Trump, Brexit, Nationalism and ‘Neoliberalism’

In the wake of Brexit, European political developments and Trump now being POTUS #45, surely it is time for the left that goes on about ‘neoliberalism’ to wake up instead to the emerging nationalist economic policies in the rich imperialist countries. Unwelcome as it may be, these policies are backed by the mass of the people in such countries, not simply by a small bunch of reactionaries. Furthermore, the nationalism of one imperialist power is, as one would expect, opposed by another, so it is also a time for the left to consider whether it will play a part in siding with one of these or rejecting all of them. That often turns out to be difficult. As with some parts of the left-wing vote for Brexit in the UK, there is often an attempt to adapt to reactionary nationalism by claiming that it represents an opposition to the established political order that can be turned to radical ends. (Which, however, is not to say that voting for EU membership was a progressive option – so I abstained)

The term ‘neoliberalism’ describes the changes in economic policy after the 1970s. I do not use it for several reasons. Firstly, there was not much of a change and what change did occur did not start from the Thatcher and Reagan governments after 1979-81. Secondly, the most important reason for the new stance in capitalist economic policy was derived from the new imperatives of the global capitalist economy, riven by crises from the late 1960s, not from a policy ‘coup’ by arch conservatives or due to the domination of government economic policy making by reactionaries. Thirdly, the perspective of people arguing for the notion of ‘neoliberalism’ is to argue for alternative and more progressive policies, but under a capitalist government and/or in a capitalist economy. Nostalgia for an illusory past – a more caring capitalism – was their common trait, and they also ignored how pressures from the global economy on policymakers led to the ‘neoliberal’ policies.

A number of articles on this blog have covered the question of the ‘China price’ and the benefits that inhabitants in the rich powers have gained from the import of cheap goods produced by super-exploited labour elsewhere. Although it is an uncomfortable fact for radicals in rich countries, this has also underpinned the complaint by workers that their jobs and living standards are being undermined by low-cost imports. In a related fashion, a more strident complaint from these workers is that the problem is migrants who will work for less than them. I would be generous here and describe these complaints as economic nationalist, and not necessarily racist, although sometimes they are.

In recent years, the ruling elites in several rich countries have adapted to these popular complaints, even if they had previously been at the forefront of promoting free trade and global economic connections. In democracies, popular opinion ends up influencing the political stance of the government. This has been behind Trump’s support in the US, Brexit in the UK, Marine Le Pen in France, Geert Wilders in the Netherlands, etc. Much of the anti-Moslem sentiment in Europe and the US is also due to a resurgence of such economic nationalism. Not that Moslems can rationally be seen as an economic threat, but they provide a convenient focus when the issue is to ‘protect our way of life’ from foreign influences.

The real challenge to the left in many rich countries comes not from the ruling class, or its policies, but from their inability to take on reactionary popular sentiment in the mass of the population. Instead, mostly they focus on their own version of progressive policies that their national capitalist state should implement, whether taking over banks or diverting public spending to better causes. That is why most radical invective around these issues will use the more acceptable pejorative term ‘racist’, rather than the often more accurate term ‘nationalist’. With this approach, they will be wrong-footed by the new, more strident nationalist stance of Trump for the US and likely similar positions taken in other major powers.

Tony Norfield, 21 January 2017

Theresa May's Brexit Speech

In her much-heralded Brexit speech today, UK Prime Minister Theresa May continued to adopt the pose of the strict headmistress delivering an address on the school’s achievements. She attempted to be bold and proud, but avoided mentioning that no prizes have been won this year and the school trip abroad is now cancelled owing to insufficient funds. The speech was long on rhetorical cliché, yet short on detail that could not have been deduced from what has already been reported. However, there was a clear statement that the UK would not aim to stay in the EU single market after Brexit and, more interestingly, another implicit threat to the EU on what would happen if there were no good deal for the UK in the forthcoming negotiations.

She seems finally to have got the message from other EU political leaders that membership of the single market is part of a broader agreement that includes freedom of movement for people too. She may also have been informed that the existing EU customs union agreements (eg for Turkey) are based on trade in goods. They do not include services, and would not help the UK’s interest in maintaining financial services access to the EU market. So the PM declared that there will be no such membership, and neither will there be any payments to the EU budget for these things. Brexit means Brexit!

Then came the brazen bit: ‘as a priority, we will pursue a bold and ambitious Free Trade Agreement with the European Union’. The great thing about this is that, because it is not called being a member of the EU single market, it will presumably cost nothing! Nothing at all, since although the UK plans to repeal the European Communities Act as part of the exit, it will at the same time ‘convert the “acquis” – the body of existing EU law – into British law’. So, you see, everything can really remain the same. Well, except that, not being an EU member, the UK can avoid paying anything into the EU (except for some specially considered exceptional cases), can control EU immigration and can pay no attention to the European Court. Which EU member state would not see that as completely reasonable?

