European Constitution referenda: "wisdom of crowds" in action

Results of French and Dutch referenda took the European political and media elite by surprise. "No" vote has been anticipated, particularly by financial markets but its magnitude and decisiveness: voter participation was high (close to 70% in France and over 60% in Netherlands: this compares with about 30% in the yes vote in Spain last March), and the gap between Yes and No, spectacular.Yet, true to form and engrained habits, learned commentators were quick to belittle the motivation of voters. The success of No was attributed to a coalition of disgruntled, backward-looking, chauvinistic no-hopers. No vote was deemed essentially a protest vote, so heterogeneous as to render it practically meaningless. It is true that in France, voters with lower incomes, reduced educational levels and from poorer regions were more likely to vote against the proposed treaty than their richer, better educated compatriots from wealthier areas. It is also true that practically all the extremist parties, whether from far Left or from far Right, called for the No vote and, on Sunday evening, their leaders were preening and crowing on national television. Similarly in Netherlands, spokesmen for No came primarily from political fringe, and their arguments often lacked political correctness.Yet, convenient as it may be, the "unworkable coalition of extremists and losers" explanation will simply not do. This was a mainstream vote, reflecting a large popular consensus, articulated, for those who took the trouble to listen, around two clear and compelling arguments:- The proposed treaty was badly thought through, sloppily written and conceptually confused. It might have an inadvertent consequence of high unemployment and 35 working hours week, but all observers noted that a very large proportion of French voters actually read the text. And it is certainly not an accident that as the referendum day was getting closer, the percentage of negative vote intention kept growing higher. In other words, familiarity (with the text) bred contempt.The core problem with the treaty was its inherently contradictory nature. Its proponents argued simultaneously that it was merely a tidying up exercise of reconciling various treaties already in force and, at the same time, a major step forward in the political integration of Europe. In the similar vein, we were told that nothing really will change after ratification of the "constitution" and that, in the event of rejection, Europe will collapse.The extent of conceptual confusion has been further demonstrated by reaction of some European leaders, particularly the President of the European Commission, Jose-Manuel Barroso, and the President of the European Council of Ministers. Mr Jean-Claude de Joncker. Before the ratification process started, the official position was that the Constitution has to be approved unanimously. Now, these two gentlemen seem to insist that, despite two countries turning it down, the Constitution is not dead. Do they mean that it will be implemented à la carte, in countries which approved it (in a way similar to the introduction of the euro) or that the rule of unanimity is being changed into a role of majority?- Citizens of France and Netherlands do not consider that the European Union made them better off. Or, to be more precise, they do not believe that the recent major EU advances, particularly the introduction of the common currency and the successive enlargement increased their economic and social welfare. Specific country circumstances differ: France suffers from low growth and high unemployment, while Dutch resent their excessive contribution to the EU and blame the euro for higher prices. Nevertheless, both citizens of both countries share a jaundiced view of EU benefits. And this view is based on uncontestable facts. Not surprisingly, it leads to a widespread skepticism about further EU evolution.Thus, confronted with a bad text, which carried a risk of aggravating an unsatisfactory economic situation, French and Dutch voters reacted in politically and economically rational way, they rejected it. They vividly demonstrated what has been called by an American author, James Surowiecki, the "wisdom of crowds ." Let's hope that, beyond epidermic posturing, the European leaders will adopt a similarly wise attitude and resist already visible temptation to keep the treaty on life support or even to revive it. They asked voters a complex question and received a clear answer. In turn, they should respond to a simple query: "Which part of No you did not understand?"

published on Interactive Investor (www.iii.co.uk)