Notes on the Crisis of Imperialism: Brexit [i]

Brexit series for FT.

This is the 1st 1/2 of a speech on the recent referendum on Britain’s membership to the European Union (EU). It deals with the the run up to the referendum, alongside the fundamental characteristics of British Imperialism & European Imperialism. A 2nd part, covering the Brexit crisis & the split in the British Labour party shall follow.

Introduction

As early as 2006, Fight Racism! Fight Imperialism! argued that the British bourgeoisie were split on the question of Europe. Yaffe (2006) pointed to the growing economic power of the EU, which had then began to outstrip the economic force of US Imperialism. In 2005, the EU had higher GDP, exports & outward FDI stock than the US. Since this date, clear steps have been taken toward the formation of a European Imperialist bloc – for example, the tightening of fiscal union within the eurozone (Yaffe, 2012). The inevitable rivalry, competition & collision between Europe & the US has enormous consequences for British Imperialism.

The key to understanding the EU referendum & all developments since is contained within an understanding of British Imperialism. The British economy is thoroughly parasitic. This is clearly communicated by an examination of British foreign assets. At the end of 2014 – 7 years after the financial crash – Britain’s foreign assets stood at £10.17tr, nearly 6x GDP. The overwhelming majority (62.6%) of these assets were made up of “other investments” (assets, loans & deposits abroad by British banks – £3.54tr) & financial derivatives (a contract between parties, the value of which is determined by the performance of an asset etc – £2.83tr). This is what we would call a gigantic usury Capital (Yaffe, 2015). The dominance of foreign assets in the British economy makes it particularly vulnerable to shocks in the global market. More than this, British Imperialism is in crisis – it is decaying. Foreign liabilities stood at £10.63tr in 2014, leaving a net external debt of £454.1bn, an 86.1% increase on the previous year. The sheer scale of Britain’s overseas assets & overseas liabilities makes this impossible to resolve, external debt alone accounting for roughly 25% of GDP. This is the character of British Imperialism: parasitic, decaying & crisis ridden.

These are the key components that shaped the EU referendum of 23 June. The British ruling class, forced by the increasing intensity of the economic crisis, needed to make a decision: the US or the EU? The position adopted by the Revolutionary Communist Group (RCG) in the lead up to the referendum reflects this understanding (Yaffe & Brickley, 2016). When asked to decide whether the interests of British Imperialism would be better suited as the financial centre of a European Imperialist bloc or as an offshore financial centre for US Imperialism, there was no progressive outcome for the mass of humanity. The interests at stake were that of the City of London & the finance Capital that it embodies. The only position tenable to a Communist was that of a boycott.

A united states of Europe

It’s important for us to understand, to a degree, what the EU & the eurozone represent. Lenin (1915) makes several points that are essential for us to understand. His short article on the subject is remarkable, demonstrating clearly the breadth & precision of his thought. For the present, however, we concern ourselves only with the essentials.

Capitalism is private ownership of the means of production & anarchy in production itself. Along such a basis any division of income may only occur in proportion to strength – that is, in proportion to Capital invested. This division creates competition between Capitalists &, in Capital’s monopoly form, between nations. It can be no other way under Imperialism. We must be clear on this. This is clearly demonstrated in the growing contradiction between US & European Imperialism. Equally, we must understand that competition operates within the EU itself. Private property, monopoly Capital & the relations behind their organisation are the heart of the question. In a striking paragraph, Lenin outlines the only form of organisation that a united states of Europe may take under Imperialism:

‘Of course, temporary agreements are possible between capitalists and between states. In this sense a United States of Europe is possible as an agreement between the European capitalists … but to what end? Only for the purpose of jointly suppressing socialism in Europe, of jointly protecting colonial booty against Japan and America, who have been badly done out of their share by the present partition of colonies, and the increase of whose might during the last fifty years has been immeasurably more rapid than that of backward and monarchist Europe, now turning senile. Compared with the United States of America, Europe as a whole denotes economic stagnation. On the present economic basis, i.e., under capitalism, a United States of Europe would signify an organisation of reaction to retard America’s more rapid development. The times when the cause of democracy and socialism was associated only with Europe alone have gone for ever.’

