Labour's Leader leads a rally to remain in the EU at Queen Elizabeth II Conference Centre, central London on May 14, 2016. Isabel Infantes/ Press Association. All rights reserved.
In 1975, a referendum was held on Britain’s
membership of the European Union in which a substantial proportion of the left
of the Labour Party, and of the labour movement more generally, voted in favour
of withdrawal. Why? Because the EU’s institutional structures and trading
arrangements favoured the interests of capital far more than they did the
interests of labour. Rejecting Britain’s EU membership was therefore a
clear-cut and correct class position for the left to take.
But is that same position correct today, more than four
decades later? As the EU’s political and economic structures are still weighted
in favour of business interests, it would seem that the answer has to be
affirmative: rejection of Britain’s membership of the EU appears to represent a
consistency of class principle. However, this consistency is only valid if
complete abstraction is made from the seismic changes in the world order that
have occurred since 1975. Factor these changes into the equation and what
appears to be a consistent class position turns out to be anything but that in
reality.
Globalisation
and financialisation
The world in 1975 was one where communism still competed
with capitalism and where the financial realm in the major capitalist economies
was still in a heavily controlled and subordinate position mainly serving business
interests in the industrial realm. But that world has gone. We may wish that
things had turned out very differently, but if there is to be a coherent and
effective strategy for defending the interests of labour in today’s reality we
must first see that reality for what it is rather than start from any wishful
thinking about what we would like it to be. The
reality is that we now have a single world economic system that has emerged out
of, and continues to draw its operational dynamic from the twinned processes of
globalisation and financialisation.
The reality is that we now have a single world economic
system that has emerged out of, and continues to draw its operational dynamic
from the twinned processes of globalisation and financialisation. These
processes still essentially constitute expansions of the commodity principle as
defined by Marx: that is, defined as any entity whose price is determined
against social standards rather than set by private negotiation. Following the
collapse of colonialism in the mid part of the twentieth century and the
collapse of communism near the end of that century, the commodity principle has
been geographically stretched to the point where it now covers virtually the
entire planet. Financialisation links in with the globalisation of the
commodity principle in that it signifies the further expansion of this
principle to the point where it now covers not only human capacities and their
current material outputs but also debt and equity securities – that is,
financial claims on the future outputs produced by capacities.
The governments and large corporations issuing securities
may only see these as funding instruments but for the institutional investors
such as pension funds and insurance companies that today dominate the buy side
of the financial markets, securities have acquired a second important function
as ‘investables’: entities whose use value is to serve as portable stores of
value into which clients’ monies can be poured and from which monies can be
extracted to repay clients.
Explosive
growth of finance sector
It is this transformation of financial securities into
commodities in their own right that holds the key to the explosive growth of
the global financial sector to the point where it now completely dominates the
global productive sector on which it is based. As long as securities’ sole
major function was to help finance the production of material commodities, the
global stocks of securities could never deviate significantly from annual
global output flows.
Thus even as recently as 1980 the $11 trillion worth of
global bond and equity volumes then outstanding was roughly on a par with the
then aggregate value of world GDP. By 2015, however, the aggregate nominal
value of outstanding global bond and equity volumes had reached about $180
trillion, a sum roughly two and a half times that for nominal world GDP for that
same year, a development only made possible by the ongoing growth in global
investor demand for securities in their value storage capacity.
Dollar supremacy
The importance of understanding the globalisation and
financialisation processes lies in the fact that their combination has led to a
huge concentration of power at the country level and to a huge concentration of
wealth at the personal level. The current position of the United States
exemplifies the first of these points. The US has long been a major world power,
but while that power was rivalled by that of other countries for much of the
twentieth century, this has ceased to be the case today.
The reason is that the major source of US power is now
located less in the global physical realm, where military and diplomatic
prowess coupled with production and trading strengths are the main constituent ingredients
of power, and more in the global financial realm where the US dollar rules
supreme. There can be no clearer indication of this supremacy than the dollar’s
percentage share of the daily $5 trillion turnover volume in the world’s
foreign exchange markets: 48% as compared with the euro’s 15%, the yen’s 11%
and the British pound’s 6%. After this
it is like falling off a precipice, with China’s renminbi registering a mere 2%
and the Russian, Indian and Brazilian currencies’ barely registering 0.5% each.
