Brexit: public square versus political market

Don't panic transparent

Photo: Christian Sinibaldi

“I’d rather be a poor master of my own fate than a rich servant of someone else’s.” Michael Caine

“My policy on cake is pro having it and pro eating it.” Boris Johnson

Introduction

The rise of populism has raised the rather important issue of the relationship between the deliberative and the representative democracy. Alternatively, and more specifically, between demagogy and plebiscitary support. The topic as old as political thought, starting with Xenophon, Plato, and Aristotle (Sen reports on similar themes in early Indian political thought, but I know nothing about that).

The way to approach this topic within contemporary positive political science or political economy is that of public choice theory (check Mueller’s advanced textbook overview and Calculus of consent by Buchanan and Tullock for the most authoritative early, foundational statement). Here is an essayistic, but hopefully not simplified, account of the theory and of the topic of democratic decision making on the example of Brexit. The query is this:

How could have such an issue like the status of the Irish border post-Brexit been so utterly disregarded or dismissed in the public debate preceding the referendum?

Jump first: Brexit

The way a country, including the UK, joins e.g. the EU is to negotiate a treaty, a contract, then vote on the agreement in the Parliament or in a referendum (mutatis mutandis this is how multilateral or bilateral agreements are arrived at). The vote can fail, as indeed referenda on joining the EU have. A well-designed treaty should theoretically ensure unanimous or quite convincing public support once put to a vote. Partners to the contract, e.g. UK and the EU, have indeed to reach the unanimous agreement. The key issue here is a well-designed treaty, which has both a substantive and a procedural side to it.

The same approach should apply to a secession or a devolution. However, in the case of Brexit, the procedure was reversed. First, the end-result was decided in the, nota bene non-binding, referendum, by a majority vote, and a close one at that, then the terms of the withdrawal (secession) and of the post-secession relationship are being negotiated, and there is no final popular vote scheduled that might contradict the result of the initial referendum given the agreement reached.

The argument could be made that there is not much of a difference between the two procedures because a lengthy public debate preceded the referendum on Brexit. And that should provide for quite an adequate substitute for the pre-decision political negotiations. Thus, the question is:

Whether public deliberation can indeed substitute for political decision making or whether there is a significant difference in the final outcome between the choice made in the public square and the one that emerges from the pre-referendum negotiations, in the political market as it were? Put differently, does trading arguments in the public square secure equal or even greater democratic legitimacy in comparison with trading votes and commitments in the political market?

Getting around the Repugnant theorem

Public choice theory has been motivated by the search for solutions to social choice impossibilities since its modern revival in the 1950s. (Plato, I think, was aware of the social choice problem in the Republic, thus the benevolent and enlightened dictator; Aristotle was aware of the public good or the free riding problem; more in Gligorov, Political preferences.) Could democratic decision-making avoid the unpleasant conclusion that:

Either the indecisiveness of the majority rule or the unlimited dictatorship – are the only two consistent outcomes of social or public choice?

Public choice, as well as social choice, theory provides many positive answers which work in specific circumstances, but none in general (consult Mueller’s book, though his treatment of public choice is better than that of social choice). One is tempted to conclude that there is something with the voting that is at fault. After all, the market, at least in theory, decides on any number of issues, i.e. who ends up with what and at which price, unanimously, i.e. in the Pareto-optimal way. Not so social and public choice however, even if it is as democratic as to be unanimous and even if a fair amount of political market is opened (Gligorov, Pareto liberals and libertarians; also, Gligorov, The sure loss).

Public choice, the Buchanan and Tullock Calculus of consent version of it in any case, relies on the Wicksellian argument of market allocation which goes as follows:

A trade at an agreed price in a market can be taken to have had the unanimous support if everybody could have offered better terms of trade, but did not. Every bilateral trade in such a competitive market satisfies the Pareto condition, i.e. the unanimity condition (more in Gligorov, The unanimity principle; also, Strncevic and Gligorov, Good, Pareto-better, and the best).

Thus, what if the political decisions are made in the same way in which they are made in the market?

Political market includes public goods though, so a decision on any single issue comes with free-riding and externalities, so:

(i) unanimity has to be required, rather than implied,

(ii) items to be voted on may have to be bundled, i.e. log-rolled, i.e. there will be compromises, and

(iii) votes have to be tradable.

