There are some very powerful reasons why the British capitalists are not keen on Britain having to leave the European Union. Some of them have been looking at ways of getting around the result of the recent referendum. Fred Weston asks: can they succeed? And what would the consequences be on the political front?
There are some very powerful reasons why the British capitalists are not keen on Britain having to leave the European Union. Some of them have been looking at ways of getting around the result of the recent referendum. The question is: can they succeed? And what would the consequences be on the political front?
Imports and exports
The European Union undoubtedly provides Britain with a huge market for its exports, both of goods and services. It is worth looking at the facts on this question to see how much this factor weighs in the thinking of the British capitalist class. In 2014, according to the CIA World Factbook, Britain’s total exports were to the value of $503 billion [£322 billion pounds, €415 billion], the equivalent of over 28% of its GDP.
How much of these exports go to the European Union? Last year 44% of total British exports went to the EU, i.e. almost half, although this reflects a decline over past years. According to The Guardian, 10 May 2016, “Taking goods and services together, the share of exports going to the EU has fallen from 54% in 2000 to 44% in 2015.”
The partial breakdown by country reveals that 10.8% of overall British exports went to Germany, 8.1% to the Netherlands [although there is some speculation as to how much of this is actually going to the Netherlands and how much is simply transiting via Dutch ports such as Rotterdam and Antwerp], 6.5% to France, 6.4% to Ireland and 4.5% to Belgium.
If we accept the latest figure of 44% of British exports going to the EU, that translates into $222 billion [£142 billion, €183 billion] and 12.5% of UK GDP. This is a big factor in the outlook of the British bourgeois when it comes to looking at future economic prospects if they were to find themselves excluded from the EU market. It would affect both profits and jobs, with the UK being pushed into a deep recession.
The other side to this equation, however, is that the UK also imports from the EU; in fact, it imports far more than it exports. As The Economist recently pointed out in an article Why Brexit is grim news for the world economy, “Britain’s economy looms large in Europe, where it is a reliable consumer in an otherwise high-saving continent. And any disruption to European growth is particularly unwelcome now.” (The Economist, 24 June 2016)
UK imports from the EU in fact stand at £288 billion, with around £75 billion [$100 billion, €90 billion] of these coming directly from Germany. Overall EU GDP stands at around €14.3 trillion (US$18.5 trillion), of which the UK contributes around €2.57 trillion, second only after Germany. Therefore, in the negotiations which are going to unfold over the next couple of years, it will not be just a case of how much access the UK has to the European market, but also how much of the UK market European producers are going to lose.
Contagion
This, however, is not the main problem. There is a wider one, and that is the risk of contagion of Brexit, with each EU country being dragged down into “economic nationalism”, de facto protectionism, which would be the outcome of a collapse of the EU as an institution.
There has been a long term relative decline of the European economy. In 1993 the EU’s share of world GDP was 30%, but by 2013 this had fallen to 24% as other economies grew at a faster pace, such as China, India, Russia, Brazil and other countries. In this context, exports from the UK to non-EU countries have been growing by 6.5% a year, while to EU countries the figure has been only 3.6% (1999 to 2014). This can explain why a section of the British bosses – albeit a minority wing – backed Brexit.
Following Brexit, there is now a risk of reciprocal protectionist measures being introduced, which would damage all the EU countries, including Britain. As The Economist points out:
“If Britain, long a champion of free trade, can vote to revoke a regional trade deal, how much faith can businesses worldwide put in other international economic agreements? An EU shorn of Britain’s deregulating influence is a troubling portent for the liberal world order. Nationalist, populist and protectionist forces in other countries will be greatly encouraged by Brexit. The WTO recently gave warning that protectionist trade measures in the G20 are multiplying at their fastest rate since 2008. In such circumstances, it would be surprising if the Brexit vote did not have some chilling effect on investment worldwide. It makes curbs on migration of workers a little more likely, which will be costly for businesses. And if Europe exports some of its misery to Asia and America through weaker currencies, it may increase pressure for restrictions on capital flows, too.” (The Economist, 24 June 2016)
Dodging the Brexit bullet
All this explains why there are serious discussions going on among bourgeois commentators as to whether a way can be found of avoiding outright exit from the EU and its market. Here we have a few sample headlines: 1) “Brexit won’t happen in the end – here’s why” (The Independent, June 28, 2016); 2) “UK voted for Brexit – but is there a way back?” (The Guardian, 29 June 2016); 3) “I do not believe that Brexit will happen” (Financial Times, 27 June 2016); 4) “Brexit loophole? MPs must still vote in order for Britain to leave the EU, say top lawyers” (The Independent, 27 June 2016). There are many others, but we can limit ourselves to looking at what kinds of arguments are being produced.
