer union, they no longer cared.

Whatever the reason, Cameron was left with a renegotiation that proved the EU would concede no more to Britain. The rest is history.

Turning Trump

Prospect, May 23, 2016

New York City, June 2016 © Andrew Stuttaford

In July last year, former Texas governor Rick Perry, then running for the Republican presidential nomination, took aim at Donald Trump, then—as now—amazing just about everyone (full disclosure: including me) by how well he was doing.

Trump, warned Perry, offered “a barking carnival act…a toxic mix of demagoguery, mean-spiritedness and nonsense that will lead the Republican Party to perdition if pursued.” Trump’s candidacy was, he added, a “cancer on conservatism.”

That was then. Last week Perry said that he would be prepared to serve as vice-tumour. If Trump needed somebody with his experience then Perry would not say, “Aw shucks sir, I’m gonna go fishing.” No sir, he would do his duty by his country.

Leading figures in the Republican Party are coming round to the political reality that Trump’s success represents. For some that’s a matter of personal ambition (absolute power may corrupt absolutely, but the whiff of power does a pretty good job too). For others it’s the product of hard-eyed, if bleak, calculation. They are unlikely—despite recent polling suggesting a swing in Trump’s direction—to think that the Donald can win the presidency (or to agree with what he stands for), but they may well have concluded that losing as a relatively united party would be less harmful than any of the alternatives.

Ordinary Republican voters are finding it easier to rally behind Trump. Those who, just a month or two ago, were telling pollsters they would not vote for him in November are falling into line. And fewer are holding their noses as they do so. In April, Wall Street Journal/NBC News polling showed that around 40 per cent of GOP voters regarded Trump negatively. That’s now dropped to 25 per cent. Politics are tribal. With the primary fight over, most will unite behind their leader despite earlier misgivings.

It helps that Hillary Clinton, the presumed chieftain of the other tribe, has been a bogeywoman to the Right for decades (and she’s not too popular with anyone else: her unfavourables—astoundingly high for a candidate in her position—are only exceeded, if by a narrowing margin, by Trump’s). It helps too that Clinton’s standing with the wider electorate is being hurt by the brawl with Bernie Sanders. In some recent polls, Trump has pulled ahead of Clinton. I doubt that lead will endure once the Democrats reunite, but to the degree that it does, it will induce even more Republicans into the Trump camp. After all, if he has a chance….

There’s something else. Trump’s mood music (it would be an exaggeration to describe his programme as much more than that) sounds sweeter to many Republicans than their leadership might like. Tough on immigration: Check. Tough on trade: Check. Rejecting Bush-style interventionism abroad: Check. Preserving Medicare (health care for the over-65s) and Social Security (pensions): Check. Trump’s voters may revere Reagan the man, but they are unconvinced by Reagan the mantra. Trump achieved lift-off with the help of a white working class that believes, not without reason, that it has been “left behind” (the parallels with today’s UKIP are obvious), struggling to prosper in a rapidly transforming America in which it no longer feels at home. It has had quite enough creative destruction, thank you very much.

But in an age of insecurity it is not only blue collars that are being felt. Trump’s campaign may owe its launch to working class Republicans, but it was boosted into orbit by supporters from far beyond the Appalachian hollows and Rustbelt towns of reassuring caricature. The collateral damage of globalization and automation is spreading ever higher up the social scale. Trump’s coalition of the anxious is considerably broader than the GOP’s high-ups seem willing to acknowledge, and, tellingly, was not soothed away by the social conservatism peddled by the Donald’s rivals. To say Trump makes an unexpected standard-bearer for a party that includes a prominent (if often misunderstood) religious right is an understatement, but that’s what he will be. Priorities change.

To be sure, Trump threw the Reaganite wing of the party a bone in the form of a supply-side-on-steroids tax plan of such absurdity that the kindest way to look at it is as a statement of intent (welcome enough from someone who has supported higher taxation in the past) that he won’t increase taxes. In another conciliatory gesture, Trump has released a list of potential Supreme Court nominees designed to appeal to the Right. If he were to abide by this promise, wrote Jim Geraghty of the conservative, Trumpsceptic National Review (of which I am a contributing editor), “justices like these would make autocracy, a likely nuclear exchange, the collapse of the dollar and the dissolution of NATO easier to bear.”