With that, costs and benefits of e.g. item by item voting may be properly aligned for each and all voters. The final vote on e.g. the trade bill, or the budget, or on market regulation, or on all of them together will still be required to ascertain that the process has indeed delivered the result which commands the necessary overall level of support.

Why is the vote on the final composite bill required? Because the overall costs may add up to more than the public, the voters, may have had in mind when voting on any separate issue or on any bundle of issues short of all the issues put together. So, what are even unanimous referenda on the parts may not imply unanimous or convincing majority support in the referendum on the whole. The same applies to the inverted procedure: vote on the final outcome may not be consistent with the line item votes (see Sen’s Collective choice and social welfare on that).

Why? Because allowing for vote-trading (to rule out dictatorship) should enable not just the representation of preferences but of their intensities too. That violates the independence of irrelevant alternatives condition of social choice theory (i.e. binary preference ranking and choice). That, however, means that the decision can be manipulated – voters may misrepresent their preferences in order to get their preferred outcome on specific issues (what is called strategic voting). Overall, however, in an up or down referendum, especially if it requires unanimity or realistically qualified majority (e.g. that all of the regions in UK vote for the deal), they may not agree to the outcome of item by item votes (or region by region votes, i.e. federalism and centralism may not end up agreeing on the separately taken decisions even if all of them were supported unanimously).

That is why, a referendum on the final deal is needed and it needs to be planned in advance, it has to be expected. The hope then is that the political process of vote-trading across specific issues of interests will not only aggregate the votes and bundle specific issues into the overall final outcome, but will also discipline the manipulations to those that can at least command, or rather will be expected to command, the support of the convincing majority in the final referendum (i.e. there might be side-payments in addition to vote trading). Majority vote will still lead to inefficiencies (compared to unanimity), but at least the sign should be the right one, and that is all that is being decided at that late stage anyway.

Agora: experts versus demagogues

Brexit was deliberated in the public before the vote. Is there a difference between trading votes and trading opinions? The difference is in the motivation and consistency.

The motivation in the political market are the interests of the participants. Negotiations over the terms on which votes or issues are traded lead to consent. The key book on this, with all its flaws, is Calculus of consent by Buchanan and Tullock. The idea is to find a mechanism to eliminate or minimise legal and legitimate (e.g. discretionary or agenda-setting) as well as the illegitimate (e.g. corrupt) coercion, with the associated rent-seeking, and look for government by consent. Political market with competition is the answer.

Relying on interests and political trade also minimises the informational requirements a la Hayek. In addition, one can solicit the support of expert knowledge to instrumentalise the interests a la Weber.

In the public square, arguments are exchanged, not votes. The arguments are advanced to support opinions rather than knowledge (as in e.g. expert discussions), so consistency is not required, persuasiveness is. Which is to say, rhetoric may win the day, may prove decisive a la Aristotle. In addition, informational requirements to participating in the debates in the public square may be heavy, so emphasis on the ends to be secured rather than on the means required may be one way for an average member of the public to minimise the investments of time and effort in acquiring the information needed to have an informed opinion. That latter task falls on experts.

So, intrinsically, in the public square, the debate tends to be between demagogues and experts, between those who emphasize the ends, the desirable, and those who point out the needed means, the feasible.

In addition, the demagogues are not constrained by the requirement of consistency while the experts are. This is really the Socratic argument – the demagogue is happy to accept the premises and reject the conclusion or even more often advance a conclusion and then search for premises. Or, the demagogue lauds the ends and dismisses the concerns over the availability or even lack of means or alternatively argues that with the power of the popular vote alone, the desirable is feasible.

E.g. laud Brexit and reject that there is the Irish border problem or propagate Brexit and then search for solutions to the Irish border problem. E.g. an invisible one, like with eyes wide shut.

Thus, the experts lose, if they lose, because they argue that the desirable is not feasible, which is what is meant losing to populism or to plebiscitary will.

Think twice: representative democracy

A way to combine the public square with the political market and potentially rule out the demagoguery is that of the representative democracy which is to a very large extent an English invention. The idea is to enable the voters to think twice via their representatives who specialise in both debating and vote trading. The representatives are bound to the interests of their principles through regular elections. Other checks and balances can and usually are thrown into the system which can be called the representative republicanism (check Mill on representative government who emphasised bicameralism and the role of expertise or informed opinion in the upper house, which he thought should be appointed not voted in – you needed to qualify as knowledgeable and public minded to become a member).