So dominant is the use of the dollar in a variety of international monetary
functions that some 90 other national currencies are currently tied to it in
one form or other.
Dollar supremacy may appear to make little sense in light of
rising US government and corporate debts and trade deficits on the one hand and
the US’ declining share of world production on the other, a combination of
trends that has led many expert commentators to wrongly predict the coming
decline of the dollar. On the contrary, the dollar’s continuing supremacy makes
complete sense once US government and corporate bonds, which together comprise
over 40% of today’s global bond volumes, are viewed not only as debt
instruments but also as investables that are sought by the world’s private
institutional investors and by many of the world’s governments for value
storage purposes. Ultimately, it is the vast mass of dollar-denominated bonds
and equities that enables the dollar to exert its gravitational pull over the
overwhelming majority of other national currencies, and it is this
gravitational pull that in the end explains the Trump administration’s ability
to pursue its highly divisive policies without fear of any effective
retribution. It is this gravitational pull that in
the end explains the Trump administration’s ability to pursue its highly
divisive policies without fear of any effective retribution.
Individual wealth
The same conjunction of globalisation and financialisation
that now sets the USA apart in terms of power is also that which sets apart a
vanishingly small number of individuals in terms of wealth. The past few
decades have seen a systematic decline in labour’s share of global income
relative to capital’s share. Key amongst the contributory factors to this
development was the collapse of communism, which served to release hundreds of
millions of workers onto the global labour pool; and the accelerating advances
in information and communications technologies that have ensured that much of
the new labour supply is harnessed to global commodity production and exchange.
However, alongside the marked distributional shift away from
labour to capital is the no less marked distributional shift away from those
groups within the capital sector that are directly involved in the production
of material commodities towards those groups managing and holding financial
commodities.
In 2015 the world’s high net worth individuals ( HNWI’s:
i.e. those with assets excluding their primary residence of over $1 million)
totalled some 15 million (a figure barely more than one tenth of one percent of
the world’s population of 7 billion) and held assets with a combined worth of
some $59 trillion (world GDP for that year was about $74 trillion).
Even more striking than this last fact is that pertaining to
the enormous amount of wealth concentrated at the very top of the wealth
pyramid. About 35% of HNWI assets in 2015
(i.e. about $21 trillion) was held by just 145,000 ‘ultra’ HNWIs (i.e.
individuals with net assets in excess of $30 million). Assuming an average
annual rate of return of just 5%, these 145,000 individuals would have earned
the same amount of income in 2015 as did the whole of Russia with a population
of 145 million.
History may be replete with cases of individuals amassing
vast fortunes, but global wealth concentration on the current scale is without
precedent and it is so in large part because of financialisation. While some
proportion of HNWI wealth is held in the form of cash and real estate, the
majority proportion (between 55% and 60%) is held in the form of income
generating financial securities, corporate equities and bonds and government
bonds. Pension funds and insurance companies may have spearheaded the
transformation of securities into commodities with a wealth storage capacity
but it is super-rich individuals who have been among the chief beneficiaries of
this transformation.
Cometh
the tax man?
The HNWI population is highly diverse in terms of
nationality, social status, occupation and source of wealth origin, but it also
has certain fundamental interests and priorities in common. On the economic
front, the overriding priority of the world’s super rich is to ensure that they
get to keep as much of their wealth as is possible for themselves and out of
the reach of the taxman. This is why they hire the best accountants and
financial advisors that money can buy, why they store much of their spare cash
in secret bank accounts dotted around the world and why they allocate the bulk
of their financial securities to an assortment of investment companies and
asset managers, including hedge funds and private equity firms, that are
invariably headquartered in off-shore financial centres where taxes are either
minimal or absent altogether. On the political front, their overriding priority
is to ensure that there are no government-coordinated attempts to tax private
wealth or to regulate any of the corporate and financial activities that
contribute to the continued accumulation of that wealth.
