139 | Adam Tooze on Europe

A special extra episode for this week with Adam Tooze, author of Crashed and one of our most popular previous guests. He takes us through the wider political and economic context for Britain's Brexit crisis, from Italy to France to Germany, and beyond to China and the US.  Plus he explains why Brexit is one of the great calamities of his lifetime.

DAVID: Hello, my name is David Runciman, and this is Talking Politics. We have an extra episode this week with Adam Tooze and he is going to explain the wider European and global context for Britain's Brexit crisis. We recorded this conversation about a week ago, so before the big vote in the House of Commons. This isn't about that. It is about the big picture: what is happening around the world? When we talked in the summer we touched on a few of the kind of potential flashpoints. Six months or whatever it is is quite a long time in political economy. We did at the end… I think you and Helen both agreed that you saw Italy in the European context as the the bit that was flashing red. So maybe we start with Italy and then work out or sideways from there. So how do you see the Italian situation at the moment? How dangerous is it for the European project?

ADAM: Well I think the Italian situation has changed shape since we last talked. All the way through to November and indeed early December it looked as though we were set for a real showdown on the battleground of the budget itself and the capital markets, and then Rome pulled back from the brink offered a compromise which the commission accepted. Both of those moves were significant. And so I think in that sense the immediate crisis that we saw coming has been postponed. I say postpone for two reasons: first of all, the warning lights on the Italian economy have been flashing red really for the last six months. So the denominator in the debt to GDP puzzle, the GDP element of that, is on a retrograde. Through the first half of 2018 it looked as though the eurozone including Italy was actually picking up some steam. And then the Eurozone as a whole has slowed down and nowhere more severely than in Italy. Really bad numbers out of the Italian manufacturing sector and ongoing problems in the banking sector.

But then the other element of this which I think is even more important is the relative balance within within the Coalition. So there are different ways in which this compromise could have been done. But I think the really worrying sign both over the latest bank bailout of the big bank in Genoa and over the terms of the settlement with the commission are that the deal is basically being done on terms set by the League not by Five Star. And if you had to pick, you know, the best of a bad bunch, from the point of view of the viability of the European project, what you don't want to be doing is handing victories to The League over Five Star because Five Star are the bit within that coalition, which, you know, a couple of years ago could still broadly have been classed as pro-European and The League evidently not. But the bank bailout… Bank Carige Is a Genoese Bank which is in the heartland of The League in the north, and the elements that were sacrificed in the budget deal were the elements that really were a Five Star territory and The League is going to get the tax cuts for small business that it wanted. And in the longer run, of course, this this bodes ill because if this coalition is reconfigured under the dominant sign of The League, that may give us a pro-business agenda, a supply-side reform agenda on which they might be able to agree with the Commission and the IMF and God knows who. But in terms of the broader politics of Europe, it's a disaster because come refugee crisis season next summer, we're going to be dealing with an even less co-operative Italian government.

DAVID: Because we also have, come the European elections, both parties in the Italian government are positioning themselves for that. And we've seen recently the one thing that Salvini has done is he's made this pitch to the Poles that there's a kind of a new axis, which is bizarrely the Italian-Polish axis to set against the Franco-German axis. And in the wider European context, I mean East-West is too crude, but there is this sense that Italy is increasingly looking east.

ADAM: Yes.

DAVID: And that's The League. I mean Five Star have also been sort of positioning themselves with populist parties, Scandinavian populist parties, the sort of slightly more techno end, but the Savini pitch with the Poles is shocking in a way.

