History Repeats Itself

Many of my liberal friends are enchanted with Brexit. It is difficult to explain why; the European Union is a project that should appeal to liberal ideology. From an economic point of view, the principle of increasing the size of the market and reducing the barriers to commerce is one of the oldest aspirations of liberalism, first expressed by Adam Smith in “The Wealth of Nations” in one of his most famous quotes, “The division of labor is limited by the extent of the market.”

For Smith, the division of labor was almost synonymous with technological progress, equivalent to growth. It is, therefore, clear that one of the axioms of the father of economic liberalism was that the larger the market, the greater the economic growth. It is not, however, a simple argument of authority. The reality of this principle is confirmed to us every day: The largest countries with the largest markets are the ones vying for economic supremacy over the world.

Today, the U.S. and China are the leaders, but there are many examples from history. From the 16th to the 19th century, Japan remained virtually isolated from the rest of the world. However, in 1868, its politics changed dramatically, and the country opened itself up to the world. What followed was a period of unprecedented growth. The case of post-Mao China is quite similar.

Europe – once the world’s greatest power – with fragmentation of its markets and internal struggles, found itself playing a reduced role after two world wars that were, above all, two European civil wars. The results of Woodrow Wilson’s nationalist policies after World War I were like using gasoline to extinguish a fire. It became evident after World War II that a Europe united around a common market was the solution to the economic and political problems of the region and was, therefore, also a powerful solution to resolve the problems of the wider world.

As with all human endeavors, the European Union has serious problems: Notable among them is the lack of cohesion between constituent nations. On the one hand, it has fallen to the sin of optimism and admitted members that were far from the required maturity; on the other, it has allowed differences and rivalries to hinder progress toward the integration necessary for experiencing the benefits of a single market. Political and economic regional disagreements, especially between the north and south, block integration. Few citizens understand the bigger picture that transcends national borders and city neighborhoods. All these problems tend to highlight growing impatience and skepticism.

But all this is not sufficient justification to explain British separatism and even less help in explaining the support for separatism from non-British sources. Even less, for those who defend the decision as liberals. The problem of the cohesion between European nations is something for which we can find a solution, in time, as the next generations travel and learn languages, making inhabitants of member nations and indeed other nations feel more connected. This is the reason student exchange programs such as “Erasmus” “Socrates,” and “Comenius” were designed.

The only explanation that occurs to me for the appearance of what I call “aberration of pro-Brexit liberals” is the wave of irrationality that has invaded the world, especially the Western world, as a result of the last great recession. If we add to this the anglophilia that Spanish liberals traditionally rally around, perhaps we can shine a light on an explanation for the paradoxical posturing of my liberal friends. Recently, the two biggest and most emblematic Anglo-Saxon nations, the U.S. and the U.K., have been invaded by a wave of irrationality that threatens to destroy the existence of coexistence and cooperation, so laboriously constructed since the end of the World War II, in great part by the same two nations.

But this is not new. History is repeating itself. As Marx said in “The Eighteenth Brumaire of Luis Bonaparte,” “History repeats … first as a tragedy, then as a farce.” (Boris Johnson clearly does not realize this.) The last time a wave of irrationality invaded the world as a consequence of an economic catastrophe was during the Great Depression of 1929-1939. A subsequent occurrence is taking place right now, as a consequence of the Great Recession of 2007-2017. In accordance with all of this, I propose a new theory to be known as “the Archimedes Social Principle,” with the following definition: “As a consequence of an economic crisis, society will experience an attack of passing madness proportional to the magnitude of the crisis, that is to say, the decrease in national income per capita.”

In response to the Great Depression of 1929, countries imposed high barriers on commerce, starting with tariffs (in which the U.S. set an example with the deplorable Hawley-Smoot Tariff Act), soon resorting to quotas, foreign exchange controls, restrictions or prevention of the movement of capital, etc. What – at the start of the century – was a somewhat integrated international market had fragmented into small, national markets surrounded by high, impenetrable walls. The cure was worse than the disease.

Under the Adam Smith principle, the decrease in market size reduced international trade, and with it, income, which aggravated the depression. The level of collective madness rose: Germans chose Hitler as their chancellor, fascism infiltrated Europe and civil war broke out in Spain. The triumph of Roosevelt in the U.S. in 1932 was seen by some as the prologue to communism and by others as a fascist Trojan horse. He was neither of those things, but the collective, transient madness warped the perception of reality, and people acted according to this perception, The last outcome of all this madness was World War II, the most violent and deadly conflict in history.

According to the Archimedes Social Principle, we are presently repeating the same mistakes. The British appear to have achieved surprising extremes of madness. Two and a half years ago, Brexit supporters tried to make leaving the EU agreeable to the public by saying that there was no danger of leaving without a deal, because negotiations would be very simple and would be over in a matter of months. Today, these same supporters, including the brand-new prime minister, have changed their tunes dramatically in favor of a hard Brexit, whatever the consequences, and the public seems willing to follow them, despite so many lies.

The madness has risen in the U.K. to such a degree that there is now a strong subsection of society that would prefer to dismantle its own country, separating from Scotland and Northern Ireland – thus ceasing to be a united kingdom – rather than to remain in the European Union.

Returning again to Adam Smith: Of course the separation of the U.K. will have a huge economic cost, above all for the U.K. itself. It does not matter to them; they are not thinking rationally, but when they wake up from this transitory madness, it will already be too late. Who knows what my liberal friends will say then.

The U.S. has jumped headfirst back into protectionism. The wall that Trump and his voters want to build is much more than a legal tariff; it is real and made of steel and iron. Protectionism, the same isolationism that so damaged the country during the Great Depression, has returned. Populist right-wing parties gain support in Europe, and the left flock to isolation. We are walking into a political and economic fragmentation similar to the one that happened 80 years ago.

But there is one small hope. One can and should learn from history to not repeat the absurdities of the past. If the recession did not become a depression, it is because economists and politicians have learned from the past and have turned to Keynesian solutions where applicable (sometimes they are not). What we now need are psychiatrists who know how to cure the collective bout of madness.