The working class has nothing to fear from European integration

Jan/Feb 1997

The ceremonious presentation of the first Euro banknotes at the Dublin European summit, last December, produced some hilarious headlines. The Daily Mail shed a frontpage-full of tears over "1,100 of our history", while the Sun's headline - "We hate Eur funny money" - sounded rather strange, even leaving aside the poor pun, coming from the paper of an Australian tycoon.

It must be said that this was a tough day in the contest for the most ridiculous display of Little-England chauvinism. MPs from both sides of the Commons were doing their utmost to distance themselves from the single currency, as if they were afraid of burning their hands with "Brussels' money". This farcical over-bidding reached a climax when Tory arch-Eurosceptic Teresa Gorman called for a boycott of French mistletoe (which, she said, without the slightest hint that she might have been joking, was threatening to kill the true British variety) with David Young, the Labour MP for Bolton South-east, seconding her call with a "isn't it time that Britain stopped handing all the advantages over to the French on a plate?".

More or less vocal, and at times extravagant opposition to Europe is an old story among British politicians of all descriptions. For a number of years now, such opposition has re-emerged periodically, in fits and starts, almost as regularly (although not quite as often) as the ups and downs of the pound. This has certainly a lot to do with the wear and tear of the ruling party after so many years in office and, in the case of Labour, with the electoral ambitions of its leadership, desperate to catch the attention of middle-England. These circumstancial, and rather artificial causes conceal, however, the very real contradictions in the position of the British capitalist class towards the European Union and its proposed single currency - contradictions which explain, much more than the politicians' demagogy and posturing, the ambiguities of Major's policies towards the European Union as well as the recent shifts in Blair's approach to these issues.

That there should be an almost parallel hostility to Europe and the single currency among many quarters of the left is, however, more difficult to understand. It would seem that Thatcher's famous fetishism for the "pound sterling" has spread to a whole spectrum from traditional Labour right-wingers like former Chancellor Denis Healey, to "left" trade-union leaders like Bill Morris and Arthur Scargill and even to some groups on the revolutionary left. Although, of course, the rationale behind their opposition to the single currency - and therefore advocacy for the retention of the pound - is different from that of the Tory Eurosceptics.

Nevertheless, there is something common to all those opposing the single currency: the idea that somehow, retaining the present status quo, with its obsolete national boundaries and currencies, inherited from bourgeois revolutions which took place several centuries ago, is a better protection against the "threats" of the outside world. In the case of those who think that, by opposing the single currency, they are defending the interests of the working class here, this amounts to saying that the state of the British bourgeoisie and its political and economic rule, as it stands today, would represent a "lesser evil" for the working class, compared to the changes which closer European integration might bring about.

In many respects, the problem posed to revolutionaries by the present drive towards the European Union is similar to, and in fact an integral part of the more general problem posed by the evolution of imperialism as we can see it today. Our readers will find another article in this issue dealing specifically with this general evolution - which is often referred to, these days, as the "globalisation" of the world economy. Due to the close connection between the two issues, the approach and the reasoning used are in many ways similar. This article will therefore concentrate primarily on the aspects which are specific to the issue of European integration.

Second-rate imperialisms fighting for their lives

For a long time, the European imperialist bourgeoisies have been suffocating within their respective narrow territories. None of them had a national market large enough to provide the solid long-term basis for large-scale industry - neither in terms of the capital available nor the demand for manufactured goods - let alone to sustain their profits in the event of a temporary slump on the world market. The French and British bourgeoisies did manage, for some time, to compensate for the limitations of their national markets by plundering their colonies. By the 1960s, however, they were no longer strong enough to carry on sustaining large colonial empires. They did their best to ensure that decolonisation would transform their former empires into lasting spheres of influence. But they could not prevent their grip from being increasingly loosened, allowing the American, or less often the Japanese bourgeoisie to step in and take part, and in some regions all, of the loot for themselves.