ADAM: And there was a position in between, which was the Berlusconi friendship with Putin, and even before that Rome has always been very lukewarm on sanctions against Russia over Ukraine. One should shouldn't underestimate the extent to which Italian business is tied up in deals in the Black Sea. You know, we think of Germany and German business as being the real appeasers, but as is always the case in Europe, it takes a coalition to actually build up a position. And in the same way as the Germans need the Dutch on the hard budget position, if you're in the business of appeasing Russia you really need a coalition, and Italy has always been part of the coalition of the willing in that respect, almost regardless of the government because of the underlying business interests. And I think… you mentioned the Franco-German axis. I think what's really critical is the position of Macron. Because Macron is positioned as every populist’s favorite enemy, and given the weakness of Macron’s position now, of course, that's also not that's not very appetizing for the elections in the spring. [5:46]

DAVID: Let's come onto this in a second because we also had the announcement of a new Franco-German understanding. But the other thing the Italians have been doing, like you said, has been not just been beating up on Macron but really picking a fight with the French to the point of saying they're not gonna lend their Leonardo's to the big Louvre exhibition and all that. You know absolutely kind of cartoonish nationalism. What's at stake in the Italian-French standoff do you think?

ADAM: Well I do think that Macron is seen, or was seen, as, as it were, the EU's best hope. If you’re an EU federalist, if you’re an integrationist, the antithesis of what Salvini’s position is, then Macron is your real enemy. And from the point of view of the Macronites and those of us who are committed to really the development of the European project, Germans may be willing now and then to announce, you know, new coalitions with France. But de facto since Macron’s election they have left him out to hang. I mean the compromise the last eurozone summit before Christmas was a disaster. I mean it was very underreported  because I think everyone's just suffering from eurozone fatigue and there were so many other things to worry about. But I mean on the all of the fundamentals, on the eurozone budget, on the issue of the Banking Union, there was just minimal movement from the German side. And what we really mean, we have to be clear here, is that the conservatives basically blocked any movement because Olaf Scholz, the German finance minister, the supposedly the strong man of the SPD was another victim of that compromise because he had been making quite loud noises about some sort of unemployment compensation… one shouldn't call it an insurance fund because it isn't really an insurance fund, it's a sort of temporary countercyclical transfer fund that he was proposing, that basically got cut down to size by the Dutch in this case. So there are now these cross cutting coalitions wherever you look anchored on a big nation state and then a smaller one, so Italy and Poland or the German conservatives and the Dutch, which make European politics right now incredibly incredibly complex, and it's a real impasse I think.

DAVID: And to what extent do you feel that Macron’s domestic political weakness factors into German attitudes here? Because it's the same with the Italians as well, domestic politics… and one of the reasons that The League wins is The League is just polling way ahead of Five Star. They’ve flipped it. One of the reasons that Macron loses is not just because of what's going on in the streets but he has historic low approval ratings and German politicians presumably notice this. But what's leading what here in a sense? You've got the sort of fundamentals and then you've got the political popularity contest. Would a more domestically popular Macron have more leverage or is he just going be cut out whatever given German attitudes?

ADAM: It's such a complicated balance because there is on the one hand the rough calculation of, ‘Well does this person have any domestic heft?’ Which, as it were, is one element of the calculus. Another element of the calculus is, ‘Oh my god, Macron is our last best hope. If he's in trouble we need to jump in behind him and back him up.’ And the Germans have periodically… different bits of the grand coalition have periodically operated on that kind of logic.

DAVID: Do they look at what's going on with the yellow vests and think there but for the grace of God? Or do they think that's French politics that's not coming to Germany?

ADAM: They think it's French politics but it's in Germany's interest to try and moderate that push. In other words, it is the kind of logic that you would hope Germany would deploy. This is the kind of intelligent hegemon. In other words, ‘He's our friend. So we really ought to work with him rather than having to work..’ I don't think the Germans imagine the yellow vest movement at home in Germany itself. The third position, which was very strong on the right wing in Germany, is the Macron is having seen as capitulated to the yellow vests with the concessions that he made before Christmas. And then all of a sudden the suspicions of German conservatives about the Macronite project were revived and Macron all of a sudden becomes the Trojan horse through which some form of indiscipline and sacrifice is going to be imported into European politics.

DAVID: And presumably they remember the Macron was the appeaser of the Greeks when he was part of Hollande’s government. He was the one that Merkel had to slap down for pandering, as they thought to Southern Europe.