Two problems still remain. One is that representatives can turn demagogues, as Burke warned early on, and the other is that the political market can be monopolised because (i) it is thinner (i.e. there are too many local and too few issues that interest everybody), and (ii) the decisions are taken by majority vote. Over time, those defects can be mitigated, but the inefficiencies can also pile up supporting the move, if it is made, towards populism i.e. towards plebiscitary rule.

A way populism can make a comeback is exactly that of the Brexit example: decide on the desirable first and search for the feasible afterwards. The way to achieve that is for the representatives to turn demagogues. In addition, the system of governance, e.g. liberal-democratic one, might be supportive of such an internal revolution because of the institutionalised relationship between the representatives and the experts, e.g. between the Parliament, the government, and the civil servants. By design, a civil servant rationalises the desired policy of the representative or the government. The latter, in the UK’s case consisting of MPs too.

This design of governance is that of liberal democracy: the choice of the ends is the outcome of politics, of electing representatives; non-elected civil servants are tasked to come up with feasible policies (one can call this the Weberian governance set-up). That determines the relationship between the politicians and the civil servants, which is reflected in the institutionalised principle-agent relationship in a Westminster type of representative government.

Thus, if the representatives turn demagogues, there is no expert check on the policies that they are advocating. That still may not work, as it did not in the Brexit case, in elections, but it may work via a plebiscite, as it did. Decide first on the desirable, then have the experts find the way to make it feasible. In that, there will have to be arguments that will be wrong, but not necessarily discarded in the public square. Or, there will be problems which will be disregarded or minimised, such as the issue of the Irish border.

Free-riding or the cake issue: having it and eating it

Why what might work in a referendum may not work in elections? Because of party politics and of the time limit (with the possibility of the change of heart or mind).

The emergence of political parties is the way to rationalise politics in the representative democracy. Parties attract voters with programmes or manifestos which aggregate the interests of those whose votes are being sought. So, political market emerges through party politics (see Hume on that; he also warned of the problems with the ideological competition). Assuming some e.g. ideological, left-right, consistency in the distribution of interests in the electorate and the majority rule, moderate (i.e. centrist or median voter) interests will prevail (perhaps because of Duverger’s rule of the dominance of the two-party systems). Then expertise helps with the design of policies to implement those interests.

In addition, the electoral decisions and the decisions of the elected officials are subject to revision in regular general elections and in early ones if there is an issue of the legitimacy of the government or of the representative body. Democracy indeed is the institutionalised irresponsibility, a system which allows the public to change its mind (public preferences need not be transitive, especially over time as the public learns from experience). Representative democracy should minimise the irresponsibility with institutionalised reflectiveness, but one possible outcome of the reflection, of reasoned and reasonable decision making is of course to change one’s mind.

So, party politics and regular elections are the way to keep the political market functioning in a liberal representative democracy (liberal here meaning that there is pluralism of ends and trade-offs when choosing one outcome or policy over another; see Berlin on positive versus negative freedom).

The system is, however, vulnerable to ideological competition which may see the emergence of demagogues with limited check by the experts in the public square. More often than not this will happen over the national interests. Nation being the usual framework of democratic decision making.

An interesting case where the expertise loses to demagogy is that of trade policy. In the Brexit case, the claim that multilateralism within and through the EU is inferior to the bilateral opportunities opened up by leaving the EU. It turns out, though it should have been known in advance, that for one, the multilateral context cannot be avoided, and for another, the immediate alternative to the multilateralism of the EU is the multilateralism of the WTO, with the latter being clearly inferior to the former.

Most basically, the multilateralism of trade never goes away (the point made already by Smith and Ricardo, though with different takes on the welfare consequences of protectionism; more in Gligorov, The theory of (international) value). But the distribution of power does change e.g. for the member of the EU negotiating trade agreements in the global trade setting alone rather than jointly.

