BREXIT EFFECT
Britain’s Global Chickens Coming Home to Roost? Radha D’Souza
The British political establishment has juggled to keep three balls in the air: an internationalised economy, international politics and internal cohesion. Every now and then a political party may drop one and trigger a national crisis. This time around it appears that all the three may have been dropped at the same time. National debt, war, austerity, falling wages and regional disparities were issues central to the leave or remain decisions. They were overtaken by one single issue: immigration.
Radha D’Souza (
[email protected]) is with the School of Law, University of Westminster, London.
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B
rexit is a multifaceted event. It signals deep divisions within the conservative Tory party in the neo-aristocratic democracy that is the United Kingdom (UK) (D’Souza 2016a). This article argues that Britain’s global chickens coming home to roost—four decades of liberalisation–privatisation– globalisation (LPG) reforms begun by Margaret Thatcher—now threaten to unravel the state. Euroscepticism in Britain
“Euroscepticism” has dogged British politics throughout the post-World War era. The foundations of the European Union (EU) were laid without Britain. Winston Churchill favoured a European community in 1946, but did not wish to put Britain at its centre. Britain stayed out of the 1951 Treaty of Paris, which was formally known as the Treaty establishing the European Coal and Steel Community (ECSC). Later ECSC became a part of the EU. Britain did not sign the Treaty of Rome establishing the European Economic Community (EEC) in 1957. By the mid1960s, against the backdrop of a stagnating economy, Britain under a Tory government sought membership of the EEC, but was prevented from joining because the French vetoed Britain’s membership. Then, as now, the EEC membership has always divided the British political establishment. It was an election issue in 1970. Britain joined the EEC in 1973 under the Labour party’s watch after the French veto was lifted. It introduced the European Economic Community Act, 1973 under which the EEC laws prevailed, if there was a conflict between the British and EEC laws in matters covered by the Treaty of Rome. The European question did not die down. In
the 1974 elections, the ruling Labour party promised renegotiation of the EEC membership and a referendum if voted into power. In 1975, a divided Labour party held a referendum. Two-thirds of the Labour party and a majority of the trade unions opposed the EEC membership. The divisions within the Labour party notwithstanding, 67.2% of the electorate voted to remain in the EEC. Tory and Liberal parties voted to stay in the EEC. The divisions within the Labour party on the referendum brought a segment of the Labour party closer to the Tories and Liberals, and away from the trade unions, their main social base. The Tory party faced the same divisions after Thatcher came into power in 1979. Thatcher signed up to the Single European Act in 1986 which set a timetable for merger and a common currency, but turned against the project later. Arguments over agricultural subsidies, food standards and regulations over various items of trade continued. In 1985, Britain stayed out of the Schengen Agreement on border controls. In 1990, Britain joined the monetary union much later than the other states only to withdraw within two years in 1992, following an intense speculation in the currency markets. It remains outside the eurozone. In 1992, Europe expanded the European project to incorporate political union with the economic union under the Maastricht Treaty (the Treaty on European Union). It provoked a rebellion in the Tory party. Thatcher, no longer Prime Minister, opposed the treaty. The Labour party too was divided. The Tory government signed the Maastricht Treaty without a referendum. The opposition within the party forced the government to negotiate several opt-out clauses and exemptions. The Labour party under Tony Blair was an enthusiastic supporter of the European project. In 2001, Blair promised a referendum on the Treaty of Nice, which introduced governance structures to sync the institutions of memberstates, but backtracked. As there was no constitutional obligation to hold a referendum, the need for it became a constitutional debate with many arguing that