Jim was not, I think, being entirely serious, but, there’s no mistaking his underlying concern that Trump simply cannot be trusted with the presidency. To the extent that Trump has an ideology (he has changed his party affiliation five times since 1987), it’s best described as a mutation of early Twentieth Century American Progressivism—something that’s a long way from contemporary GOP orthodoxy—but ultimately Trump is about Trump. Being Trump has enabled him to get to where he is now, but being Trump will ensure that, however horrified Republican voters might be at the prospect of another Clinton presidency, there will be a number of them who will not vote for their party’s candidate.

Some will worry that a Trump victory in November would be even worse for the future of the GOP than defeat. For others, the fears may run deeper still. A month or so back, a Midwestern Republican told me that Trump would, for the most part, be a better president than Clinton. But the worst of Trump could, he fretted, be far worse than the worst of Hillary: “He could blow the country up.” That was not a risk he would take. He hasn’t changed his mind since.

That’s just one voter, but I suspect he’s not alone.

The Abolition of Cash

National Review, April 11, 2016

Government gathers power sometimes in great swoops, sometimes by stealth, and sometimes in slow, sly increments, foreshadowed by position papers, op-eds, and regulatory tweaks designed to address an “issue” that a careless citizenry has overlooked.

It’s this slower, slyer approach that is now in motion as Big Brother’s smaller brethren take aim at cash. An advance guard of regulation has paved the way. Deposit more than $10,000 in cash into a bank and the feds have to be told. Bring that amount into the U.S. and Customs has to be told. Get stopped by the police with “too much” cash (a conveniently elastic concept) and you risk watching it disappear into the swamp known as civil forfeiture. Meanwhile, the country’s Croesus bills have long since vanished — $10,000, $5,000, $1,000, even the $500 that bore the face of poor murdered McKinley. Under the circumstances, they might have let him keep his mountain. 

The cull has further to go. Writing in the Washington Post earlier this year, former treasury secretary Lawrence Summers called for a “global agreement to stop issuing notes worth more than say $50 or $100.” He praised a Harvard paper by Peter Sands, the former CEO of the Standard Chartered bank, in which Sands claimed that the arguments for eliminating notes with a denomination above the equivalent of $50 “could well be compelling at an even lower threshold.” An even lower threshold: The ratchet turns in only one direction.

Naturally, there are good reasons for this latest government grab. There always are. The anonymity of cash makes it the criminal’s friend, and there are (just to start with) the wars on drugs and terror to think of and, of course, tax evasion. 

In Europe, authoritarian creep creeps more quickly. Italy introduced a maximum limit of €1,000 for cash transactions in 2010 (the current prime minister has proposed raising it to €3,000). By taking aim at widespread tax-dodging, this was intended to bolster Italy’s finances during one of the euro zone’s uglier spasms. It was also designed to discourage Italians from withdrawing euros from banks in a period when there were legitimate concerns about banks’ stability and the possibility that money deposited with them would be converted overnight from euros into rapidly depreciating “new lire.” “Forcing” Italians away from cash would make it more difficult for them to reduce their exposure to those dangers. This was about more than tax evasion: It was about keeping Italians locked within a crumbling system.

The ratchet keeps turning. Germany has proposed a €5,000 limit on cash transactions. Mario Draghi, the president of the European Central Bank, has called for the scrapping of the €500 bill.

Meanwhile, in Scandinavia, a part of the world where governments are trusted and technology is advanced, digital payments are squeezing out cash. In Sweden, cash is now used in only about 5 percent of retail sales. Progress is progress: If people prefer to make payments electronically, that’s up to them, and if that entails a loss of privacy, that’s their choice.

But choice may well be followed by compulsion. Forget about doing away with the Benjamins; the technology now exists to kill off cash altogether. The will has been there for a while. Now there’s a way. The Danish government would like to abandon paper money altogether by 2030. Norway’s largest bank, the partly state-owned DNB, has called for cash to be phased out, moaning that 60 percent of the kroner in circulation are “outside of any [official] control.” The horror!

Excuse me while I adjust the tinfoil, but this is not (and will not be) just a Scandinavian thing: We live in an era when central banks have driven interest rates down to levels that bear little connection to economic reality. Certain key rates are now below zero in the euro zone, Sweden, Denmark, Switzerland, and Japan. This is a terrible idea, and its time has come. The question is not only how far negative interest rates will spread, but how low they will go.

