The intervention of Michael Roberts in the event about the EU and the Radical LeftPosted: June 19, 2019
It’s been 70 years since the political leaders of European capital began the process of trying to integrate the previously warring states of Europe into a single trading bloc with a view to turning Europe into a force capable of rivalling US imperialism across the Atlantic and later, the rising powers of Japan and industrial Asia.
It started with the integration of key basic industries in the European Coal and Steel Community in 1951; then with the formation of a Common Market based on the core economies of Western Europe and then to the wider European Economic Community in 1957 with a customs union. Finally, the political project was completed with the formation of the European Union in 1993. Such was the early success of this project that eventually the declining imperialist power of Britain decided to join and put its future in the hands of Europe rather than with any ‘special relationship’ with America.
In the period of fast growth and high profitability of the 1950s and 1960s, the EU was a relative success. Indeed, when the weaker capitalist economies joined, like Spain, Portugal and Greece after their revolutions to overthrow military rule, these economies made gains through more trade and investment, even converging somewhat towards the rich core economies of Germany and France.
But, as the world capitalist economy entered the 1980s with low profitability of capital across the board, that early success in integration began to subside. The French and Germans then took an historic decision to drive integration forward with a move to single currency area and the euro. But convergence to the euro was based not on closing productivity, employment or income levels, but purely on monetary and fiscal convergence. The squeezing of the weaker capitalist economies into the Eurozone’s monetary and fiscal straitjacket turned convergence into divergence and set up faultlines for future crises.
Franco-German capital took advantage of cheap labour and the single currency to invest in the weaker Eurozone economies, but not always productively and not necessarily to the benefit of weak. Indeed, the strong got stronger and weak got weaker. The weak were only able to expand by borrowing heavily. Private sector credit rocketed in Spain, Greece, Portugal and Ireland. At the same time, EU governments cut taxes on the rich and corporations and so lost revenues, while still trying to sustain welfare benefits and public services. Then came the global financial crash and the Great Recession.
The credit crunch and the collapse in world output and trade pushed the weaker Eurozone economies into bankruptcy. They could not pay their debts to German and French banks. Public sector finances were trashed by the loss of revenues and the huge rise in unemployment and other welfare benefits. And then the banks had to be bailed out and the public sector had to pay.
Greece’s public sector debt had risen to 100% of GDP when the euro was launched, so already very high. But in order to pay off the Franco-German banks in the Great Recession, the government had to nearly double that debt. It only got the funds to do that by borrowing from the IMF, the ECB and the EU funds – the dreaded Troika. In return, the Troika demanded the most vicious austerity measures since the Versailles treaty imposed on Germany after WW1. Pensions, wages, public services and benefits were decimated; public assets were sold off for a song. The funds saved and raised were not used to sustain the Greek people in this terrible depression. They were used to pay off the banks and then meet the repayment schedule of the IMF and the ECB.
The Greek people fought back. When the Syriza government reluctantly called a referendum on whether the government should accept the draconian measures demanded by the Troika, despite the international media pressure and despite the domestic big business attacks, they rejected the Troika deal by 60-40. This was not what European capital or Syriza expected, and as we know, within days, the Syriza government broke the people’s mandate and capitulated. Finance minister Varoufakis, having failed in his policy of trying to ‘persuade’ the German and the EU leaders to ‘see reason’, resigned and rode off into the sunset. Syriza split but the bulk of the government party stayed behind Tsipras to keep Greece in the EU and Eurozone and impose the Troika’s austerity.
Now four years later to the very month, Greece’s public debt ratio remains unchanged at 180% of GDP. This debt that Greece owes to the EU will remain on the books for a generation at least and so austerity has become permanent! No wonder Greek will probably vote to oust Tsipras and return the conservative pro-business New Democracy in the July elections.
Was there an alternative to this capitulation? And what can we learn from this tragedy for the future of the EU and the outcome of the current battle in Britain over Brexit? Was Grexit the answer? At the time, some on the left in Syriza and much of the revolutionary left groups outside Syriza, as well as the Greek Communists, put forward this alternative. For example, Costas Lapavitsas, a Marxist economic professor and Syriza MP, who correctly broke with the government over its capitulation, advocated Grexit. Lapavitsas said at the time: “the obvious solution for Greece right now, when I look at it as a political economist, the optimal solution, would be a negotiated exit. Not necessarily a contested exit, but a negotiated exit.”
But would that have worked to avoid austerity and put the Greek economy back on its feet? Even if the Troika were to have agreed to such a ‘negotiated exit’, which is a moot point; and even if the new Greek drachma only depreciated by 20% (extremely unlikely), the Greek economy would still be on its knees, unable to restore living standards for the majority. Devaluation and rising prices would eat into any gains made from cheaper exports. Lapavitsas seemed to recognise this: “Wages must rise, but even if they rise, you’re not going to go back to where you were. It’s just not feasible at the moment. We need a growth strategy for that.” Exactly.
