Embracing Brexit would be a historic mistake for the left

The left’s flirtation with Brexit is not just a mistake; it is downright dangerous, writes Tom Kibasi

December 5, 2018
14 min read

David Cameron and Theresa May visit a property following an immigration operation. Photo by Number 10 (Flickr)

With the prime minister set for almost certain defeat on the ‘meaningful vote’ on her Brexit deal, the probability of a second referendum on EU membership appears to be rising by the day. While Labour has said that all options must remain on the table, it has widely steered clear of endorsing a public vote—for now. Should a referendum occur, it is clear that it will be because of the failure of May to negotiate a good enough deal to command parliamentary support—and the failure of Brexit as a political project. Setting aside whether there should be a second referendum, should the left support Britain leaving the EU in pursuit of ‘Lexit’ if one were to occur? This is the case against.

The EU is no more perfect than any human creation. Refugees fleeing war or persecution have been treated atrociously at its borders. Its treatment of Greece has been undemocratic and disgraceful. It has failed to address the structural problems in the Eurozone, failing to rebalance from surplus countries to deficit countries either through fiscal transfers or through raising wages and consumption. It has a democratic deficit driven by the absence of a European demos, and a desiccated political discourse. It lacks transparency and accountability in many aspects. There are serious critiques that can and should be made of the EU, explaining some of the hostility felt by those of the left towards it. The contempt towards it must also be understood in the context of the past two years where EU membership has been adopted as the defining cause of the progressive neoliberals of the centre. So it is unsurprising that Lexit is fashionable among those on the left who are spoiling for a fight. Indeed, it’s quite possible that the #FBPE crowd are in themselves the best argument for Britain to leave the EU. But the arguments of Lexiters are different and require examination.

The role of the state in the economy

The central critique of Lexiters is that the EU is a neoliberal project whose rules on state aid prevent and active and expansive role for the state in the economy. But anyone who thinks the EU prevents the state from having a role in the economy ought to meet Denmark, Finland and France. In each of these countries, according to OECD data, government spending was 55 per cent or more of national income. That means more of the economy was in the government sector than the state sector. This Conservative government’s plans are for government spending to be 38 per cent of national income in the 2020s. In Denmark and Sweden, the difference in income between the top and bottom deciles is fivefold while in France and Germany it is sevenfold. In contrast, the income levels of the top decile in the UK is 11 times that of the bottom (and 14 times in the US). On state intervention and equality, other European states are examples to us, not us to them. To think otherwise is to embrace the unpleasant combination of arrogance and ignorance that has long characterised English exceptionalism. It is the left’s mirror to the right’s ‘Empire 2.0’.

Moreover, building societies of equality, solidarity, and liberty has not been the task of a single government. It has taken our European neighbours 70 years of hard work, investment and political commitment to get there—a collective project across generations. It is magical thinking to imagine that a single government of any persuasion could match those achievements in a single term. It is pure fiction to claim that any modern economy could be restructured to such a degree in such a short period. For left and right, Brexit is the magical solution that fails to recognise that the problems we face are deep and structural and largely of our own making.

What about state aid?

Sadly, many of the Lexiters share the casual indifference to the fact found in their Brexiter cousins. Many latch on to the term “state aid” without understanding either what it means or why the rules exist. These rules are about a basic principle of fairness—they exist to stop countries from unfairly undercutting one another and putting workers out of jobs. They are a necessary feature of any free trade area formed between two or more states. It is true that state aid rules are not necessary outside of a free trade area, though there are state aid rules included in WTO law. But the reason is that any country that indulged in unfair practices would be subject to tariffs to eliminate the distortion. If a Corbyn-led government went on a spending splurge offering direct subsidies to green businesses large and small, then the retaliatory tariffs would eliminate any price advantage and effectively transfer taxpayers’ money to foreign governments.

