Issue 199 of SOCIALIST REVIEW Published July 1996 Copyright © Socialist Review

Feature Article: On top of the world?

Alex Callinicos

The Tory government's beef war with Europe has put the question of British withdrawal from the European Union back on the political agenda. This marks a significant development in the European debate that has been raging in the Tory party for the past decade.

There are three reasons for this. First, John Major's declaration of the beef war was a substantial political victory for the anti-EU Tory right. Whether or not they are prepared openly to admit it, many of them now support British withdrawal.

Secondly, it is clear that the European Inter-governmental Conference to review the treaty will, under the leadership of France and Germany, push for further political integration. The evolution of the EU is thus tending to confront the Tories with a choice between staying in a more integrated union or getting out.

Thirdly, in the past Britain's European partners have been willing to make concessions to the Tories' nationalist sensibilities. But the exasperated reaction of to the beef war suggests that their patience may be running out. Major's infantile efforts to blame the EU for a crisis of his own making may help to crystallise the feeling that British obstructionism is no longer merely a marginal nuisance but has become positively destructive.

The crisis finds the British ruling class deeply divided. This was symbolised by the conference of the CBI which Major attended immediately after declaring the beef war. He heard outgoing CBI chairman Sir Bryan Nicholson denounce the pungent atmosphere of romantic nationalism and churlish xenophobia created by the Eurosceptics and the tabloids. But Nicholson's successor, British Airways boss Sir Colin Marshall, swung his support behind Major's policy of non-cooperation.

Proponents of withdrawal argue that Britain can have its cake and eat it outside the EU. They claim that British companies could participate in the European common market in which the EU originated, exporting to the continent and continuing to attract inward investment on this basis. At the same time, they could enjoy the benefits of their involvement in the rest of the world economy, trading with and investing in North America and the Far East. Britain could thus be a kind of global Singapore, a free market island involved in all the economic regions.

This case is almostly certainly founded on delusion. The European Economic Area does allow the few remaining non-EU west European states access to the Single European Market. But it is a device for drawing countries that may join the EU closer, not a refuge for states that break away.

France has one of the highest unemployment rates in Europe thanks to tying its monetary policy to Germany's. There is already bitter resentment in French ruling circles of Britain's policy of social dumping of gaining what they regard as an unfair competitive advantage by allowing the pound to float downwards and denying British workers social benefits. A Britain that left the EU could not expect to get favourable trading terms in Europe.

Major's vision of Britain as the enterprise centre of Europe is based on its success in attracting foreign direct investment. The United Kingdom's stock of inward investment rose from £52 billion in 1986 to £131 billion in 1994. Foreign owned companies now employ 15 percent of the workforce and produce 40 percent of manufacturing exports. Britain attracts 40 percent of all American and Japanese investment in the EU. This influx assumes, however, Britains membership of the EU. Even a recent study by the Eurosceptic economist Patrick Minford found that any gains that withdrawal from the EU would produce by ending Britain's net contribution to the Common Agricultural Policy would be wiped out by lost exports.

A poll organised by the CBI suggests that a majority of bosses support Britain's EU membership and indeed participation in a single European currency. The key interests involved here are British owned companies heavily involved in trade with and investment in the rest of Europe and British subsidiaries of foreign owned multinationals.

On the other hand, there is a powerful group of capitalists who back the Eurosceptics. Many of these represent what one might call offshore interests­firms which though based in Britain operate on a global rather than a European basis. Colin Marshall of BA and Lord Hanson are examples.

There are also the media barons Rupert Murdoch and Conrad Black, whose British papers have been lustily talking up the beef crisis into another Battle of Britain. The hard anti-European wing of capital is a minority of the ruling class, but its media power greatly amplifies its voice.

The final piece in the puzzle is the City of London. The City is the leading centre of global currency and capital markets. London had 30 percent of all foreign exchange transactions last year, is one of the three top futures markets and the world's biggest fund management centre, and handles between 40 and 50 percent of international mergers and acquisitions. On the face of it, the City is the sector of British capitalism that needs the EU least.

In fact, however, London is becoming a centre of European banking. Many City firms have been taken over by big European banks. Whether these banks­and the major American and Japanese banks operating in Europe through London­would stay on if Britain left the EU is anybody's guess.

The difficulty in establishing with any precision where the British ruling class's interests lie over Europe is an objective one. Britain is probably the most internationalised of the major capitalisms. So in 1992-93 some 75 percent of Japanese and German companies' sales were in their home base, 67 percent of American, and only 65 percent of British. In the same year 97 percent of Japanese industrial multinationals' assets were in their home region, 73 percent of American, and 62 percent of British.

Because British capital's interests are more globally dispersed than those of its main competitors, it is harder for the ruling class here to arrive at a consensus about what line they should take over Europe.

The European crisis is unlikely to go away even when Labour comes to office. France and Germany will press ahead with further integration­probably on the basis of a multi-speed Europe. At the centre of this project are the criteria for economic convergence laid down at Maastricht.

These require massive cuts in government budget deficits and therefore in social spending. The European ruling classes have thus set themselves on a collision course with the workers' movement. These social strains will get worse. They will make themselves felt under a Blair government. The present European crisis is only the beginning.

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