ADAM: Once upon a time he was a socialist. Once upon a time he was that conniving… you know, Varoufakis’ best mate in the negotiations that summer. So the calculations are extraordinarily complex, I think. But if you look at the outcome of the actual eurozone deliberations before Christmas, the conclusion of those is extraordinarily minimal. And if this is about substance, then the willingness of Germany to support Macron is actually in practice very minimal. And I think we would need a fundamental power shift in Germany itself. [10:28]

DAVID: So let's ask that question is there any chance of a fundamental power shift in Germany?

ADAM: Well if they take the polls, evidently. If you ran the election right now we'd be in a new reality. I mean the the SPD’s position is so weakened. The big charge by the AfD seems to have somewhat come to a halt. They seem to have plateaued out at 20 percent. The big shift now is really between the SPD and the Greens with this huge surge in support for the Greens, who emerge as the kind of...  in some sense the party of nostalgia for the old federal republic. You know they're pro-European they're a rationalist Party, they're long-term horizons of ecological change, capable of compromising with the CDU and the SPD, and they are a party overwhelmingly of Western voters, so they don't have a strong base in the east at all. That I think of as being one of the really characteristic developments of the last 12 months in Germany is the emergence of… On the one hand the solid new formation of the right, but then also the emergence of this sort of retro-Western politics on the part of the Greens, which however, would form an ideal coalition partner for a Merkel 2.0 CDU.

DAVID: In that context, were that to be the new coalition, what would that do to that fundamental relationship with Macron? Because that's a huge… you know that I can guarantee, that's not being discussed in Britain at all. But potentially that's the consequential part of this picture?

ADAM: Yeah but what's really striking about German politics is that everyone understands them as pivotal to Europe's future. The German political class understands the European stakes, but their elections are not about Europe anymore than anyone else’s are directly about Europe, and it's unclear, I think, whether the current Green Party has the kind of Joschka Fischer foreign policy guts and instincts. They're not a party hardened in the way that Joschka Fischer’s Party was by the big struggles on principle in the red-green coalition in the 1990s about intervention in Kosovo and so on. That kind of fibe,  if you like, is not constitutive of the Green Party at the present. They aren't a party that's been in government. They were not in government at any point during the eurozone crisis. So they haven't really had to prove their mettle on eurozone politics. It's not obvious which portfolios they would get in that coalition, whether foreign policy would really be one of their portfolios, or is this some sort of toxic coalition in which they add the green pizzazz to a reconsolidation of a more conservative agenda on the part of the CDU, which is I think also a possibility here.

DAVID: And all of this very finely balanced coalition building, coalition breaking is taking place with the prospect of a slowdown in the German economy, potentially a recession, and a wider global recession. That’s what’s happening in the United States, what's happening in China. But if we do it from the European perspective, what's driving economic anxiety in Germany at the moment? How much has that got to do with China?

ADAM: Well I mean I think what we're seeing is the vulnerability of the German economic model in its current form to global economic conditions. This is the path forward that I think is, broadly speaking, true, insofar as their manufacturing sector in particular relies on high valued exports of capital goods and so on to emerging market economies, they are acutely sensitive to a slowdown in China. And I think we have to accept now, whatever the fogginess of the Chinese statistics may be, that that is what's going on there. It's been a very very significant fall in investment. Just a general slowdown in economic activity across the board. And so that does ripple back.

DAVID: And it's already rippling back.

ADAM: Yeah Germany is slowing fast down. The manufacturing numbers are very bad for the last couple of quarters. And that's true across the board for the entire eurozone. There's been a really marked slowdown. And in the face of that the ECB is still committed to ending quantitative easing, ending the bond purchase program, and opening the door to a discussion about rising interest rates despite the fact that, you know, the trigger for QE, the trigger for bond buying in 2014-15 was fear of deflation. The core measure of that is the so-called core price indicator. In other words not the bit affected by oil prices and extraneous factors like that. And that is not trending in the right direction right now. If anything it's trending back towards 1 percent which is dangerously close to deflation territory. So the enemies of QE will say, ‘Well we did QE for all these years and it doesn't work.’ Friends of QE will say, ‘Well imagine what it would have been like if we hadn't done it. You know this is how lame this engine is and we have to keep our foot, the pedal to the metal, then we just have to keep up a foot on the gas because the European economy really is a lame duck and just needs this amount of stimulus.’ [15:15]

DAVID: And what's the danger here that the Germans, many Germans have sunk so much into the skeptical position about QE that at the point where they actually need it, they’re going to shoot themselves in the foot essentially by using this as an opportunity to justify a position that's now out of date?