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it undermines the principle of parliamentary supremacy as practised in Britain. Other EU states, in contrast, had held referendums on key milestones in the EU project. As several EU member-states had rejected the Nice Treaty, it was replaced with the Treaty of Lisbon in 2006. Britain signed the Lisbon Treaty in 2007 which was ratified by its parliament without a referendum despite persistent divisions. David Cameron as a member of the opposition promised a referendum and argued for leaving the EU. After announcing the referendum in 2013, he switched his position and argued in favour of remaining. Many politicians in Tory and Labour parties alike have prevaricated on the European question. The last word on Brexit may not be over yet. Already constitutional lawyers are arguing that the referendum is advisory and parliament could refuse to repeal the EEC Act of 1975. While legally possible, it will take a brave political party to withstand the backlash that will undoubtedly follow. What divides Britain so much over the European question? The British political establishment has juggled to keep three balls in the air: an internationalised economy, international politics and internal cohesion. Britain has championed free trade throughout history, engaged in wars around the world, and periodically conducted a jolly good class war at home. Every now and then a political party may drop a ball and trigger a national crisis. This time around it appears that all the balls may have been dropped at the same time. National debt, wars, austerity, falling wages and regional disparities were issues central to the leave or remain decisions. They were overtaken by one single issue: immigration. Economy The Tory government came to power in 2010 promising to cut down public spending, wipe out budget deficits, keep Britain’s triple A ratings by the financial rating agencies, and introduce humane conservatism, whatever that may mean. In the wake of the 2008 financial crisis and clamour for greater regulation of the financial sector in the EU, the City of London, the most deregulated financial capital of the world, was naturally sensitive Economic & Political Weekly
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to Brexit. Equally, to keep the triple A ratings, the government argued, it had to cut deficits and introduce austerity. National debt is not a new issue, but for a country frequently at war, defence budgets are difficult to cut down beyond a point. Wars and public debts have a close nexus historically. In March 2015, a hundred years later, Britain paid off the last instalment of money it borrowed to finance World War I. Britain mobilised men and material from home and the empire and won World War II militarily, but lost it economically. Under the Lend– Lease Agreements with the United States (US), Britain had to cede political leadership of the post-war world to the US and became economically indebted to it. Britain was the recipient of 25%, the largest share, of the US aid to rebuild Europe under the Marshall Plan (the European Recovery Programme initiated by the US to aid Western Europe). By the mid-1960s, the post-war recovery funded by loans and aid began faltering and Britain faced balance of payment deficit, falling value of the pound–sterling, unemployment and economic stagnation. The army was sent to Northern Ireland to put down “the troubles,” Scotland won the referendum on devolution, and the government faced a “Winter of Discontent” (1978–79) from trade unions against falling wages, unemployment and working conditions. Britain went cap in hand to the International Monetary Fund (IMF) for emergency assistance, a moment that deeply scarred the national pride of a country that was until two decades ago the world’s largest empire. The British membership of the EEC in 1975 was born from that crisis. Britain turned to Europe, away from the Commonwealth nations, its traditional zone of economic influence. Under Thatcher, the LPG reforms ripped up the industrial and production infrastructure and Britain laid its bets on becoming the world’s financial capital by offering a deregulated financial market and ancillary market services like legal innovations and skills, and international market institutions. For example, the City of London was a big beneficiary of the sovereign debt crisis throughout the 1980s, brokering vol lI no 33
agreements between the private sector and indebted developing countries, and offering financial, banking and arbitration services. While London boomed, other parts of the country trailed, incomes and employment fell. Class polarisation created divided geographies that are mirrored in the Brexit voting patterns. In 1991, Britain faced another economic meltdown caused by the financial sector in London. The political establishment blamed the EU, the exchange rate mechanism and high interest rates set by the EU. However, getting out of the EU exchange rate mechanism and staying out of the euro did not ward off the 2008 crisis. By 2008, the “BITs (bilateral investment treaties) revolution” was underway and offered new opportunities. As the multilateral trade negotiations under the World Trade Organization (WTO) saturated and the Doha round of negotiations stalled, the US and EU began pursuing BITs. The number of BITs increased from 309 by the end of 1988, to 2,181 by 2002 and 2,926 by 2015. In this scenario, would Britain’s old Commonwealth connections have offered better opportunities, if it abandoned the EU? Why get stuck with a bilateral EU agreement when Britain has long historical ties with so many other states around the world that it could pursue if it went alone? Indeed, throughout the Brexit campaign the leave camp was vocal