by Michael Roberts
The UK’s referendum on European Union membership takes place
three months from today. How Britons vote will have an impact not just
on Britain but also on Brussels. The ‘capital’ of the European Union is
under pressure from the terrorist bombings, but Brexit would open up
fault-lines in the EU ‘project’ itself. There could be implications for
the survival of the European Union if one of its largest members should
opt to leave. It sets a precedent that could be followed.
“Should I stay, or should I go”. The Clash
Should the British people vote to leave or stay in the European Union
in the referendum in June? Before anybody answers that question, they
ought to consider this. Whether Britons vote to leave or not is
relatively small beer compared to the growing risk of a new world
economic slump. That will have much larger consequences for the British
people than Britain leaving the EU. Look at the damage that the Great
Recession did to the major economies (graph below).
Some very pessimistic estimates have put the cost of leaving the EU for the UK economy at 10% of GDP. Some very optimistic estimates have put the gain
from leaving at 10%. Even if this were the case, either way, that
margin would still be less than the loss of income per person already
caused by the Great Recession and the very weak economic recovery since,
which currently stands at 14%. Open Europe, a think-tank that
is itself neutral on the issue, reckons that, at worst, were the UK to
leave the EU, its GDP would be 2.2% lower in 2030 than it would have
been were the UK to stay in. And at best, it would be 1.6% higher.
Anyway, it is not a question what is ‘best for Britain’, but what is
best for the British people. There’s a difference. Would British big
business benefit from leaving the European Union, some 40 years after
joining the club? Remember, right up to the global financial crash in
2007 onwards, the talk among the circles of British capital was whether
to join the Eurozone or not, not whether to leave the EU. Very few
thought the latter would benefit British capital.
Since the global financial crash and the ensuing Euro debt crisis,
the view has changed. Today, the euro area is grappling with sluggish
growth, the fallout from the euro crisis and an influx of refugees and
migrants (and now terrorism – something previously aimed at Britain and
the US). So, from the point of view of British capital, the gains from
EU membership have begun to look less convincing.
capitalism now do better outside the EU? The answer is that it depends,
but on balance, probably not.
Sure, much of the original gains in removing trade, investment and labour barriers within the EU have been exhausted.
But what would improve if Britain left? The EU institutions are
certainly not holding the UK back from selling globally. Could Britain
do better than Germany in world markets if it were outside the EU?
Germany has a world trade volume that is more than three times the UK
figure, but it is suffering from the economic slowdown in China right
now. So why would British capital do better than Germany by opting for
Asia or America over Europe for exports or investment? Indeed, the Asian
emerging economy crisis may break just as Britain votes to leave the EU
There is a myth pushed by the EU-leavers that Britain can negotiate
just as good trade terms as they had within the EU without all the EU
regulations and budget funding for EU institutions. But the experience
of European countries like Norway or Switzerland that have negotiated
such agreements shows that with any trade deal comes obligations and
conditions. Norway and Switzerland must abide by all EU single market
standards and regulations, without any say in their formulation. They
must agree to translate all relevant EU laws into their domestic
legislation without consulting domestic voters. They contribute
substantially to the EU budget. And they must accept unlimited EU
immigration, resulting in a higher share of EU immigrants in the Swiss
and Norwegian populations than in the UK! So overall, for British
capital, there would be little difference outside than being in the EU,
assuming it can negotiate a similar arrangement that Norway and
Also, European Economic Association (EEA) members such as Norway do
not belong to the EU’s customs union. Consequently, Norwegian exports
must satisfy ‘rules of origin’ requirements in order to enter the EU
duty free and the EU can use anti-dumping measures to restrict imports
from Norway, as occurred in 2006 when the EU imposed a 16% tariff on
imports of Norwegian salmon. Also, EEA members effectively pay a fee to
be part of the Single Market. In 2011 Norway’s contribution to the EU
budget was £106 per capita, only 17% lower than the UK’s net
contribution of £128 per capita (House of Commons 2013). So becoming
part of the EEA would not generate substantial fiscal savings for the UK
government and taxpayers. The UK’s contribution to the EU budget,
after rebates, is not particularly high per head of population and low
as % of GDP compared to other EU members.
The key interest of British capital is to preserve its hegemonic
global position in financial services – and with the UK outside the EU
that could come under threat. Britain’s specialisation in services –
not only finance, but also law, accountancy, media, architecture,
pharmaceutical research and so on – makes entry to the EU single market
critical. If Britain refuses similar EU trading conditions to those made
with Norway, its service industries could be locked out of the single
market. The French, German, and Irish governments would be particularly
delighted to see UK-based banks and hedge funds shackled by EU
regulations, and see UK-based businesses involved in asset management,
insurance, accountancy, law, and media forced to transfer their jobs,
head offices, and tax payments to Paris, Frankfurt, or Dublin.
As it is, even within the EU, Britain is one the least regulated
countries in the world, as previous Labour and Conservative governments
have boasted. So getting rid of any EU regulations by leaving would
have little added value for British capital. Anyway, even outside the
EU, the UK would still be subject to 700 international treaties, as a
member of the UN, WTO, NATO, IMF and World Bank, and subscribe to a
swathe of nuclear test ban, energy, water, maritime law and air traffic
treaties. The idea that leaving the EU would lead to a golden era of UK
sovereignty and self-determination, is, it is fair to say, far-fetched
at least. National sovereignty is a relative concept in modern imperialism.
EU states may also try and usurp the UK’s position as the EU’s most
popular destination for foreign direct investment. Over the past 15
years, the UK has received more than 20% of inward EU FDI, but without
full access to the EU’s internal markets, future FDI flows into car
factories or financial services hubs might be redirected and create jobs
elsewhere in the EU.
