The Stakes Are Clear
Theresa May's plans for implementing Brexit will be disastrous for workers.
This is hardcore. Prime Minister Theresa May has said that not only will Britain leave the European Union, it will leave the single market, which gives Britain privileged, tariff-free access to its biggest trading partner. Staying in the single market “would, to all intents and purposes, mean not leaving the EU at all.”
This means that May has put border controls and withdrawal from the European Court of Justice (ECJ) ahead of trade. The withdrawal from the ECJ is particularly important, since being bound by its decisions means being bound by the European Convention on Human Rights and the Charter of Fundamental Rights. The range of the ECJ’s remit extends from trading and market regulations to home affairs, civil liberties, justice, immigration, and asylum. In recent years, it was the ECJ which ruled against deportations of foreign criminals with a child, and denying prisoners the vote. The British state will now be at liberty to revisit these and other issues.
Race figures prominently in this. The ability to keep out immigrants, to bolster authoritarian state apparatuses, to lock up, deport, exclude, extradite, and extraordinarily render, comes before the interests of the City of London and the CBI. Britain’s colonial past is never entirely in the past — though, “Britain” may be in the past very soon, since Scotland’s secession has now been made much more likely.
But this also means that, to achieve these goals, May is really going to pursue the ultra-Atlanticist fantasy that UKIP has been pleading for all these years: instead of a European-oriented British capitalism, a “global” state linked to Washington and Europe through bilateral free trade deals, and trying to foster former colonies as export markets. This suits a wing of cowboy capitalists, spivs, and petty-bourgeois traders, anxious to be relieved of the constraints of the EU’s ordoliberal “social model.”
Instead of the single market, therefore, Britain will seek a separate free-trade deal with Europe, allowing it to trade more freely globally. And in the event that it can’t get good terms, Chancellor Philip Hammond promises to use massive tax reductions for corporations to lure investors, prompting German scowls. Donald Trump, using his position already to create leverage for the Brexit right, has promised that Britain can have a “quick” free trade deal with the United States once Brexit is complete. This is probably more of “the old Trump bullshit,” since it would take at least a few years to get such a deal in place, but it has been welcomed by May as a conversation-changer.
It is possible that May’s current position is posturing, an attempt to drive a hard bargain. Asked less than six months ago, I would have wagered that May has no interest in leaving the single market. But this may have been to give her too much credit as a strategist, and the squeals of business and the business press suggest that they’re taking her plans very seriously. The Financial Times laments that May is giving up on “one of Margaret Thatcher’s greatest legacies.” Former Liberal leader Nick Clegg echoes this sentiment: “Theresa May has finally turned her back on Margaret Thatcher’s greatest economic achievement, the world’s largest borderless single market.”
There are various reasons why this is bad capitalism. In the first instance, as Oxford academic Ngaire Woods pointed out prior to the Brexit vote, if you aren’t part of the single market, then you can’t offer access to that market as a perk of trading with you. You will get worse terms in any trade deal you strike, because you have a smaller market, and the larger economies you’re trading with will dictate the rules. When Trump talks about a “fair” trade deal, this artist-of-the-deal can be assumed to know what leverage he will have.
The government has attempted to talk up post-Brexit trade deals, claiming a total of £16 billion in trade deals made since the vote: a figure that turned out to be concocted from deals unveiled in previous years. Investors, who were interested in Britain in part because its access to European markets, have been reconsidering their investments. Those who have invested have been subject to extraordinary serenading and special offers on the part of the government. The Telegraph, which can always be relied on to deliver the “good news” about Brexit, can at best offer the decidedly unenthusiastic opinion of someone at the Fitch ratings agency claiming that Brexit will not be “the bogeyman that causes everything to fall over” and “ultimately companies will cope.”
British capitalism is already in a bad way. With low domestic demand caused by wage contraction and spending cuts, the Bank of England and the chancellor’s office has for some time talked of an “export-led recovery.” This was part of an austerian answer to Britain’s economic malaise: suppress wages and cut corporate taxes to stimulate investment, reduce debt, and export goods. This proved unavailing. It was hoped that the plummeting value of the pound, post-Brexit, would finally stimulate more exports. The large British trade deficit begged to differ with such sunny prospects.
Labor productivity remains very low. It was never Britain’s strong point and, while it has recovered to levels last seen prior to the credit crunch, it remains well behind that of other powerful economies and will not return to its long-term trend before 2020.
Hammond, appointed after the Brexit vote, claims that he is prepared to raise public investment in order to raise productivity. In this respect, he has stolen a trick from shadow chancellor John McDonnell. But what was notable in his autumn statement was how little he actually broke with the policy of his predecessor. While he abandoned the failed attempt to run a budget surplus, in order to invest about 1 percent of GDP in infrastructure investments by 2020, the figures are extremely modest. It also comes with a continued commitment to public-sector austerity, contributing to the “humanitarian crisis” in the National Health Service.
So what we are looking at is an attempt to engineer something far more radical. It is an epochal shift in a whole ensemble of relations: not just Britain’s relations with the United States and the European Union, but also the internal distribution of power in its capitalist class, in favor of its most short-termist elements.
The political power of the middle-class right is altering the character of the national power bloc on both sides of the Atlantic, and forcing a recomposition of the state apparatuses in a more authoritarian, death-dealing direction. It should be said, meanwhile, that there are already signs that business will be forgiving if May can indeed negotiate a bilateral, tariff-free trade deal. The reactions to her speech, while worried, are far from completely hostile.