This, together with obvious geographic and historical factors, has been the basis for the development of intra-European trade, to the point where it represents, today, over one third of all international trade. With a size which is significantly larger than NAFTA, the single market set up by the USA with Canada and Mexico, the European market could provide the main European imperialist bourgeoisies with something approaching the national market they never had. It has therefore become absolutely vital for them to protect this market against their American and, to a lesser extent Japanese competitors, and to develop it for their own benefit.

This is why the main European countries, with their competing but complementary interests, have been engaged for the past forty years in what they call "European construction". It took them all these years of hectic negotiations, to more or less abolish customs barriers and many other obstacles to trade, while trying to put some order into the jungle of tricks which each national state used to stop the penetration of competing capitals and help the penetration of its own capital into other countries. Once the main economic powers of the continent - mainly Germany, France, Britain and to a certain extent Italy - had finally succeeded in creating a common market (if not a single market yet), the other European industrial countries had no choice but to join in, one after the other.

For the European market to provide, as much as possible, the same benefits as a large national market, that is to really operate as a single market, all obstacles to the circulation of goods and capital have to be removed. A lot still remains to be done in this respect. In particular, it would require the harmonisation of trade, company and tax laws across Europe, which is very far from being achieved. Likewise for environmental, health and safety, and consumer laws, which impose more or less stringent limitations on the right to sell a wide range of goods. It would also require the free circulation of people, if only to guarantee the maximum flexibility in terms of the flow of manpower. But this would require, in turn, harmonisation of labour laws and overcoming the numerous obstacles to immigration mounted by the various governments for their own demagogic reasons - even if, on paper at least, these obstacles no longer exist for European citizens.

In economic terms, the changes introduced so far, in the spheres of trade and finance mostly, have already resulted in a sharp increase in intra-European trade and investment. The movement of financial concentration which has been taking place worldwide, took a particular intra-European form with the setting-up of European-wide conglomerates, through mergers or alliances - GEC-Alsthom and ABB in engineering, for instance - or through cross-border takeovers between European countries.

There still remains one major economic obstacle to the free circulation of goods - the constant uncertainty created by the instability of the currency market, which adds a certain element of risk, and an additional cost, to any intra-European commercial operation, therefore acting as a brake on the development of the European market. The European Monetary System (EMS) was set up, in its time, precisely as an attempt to overcome this problem by pooling together the resources of all European central banks, within certain limits at least, to stabilise the European currency market. However, after a long series of incidents, the EMS eventually broke down when it proved incapable of resisting the speculative storms of 1992-93, in which the pound and the Italian lira broke free.

The chaotic history of the EMS led the European bourgeoisies whose economies were most interdependent, and therefore were most in need of a stable European currency market, primarily Germany and France - Britain having to an extent more leeway - to the conclusion that the only solution was a single European currency, with its necessary corollary, a single issuing European bank.

Achieving this objective was not simple. It required some degree of harmonisation in the policies followed by the various states, and in their resulting performance, particularly in terms of budget, interest rates and inflation. This need for harmonisation was the basis for the "convergence criteria" written into the Maastricht Treaty. These criteria were the result of protracted negotiations involving all governments, including those which demanded, and got, temporary opt-out clauses on certain aspects of the agreement - particularly Britain and Denmark - for the single currency. In other words, these "convergence criteria" were the expression of a concensus, albeit one which was difficult to reach, between the European bourgeoisies, to agree on a few rules and abstain from using any below-the-belt tactics.

The particular position of the British bourgeoisie

In several respects, the British bourgeoisie is in a particular situation compared to its two main European rivals.

Overall, the British bourgeoisie is more directly dependent on finance and services than on production or trade, and therefore less dependent than the other main European bourgeoisies on intra-European trade.

The fact that Britain has a lower GDP per head than Germany and France, and in fact than a number of other smaller European countries, including Italy, Holland and Luxemburg, conceals the real wealth and income of the British bourgeoisie, which is probably comparable, if not greater, than that of the French bourgeoisie. But its wealth and profits are scattered - and often hidden away - all over the world in the vast banking and financial web that it has maintained since the days before World War I, when it was still the banker of the world. It is significant for instance that out of the five largest British banks, Barclays, NatWest and Lloyds/TSB have over a third of their assets outside Britain, HSBC/Midland has over half and Standard Chartered over three-quarters - far more than most of the leading German and French banks. Neither the French nor the German bourgeoisies have been in a position, anywhere in the world, to play a role remotely comparable to the role of financial intermediary played by British banks in Hong Kong and Singapore, or even in the USA.