In a speech last September, Andrew Haldane, the Bank of England’s chief economist, grumbled about the “constraint physical currency imposes” on setting negative interest rates. After considering various ways of dealing with this nuisance, he concluded that an “interesting solution” would be to “maintain the principle of a government-backed currency, but have it issued in an electronic rather than paper form.” This “would allow negative interest rates to be levied on currency easily and speedily.” Translation: Make people hold their cash in electronic form (and thus in banks); they will then have no means of escaping the levy on savings that negative interest rates effectively represent. 

Before dismissing this as a form of madness that only Europeans could embrace, check out what Harvard’s Kenneth Rogoff has been saying. Writing in the Financial Times in May 2014, he argued that replacing paper money with an electronic alternative “would kill two birds with one stone.” It would strike a blow against crime, and it would free central banks from a bind that has “handcuffed” them since the financial crisis. “At present, if central banks try setting rates too far below zero, people will start bailing out into cash.” Indeed, they will: To its credit, the central bank of Switzerland, one of the countries now burdened with negative interest rates, has made it clear that it has no plans to junk its thousand-franc bills. It accepts that these are used as a store of value, something that Rogoff, no friend of the saver, might regard as reprehensible but the sensible Swiss do not. There has been a 17 percent increase in the number of these bills in circulation in the last year. 

“Hoarding cash may be inconvenient and risky,” wrote Rogoff in a related paper, “but if rates become too negative, it becomes worth it.” He would clearly prefer to see that emergency exit locked and the key thrown away, leaving savers helpless in the face of whatever central bankers (and not only central bankers) might dream up.  

An open-minded sort, Rogoff did concede that there might be a problem or two with such a set-up, including the fact that “society may want to preserve the right for individuals to make anonymous payments in certain activities,” a telling choice of words. It’s not the rights of the individual that count, but what “society” (defined by whom?) “may want.”

Another Alpine nation, Austria, is aware of the menace to privacy that a cashless society could be. Its deputy economy minister, Harald Mahrer, has vowed to fight rules curtailing the use of cash: “We don’t want someone to be able to track digitally what we buy, eat, and drink, what books we read and what movies we watch.”

And this is more than a matter of books, movies, and meals. It’s worth noting that the German proposals to restrict cash transactions ran into opposition across the political spectrum, from the leftist Greens to the populist-right party Alternative for Germany on through to the classical liberals of the Free Democratic party. After Hitler and Honecker, Germans understand how totalitarianism works, and they know too that the slippery slope is all too real.

The abolition of cash is a notion that we should reject out of hand. It puts too much faith in technology, and it puts too much trust in the state. It eliminates privacy to a degree that ought to be unacceptable to any free society, and it leaves people dangerously exposed to having their savings confiscated by negative interest rates or, more traditionally, confiscated by government, by way of a savage wealth tax perhaps. It  leaves them with nowhere to hide.

To those making the case against cash or high-denomination bills, that, of course, is the whole point, but it is a point they are pushing too far. Their tightly controlled, fully tax-compliant society could easily, given a sufficiently malign government, be as dysfunctional as one where the “shadow economy” (not to be confused with the “criminal economy”) is flourishing. The ability to dodge the system acts as a brake on overreach by the system. For example, there’s no sense in pushing taxes so high that people decide it’s worth the risk of not paying them. Tax evasion should not be endorsed (I write, nervously aware of the IRS), but the potential, if somewhat paradoxical, benefit to society from the threat of tax evasion can be. Make tax impossible (or close to impossible) to dodge and there’s far less to hold back the demands of a greedy state.

And yes, there is cash’s role as crime’s discreet accomplice. Well, as I alluded to before, government already has a wide range of powers to combat that. To ask for much more seems excessive. To borrow a famous comment a wise man once made: “Those who would give up essential Liberty, to purchase a little temporary Safety, deserve neither Liberty nor Safety.”

That wise man? He is on the $100 bill.

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.

What did “Super Tuesday” tell us about the Presidential election?