So if Britain votes to leave the EU, it is unlikely to get as good
trade and investment terms as before and Britain will still have to
agree to most EU regulations and contributions, but without any say.
And it could lose ground in financial services and in inward investment
from America and Asia. Only if ‘freedom’ from EU institutions were to
produce a sharp increase in productivity, investment and trade with the
rest of the world, would these losses be overcome. On balance, that
Indeed, in the short term, the uncertainty over the terms of any
negotiations will mean a big reluctance of British capitalists to invest
and for foreign investors to hold British financial assets. The pound
sterling has already weakened and it would fall even more with a vote to
leave. Any losses in investment and trade will add to losses in
employment. Sure, maybe after two years of negotiations and, with
perhaps further economic collapses in the Eurozone that threaten the
Euro project itself, British capital might appear more attractive and
the decision to leave the EU might seem right. But that’s a big if.
Would the majority of British people gain or lose from Britain
leaving the EU? Britain’s Trade Union Congress (TUC) reckons that there
are benefits for British workers from the EU. In a report, the TUC
cites rights such as paid annual leave and fair treatment for part-time
workers may be in danger that could be rolled back by a Conservative
government (UK Employment Rights and the EU). “These
are wide-ranging in scope, including access to paid annual holidays,
improved health and safety protection, rights to unpaid parental leave,
rights to time off work for urgent family reasons, equal treatment
rights for part-time, fixed-term and agency workers, rights for
outsourced workers, and rights for workers’ representatives to receive
information and be consulted, particularly in the context of
restructuring. And without the back-up of EU laws, unscrupulous
employers will have free rein to cut many of their workers’ hard-won
benefits and protections”.
But the TUC exaggerates. EU laws and directives like the 48-hour
working week are hardly worth the paper that they have been written on,
with many exemptions for employment sectors for example, like junior
hospital doctors on a 72-hour week or the practice of many employers to
get employees to sign a ‘waiver’ on working hours and conditions. The
point is that most of our working conditions are determined by national
laws and by the class struggle at the workplace, not by EU laws. Those
battles have not been hindered or helped much either way by EU
Even this isn’t the whole story, though, as it has become much more
difficult in the UK for workers to enforce any employment law. The
introduction of employment tribunal fees has seen a sharp drop in the
number of cases being brought. As an employer in the UK there isn’t much
employment law to fall foul of but, even if you do, the chances of
being prosecuted for it are pretty remote.
Then there is the question of immigration. Leaving the EU would
supposedly allow Britain to block cheap labour from eastern Europe
flooding into the country and lowering wages and conditions. Or so the
argument goes. But any trade deal with the EU would involve free
movement of EU labour as Norway and Switzerland must do.
Reducing immigration will not improve the situation for working
people already in the UK. Migrants often fill the gaps in the labour
market that Britons won’t or can’t fill. To take one example,
strawberries, are now available in the shops for much longer. They are
picked by migrant workers who return to Eastern Europe at the end of the
season. Care work is another industry heavily populated with migrant
labour. Migrants often perform low paid, dirty work that British workers
would be reluctant to perform.
It’s true that mass immigration can also cause pressure on education,
housing and social services, particularly for working class people. But
the actions of the Conservative government in reducing public spending,
privatising schools and the NHS has a much bigger effect on services.
So whether Britain is in or out of the European Union will make
little difference to the majority of people in the UK. What does matter
is the health of the economy, the level of wages and employment and the
state of public services. That does not depend on Britain’s membership
of the EU.
The euro debt crisis in Greece, Portugal, Spain, Italy etc is mainly
to do with the crisis in capitalism since 2007 and not really to do with
the institutions of the EU, cumbersome, bureaucratic and undemocratic
as they are; or to do with the policies of the EU leaders for Europe.
The neo-liberal, pro-austerity measures applied by the EU Commission are
the very same policies adopted by the national governments of Europe on
their people. EU policy is no more neo-liberal and pro-big business
than is the policy of successive British governments of the last two
decades, Conservative or Labour.
That’s something the Greek people recognised last year. In their
referendum on whether to accept the Troika ‘bailout’ last July, despite
huge pressure from the EU leaders and Greek capitalism, the Greeks voted no because they opposed further austerity. But the vast majority of Greeks still wanted to stay in the EU and even keep the euro currency. For them, the issue was not ‘in or out the EU’, but ‘yes or no’ to further cuts in living standards.
Leaving the EU would probably be marginally bad for British capital
and there would be little or no gain for British Labour. But the debate
is a total distraction and an irrelevance from the issues that do
affect people’s lives, the crisis in global capitalism and what to do
about it. Under global capitalism, no one country can protect its
citizens from pollution, climate change, economic slumps and world
wars. That needs global cooperation and policy action by socialist
governments – something we don’t have. Avoiding the damage from another
major global slump, which is now on the horizon, however the British
people votes in June, is way more important.
Two years ago, I made three predictions: that the Conservatives would
be re-elected in the general election in May 2015; that the Scots would
vote against independence from the UK; and that the British would vote
to stay in the EU. So far, it is two out of three. I expect the third
prediction to be confirmed by the end of June.
- AFSCME Local 444 negotiations assesment 1997
- Preparing for Revolution: A discussion document
- The Internal lives of Revolutionary Organizations
- Socialist Alternative members: Questions and Answers
- Sanders: Our Alternative
- The Nature of the New European Left
- University of California workers and Unions
- An Invitation to Our Readers
- Facts For Working People Weekly Phone Conferences and Discussions
- Help open The AFL-CIO AIFLD Archives