The case for Brexit: Democracy and Sovereignty in the EU?

Antoni Soy

1. We should never forget some important questions. Firstly, at the beginning the European Union (EU) was relatively successful in economic terms but, more recently it has done pretty badly. Over the last two decades, the economic performance of the EU is poor in comparison with that of almost all industrialised countries (USA, Canada, Australia or even the UK). Different reasons have been pointed out: the EU policy has tended towards excessive regulation and interference which have produced poor and inefficient spending of funds and allocation of resources; the objective of ever closer union has absorbed the time and attention of Europe’s elites, when they should have been occupied trying to address the factors that make for real economic growth; the trends of demographics in the EU with an important increase, in absolute and relative terms, of the aging population; the implementation of the euro and the corresponding fixed exchange rates of the currency.

Secondly, the European Union began as part of the post-World War II construction of the Cold War, with the United States providing economic, military, political and ideological resources to build up Western Europe against the Soviet bloc. The founding fathers of the EU wanted to create a European super-state and they intended to achieve this through a project of integration imposed by the European elites on peoples, whom they did not trust. They did not believe in democracy: they thought they knew what was best for European people. Afterwards, by the early 1980’s the larger and more powerful sections of European capital had recovered enough to be able to develop a strategy which would enable them to act with relative independence of USA capital. In 1983 the CEOs of 17 of the largest companies in Europe formed the European Roundtable of Industrialists (ERT) in order to generate ideas and mobilize governments, parliamentarians and public support to create a more favourable market climate in Europe in order to revitalize the EU. (Obviously, the ERT now supports the permanence of the UK in the EU). Their success was apparent when Jacques Delors became president of the European Commission in 1985 and he promoted, first, the “single market” (elimination of all barriers of the internal market and free movement of goods, services and capital within the EU), and second, the single currency since the Maastricht treaty.

Thirdly, the extension of the EU membership to the eastern European countries which were coming from communism was probably, and in some sense, an important achievement. But with this extension the same concept of Europe changed radically. Unfortunately, no one considered the idea that the fundamental nature, the type of European association, the objectives, and the institutions of the EU would have to be changed. And once the EU was extended to the East, in countries with both different cultural and political backgrounds and much lower levels of income per head, emerged the significant and important problem of net migration from East to West inside the EU. And the problem could get bigger if the EU attempts to further the extension to Serbia, Ukraine and mainly Turkey with 80 million inhabitants.

Fourthly, for many years the EU raised the question of the implementation of a single currency (Werner Report, McDougall Report), but the conclusion was always the same: a fiscal union and a political union must be put in place before the creation of a single currency to be able to create an appropriate monetary union. Things changed with the arrival of Delors to the presidency of the European Commission because he sped up the implementation of a single currency. Nevertheless, many experts have pointed out that, finally, the implementation of the euro has been mainly a political decision. It has been a consequence of the terms under which France was able to agree to the reunification of Germany. The French political elite has thought that the elimination of the Deutschmark would tie Germany down and would diminish its status and standing within Europe. But the opposite has happened. The combination of a fixed exchange rate (the euro) and the ability of Germany to keep wages and costs down to increase its competitiveness and to export more and more competitive products, has created external asymmetries among the European countries: a massive and increasing current account surplus in Germany (and other countries of the core of the euro zone) and a massive and increasing current account deficit in the peripheral countries of the euro zone, and even in France. So, rather than containing Germany, the euro has increased its power within Europe: we need only compare the levels of growth and its structure in Germany and in the other countries of the euro zone before and after the implementation of the euro. Exchange rates matter and they matter a lot. Furthermore, other important agreements (NAFTA, between Australia and New Zealand) show us that there may be a high degree of economic and commercial integration without the need for monetary integration at all.

2. Technically, from an economic point of view there are contradictory studies in relation to the economic consequences of Brexit. On one side, there is the “official” position of the OECD study (“The Economic Consequences of Brexit: a Taxing Decision”) -or from the IMF, the UK Treasury and other private think tanks- whose conclusions are absolutely negative, in the short and in the long term, both for the UK and for the rest of the EU. On the other side, the Woodford Investment Fund study carried out by Capital Economics (Roger Bootle) -or the Economists for Brexit- concludes that Brexit would mean gains and losses for the UK economy and that in any case that “the UK’s economic prospects are good whether inside or outside the European Union”. Some have speculated on whether the EU could impose sanctions against the United Kingdom, as for example hindering its exports to the EU. However, considering that the EU as a whole is a net exporter of goods and services to the United Kingdom (the UK is a net importer of goods and services from the rest of EU with a value over 100.000 million Euros per year), it seems difficult to imagine that someone (both in the European Commission and in the individual EU countries) could think of something like that. A Brexit will undoubtedly have economic consequences, but they are in no way unequivocal. There are conflicting studies about the positive or negative consequences, both at short and long term, for both the UK and the European Union.