In trade theory and policy, the bilateral setting of a country and the rest of the world is useful to see the policy alternatives for a small open economy. For economies with some weight bilateral trade policies have to either assume away the rest of the world with a caeteris paribus condition or have to take multilateralism into account explicitly. If e.g. UK is to negotiate a trade agreement with the US, both parties need to take into account their trade relations with the other countries or the rest of the world with all the trade-offs that implies. Issue then is whether the influence of the UK as a member of the EU, which is a large trading block, in negotiations with third parties or with multilateral institutions is higher or lower than that of the UK alone. On the basis of the weight of the economy, clearly UK enhances its influence as a member of the EU both within the EU, within which it is a large economy, and with the rest of the world, where it is a much smaller economy.

Another important example is that of sovereignty. And that gets to the heart of the Irish border issue. The issue is not about trade facilitation and not about the post-Brexit trade regime. It is about the Good Friday Agreement. Now, international agreements are the expression of sovereignty, not a limitation of it. In this case, there is an agreement, the Good Friday Agreement, between two sovereign states, Ireland and the UK, which, and that is crucial, is facilitated by their joint membership in the European Union. The latter, through the single market and the EU human rights convention, enables both the equal rights provisions in the Good Friday Agreement and the self-determination right for Northern Ireland. The latter is crucially dependent on the former in the following way:

The crucial requirement in secessions or in exercises of self-determination is that there is no deterioration in the equality of rights of the individuals and peoples, of the minorities in particular. Which is why the Irish border issue is the withdrawal issue, not the issue of the future trade or market regime.

The issue then is does Brexit invalidate the Good Friday Agreement by changing the rights and liberties on the island of Ireland?

If it does, does that represent the limitation on UK sovereignty? The answer is obviously negative, the Good Friday Agreement being a sovereign decision of the UK government on a contract with the Republic of Ireland. Both the membership in the EU and the agreement with Ireland are sovereign acts. The issue is:

Can a sovereign country renege on its international obligations?

That goes to the heart of the issue of sovereignty as far back as Bodin:

In the end, sovereignty is a real, not a legal capacity (the same way a state is, comes into being, as a real entity and not through a legal process).

UK can leave the EU legally on the basis of the Article 50 of the EU Treaty, but the Good Friday Agreement has no time limit and no exit close. So, getting out of it, albeit by leaving the EU, risks legitimacy crisis in Northern Ireland. And then it is a real not a legal question whether the UK government can impose its will on Norther Ireland. The persistent crisis of legitimacy and sovereignty on the Irish Island led to the Good Friday Agreement, with the EU membership of both Ireland and the UK facilitating it, so the same issue of effective sovereignty which the UK faced prior to the Good Friday Agreement is what potentially UK is going to face post-Brexit if Good Friday Agreement is invalidated in the process.

The bet of the Brexiteers is that it is one thing to keep the legitimacy crisis alive for years or decades even, while it is another to trigger it again after a prolonged period of peace even if the terms on which that peace is maintained have been changed. There are fixed costs which may make it undesirable and thus getting out of the EU and the Good Friday Agreement, albeit de facto by changing the rights and liberties of people living on the Irish Island, may prove feasible, and thus an exercise of effective sovereignty. By, and that is crucial, violating the previous sovereign contractual obligation.

That leads to the understanding of the one condition which enables the effective use of demagogy, known since Demosthenes and Cicero. National interests are especially susceptible to demagogy for two reasons: the public good problem and the emphasis on privileges over rights.

National interest is almost intrinsically about public goods, e.g. security or sovereignty or protectionism. That enables the public debate that is about the ends rather than the means, because the voter can be under impression that they can free-ride on the costs of their decisions – they can have their cake and eat it. Indeed, one can demonstrate one’s patriotism apparently without cost, e.g. one is ready to be poor to be sovereign, especially if one is already poor or even more readily if one is not, as in the case of Mr. Michael Caine’s counterfactual patriotism quoted at the head of this piece.

That leads to the second opening for the demagogues – attracting support of the special interests by arguing that their rights will be privileged, e.g. over the rights of foreigners: my interest, i.e. my job, is in the national interest while yours is not because you are a foreigner (where the criteria of foreignness may be satisfied even by citizens let alone by non-citizens). These are incentives which are hard to argue against on their merits, because the rights of the others, of the foreigners, have to be considered too, who of course are not party to the conversation, which is why experts, who are arguing, if they are arguing, impartially tend to lose in the debates about the national interests – when they do not turn demagogues themselves, the latter happening all too often with the rise of populism (more on the social welfare function in Gligorov, The theory of (international) value).