Let’s take an example. Imagine countries A, B and C are each home to aluminium producers. They compete to sell the best quality aluminium at the lowest price both to each other and around the world. Countries A and B decide to form a free trade area together so they are able to sell more to each other—but do not include any rules on state aid. Now imagine that country A decides that it wants to expand its exports by giving its producers a costs advantage and so instructs its state-owned electricity utility to provide its aluminium producers with free power, which comprises around 40 per cent of the production cost. Country C responds by putting a 40 per cent tariff on aluminium imports from country A, cancelling out country A’s subsidy and protecting its own firms. But country B has formed a free trade area with country A, so tariffs are not an option. As a result, the aluminium producers in country B go out of business and the workers lose their jobs. Soon after, with a dominant market position within the free trade area, country A cancels the power subsidies and pushes the price up for everyone. State aid rules are designed to stop this from happening. They exist to protect businesses and workers from unfair competition. Earlier this year, the EU forced Apple to pay an additional £13bn in taxes to the Irish Government – after ruling that the tax arrangement between the Republic and the technology giant amounted to illegal state aid.

Other Lexiters claim that the EU’s state aid rules somehow prevent nationalisation. They claim that the founding of the NHS, for example, would have not been possible or that the railways or Royal Mail could not be returned to public ownership. This is simply a myth: it is untrue. Article 345 of the Treaty on the Functioning of the European Union literally says: “The Treaties shall in no way prejudice the rules in Member States governing the system of property ownership”. It is the European Convention on Human Rights (ECHR) that enshrines property rights. But the ECHR is entirely separate from the EU. Moreover, the ECHR does not prevent nationalisation per se. It prevents nationalisation without compensation, which is something that Labour has already ruled out, and which would prove politically and economically impossible (the increase in the cost of government borrowing that would follow from such an act would cancel out the acquisition of an asset without payment).

Who decides?

Lexiters rightly point out that European institutions and decision-making aren’t neutral and objective in the way that some liberals assume them to be. This is especially true on state aid, where the European Commission makes decisions on a case-by-case basis. But that is all the more reason for the UK to remain a member of the EU and to shape its decision-making. As one of the ‘big three’ member states, the UK has historically had enough political muscle to ensure decisions work to its favour. And with this country set to be Europe’s most populous state by 2050, Britain’s power is set to grow rather than diminish. And in just the same way, promoting Britain’s departure from the EU is not a neutral act: Brexit is primarily a project of the radical right, and leftists ought to think very carefully when they find themselves on the same side as Tommy Robinson and Jacob Rees-Mogg.   

If the European project has taken a neoliberal turn, it’s precisely because the British government has had its hand on the steering wheel. It has been the UK government that has been most rigorous in the application of state aid rules at home and most vigorous in its insistence that they are applied to others. The proposition that the only proper role for state intervention is in the case of market failure has its intellectual and political home in HM Treasury, the citadel of neoliberalism, rather than in Brussels. Every other EU state sees government support for business as routine industrial policy. And even if the neoliberal turn were substantially rather than anecdotally true, just as the left does not conclude that the election of a Conservative government means we should dismantle the state, a Europe that is heading in the wrong direction does not mean that we should exit the EU. This is why Varoufakis is right that the left should seek to mend the European project, not to end it.

Commodified labour

For those in the ‘Blue Labour’ tradition, the EU is to be resisted primarily because freedom of movement represents the commodification of human beings. It is certainly true that Britain has been the destination for a disproportionate share of internal migration within the EU compared to its size: the UK is 8 per cent of the EU’s population by accounts for 24 per cent of EU migrants. Setting aside the UK’s desperate need for immigration because of ageing (between 2016 and 2030, the over 65s are set to increase by 30 per cent while the working age population increases by just 2 per cent), it is a mistake to believe that this has been driven by the EU rather than by our own choices.

