EMU: very good indeed?
EMU: very good indeed?
John Palmer, the Guardian's Europe correspondent, replies to recent LLB criticisms of EMU.
It would be a serious error for the left to follow Bernie Moss and his nostalgic strategy for a British state sponsored so-called "Keynesian" alternative to European economic and monetary union (April LLB, EMU: what the Government doesn't want you to know). Bernie is simply wrong when he says membership of EMU necessarily means deflation, public spending cuts and unemployment. Indeed as the countries entering the Single Currency show, preparation for the Single Currency stimulates faster growth and (too slow) reductions in unemployment.
EMU does not require lower public spending but a lower budget deficit. Right wing governments will try to achieve this by spending cuts, progressive governments will achieve it by taxing capital, the rich and the use of scarce ecological resources. Public spending in Ireland, Portugal and Spain is at record levels. New Labour refuses to join the Single Currency in part because it is morally in hock to Murdoch's media empire but mainly because entry would require lower British interest rates and (almost certainly) some increases in taxation. But this conflicts with Blair's "second term" strategy for tax cuts.
The left has every interest in backing EMU precisely to achieve a fairer and more economically effective mix between tax and monetary policy. This may explain why the German Greens, the Italian Communists, the Spanish far left, the Dutch left/greens (as well as our own Hugh Kerr and Ken Coates) back economic and monetary union -- as a part of a Europe wide strategy for employment, social justice and a social and ecologically sustainable economy. EMU will give the governments which share key decision making powers the capacity -- for the first time in history -- to challenge the priorities of global capital and the global markets in a way none could do on their own.
Whether they do so or not will depend on the left. It has every reason to strengthen what Bernie Moss calls the "institutions for social and economic governance." That is why to be a socialist today logically requires one to be a European (and national federalist). Tomorrow we will have to build a democratic global federalism (our forbears called it "international socialism"). Unfortunately the English left is still in the ideological embrace of a stultifying conservative nation state patriotism (the Scottish and the Welsh left are moving way beyond this, not least regarding European issues). Bernie should leave that kind of stuff to Jack Straw and the Daily Telegraph.
Brian Burkitt's article in last month's LLB reproduces most of Bernie's misunderstanding of the entire EMU project. The question of Britain's trade cycle or its interest rate structure being different to the rest of the European Union is frequently cited by Bank of England and Treasury monetarists but is really quite beside the point. If Britain joined EMU now it would have to reduce interest rates. Quite right too, say I. The Government would be under no obligation to reduce the UK budget deficit which is already well under the three per cent ceiling set in the Maastricht Treaty.
Brian combines a monetarist prejudice about interest rates with Keynesian illusions that letting the exchange rate go generates lasting growth. It does not. The British have had forty years experience of this sad fact. Indeed in a modern, globally integrated capitalist economy, a country which seeks a devaluation advantage or which runs a dangerous budget deficit risks a far more deflationary sanction at the hands of the international money markets than anything suggested in the Maastricht Treaty. The real issue for the left is not whether to run a low inflation strategy -- we have little choice about that in a globalised system -- but how this is to be achieved.
Crudely, is it to be achieved at the expense of capital or of working people? That is the key issue facing New Labour over taxation, public spending and growth policy. The simple moral is that not only can there be no socialism in one country -- there can be no reforming social democracy in one economy today. That is why European integration is so essential for any strategy which sets out to confront the global power of contemporary capital. That is why the trade unions and the left in so many EU countries, while bitterly critical of the policy of member state governments, by and large support the Single Currency project.
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