In or out of the EU - neoliberalism is the real disease
by Bert Schouwenburg
Keir Starmer’s election as Labour leader represents a satisfactory outcome for the forces of reaction both inside and outside the Party who had come to view Jeremy Corbyn as a real threat to the established neoliberal capitalist order. Ironically, it comes at a time when the coronavirus pandemic has served to highlight the system’s deficiencies as never before, not least within the European Union, the endorsement and defence of which cost Labour the 2019 election and Corbyn his job.
THE BREXIT ELECTION
During opening remarks at the Chingford and Woodford Green constituency hustings on December 6th, Tory candidate and eventual winner, Iain Duncan Smith had said that the General Election was about Brexit, that all political parties had pledged to uphold the result of the 2016 referendum but that the Conservatives were the only party that would keep their promise. We now know that IDS’ analysis was correct. Voters in the hitherto Labour strongholds of the North and Midlands who had voted to leave the EU in 2016 abandoned the party in droves and handed the Conservative Party a landslide victory.
In the 2017 election, Labour had said it would honour Brexit and reaped the benefits at the ballot box, but by 2019 their manifesto policy had morphed into a commitment to renegotiate its terms followed by another referendum with an option to remain in the EU, a muddled compromise rightly seen by many as a betrayal of the 2016 verdict. In the months and years leading up to the election, Labour had repeatedly thwarted all attempts by the government to negotiate an exit package with the EU and by the time it took place, several prominent shadow cabinet members were openly supporting the remain option, in lockstep with a sizeable rump of their backbench colleagues. Kier Starmer was at the forefront of this pro-EU movement and his activities made a significant contribution to Labour’s humiliating defeat.
Outside Parliament, a formidable campaign had been launched for the UK to remain in the EU, a campaign that attracted huge numbers of people onto the streets of London in support of a second referendum or “People’s Vote”. A significant percentage of the marchers were white, middle class folk from London and the Southeast, many of whom had a scarcely disguised contempt for those who had voted for Brexit. Indeed, a feature of the campaign were claims that the referendum result was unfair because ill-informed Brexit voters had been lied to by politicians like Boris Johnson and Nigel Farage, as if other elections were somehow different. Unsurprisingly, what was seen as patronising drivel from the metropolitan chattering classes went down like the proverbial lead balloon in the deprived post-industrial areas of England where the electorate saw the European Union as an integral part of a system that had largely abandoned them.
In contrast, many remain supporting voters had an idealised view of the EU as a benevolent institution promoting international cooperation and harmony and perceived anyone who opposed it as being “Little Englanders” or downright racist. As Costas Lapavitsas said in his book The Left Case Against the EU, “the privileged layers, including a broad section of the middle class with access to the media, the universities, research institutes and so on have become closely attached to the notion that the EU stands for progress”, an illusion that is shared by many on the left, including trade union hierarchies increasingly out of touch not only with the poor and the dispossessed but also with their own rank and file members. The attachment to the EU by the left has alienated working class people across Europe who have looked elsewhere for a political voice to the detriment of social democratic parties seen as defenders of the status quo, and to the benefit of re-emerging extreme right wing nationalist parties.
Far from being a force for international cooperation and development, the EU has its origins in the politics of the Cold War. From the 1950s onwards, it was essentially a customs union designed to promote the coal and steel industries of Western Europe, protect its farmers and act as a bulwark against the Soviet Union and the Warsaw Pact countries. The Maastricht Treaty of 1992 created the common currency, the Euro, and reasserted the ‘Four Freedoms’ that underpin the European single market, i.e. free movement of goods, services, capital and people between what were to become the 28 member states. Significantly, it reinterpreted them as individual rights, thus enabling them to be used against collective interests and policies. Maastricht provided the impetus for increasing European integration to the benefit of multinational capital and big business by institutionalising neoliberalism.
In 1939, the economist who is considered to be the Godfather of neoliberalism, Friedrich von Hayek, proposed the creation of a federal union that would remove the impediments to the free movement of ‘men, goods and capital’ and become a single market. Consequently, prices and wages would reflect production costs across member states and, crucially, would inhibit their ability to arbitrarily interfere with workings of the free market. The EU has become the embodiment of Hayek’s vision, a hierarchical alliance of nation states operating within a single market promoting neoliberalism, a borderless region for private property and enterprise. By contrast in this federal body, member states have limited rights and decision-making in many spheres is taken out of their hands. The control of money has also become the province of the EU through the establishment of the European Central Bank and the introduction of the Euro which played key roles in the evolution of a neoliberal EU and the hegemony of Germany.
