Chaos in Britain and Europe? Not so fast …

An observer of current United Kingdom and European Union politics can be forgiven for thinking that right now all is chaos and upheaval. In the UK, despite it being three years since that country voted to leave the EU, Parliament and the Conservative government have been unable to pass or agree on any kind of agreement on how to make that exit a reality. The issue has now brought down yet another Conservative leader. The opposition Labour Party has not benefitted from this: in the recent elections for the European parliament, both parties had their worst ever election results. Meanwhile, across the EU as a whole, the recent election saw a sharp decline in votes for the traditional parties of the centre left and centre right and a rise in support for radical left and green parties on the one side and right-wing populists on the other. There was also a rise in support for liberal parties (which in Europe means parties that combine a broadly free market orientation with internationalism and social liberalism). This pattern was also found in the UK.

Faced with this, the outside observer could well conclude that we are seeing a breakdown of stable politics and a kind of modern peasants revolt, with voters moving to radical parties of left and right. On a more specific level, the chances of the United Kingdom leaving the EU without a deal in place (which would undoubtedly be severely disruptive, at least for the short term) have increased significantly. In the EU, there is increasing fragmentation and argument at a time when the Union faces severe, even existential challenges over things such as the survival of the Euro. Maybe this is a time to sell UK and European assets or at least short them? In fact, the disorder is only apparent. There is a clear pattern to what is going on in both the UK and the EU. Once you understand what that pattern is, the current situation makes more sense and you can have a much clearer idea of what is likely to happen in the next few years.

The key is to realise that what we are seeing across Europe right now is not the normal political cut and thrust but neither is it a collapse of democratic politics. What we are seeing is a political realignment. What though is that? In any time and place there are many issues and debates. Typically, however, just one or two of those debates have a particular salience – they matter to large numbers of people, both voters and what we may call ‘political investors’ (donors, whether individual, corporate or bodies such as unions). These are the aligning issues – people sort themselves out into large and diverse coalitions on the basis of where they stand on those issues and political parties both reflect and shape those coalitions.

There is typically one main aligning issue and one or sometimes two secondary ones. After a time, however, the primary aligning issue loses its salience. This can be because the arguments have become exhausted and a consensus has emerged or because of social and economic change, which means some other division in society has become primary. At this point, there is a realignment: the old tribes and coalitions break up and new ones form; allies become foes and opponents find themselves on the same side; some issues disappear or become secondary while new ones appear.

Since at least the 1960s and maybe even the 1930s, the main aligning division in developed societies has been over economics, specifically the question of the relative role and importance of government and politics on the one hand and markets and spontaneous orders on the other. This reflects deep divisions of interest and perception or experience within those societies and has produced in almost all of them a political division into two large political camps. There has also often been a secondary division over the degree to which governments should enforce certain moral standards and social norms – combining the two produces four broad blocs of voters. This is now changing. The economic division is becoming a secondary one. The new emerging division and consequent political alignment is over questions of identity and the tension between nationalism and the nation state on the one hand and supranational governance and a global economy on the other. Socially, it is a division between large, successful, and globally connected metropolitan areas and rural areas plus small towns and declining ex-industrial districts. So the main issues now are ones of culture and identity, of nationalism versus cosmopolitanism, with economics playing a secondary part (the two emerging sides are both internally divided over economic questions).

In the UK, it was this emerging division that led to the vote for Brexit. Subsequent analysis and polling has shown a weak to non-existent correlation between voting Leave or Remain and economic position but very high correlation between the position taken on Brexit and a range of social and cultural attitudes or even favourite brands. The view taken of migration, for example, was an almost perfect predictor of the way the respondent voted. What the Brexit referendum did in the UK case was to accelerate the emergence of the new division and crystallise it. Since the referendum, a series of polls have shown that the identities of Leaver and Remainer are much stronger and matter far more to most voters than traditional party allegiance. The problem is that this new division in British society is not reflected in the traditional party division. That in turn means that it is not reflected in Parliament where a body that has two thirds of its members backing Remain in the referendum charged with delivering an exit from the EU.

