The EU and the economy – Project Fear steps up

‘Exit the bosses’ EU’ sticker: Order sheets from  , designed by Helen Pattison

Exit the bosses’ EU sticker: Order sheets from , designed by Helen Pattison   (Click to enlarge: opens in new window)

The EU and the economy – Project Fear steps up

Remain or Leave, workers must fight for socialist change

Judy Beishon, Socialist Party executive committee

‘Every household will lose £4,300 a year,’ proclaim Cameron and Osborne to spread fear and increase the chance of a Remain vote in the EU referendum.

As most of big business in Britain and globally wants Britain to stay in the EU, the government’s warnings have been vocally backed up by many institutions of capitalism, including the OECD and IMF, along with prominent individuals from Obama in the US to the prime minister of Japan.

The UK is threatened, they argue, with investors fleeing, the pound plummeting, prices rising, trade volumes falling and all manner of other calamities – which would all impact badly on living standards.

The spectre of renewed recession has also been raised by Osborne and Bank of England governor Mark Carney. But the economy is on the brink of another recession anyway!

The Bank of England and the CBI bosses’ organisation have cut their growth forecasts, with CBI director Carolyn Fairbairn commenting: “A cloud of uncertainty is looming over global growth, particularly around weakening emerging markets.”

She also factored in the uncertainty of the EU referendum result. But while the present fall in investment by British corporations is inevitably partially linked to the referendum, the entrenched weakness of the economy underlies it.

Already British industry has nosedived into its third recession in eight years; the trade deficit is increasing – including with Europe – and productivity growth continues to be low.

In addition, growth in the services sector is falling. This growth is heavily dependent on consumer spending, which in turn is unsustainable at current levels – households have a bigger debt-to-income ratio than in the run-up to the 2007-2008 crisis.

With interest rates at the record low of 0.5% for over seven years now and the Bank of England having already pumped £375 billion of electronically created money into the economy, the ruling class and government are perilously short of options for stimulating growth further.

So it isn’t surprising that with the referendum opinion polls still almost neck and neck, they’re panicking at the prospect of added economic instability and hits on corporate profits in the event of Brexit.

Repercussions for the 99%

In response to the ‘project fear’ on living standards, many people will say ‘what’s new?’ Brutal austerity measures have been inflicted for a decade, whether the economy has been growing or not, including the rigid holding down of public sector pay.

Many working class and middle class people are struggling to get by and a layer will vote for Brexit to express anger towards the parliamentary parties and EU institutions that have been supporting cuts in services and other attacks on living standards. Whether Britain ends up in or out of the EU the struggle against austerity will go on.

However, another layer of young people and workers are leaning towards voting Remain because they fear being forced to pay the price of a worsening economy following a Brexit. This concern is understandable, especially after witnessing the bailout of the bankers after the 2007-08 crisis at the expense of the majority in society.

But the living standards of workers in Britain won’t depend on the level of profit being made by the major industries and services in the months and years after the referendum. Rather, they will depend on how far working class people manage to go in mobilising through the trade unions against both the austerity policies of the government and private sector bosses’ attempts to drive down pay and conditions.

‘Trickle down’ theory – that all layers of society benefit from wealth creation at the top – has been shown to be a sham by the rapidly growing wealth gap in recent decades, which has led to an obscene level of enrichment within the top 1%. Oxfam calculated that the five richest families in Britain now have more wealth than the poorest 20% – over 12 million people!

In addition, studies from the OECD have shown that “income inequality has a sizeable and statistically negative impact on growth,” as does the unrelenting austerity drive of Osborne and co. How will a Remain victory, a vote of confidence in Cameron and Osborne, reverse these?

Class interests

Just as it is against the interests of working class people to vote in a general election for the Tories on the grounds that they are the first-choice team for the capitalist markets, likewise it is against workers’ interests to vote for the capitalist club that is the EU.

Events in Greece have clearly shown which class the EU is serving. The European Commission has insisted on mass impoverishment of Greece’s working class and middle class. Fighting this, the Greek people have engaged in many rounds of industrial action and magnificently voted ‘no’ to the EU’s austerity imposition in a referendum last July.

Tragically, the Syriza government spurned that vote and proceeded to do the EU’s bidding.

With mass support behind it to oppose the EU diktats, that government could have moved to take fundamental measures in workers’ interests – including taking the banks and other key companies into public ownership under workers’ control and management and introducing democratic, socialist planning of the economy.