Prospect, March 2, 2016

New York City, March 2016 © Andrew Stuttaford

Let’s get the easy stuff out of the way. Hillary Clinton had a good night, stumbling in places where she was expected to stumble: Colorado, and also Vermont, where Sanders is the junior senator. But benefiting from solid African-American support in the south and snatching a significant victory over Sanders in Massachusetts, just across the Vermont border. Senator Sanders is not going to give up his quest any time soon, but, in the absence of an indictment arising out of Clinton’s email adventures, Hillary looks well set to take the Democratic nomination in due course. That there has been any doubt about that, and that America’s Corbyn was the source of that doubt, says something about the unsettled mood of the American electorate.

And that brings me to the Republicans. There was no fresh earthquake, but the aftershocks of what had already hit the GOP were only marginally less devastating. Trump romped home in a series of victories that would have been unthinkable just a few months ago. But the Republican establishment can take a few crumbs of comfort from the fact that The Donald’s triumph was not quite as complete as some were beginning to anticipate. Averaged across the twelve states, percentage-wise he scored in the mid-thirties. Impressive, but far below the 49 percent he took in a recent CNN poll of Republican voters. His delegate haul—less than half those up for grabs on Tuesday—fell short too: Trump’s path to the magic 1,237 (the number of delegates required to secure the nomination) is not clear yet.

Building on earlier success in Iowa, Ted Cruz, the junior senator from Texas, prevailed in his state, in Oklahoma next door and Alaska. Cruz is a hardliner, clever, abrasive and don’t-you-forget-it devout. He has craftily reinvented himself as an outsider despite Princeton, Harvard, an impressive legal career, a seat in the senate and a wife who works at Goldman Sachs. But he is only the junior outsider, outranked in the wilderness by a billionaire, and, currently running second to Trump in the delegate count, he may end up the insider candidate who leads the last stand against Trump—who runs him closest at the end.

But most of the Republican establishment would rather work with the more emollient Marco Rubio, a senator from Florida and and the Republican most likely to beat Hillary. Once again, Rubio failed to live up to his advance billing, but he managed to win in Minnesota and—an achievement these days—ran Trump close in Virginia. Overall, however, he was outscored on Tuesday by Cruz and a loss to Trump in the Florida primary on 15th March would be a blow from which he would probably not recover. But for now he’s very much in the race. His problem is that so is Cruz.

If we ignore (as we should) retired neurosurgeon Ben Carson, plugging on despite poor results for self-promotional reasons of his own, that leaves Ohio governor John Kasich, now positioning himself as a moderate of sorts and (although he denies it) as someone’s vice presidential pick. His results did not amount to a great deal, but he only fell a few percentage points behind Trump in Vermont and he came close to respectability in Massachusetts. That was enough. He’s not pulling out yet.

So what’s next? Trump, who has long since transcended what were thought to be the rules of the American political game, will sweep on through outrage and gaffes, the strong favourite to win the GOP nomination and the strong favourite to lose against Hillary. Republicans who oppose Trump are focusing on his failure (to date) to win over more than half of their voters. Their best hope is that the non-Trump forces can coalesce behind one credible champion—Rubio, preferably, or Cruz—in sufficient numbers to put to a stop to a momentum driven by forces much greater than any of the candidates in this race. Failing that, they have to pray that, between them, Rubio, Cruz, Kasich and the good doctor can amass sufficient delegates to take the fight against Trump all the way to the Republican convention in July. Yes, these are long shots, very long shots.

Meanwhile, Hillary is measuring the drapes for the White House.

Into the O.K. Corral

National Review Online, February 26, 2016

In a new article posted elsewhere on this website, my old friend Rupert Darwall has, with characteristic elegance and precision, dissected some of the issues surrounding Britain’s referendum on its membership of the EU, a vote set for June 23. For anyone interested in what’s at stake (and I appreciate that not everyone on NR’s side of the Atlantic will be), it’s a must-read.

  As Darwall explains, this particular chapter in Britain’s unhappy European union began in 2007, when then–opposition leader David Cameron gave a “cast-iron guarantee” of a referendum on the EU’s notorious Lisbon Treaty. That treaty, another of Angela Merkel’s gifts to the Continent, was a disgrace to democracy, designed to bludgeon through the functional equivalent of the EU’s rejected constitution. Unfortunately, it came into force before Cameron became prime minister. His referendum would have had no legal effect. Being a pragmatic sort, Cameron dropped it.

