I've not read the book, so I can't know exactly what they mean but this is one possible explanation.

History can be used for ideological and nationalistic purposes.

Basically teaching people that their country and culture is based on a set historical background wherein that country, people and culture is glorified may serve a purpose to calm and reascertain people that their lives stand on firm ground. They don't have to question their way of lives or their morals if it's all backed up by it's nations history.

I mean, history can be used to back up the politics, policies, morals, ethics of a nation. History can for instance be used to justify war, wether it be civil war or against a neighbouring country.

Usually this kind of history is created by scholars upon instruction from the ruling elite (to simplify) and is taught to Eriksons "dull-witted" people. (usually poor people without formal education, meaning the majority of a poor countrys population)