Issue 210 of SOCIALIST REVIEW Published July/August 1997 Copyright © Socialist Review

Feature article: Europe: the bosses' fading star?

Kevin Ovenden

It is easy to suppose that the Tories have always been savagely split over Europe. But the Euro civil war inside the Tory party is a comparatively recent phenomenon.

In the 1950s, as the European Economic Community (EEC) was taking shape, British capitalists were sure their future lay outside. Instead they looked to trade links with former colonies of the British Empire in the Commonwealth and relied on the fact that in the years immediately after the Second World War Britain had the second largest economy in the world.

Yet within a few years the Tory government of Harold Macmillan applied to join the European Economic Community which had been launched with the Treaty of Rome signed by West Germany, France, Italy, Belgium, Luxembourg and the Netherlands. Macmillan came to power after the British military was humiliated in the Suez crisis of 1956. He identified the 'wind of change' sweeping European colonies in Africa and Asia, and presided over the dissolution of the British empire. The same Tories also saw the EEC rather arrogantly as 'a fledgling, young organisation which British leadership could shape and mould'.

British capitalists looked at the West German 'economic miracle' and concluded that joining the EEC was the surest way to shake up British industry through exposing it to sharpened competition­thus arresting the relative economic decline which continued even during the long boom of the 1950s and 1960s. They took it for granted that British industry would be able to exploit the large home markets of France, West Germany and Italy. French president de Gaulle vetoed Britain's entry bid in 1963. But Britain's bosses became increasingly Euro-enthusiastic, and by the early 1970s ruling class opinion was unanimous in its backing for joining the EEC. Tory prime minister Edward Heath faced no serious opposition within his own party when he took Britain into the EEC in 1973. Matters were even clearer in the 1975 referendum called by Labour prime minister Harold Wilson to reaffirm Britain's membership of the EEC on renegotiated terms. The Economist argued:

'Firms will be forced into greater specialisation, abandoning product lines which might otherwise have drifted on for years. Fear of greater competition on the home market will lead to a change in the attitude towards exporting.'

Most major firms produced special issues of their company journals, arguing for a yes vote in the referendum, and distributed them free to their workforces. Margaret Thatcher, who became the Tory Eurosceptics' heroine in the 1980s, was so in favour of the EEC that, as Tory leader, she threatened to ignore the referendum if the majority was for withdrawal. She later criticised the Labour government for refusing to join the Exchange Rate Mechanism (ERM). Opposition to Europe was peripheral to the Tory party. It centred on a few right wingers in the Monday Club and the ultra-nationalist and racist demagogue, Enoch Powell, who was prepared to defect from the Tories over the issue. It was the Labour Party that was split on the question­so split that Harold Wilson called the referendum to prevent his party from fracturing between pro- and anti-European wings.

Labour opposition to the EEC comprised two sets of arguments. Taken together they reflect the class nature of the Labour Party­a bourgeois workers' party, whose policies are an unstable mixture of national interest and working class aspirations. The right wing leader of the Labour Party, Hugh Gaitskell, voiced both sets of Labour's objections to Europe in a speech to the 1962 party conference.

Gaitskell repeated the argument that Britain's trade lay largely with Commonwealth countries and the European Free Trade Area. This argument was coupled with the kind of patriotic defence of the British constitution that sends today's Tory Eurosceptics into a state of near religious ecstasy. He warned, 'If we go into this we are no more than a state (as it were) in the United States of Europe such as Texas and California... it does mean the end of Britain as an independent nation state'.

However, the bulk of Gaitskell's speech articulated, albeit in an often confused way, class reasons for opposing the EEC. He exposed Macmillan's scarcely veiled view that the EEC, founded on strictly capitalist terms, would act as a buffer to the growth of socialism in Britain. Gaitskell claimed that joining the EEC would deprive future Labour governments of the instruments of economic policy needed to maintain full employment and an expanding welfare state. He was in favour of government intervention in the economy to ensure a redistribution of wealth and the defence of jobs from the madness of competition.

By the early 1970s the bulk of the Labour Party was opposed to entry into the EEC. Tony Benn, rapidly emerging as a leader of the left, became an 'anti-marketeer' in 1970. In 1972 most Labour MPs voted against the Tory government's legislation for EEC entry. However, 69 Labour MPs, including Roy Jenkins and future Labour leader John Smith, voted yes with the bulk of the Tory party. The number of Tories who joined Enoch Powell in the no lobby was only 38.

