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.
Some very pessimistic estimates have put the cost of leaving the EU for the UK economy at 10% of Gross Domestic Product (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% of GDP.
Anyway, it is not a question of what is ‘best for Britain’, but what is best for working 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 theglobalfinancialcrashandtheensuingeurodebtcrisistheviewhas changed. Today, the euro area is grapplingwithsluggishgrowth, the falloutfromtheeurocrisisandan influx of refugees and migrants. So, from the point of view of British capital, the gains from EU membershiphavebegunto look less convincing.
Would British 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 achieved. 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 UKfigure, 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, an ‘emerging economy’ crisis may break just as Britain votes to leave the EU trading area.
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, come obligations and conditions. Norway and Switzerland must abide by all EU single market standards and regulations, without any say in their formulation. They 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 to that of Norway and Swtizerland.
And that is not certain. Indeed, the key interest of British capital is to preserve its hegemonic global position infinancial services – and with the UK outside the EU that could come under threat. Britain’s specialisation in services – not onlyfinance, but also law, accountancy, media, architecture, pharmaceutical research and so on – makes entry to the EU single market critical. If Britain refuses similar 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.
EU states may also try to usurp the UK’s position as the EU’s most popular destination for Foreign Direct Investment (FDI). 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 FDIflows into car factories orfinancial 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 infinancial 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 seems unlikely.
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 may be in danger and 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 offwork 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 employment laws.
Whether Britain is in or out of the European Union will make little difference to the majority of people in the UK. What matters isfighting to end austerity, save public services, including the NHS, to end the power of the big banks and corporations and begin a programme of planned investment for economic growth and employment that can deliver decent incomes and pensions. That does not depend on Britain’s membership of the EU.
The euro crisis 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 of 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 of 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 co-operation 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.
works in the City of London as an economist.