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21 June 2016

What the world needs now is closer collaboration and institutions which foster rules-based order, not a raising of the drawbridge, writes Jürgen Bröhmer.

Britain’s historic referendum on membership of the European Union is about to take place, and whichever way it goes, there are unlikely to be any clear winners.

If the Bremain side wins many will think that we witnessed a case of much ado about nothing. The reality will be somewhat different. The campaign will have left deep scars, and its impact on the political reality in Europe and the EU will be felt no matter what the outcome is – especially if the result is close.

If the Brexiteers win, nobody knows what will happen, and the challenge will be for all involved to start cleaning up the debris. It will be a major political earthquake.

The Brexit vote is a placeholder for a much broader question relevant around the globe, including in the Asia-Pacific region. The overarching narrative of the Brexiteers is the notion of having lost control over their own political destiny, and wanting it back. The problem raised by the Brexiteers – and it is a problem – is the fact that, increasingly, important decisions are perceived to be, and often actually are made, not in the various parliaments, such as Westminster, by electorally accountable deputies, but elsewhere.

From the perspective of those complaining, the main actors are faceless people alternatively addressed as bureaucrats, capitalists, speculators, “Washington”, or whatever fits the respective ideological mood and circumstance.

The Brexit referendum is only one, albeit a very significant, example. When in the 1990s the International Monetary Fund (IMF) made access to its financial instruments contingent on certain conditions and the catch-word “conditionality” was born, the question was raised whether an organisation such as the IMF should have the power, perhaps even the right, to determine important social and other policy outcomes against the will of the affected people.

Back then conditionality mainly happened in the third world. But when conditionality came home to roost in Greece in the shape of the Troika of the IMF, the European Central Bank and the European Commission (two EU institutions) it led to an outcry in the country and prompted a referendum. When that referendum didn’t help and conditionality prevailed, some believed that a democratic foul had been committed.

Similarly, with an increase in global trade, discussion of free trade agreements, smaller deals or mega deals such as the TPP and TTIP, leads to opponents arguing that the other side will now be able to dictate health, environmental, safety and other standards to the detriment of one’s own country. Simply put, a loss of control. Regulations of the World Trade Organization (WTO) are another example; even if it is only a reduction in admissible tariffs, member states are barred from legislating higher tariffs. This too is a loss of control. When investment chapters in free trade deals or so-called BITs (bilateral investment treaties) allow investors to seek legal protection in arbitration tribunals (investor-state dispute resolution, ISDS) there is an outcry.

More on this: Counting the cost of Brexit | Thomas Sampson

But should we (always) retain control? With climate change and the mitigation of possible effects, little appears to be happening because it is so difficult to reach a broad consensus on anything because joint action would require some real loss of control at home. When it is revealed that obscure law firms in Panama (Mossack Fonseca) are dealing in all kinds of business, some of which apparently enable not only legal tax avoidance but perhaps even large-scale tax evasion, there is an outcry. Is this outcry about too much loss of control? No, in this case, it is an outcry about too little control.

Democracy is, by and large, national democracy. Democratic legitimisation is mainly achieved through national institutions. Increasingly, however, governance is required on a transnational or international level.

Insofar as democratic legitimisation cannot be achieved in international decision-making there is a dilemma. Either there will be a democratic deficit and all that such a deficit entails, from decision acceptance deficits to loss of control referenda, or there is a governance deficit for all the decisions not taken in tackling problems.

Both alternatives are bad alternatives.

There needs to be a better option, but what could this alternative be? It could only be a mix of things in which the concept of subsidiarity would be an important central pillar. The concept of subsidiarity posits that decisions should be made at the lowest governmental level unless the objectives of the action cannot sufficiently be achieved at this lowest level. This principle is as important as it is vague and it is therefore by no means sufficient, as the EU is now finding out. A system that marries democracy with effective transnational decision-making institutions will not be easy to devise. Ironically, the EU’s democratic system is actually a pretty good one as far as aligning national and transnational decision-making goes. It is not good enough for some, however. But could anything be good enough?

The issue is not only a national versus an international issue. The Scots were close to leaving the UK, many Catalans and Basques want to leave Spain. Many Americans feel disenfranchised by “Washington”. People everywhere appear to be uneasy with their central political system and politicians. The reaction always seems to be one of retreat. To Scotland, to England, to the home state, to one’s private circles, to more autocratic government.

All of this leads to a disengagement from the political system. That is exactly what is not needed. What is needed now is collaboration and institutions which foster rule-based collaboration. Raising the drawbridge is certainly not the answer.

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Bröhmer, Jürgen. 2016. "Brexit Versus Bremain - Policy Forum". Policy Forum.