Moreover, a Brexit is not the same a Grexit: Greece would leave the euro zone whereas the UK would opt out of some European Treaties. But, in the short term, all agreements remain valid until new treaties are adopted. After some time, bilateral treaties will replace the multilateral European treaties and keep the substance of the relationship between the two economic regions largely intact. In the short run, no one will act against the UK or the City. In the long run, the British will be free and sovereign again. The clear disadvantage to the UK would of course be that it would no longer be possible to take part in the negotiations of European agreements. The real danger for the EU does not come from UK. It could come from other countries where a referendum could also be requested. So, the real problem of a possible Brexit is that other countries may follow the way of a referendum.

In any case, the main question is not economic but essentially politic: the Treaty of Lisbon contemplates the possibility that a country can exit unilaterally from the EU (article 50) but the important scaremongering that the British population has suffered (and is suffering) from different public personalities (including President Obama and the main authorities of the European and international institutions) seem intended to convert this right in a purely theoretical one. The institutions that should ensure the respect and compliance of the Treaties are the ones threatening citizens and democratic institutions in the UK for wanting to exercise a right provided for by the Treaties of the EU. Therefore, the EU is acting wrongly in any case: either the treaties were conceived and written wrongly or the EU is acting wrongly to hinder its implementation. The credibility of the European project is completely in doubt. One more of the many broken promises by the EU. A Union that needs to threaten others in order to achieve their cooperation does not seem to make much sense in political terms. There are no common goals nor common will, nor a framework in which they could discuss and reach agreements on the different positions.

3. From a leftist point of view, there are many and clear strategic good reasons for the UK (and other countries) to leave the European Union (EU). The EU is not -and cannot become- a democracy. In fact, it provides one of the most hospitable ecosystems in the developed world for rentier monopoly corporations, elites dodging taxes and organised crime. It has an executive so powerful that it could crush the leftist government of Greece. A Parliament is so weak that it cannot effectively determine laws or control its own civil service. It is subordinating the workers’ rights to the employers’ rights to do business freely. Its central bank is committed, by treaty, to favour deflation and stagnation over growth. State aid to problematic industries is prohibited. Austerity is, in fact, written into the EU treaty as a non-negotiable obligation for member states.

And the situation is getting worse. Europe’s leaders still do not know whether they will let Greece go bankrupt or not; they still have no workable plan to distribute the refugees that Germany accepted last summer, and having signed a morally bankrupt deal with Turkey to return the refugees, there is now the prospect of a collapse of that deal. We may argue that other countries treat migrants just as badly. The difference is that in these countries we can replace the government, whereas in the EU, we cannot. After so many years of crisis in the euro area, there isn’t any project for a fiscal union, Eurobonds, debt rescue fund, and there is no prospect of fiscal transfers because the EU budget is economically insignificant. Nobody in the EU wants to admit the failure of the economic and monetary union. The weight of the crisis adjustments is still supported by the countries of the south without any behaviour minimally supportive and solidary on the part of northern countries.

Brexit forces the British people to make a fundamental choice: to recover their political and economic sovereignty, or to continue to live in a supranational regime governed by institutions with elites who have not been elected according to democratic rules and that citizens cannot ever change even when they make mistakes and persist in doing them. Brexit (although I think it is not too likely, and less after the criminal terrorist murder of a Labour MP) could be the chance to reimpose democracy, promote social justice and subordinate corporations to the rule of law. Brexit could trigger a series of events that may lead to a true reform of the EU in which the various countries could feel comfortable. And this alternative would not have to be a return to nation states competing with each other or even hating one another. It is about building a Europe in which the nation states are truly willing to cooperate, sincerely and fraternally as equals, at many levels: commercial, economic, social, environmental… That is probably just a dream, a utopia. But, as Bill Mitchell has recently written, the current EU and the current euro zone are a dystopia.

Source: erensep.org//articles/europe