This financial weight of the British bourgeoisie is best illustrated by the importance of the City. Its total capitalisation in shares is 25% larger than that of France and Germany put together. It is also, by far, the main channel for currency trading between Europe and the USA, and the world's second largest between the USA and Japan. Some of the worries most frequently expressed by economic commentators in the press, are over the future of the City within a single currency Europe. A large part of the success of the City is due to the fact that American floating capital has taken shelter there, to escape the much more stringent regulations which exist in the USA. Would participation in the single currency force the City to align itself on the tighter regulations which exist in Europe, with the risk of frightening off the dollar milch cow? Or on the contrary, would it mean that regulations might be loosened in the rest of Europe, thereby exposing the City to much more serious competition from the French and German Stock Exchanges? In any case, these worries have led to speculation on the possibility of London getting the best of both worlds, by becoming the main financial intermediary between a single currency Europe and the rest of the world, while retaining its monetary independence.

The exposure of British capital outside Europe is generally much larger than that of French and German capital. Among other things this reflects the fact that the British bourgeoisie has retained a much larger and richer backyard in its former colonies than France and, of course, the fact that its colonial empire was also by far the largest. Both in terms of banking and in terms of trade, it retains a privileged - and profitable - relationship with large countries like India, Nigeria, South Africa, Pakistan, not to mention the links developed into south-east Asia through Hong Kong and Singapore.

In average, British multinationals have about 30% of their assets outside Europe compared to 18% for their French counterparts. Some of the largest British companies have over 70% of their assets outside Europe - mining groups such as RTZ and Lonrho, financial conglomerates such as Jardine-Matheson, the Swire group, the Hanson group, etc.. Most of these groups are more closely, if not exclusively, dependent on the US dollar, or the Japanese yen, than on European currencies and they are likely to be more resistant to the idea of linking their fate to a single European currency.

More generally, the British bourgeoisie is by far the largest foreign investor in the USA where half of the stock of British investment abroad is located. By comparison, only 27% of all British investment is in Europe. The recent giant merger announced between BT and the US company MCI, will only reinforce this trend. Such is the real content of Britain's famous "privileged relationship" with the USA - nothing sentimental, just a very down-to-earth mountain of dollars. This can only generate caution, if not suspicion, towards the single currency.

That being said, these differences should probably not be overestimated. They are becoming less important with time. For instance, the number and relative economic importance of European subsidiaries in Britain has been increasing very rapidly over the past years while that of US and Japanese companies has been receding. Conversely, many British companies have been expanding into Europe and the overall dependence of British business on the European market is increasing - adding on to their existing trading dependence, since Europe absorbs already over 50% of British exports. British banks and financial institutions are watching the European scene with envy. They hope to be able to sell their financial expertise to the large number of European companies which, compared to British companies, have made relatively little use of the share market so far to raise fresh capital.

Meanwhile, increasing international competition is eroding Britain's backyard. In the biggest Commonwealth countries, the British bourgeoisie has already been, or is in the process of being replaced by the USA as the largest investor and trading partner in these countries. Likewise Britain's share of the plunder of south-east Asia can only shrink, in favour of US and Japanese capital, once Hong Kong reintegrates China in July 1997 and loses, as is likely to be the case sooner or later, its quasi-monopoly as trade and financial intermediary between the West and China.

The European war machine

Will the single currency get off the ground and if it does, will it be with or without Britain? No-one can be absolutely sure at this stage.

The recent BSE crisis was a reminder of how fast barriers can be set up. Their "European construction" did not in any way do away with national states - it still does not aim to do so - and each state can in principle undo what has been done with its agreement.