Harold Wilson's cabinet in 1975 was made up of '12 antis, nine pros and one don't know' and the majority of the Parliamentary Labour Party and the party at large was opposed to the EEC. However, Wilson was under pressure from big business which still favoured entry and these opinions exerted a more powerful influence on Wilson than those of the majority of his own party. Wilson forced a pro-EEC line through his cabinet. Even so, most Labour MPs voted against staying in the EEC and Wilson only got those terms through with the votes of the Tories. During the campaign that followed, the special conference of the Labour Party voted by two to one for withdrawal. Wilson and Callaghan threatened to resign if the Labour Party campaigned against the government. Wilson was forced to suspend collective cabinet responsibility and allow the two Eurofactions to campaign openly in order to prevent uproar in the party.

Those leading Labour figures who were closest to the captains of British industry in outlook were also keenly pro-EEC. Roy Jenkins was co-chair of the 'Vote Yes' campaign alongside Edward Heath. He was joined by Shirley Williams, Bill Rogers and others who would later gravitate towards the Social Democratic Party in 1981. The Labour left and the bulk of trade union leaders stuck firmly with Labour Party policy in opposing the EEC.

A series of articles in Socialist Worker during the 1975 referendum campaign situated the growth of the EEC in the tendency for capitalism in each European state to outgrow its own domestic market and seek greater international links. At the same time it pointed to the continued reliance of major capitalist enterprises on the support of their home states.

EEC membership represented one way for Britain's ruling class to 'rationalise capitalism'­at workers' expense. Membership would lead to an increase in food prices. At the same time Value Added Tax would be introduced which would shift the burden of taxation from rich to poor. Membership would 'also be used by employers as a weapon to erode working conditions, push productivity dealing further, and uproot shopfloor defences.' International Socialism journal spelt out the attitude the left should take towards joining the Common Market. It laid down four principles:

1) We oppose the attempt through the Common Market to rationalise capitalism at our expense.

2) We oppose the ideological illusion being peddled in the labour movement that somehow a 'sovereign' capitalist Britain is a real alternative for working people.

3) We argue, against the chauvinists, for a linking of opposition to the Common Market to opposition to other attacks on working people­so as to build up a class based opposition to the whole range of government policies, counterposing demands pointing towards a socialist transformation of society.

4) At all possible times we put forward our own consistent class based views in opposition to that of the confusion of the Communist Party and Tribunites [Labour left].

In the referendum campaign of May 1975 Socialist Worker linked opposition to the Common Market with opposition to the Social Contract. The paper slammed the 'love-in' between the Labour right and the Tories. But equally it savaged the Little Englandism of politicians like Enoch Powell. Socialist Worker opposed sharing any platform with Powell. It argued against displaying the Union Jack at 'no' campaign meetings. Socialist Worker also criticised the Labour leaders who argued against the Common Market for their nationalism. Leading figures on the Labour left concentrated on the defence of the British parliament and the 'threat the EEC posed to British sovereignty'.

Continued membership of the EEC did little to halt Britain's decline. On some measures British economic output had fallen below that of Italy by the mid-1990s. That decline broke the ruling class consensus in favour of integration into Europe. The Tory party, which was both in government and the political expression of big business, felt the divisions acutely.

In the summer of 1989 Howe and Lawson both threatened to resign because of Thatcher's hostility to the European Exchange Rate Mechanism (ERM). Lawson did go three months later and Howe went the following year. Howe's resignation speech was another nail in the coffin of Thatcher's premiership, which had been rocked by the poll tax rebellion. Thatcher departed in November 1990.

The rows continued under John Major and reached a crescendo in 1992 as he pushed the legislation approving the Maastricht Treaty, which outlined moves towards a single European currency, through parliament. Tory factionalism over Europe became a cypher for wider political differences. At times the antics of the hardcore Eurosceptics became surreal­the image of Tory MP Teresa Gorman chomping into a British steak, when the government admitted 'mad cow disease' was very likely transmissible to people, is the most memorable. However, real tensions in Britain's economic relationship with Europe provided ready fuel for the Eurosceptics. The forced exit of the pound from the ERM in September 1992 was a defining moment. The Eurosceptics grew in influence, prompting John Major to denounce their standard bearers in cabinet, John Redwood and Michael Portillo, as 'bastards' and pushing him to initiate a leadership contest.

On two occasions in 1996 Major tried to call a truce over the Euro-hostilities, but the compromise 'wait and see' position on the single currency satisfied neither the Eurosceptics nor the pro-EEC Tories. In the months preceding the 1997 election Major adopted an increasingly Eurosceptic line. However, chancellor Kenneth Clarke's threat to resign if the Tories ditched the 'wait and see' policy led to a permanent tension between the government and Eurosceptic back benchers and within the cabinet itself.

