British capitalism's crisis
By Frieda Park
Britain’s departure from the European Union is a major crisis for the ruling class. It represents the failure of the UK to assert its interests within the Union and is the result of contradictions created by the effort to manage its imperial decline. The crisis has been made worse by the embrace of parasitic neo-liberalism and the Covid pandemic, and has happened in a world where there is increasing conflict between new and existing power blocs.
HOW BREXIT HAPPENED
While the media focused on Labour’s problems around Brexit, the big story was really the eventual capture of the paramount party of the British ruling-class, the Tory Party, by Brexiteers promoting a policy which the overwhelming majority of the ruling elite was opposed to and was never even meant to be on the agenda. It seems like an age ago now, but it is worth remembering that Brexit was opposed by employers and organisations like the Confederation of British Industry; the majority of the capitalist media, including the Financial Times; and all the main political parties, including the Tories themselves, at the time of the referendum.
After the vote to Leave, the ruling class tried hard to avert Brexit, other arms of the state were deployed. A long war of attrition was fought by Remainers in parliament, which included all kinds of shenanigans by the Speaker of the House of Commons, John Bercow. There was action through the courts and there was the campaign for a second referendum, which was termed a People’s vote, as though the people hadn’t already voted. Even the Church of England and the Church of Scotland weighed in with prayers against a No Deal Brexit. These persistent and blatant attempts to undermine the democratic vote only served to harden Brexit sentiment in the Tory Party and the country and led to the election of Boris Johnson as leader and Prime Minister. He then gained a huge majority at the 2019 general election. The manoeuvres by the ruling class, therefore, had the opposite of the desired effect, handing the Tories to the anti-EU wing of the party, now powerful enough in parliament to ensure that Brexit would happen. This was something many were sceptical would be allowed - surely the ruling class would find a way to impose its wishes. Eventually the only way out would have been for it to have thrown its weight behind Corbyn and Labour at the election and that was not going to happen.
Brexit is momentous. How could the world’s oldest and most experienced capitalist class allow its dominant interests to be subverted by a minority within its own ranks? What does this political crisis and Britain’s exit from the EU say about British capitalism’s place in the world?
As well as having its origins in Britain’s decline as a world power, Brexit was also the result of the crisis of neo-liberalism. This brand of capitalism worships the market and relegates politics to the back burner. The politicians it produces are, therefore, largely shallow non-entities who rely on managerial solutions, consultants and spin. Their political incompetence was a key factor in how the agenda spun out of control over Brexit. In addition to the incompetent politicians, the other significant problem was that the neo-liberal model breeds discontent and disenchantment not happy consumers. As industries were destroyed, services slashed and children’s futures looked increasingly bleak, and crucially without an organised movement fighting back, people became disinterested in and cynical about politics. New Labour certainly did not pose an alternative. So when the incompetent political class in the shape of David Cameron promised a vote on EU membership the scene was set for that previously unexpressed discontent to manifest itself in the Leave vote.
The reason Brexit became the pivotal issue was because of the long-term conflicts and contradictions produced by Britain’s decline as an imperial power.
At the outbreak of the First World War Britain had reached its peak in terms of empire - with a third of the world infamously coloured pink on the map - the biggest physical Empire in human history. Yet the challenge to Britain’s dominance began some decades before that. Both Germany and the USA had already overtaken it in manufacturing output. It was no longer the workshop of the world. By the end of the second world war, US dominance was clearly established and the Empire had to respond to demands for independence from subject nations.
Britain’s failed invasion of Egypt (along with France and Israel) in 1956, aimed at toppling Gamal Abdel Nasser, who had nationalised the Suez Canal, was a defining moment. By then Britain seemed resigned to accept its relative decline. Aiming to bolster some position of power it opted to align itself closely as a junior partner with the United States. Britain likes to term this “the special relationship”, a phrase coined by Winston Churchill in 1946. There has undoubtedly been close collaboration over foreign policy, security and war fighting capabilities and leaders on both sides of the Atlantic have talked the relationship up. That is until relatively recently when President Obama cast doubt on its specialness.
But if the British ruling class saw itself as aligned with the US how did it end up in the EEC/EU, a developing rival bloc? As Britain was trying to manage the decline of its former empire, new neo-colonial relationships and cement its junior partner alliance with the US a complication was added to the mix. That was the emergence of the transnational bodies which would eventually become the European Union. On its doorstep the other two big powers in Europe, France and the relatively recently defeated Germany, were making a clear bid to become another capitalist power centre and push back against US dominance. The Treaty of Rome, founding the EEC out of the previously existing institutions was signed in 1957, a year after Suez.