The European "Union" is really a conglomerate ridden with contradictions, organising the spheres of influence of the major European powers, which are rivals and at the same time obliged to get on with each other in the face of more powerful competitors (the United States and Japan). The demand for a single currency itself only reflects a situation in which even the most powerful by far of the economies involved, that of Germany, is not in a position to impose its currency, the deutchmark, as the currency accepted by everyone.

In this alliance, and to various degrees, depending on their real power, all the states have the same attitude - they all want to retain as much independence as possible in order to protect the specific interests of their respective national bourgeoisies. The British state is not acting differently from the others in this respect, just a bit more ostentatiously. Its present vociferous attitude does not say anything about its future choices - all the more so as the British government has always been very careful to do what was needed to remain on the European train.

One of the main weapons of the states is to use their national currency and related monetary instruments against their rivals. The "competitive devaluations" carried out in recent years by Britain, Spain, Portugal and Italy, are examples of how they can use this weapon. But playing on their budget deficit, interest rates or public debt, in order to increase their direct or indirect subsidies to their own bourgeoisies is also other means they often use in the economic war.

This is why Germany, and behind it France, the two pillars of "European construction", because they stand to gain the most out of it, have been insisting for several years that everyone should lay down this monetary weapon by joining in a single currency. But this is also why the build-up to the single currency has been so slow and has involved so many tensions which are still to be resolved, because every state is reluctant to give up such a weapon, without opt-outs, exemptions, guarantees, of all kinds, which are mutually irreconcilable.

For the main partners, the three imperialist powers, and a few others, like Portugal, Italy, Holland and Spain, the EU and the single currency are vital, albeit to various degrees. All have something to gain and something to lose. The weakest will gain less than the strongest and lose more. As for the other countries, such as Greece, the countries of Eastern Europe and Turkey, they have no real choice. By joining in, they will be submitted to a currency which will be completely out of their control - because it will be in the hands of the main powers - and they will lose a large part of their economic and political freedom, but at least they will not be reduced to the rank of the so-called "developing" countries submitted to the full rigor of the world imperialist market without even the minimum protection that the EU can offer them.

A united Europe and a single currency means the iron heel of the main European bourgeoisies on the weakest and, possibly, a means for them to make the weakest share the cost of their inflation and economic disorders, just as the USA did with the rest of the world in the past. It also means no more than an armed peace between these main powers which will be united, despite their on-going rivalries, only by the need to protect the European market and to maintain their plunder of the Third World against their more powerful common rivals, and to bring their smaller partners into line. Of course, none of these main powers is too pleased at having to compromise with the others. But on a historical timescale, it is their only chance not to be reduced to third-rate status. And judging by the statements recently made by a leading French politician, demanding that the value of the future single currency should be pegged at a low level compared to the dollar, to boost European exports at the expense of US exports, it is a chance that some intend to use fully.

In other words, this Europe is a war machine in the economic war against the USA and Japan. Just as the old CFA Franc Zone, the old Sterling Zone and even the Commonwealth were originally designed to be war machines, to allow the European bourgeoisies to carry on imposing their imperialist plunder on the poor countries. These bourgeoisies hope that it will allow them to avoid another military war aimed at dividing the world, by replacing it with an economic war which "limits" the bloodbath to the poor countries, through civil wars generated by poverty or political rivalries by proxy.

Poundstretcher against Eurostretcher?

At this point, the odds are that there will be a single currency involving at least Germany and France, together with the countries which are part of their sphere of influence in Europe, but possibly also Britain, even if only at a later stage, if only to secure a few more concessions for the British bourgeoisies.

What should be the attitude of revolutionaries towards this new version of the European Union?

Should they go along with Bill Morris and jump on the bandwagon now shared by Blair, Major and the Tory Eurosceptics, of a campaign for a referendum on the single currency?

