EMU: what the Government doesn't want you to know
EMU: what the Government doesn't want you to know
Bernie Moss, lecturer in European history and author of The Single European Currency in National Perspective, rejects EMU and the myth of globalisation.
EMU is probably the most momentous issue to face Britain since the Munich Pact of 1938. In the country and the labour movement debate on it is at a distressingly low level for several reasons. First, the information we receive is controlled by an elite of specialists who are true believers in the EU. Sceptics ignore the workings of the EU at their peril and the public, which may be Eurosceptic for the wrong reasons, remains poorly informed of the dangers that the single currency poses to economic growth, social welfare, wages and employment.
Second, the Government has put a damper on debate with a decision to delay entry that seems to be a Solomon-like compromise between the Europhiles and Eurosceptics. In reality the Government is preparing entry but does not want to risk losing a referendum. Polls show that support for entry, which as elsewhere divides on class lines, is running at 30%. The Government justifies delay by a Treasury Report that shows the British business cycle to be out of kilter with those on the continent, which are increasingly out of harmony with each other.
No mention was made by Gordon Brown of the disastrous deflationary effects of EMU, which has already reduced growth by at least one per cent a year and increased unemployment by seven million. Characteristically, Brown rejected immediate membership for the wrong reasons. Lower interest rates on the continent, he said, would mean too much expansion, too high wages, and necessitate a tax increase! There was no awareness that before long Britain might have to run a large deficit to combat recession that would disqualify it from membership.
Third, discussion of EMU is dominated, like all major issues facing the Government, by the myth of globalisation, the notion that national governments are no longer capable of regulating economies in the face of global markets. This myth, which justifies lower deficits and Tory spending limits, welfare reform and social cuts, is paralysing the Labour Party. Globalisation must be seen in historical context primarily as a self-fulfilling neo-liberal prophecy. Foreign trade and direct investment are no greater today than they were on the eve of WWI. Intra-European trade in manufacturing goods has stagnated since the 1980s; Britain runs a trade deficit with the EU to which it sells less than half of its exports.
The greatest globalisation concerns currency speculation. Resulting from the breakdown of the Bretton Woods system and the abolition of exchange controls by Thatcher's and other neo-liberal governments, short-term financial flows have limited effect on long-term investment. The other major manifestation is the multinationals, which control sources of high technology, but are really nationally-based firms that can be controlled by governments willing to do so.
Many Labour MPs think that the EU and EMU are remedies for globalisation when the reality is that they are a cause of the disease. The formation and deepening of the EU, sweeping away national barriers, protection, exchange control and regulations, were its regional instrument. By lowering tariffs below that of the US and Japan the EU has vitiated European industrial and technology policy. The hard euro mandated by Maastricht will further expose European industry to ruinous competition.
Fourth, many Labour activists think that the debate on EMU is a re-run of the old debate of British membership of the European Community (EC). It is too easy to accuse sceptics of nationalism or chauvinism when the internationalism of EMU is literally that of the free market and finance -- a Europe run by central bankers. There are profound reasons to be sceptical of the monetarist direction the EU has taken, but few people would propose withdrawing from the common market or neglecting the EU and Europe as an arena for struggle and a framework for solidarity and minimum standards.
The question is really strategic: where can labour best defend its values and interests. Nation-states may change -- the Scots may declare independence -- but the people or nation remain the repository of democracy and the public good. Labour depends on social norms, ideology, and legislation that are not available on the European level where it is divided by linguistic, cultural and political barriers, unlike capital which speaks a single language of profit.
The nation remains the chief locus of loyalty, solidarity and regulation in Europe. From its liberal foundations the EU has always contained a bias in favour of capital. Maastricht consecrates the competitive open market as the guiding principle, making public intervention problematic. Still, the EU can provide minimal levels of social protection and perhaps fiscal harmonisation, but even this minimum can only be won by mobilisation on the national level (a point Ken Coates in his employment campaign seems to have forgotten).
The EU has been successful in creating a free market, but has failed in areas requiring constructive action -- transport, commercial, industrial, regional, social and employment policy. The TUC talks of a social dimension, but the failure of EU social policy is patent. It took twenty-five years for unions to obtain minimal works council legislation.
