The European single currency, the Euro, has already been up and running in
twelve countries in the European Union for nearly 18 months now. The question as
to whether Britain should join is one of the most important political decisions
facing the Blair administration, and the people of this country, over the next
few years.
The government is due to make an announcement on June 9, as to whether
Britain has yet to meet their ‘five economic tests’ for entry. It is widely
known that the five tests for economic convergence are really just a fig leaf
for a political decision, with plenty of scope for fudging for them to come up
with the ‘right’ result. At the time of writing all commentators are agreed that
‘not ready yet’ will be the word. But the issue won’t go away. Big business is
lobbying new Labour in favour of entry, saying that if Britain doesn’t go in
they will move production to the continent.
Socialist Appeal opposes Britain signing up to the Euro. There are,
however, two groups of opponents of entry. The first is against adopting the
single currency because the Queen’s head will no longer appear on the coin.
Eurosceptics argue that adopting the Euro will be another step on the road to
abandoning ‘British’ sovereignty to a European superstate. But socialists know
better. We understand that in a capitalist economy we, the working class, have
no sovereignty. Whoever is in government, we don’t get to decide whether we’ll
have a job next year or whether our standard of living will go up. The serious
decisions are taken by the capitalist owners of the means of production, in
response to market forces. Tory Eurosceptics have always been in favour of the
rule of market forces – which actually make Parliamentary sovereignty a sham.
It’s true that Eurosceptics go on about an unelected European Central Bank.
When did you last cast a ballot for the ECB? But are they against it because it’s
unelected or because it’s full of "foreigners"? Since 1997 interest rates have
been set in Britain by the Monetary Policy Committee of the Bank of England, by
a process very similar to that of the ECB. When did you last cast a ballot for
the MPC? Gordon Brown gave up any pretence of democratic control of monetary
policy as soon as he became Chancellor.
For the working class all bankers are ‘foreigners’ – they have the opposite
interests and objectives from us. Of course the level of interest rates can make
a difference to an economy, especially when they get it wrong. And it is a
problem that the ECB sets a single rate for Germany, which is in recession, and
Ireland, which still shows signs of overheating, in a ‘one size fits all’
policy. But there is no evidence that a discretionary monetary policy can halt
the fundamental processes of boom and bust rooted in a capitalist economy.
Austerity
The second group of opponents, rooted in the labour movement, believes that
entry will involve the sacrifice of large swathes of the welfare state in forced
austerity as the price of entry. This is the only serious reason for opposition.
Here’s Bill Morris, General Secretary of the Transport and General Workers’
Union, quoting the European Central Bank’s Monthly Bulletin. They believe "public
health and long-term care systems should focus on providing core services for
healthcare prevention while leaving individuals to provide for non-essential
expenditure". In other words the ECB wants privatization of big chunks of our
health service. Why should they have any say? The article is headlined ‘Price of
entry will be our NHS’ (Observer May 11, 2003)
There is also the myth about a hard-faced Anglo-Saxon variant of capitalism,
where they can only make money by grinding down the working class. Then there is
supposed to be a nice European form of capitalism, ‘social Europe’, where they
always consult the workers and protect them from the rigours of the market.
Actually hard right neoliberal loonies have taken charge of the institutions of
the European Union. The ECB is one example of this. Another is clearly seen by
the Growth and Stability Pact, a kind of corset for Euro member states. If a
government fails to balance its budget and gets into too much debt, it can be
fined by the European Central Bank. First this is undemocratic – at least you
get to vote for the national government every four or five years. It is also
futile. The fines will of course make it more difficult for the government to
make ends meet.
It flows from another mistaken neoliberal attitude, i.e. that if governments
get into debt, that’s their silly fault. There are supposedly two sorts of
administration – thrifty Tory ones and spendthrift social democrats. In fact
governments of all stripes have to borrow when they are in economic
difficulties. The reason Germany is in breach of the Growth and Stability Pact
is because unemployment there is over 10.7% – four and a quarter million workers
claiming benefit rather than paying in to the tax pot as employees.
What is the case for entry into the Euro? The first argument is about ‘transaction
costs’. Apparently about half of one per cent of European national income was
sucked away by moneychangers, who are of course parasites. Moving to a single
currency would enable us to dispense with their services.
