First, a word of advice if you have any stocks or mutual funds: don’t check your portfolio.
Since the Brexit referendum passed, things have been pretty much of a mess, thanks to our friends in the United Kingdom who decided to be less united to their friends on the Continent.
Of course, the union of the UK with the EU was always a bit more of a marriage of convenience than a bond of eternal love. What current events are revealing is what happens when such a marriage is seen as too inconvenient by one of the partners.
The European Union is the tangible manifestation of a post-World War II vision of a united Europe at peace with itself and thriving on the collective efforts of the hundreds of millions who are residents of the Continent. It emerged, along with NATO, from the liminal moment the end of the Second World War presented to leaders.
They stood, amidst the ruins of total war across Europe, with a keen sense that the way forward could not be the same as the ways of the past. Two brutal wars in the span of four decades had decimated two generations of productive workers, devastated families, shredded social networks, and raised serious questions about the true legacy of ‘Western civilization’.
Visionary leaders looked to the East and to the West for models on which to build a future for their countries and their peoples.
To the East, they saw the power of the Union of Soviet Socialist Republics, a single vast country made up of diverse peoples. It was held together by an ideological projection of a single Soviet people united in a common struggle to transform the world into a workers’ paradise. More practically, it was sustained by a system of distribution of benefits and burdens that effectively silenced public opposition and directed political conflict into the secret bowels of the party apparatus. Economic, social and cultural institutions were harnessed to the service of an overarching vision of ‘revolutionary’ politics.
To the West, they saw the power of the United States of America, a single vast country made up of diverse peoples. It was held together by an ideological projection of a single American people united in their common love of liberty and their quest for opportunity. More practically, it was sustained by a system of distribution of benefits and burdens that held the prospect that through hard work and ingenuity, one could rise above the status of one’s parents and pass on to one’s children an even better life. They saw a political process harnessed to the service of economic well-being and the preservation of personal liberty.
They opted for the American model as a starting point, then fashioned a constitution more suited to their particular historical circumstances.
The British referendum on leaving the European Union reflects one of the most daunting challenges of such union-building endeavors: system preservation.
The USSR proved unable to meet that challenge, unraveling in 1991. In striking contrast, the United States met the challenge . . . but only at the cost of a devastating civil war and, it must be added, periodic and at times forceful reaffirmation of the results of that war.
The European Union, to be accurate, is not as much of a ‘union’ as either the USSR was or the USA is. It is more like the confederation of states that was our first effort at union on this side of the Atlantic. The central government is considerably more powerful than the Confederation’s was, but it also pays a greater deference to the sovereignty of its members than is accorded the states in the United States of today.
One of the most clear-cut examples of such deference is Article 50. This is the provision in the treaties forming the EU that provides a legally-valid path (under international law) for a country to leave the EU. No similar provision can be found in the U.S. Constitution.
The European Union is a bond of mutual convenience; the U.S. Constitution is a bond (almost literally) of blood.
The problem with a marriage of convenience is that notion of convenience. Being united with another person, or a group of people, or a group of countries, inevitably will be most inconvenient at times. Inconvenience is the serpent that whispers in the ear of first one, then another, asking why they should be sacrificing for others, promising greater wealth, power and prestige if they make the break and go it alone.
What the early market reactions are suggesting (and I suspect will prove to be true) is that, indeed, strength is in union. The greatest inconvenience comes not from having to find a way to work together, but from trying to find a way to go it alone.