Cameron could have gotten away with that flip-flop but for a pattern of behavior, both before and after that decision, that gave the entirely fair impression that he neither shared nor even understood euroskeptic concerns. Thus he made clear his irritation with those Conservatives who were “banging on about Europe.” He denounced UKIP, at that time more clearly a tribe of the ex-Tory Right than it is today, as a party of “fruitcakes, loonies or closet racists, mostly,” a slur that backfired badly.

Compounding this — and whatever eurofundamentalists might claim to the contrary — Cameron was generally cooperative in his dealings with the EU, something all too typical of what Darwall accurately describes as the prime minister’s “steady-as-you-go” politics.

But his clubbable approach generated no gratitude in Brussels and fueled mounting suspicion among euroskeptics at home. Darwall writes that if Cameron’s “party had trusted him more on Europe, he would have been better placed to withstand the pressure for [the] referendum” that now lies just ahead. That’s true. It didn’t help him that the increasingly uneasy Tories also felt threatened by a UKIP insurgency that was itself boosted by Cameron’s inability or unwillingness to fight Britain’s corner in Europe. The result was that, in 2013, he had to concede an “in/out” referendum that, if the voters opt for Brexit, could bring his premiership to an end.

Ranging more generally, Darwall argues that “other than the cap on net migration, there is little from the EU that constrains [Cameron’s] policy ambitions for Britain.” There’s quite a bit to that, but it should come with the important qualification that this is true of Cameron’s ambitions. As Darwall notes, in many areas the prime minister’s ideas converge with those of Britain’s European partners. Once those ideas are enacted into law at the EU level, they are nearly impossible to repeal. A future Tory prime minister, more interested in the free market and, say, scientific realism (Cameron is a climate warrior), will find such faits accomplis very frustrating indeed. With the EU in an increasingly dirigiste mood, that poisonous legacy will only get worse.

But all this is, in a sense, a sideshow, ignoring, as Darwall puts it, “the nine-tenths of the iceberg below the surface”:

How can a Union on the path to becoming a full-fledged political union — what the agreement Mr. Cameron secured in Brussels at the weekend calls “further political integration into the European Union” — accommodate a large nation that is on a diverging path?

It cannot. The EU is what it is, and what it is is a machine grinding relentlessly in the direction of “ever closer union,” a phrase that is both aspirational and of profound legal and institutional consequence. Allowing exemptions from the EU’s forward march — such as those releasing Britain and Denmark from the obligation to sign up for the euro — grows more difficult by the year and needs, well, “cast-iron” legal protection of the type that Cameron has notably failed to secure in his current “renegotiation” with the rest of the EU.

That’s why Cameron’s deal largely covers what Darwall rightly dubs “second-order issues.” The British prime minister desperately wanted his country to stay in the EU, but he had to give the euroskeptic hordes something. Because of the nature of the EU, “second-order” was all that could ever be on offer. The result, fears Darwall, is a distraction, a package that enables Cameron “to trap euroskeptics in a manufactured choice when the real one is still over the horizon.”

In a way, that’s too pessimistic. The deal Cameron has struck is so feeble that, at best, all it can do is give a hand to waverers wanting an excuse to vote to remain in the EU. That’s not nothing, but the deal will not be center stage other than as comic relief. Rather, the debate will probably slide out from underneath Cameron’s control and into more important territory. On the euroskeptic side it will be focused on Britain’s regaining control of more of its own destiny, not least where immigration is concerned.

For their part, those looking to persuade Brits to rally behind the status quo will also, I suspect, move rapidly away from Cameron’s sad surrender and concentrate instead on the underlying case for continued membership of the EU. There will be happy talk of travel, peace, and free trade, but the key message will be negative: Leaving the EU is, they will warn, a leap in the dark, risky at the best of times, utter madness now.

Aided by the fact that Brexiteers have so far failed to unify around an easily grasped, unfrightening alternative to membership in the EU (such as the variant of the “Norwegian option” long advocated by EU Referendum’s Richard North), fear will prevail. Brits will stick with the EU, the devil they know.

