By Peter Atwater
On September 18, Scottish people will vote on a referendum for Scottish independence. This past Sunday, September 7, the front page of the Sunday Times of London delivered what Business Insider described as a “bombshell.” By a slight margin, Scots are now in favor of independence– a reversal from only a few weeks ago. Business Insider, like many media outlets, was taken aback by the latest poll out of Scotland.
As a socionomist and a researcher in confidence-driven decision-making, I have been watching the polls in Scotland closely. Changes in confidence alter our preferences, decisions, and actions, and history shows a strong and very clear relationship between weak social mood and secessionist behavior. While the ties between England and Scotland have been longstanding and particularly strong, social mood across Europe has been weak, particularly among low– and middle–class voters. Based on this, socionomic theory strongly suggests that the relationship between the two countries will be challenged, making the odds of a “yes” vote far higher than the earlier polls may have suggested.
When social mood is weak and confidence is low, self-interest, close physical, ethnic, and racial proximity, and short-term time frames dominate behavior. We exhibit what I call “me, here, now” choices. We impulsively select options that “narrow” our world, which we believe will help reduce uncertainty. Voting for national or ethnic independence is one of these impulsive choices. With even more extreme declines in confidence, internal civil wars and external nationalist occupations can occur. The recent events in Ukraine, which followed a particularly severe collapse in Russian confidence when the Russian equity market lost more than one-third of its value – would be an example of the latter. Rather than weak mood causing Russia to turn on itself, it is instead seeking to create “Novorossia,” a national state that replicates and brings to mind strong nationalist memories of the Russian Empire at the end of the 19th century.
What economists and policymakers fail to appreciate is that the decision to secede is not based on rational financial or political measures. All of the perceived benefits of integration are overpowered by an intense weak confidence-driven need for a smaller, simpler, and more isolated existence. In 2010, Alan Hall of the Socionomics Institute noted, “Major social-mood declines trigger anger that is expressed in social division, disillusionment with government, civil unrest, and, at large enough degrees, war. Secessionism springs from the [negative social mood impulse] to polarize and separate.”
To paraphrase Swedish actress Greta Garbo, when confidence is low, we want to be alone – even more, we want to be alone with people who are most like ourselves. Differences equate to heightened uncertainty. Across Europe today there are many examples of mounting national and regional isolationism. In Spain, Catalans are seeking an independent state that recognizes their unique language, culture, and traditions – all familiar social elements that rise in importance as confidence falls. Other groups in Europe, rather than seeking independence, are instead excluding others who have cultural or ethnic differences. Anti-immigration sentiment is particularly high today in the hard hit periphery, where social mood remains particularly weak.
There is also, of course, the march of “de-globalization” that is afoot; voters are seeking to reverse the complex interconnectivity that exists today across labor, goods, services, and capital. This, too, is driven by rising “me, here, now” preferences.
It is almost certain that policymakers will appeal to Scottish voters with offers of financial and political incentives in exchange for a “no” vote on independence over the next two weeks. At the same time, ad campaigns will offer long lists of potentially dire consequences arising from separation. Not only will these pleas not sway voters, they run the risk of further alienating voters who may still be on the fence. Ironically, during periods of weak social mood, testing nationalist conviction only strengthens the resolve.
As the polls are currently tied, I expect that the outcome of the vote on September 19 to be largely determined by what happens to Scottish social mood between now and then. For those looking for a real time proxy of mood, they should watch the London Stock Exchange closely, as market and mood often move in tandem; a falling market will significantly increase the odds of a “yes” vote.
Even if Scottish voters reject this referendum, European policymakers would be wise to take note. Without a sharp rise in social mood, not only will Scots soon reconsider their action, but secessionist movements across Europe will also resurface.
At the same time, should the Scots vote “yes” and separatists mobilize elsewhere, particularly across the periphery of Europe, policymakers’ attempt to link the two actions – or worse, blame the Scots – should be ignored. Some suggest that a Scottish “yes” will cause a contagion. What they miss is that a Scottish “yes” vote won’t cause others to act. The real source of action will be the same weak confidence that is driving the Scots to action today.
Unless confidence rises across Europe, the secessionist efforts of regional and national voters will continue to swirl. If European leaders want to get ahead of this movement, they need to focus on how their own efforts are impacting the confidence of voters. Rather than focusing exclusively on building economic growth, they must focus on boosting national confidence as well.
While secessionist news out of Scotland is making headlines today, it is hardly the only way that weak confidence is adversely impacting Europe. So long as mood remains weak, voters’ “me, here, now” decision-making will be a strong headwind to growth.
Peter Atwater is the President of Financial Insyghts LLC and an adjunct professor at the University of Delaware. The author of Moods and Markets, he writes and speaks frequently on confidence-driven decision-making.
[Photo courtesy of Lawrence Lew]