about its Commonwealth connections. It was bizarre to hear extreme anti-immigrant, racist parties like the UK Independence Party (UKIP) praising India, which, according to its leader Nigel Farage, has much more in common with Britain than Eastern Europe. The points-based system followed in Australia was held up as a model for Britain to follow. India, South Africa, Australia, New Zealand and Canada were presented as desirable partners for Britain after leaving the EU. The underlying thread that connects these countries is, of course, the empire! The leave camp hopes to pursue bilateral trade agreements with individual Commonwealth countries. The points-based system will open immigration to a wealthy few who will take the best jobs, properties and privileges, leaving locals without basic services that low-paid migrants provide. 31
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The remainers argued over the size of the EU markets and London’s special place as the financial capital. However, the economy does not operate in a political vacuum. Rosy pictures of Britain resurrecting its Commonwealth connections were thrown into doubt by an unscheduled visit by John Kerry, the US Secretary of State, within days of the referendum results, highlighting another facet of the divisions over Europe. Troublesome Wars After the City of London, arms sales and manufacture forms an important pillar of the British economy. It is not possible to be an arms broker without becoming involved in financing wars. Since the end of the Cold War, Britain has played a lead role in the wars in Afghanistan, Somalia, Sudan, Iraq, Yemen, Syria and many other places. Its involvement with every major war in the world is rarely discussed in the same breath as budget deficits. Wars cost money, however. Britain’s membership of the North Atlantic Treaty Organization (NATO) is crucial to its war and weapons programme around the world. The EU has a common foreign policy and discussions on closer integration of defence policies are underway. Where does greater defence integration leave Britain? Throughout the Brexit campaign neither the leave nor the remain camps mentioned NATO but the US was not about to let it go. Barack Obama exhorted Britons to vote to remain in the EU for security cooperation (Rampton and Maclellan 2016). It set the cat amongst the pigeons in the referendum. During the campaign, the remain camp put out the story that the leave campaign was supported by President Vladimir Putin, who would be the main beneficiary of a leave victory. Hostility towards Russia has been pervasive in the government and the media in recent years. We do not know if Putin financed or supported the leave camp. If he was indeed sympathetic to their cause, he was diplomatic enough to not say anything. Nevertheless, it is true that without Britain, the US’s most hawkish warmongering ally in Europe, its own ambitions for eastward expansion and taking on Russia require at least a rethink of the ongoing militarisation of Poland and Ukraine. 32
Leavers and remainers assumed that whatever the result, it would not affect NATO. That is not how the US saw it. Kerry announced the referendum result could be “walked back” (Rankin and agencies 2016). He made it clear that the US would pursue what was in its own national interest, whether that be NATO or the Transatlantic Trade and Investment Partnership (TTIP) deal under negotiation. It is often forgotten that the EU project was a US-sponsored, Central Intelligence Agency-supported project after the world wars, continuing from the Harry Truman to Richard Nixon presidencies. A united Europe was the key to US rivalries and engagement with the former Union of Soviet Socialist Republics. At a time when the US seeks to use NATO to encircle Russia, foment trouble in Ukraine, and generally push for eastward expansion, Britain’s untimely leave vote presents new problems which neither leavers nor remainers can afford to ignore. Tony Blair is amongst the most-hated politicians in Britain because he was perceived as being “joined at the hip” with the US, and that he reduced Britain to a secondary partner in the “special relationship” with the US (D’Souza 2016b). This “special relationship” will no doubt give more ammunition to all sides. Kerry’s advice to “walk back” the Brexit results makes it more difficult to pick up the economic and political balls at the same time. Impending Class War? During each round of the crisis, Britain turned outwards for solutions to the US, to the EU, and now to the Commonwealth. British people were told that globalisation would bring prosperity and wealth for all, but they were not told that it would come with wars, and that prosperity would be limited to the tip of the social pyramid. The Equality Trust reported in 2012 that the bottom 10% of the people earned on an average £8,468, whereas the top 10% earned ten times more. At the top-end of the top 10%, wage disparity was the highest. The top 1% earned £2,59,917, while the top 0.1% earned £9,41,582. Each crisis was accompanied by a class war and each class war exacerbated the disparities. If the Labour party in the 1960s was indecisive, Thatcher launched a full-scale class war,
