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Shaking faith in democracy

Shaking faith in democracy

How Brexit damages confidence in international governance 

by Ben Shenglin in Beijing

Thu 21 Jul 2016

With consequences unfolding around the globe, Britain’s departure from the European Union has been guided by the conventional wisdom that democracy, ultimately expressed through a referendum, is a good and effective system for governance. Britain is held out as the pioneer and standard-bearer of western democracy; the EU vote was supposed to show how a democratic system functions.

However, ‘Brexit’ is likely to wreak irreversible and irreparable damage to Britain and the world. So, as an important by-product, the outcome will shake popular faith in the ‘sacred’ system of democracy.

A principal fault line between developed and developing countries appears to lie in divergences between economic systems. But there may be another one in the form of different views on universal suffrage, which many in the West consider a panacea for economic development.

With Brexit, democracy seems to have backfired. If democracy can go terribly wrong in Britain, the risk of this happening in many countries less ready for it may become unbearably high for their authoritarian leaders, prompting them to hesitate with or backpedal on democratic initiatives.

Of course, some people will argue that 23 June and the aftermath displayed shortcomings not of the system itself, but simply of how it was exercised. One can cite the ‘agency problem’ in politics: elected politicians tried to negate their own responsibility by calling a referendum on a decision that is not suitable for popular vote and should be made by elected representatives themselves.

A further argument would be that, if a popular vote is required, politicians should fine-tune the system. This would ensure that key decisions – such as leaving the EU – are made not just through a simple majority but through a more rigorous procedure subject to greater checks and balances.

Whatever the referendum’s longer-term implications, we have to investigate its more immediate impact, on the UK and further afield. As I noted in March before the referendum, ‘No one should underestimate Brexit’s potential negative impact on Britain’s relationship with Europe and its wider international reputation’. Many consider Brexit a ‘Black Swan’ event, previously unexpected and unthinkable.

In confronting harsh reality, we need to answer some challenging questions. The first is whether the UK will survive in its current shape. Will centrifugal forces in places like Scotland and London gather so much momentum that the UK will be dismembered and diminished into a much less important nation? Will history come full circle with a return to the pre-British empire era, when England was a standalone entity? The answers will determine much more than simply how harshly historians judge David Cameron, the luckless former prime minister.

The second issue is whether the EU falls apart and retreats to the original union of ‘core countries’, reduced significantly in size and global influence, perhaps enhanced in internal cohesion. Arguably the EU has been expanding too quickly and has focused unduly on amalgamation, rather than internal harmonisation among member nations. EU leaders now, still more urgently than before, must re-examine the balance between external expansion and internal cohesion, assess an optimal size for the Union, and find the right strategic path for the future.

The third area is in geopolitics. Whatever the exact progression of the first and second sets of circumstances, ‘Europe’, both as an idea and as a functioning body of nations, will be weakened on the world stage. This will change global dynamics, probably in favour of America and to a lesser extent Asia.

The overall repercussions extend well beyond such direct impacts. The indirect international effects, through a redrawing of ideological concepts of governance, may turn out to be still more profound. The results will reverberate around the international landscape for years to come.

Ben Shenglin is Professor of Banking & Finance, Dean of Academy of Internet Finance, Zhejiang University and Executive Director, International Monetary Institute, Renmin University of China, in Beijing.


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