It is in the context of these shared economic and political
priorities of the world’s HNWI population that we can understand why the
dissolution of the European Union is an objective fervently desired by a
significant proportion, if not by the entirety, of that population. It is no
coincidence that the clearest and most brutally frank expression of this desired
objective should come from the most powerful representative of the world’s HNWIs:
the multi-billionaire US president, Donald Trump.
The EU
As agreed, the EU’s institutional structures and regulatory
framework are designed to promote the interests of capital over those of
labour. It is symptomatic of this fact that the EU’s continued expansion in
size over recent decades has done next to nothing to slow down, let alone
reverse, the trend decline in labour’s share of global income. This said, it is
still the case that the EU’s existence poses a threat to the interests of
certain segments within the capital sector.
While some of the EU’s internal market rules and regulations
are conducive to profit creation in the manufacturing and financial spheres,
there are several others that impede profits and their distribution to private
individuals. Health, safety and environmental regulations in the manufacturing
sphere, and hedge fund transparency requirements and bankers’ bonus caps in the
financial sphere are just a few examples. If these regulations are one major
reason behind most HNWIs’ desire for the EU’s dissolution, the other major
reason has to do with taxation. If these
regulations are one major reason behind most high net worth individuals’ desire
for the EU’s dissolution, the other major reason has to do with taxation.
While there is a relatively high degree of EU-wide
governmental coordination in many policy areas – and in the eurozone this even
includes monetary policy – taxation is the one area where there is minimal
coordination. The resulting wide divergence between national tax regimes taken together
with high capital mobility has inevitably led to a trend shift in the tax
burden away from multinational corporations and wealthy individuals (as the
competitive race to the bottom forces ever lower corporate and wealth taxes)
towards small businesses and salaried workers (who are not only not able to
take advantage of differing national income and profit tax rates but must also
bear the major burden of rising indirect taxes such as value added taxes,
excise duties and local service and business charges). This is how things
currently stand in the EU and, given the degree to which national governments
zealously guard their sovereignty over taxation, it is a situation that will
not change easily. There is, nevertheless, always the possibility that it will
change.
The end
of austerity – one risk too far
So far, many governments across the EU have dealt with the
fall-out of the great financial crisis of 2007-8 largely through austerity
measures, that is, by cutting back on their expenditures rather than by
increasing their tax revenues. However, if the point is reached where the
continued erosion of the tax base of the member EU countries and the ensuing
cuts in government services begin to seriously threaten the economic stability
and social fabric of those countries then, at that point, there is a real
possibility that they might agree to some kind of coordinated position with
regard to corporate profit and wealth taxes.
The risk that this possibility may become reality is a risk
that certain echelons within the global corporate and wealth elites are not
prepared to take. It is for them a risk that has to be eliminated completely
and for this to happen the EU must be eliminated as an overarching framework
linking together 28 member countries (27 in the event that Brexit does go
ahead). The EU must be eliminated as an overarching
framework linking together 28 member countries (27 in the event that Brexit
does go ahead).
The EU is not going to fold under the impact of any outside
pressure. Indeed, a central purpose behind its establishment in the first place
was that it could provide protective cover against any of the economic,
financial or political pressures emanating from other parts of the world. Rather,
any attempt at destroying the EU must be mounted from within the EU itself, a
point that brings us to the role of the populist far right movements and
parties to be found in virtually every EU member state.
Their role has always been to help leverage up the position
of the anti-EU politicians within the mainstream political parties by tapping
into the fears and anxieties of ordinary working people and ensuring that their
resulting anger is channelled less against the rich and powerful elites than
against poor job-seeking immigrants and thus against the EU bureaucracy that encourages
cross border migration. That role became newly opportune and newly feasible in
the wake of the financial crisis because that crisis hit the EU particularly
hard, and because the ensuing steep rise in unemployment in many of its member
states provided fertile soil for the poisonous spread of far right populism.
Labour
and the Brexit referendum
Thus far the anti-EU political parties and movements have not
succeeded in pulling any EU member state out of the EU – of course, the UK
being the exception should Brexit go ahead.