The hysterical exchanges within the Tory party were an expression of the doubts and divisions within British big business. One reason for those doubts is that British capitalism is more internationalised than any other major captialist power. Important sections of big business see their interests lying in North America and the Far East. However, much investment in Britain is tied to Britain's continued participation in the European Union.

That is why Toyota boss Hiroshi Okuda let slip in January of this year that the Japanese car giant's investment into Britain might dry up if Britain ruled out joining the single currency. The boss of Unilever chimed in weeks later with a similar warning. Strong Eurosceptics are probably a minority of the British capitalist class. A CBI poll in November 1996 found 58 percent of top businesspeople supported joining the single currency and 30 percent opposed doing so. In the closing weeks of the general election campaign the CBI fired a warning shot across the bows of the Tory Eurosceptics.

It is hard to pin down the British ruling class's position over Europe because confusion and vacillation are its dominant features. One survey in the Financial Times found 73 percent of bosses of medium and small companies thought Britain should join the single currency, but 64 percent thought the decision should be delayed.

As Tory Euroscepticism grew in the 1980s, the Labour Party, under Neil Kinnock and then John Smith, moved in the opposite direction. The pro-EEC lurch was just one element of Kinnock's drive to the right which meant distancing the party from any of the policies which had smacked of socialism. But there were other factors at play. Many trade union leaders reacted to the defeats they had allowed Thatcher to inflict by putting their faith in the Social Charter (the precursor to the Social Chapter). By the end of 1988 shadow chancellor John Smith convinced Kinnock to back early entry into the ERM. In 1992 the Labour leadership voted for the Maastricht Treaty without the Social Chapter, for which John Major had secured an opt out­although 61 Labour MPs rebelled against the leadership to oppose the second reading of the Maastricht Bill. Labour's passion for joining the ERM left them hamstrung when the pound was bounced out of it on Black Wednesday 1992.

The pro-EEC turn continued under Tony Blair when he took over as Labour leader in 1994. Yet by the spring of 1997 Labour's position on the single currency was 'wait and see'­identical to the script John Major had written about six months previously. The closer the general election, the more Blair sought to narrow any public perception of policy differences between New Labour and the Tories. On the day the election campaign was launched Blair wrote in the Sun that he was a 'British patriot' and he dashed the hopes of many trade unionists, stating that Labour would ensure that the Social Chapter did not interfere with the profits of business.

The Labour government's 'Euro-pledges' mention deregulation, flexibility and help for small businesses, but not greater workers' rights. There was more behind Blair's tempering of New Labour's pro-EU ardour than his mistaken belief that the only way to defeat the most hated government for decades was to offer people little change and a continuation of large chunks of Tory policy. Blair's shift was an indication that the same doubts and divisions within the British ruling class that had spawned the deepest split in the Tory party since the beginning of this century could also wreak havoc for the Labour Party in government.

There are three sources of division within the Labour Party over Europe. First, Blair's insistence that the European Social Chapter would be introduced in such a way as to protect the profits of big business sits uneasily with the promise of Europe guaranteeing workers' rights that trade union leaders have given their members. In the run up to the general election the TUC came out with the strongest calls for greater European unity issued by any major institution in British society. Two of the reasons TUC general secretary John Monks gave for voting Labour, the introduction of the Social Chapter and the European directive on working 48 hours a week, depended on Britain pursuing a policy of further EU integration.

Expectations of what the Social Chapter would bring for workers are not restricted to the likes of John Edmonds and John Monks. They are shared by large numbers of local and regional union officials and many active trade unionists. Usually there is massive exaggeration of what the Social Chapter would do. But just as Blair has unsettled trade union leaders and rank and file activists with his attacks on Labour's links with the unions and socialism, so too he can alienate these same sections of the labour movement through watering down what they believe the Social Chapter will deliver.

A second source of tension over Europe within the Labour Party stems from the Labour left and its opposition to the Maastricht Treaty and monetary union. In November 1996 the People's Europe Campaign produced a pamphlet, The Single Currency Axing Labour's Programme, opposing moves towards a single currency. It estimated the budget cuts required to meet the Maastricht conditions on currency union would mean £18 billion cuts in social spending.

The influence of the Labour left has fallen markedly over the last decade. But over Europe they have been able to tap into wider unease among Labour MPs. In the second reading of the Maastricht Bill in 1992 some 61 Labour MPs defied the party whip and voted against.

The Labour left today share the confusions of their counterparts in the 1970s. On the one hand, much of their argument centres on opposing the deflationary economic criteria for joining a single currency. On the other, many leading anti-EMU Labour MPs follow Tony Benn in making the defence of British sovereignty the centrepiece of their opposition to EU.