That will be a tragedy, and that is the trap this referendum really represents. Darwall eloquently highlights the danger that the EU represents to British democracy. And he frets that “Mr. Cameron’s small-bore approach — asking for little and getting less — stores up problems for the future by fostering the impression that a vote in June to remain in the EU settles the matter of Britain’s relationship with Europe.” My worry, by contrast, is that that impression is correct: The vote will settle the question.

Darwall reckons that the “tensions inherent in Britain’s EU membership will remain” even after the vote to stay in that he expects. So they will. Where we differ is over Darwall’s obvious belief that they will count for something. He thinks that “Mr. Cameron’s referendum will not be the end of the story.” But my guess is that, for all practical purposes, it will. Euroskeptics are an aging segment of the electorate. Absent some truly major convulsion shaking the EU into reopening its core treaty for discussion, this vote is their last good shot at Brexit. And they are likely to miss.

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.

Will we lose America if we vote for Brexit?

Prospect, February 17, 2016

The news that Barack Obama is, in the words of the chairman of the Senate Foreign Relations Committee Bob Corker, planning “a big, public reach-out” to persuade British voters to remain in the EU should not come as a great surprise. Obama has made his thoughts clear on this topic for a while now, and so have his surrogates, including Michael Froman, America’s most senior trade official. In October last year, Froman somewhat menacingly suggested that the US would not be particularly interested in signing a trade agreement with a post-Brexit Britain.

For his part, Obama was in sync with the long-established, bipartisan Washington line. Henry Kissinger may never have said, in the words famously attributed to him, “Who do I call if I want to call Europe?” but the US has backed deeper European integration since the dawn of the Cold War. It was regarded as a supplement of sorts to NATO as well as a guarantee that Europeans would not again be at each other’s throats. Having, as they saw it, come in to rescue the old world twice in one century, Americans were anxious to avoid a third go-round.

And with British power waning, the US thought that London should throw in its lot with Brussels, not least because the Brits could be useful allies there. Damon Wilson, a former member of George W Bush’s National Security Council, recently fretted that Brexit would deprive the US “of a critical voice in shaping not only EU policy, but the future of Europe.” This viewpoint that may not reflect political reality (no member state is more outvoted in the EU than Britain), but it remains highly influential nonetheless.

However, a few months earlier, Jeb Bush had this to say about Froman’s not so veiled threat: “Great Britain is a sovereign nation, and they must make this decision about their relationship with Europe on their own. The US should not be putting a thumb on the scale and certainly shouldn’t bully an ally.” Marco Rubio, another candidate for Republican presidential nomination, followed suit: “Irrespective of what decision the UK makes… they’ll continue to be certainly our best friend in the world and one of our strongest alliances.”

Donald Trump may be raising the prospect of “revolutions” in Europe, but even in less excitable sections of the American right, sympathies are starting to swing away from the Brussels project. The succession of crises that has shaken the EU has also shaken the perception that it is a stabilising force on the continent—a perception that has always underpinned America’s longstanding enthusiasm for an “ever closer union” it has never quite understood.

And members of America’s conservative pundit class have recently begun to take a more critical look at what the EU stands for. Its supranationalism and suspicion of Anglo-Saxon capitalism don’t play well, and nor do obvious signs of anti-Americanism. For now, the broader Washington consensus on the EU is more or less unchanged, but there will be more sympathy for Brexit on the American right than there would once have been.

Conversely, to a good number of American progressives, including almost certainly Obama, the EU is a glimpse of a better tomorrow, a fine example to their own country, nicer, greener, its supranationalism an advantage. To be sure, Brexit would be unhelpful to America’s broader interests as traditionally defined (reinforced by worries that if a British departure from the EU triggers Scottish independence, the implications for NATO could be grim.) At the same time, there’s an element of moral disapproval too, fuelled by bien-pensant prejudice: walking away from that better tomorrow would be retrograde, reactionary, nationalist.

Then again, the EU’s disasters and triumphs, let alone the twists and turns of the Brexit saga pass most Americans by. And it’s hard to think that US business is much more concerned by a British rejection of “ever closer union.” Yes, there’s widespread appreciation for the single market, but the disapproving comments of some American multinationals and Wall Street power players about Brexit can largely be disregarded as political moves designed to curry favour in London, Brussels and Berlin. For the most part, American companies can be expected to take a pragmatic view. The problem for them is less Brexit than the uncertainty over what it will look like. British voters may feel the same way.