German economic dominance of the EU destroys a prevalent a myth that there is a level playing field allowing all member states to share in its supposed prosperity. From the outset, the European Monetary Union (EMU) lacked mechanisms such as mutualising public debt, that would alleviate the glaring inequalities within and between EU member states. Although national central banks retain control of assets and liabilities, the European Central Bank oversees the statutory responsibility for member states to keep inflation below 2%. The EMU Stability and Growth Pact (SGP) obliges member states to maintain public deficits within 3% of GDP and public debt within 60% but, pursuant to Article 125 of the Lisbon Treaty, the ECB will not assume responsibility for their obligations in this regard. In short, the EMU has benefited large European multinational corporations in an era of advancing financialisation of the economy, and in particular those of Germany which has become the hegemonic country of the EU.
An important factor in Germany’s dominance was the defeat sustained by organised labour in the 1990s, exposing another myth: that EU membership is essential for the protection of workers’ rights. Neoliberal policies were enacted to curb trade union power and drive down wages. The labour market was deregulated and worker protections reduced to permit the growth of part-time, temporary and precarious employment. Rights to unemployment benefit were curtailed, forcing people to take work that they would otherwise not have considered. Unions were less able to resist and few workers were organised in the growing service sector. The cumulative effect of the labour market reforms was to effectively end the tripartite bargaining relationship between employers, unions and the state and, make Germany a harsher and more unequal society. Germany became more competitive, not through improved productivity, but through enforced austerity.
The constraints of the SGP have occasioned enforced structural adjustments in several member states, most notably in Greece where an EU/IMF bailout, primarily designed to protect the Euro and safeguard loans from German banks, has brought the country to its knees. An integral part of the adjustment package involves the dismantling of collective bargaining mechanisms and across the EU over the last 10 years there has been an average reduction in its coverage of 14%. The largest drop has been in Romania – a staggering 63% - and, predictably, in Greece (45%). According to the International Labour Organisation, EU collective bargaining agreements are experiencing the greatest percentage drop in the world. Of course, the most basic right is the ability to have a secure and well-paid job in the first place; what the TUC would refer to as decent work. With unemployment rates across the EU having touched levels not seen since the great depression and significant increases in precarious, informal low paid work, not even the most ardent EU supporter can claim this as a success. Hardly surprising then, that in a recent poll, over 60% of Bulgarians said that life had been better under Communist rule.
In fact employment rates in the accession states of the old Eastern Bloc would have been worse, had it not been for “freedom” of movement inside the EU, allowing people to emigrate in search of work elsewhere. Entire villages and towns in Poland and Romania have lost virtually all their young adult males, leaving children to be looked after by their mothers and grandparents. What is seen as a success by some of the more naïve NGOs in the UK is in fact a licence for exploitation, not only by unscrupulous employers but also by organised crime syndicates engaging in modern day slavery to such an extent that British police forces have admitted that they do not have the resources to control it. Migrant workers are routinely employed to undercut hard won terms and conditions and union rates of pay and in these circumstances it is hardly surprising that there can be resentment amongst the indigenous workforce, especially in poorer areas that then become fertile territory for the xenophobic rhetoric of the far right. The situation is worsened by erroneous claims from the TUC that freedom of movement is not a factor in the decline of workers’ rights, a direct contradiction of Friedrich Engels accurate observation on the benefit of a ‘reserve army of labour’ for the capitalist class.
Nevertheless, workers’ ability to cross borders to find employment does not extend beyond the boundaries of the EU and the treatment of migrants and refugees from other continents who are fleeing famine, wars and the effects of climate change, often as a result of Western interventions, is appalling and well documented. Indeed, those who have suffered most within the EU during the coronavirus pandemic are refugees packed into squalid camps on Greece’s Mediterranean islands without adequate food, housing or sanitation. Even before the virus took hold across Europe, not one EU member state had fulfilled its obligations towards taking in a proportionate share of those currently stranded in Greece. In a more recent development, European Commission President, Ursula von der Leyen, praised Greece for being the EU’s border “shield” after their police teargassed and brutalised thousands of refugees on the Turkish border.
In other aspects of the struggle to contain the virus, there is little evidence of pan-EU solidarity and it has exposed EU divisions and the unequal status of member states. Appeals for help from Italy, the most hard-hit member state, fell on deaf ears obliging it to bring in doctors from Cuba and medical supplies from Russia and China, some of which were impounded by the Czech Republic en route, prompting Lombardy’s Health Minister to castigate the EU for its lack of support. As Serbia’s President, Aleksander Vucic, said, EU solidarity is a ‘fairy tale’.
