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Monday, September 16, 2013

Ten years on, what Britain can learn from the Swedish euro referendum

Last Saturday was the tenth anniversary of the Swedish referendum on the euro, and our Director, Mats Persson, wrote this piece for the Guardian's Comment is Free:
"The best argument against democracy is a five-minute conversation with the average voter," Winston Churchill famously said. He could have added that the best argument against elite rule is a five-minute conversation with your average politician.
I used to be sceptical of referendums. They are populist instruments, I thought. Voters never vote on the actual issue. And what do voters know anyway? Then the euro happened. 
Saturday is the 10-year anniversary of the Swedish public voting no to joining the euro in a high-profile referendum, 56% to 42%. The Swedish elite was in shock. All the major parties, the national newspapers, the business organisations, including the Swedish CBI, and most of Stockholm's chattering classes favoured ditching the krona. According to some estimates, the yes campaign outspent the no campaign 10 to one. There were a lot of clever and genuine people on the yes side, making valid arguments such as eliminating exchange risk for business and replacing the flaky devaluation policies of the past.
However, it was obvious that something wasn't quite right. Yes, perhaps Sweden could benefit from sharing a currency with Germany, the destination of many of its exports. But the euro wasn't about liberal economics: stretching from the Arctic circle to Sicily, it locked vastly different countries, cultures and economic structures, into one monetary system, under a single interest rate – forever binding together the problems of all its members, large or small. It was a system based on the hopelessly flawed assumption that politicians and central bankers would make the right decisions all the time.

As with all referendums, there were various reasons why the Swedish public voted no, including an inherent bias in favour of the status quo. Fundamentally, though, most Swedes' gut instinct – bondförnuft as the Swedes say (literally "farmer's common sense") – told them that a serial defaulter with dubious finances, Greece, and a heavily industrialised exporter with an obsession with sound money, Germany, simply couldn't share the same currency. Swedes treated the exam question with the same kind of book-keepers' approach by which many of them run their own household economies. Whatever the experts told them, the arguments – and the numbers – simply didn't add up.

Ten years on, Europe is shrouded in uncertainty, but one thing is clear: the Swedish public got it right, the elite got it wrong. Though there may have been some politicians in Sweden and elsewhere who saw the single currency as the ultimate way to set the snowball rolling towards an EU superstate, the euro was far more a case of cock-up than conspiracy. Today, 80-90% of Swedes oppose the euro, and the political and business elites are wary too – save the odd isolated politician doing an impression of the Japanese soldiers found in the 1960s refusing to believe the second world war had ended.

However, referendums are by no means a magical potion. It's clear that there are cases where they're hijacked or misused – and where they lead to outcomes that no one intended or that settle nothing. Sweden itself has some less successful experiences with public votes. In 1980, a three-way referendum on whether to ditch nuclear power – arguably a populist kneejerk response to the Harrisburg disaster – generated a vote in favour of a vague plan to incrementally dismantle all nuclear plants. The result was totally inconclusive, leaving half the country embittered on the issue (Sweden still has nuclear power today).

Incidentally, there's a lesson for David Cameron here. He has promised to negotiate a new settlement in the EU and put that to an in/out referendum by 2017. If that indeed happens, the worst possible outcome is a 49-51% type result, too close to call in either direction. As in Sweden in 1980, much of the population would feel disenfranchised and the EU debate will continue just as before. This isn't in either the UK's or Europe's interest.

To avoid this scenario, there needs to be substantial and systemic changes, ideally rooted in EU-wide solutions so that they last (unilateral opt-outs tend to be eroded). That would allow a decisive vote in favour of the UK staying in a heavily reformed, slimmed-down EU.

One can have different views on Cameron's strategy, but given public and political discontent about the EU status quo, sooner or later there will probably have to be a referendum to settle the Europe question in this country. And as the Swedish euro vote shows – warts and all, the public can opt for perfectly rational and responsible outcomes that would not occur if politicians were left to their own devices.


jon livesey said...

This is one of the best pieces I have read for a long time. I think the concluding remarks about the UK are dead on. If Cameron gets a "kind of" half satisfactory deal with the EU and that is followed by a slim majority for staying in, that will be more or less the worst outcome, because it will settle nothing, and the in/out debate will simply come back to life.

If the EU was really thinking of its own best interests, they would offer Cameron major concessions to keep the UK firmly in the Single Market, and accept that the rest of the EU superstructure isn't needed or appropriate for the UK.

Unfortunately, events such as Barosso's speech this week make me think that EU leaders are in such a sealed bubble that such an outcome is pretty unlikely.

Anonymous said...

It is clear to most UK citizens that neither the EU nor the Euro work. The EU has presided over the biggest economic disaster that Europe has seen and yet everyone responsible is still in their jobs..

The UK's own politicians have let the country down badly by not seeking any kind of mandate from their own electorate over the last few decades. Politicians have gone off piste.

The UK's referendum must happen ASAP and not in 2017 to prevent further damage to the relationship between parliament and the people.

When it does come, the baseline for the referendum must be leaving the EU in favour of EEA/EFTA membership and not leaving the EU per se.

Free trade -Yes
Sovereignty - No


Martin Anderson said...

The reasonable argument put by reasonable men like Mats Persson that Britain should remain inside a reformed EU ignores the question of how long the EU would remain reformed. Even post-reform, the interest groups in Brussels would remain to push for centralisation and aggrandisation; there are no countervailing incentives to ensure equal pressure in the opposite direction in favour of liberalisation. So even if Britain did opt to remain in a reformed EU, it would be only a matter of years before the same problems provoked the same debate all over again. In brief, the incentive-structure in Brussels, as in all political markets, means that enduring, long-term reform of the EU ain't going to happen. Out is the only answer.

Average Englishman said...

Open Europe is located more in the real world than the Brussels elite but I still do not see why your mentor should consider it would automatically be a good thing for the UK to remain in the EU after a few changes, even major ones.

What the UK population signed up for (me included) was to be part of a Common Market' not a Disunited States of Europe with 'One People', 'One Government' and 'One Leader', (now where have we heard that phraseology before?.....In German it will perhaps be clearer.....'Ein Volk', 'Ein Reich', 'Ein Fuhrer'.

If the guys in Brussels will roll the legislation back to 1975 (and give the UK back its stolen fishing rights) then who knows; such an unlikely attack of reasonableness might just do the trick and keep the UK in the EU but absolutely nothing less will do and let's be completely real guys; there is as much chance of that happening as England winning the next World Cup.

Anonymous said...

"Though there may have been some politicians in Sweden and elsewhere who saw the single currency as the ultimate way to set the snowball rolling towards an EU superstate,"

This is not only untrue, it's a deliberate attempt to obscure the ONLY reason the Euro was devised: to force its users and other EUSSR countries into a crisis that would precipitate total, anti-democratic political union.

Some liars call this a "conspiracy theory."

But honest people know better.

Anonymous said...

What I have learnt in the last 5 years, let alone 10, is that our MPs and the EU cannot be trusted with our futures.

No democracy, no transparency, no accountability and no financial clue have led to a complete loss of confidence and trust.

I quite agree that should there be a UK renegotitation we will only end up in the same situation in a few years time.

UK out.