British business has always been short-termist in its approach, and might find May’s Brexit preferable to a more redistributive, “social” capitalism of the sort that the opposition led by Jeremy Corbyn might try to implement.
Crossing the Rubicon
“Hard Brexit” might be a tough sell for capitalism, but it augurs even more ominously for workers. The Office for Budgetary Responsibility anticipates that the economy will grow more slowly as a result of “lower trade, lower investment and lower net inward migration.” But the first people to pay for this crisis will be the same who have paid for the credit crunch: the majority who don’t make their money from rent, interests, and dividends.
Corporations can hoard cash, or circulate it through the financial system to generate profits. Meanwhile, the incomes of the poorest will fall. Unemployment will rise. Retirement ages, already being driven up, will be raised further still.
This raises the question of why we’re sitting here and taking this. There is, despite divisions on the British left over how to handle Brexit, a fairly large and broadly anti-Tory bloc of opinion in the United Kingdom which was against leaving, and which engaged in near spontaneous protests in the capital after the vote was recorded. That outrage exhausted, and it was never especially politically sophisticated or reflective as to how the vote was lost. The initiative has been with the Brexiteers ever since.
May’s speech, however, crosses a Rubicon. There is hardly anyone to the left of Philip Hammond who can think the future proposed by her government is a good idea. So it falls to the Labour Party to lead the opposition. With admirable clarity, Corbyn denounced the proposals emanating from May and Hammond for making Britain into “a bargain basement economy off the coast of Europe.” This is a step forward, since Corbyn hasn’t always been particularly aggressive on this issue, no doubt in part because of the Left’s ambivalence about defending membership of the single market. But that — negotiated access to the single market with the free movement of labor that entails — is Corbyn’s logical position, and he should be blunt in saying so.
But Corbyn’s attack was immediately compromised by the response of the shadow minister for Brexit, Keir Starmer, who said of May’s speech that “it is good that she has ruled that hard Brexit out at this stage,” an astonishing interpretation. Starmer was not wholly uncritical but, as a conventional figure from the Labour soft right, who enjoys close relations with liberal Tories, he presumably thought it best to sound a diplomatic note. He is, either way, utterly ineffectual in his role — as he must be, given his attempt to square opposition to “hard Brexit” with immigration-bashing.
Meanwhile, those Labour backbenchers who, having been beaten twice, are now mithering Corbyn for a “clear” position on Europe, while not entirely without a point, also lack clarity themselves. Since many of them are pressuring Corbyn to sound “tough” on immigration controls, they can’t straightforwardly call for a pro-single-market position. And yet, what is their alternative? And what is the alternative among Corbyn’s allies who think it’s possible to restrict free movement as a sop to UKIP politics? Can they seriously believe, for a second, that the European Union will offer them an a la carte menu when it wouldn’t offer one to Theresa May?
Finally, there is a faction of the Labour right that has always been anti-EU. The former Labour MP Tom Harris, always on the party’s hard right and a long-standing anti-immigrant bigot, urges Corbyn to swing hard behind May’s Brexit plans, claiming in Telegraph that “the vision of the future outlined by Theresa May today would, if realized, set our country on a resolutely sound path to economic prosperity.”
This is bonkers, but it is at least internally coherent. Labour can have the anti-immigrant noises, but only if it swallows the “hard Brexit” Kool-Aid. And any pro-Brexit stance would send many of its voters to the Liberal camp. Otherwise, and absent any clear alternative, Labour will have to bite the bullet and tell the truth: its current “red lines” mean that it will back negotiated access to the single market and free movement of labor.
The Risk for Labour
Brexit has thrown the entire British political system into chaos, and “hard Brexit” is in one sense an attempt to master the terrain before the pieces settle back into place. It is a moment akin to crisis of the 1970s, and May models her approach to statecraft on Margaret Thatcher.
May is clarifying matters quickly, presumably hoping that audacity amid opposition confusion will pay off. She certainly shares some of the attributes which constituted Thatcher’s unique virtù: a ruthless sense of weakness in her opponents, a willingness to take risks, a sense of her allies, and a lack of sentimentality among them.
But it is not clear that she has Thatcher’s ideological hardness, or her ability to communicate. Ideologically, she was a modernizer and a Remainer until, apparently, she wasn’t. She demonstrates no particular charisma, having been protected thus far largely by the default British assumption that the Tories are made for exerting power. That aura can evaporate surprisingly quickly, and irreversibly, under duress.
And, at any rate, her solution is probably the worst of a series of bad options. Its costs, both economically and politically (in terms of Scottish independence) will probably start to make themselves felt before she leaves office, at which point a rearguard of soft Tory “bastards” are preparing to descend on her.
However, the risks are if anything even higher for Corbyn. The changes that would be wrought by May and Hammond’s model of capitalist growth would devastate a big part of Labour’s base, especially in the public-sector workforce and trade union movement. It would hurt the poorest workers and the unemployed.
Corbyn’s leadership was made possible by the very crises he is now called on to meet, and resolve on left-wing terms. He was put in his position to save social democracy from its long-term trends, a tall order. All odds have always been against him actually being able to do this. But if he can’t respond decisively to this situation, it might be over a lot quicker than anyone bargained for.