That the UK is the exception is the result of a 2016
referendum which exhibited as massive a gulf between the inputs into the
opposing campaigns on Brexit as the margin between the final voting results was
narrow. From the very outset of the referendum the right wing press with more
than 80% of the UK’s readership and led by Rupert Murdoch’s The Sun and Viscount
Rothermere’s Daily Mail conducted a campaign that was unerringly consistent in
its hatred of the EU and all things to do with the EU. No less consistently vicious
was the anti-EU advertising and billboard campaign that was heavily financed by
many hedge fund managers and by other rich Tory party and UKIP donors. Up against
all this the left had the grassroots Momentum group flatly refusing to take any
part in the referendum, and sections of the Labour Party leadership running a Remain
campaign that was so tepid and hesitant and hedged about with so many
qualifications that many traditional Labour Party supporters were left confused
as to exactly what was the Party’s position on Brexit. It may well be a fact,
from any left-wing perspective, that the EU as a whole merits no higher score
than 7 out of 10. But to go on air and state this at a time when right wing forces
were running a relentlessly venomous anti-EU campaign, was either to be
wilfully disingenuous or irredeemably naive. What other interpretation is
possible? Given the extreme unevenness of the
Brexit debate in the 2016 referendum, the fact that 48% of the British
electorate still voted to remain should be cause enough for demanding a second
referendum.
Given the extreme unevenness of the Brexit debate in the
2016 referendum, the fact that 48% of the British electorate still voted to
remain should be cause enough for demanding a second referendum. Yet the current
Labour Party leadership refuses to put this demand. Why? Respect for “the will
of the people” cannot be the reason because the left does not usually abandon a
progressive position on a particular policy whenever a conservative counter-position
on that same policy happens to be voted through.
Rather, the real reason is that a substantial section of the
Labour leadership is in actual fact solidly in favour of Brexit. The thinking
behind this position has been given its most vocal formulation by the Morning
Star and the Communist Party of Britain under the rubric of ‘Lexit’, the left
case for Brexit. The differences between Lexit and Brexit are basically two:
where the Right targets the centralised bureaucratic nature of the EU, the left
targets its centralised capitalist nature; and where the purported reason
behind the Right’s anti-EU position is to safeguard jobs by taking back control
of national borders and thus by cutting back on immigration, the declared
objective of Lexit is to safeguard jobs not only by controlling national
borders but also by breaking free of the EU’s pro-capitalist strictures that
inhibit nationalisation or increased government investment expenditures and manufacturing
subsidies.
Anti-capitalist?
The professed ant-capitalist reasoning behind the case for
Lexit is what, of course, makes this case so seductively appealing to certain
sections of the left in the Labour Party and in the trade unions. But does this
case really advance the interests of labour as opposed to those of capital?
To find the answer, consider the following scenario. To say
that the British left should campaign for EU withdrawal in order to promote an anti-capitalist
programme is to say that every leftwing movement in every other EU country
should do the same. Now let us suppose that these Lexit-type campaigns are uniformly
successful, such that the EU is no more and we are left with 28 completely
independent European countries with left-leaning governments committed to job
creating and service expansion programmes. While some part of these programmes
can be sourced internally, their full realisation will in many instances
require substantial investments from multinational corporations. Taking full advantage
of the absence of the EU as a inter-country coordinating framework, these
corporations will inevitably press forward two sets of demands as conditions either
for locating new investments, or for expanding existing investments, in any
single country.
As already noted, the EU currently has in place a wide range
of marketing, production and employment standards that, while not going far
enough to promote the interests of working people, nevertheless set a
protective bar for safeguarding those interests. The first set of conditions corporations
would exact is to do with profit maximisation: on the marketing and sales side,
they will demand the relaxation of certain standards the compliance with which
eats into profits; and on the production side, they will demand the relaxation
of certain labour rights and employment terms the compliance with which raises
input costs thus lowering profit margins.
The second set of conditions is to do with profit
distribution: multinational corporations will want to keep as much as possible
of the profits they generate for themselves and for their shareholders, which
means forcing down state taxes on corporate profits. The current EU average
corporate tax rate at 21% is comparatively low as compared with the 35% that
was the average 20 years ago, but, this said, the EU is still holding the corporate
tax bar well above zero. Absent the EU, and that bar will inevitably drop to zero
as countries compete with each other in a tax race to the bottom in the fight
to attract and keep multinational investments.