ADAM: And there's also I think there's also reason to fear that the euro will in fact appreciate against the dollar over the next couple of years, so we're moving into a position now where the eurozone surplus with the dollar region of the world is sufficiently large to actually lead well on the fundamentals. I mean currencies are moved by all sorts of factors, but the fundamentals of the situation would suggest the need for a eurozone revaluation, a move upwards in the euro against the dollar because the surplus is very substantial, and that's absolutely the last thing that the German economy would need at this moment. So you can see the eurozone drifting towards territory which is dangerously reminiscent of Japan's situation in that sense, where you just have to keep providing the monetary dose. The euro slash yen is constantly at risk of appreciating too much, which which then causes an export-led recession. It's not a pretty picture from that point of view.

DAVID: Do you sense it's going to feed into wider… we're going to come on to Brexit in a bit. I’m kind of circling around that before we come back to it… that it could feed into a kind of wider European political weakness, which is… it’s going to be really really hard to get agreement on any kind of decisive action. There will be a lot of tinkering... I mean the Japanese situation as I understand it is it's kind of calibrated so that you do just enough to stave off absolute catastrophe but you're basically frozen. So British politics is in a weird way frozen at the moment, but is there a risk that, rather than something dramatic happening in Europe, that it is also frozen through this Brexit process and is weak? I mean politically and economically weak?

ADAM: I mean yes. I think it's important to distinguish different types of negative outlook. And I don't think right now we're in the heart attack zone that we were in in 2007-8 or in 2010 or even the disaster scenarios that we were pitching earlier this year with that unravelling driven by Italy. All of that kind of nightmare has receded.

DAVID: So I took you by the Japanese comparison, that's what I took it to be saying, which is Japan has gone through 30 years of non heart attack. It's actually kind of frozen…

ADAM: Exactly, it’s more kind of debilitated cardiovascular system.

DAVID: Getting older.

ADAM: Well this is your thesis, isn’t it? About the kind of middle aged, late middle age of advanced society? I know as an aficionado of Kojeve and Fukuyama and these kind of things myself I appreciate the sentiment. A kind of end of history mood is maybe the best way of thinking about Europe's situation. But that certainly I think is a more likely scenario than an explosion or a collapse, either one of those seems unlikely.

DAVID: And just… I’ll come back to Britain after this question… going beyond Europe, the risks of something explosive happening: China or the United States?

ADAM: They remain in China.

I mean the US, the adjustment in the stock market I think has to be taken as an adjustment. I mean the tech stocks there were were hugely overvalued by in relation to other stocks in the US, let alone stock markets anywhere else. I really think that reevaluation of equities that we saw at the end of last year and continuing is not that surprising. And the other fundamentals of the U.S. economy point to an economy which is running not at full steam exactly but in a pretty good healthy condition right now. But those tend to be trailing indicators, so labor markets records that you were in a good state. So I think in the US the prospects are now quite widely discussed of some sort of slowdown slash minor recession by the end of this year or early next year, which on the basis of cyclical form would be completely normal. Again, it's crucial to emphasize that it's not obvious, as hard as people have looked, it's not obvious right now that there's any material for a forest fire. The kind of catastrophe that we saw in 2007-08. There are certain sectors of the corporate debt market where certain people make out the possibility for threshold effects, where a small quantitative shift suddenly induces a qualitative shift in the nature of our economic outlook. So there is a large volume of corporate debt which is just on the brink of being reclassified from investment grade to non investment grade to junk. And when that happens it unleashes a huge shift in pricing because funds are no longer able to hold the same quantities. Now whether that by itself would be enough to produce an ‘08 style crisis I think is very debatable because to have that you would need those losses to be concentrated on the balance sheets of something as fragile as a bank, and that doesn't seem to be our situation right now. [20:02]