The question was what to do about this further threat to British power – should Britain stand aloof from, or against, these developments or be part of them both as a benefit and to assert British interests against Germany and France? But this would be at the expense of other power bases, since committing to the EEC would inevitably weaken other bonds. (1) Thus the long-term crisis of managing Britain’s imperial decline was exacerbated by the foundation of the EEC. The ruling class was divided about what to do. The dominant faction supported membership. Britain would be part of the EEC and maintain a special relationship with the US – being also a bridge into the EEC for the US, including increasingly for financial services via the City of London. Britain’s weakened bonds with the Commonwealth/Empire also served US interests. This tangle of inter-imperialist rivalries and Britain’s dual relationships with the US and the EU as well as asserting its own interests are a fine example of the contradictory nature of imperialist rivalries and alliances. What R Palme Dutt called “antagonistic partnership”.
However, those opposed to EEC membership remained unhappy and today’s Tory Brexiteers are heirs to that viewpoint.
BRITAIN AND THE EU
As a member Britain worked to gain influence in the EU, but was often at odds with its direction of travel. Perhaps the high point was Margaret Thatcher’s crucial role in shaping the EU Single Market in her neo-liberal image. The Commissioner responsible for drawing up the Single European Act was Lord Cockfield, appointed by Thatcher, and working under Jacques Delors. But she failed to have excluded from the final Act moves towards further political integration and a common currency which would later become the Euro.
Successive Tory leaders struggled with the Party’s persistent and influential Eurosceptic wing. This was exacerbated by the continued movement of the EU beyond being a trading bloc and in the direction of currency and political union with increasing numbers of EU laws and regulations governing domestic life. Even those who were pro-EU were also unhappy with this. Such half-heartedness meant that little was done to counter Euroscepticism or promote pro-EU sentiment. In recent decades as Germany emerged more than ever as the dominant force in the EU and as its direction of travel diverged from British wishes, Britain became less influential within it. This increasing alienation also played its part in facilitating the Brexit vote.
However, after 46 years of membership Britain had become embedded in the EU – the bulk of the capitalist class did not see leaving as an option. The EU is Britain’s biggest single trading partner, accounting for 49% UK trade, up from 30% when the UK joined in 1973, and at times it has been higher at over 50%. Crucially, the City of London is the EU’s main financial hub. In 2018 Britain had nearly a third of EU financial markets, by far and away the biggest chunk of the markets of any EU country - as much as the next two (France and Germany) combined.
But Brexit has happened and in its new world, British capital’s ties with its key powerbases and alliances will be weakened. It will be on the edge of the EU where it will be less useful to US interests and its former colonies will be less accessible than they once were. It was a sign of the Tories’ inability to carve out a new place for Britain in the world that they caved in to US demands to ban Huawei from the development of the 5G network. The financial sector will continue to suck the life out of the economy and there is a prospect that the UK itself will cease to exist.
The accidental Brexit surely marks a qualitative moment exposing just how far British imperialism has declined. From dominating the world through its colonies and economic and military might it has become less powerful politically and economically and, it seems, not even in control of its own destiny.
A No Deal Brexit was averted by the ejection on Dominic Cummings from Downing Street. The deal that was done, the UK-EU Trade and Cooperation Agreement, is a big improvement on Teresa May’s offering, however, its intention remains to keep Britain closely aligned with the EU. Inevitably that means that the divisions around the UK’s relationship to the EU will rumble on. (For analysis of the deal see Brexit is done – or is it? By Frieda Park in this issue of The Socialist Correspondent)
The government has been doing trade deals with other countries, notably with Japan, but after the agreement with the EU, the biggest by far is a deal with the USA, and that is still outstanding. A big part of the Tories’ post-Brexit strategy was rebuilding the special relationship with the US which looked more promising under Trump, whereas Obama had effectively repudiated it, describing Angela Merkel as “his closest international partner”. Obama also intervened directly in the debate over Brexit, probably not helping the Remain cause, saying that Britain would be at the back of the queue for any trade deal with the US. Part of the specialness of Britain to the US was its membership of the EU providing a bridge for its interests, so the US establishment was not for Brexit either, nor does it have as much use for Britain outwith the EU. Going against this grain, Trump was supportive of Brexit and a trade agreement might have been achieved more easily with him. Although even under Trump it hadn’t actually happened. But with Joe Biden as President things will be harder. The Tories have blotted their copybook with the Democrats by cosying up to Trump and with Johnson’s personal attacks on Obama.