Goods prices
More significantly it should bring prices down to the lowest level to be
found within the EU. For years economists have been puzzled as to how identical
cars (to take just one example) can cost thousands of pounds more in Britain
than on the continent when we live in a common market. The argument is that you
can just go to where the cars are cheapest and buy them there. Some have
concluded that the problem is that goods are denominated in different
currencies. If everything is priced in Euros then they won’t be able to get away
with ripping us off. Well, it doesn’t work. If you buy a Frankfurt edition of
the Financial Times in Europe for instance, it is marked with different
Euro prices for Portugal and Sweden. They continue to charge what the market
will bear in different national markets. Monetary union just hasn’t led to price
convergence.
The second argument is for investment stability. If a Japanese capitalist
wants to invest in Britain, then they are taking enough risks already without
worrying about how many pounds they’ll get to the yen in twenty years when it’s
time to repatriate their money. Maybe they just won’t bother. So the answer’s an
internationally recognised single currency. It is true that inward investment
into Britain as a proportion of European investment has collapsed since the
launch of the Euro. There is no complete explanation for this. The Tories
boasted that this country attracted so much investment from abroad because of
their iron heel on the workers’ necks. When asked, the investors said it was
because English was the only European language they understood.
A case in point is the Nissan plant in Tony Blair’s constituency of
Sedgefield. Management are threatening to relocate to the Eurozone, leaving
5,000 jobs behind, if we don’t sign up. An anonymous commentator explains their
angle (Observer May 11, 2003). "I know it sounds cynical, but it does
Nissan no harm to talk about the virtues of the single currency, while trying to
drum up grant aid as compensation if Britain fails to enter." Let’s face it.
Nissan management are playing mind games with us. As the article goes on to
point out, 80% of the cost of producing a car in Sunderland is parts, which can
be produced in the Eurozone anyway. The answer is surely for us to control the
movement of capital by taking over the means of production, not relying on the
goodwill of our enemy, the capitalist class.
"Cry for help"
The third argument for British entry is in the nature of a cry for help.
Sterling has been massively overvalued for years. With British goods so
expensive abroad, British industry has been in recession almost constantly for
the past four years. Hundreds of thousands of jobs in sectors from textiles to
steel have haemorrhaged from manufacturing over this period. Gordon Brown has
met this disaster with stony silence, helped by the stupidity of the Tory
opposition. Quite simply, the overvaluation of sterling has not been an issue
between the political parties. But for some in the trade union movement it is
the only issue and they have argued the case for entry as a means of devaluation
and a basic protection for jobs.
That case has been undermined by the collapse of sterling this year. Last
year sterling got you 3 Deutsch Marks, now translated into 1.59 Euros. But now
it’s down to DM 2.72 (or 1.39 Euros). To see how far it has fallen, back in 1992
the pound got you DM2.95. And it’s due to fall further, not good news for those
of us who like to holiday in Euroland. Plus, of course, manufacturers get less
pounds for every Euro they earn by selling abroad, so devaluation is not all
bonus points.
Decline in industry
This devaluation ought to have got British manufacturing out of the hole it’s
in. It hasn’t. British industry has been in relative decline against its main
rivals for at least fifty years. CBI economist Doug Godden points to other
recent factors. "The pound/euro exchange rate has had a fairly dramatic effect,
but in the past 18 months the most important factor has been the slowdown in
world demand."
The major indicator of the poor performance of British capitalists is the ‘productivity
gap’ between us and our major rivals. The Treasury Budget Report (the ‘Red Book’)
for 2002 comments, "By international standards the UK’s productivity performance
has historically been poor… the productivity gap between the UK and its main
competitors is substantial… in terms of output per hour, the gap against the
US narrows slightly – to 25% – while the gap against France and Germany widens
to 27% and 25%." So an American, German or French worker can bang out five
widgets in the time it takes us to make four. Is that our fault?
Patricia Hewitt, Minister at the Department of Trade and Industry, blurted
out in exasperation, "When you look at the gap in productivity between Britain
and the rest of the world, too often it is poor management of the production
processes and poor management of people that accounts for that gap." (Financial
Times October 15, 2002, ‘Hewitt turns spotlight on UK’s mediocre managers’). So
management are thick as planks, except when it comes to sitting round a table
with themselves and negotiating bonuses.
Back to the Red Book. "By international standards, levels of innovation in
the UK have historically been low…levels of UK private sector investment in
research and development (R & D), a key indicator of successful innovation,
are significantly below those achieved in many other advanced industrial
countries." And, whatever the investment climate, year after year British
capitalists have invested more abroad than they have at home. So the reasons for
British lack of competitiveness are complex – but the problem can’t be sorted by
a quick fix of the currency.
British capitalism is a failure internationally. Its problems are deep rooted
and structural. Entry into to single currency will not provide a solution to
relative decline. We have to understand that it is time to make the ‘captains of
industry’ walk the plank.