Devolved into us: taking back control

The key concern of public choice theory is the elimination of the coercive or agenda setting power. An example is the power in the US Congressional committee system. The chairperson of a committee of the US Congress determines the agenda by putting a motion to a vote or not and by prioritising both the order in which motions are put to a vote and the amendments are submitted and decided on. So, by knowing the preferences of the committee members, who are usually transparent given their party’s policies, the chairperson can set the agenda, which includes the decisions of not putting motions on the agenda, in the way that pre-determines the outcome. That power is valuable, which is the say it is the object of rent-seeking. The chairperson can sell it to the highest bidder as it were. The end result is government by consent albeit a rigged one.

This is of course a much more general problem of the exercise of power and not only of a discretionary one but of any power, legitimate or illegitimate likewise, e.g. of centralisation. One remedy to centralised decision making is devolution, e.g. federalisation or any other type of state or political union. Disregarding de facto, and not to mention de jure, devolved decision-making responsibilities can risk a constitutional crisis. Which is the case in point with the issue of the Irish border.

More generally, this is the issue of the referendum design. In a political union, it makes sense to require that all the members of the union approve of the referendum decision which is of such importance as the membership in the EU clearly is. This was completely disregarded in the Brexit referendum. With that, the special position of Northern Ireland was also disregarded. However, if indeed, post factum, it must be considered, as there is now realisation that it must, constitutional problems will emerge with the requests for equal treatment of the other union members. Indeed, UK is not a federation, but it is a political union, a composite state so to speak, and though it is mostly governed centrally, by the parliament in Westminster, the constitutional stability still depends on the sense of legitimacy among the union members. Indeed, UK is more of a political union then most federations because the member regions and nations have the right to secede if they choose to do so. And a decision to leave the EU without the consent of, in this case, Northern Ireland and Scotland, who voted against leaving the EU, can clearly trigger constitutional crisis in the form of increased support for independence.

This is also relevant for sovereignty or to the desire to take back control. UK is externally sovereign, while constituent regions are not. However, internally, sovereignty is devolved and while UK is fairly centralised, comparatively speaking, the right of Scotland or Northern Ireland to secede makes them indirectly externally sovereign too. Of course, not as long as they are within the UK, but to the extent that they can condition UK’s external sovereignty, i.e. its ability to sign international contracts or get out of those, with the threat to deny their legitimacy or outright secede. As in the case of the Irish border.

From the theory of public choice point of view, federalisation contributes to stability because it limits the discretionary power – in this case of the centre over the regions. And it limits the potential for rent-seeking. This indeed was one of the arguments for the inclusion of the article 50 in the current EU treaty. If used consistently, the threat of secession should discipline the power of the central governing body and strengthen the consensual aspects of governance.

Again, as in the case of sovereignty, the power of the centre is a real or political and not necessarily a legal issue. However, in the case of Northern Ireland it is not clear whether the real can beat the legal, which also can lead to constitutional challenges in other devolved regions of the UK. The way the referendum decision was taken and is being implemented does increase the risks for stability of the political union, of the UK (more on that in Gligorov, Why do countries break up: The case of Yugoslavia).

Invisible backstop

The normative part of public choice theory is its contractual view of legitimate coercion or of governing. This is true of social contract theory in general since the earliest versions from Hobbes to Kant. Its importance for the decision like Brexit is clear in the example of the problem with the so-called backstop provision on the Irish border. To see this, take the argument that the backstop arrangement, by which the border between the UK and the EU will not be re-established if an alternative arrangement is not found which will rule out the necessity for that border in the first place. The backstop, which in essence continues to treat Northern Ireland as if it was inside the single market as long as a permanent arrangement is agreed on which does not, to simplify, violate the Good Friday Agreement. It is a temporary arrangement, although without a precise time limit. The backstop will not be resorted to if the two sides, the EU and the UK, agree to the permanent alternative arrangement.