Lexit’s core assumption is that this struggle is most likely to be settled in
favour of labour when each country’s working class takes on its own capitalist
class.
Can it be said that the above scenario is wrong because all
of the independent left-leaning governments would exhibit international
solidarity and not engage in beggar thy neighbour policies? The answer is no,
because such a statement contradicts the most basic premise of Lexit, which is
that the whole point of regaining national control over one’s laws and borders
is to enable each left-leaning government to fulfil its primary domestic
responsibility, namely, to promote the material interests of its own working people
and not the interests of other countries’ working peoples.
If class struggle provides the all-encompassing rationale for
Lexit, its core assumption is that this struggle is most likely to be settled
in favour of labour when each country’s working class takes on its own
capitalist class. For, as was put by one committed socialist Labour MP who
campaigned for Leave in the 2016 referendum: “fighting capitalism
state-by-state is hard enough …It’s even harder when you’re fighting it on the
basis of eight states, 10 states, and now 28.”
“Socialism
in one country” makes no sense
This type of ‘socialism in one country’ strategy may make
sense in a world of parallel immigration and capital controls, but it makes no
sense in today’s globalised and financialised world where the continuing
possibility of imposing physical constraints on labour mobility is not matched
by anything like the same possibility of imposing constraints on capital
mobility.
In such an asymmetric world, international class solidarity
across the countries of Europe will not hold up for an instant because of the disparate
sizes and levels of development of their domestic economies and the concomitant
disparate degrees of dependence on labour emigration as a constituent element
in job creation.
The logic is remorseless: why should left governments in
countries that are heavily dependent on labour emigration rights for
substantial numbers of their workforce show international class solidarity when
negotiating employment or tax terms with multinational corporations when the left
governments in countries that are not so dependent on labour emigration show no
similar solidarity when demanding strict labour immigration controls. In effect,
a successful European-wide implementation of Lexit would result less in a move
from capitalism to socialism than in a move from a relatively controlled and
fettered form of capitalism to a completely uncontrolled and unfettered form of
capitalism.
Know
thine enemy
It is precisely because this would be the likely result of
any European-wide implementation of Lexit-type programmes that the argument
behind Lexit should be ruthlessly thought through, taken apart and abandoned.
The critical point to consider in this context is the strategic interests of
that sector of the global corporate and wealth elites who want the dissolution
of the EU as a bulwark against unfettered capitalism. These interests will not
be achieved by relying solely on the far right populist parties because these
in most EU countries will not generate sufficient mass support for an anti-EU
position. Their overtly xenophobic and racist sentiments and language are
simply too repulsive to too many sections of the electorate, including those
people that might otherwise be sympathetic to an anti-EU position.
It is in regard to the latter group of people that the far
left’s role assumes crucial importance, because the provision of an anti-EU
argument coated in anti-capitalist rhetoric allows these people to hold their
noses and keep their conscience clean when voting with the far right against
the EU. One of the cardinal lessons of the Brexit referendum result was that it
proved how effective the anti-EU roles of the far right and of the far left can
be when combined together in a mutually reinforcing dynamic: for where the far
right conducted a full frontal offensive against the EU that was unashamedly
pro-liberal capitalist in aim and content, the far left acted as a corrosive
force in the rear, undermining and fragmenting any opposition to that anti-EU
offensive.
Reversing
the original decision
The conclusion that follows from everything that has been said
above is that any genuinely left internationalist position on the EU is one
that fights for its preservation. And what this means in the British context, is
that the left must come together with those who demand a second referendum on
Brexit that can reverse the original decision.
Only by remaining in the EU and acting in concert with its
EU partners can Britain confront the multinationals and the super-rich on the
scale necessary for the realisation of a growth-generating and job-expansion
programme.
Of course the present structures of the EU inhibit the
degree to which such a coordinated confrontation can be made, and of course the
present dominant economic ideology in the EU is one that favours austerity-type
programmes. But these are reasons for fighting to change these existing
structures and this dominant neo-liberal ideology within the EU. They are categorically
not reasons for abandoning the EU, for to do so will constitute a highly irresponsible
act that will neither be forgotten nor forgiven by future generations.