‘Polishing Poo’: Cameron’s Dirty Deal with the EU

National Review Online, February 10, 2016

To pull a rabbit out of a hat, there has to be a hat. In a speech in January 2013, British prime minister David Cameron promised to negotiate a fundamental reworking of Britain’s relationship with the European Union. There would then be a referendum to decide whether Brits wanted to quit the union or stick with it to enjoy the “new settlement” Cameron had secured. There was bold, delusional, or dishonest (take your pick, I’ll go for dishonest) talk of strengthening the EU’s “democratic legitimacy,” of opting out of the forced march toward “ever closer union,” of power “flowing back” to the member states, of an increased role for national parliaments. Euroskeptics scoffed. They were right to. There was no hat. The EU is what it is, and what it is not is some sort of super-free-trade zone: If Cameron got what he wanted, it would no longer be the EU. The rest of the EU was never going to go along with that.

And, now, three years later, the EU’s “president,” Donald Tusk, is brandishing a draft deal that makes that all too clear. Mr. Cameron doesn’t seem too fussed. Many Britons have identified Tusk’s settlement for the malevolent nothing that it is, but their prime minister is insisting that the rabbit that they don’t see is in fact there. He is, he explains, on the edge of winning a splendid new deal for Britain.

It’s customary at times like this to drag out tired old analogies with poor Neville Chamberlain, so notoriously swindled by a wily foreigner at Munich, but that comparison doesn’t work here. No one has swindled Cameron, but if he sells this deal, he will have swindled his country.

In that speech three years ago, Cameron noted how many Britons were asking, “Why can’t we just have what we voted to join — a common market?” Well, that was what they were told they were joining. But what the U.K. actually signed up for was very different — and infinitely less benign.

Yes, “common market” was indeed what Brits used to call that mysterious structure run out of Brussels, but that was a label that concealed more than it explained. In joining what were then more accurately known as the European Communities, Britain had committed itself not only to a trade pact, but also to ever closer union. And that was a project that had been grinding on for a long time. The institutional machinery was already in place to ensure that the integration process — and with it the continuous and irreversible transfer of powers away from national democracies — only moved forward.

And that has continued. The pace may not have been certain, but the direction always was. The changes that David Cameron talked about in 2013 (and before then) were not mere technicalities. They were aimed at the essence of what the European Union, the intended graveyard of the nation-state, was supposed to be. The fact that Cameron wanted quite a few of these changes to be for the benefit of all the EU’s members made things worse still. They were not only a challenge to Brussels but to the euro-fundamentalist political class across a wide swathe of the EU. To repeat myself: The idea that Cameron would secure the unanimous agreement of Britain’s European “partners” to this (because that’s what would, under EU rules, be required) was nonsense.

Cameron, no fool, must have known this, but he was playing a different game. The referendum had essentially been forced on him by the threat to the Tories posed by UKIP’s euroskeptic insurgency. The “renegotiation” would buy valuable time to safely (fingers crossed!) see him through the 2015 election. If it turned out to be a dud, well, he would sort out the problem then.

And a dud is what it has turned out to be

One Tory MP described the proposed deal as “a slap in the face for Britain.” More like a punch, I’d say, made more vicious by the contempt for the electorate with which it was landed: “Hand on heart,” boasted Cameron, “I have delivered the commitments made in my manifesto.” Hand on heart . . . 

Meanwhile, he did his best to stifle dissent within a Conservative party in which many were startled by Cameron’s interpretation of what they had naïvely believed was their manifesto, too.

Speaking in the House of Commons, another Conservative MP, Steve Baker, commented that the deal looked and smelt “funny.” “It might be superficially shiny on the outside, but poke it and it’s soft in the middle.” He asked the prime minister whether he would admit to having “been reduced to polishing poo?”

Cameron wouldn’t, but, dung or not, his renegotiation was always going to be a dud. Bit by bit, he had dropped or diluted his demands. The grand constitutional rearrangements were shelved and the EU’s job-destroying social legislation was left untouched. The tough talk of regaining at least some meaningful veto rights over immigration into the U.K. from elsewhere in the EU dwindled (mostly) into snarling about welfare benefits, a telling retreat. The surge of EU migrants into the U.K. (currently running at a net 180,000 people per year) has done much to fuel British euroskepticism, but Cameron was compelled to accept that he could only nibble at its edges. The free movement of people within the EU is one of the union’s fundamental principles: It wasn’t something that was going to be bartered away.