The argument then is that it is an insurance policy which is needed at the point of UK’s withdrawal from the EU but will never be invoked because the future permanent arrangement will be agreed on during the transition period, during which UK will as a whole be in effect inside the single market. The problem with this argument is that to the extent that the Good Friday Agreement relies on the support by the joint, Irish and UK, membership in the single market, there is no alternative to that which does not violate the parts of the Good Friday Agreement. Therefore, joint agreement to the alternative arrangement will be needed, not a unilateral decision by the UK, which is not going to be forthcoming if indeed it is to change the rights and liberties that people living on both sides of the Irish border enjoy.

So, rather than looking for an invisible border, the negotiations will have to somehow make the backstop solution invisible.

Contractual government or rule by consent is conservative in the sense of Burke, it does require the agreement of all the parties to the contract, which is to say that without unanimity of the parties to the contract, the status quo prevails.

Brexit means Brexit: blackmail by authenticity

The remedy to the power of demagogy and plebiscitary democracy comes with competition, in this case ideological. The commitment to a set of ends and means to achieve them stabilises the space for deliberation and decision making a la Hotelling. Put differently, the distribution of ideological preferences, and thus party programmes, due to the exchange of ideological arguments gets to be single-peaked, which makes majority vote decisive and consistent over time. Ideology serves as a commitment device and thus rules out cross-ideological coalitions needed for populism. Crucially, it limits the appeal of demagogues to their respective parts of the political space. Finally, it supports deliberative democracy by supporting cross-ideological trade of arguments in order to come to a common conclusion (what Habermas called communicative action).

Putting aside intrinsic problems, of which there are many, ideological competition tends to break down once there is an agreement about the ends without due consideration of the available means. Most studies of actual surges of populism find the same pattern: commitment to ends ahead of proper consideration of the availability of means, with populist policies proving to be unfeasible or self-defeating (most of those studies are about left-wing populism in Latin America in particular and indeed they led to the so-called Washington Consensus as the policy remedy for that variety of populism).

However, once there is the commitment, ideological competition becomes an obstacle rather than the instrument of rationalisation. This is clear on the Brexit example. The demagogy of ends becomes the one of authenticity to the commitment. The initial expression of desire becomes the instrument of blackmail to stay true to the decision – ideology turns into blackmail. Those who would change their mind are labelled traitors.

Thus, populist demagogy collapses the political and ideological space, it engenders an ideological revolution by crossing ideological and party lines e.g. by pitting the people against the establishment or the bureaucracy or the experts, against the feasible, in the triumph of the will as it were, which then serves as the commitment that the demagogues rely on to urge the public to stay true to. That is blackmail by authenticity. E.g. the slogan: no deal is better than a bad deal, which turns out to mean: there is no better deal than no deal.

Put simply, pragmatists tend to lose to hard-liners in the populist ideological competition. The remedy is the rebirth of political competition, which is possible once democratic mechanisms of decision-making are used to reassess the political commitment – i.e. the feasibility of the desirable.

Brexit is the perfect example. The referendum is basically a constitutional moment, i.e. a potential change in the constitution i.e. from representative to plebiscitary democracy. The constitution will be changed if the result of the referendum cannot be challenged in a follow up referendum or in the Parliament, preferably after the general election. The demagogical argument is that the decision was made, and implementation is the only issue left, even if that meant pure democratic impotence.

Alternatively, political market needs to be recreated. In that, the public square should play a role if it can resurrect proper ideological competition. This is where the public push for a popular vote is helpful. While public debate ahead of a referendum may prove fertile ground for demagogues, public consideration after the terms of implementation are known may provide the public of the opportunity to think twice, to decline the ideological or political blackmail.

Conclusion: Destabilising democracy with the will of the people

This is really the oldest political theme: how to immunise democracy from demagogic revolution. Public choice theory identifies the vulnerabilities of both the direct and the representative democracies and highlights the useful contribution that the political market can make. Trading arguments is not enough to check the demagogues, it in fact may provide them with the mechanism of influence.

Even as an established representative democracy as the UK can be revolutionised by demagogues who, as is usually the case, cross the party lines on a combination of national and social public goods – the promise sold to the public for its desirability with the appeal to the all-powerful provider of feasibility which is the authentic will of the people. And demagogy subverts the representative into the plebiscitary democracy, which in the end does not even command the support of the majority.

Peščanik.net, 19.11.2018.