The UK has pursued a low-productivity low pay economic model with a deregulated labour market that has created millions of jobs but at the expense of decent pay and conditions for many. The UK has eschewed strong trade unions and collective bargaining and guild-based professional accreditation which has meant that countries such as Germany and France have not had huge influxes of low-wage workers, and where new workers have arrived, they have been integrated into social processes in which organised labour has significant power. In addition, the outsized financial sector based in London has artificially boosted the value of sterling—so-called Dutch disease—which has increased the value of remittances, further encouraging intra-EU migration.  

Other Lexiters object to ‘fortress Europe’, that the EU has freedom of movement within its borders but excludes those from the rest of the world. In this analysis, the EU is a racist project that confers greater rights for predominantly white and Christian Europeans over those from other countries. But this fails to recognise that without the EU, there would be more borders, and that the EU as a project establishes the idea of governance and institutions that are postnationalist. Indeed, one of the most compelling aspects of the European project is the idea of constructing a way of organising human affairs that are not based on the myths of ethno-nationalism that are powerful forces against equality.

Collective action

Some Lexiters breezily dismiss international efforts to tackle global challenges. They argue that issues such as climate change or conflict-induced migration will be solved by technology not by international agreements, and worse, that the very act of internationalism obscures the failure to address the issues. But this is an argument against collective action per se: it is akin to believing that we shouldn’t worry about the NHS because new drug discoveries will cure disease. In the modern economy, the policy framework has a huge impact on the direction of research and development investment and the pace of change in society. In the short run, new technologies can be cost additive—an approach that moves all economies in the same direction allows innovation to flourish because it prevents undercutting. Yes, it can be a painful process to try and improve conditions across the entire European continent at once. It is the incredibly difficult politics of raising everyone up. But the alternative of state-to-state competition rather than solidarity produces a race to the bottom and social dumping.

The common thread that connects the challenges of the 21st century is power. As recent IMF research has shown, corporate power has risen across all sectors in advanced economies over recent decade. Corporate mark-ups—a measure of corporate power—are up by nearly 40 per cent. Nearly half of that increase has occurred in the last 5 years. The extraordinary power of technology firms in particular show that this is the new arena for the contest between the many and the few. Competition regulators in the United States and the UK have been weak and craven. The only challenge to the rising power of corporation such as Apple, Amazon, Facebook and Google has come from the European Commission. In the 21st century, only the EU has shown itself to be an effective bulwark to the rising power of global corporations. Whereas Lexiters see the EU as an instrument of neoliberalism, it may well be our last best hope to resist it.

The revolutionary path

For other Lexiters, supporting Britain’s departure has little to do with EU itself. For those who despise the status quo, Brexit has been instrumentalised: a means to bring everything tumbling down. In the belief that the left will benefit from chaos, some Lexiters are prepared to concede a nationalist, resurgent right as the method to discredit the neoliberal settlement. A hard Brexit will allow the right to ‘bring the country back together’ through nationalism. The pain and suffering that will be caused by crashing out of the EU will not bring about reflectiveness but rage. Leave supporters will not concede that they made a mistake, but convince themselves they made the right choice.

For those in the Marxist tradition, the Brexit question speaks to a much older historical division. In important respects, the argument about EU membership rehearses the disagreement between Trotsky and Stalin about the future direction of the Soviet Union following the death of Lenin. For Trotsky, internationalism was not merely a preference but an imperative. Trotsky’s theory of permanent revolution embraced the classical Marxist emphasis on world communism. This stood in sharp contrast to Stalin’s ‘socialism in one country’ which was to see the Soviet Union embrace nationalism as a means to accelerate industrialisation and rearmament. The Red Terror that followed was not some historical accident, but rather the consequence of this synthesis of nationalism with communism. It is a sober warning to the left. With the radical right already identifying modern enemies of the people, the left’s flirtation with Brexit is not just a mistake; it is downright dangerous.

Tom Kibasi is Director of the Institute for Public Policy Research (IPPR) and founder of the IPPR Commission on Economic Justice. He writes in a personal capacity.

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