The author of the first article declares himself a Brexiteer and explains that he voted Leave. He explains that, “Even for an optimistic Brexiteer like me, the last few days have been difficult. Many people who voted out are already feeling a bit betrayed as certain fundamental truths sink in. The ‘uncertainty’ is already affecting the real economy as we see… Before long this uncertainty will feed through even more concretely from the slightly abstract world of financial markets and exchange rates through to jobs, savings, and, above all, the value of people’s homes…”
The author of the second article in The Guardian, looks at different scenarios whereby the referendum result could be overturned. He explains that, “…there is not a majority for Britain to leave the EU in either the House of Commons or the House of Lords. Indeed, given a free vote, the unelected Lords would probably reject Brexit by a margin of six to one.” The point about this is that in British law a referendum is only consultative and it is Parliament that has to actually take the decision on leaving the EU.
He also develops the idea of a second referendum, “There is also pressure to hold a second referendum. Few UK politicians – fearful of challenging the verdict of an already angry electorate – will articulate such an argument in public. But Jeremy Hunt, the health secretary, has boldly made the case for a second referendum or another general election on the negotiated terms of exit. Robin Butler, the former head of the civil service, has suggested the same.
“Hammond, the foreign secretary, has said the new prime minister will need to think about the democratic legitimacy of the terms of Brexit. At one point even Johnson, and Dominic Cummings, the director of the Vote Leave campaign, made the case for a second referendum on the terms of a Brexit.”
In the third article in The Financial Times, Gideon Rachman states the following, “I know how it ends. And it does not end with the UK leaving Europe.” He quotes previous examples of referendums in Denmark and Ireland, where on the basis of renegotiation second referendums were called where they got the result they wanted. Of course, the problem here is that “The UK has voted to leave the EU altogether.” In spite of this, he notes that, “…there are already signs that Britain might be heading towards a second referendum rather than the door marked exit.”
Second referendum?
Although there is all this talk of a second referendum, most of the serious bourgeois commentators accept that a re-run of the recent referendum is not possible. It would be so blatant as to provoke widespread anger, and create more problems than it would solve. Also, although the majority of MPs are pro-EU and wish to remain, they also understand that it is not easy to simply ignore the majority vote for Leave.
That explains why a more nuanced approach is being sought. The idea is more or less along the following lines. It would only take a very small swing to achieve a majority for Remain. Already many of the promises made during the campaign have been withdrawn. There is no longer talk of the £350 million a week that the UK contributes to EU funds being channelled into the NHS. There is a lot of talk about having to compromise on immigration controls in exchange for access to the single market. There is the shock effect of the sudden sharp fall of the pound and stock markets. There is all the talk of companies pulling out of the UK, with all the job losses that would imply. There is much talk of an impending economic slowdown and possible deep recession.
All this is being used to say that many who voted leave are now “Regrexiteers”, i.e. have already regretted the way they voted. Even Tony Blair has thrown his tuppence worth into the debate with an article in yesterday’s Daily Telegraph, in which he raises, “…an argument for another referendum…the people do have a right to change their mind…”
Gideon Rachman in the already quoted FT article, states, “If the Remain campaign could fight a second referendum with a proper answer to the question of immigration it should be able to win fairly easily.”
Free trade vs Fortress Britain
Here of course lies the crux of the matter. The whole Leave campaign was fought fundamentally on the idea that leaving was the only way of getting control over migrant flows into the country. Already, the fact that people like Boris Johnson and other prominent Leave politicians were very quick to come out with statements saying that it would not be possible to regain control of the country’s borders has provoked anger. And yet in order to keep the UK’s access to the single market, this is something they are going to have to compromise on.
Rachman also explains why it would be in the interests of the EU to also negotiate terms that would allow for a second referendum: “…the British are valuable members of the EU. The UK is a big contributor to the budget and it is a serious military and diplomatic power. Just as it will be painful for the UK to lose access to the EU’s internal market, so it will be painful for the EU to lose access to the British labour market. More than 3m EU nationals live and work in Britain…”
He ends his article thus, “Of course, there would be howls of anger on both sides of the Channel if any such deal is struck. The diehard Leavers in Britain would cry betrayal, while the diehard federalists in the European Parliament — who want to punish the UK and press on with ‘political union’ in Europe — will also resist any new offer.
“But there is no reason to let the extremists on both sides of the debate dictate how this story has to end. There is a moderate middle in both Britain and Europe that should be capable of finding a deal that keeps the UK inside the EU.
“Like all good dramas, the Brexit story has been shocking, dramatic and upsetting. But its ending is not yet written.”
Parliament dictates
The author of the fourth article, published in The Independent, Ian Johnston, quotes Geoffrey Robertson QC, founder of the Doughty Street Chambers, who explains that it is the Members of Parliament who must decide whether to act on the results of the referendum. The respectful QC states the following:
“The 1972 communities act [the act that took the UK into the then EEC] … is still good law and remains so until repealed. In November, Prime Minister [Boris] Johnson will have to introduce into parliament the European communities repeal bill,” Mr Robertson said.