Nor did the Tories’ use of the Irish border as a negotiating ploy help relations with the Democrats. Biden has Irish roots and the US has always taken an interest in Ireland as part of its rivalry with Britain. The talks which led to the Good Friday Agreement were chaired by US special envoy George Mitchell. As well as a strong relationship with Germany, the US might also cultivate Ireland as another back door into the EU now that Britain is out. It is interesting that England’s oldest colony continued to cause it difficulties as it became the centre of a tussle between competing imperial powers over Brexit, the EU, the US and Britain. Thus its status as the most oppressed country in Europe was cemented, with the Irish political establishment keener on selecting the most agreeable oppressor rather than challenging this status. Even if there was more impetus to forge a deal with Britain over trade, Biden will have a huge amount on his plate when he takes office. An agreement with Britain’s second biggest market is currently in limbo.
Aside from Brexit there are other structural problems besetting Britain. The Big Bang of 1986 facilitated the growth of the City of London and the financial sector and the further neglect of other industries which had already experienced decades of decline and underinvestment. Around 1950 Britain was responsible for over 6% of the world’s GDP, now it is around 2%. Since 2005 alone the world share of market capitalisation of British firms has fallen from 7% to 3%. It’s share of cross border investment by multinationals has fallen from10% to 6%. These falls are both bigger than for any other large European economy. (2) In its total embrace of free market dogma, Britain effectively put up no barriers to foreign takeovers including of privatised services. Huge swathes of the former public sector such as the railways are now foreign owned as are one in four large companies.
On top of this there is the mis-management of the coronavirus pandemic by the Tories which will leave the economy weaker. Predictions for the contraction of UK economy seem to go from bad to worse. By the end of last year the OECD club of rich countries was predicting that the UK economy would contract by 11.2% and that by the end of this year the economy will still be 6% smaller than it was before the pandemic. This is worse than every other of the OECD’s 37 members apart from Argentina. Public debt is now in excess of £2tr, the biggest in peace time. Unemployment was 1.7m in December with many more redundancies to come as chaotic on/off coronavirus restrictions put more companies out of business. Government policies have neither saved the economy nor saved lives.
On the wider world stage as well as China, there are other growing assertive powers, particularly Russia, Iran and Turkey. Their rise is being countered by the US and other established imperial powers with trade wars, armed wars and sanctions. Into this conflict-riven and uncertain world a weakened British capitalism has to navigate its future outwith the EU. This would be no easy task for the most skilled politicians, however we have the cunning, but inept Tories, with Johnson at the helm.
THE BREAK-UP OF THE UK
The fallout from Brexit and Covid makes the possibility of the break-up of the UK very real. What would that say about the state of British capitalism if the UK ceased to exist as a nation state?
Despite its failures over the coronavirus pandemic and the rumbling scandal in the wake of the Alex Salmond trial, the SNP retains huge support. In part this is as simple as Scottish people looking at Johnson and the Tories and preferring Sturgeon and the SNP. Many people in Scotland now view England as another country which has little to do with them. It is worth noting that if people in Scotland had voted Labour in the 2017 general election in anything like the numbers they used to, then Corbyn would have been in number 10. It wasn’t only the right of the party that kept Labour out but nationalist blinkers in Scotland where people believed that Corbyn was happening somewhere else, irrelevant to them and that he could never be elected in backward England.
The majority vote in Scotland in favour of remaining in the EU, the unjustly perceived competence of Sturgeon over the coronavirus pandemic and the horror show that is the Tory government are all drivers of increased support for independence. Since June 2020 opinion polls in Scotland have reversed and now consistently show majorities in favour of independence rather than against, with a good number putting support at over 50%. On their current direction of travel the SNP will win a convincing majority at the May Holyrood elections and then demand a referendum from the UK government which has to agree for it to be legal. Johnson could just hold out and deny the powers – he is quite capable of that, but as a strategy that becomes harder as time goes on, entrenching pro-independence sentiment in Scotland. In these circumstances how long can a UK government resist?
The other fault line is Ireland. The Tories played fast and loose with the North in the Brexit negotiations and their actions have annoyed both nationalists and unionists. The North also voted Remain in the EU referendum. Support for reunification seems to be edging up. Unity with the rest of Ireland is more attractive now that the Republic is less of a repressive theocratic state and unity with a UK, which has used the province as a political football, is less attractive. With the North remaining in the EU Single Market and a customs border with the rest of the UK down the sea, Ireland will become a more distinct economic entity from Britain. The Irish government has said that post-Brexit, it will fund emergency health care in the EU and the Erasmus student exchange programme for people in the North. Nevertheless unionism remains deeply entrenched so unity may not be an immediate prospect, but the case is growing stronger. If Scotland goes – whither Northern Ireland and Wales?