This has produced a rough three-way division among MPs that cuts across the exiting party lines. About one third of MPs are hard-line Brexiteers who think the UK should leave the EU no matter what, even without a deal; another third are diehard Remainers who think that Brexit is a disaster that should not happen and the original decision should be reversed via a second referendum. Finally, there is a third in the middle who think that the referendum result must be respected for democratic reasons but that there has to be a deal. The problem is that the way the relative preferences of the groups stack up, plus the pull of party loyalties means that there is no majority for any specific course of action – any particular position will be voted down. The result, of course, is the paralysis that we can see in Parliament’s handling of the issue. The normal way of settling this would be to have a General Election but that will not work because neither major party is clearly aligned with the two ‘pure’ positions, which between them command over two thirds of the voters, and they are internally divided because they do not line up with the new emerging division among voters.

Meanwhile, the electorate has clearly sorted itself out into two hostile tribes on the basis of Brexit with that issue acting as a proxy or signifier for the new alignment. All of the polls show that support for the two extreme positions of staying in and a no deal exit has grown while support for an exit with a deal (the majority position in the immediate aftermath of the referendum) has shrunk steadily. This was reflected in the recent European Parliament elections. About 36% of voters supported parties committed to a no deal exit (the Brexit party and UKIP) while 40% voted for parties opposed to any kind of Brexit (the Liberal Democrats, the Greens, Scottish and Welsh nationalists). The two traditional parties were left with the rump of exit with a deal voters and pure tribalists. Since the vote, further polls have shown this new division firming up with Labour and Conservative both seeing massive declines in support and sharp rises for the Lib Dems, the Greens, and the Brexit Party.

A similar pattern can be seen in the rest of the EU. In most countries there was a decline in votes for the traditional centre left and centre right. Populist nationalists did well, though not as well as expected. There were gains for green parties and also liberal ones. Centre left and centre right parties are both based on electoral coalitions defined by their position on the old aligning issue of economics but those coalitions are now being pulled apart by the new divide over culture and nationalism versus cosmopolitanism. Social democrats are losing their traditional working class core to the populist right and are also shedding middle class and metropolitan voters to the Greens and radical left. Meanwhile the traditional centre right are losing voters to both the populist right and the liberals – in the first case rural and also more affluent but older voters, in the second middle class and metropolitan ones.

In both the UK and Europe, we can clearly see the emergence and consolidation of three new political poles. The first is the one commonly described as populist right but which is better thought of as ‘national collectivist’. Parties of this kind such as the RN in France combine nationalism, anti-cosmopolitanism, and cultural traditionalism with economic interventionism and strong support for the national welfare state. Some of the parties of this kind favour what we may call ‘capitalism in one country’ i.e., radical free market policy combined with anti-globalism. This, however, is unlikely to be a sustainable position and even now the typical model is South Korea or even China rather than Singapore or Hong Kong. The second is radical left or green parties that combine radical social and cultural politics with strong cosmopolitanism and a rather unfocussed anti-capitalism. The third is liberal parties that are broadly free market, socially liberal, and strongly cosmopolitan. In most European countries the final division is likely to be between the first and the third, with the second group in a distant third place but there will be some countries where the main choice will be between the first and the second.

Given this understanding, what is likely to happen now? In the UK case, it is very unlikely that Parliament will resolve its paralysis. A no-deal exit is more likely than before but still unlikely because of the overwhelming parliamentary majority against it. A second referendum is also becoming more likely but, at present, there is a majority against it – the only way to break that deadlock would be to have referendum with three options on the ballot (deal, no deal, and remain) but so far there is no sign of that.

Whatever happens, at least a third of voters will be really enraged and the party system will very quickly come to align with the new division in UK society. This may be by both of the parties transforming into something very different or by at least one, or even both of the parties suffering dramatic splits.

In the EU as a whole, we can see a new and genuinely pan-European debate beginning, which will probably produce for the first time ever a genuinely European politics. The two big issues will be these. Firstly whether the way to resolve the problems of the Euro is, as Emmanuel Macron argues, to create something like a European government, or alternatively to abandon the Maastricht Treaty and revert to a ‘Europe of nation states’ with the EU becoming once again an association of sovereign states for specific purposes without a common currency and citizenship. The second will be over what, if anything, is a European identity, with the populist nationalists arguing for a definition based on the historic white and Christian identity of Western Europe while their opponents argue for a more open and cosmopolitan definition.