If the rest of the EU did not agree that this was a wonderful solution to an intractable problem, then there was the threat, one initially posed by Chancellor Philip Hammond in his recent interview with the German newspaper, Welt am Sonntag. The newspaper stated that ‘your government sees the future business model of the UK as being the tax haven of Europe’. Hammond did not deny this, but indicated that it could happen if they were ‘forced to do something different’. Hammond said

‘If we have no access to the European market, if we are closed off, if Britain were to leave the European Union without an agreement on market access, then we could suffer from economic damage at least in the short-term. In this case, we could be forced to change our economic model and we will have to change our model to regain competitiveness. And you can be sure we will do whatever we have to do. The British people are not going to lie down and say, too bad, we’ve been wounded. We will change our model, and we will come back, and we will be competitively engaged.’

Theresa May was clearer on this ‘change our model’ option in her Brexit speech when she said that ‘no deal for Britain was better than a bad deal for Britain’

‘Because we would still be able to trade with Europe [even with no deal]. We would be free to strike trade deals across the world. And we would have the freedom to set the competitive tax rates and embrace the policies that would attract the world’s best companies and biggest investors to Britain. And – if we were excluded from accessing the Single Market – we would be free to change the basis of Britain’s economic model.’

Britain is the second largest EU economy, and the one with the second largest net EU budget payments after Germany, so it does have some negotiating power. But it is still in a relatively weak position compared to the other 27 states negotiating as a bloc, especially if it does not want to make any payments to the EU. The UK government is obviously not promising to change the capitalist economy, but merely to change or cut some taxes and regulations that would make domestically-based business ‘more competitive’ – meaning more attractive for business. This would be a problem for the rest of the EU, since they would either lose out or also have to adapt to these changes, so it is a credible, if desperate, negotiating tactic.

A big problem for the global capitalist system is that the UK moves are helping to undermine the existing structures of international political-economic relations that have been slowly built up over decades. This makes the international policies of all major states up for grabs, and we can obviously add in Trump's US to the mix. Partly in compensation for this, PM May went on about how much she valued the partnership with Europe and how Britain was important for European ‘security’ in terms of its permanent membership of the UN Security Council, nuclear weapons and ‘intelligence capabilities’.

These are more signs of how the chronic economic crisis is leading to growing tensions in capitalist policy making. In Britain’s version of the economic nationalism being introduced by Trump, Theresa May uses blather about a ‘fairer Britain’, rather than a strident ‘Make GB Great Again’, if only because she knows there is a more vulnerable position to protect and no ability to force unilateral deals. We will see more arguments and conflicts between the major countries in the years ahead.

Tony Norfield, 17 January 2017

The EU Budget: Who Pays What?

In the lead up to the UK's exit from the European Union, there will be debates not only on the question of market access and migration but also on the EU's budget. Twenty-eight member countries both pay into the EU central budget and receive funds from it, the numbers being broadly related to the relative size and wealth of an economy. For example, in 2015, Germany paid in most, €28.1bn, while receiving €11bn, to give a net payment to the EU of €17.1. At the other end of the spectrum, Poland paid in €4.2bn and received €13.4bn, so was a net recipient of €9.1bn. However, there are some interesting anomalies in the payments dating back to earlier budget debates among members.

The EU budget is no longer so dominated by the farming lobby as it was in 1985, when 70% of payments went on agriculture. But direct payments to farmers still account for 30% of the total, with another 9% on 'rural development'. It is this mechanism that France, in particular, has used to secure large payments from the central EU fund, amounting to €9bn in 2015 under the 'Sustainable growth: natural resources' budget. The agricultural payments vexed the Brits back in the 1980s, and Prime Minister Margaret Thatcher secured a rebate for the UK. In 2015, this amounted to €6bn, and the EU accounts show how this 'UK correction' was allocated to other EU members ... with France paying back the largest amount, nearly €1.5bn.

So, when the UK leaves, France might stand to gain somewhat by not paying the UK correction item. However, the bigger problem is that the UK has been the second largest net contributor to the EU budget, significantly more than France, despite both countries being not so far apart in terms of GDP and GDP per capita. Budget figures for 2015 show the UK with payments into the EU of €21.4bn, close to France's €20.6bn. But the UK received back just €7.5bn compared to France's €14.5bn. 

The following chart is taken from European Commission data. For payments made by each country it adds the total national contribution and the 'traditional own resources' payments passed on to the EU. The latter item is often missed out in graphs that are derived from an EU summary table, which leads to understating the actual payments. For receipts of funds from the EU budget, all the standard items are included.

When 'net payments' are negative, this means that the country has paid more into the EU budget than it has received; when positive, that net funds have been paid to it from the EU budget.

Let us see how this plays out!

Tony Norfield, 12 January 2017