The Tories, meanwhile, are doing nothing effective to combat these tendencies towards fragmentation nor are they even uniting England with northern councils and mayors in rebellion over coronavirus policies. Johnson’s promises to working class voters in the North of England, whatever they might have amounted to, have gone AWOL in the face of the virus.
THE FUTURE OF BRITISH CAPITALISM
Brexit has served both to expose the extent of the weakness of British capitalism and to deepen its crisis.
Despite its marked decline, however, Britain has not yet slipped into the ranks of minor capitalist countries. It is still an imperialist power. According to the IMF it has the 5th biggest economy in the world, houses some major companies especially in financial services, where the City of London remains, next to New York, the top financial centre in the world. Although in decline it is still a major source of foreign direct investment. It has a thriving arms industry which gives it clout and nuclear weapons. It has a marked willingness to go to war, remains a key part of NATO and the west’s spying capability and has a permanent seat on the UN Security Council. It retains a capacity to act in its interests, exploiting markets and countries across the globe.
So the position of Britain is somewhat contradictory. It remains relatively strong in some ways, however, its underlying economic health continues its chronic decline. It is certainly not what it was in 1880, 1914, 1939 nor pre-Brexit. The unwanted and unplanned for exit from the EU will mean that British capitalism will continue to decline, and its influence wain. How serious and how rapid any such decline is and what its impact will be remains to be seen.
As part of the political response Johnson has engaged in overblown nationalist rhetoric and tried to promote culture wars, attacks on the legitimacy of dissent and socialist ideas and shoring up reactionary ideology that has always pervaded the working class. Priti Patel has eagerly promoted an authoritarian agenda, attempting to outlaw progressive ideas in schools equating them with radical jihadi views and introducing repressive legislation such as the Spy Cops Bill which would effectively place the coercive arms of the state above the law. The security services and army are having their capacity to deal with domestic dissent boosted.
Partly this is an ideological crusade to promote a glorious post-Brexit nationalist vision of the UK and to delegitimise socialist and revolutionary ideas, but it is also practical policy to ensure that the ruling class has the repressive tools at its disposal to crush any resistance to its policies. Clearly the government is concerned about the potential for civil unrest. But there is no certainty that people will look to socialist or progressive solutions as Britain’s crisis deepens. We see that all the time in the success of divide and rule tactics like racism and other forms of hatred. Throughout the coronavirus pandemic we have been encouraged to blame each other for not following the rules, for robbing the young of their futures, for killing our grannies and regions and nations have been pitted against each other.
There needs to be a strong socialist movement to counter that and build unity. But since the neo-liberal onslaught of the 80s, the working class and its organisations are still very weak – as is its ideological understanding. At least there is a left now, a positive outcome of the Corbyn surge, and trade union membership has been growing during the pandemic. But it is a left which needs a lot of development. Clearly the ruling class do not regard the mere election of Starmer as enough to remove the danger of socialism from the Labour Party. Hence the suspension of Corbyn in the hope that the left will crumble and/or be followed with more suspensions and expulsions.
We need a left that is rooted in working class communities and organisations including trade unions, that is politically educated and tactically mature and principled. That is the work in progress. Our world needs to be the concerns of working class people and not the self-serving wafflings of Guardian columnists, identity politics and culture wars which pass for political discourse. We need to stand shoulder to shoulder with working class people and fight with them day in and day out, not just come looking for votes at election time. In this dangerous and conflict-riven world of declining and rising capitalist powers we need a strong internationalist perspective which opposes imperialist aggression and fights for peace. It is becoming clearer that British capitalism is increasingly unable to either thrive or provide decent futures for its people so we must also put the alternative of socialism on the table.
(1) See also Brexit and capitalist rivalries by Alex Davidson Issue 34, Summer 2019 The Socialist Correspondent. And EU intransigence – division and weakness in Britain by Alex Davidson Issue 32, Autumn 2018 The Socialist Correspondent
(2) Amazing journey?, The Economist 2/1/21
It is interesting that England's oldest colony continued to cause it difficulties as it became the centre of a tussle between competing imperial powers over Brexit, the EU, the Us and Britain.