“MPs are entitled to vote against it and are bound to vote against it, if they think it’s in Britain’s best interest [to vote that way]. It’s not over yet.
“MPs will have to do their duty to vote according to conscience and vote for what’s best for Britain. It’s a matter for their consciences. They have got to behave courageously and conscientiously.”
What we have here is blatant disregard for what the people have expressed democratically in a referendum. He reveals utter contempt for the people when he states the following:
“Democracy in Britain doesn’t mean majority rule. It’s not the tyranny of the majority or the tyranny of the mob … it’s the representatives of the people, not the people themselves, who vote for them.”
This is in line with the many comments we have read and heard about the “untrustworthiness” of the people, about how referendums are not a good way of taking decisions, and so on. It shows what idea of democracy the ruling class really has. So long as they get the results they want then they accept the decision. If not, however, they are prepared to cook up all kinds of manoeuvres and will also bide their time in order to prepare the conditions for a reversal of the recent referendum result.
Political instability
Whether they will manage this, however, does not depend solely on economic factors. There is a bigger equation here, in which there are other elements. And one of these is the stability of their own political system. All the talk quoted above in the bourgeois press is aimed at re-establishing economic equilibrium. The problem is that if they act too quickly and too clumsily on this question, they could very easily tip the system into chaos.
We already have the outlines of this. The fault lines in the Tory party have widened; and although they may patch together some kind of unity, by discrediting Gove and promoting Theresa May as party leader, a future split in the Conservative is being prepared.
The Labour Party is also on the verge of a split. The bourgeois require the Labour MPs, who are predominantly right-wing Blairites and considered trustworthy by the ruling class, to collaborate in attempting to avoid a final break with the EU. That, in part, explains the rush to remove Corbyn, but in so doing they are provoking the anger of the ranks of the Labour Party and thus risking an open split.
All this means that to achieve economic stability they risk destroying the two parties they have relied upon to govern the system for over a century.
So what will they do in the next period? The short answer is they will try to gain time. An article that appeared in the Financial Times on June 28, “Merkel, the great procrastinator, could be Britain’s saviour”, gives an insight to their thinking on this. Referring to Angela Merkel, the German chancellor, it describes her thus:
“…when a situation calls for constructive delay and calculated dithering, she is a world beater. Germans have invented a verb, merkeln, meaning to postpone decisions indefinitely. While lesser politicians instinctively look for a rapid solution to problems, Ms Merkel specialises in finding previously uncharted stretches of road down which a can may be kicked.
“Never has a talent for merkeling been in demand more than now. The EU starting exit talks either formal or informal with the UK at this point would be disastrous, forcing hasty decisions to be taken on a rushed timetable and bundling Britain prematurely out of the union.
“During the process of choosing a new prime minister, the UK needs time for the importance of the decision to sink in and a chance for remorse to develop. If the turmoil in financial markets is followed by a slowing in the real economy, regret among Leavers is only likely to increase, and with it the prospect of a final deal somewhere near the status quo.”
The end of the article uses language we are not accustomed to from the Financial Times,
“Chancellor, a continent looks to you to do what you do best, which is to do nothing. On behalf of us all, for the love of Europe, you must postpone, prevaricate and procrastinate with all the strength you have. We beg you to merkel us towards salvation.”
The system has broken
This shows the impasse they are facing. The world economy has been slowing down in the recent period. China is not having the effect it had previously of providing an outlet for an otherwise sluggish world market. Parts of Europe are already in recession, or at best are stagnating. All serious bourgeois analysts could see the slowdown.
The economic crisis that has gripped Europe since 2008 produced the draconian austerity of these past years. In this context a growing section of the population has seen significant falls in living standards. There has been a social polarisation, with immense wealth at one end of the spectrum and growing poverty at the other end.
In these conditions we have seen social and political turmoil emerging from the economic turmoil. We have seen traditional parties collapse, small parties balloon into major forces, new parties emerging from nowhere, combined with social protests, such as the big trade union struggles in France.
The crisis in Britain is a product of this, but in turn the political crisis in Britain can impact on the economic situation, having the function of accelerator, bringing forward processes that one expected to happen somewhere in the future. The political events in Britain can tip the whole of Europe into a deep economic crisis, which in turn will spread the political instability across the continent.
All these factors explain why they are frantically seeking a way of delaying Brexit. The point is that there is no guarantee that in the long run they will be able to avoid it. In the meantime, the crisis will deepen all across Europe, creating the conditions for a growing anti-EU sentiment among ordinary people in countries like France, Holland, Italy and many others. So by the time they manage to put in place all the pieces for a possible second referendum, they may be facing a Europe that is tearing itself apart, with the EU facing a severe existential crisis.
This opens up the scenario for an intervention of the working class. As it sees no solutions forthcoming from the traditional parties, the working class will be forced to move to take its destiny into own hands. The bourgeois can feel this, and that is why they are manoeuvring so desperately.