DAVID: Though the difference with ‘08 is there is a president who's willing to go to the, whatever it is, the wire, the mat, not just on the government shutdown, not just on the wall, but with the Fed, potentially. I mean at least to deeply politicize the relationship between the Federal Reserve and the U.S. government.

ADAM: This is true but this is a president above all with expansionist instincts, right? So what he’s complaining about is the Fed not doing a Bernanke. I mean this is his perpetual crazy mantra that, you know Obama had it so good because interest rates were zero. If only I had a presidency with zero interest rates… But I think that's the crucial thing to understand about Trump. And to do him historic justice, in ‘08 he was all in for TARP, he was all in for stimulus. He likes the state to do favors to American business. So I would not expect him to be a major obstacle to, you know, expansionary measures if necessary. But the politicization in and of itself might add an element of uncertainty the equation which could spook people. But only on the basis of the evidence of the first two years of the Trump presidency you'd have to say the American markets… you know they kind of like it.

DAVID: Well I kind of feel with that, a bit like what you were saying with corporate debt, that there is still possibly a spooking event out there that is qualitatively different. And then we haven't… the next two years could bring it.

ADAM: Yeah. I mean if he had fired Powell, you know, if he'd really gone after the Fed chair, that would have been a seismic event that, that would really scare the markets I think.

DAVID: Whereas in China as you see it there are big movements happening which could have global effects quite soon?

ADAM: In China our problem is opacity. We don't really have as much insight as we would like. But the canniest western China observers, you know, people like Magnus and so on, who write about China from a skeptical point of view from the outside, they really think that the situation is extraordinarily difficult and it will take another act of inspired technocratic management on the part of Beijing to avoid a hard landing at this point. It may indeed already be happening and they may be doing a very good job of burying it. You know they they cancelled the publication one of the leading indicators of Chinese manufacturing production, the Purchasing Managers Index from Guangdong a couple of months ago. You know there's real sign there the anxiety on Beijing's part and also an increasing awareness of the costs of further doses of stimulus. Now again there are like three different scenarios: there's a soft landing, there's a gradual recession, and then there's something shocking where we tip over an edge. And it's pretty difficult from the outside to tell which one of those we're going to be dealing with but any one of them represents a major shift in the forward dynamic of the global economy because China growing at 7, 8, 9, 10 percent per annum was the common denominator, was the taken for granted assumption behind so much of global growth. One shouldn't exaggerate I think how much it directly spills over. But to have that beating heart of rapid growth going on in East Asia in indirect ways created an environment of optimism, animal spirits, basically we were on a high. If that goes then we're really in new and uncharted territory. There are people who will talk up the India story. India is now the most rapidly growing economy. But there aren't that many people I think who believe that it can take over, and furthermore, right now India is still small. The thing about China is even if it's growing more slowly it's now much bigger than it was in its heyday super rapid growth. So the spillover effects for the global economy now are massive still.

DAVID: And do you take Xi talking about Taiwan, and I mean that increased turn to that slightly chilling nationalism a sign of what's going on in the background economically?  mean are these connected in your mind?

ADAM: I'm not sure I go for that kind of hydraulic, you know they're looking for distractions. I think we need to take seriously China's nationalist aspirations. Full stop always.

DAVID: Whether they’re booming or they’re busting.

ADAM: Yeah I mean they're for real about those issues and we should not kid ourselves about the seriousness with which they regard that issue, particularly the Xi generation of people who've come in and really see a new future for China.