"I will not ask T&G members to put their jobs on the line for a single currency without them having a say in the process", said Morris in a column published last September in the Guardian, on the grounds that "the present crusade for a single currency is based on a continent-wide austerity drive (..) The T&G believes that there should be a referendum of the British people before any final decision is taken"

But why should a single currency necessarily put workers' jobs on the line? Because it is based on a "continent-wide austerity drive"? But has Morris failed to notice the austerity drive of the past 17 years? Did it have anything to do with the single currency, or with Europe for that matter? Of course not. It was a drive by all British capitalists to screw more profit out of a leaner and poorer working class, a drive which was compounded by government policies aimed at channelling a larger share of government funds into the pockets of the rich, by cutting social expenditure on the back of working people. This was what the British working class faced yesterday, what it faces today and what it will face tomorrow, single currency or not. It is lying to workers to tell them today, as Morris does, that the only way they can defend themselves is by putting a ballot paper in a referendum box. Just as it was, yesterday, when the T&G was telling workers that the only way to fight Major's austerity was to elect a Labour majority in the Commons. Because, in either case, that ballot paper gives them no say whatsoever, not yesterday, nor today.

It is not the working class which is drying up public funds and creating a budget deficit - it is the wealthy with their reduced taxes, the bosses and the shareholders with the massive handouts awarded to them, the banks with the yearly £25bn interest payment they cash. And if this is happening, it is only because the British bourgeoisie feels confident enough to openly plunder the coffers of the state. If there is a deficit to bridge, let the capitalists pay for it! And if, as it is the case, in order to achieve this, workers need to take to the streets and to use their own weapons in the class struggle, then that is what they should be told straight. In any case, this is what revolutionaries should tell them.

But there are revolutionaries who believe they should tell workers something different, something similar to what Morris tells them, if not identical. Thus the SWP argues in its weekly (14 Dec 1996) that "Some bosses believe they could gain through having a fixed exchange rate with Europe. But this will mean sharper competition between companies as they fight for a share of the European market. Some companies will be driven out of business and workers forced to pay the price (..) Socialists are against the drive towards a single currency precisely because it means European governments coordinating attacks on workers"

"Sharper competition" because of the single currency? Why? Because of the pound being under-valued today, export industries would find it more difficult to sell abroad once it comes back to a more realistic level? Why doesn't the SWP demand that Major carry out another competitive devaluation, in order to boost exports? Besides, since the devaluation of the pound in 1992, how many jobs have been lost in manufacturing alone, despite the boost to exports? Over 200,000, despite "less sharp competition"! As to the "European governments coordinating attacks on workers", this is a joke. If the European governments are showing anything for the time being, it is the difficulties they have in any kind of coordination, let alone attacks on workers. If this was what they were doing, they were not doing it very well, judging from the two retreats of the French government in front of large strikes over the past 12 months! As if the bourgeoisie has ever waited or would wait for coordination from Brussels or elsewhere to attack workers' conditions and jobs in this country! Once the SWP's package is unwrapped, the only thing left is Bill Morris' implicit argument that the working class cannot defend its own interests - but at least, without the nonsense about a referendum, to be fair.

These doomsday scenarios can only point to the wrong enemies. They are saying that somehow, a European Union with a single currency would be worse for the working class than a Britain with its "good old pound sterling".

Revolutionaries have no reason to campaign either for this imperialist Europe or against it, particularly in the name of retaining the present status quo with all its nationalist paraphernalia. The working class has nothing more to fear from an imperialist European Union than it has from an imperialist Britain - but in both cases it has no choice but to fight the imperialism of the capitalist class.

Europe and a single currency could represent a considerable step forward for the people living on this continent - but not under imperialist rule. The same is true of the development of rapid transportation, or any technological progress for that matter, which under capitalism always ends up, one way or another, being used to increase poverty.

This is why the working class should not refuse the abolition of borders, the free circulation of people and the single currency, because these cannot be the causes of future attacks against workers. At most it could provide the capitalists with a new pretext for attacks - but if they do not use this pretext, they will use another one. The only cause of the attacks aimed at the working class is capitalist exploitation itself - and primarily, exploitation by very British exploiters. The working class needs to put its own house in order, by fighting first and foremost against capitalists here, Europe or no Europe!