Brexit Developments

Britain now has a tarnished reputation in the imperial family. It has long been the consigliere, advising on disputes and helping negotiate deals. While, of course, it often gets up to mischief for its own reasons, usually this is done in concert with one or more of the family – for example, it instigated the attack on Libya with France, drawing the US in too, and with the US it has promoted more liberal rules on financial dealing. But now the UK looks like a reckless troublemaker. Not only because the Brexit referendum led to shockwaves in world financial markets, but also because the aftermath of the vote further upsets an already crisis-ridden imperial landscape.

World leaders are bemused that the British government can have let things come to such a pass. For a major country to allow a pillar of foreign policy to be decided by the sentiment of a popular vote is just not done! Or, at least, never done unless the right outcome is assured. This outcome is unfavourable for the established powers, but that is no reason to look upon the result as progressive.

The Brits are in probably the biggest mess, not simply due to the drop in both sterling and the UK’s credit rating. It is also a question of status. They will look pretty stupid the next time they try to lecture other countries on the best way to run things. They will also be the wallflower next time they are in a party of ‘friends’, such as in NATO or the UN Security Council, aside from having fewer European-related parties to attend anyway. It is hard to see any way for the British state to restore the status quo ante. Even Britain’s new relationship with EU countries cannot be sorted out easily, quite apart from the main EU powers not wanting to make an exit seem like an easy option. The Brexit stance was based upon wanting (full) access to the single market, but rejecting the EU’s insistence on free movement of people within the single market, something that is anathema to the Leavers.

At the same time, the Conservative Party has to try to get a new leader, following Cameron’s resignation. It may only be then that the UK government will use the celebrated Article 50 of the Lisbon Treaty formally to tell the EU of the intention to exit, which will then initiate a period of up to two years of divorce proceedings. The schedule is uncertain, but the main EU powers have made clear both that they want things over relatively quickly and that there will be no real negotiations until the Article 50 exit period has begun.

Some writers have noted that the Brexit referendum is not binding on the UK government, and could be taken as ‘advice’ from an opinion poll. That is true constitutionally, but it looks politically impossible to reverse it, nevertheless. The point behind Cameron calling the referendum was to stem the populist anti-EU threat to the Conservatives’ base of support. Instead, it revealed how many voters thought they had gained little or nothing from established policies, and how far popular sentiment had congealed on anti-immigration policies for their solution. While the 52%-48% split in favour of Leave was close, there had been no guidance that only a 55% or 60% Leave decision, for example, would endorse a change to the status quo.

To ignore the referendum result would bring an electoral disaster for the Conservatives as much as it would for the Labour Party. The core Leave vote came from England, where the majority was 1.9 million in favour (15.2 versus 13.3 million votes), more than accounting for the overall UK majority vote of 1.3 million in favour of leaving the EU. This was despite a number of the bigger English cities – London, Liverpool, Manchester and Bristol – having large Remain majorities. According to the BBC, the Brexit vote was widespread, on top in 270 UK counting areas versus only 129 areas for Remain.

It will be interesting to see how much further the Labour Party adapts to anti-immigration sentiment, whether or not under the leadership of Jeremy Corbyn. Not under Corbyn is most likely, given the scale of opposition from Labour MPs to his continued leadership (172 against, 40 for). The Labour Party fears a near-term general election that they will lose, and there is evident panic and plotting in its establishment ranks.

Last September, Corbyn won the Labour leadership election by a landslide, driven especially by younger people who had recently signed up as Labour supporters to back a more radical set of policies. They will now find their hopes shattered. One can only hope that they will learn some lessons from their earlier foray into the Labour Party.

History shows that the Labour Party exists to divert popular demands for change into a dead end, and that its policies are always determined by what is viable for British capitalism. Adapting the catchphrase of an old Heineken lager advert, Labour can reach into the parts of the electorate other parties cannot reach, in order to sustain popular support for the system. Even Labour’s welfare spending proposals are made explicitly on the basis of what capitalism can afford. Still worse, Labour’s policies are unashamedly patriotic and support British imperialism’s ventures. In March 2003, for example, the vote on the Iraq war was 254 Labour MPs in favour and just 84 against. Hilary Benn’s more recent ‘bomb Syria’ speech in the House of Commons was not an anomaly. But a few differences with the party line, eg with Corbyn’s timeserving of 30-plus years as a Labour MP, help give a different impression to the gullible.

Scotland is in a separate quandary, having voted 62% in favour of Remain. The Scottish National Party is now trying to deal with the EU on behalf of Scotland’s relationship, but is being told very clearly that Scotland is not an independent political entity so there can be no negotiations. That would require independence from the UK, and that – via another Scottish referendum – is something the EU is not going to encourage, since they are already worried about the threat from other potential regional breakaways in Italy and Spain. In any case, were Scotland to gain independence from the UK and apply for EU membership, it would have to sort out the tricky problems of replacing UK subsidies, avoiding an obligation to join the euro and running a budget on the basis of $50 per barrel of oil.

Meanwhile, other moves are afoot outside the UK. For example, the French government has raised again the role of the City of London in euro financial trading. Back in 2011, the European Central Bank, with Trichet then its French president, put forward a regulation that would have led securities trading in euros to be ‘cleared’ in a euro zone country. The UK challenged that in the European Court of Justice. The legal and financial details are very technical, but the gist of the matter is as follows. Being annoyed at the City’s dominance of euro financial trading, there had been a number of attempts on the part of France to shift financial trading into the euro area, meaning Paris. The 2011 ECB regulation looked innocuous, but the Brits smelt a rat and challenged it in the European Court, since it would have disadvantaged euro-clearing in London. In 2012-13, France and Spain backed the ECB position in Court (Italy did too, in March 2013, but pulled out in November), while the UK was backed by Sweden, also a non-euro EU member.

The ECB argued that the UK did not have the ‘standing to bring an action against it, on the ground that it does not participate in certain aspects of economic and monetary union’. No status, hence not able to make a case at the European Court. However, the Court ruled in March 2015 that ‘as a Member State [of the EU], the United Kingdom has standing to bring proceedings against acts of the ECB’. Furthermore, the Court accepted that the ECB’s new regulation was against the principles of a level playing field between euro and non-euro members of the EU. The UK won the case, and also got the ECB to pay its legal costs. It is unlikely that the same judgement would happen again, since the UK is not (rather, will not be) an EU member any longer, but very likely that a similar ECB regulation will reappear.

Admittedly, this looks like just a small-scale example of an opportunistic use of status to press an advantage. But the bigger picture it shows is how the UK’s changed status in the EU is going to have unexpected effects elsewhere. The Brexit vote has sent tremors through the imperial system’s tectonic plates and a number of structures are shaking. The great pity is that this has occurred in the context of a reactionary debate on Britain’s status in the world and delusions about how the new found ‘freedom’ of the British state will benefit the mass of people, while adding fuel to the fire of growing nationalism in many European countries.

Tony Norfield, 29 June 2016