Labour's position over Europe under Kinnock, Smith and Blair has shadowed the opinion of the British ruling class. Labour swung behind greater European integration in the late 1980s just as a clear majority of the British capitalist class thought their interests lay in the creation of a single currency. Now ruling class divisions over Europe are rippling through the Labour Party at the highest levels. Gordon Brown is the leading government figure most in favour of proceeding towards a single currency. However, Labour's deputy leader, John Prescott, and foreign secretary, Robin Cook, are reportedly much more cautious.

There is a continuity with the Labour rows of the 1970s, but there is also a sharp, and for Blair dangerous, break. The division over Europe is not reducible to a simple left/right split. It could tear a Blair cabinet apart. Up to a third of the pre-election shadow cabinet were thought to be cool on the idea of a single currency. It could even become a kind of proxy for other disagreements, just as it has become in the Tory party.

Time is not on the side of the Labour leadership. The Maastricht timetable is extremely tight. Eligibility for the single currency will be decided on each country's 1997 economic performance. Primary legislation would need to be in place by summer 1998, with the promised referendum taking place probably in October that year. And running through all these political crunch points is the continued drive to hold down public spending to keep the government's budget deficit below 3 percent of GNP.

By 1997 Euro-rows had broken out within and between European ruling classes. There is growing uncertainty in Germany, Europe's largest economy, about the future of the single currency. The price paid by German workers for Germany meeting the Maastricht criteria is high­unemployment reached 4.2 million in February 1997, at over 12 percent the highest rate since Hitler came to power in 1933.

When European leaders negotiated the Maastricht Treaty in 1991 on the back of German unification, they were confident Europe would become more unified, and a single currency would provide a spur to high levels of growth and investment. Now that plan for restructuring European capitalism to make it competitive on a world scale is leading to savage welfare cuts, workers' opposition to austerity, and huge political instability. But Europe's leaders cannot easily retreat from the task they set themselves at Maastricht. The failure of the drive for European union would create enormous turmoil on the money markets and increase friction between the major European states.

So Europe's rulers tried desperately to rescue EMU at the Amsterdam summit last month. They are likely to continue to push for closer integration, despite the political and economic crises that generates. Our rulers are caught in a dilemma. That ought to be good news for socialists. However, there are great dangers that workers can be conned into either backing a bosses' Europe or supporting nationalist and xenophobic politicians. Avoiding that possibility means taking an entirely independent position based on workers' interests.

The plan for a single currency is the main way European rulers are seeking to coordinate their attacks on workers' living standards. In principle it makes little difference whether workers in Britain are exploited in pounds or euros. However, EMU is about restructuring capitalism at workers' expense. Socialists should oppose the single currency on that basis.

Austerity measures across Europe are producing a huge well of bitterness at the base of society. Right wing politicians, from populists like John Redwood and James Goldsmith through to Nazis like Le Pen, are attempting to tap this bitterness. They seek to blame 'foreign' capital for attacks on workers' living standards. But they are at least as keen on making those same cuts themselves, as are those capitalists who argue for a nationally based alternative to European union. While opposing the single currency from a working class standpoint, under no circumstances can socialists unite with these forces of the populist right who seek to connect opposition to the EEC with, for instance, opposition to immigration. Indeed, at times they may be the main target of socialist propaganda and agitation.

Significant sections of the Labour Party may well come out openly to oppose Britain joining a single currency. But, as we have seen, they are likely to do so with arguments which are at best confused, and at worst centre on the issue of sovereignty which provides a bridge to the right. Instead of drawing a clear line between the interests of workers and capitalists, such arguments can lead workers into uniting behind each 'national' capitalism. Already the Greek and French Communist parties have shown themselves capable of celebrating the struggle of workers across Europe against austerity, but at the same time arguing for pacts with bosses in their own countries.

There is growing workers' militancy across Europe. The French public sector strikes of December 1995 and the victory of the lorry drivers a year later stand as the clearest examples. But 1997 has also seen the explosion of anger among steel workers and coal miners in Germany, and the strikes and protests across Europe in support of Belgian Renault car workers. In some of these struggles workers have begun to raise such slogans as: 'For a workers' Europe, not a bosses' Europe' and 'Yes to a Europe without frontiers­no to a Europe without jobs'. These provide an answer to those who say workers must make sacrifices to bring about a single currency. They need to be linked to successful workers' struggle and underpinned by a clear socialist argument which can cut through the official political debate and chart a path through the deep political splits and crises we had a hint of under Thatcher and Major.

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