smashed unions, brought down wages, cut back social welfare, introduced stiffer penal sentencing, sent the army into Northern Ireland, privatised essential services and much more. Labour under Blair did likewise, as did the Tories under Cameron after the 2008 crisis. Some things did not change. The leave vote and the economic uncertainties portend another class war far bigger than the previous ones. Brexit shows that market mantras do not work, and proselytising the virtues of the free markets ad nauseam do not stop regional disparities. In Northern Wales and Scotland, where the nationality question and union with Britain remain contentious, it stokes separatist embers. London, which is closely integrated with European markets, voted to remain. Mayor Sadiq Khan called for greater devolution of economic and political powers for London. In England, it unleashed the expectation amongst leavers that leaving the EU would reduce income gaps and create employment opportunities; desires that could invite another class war. Whether the class war will take on racial overtones or lead to a new type of politics is a moot question. Since the results, reports of racist attacks against immigrants keep coming in from around the country, including London. One of Cameron’s first decisions after the referendum was to increase funding for the police to deal with racist attacks. Britain’s global chickens are indeed coming home to roost and threaten to unravel the internal cohesion of the state! Postscript Since this article was written, NATO held its summit in Warsaw, Poland on 8–9 July 2016. As argued herein, Brexit was on the summit’s mind at a time when NATO focuses on arms build-up against Russia. Obama called for an “orderly and smooth” transition on Brexit that would not imperil Europe’s determination to take on Russia (Agencia EFE 2016). Notwithstanding Brexit, “we cannot lose sight of the extraordinary achievement that European integration continues to be,” Obama said (Office of the Press Secretary 2016). Cameron on his part was at pains to emphasise that exiting the EU did not change Britain’s commitment to NATO or
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against Russia. He warned that the EU faced grave threats from Russia, if it allowed Brexit to affect its relations with Britain. Indeed, Britain has stationed troops in Poland, Estonia and Ukraine as part of the wider preparations underway to draw Russia into an armed conflict. It remains to be seen how Britain can remain outside the EU on everything else except a common EU defence policy! Theresa May, the new Prime Minister has tried to convince the nation, the EU leaders, and the world beyond that it is possible for Britain to have the cake and eat it too; that it is possible for Britain to leave and remain, have the best of both worlds. Whether this logicdefying stance is possible at all remains to be seen. More importantly, whether
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former colonies will continue to dance to Britain’s tunes is moot. Tanzania has already signalled that it will pull out of the Economic Partnership Agreement (EPA) between the East Africa Community and the EU following Brexit. Campaign groups and critical intellectuals in other African countries have called upon their leaders to see Brexit as an opportunity to revisit and renegotiate EPAs, effectively, as an opportunity to pull back from the neoliberal rampage that now threatens to recoil on Britain and the EU. Is it time for India, and indeed, South Asia, to follow the Tanzanian example? References Agencia EFE (2016): “President Obama: A Smooth Brexit Process Is in Everyone’s Interest,” 8 July, http://www.efe.com/efe/english/portada/
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president-obama-a-smooth-brexit-process-isin-everyone-s-interest/50000260-2980109. D’Souza, Radha (2016a): “From Great Britain to Little England,” Economic & Political Weekly, Vol 51, No 28, pp 20–22. — (2016b): “Chilcot Report and How Democracy Actually Works in the West,” Vol 51, No 29, http://www.epw.in/journal/2016/28/web-exclusives/chilcot-report-and-how-democracy-actually-works-west.html. Office of the Press Secretary (2016): “Remarks by President Obama, President Tusk of the European Council, and President Juncker of the European Commission after US–EU meeting,” 8 July, The White House, Washington DC, https://www. whitehouse.gov/the-press-office/2016/07/08/ remarks-president-obama-president-tusk-european-council-and-president. Rankin, Jennifer and agencies (2016): “John Kerry: Brexit Could Be ‘Walked Back,’” Guardian, 29 June, https://www.theguardian.com/us-news/ 2016/jun/29/john-kerry-brexit-could-bewalked-back-david-cameron. Rampton, Roberta and Kylie Maclellan (2016): “Obama Exhorts Britain to Stay in EU, Warns on Trade If It Leaves,” Reuters, 22 April, http:// www.reuters.com/article/us-britain-eu-obamaidUSKCN0XH2U6.
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