How Europe bungled its way to the Brexit

A man murdered Jo Cox, a Labour Member of the British parliament, yesterday.

It may have been an act of terrorism, as Cox was a prominent supporter of Muslim refugees and spoke out in favor of staying in the European Union. Several witnesses reported that the murderer shouted "Britain First" — the name of an extreme right anti-immigrant, anti-EU group — while shooting and stabbing her. If so, that would make it the first political assassination of a sitting MP since Irish nationalists murdered Ian Gow with a car bomb in 1990.

The background here is an upcoming U.K. referendum on EU membership, scheduled for next week. In the most recent polls, the "leave" campaign has pulled ahead. Cox's murder may change some minds, but it's not terribly surprising that it's close. Far-right xenophobes like Nigel Farage bear some responsibility for whipping people into a frenzy — but so do the elite technocrats that dominate the EU. The last decade of EU policymaking, particularly with respect to the eurozone, has been saturated with nonstop bungling so horrendous that it has badly discredited liberal internationalism itself.

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On the face of it, the "Brexit" vote is an odd development. The U.K. has an unusual status within the European Union, with most of the advantages of EU membership and few of the disadvantages. In particular, Britons get visa-free movement throughout the EU and privileged access to European markets, but are not trapped in the economic murder-suicide pact that is the eurozone.

Still though, the eurozone is undoubtedly the signature feature of the European Union. It only covers 19 out of the 28 EU members, but aside from Denmark and the U.K., all are obligated by treaty to join it in the future.

The original point of the eurozone, in keeping with the romantic post-WWII ideals of the EU itself, was to further political integration by putting the economic cart before the horse. It was and remains a very large currency union without most of the things that make a currency union work. Unlike the United States and the dollar zone, there is no universal European banking authority, and no overarching EU government with any power. By contrast, the U.S. federal government, with its centralized bank regulation and large taxing and spending, acts as a shock absorber by preventing banking crises from spreading and by automatically doling out increased social spending to struggling locations.

This was all known at the time, even by designers of the EU. They thought that once a crisis happened, Europe would be forced into the real economic and political union that would make the eurozone viable over the long term. It would be painful, but eventually a true United States of Europe would emerge, and the violent nationalism that twice drenched the entire world in blood would be buried forever.

But the generation of European politicians and bureaucrats that actually had to deal with the crisis when it came did the opposite. They did not push for the fiscal, banking, or political union which would have required uncomfortable admissions of gross error on the part of French and German banks and EU regulators.

Instead, they searched for scapegoats, and found them in the supposedly lazy and irresponsible countries of southern Europe, which were suffering the predictable result of a years-long trade deficit coupled to a sharp recession. So those countries were brutally savaged with austerity in return for unsustainable loans, pushing their economies into an ongoing crisis about equal to the Great Depression that is not remotely fixed. Spain, Portugal, Italy, and Greece are all still in dire economic straits, with zero chance of a quick recovery. The eurozone as a whole only just crawled back to its pre-crisis economic output in April of this year — something the U.S., itself not a paragon of good policymaking, managed back in 2011. As Steve Randy Waldman writes:

Again, it doesn't really make sense for Britain to be worried about eurozone failure per se. They still have their sovereign currency. But the incompetent and violently anti-democratic way EU elites have handled post-2008 policy has poisoned the very idea of a united Europe, and provided enormous stimulus and substantial credibility to political factions that have been against the EU from the start. Some such people are vile racist xenophobes who are enraged that the mayor of London is a Muslim for the first time.

But others, such as The Telegraph's Ambrose Evans-Pritchard, are ordinary cosmopolitan liberals who have concluded that the EU is so broken and dangerous that it's better to get clear of it while they can. Witness British currency markets, which are in upheaval partly at the prospect of the savage reprisals EU elites would likely extract if it leaves, so as to set an example to other nations that might consider an exit. Perhaps better to end a relationship where that sort of abuse is a constant threat.