The progressive argument for leaving the EU is not being heard

Larry Elliot in The Guardian


It is now nearly nine years since the problems of three hedge funds heralded the arrival of global financial and economic chaos. Britain’s EU referendum this week is the latest manifestation of that crisis.

That is not the way the debate in the UK has been framed. For one side, the decision is all about taking back control, especially over immigration. For the other, it is about the potential consequences for the economy in general and individuals in particular.

This narrow focus reflects the fact that the referendum has been a contest between two wings of the Conservative party, neither of which has any great love for the EU. Few of the bigger themes have been drawn out by this blue-on-blue affair.

There is, however, an obvious reason why immigration has proved an effective weapon for the leave side. Life is tougher for millions of Britons on modest incomes than it was a decade ago.

Contrast the state of the UK when the accession to the EU of Poland and other former Soviet bloc countries led to strong net migration in 2004. At that time, average earnings were growing by 4-5% a year, the Labour government was investing heavily in schools and hospitals and the eurozone appeared to be over its initial problems.

A second big increase in net migration has occurred since the great recession of 2008 and 2009, but the economic and political environment has changed. Real earnings have been squeezed, the expansion of the public sector has been halted and the eurozone has been in a state of permanent crisis.

The British economy has become increasingly dominated by the fortunes of the financial sector, with the bankers responsible for the worst slump since the 1930s escaping pretty much scot free. London and the rest of the UK have become two countries, which explains why hostility to the EU increases with distance from the capital.

Nor is this phenomenon confined to the UK. It has become commonplace to bracket growing support for leave in poorer parts of Britain with Donald Trump’s emergence as the Republican candidate in this year’s US presidential election, but populist and anti EU sentiment is on the rise across Europe.

The US research company Pew conducted a survey earlier this year to test sentiment towards the EU. In Britain, 48% said they had an unfavourable view of the EU and 44% said they had a favourable view. In France, the anti-EU sentiment was much more pronounced at 61% and 38% in favour, while in Germany there had been an eight-point drop in support for the EU in the past year, leaving those in favour only narrowly ahead at 50% against 48% .
The impact of the great recession in Europe has been exacerbated by monetary union, a policy blunder of catastrophic proportions. The euro has been responsible for the slow growth and high unemployment that has angered the French, and the high debts and that have alarmed the Germans. Stir in the unexpectedly large flows of refugees from the Middle East and North Africa, and you have a toxic mix.

Last summer, when the Greek debt crisis was at its most intense, Europe’s leaders came up with a plan. The “five presidents’ report” laid down a step-by-step approach to a United States of Europe, with banking union followed by a common budget and finally political union. Getting even the least controversial part of this agenda – banking union – past sceptical European electorates has proved impossible. Yet the alternative approach, breaking up the euro and giving countries more control over their own economic destiny, is seen as not just potentially dangerous but also a betrayal of the idea of ever-closer union.

When Britain first sought to join the Common Market in the 1960s it did so for pragmatic, not ideological reasons. There was no great desire to pool sovereignty in pursuit of wider political goals, merely a feeling that Germany, France and the Netherlands were growing faster and had more modern economies. After Britain finally became a member of the European club in 1973, there was admiration for Germany’s control of inflation. In the 1980s, the UK left wing changed sides because it saw Europe as a bulwark against Margaret Thatcher. European solidarity was advocated in the 1990s as the best defence against the forces of global capitalism unleashed by the end of the cold war, which is why many on the left wanted Britain to join the single currency.

Times have changed. Even with a welcome pickup in activity in the past year, Europe’s growth performance since the launch of the euro has been pitiful. Talk of protecting workers’ rights is meaningless unless you have a job, and millions of Europe’s citizens do not. The structural adjustment programmes forced on those countries that have required financial bailouts have involved savage attacks on workers’ rights, including collective bargaining. The EU has not taken the fight to multinational capital. Rather, Brussels has become a honeypot for corporate lobbyists demanding deregulation and the transatlantic trade and investment partnership (TTIP).

One of the great ironies of the UK’s referendum debate is that Europe, with its austerity programmes and its drift towards neoliberalism, has been moving in a direction that rightwing Conservatives would tend to support. Just as in the UK in the 1980s, unemployment has weakened the power of organised labour and the trend is for more competition and for free markets.

There is a modern and progressive argument for leaving the EU, but it has struggled to be heard during this dispiriting campaign. It is that Europe is unable to deliver because it is wedded to backward-looking ideas. Or to adapt the words that David Cameron used on his first outing as Conservative leader to taunt Tony Blair, it was the future once.

There is a leftwing case for staying in too. This accepts that the EU is far from perfect and must change, but says the answer is to work for a kinder, gentler, greener and more equal Europe from within. Exit, by contrast, would be the catalyst for a breakup of the EU that would give rise to aggressive nationalism and leave Britain at the mercy of rightwing Conservatives who would have the wherewithal to cause immense damage before there was a chance to get rid of them at an election.

Yet, it is stretching a point to argue that the treatment of Greece has much to do with the theories of Maynard Keynes or that TTIP would sit comfortably with Fritz Schumacher’s “small is beautiful” vision. Europe has been going in an entirely different direction, which is why aggressive nationalism will continue to be a problem even if Britain votes to remain. That’s because Europe’s economic model isn’t working and hasn’t been working for a long time. Bad economics leads to bad politics. Always has, always will.