Bad as this may be, the longer term threat to Italy arises from the imposition of the SGP. The country’s economy is no bigger now than it was at the time of the crash in 2007. When it joined the Eurozone in 1999, it had a thriving manufacturing sector but this has reduced by 20%. Its national debt is already 135% of GDP and growing during the crisis. Most of it is held by Italian banks so if there is a collapse, the banks go down too, leaving the State with little room for manoeuvre, given that, being part of the Euro, it cannot devalue the currency or print money. Italy’s plight epitomises the EU’s inability to address the economic consequences of the Covid-19 lockdown, largely because of German Chancellor Merkel’s refusal to contemplate any form of fiscal union to socialise the collective debts of member states by the issuing of Eurobonds. Instead, Germany, the Netherlands and other more prosperous northern states are insisting that Italy and others can only be bailed out by using the same mechanism that was deployed in Greece with all the attendant austerity measures that entails. Small wonder then that some economists are predicting that the Eurozone will break up under the weight of its own contradictions. Yanis Varoufakis, Greece’s former Finance Minister, has said that Greece should have abandoned the Euro and still should.
The EU has competence for trade on behalf of all member states and has an aggressive policy of securing Free Trade Agreements (FTAs) across the globe. In reality, these have little to do with trade, are not free and do not have the agreement of those affected. They are primarily instruments to facilitate the deregulation and liberalisation of trade partners’ economies for the benefit of European capital and are therefore more about investment than the exchange of goods. FTAs are long term commitments that override any constraints that may be imposed by domestic legislation and are enforced by investor state dispute settlement mechanisms, allowing private corporations to sue countries that do not allow them unfettered market access as per the terms of the agreement.
FTAs are particularly pernicious when applied to countries in the global south and the deals made by the EU would be instantly recognisable to an 18th century colonial administrator. Euphemistically titled Economic Partnership Agreements have been made with African countries using a style of negotiation that would not be unfamiliar to Al Capone, whereby the European Commission demands that their economies are opened up to subsidised European agribusiness, failing which their exports would be barred from the EU. In Latin America, despite opposition from civil society groups on both sides of the Atlantic and the EU’s supposed commitment to human rights, FTAs have been signed with some of the most repressive regimes on the continent, including Guatemala, Honduras and Colombia. The European Commission justifies this by repeatedly insisting that constructive engagement will improve matters and that that each FTA includes a chapter on “sustainable development” obliging the trade partners to respect labour rights and the environment. Without the will or the means to enforce the chapter, it is utterly meaningless and widely ignored.
It is precisely this type of agreement that Boris Johnson wants the UK to sign up to post-Brexit. His assertion that it can be negotiated and finalised in a year, together with his Chancellor’s insistence that they will not have to adhere to EU standards on goods and services are little more than grandstanding. EU FTAs take, on average, 7 years to complete. The proposed deal with Mercosur (South American Common Market) has already taken over 20 years and if a third country wants to operate in or sell goods to the EU, they will have to comply with their standards. If and when Johnson does get his deal, it will compromise British sovereignty as much, if not more in some aspects, than remaining in the EU and will undoubtedly permit EU companies access to services that are already tendered such as the railways and, yes, the NHS. This should not come as a surprise to anybody. Johnson may have wanted to come out of the EU for reasons related to British capital’s ability to compete on a wider stage and for his own personal ambition but his government’s version of neoliberal capitalism is in essence no different to that of the EU. His effusive praise of NHS workers caring for coronavirus victims should not be interpreted as a damascene conversion to a health service exclusively owned and run by the state.
A progressive government freed from the constraints of the EU could have begun to reverse some of the collateral damage caused by decades of neoliberal capitalism and, at the same time, weakened an institution that is dedicated to the preservation and advance of a profits based system predicated upon infinite economic growth as measured by GDP, an absurd proposition at the best of times, let alone in the midst of a growing climate emergency and the current health crisis. Instead, thanks to Labour’s shift towards Remain and defeat at the election, we have a right wing administration largely in tandem with Brussels’ direction of travel, The common enemy was and is neoliberal capitalism, a class issue rather than a nationalist issue, and those of us on the left must do everything possible to agitate, educate and organise to get that message across, not only to the supporters of the EU, but also to the alienated Brexit voters who will soon realise that, under Johnson, the separation that they wanted will be little more than a sham. Just ask Kier Starmer.
Bert Schouwenburg is a trade union adviser
Migrant workers are routinely employed to undercut hard won terms and conditions and union rates of pay and in these circumstances it is hardly surprising that there can be resentment amongst the indigenous workforce, especially in poorer areas that then become fertile territory for the xenophobic rhetoric of the far right.