Cameron ended up asking for little. He will receive less. Thus, so far as benefits are concerned, his proposed scaling back of “in-work” benefits for EU migrants has itself been scaled back. Even that only kicks in if Britain applies an “emergency brake” in the event of undue pressure on public services or the welfare system. And who decides whether the conditions for applying that emergency brake have been met? The EU Commission. Ah.

To be fair, the Commission has said that those conditions are met in Britain — for now.

Wait, there’s more.

The definition of those EU citizens that the U.K. can turn away on the grounds that they represent a “present” threat to public policy or security will be broadened. That’s a welcome change, but it does nothing to address the way European human-rights legislation — all too often stretched beyond reasonable interpretation — can stand in the way of the deportation of equally undesirable non-EUcitizens. Cameron once undertook to tackle this, too. (No matter that doing anything about it was — for reasons too complicated to go into here — a legal impossibility as long as Britain remained within the EU.) He gave up on that as well.

Meanwhile, the introduction of a “red card” system that would, under certain circumstances, allow national parliaments to block EU legislation is one of the few “constitutional” reforms to survive, but it would require the support of another 14 national parliaments before it could be played. The chances of that ever happening are, to say the least, remote.

Another area of British concern has been that the nine EU countries — including the U.K. — not in the euro zone might be ganged up upon by the 19 who are. So, if enough of the nine (it’s not indicated how many) get together, they will be allowed to give their “reasoned objection” to measures designed to integrate the euro zone further. How kind! These objections will then be “discuss[ed]” with a view to finding a “satisfactory solution.” And if that can’t be found, well, silence.

More helpfully, it’s confirmed that Britain will not have to contribute to future euro-zone bailouts, and there will be some protections for Britain’s financial sector from euro-zone regulators. There will also be a prohibition against discrimination against individuals and entities based on the fact that the member-state where they are established has not adopted the single currency, something that will, again, please the City.

Then there’s “ever closer union,” that lethal ratchet. Cameron has been handed a few words, of limited legal consequence, to the effect that the U.K. “is not committed to further political integration into the European Union,” whatever that might mean. But nothing direct is said about the European Court and its habit of interpreting EU law in a way that takes “ever closer union” as a guiding principle. This matters: In the event of a conflict between European law and the law of any member state (including Britain’s), European law prevails. As long as the EU is the EU, that, too, is not going to change.

Is the deal even binding? At the moment it’s only a draft. There will be more bargaining to come, but this proposal, or something close to it, will probably be agreed to by all the EU’s leaders, conceivably as early as next week. Once that’s happened, it can (arguably) be reversed only by a unanimous vote. Once filed with the United Nations, it is (arguably) also binding under international law.

Arguably: With the EU the devil is always in the details, and the law in this area is decidedly murky. The deal will commit the EU’s leadership to amend the EU’s secondary legislation to reflect what has been agreed, a procedure that will give the EU’s (reliably euro-fundamentalist) parliament an opportunity to weigh in. And if it declines to sign off on the deal, what then? After all, the British will have already voted.

Tusk also accepts that the EU treaties may “possibly” need amending at some (unspecified) point to reflect “a few elements” in the proposed deal. Forget that “possibly.” The word is “certainly,” and the amendments may have to cover more than a “few” elements. Amending the treaty is a lengthy, rarely straightforward business, requiring the agreement of all 28 member-states. If that’s not forthcoming — if a parliament votes it down, say, or a referendum gets in the way — what then? It’s by no means clear that Tusk’s agreement to agree would have the legal force that he and Cameron claim. Again, this would take place after (maybe years after) the British referendum, which may take place as early as June.

So, what’s a Brit to think? Well, even on the most favorable construction, the deal does next to nothing to restore Britain’s control over its borders, next to nothing to return any powers to its parliament, next to nothing to extricate Britain from the jaws of “ever closer union,” and nothing at all to restore supremacy to its courts. Adding insult to injury, what’s been thrown the country’s way are, for the most part, not even scraps but promises of scraps, promises that may well not be binding.

Apart from that, it’s a great deal. Hand on heart.