The TUC never had a chance of getting European collective bargaining, which was its quid pro quo for the single market and currency. Its hope of gaining some say over the latter was always based on delusions about the nature of the EU. Much was made of the social protocol, but it excludes matters of pay and strikes and requires respect for national usages and setting only minimum standards. The new employment chapter and resolution adopts the Blairite philosophy of lower charges on employers and labour flexibility, confirming the unwillingness of members to contribute funds to European job creation.
The social deficit is linked to the democratic one: the absence of a legislative process that reflects popular needs and opinion, particularly that of labour. Hopes placed in an interventionist EU super-state are ill-founded. The EU lacks the constitutional and institutional foundations for social and economic governance.
The market bias of the EU was exploited by neo-liberal governments in the 1980s to create the single market and currency. The pivotal change came from the turnabout of the French under Mitterrand from interventionism to hard money and free markets. Mitterrand did not prove that national action in the face of global markets was futile, for he was blocked in his recovery programme by the very people who preferred EMU, that is Delors and other Europeanists in his government. Many Labourites find it hard to believe that EMU is Thatcherism writ large, since she opposed its federalist consequences, but she was in fact instrumental in introducing the deregulatory and hard money policies that resulted in the single market and currency.
The single currency followed logically from the single market with the mobility of capital and currencies tied to the D-mark at a high level. The recommendations of the Delors committee, composed of central bankers, were for the establishment of an independent central bank aiming at price stability free from any democratic influence or accountability. To assure a strong currency governments would have to reduce their debt and deficit and refrain from market intervention. Labour would have to keep its wage demands below productivity and bear the cost of adjustment. What attracted UNICE, the employers' union, to EMU was not the reduction of transaction costs and risk premiums on currency exchange, which were minimal, but the depressive effect it would have on wages and benefits.
Monetarist policies associated with EMU have already done their damage. In broad simple terms restrictive monetary policies have reduced growth in Europe from an average of five per cent before 1973 to two per cent since the 1970s, raising unemployment from 8.4% in 1990 to 12.5% today. As a result, income has shifted from wage earners to capitalists, nine per cent of GDP in France between 1982 and 1994 and over three per cent in Britain, which has fallen to Victorian levels of inequality alongside Portugal as the most unequal society in Europe. In order to meet the Maastricht convergence criteria, which are enshrined permanently in the Stability Pact, governments have had to make deep social cuts -- health, pensions, investment, unemployment and regional assistance.
This social compression has not occurred without popular reaction, a loss of support for the EU in the Europhilic countries of Spain and Portugal, the hostility of German opinion, which has mixed motivations, and a wave of protest in France that nearly defeated Maastricht in a referendum and last June elected a rose-red-green government under Lionel Jospin pledged to job creation and a revision of the terms of Maastricht.
Most informed observers like Delors doubt that the single currency can survive without political union. The Treasury shows that the trade cycles of member states are not synchronic; they move at varying rhythms and in different directions, requiring different monetary policies. The deflationary model, mandated by treaty and enforceable in law, may not survive states protesting (due to popular pressure) its rigid structures fettering national growth. Robin Cook recognised the problem when he said we are being forced to choose between "a softer euro, which would not be workable, and a harder euro, which would not be popular." EMU contains the seeds for endless disputes, blockages, compromises and package deals involving non-monetary matters.
Rather than provide a new élan for Europe, it is likely to compound the existing policy paralysis. Frustrated in efforts to alter policy to suit national requirements, governments may consider exit as they did last century from the Latin monetary union. EMU will divide Europe internally between capital and labour, and externally between the ins and the outs, which will include not only Britain, Sweden, Denmark and Greece, but also the candidates for membership in Eastern Europe.
Delors acknowledges that EMU will produce more unemployment and protest out of which he hopes will come demands for political union. But further transfers of sovereignty to the EU are unlikely. Few governments, certainly not the British, would want to dissolve themselves into an artificial European entity that lacked democratic and constitutional foundations. Second, as countries like France under popular pressure become disillusioned with monetarism, it will become increasingly difficult to achieve any European agreement on economic and monetary policy.
The tension and conflicts produced by EMU are far more likely to produce a reaction against federalism and a re-centring of economic and social policy in the member states. If EMU is the disaster that its structural flaws indicate, the day of British reckoning may never come.
Bernie Moss is available to speak on EMU in the London area. Call 0171-435 5909.
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