Overall I think we are moving in the trade war scenario from arguing about tariffs on particular goods on particular commodities to a much deeper and more thoroughgoing re-evaluation of Chinese-American relations, which is also bipartisan on the American side. So whether or not Trump is the president in 2021 I expect this to be a key issue going forward. There's bipartisan, I think, agreement on the security policy side in DC about the vulnerability that America has accumulated over these last, what is it, 20 years of integration with China since the mid 1990s. And uncoupling is the new buzzword in the policy circles. I had an extraordinary breakfast with the French ambassador to to Washington who said he'd convened a bipartisan security policy meeting in the French Embassy to just kind of get... because you cannot get any sense out of the White House so he thought he would try to build a broader picture. And the consensus from both sides of the table was that uncoupling is on the agenda. So you know the Apples, the GMs that have made these huge investments basically in an integrated system in the East Asian economy, I think are facing very big question marks about how that's sustainable. And when we move into these new tech arenas with 5G and whatever the question is going to be put very very rapidly and with real intensity because you've got to jump one way or the other on that technology and you have to make a choice whether you get it from the Chinese or not, and if not what are you going to do? Similarly I think the batteries… so there's again a series of sort of threshold things which are pace setters, which mean that Taiwan has been an issue in Chinese-American relations all the way back to 1949. 5G has a kind of different temporality to it. We’re all going to want it, we all will feel we need it. Who are we going to get it from?

DAVID: [27:27] So in that context, the parliamentary dance of death around Brexit… you’ve definitely put it into a kind of perspective. But there is also still this fundamental question now for British politicians about what's at stake in the choices they make, which we've almost lost sight of because the choices have become defined in terms of very very short term advantages and in a very complex political game, essentially. But to go back to the conversation we were having in the summer that comes out of your book that fundamental question that fits the picture you've just described: We've got these contingencies and these very small, particularly political events that could have quite significant, dramatic, systemic consequences, and then we have the fundamentals: the necessity in all of this technological, ecological, geopolitical. And there is little Britain doing its little dance. You don't live here. You have attachments. What do you think is at stake in the decisions being made by British politicians over the next couple of months?

ADAM: Well I mean I’ll start from the small and personal end. What continues to be at stake for hundreds of thousands, now millions of people are really existential issues of where they live, and with what rights they live in the places that they live, and what the legal framework for their identity is. I was just having lunch with old German-American and British friends who don't know what the citizenship rights of their children are going to be who've spent their entire lives in the UK. I myself spent all of the formative years of my youth in Germany, never acquired a German passport. It didn't seem necessary and I'm now faced with losing, you know the legal frame within which that dual identity made sense. It's the most disruptive thing that's happened to me personally in my entire life.So I find it difficult to answer that question without starting there. That, for crying out loud, is what's at stake. And I appreciate that people who are affected in this direct way are a minority, and I've also come to understand what it means to be discussed in those terms, to be reminded constantly, ‘Oh but you're a small minority,’ which is indeed true. And what's clearly gone out of the picture here is the ordinary protections that liberals anyway would want minorities to enjoy as opposed to you know rampaging but rather thinly based majorities.So that's for me first and foremost what's still at stake. If we go back to the the bigger picture…

DAVID: And just to be clear, still at stake in the sense that you still think there is a way to rescue the thing that otherwise will be lost? Because there is also a possibility here that that ship has sailed and we're talking about different permutations. [30:15]

ADAM: Oh I understand that. Yes. No but I mean there is still after all a  thin, narrow path that would lead to a second referendum...

DAVID: But essentially the way back to the thing that that personally so affects you can only be achieved by getting back into Europe?

