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Brexit, Trump and superstates: When economics isn’t enough

Written By | Jul 3, 2016

No one has cheered for Europe in UEFA’s Euro 2016 championship series. Ten percent of Iceland’s population traveled to France to cheer for Iceland’s team. The French have cheered for France, and Italians for Italy. The citizens of those countries may trade with each other without tariffs and they may in principle be able to work anywhere in the EU, but Germans and Greeks are more emotionally bound to their home countries than to Europe.

This is an important reason that the EU as more than a trade bloc has never made much sense. European bureaucrats may dream of a U.S.E., but half steps in that direction were doomed to fail.

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The euro was meant to be a first step in the creation of a monetary union and then a superstate. There would be no more currency risk in trade between countries. The price of goods produced in Italy wouldn’t have to be converted from lira to deutschmarks, drachmae, French francs and pesetas. Europeans could move freely without visas and without currency exchanges.

But that meant that monetary policy would no longer be set in Athens and in Amsterdam and in Madrid, but in just one capital, the capital with the most powerful economy and the most powerful currency on the continent: Berlin.

Pre-euro, if unemployment were rising in Greece or the economy were slowing, the Greek government might expand the supply of drachmae to boost exports, slow imports, and goose the economy into growth. (Yes, they were all Keynesians once upon a time, but let’s let that pass.) Post-euro, the inflation-averse Germans control the currency and have told the Greeks, “work harder, but forget about trying to boost your exports with money magic.”

In the United States, the different states don’t have control of the currency, either. But if the Louisiana economy slows, Louisianans can and do pick up and move to Texas, Georgia, the District of Columbia, and anywhere else with a growing economy and demand for labor. And when they get there, they will find the same language, the same stores and the same general culture that they left behind, but without decent gumbo and with less corruption.

A Greek machinist who moves to Berlin will find a difficult new language, completely different foods, and a politely hostile culture. He probably won’t find a job.

Years ago, I was offered a job in Munich with BMW. “But my German is awful,” I protested. “No matter,” was the response. “At our headquarters we speak English.”

English is a European lingua franca for young professionals. They are cosmopolitan, much more able to adapt to new cities in new countries and find jobs there when they arrive. The middle-aged Portuguese engineer who drove my cab from Schiphol Airport to downtown Amsterdam told me that he’d left Portugal because there were no jobs. “But I don’t speak English or Dutch,” he told me sadly in Portuguese. “Just enough English for this job. I was lucky to get it.”

The euro has helped make things more difficult for Europe’s southern economies, while the open borders have not made most labor mobile. The combination of monetary union and distinct local ethnic and linguistic communities has joined together the worst elements of both regimes. Europe is not a United States, and it never will be.

The U.K. has one of the most prosperous, robust economies in Europe. It is a winner in the European sweepstakes. But it also kept its own currency, essentially positioning itself near the door for a quick exit. And, facing the pressure of immigration and nationalist sentiment, it bolted. Economics isn’t everything.

But it’s still a lot. Grocers in Brighton and chemists in Bedford haven’t done nearly as well as bankers, real estate brokers and Bentley dealers in London. Had they done better, they might be more willing to stay. If nothing else, the exit-remain referendum has laid out a map of the national mood.

It also serves as a warning to Brussels of what might be. Portugal, Spain, Italy and Greece aren’t EU winners, and the enterprise has to look shaky from Budapest, Warsaw and Prague. For them, support for the EU might be like American support for Hillary Clinton—not so much support of option A as fear of option B: facing Vladimir Putin without a lot of friends at your back.

This story has more than national security implications for the United States. His critics say that Donald Trump’s support is irrational, not in the economic best-interests of his supporters. That view presupposes that politics is driven primarily by reason or by economics. (To an economist, there’s not that much difference). But it is not.

Politics is driven by emotion. Most supporters of Trump or Clinton will not have arrived at that support on the basis of facts and logic. Almost no one reasons himself into supporting a candidate. Instead, we rationalize our support by constructing supposedly logical arguments after the fact.

If you really want to buy a Mac, you’ll find the facts to justify your decision. If you really hate Apple, you’ll justify your purchase of a PC with an appeal to technical considerations that really don’t matter that much to you.

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The most powerful emotion we rely on in making political decisions is disgust. It wasn’t logic that pushed British voters out of the EU, but disgust: disgust at Brussels, at the erosion of British autonomy, at the massive influx of immigrants. After the vote, the “Bremainers” are disgusted with the stupidity, racism and narrow self-interest of the “Brexiters.” They had a dream that Brexiters denied, a vision that has been crushed. The feelings are closer to the loss of faith than just a change in dry economic policies.

American voters are likewise disgust-driven: disgust at Trump, disgust with Clinton. Given that disgust, we rationalize. Immigration and the change in our culture are much more powerful drivers of disgust than Trump’s crudity.

What we’re witnessing in the U.K. and the U.S. isn’t racism versus cosmopolitanism, smart versus stupid, or educated versus ignorant. It’s competing categories of disgust, with the other issues piled on afterwards to justify our own positions and to vilify people on the other side who deny our dreams and belittle our faith.

If Trump wins, it will be because he has a much better sense of what disgusts American voters than Clinton does. If Clinton wins, it will be because fear of Trump is greater than disgust with changing social arrangements and the loss of “American culture.”

Unlike the Brexit vote, our elections in November won’t be a referendum on the United States. But they will deal with similar motivations, and they won’t be won or lost on economics. Economics will only be a rationalization we use to explain our votes.

When it comes down to it, we don’t care about economic data. We care about what we feel. On that, in a democracy, the fates of nations hang.

Jim Picht

James Picht is the Senior Editor for Communities Politics. He teaches economics and Russian at the Louisiana Scholars' College in Natchitoches, La. After earning his doctorate in economics, he spent several years doing economic development work in Moscow and the new independent states of the former Soviet Union for the U.S. government, the Asian Development Bank, and as a private contractor. He has also worked in Latin America, the former USSR and the Balkans as an educator, teaching courses in economics and law at universities in Ukraine and at finance ministries throughout the region. He has been writing at the Communities since 2009.