But Lapavitsas was opposed to a growth strategy that took away the levers of power from capital in Greece and put it the hands of the government and people. “I don’t think that Syriza should come out with a broad and wide nationalization program right now.” Apparently, that was something for the future, the medium-term, not then in 2015. “I am very skeptical, though, about this in the context of Greece right now… These are medium-term questions. These are questions that one should knuckle down and begin to confront once the problem of debt, fiscal pressure, and the monetary union have been resolved.”
But this idea of stages: first exit and devaluation and later, socialist measures, seemed to me to be both suicidal economically and also weak politically. The Greek people opposed austerity but the majority also wanted to remain in the EU and the single currency (and still do four years later). They sensibly recognised that exiting the EU would put Greece overboard in the Aegean without a paddle, suffering the fate of Argentina in the early 2000s of hyperinflation and mass unemployment.
Sure, if the Syriza government had nationalised the banks, taken over the major sectors of Greek big business and introduced controls to stop the flight of capital, as well as taxing the rich and ending huge spending on NATO-style defence, the EU leaders and the ECB may well have moved to kick Greece out of the EU. But then the government could show the Greek people and the wider European labour movement that they were not exiting out of choice but being thrown out because the government opposed austerity and was for class policies. That seems to me a much better way of raising the consciousness of the people as well as being much more effective in taking the Greek economy forward.
For me, that lesson applies to Brexit as well. The Brexit referendum in 2016 and the argument since was a product of a split in the British ruling class over which direction to take British capital. The British finance sector in the City of London and the multinationals want Britain to stay in Europe as it benefits their profits most. But there has always been a layer of the ruling class, based on old empire and imperialist ideology, particularly among smaller business where exports are less important and finance capital is remote. This layer has always opposed entry into the EU and Europe. It still reckons that Britain could ‘go it alone’ in the world of capital and do better.
This is nonsense, of course – no capitalist economy is an island, particularly island Britain. But this old ‘empire’ view held the hearts and minds of the old petty bourgeois elements that make up the ruling Conservative party and a layer of voters. And these elements whipped up a myth that ‘EU regulations’ and a flood of EU immigrants were the cause of the woes of many workers, particularly in those areas where austerity under the Conservative government had hurt most. Thus the myth was created that the EU was the enemy, not capitalism or the Tories and their austerity policies. This myth was enough to deliver such a potential loss of votes for the Conservatives to pro-Brexit forces that the Conservatives opted for a referendum to solve the issue. Much to their amazement and chagrin, the vote went for leave, if narrowly.
In the referendum, the British population was split down the middle; split in the top 1%; in the middle-class, in the working class, between city and town, town and country; between young in the cities and the old in the small towns; between the south and the north. The class lines within British society were totally submerged into whether to leave the EU or not.
But the reality is that the Great Recession and the ensuing Euro debt crisis in 2012-14 was not the product of the euro or EU structures as such, but the result of the global crisis in capitalism. The British capitalist economy is already suffering from the uncertainty about Brexit as parliament bickers and drags out a way of reaching a deal with the EU on the future.
The solution to austerity in Britain and a raising of living standards is not to be found in exiting the EU but in the replacement of capitalism and implementation of socialist measures by a socialist government. If the UK leaves the EU, then most realistic estimates are that the UK economy will end up being about 4-10% smaller in output in ten years than it otherwise would have been. But if there is another global slump in capitalism, that will be much more damaging. The Great Recession lost four times as much potential output from the UK economy over the last ten years than Brexit would in the next ten. So Brexit is not vital to the future of British capital or the British people: the state of capitalism is.
That’s why I do not think that putting Brexit at the top of any left programme for socialist change in Britain is the best way to proceed. The Brexit referendum did not unfold on class lines and Brexit is not an opportunity to promote socialist policies. On the contrary, it is a reactionary smokescreen erected by far right nationalists and the Conservatives to shift the blame for working people’s miseries onto the remote bureaucrats of the EU and onto Polish and other Eastern European immigrants who have contributed so much to keeping the UK economy going since the Great Recession.
My approach would not be dominated by some ‘Lexit’ policy as such. It would aim at getting a socialist government elected that would push for taking over the banks and multinationals and reversing austerity through a plan of production and investment involving workers in control. If such a government then came into conflict with the EU leaders who threatened to expel Britain, then Brexit would become a class issue for the first time. Unfortunately, for now, leaving the EU can only be posed as a reactionary nationalist demand.