ADAM: All of the other things are various degrees of bad compromise. You know, do I get to stand at the passport line with the Swiss or the Norwegians or  whatever. Right? And out of protest I'm sometimes motivated to just go and stand with my American partner rather than carry this odious passport. But that is at the personal level and it's the experience, the intense experience of a minority. But at the bigger level surely what connects our conversation at the summer, what connects our earlier conversation now is this broader issues that any fantasy that the advocates of Brexit might have that there is, as it were, a welcoming, friendly world of possibilities out there into which a Britain freed of its ties to the EU could navigate its own way on some grand new adventure in globalisation… that to me is looking even more naïve than ever before and frankly even more dangerous and unproductive than ever before. I don't actually think that great harm is going to come to Britain but it seems extraordinarily unlikely that a Britain outside the EU will be able to make much positive contribution towards issues of global governance that ought to concern everyone and that will affect Britain as well. In the short run, all of the big actors just have more important things to worry about. I mean in European affairs I'd say Brexit is a second or third order worry. On a broader global agenda it's probably even lower ranked than that. The EU is done with this. [32:02]

DAVID: Did it come up at the French ambassador’s colloquium on global security?

ADAM: Not really. He just says, ‘At this point I'm the leading European diplomat in Washington because they don't take the EU seriously, the Germans are in a in a tizzy, and the Brits don't count anymore.

DAVID: And everyone else, god forbid. So that’s very French.

ADAM: I think it's understood to be a decision made by the British people. It’s been given a binding force. It’s been interpreted as a sovereign decision. Once you've done that it does indeed have a compelling force. And so then the question is, okay, what are the terms of this deal? And the answer is, given the balance of negotiating power, incredibly bad. But then that's what you voted for. And no one should be surprised. I mean a rational calculus would have told you that anything else was a sheer fantasy. And it is profoundly irresponsible on the part of the people who advocated it to suggest anything else. But there's nothing very, you know from the point of view of hardened European negotiators, there's nothing very surprising about where this has ended up. So it is a second or third order consideration. I mean there will be losses to bits of the European economy and they'll come at a painful time. But pretty early on in the process. Angela Merkel made clear that the German export sector was not going to call the shots on this. And pretty early on in the process the Europeans made clear that the Brits weren't going to be able to use Ireland as a as a weapon against the EU. They were going to back Ireland. How that will work out in economic terms I think is unclear because the cost to Ireland will be considerable. But you know, those are things for going forward.

DAVID: And going back to what we were talking about with Macron, do you feel for the Germans in particular there is a question about what needs to be done to prevent something far worse from being encouraged out of the bag. British politics is not in the condition of French or Italian politics but there are forces at work that you'd think German centrists would be reluctant to see let loose in Britain, and that therefore this deal which the Germans are committed to needs to be preserved and maybe concessions need to be made. Is there any sense that…

ADAM: Hang on, am I reading you right? Are you suggesting that French politics is in a greater, more alarming state than British politics from a German point of view?


ADAM: Ah, that’s really… puzzling to me. It's hard to imagine a political system more like spectacularly dysfunctional from a German point of view than the British one.

DAVID: So this is really interesting because, I mean...  let's talk about this because I haven't really thought about this. The British system feels to me like it's trapped and it's stuck.

ADAM: Yeah.

DAVID: And the forces are aligned in such a way that almost no one has any room for manoeuvre. And the French political system feels like fundamental social divisions now like lapping at the edge of conventional politics. And we don't have that in Britain, actually. The great line of the Brexiteers is that we killed UKIP and we kind of put the block on that kind of politics. And their great warning is, ‘You do a second referendum and you open the door to that.’ You do no deal, the more rational ones, and you open the door to something else. We're treading this path. So it's completely dysfunctional in this sense, and I would agree if you were a German, like malfunctioning frozen institutions is your ultimate fear because you think, like you said earlier, the yellow vests aren't coming in our country. But the French one looks to me dysfunctional in a different way because the social divisions are at work. And part of our problem is the social divisions have got nowhere to go because the politics has frozen them. Does that make sense?