Oxi: no to austerity; Greece Troika protest (Creative Commons), photo (Creative Commons)

Oxi: no to austerity; Greece Troika protest (Creative Commons), photo (Creative Commons)   (Click to enlarge: opens in new window)

Today in Britain, whatever the extent of losses suffered by big business as a result of a Brexit or a new recession, they don’t have to be passed onto ordinary people.

The six million strong trade union movement has the power to mobilise effective mass resistance if enough pressure is put on its leaders to do so. This must include demanding the nationalisation of any large company threatening job losses, and assistance for small companies facing difficulties.

Also, Jeremy Corbyn must be held to his welcome anti-austerity stance, through building on the surge of support that elected him as Labour leader and turning it into an organised form – providing political representation for ordinary people.

Unfortunately Jeremy Corbyn and John McDonnell have departed – under pressure from Labour’s right wing – from the Labour left’s historic position of opposition to the capitalists’ European institutions. They are now echoing the Tory government’s propaganda by sending out Labour leaflets and social media messages saying that Brexit would threaten jobs and wages.

They, along with most of the union leaders, have abdicated responsibility in this referendum campaign for exposing the EU as a tool of the multinationals and calling for a Leave vote that could bring down Cameron and his entire cabal of public spending slashers.

Capitalist fears

How deep and long term would the negative repercussions of Brexit be for British capitalism? While the exact outcomes are not possible to spell out in advance, most large businesses estimate that leaving the EU would be a significant blow for them.

Britain’s ruling class – in the second biggest economy in the EU – through their representatives in successive governments, were part and parcel of creating the EU in the mutual interests of the top corporations across Europe.

While at the same time even the most pro-EU capitalists are competing with each other across the continent, they – including those in Britain – have made sure that overall, the EU treaties uphold their profit-making interests.

They better enable their enrichment on the European and global arena and their exploitation of the European working class, through ‘market liberalisation’ agreements and anti-working class measures such as allowing companies across the EU to bid for public contracts using a lower-paid workforce.

In the event of Brexit, despite threats by European capitalist politicians of reprisals, corporations across Europe would want to minimise interruption to their trade with the UK, it being the largest single export market for goods from the other 27 EU countries collectively.
Nevertheless, an exit vote would still be a major setback for the British ruling class, for their prestige and influence as well as economically.

Contingency plans are being put in place, including the Bank of England preparing to pump more money into the economy; and banks introducing ‘flexit clauses’ to loans – allowing them, if deemed necessary, to raise interest rates.

Trading would go on amidst the predicted disruptions, with a two-year period for the negotiation of new agreements, during which the government could come under pressure to organise a second referendum to try to overturn the decision of the first.

Right-wing Brexiters

Clearly not every capitalist in Britain thinks Brexit would be a bad thing for the economy and some think they would benefit from it, along with many small businesses.

They decry the declining weight of British industry in Europe and globally and believe that ‘free trade’ outside the ‘protectionist trade agreement’ of the EU could flourish. Brexit-advocating economist Ruth Lea argues that the government would be able to negotiate a ‘free trade’ deal with the EU for tariff-free goods, along with ‘passporting rights’ for financial services, because the UK already complies with EU finance and other regulations.

But while staying in the EU won’t lead to a new era of prosperity, neither will leaving it. Either way, British capitalism is a sick entity in an anaemic European and world economy. The ‘outers’ are much divided on the economy and tie themselves in knots when seeking a model for exit – Michael Gove was ridiculed for citing Albania as an example.

So they turn heavily to the issue of immigration, but also are leaning on anti-establishment feeling. For example, David Davis said that the single market benefits “big companies to the detriment of small businesses”; David Owen hypocritically remarked: “the EU works in the interests of the elite” and IDS attacked the EU as “a friend of the haves rather than the have nots”.

Their real attitude to the working class is typified by billionaire donor to Leave.EU, Peter Hargreaves, whose recent comments include that workers’ rights have gone too far, such as flexitime, extended maternity leave and protections against redundancy. He and the likes of Boris Johnson, Gove and Nigel Farage want bosses to be free to pursue a ‘race to the bottom’ in their workforces’ pay and conditions.

The economic arguments of socialists are the polar opposite of those being used by right-wingers whether in the Remain or Leave campaigns. None have any solution to the economic impasse of capitalism in Britain, Europe and globally.

It is crucial that the anti-capitalist and socialist ‘vote Leave’ message of the Trade Unionist and Socialist Coalition (TUSC) and the Socialist Party is heard as widely as possible in the coming weeks, as the only position that can be taken in working class interests.