ADAM: Doesn't that require you to take a view of Brexit as in some way independent of social divisions within the UK? Whereas you could see the Brexit as the result precisely of the contorted political expression of profound social divisions within the UK, articulated by political entrepreneurs of various stripes into and by way of the constitutional system, which is itself this creaking 18th century relic, into a into a total functional impasse the likes of which probably no one in Europe really has ever witnessed. Like this is an extraordinary act of self destruction on the part of a state. In France, no doubt there are nightmare scenarios in which Le Pen-Melenchon runoff for the French presidency. From Germany's point of view that would indeed be a disaster. I think their read of what happened with Macron is that when it comes to that, the centrist French forces rally. They may feel in light of what's happened in the last couple of months that the balance of that calculation has shifted. But Macron has got plenty of time on his presidency, you know that I think was probably their calculation. What from the point of view of a European is so terrifying is that they are so unwilling to grant any aspect of Macron’s positive agenda for Europe. That's the the connector which doesn't seem to have been made. That if he was able to present some aspect of his politics as actually having succeeded at that level he might have a stronger basis to stand on, and that that's where the Germans have just been completely unhelpful. [37:26]

DAVID: I completely see how, particularly from a German point of view, the British situation looks, apart from anything else, more hopeless. And is that part… because we sometimes hear that in this dance that's going on, not just in Westminster, but back and forth to Brussels Theresa May goes back and forth, doesn't get what she wants, tries again, there’s going to be a lot of trying again. There is this European view there's no point. I mean there's no point in kind of making concessions into this system that has just ground to a halt. All you're doing actually by making the concessions is empowering the people who are dying in their respective ditches and won't budge. Is that the way to see it from the European point of view? That actually what is so dysfunctional here is there's almost nothing to negotiate with. That giving Theresa May what she wants to get this deal through Parliament is simply pandering to what looks increasingly like a malfunctioning political system that will not produce any net benefit?

ADAM: I think I'd agree with that but there's also the European Union's position on almost all the issues. I think they just see it as logical deduction…

DAVID: I mean this  is what Chris Bickerton has been saying, that the process for them is clear and actually nothing really causes that to change.

ADAM: No. There's nothing really to negotiate over.

DAVID: Ireland is Ireland. These things, they aren’t real red lines, it's just it's the position they are bound to take.

ADAM: Yeah. There's very little kind of sense of political freedom or option here. We can talk about transitional arrangements for various type of banking regulations, on that you can make concessions, right? But on the basic issues of how does law and regulation operate if you remain within a customs union there just is very little scope for the EU to deviate. And in all elements of dispute they have the power to just sit this out because the worst case scenario for them is bad but it's not terrible. And they know perfectly well that on the British side the worst case scenario is literally difficult to calculate. So why move?

DAVID: So that was going to be my last question because the other way this is framed often more in the British context, very inward looking, is it's a game of chicken. Probably is a game of chicken in parliament but there is also somehow this thought that as we get closer to some kind of cliff edge it will focus minds in Europe too. But from what you say it's a game of chicken in which it's kind of a truck on one side and a small…

ADAM: It's more like a small child holding their breath and saying I’m not going to breathe. Like, fine. That kind of game of chicken. It's like whatever, I think you probably will. I mean I don't… that is part of, I think the misconstrual of the power dynamic. I mean it is such a legally bound, bureaucratically operating system, not in the sense that Brussels is some bureaucratic monster, that's a nonsense of Brexit propaganda. It’s actually a rather thin bureaucracy that operates on some very very clearly defined legal norms and legal bases. And so there are just hoops you have to go through. And leaving it doesn't make you free. It puts you in this position essentially like multiple ties, multiple binds, multiple forms of subordination until you are totally separate. But in that case you enjoy none of the benefits of a close relationship. So, I mean that's been clear from the outset. I mean there's not really been that much scope. It's just the question of how long it takes the British political system to digest this. And then yes, when it runs up against the competing claims made by different constructions, it leads to an insoluble problem on the British side. And I think the Labour party is totally kidding itself if it imagines that it breaks the May government by means of a vote of no confidence or the failure of the proposal and then has a general election and say it were to win the majority that it could negotiate anything fundamentally different. I mean that's I think that's also profoundly naive.

DAVID: The previous episode that we recorded with Adam about his book Crashed is still I think our most popular episode ever. You can find it on our website and we also have the full transcript. Join us in our usual slot next week when we will be talking about America and Donald Trump. My name is David Runciman and we've been talking politics.