The entire historical development of the EU stands to confirm this observation. It is an unstable alliance. Even if the PIIGS countries (Portugal, Ireland, Italy, Greece & Spain) were to leave the EU, around 58% of the value of Europe’s banks would be wiped off the market (Bell, 2015). For our purpose, Yaffe & Brickley (2016) point to the formation of the EU as a keystone to understanding the uneasy decision that needed to be made by the British ruling class. Following the end of the 2nd world Imperialist war, the US was fully behind the formation of the EU. It wanted Britain to be centrally involved, both to ease the replacement of Britain as the leading Imperialist power by the US & to ensure that US interests played a prominent role in shaping the future European economy. Britain could accept this, but only insofar as it would not interfere with the role of the City of London as 1 of the world’s leading finance centres, or the prominent role of British Imperialism. In a word, Britain would not accept that it should submerge its sovereignty to Europe, nor could it tolerate continental unity which would lead to the domination of Europe by a single power – a role that is presently being played by Germany. There have been enormous developments since the founding of the EU, but the essential points remain unchanged (Kenealy, 2016).

Thus is the EU: a fragile alliance between competitors, created & sustained to bolster European Imperialists against their counterparts in the US.

Thus is Britain: a desperate & childish Imperialist power, clinging to a precarious position in an effort to sustain its interests. A leech unable to accept its position lower down in the swamp.

The referendum

Cameron announced that an in-out referendum would be held on Britain’s membership to the EU on 23 January 2013. The date was originally set for 2017, following his attempt to renegotiate the terms of Britain’s membership (Yaffe, 2013). This was an attempt to outflank the eurosceptics in his party & strike a populist pose capable of dealing with UKIP. It spectacularly failed. Lord Geoffrey Howe, the longest serving cabinet minister under Thatcher & the precursor to her downfall, wrote that Cameron had committed a grave error. History would seem to confirm this. Cameron’s negotiations on 19 February 2016 achieved very little & pleased only him (Wright, 2016). They included changes to benefit regulations for EU migrants to Britain, greater powers for Britain to intervene in the eurozone & an opt-out clause that stated that references in the EU treaty to ‘ever-closed union do not apply to the United Kingdom’ (Yaffe & Brickley, 2016). Although this did not represent a significant change in Britain’s relationship to the EU, Cameron was emboldened. Under the excuse of not wanting to clash with French & German elections (Watt, 2015) the referendum was moved forward to 2016.

The dominant sections of the British ruling class pulled out all the stops to ensure that Britain would remain in the EU. The Bank of England (BoE), the IMF, the OECD, enormous corporations & banks, the CBI, Blackrock, leading EU politicians, Obama & MI5 all put their bluster in the service of the remain campaign. Tactics ranged from outright fear mongering to clearly Imperialist economic argument. Ex-MI5-cheif Eliza Manningham-Buller stated that a Brexit would pose a significant threat to Britain’s safety (MacAskill & Weaver, 2016). A somewhat bizarre insistence that the EU represents the only hope of peace in Europe followed from Cameron, the Labour remain campaign & survivors of the 2nd world Imperialist war (Mortimer, 2016). The US’ intervention into the campaign saw Obama claiming that a Brexit would put Britain at the ‘back of the queue’ for trade talks, expressing clearly the role that Britain was expected to play for the US in the EU: ‘The United States sees how your powerful voice in Europe ensures that Europe takes a strong stance in the world, and keeps the EU open, outward looking, and closely linked to its allies on the other side of the Atlantic. So the US and the world need your outsized influence to continue – including within Europe.’ (Asthana & Mason, 2016).

164 financial services firms from the rest of Europe are based in Britain. EU banks hold about £1.4tr in British assets, 17% of total bank assets in Britain. The City of London accounts for around 40% of all euro-denominated assets, with an average daily turnover $868bn. 3 years prior to the referendum, following Cameron’s announcement in January 2013, an article published in the Financial Times argued that a referendum would put all this on the line, stating that if ‘the UK leaves the EU, the City is dead.’ Martin Wolf, the same paper’s chief economics writer, agreed in a later article (Yaffe, 2013). US companies use Britain as a way to gain access to the European marketplace, a role that the City has played diligently for decades. $558bn of Capital are invested into the City by around 7,500 US companies. London is able to use its status as a financial market Capital to secure “passporting rights” for its financial services in the EU. In addition to this, EU companies have accumulated investments of £741bn in Britain, around 60% of total FDI in 2014. These were the cornerstones of the remain campaign’s economic arguments (Yaffe & Brickley, 2016).

& such arguments were able to gain a substantial traction among layers of British society outside of the bourgeoisie. The British middle class & labour aristocracy rightly regard the EU as a safeguard of their privileged interests. This section of society, however poorly it articulates its reality, is keenly aware of the precarious position it operates. Any damage to the power of British Imperialism directly threatens the amount in breadcrumbs that the British Imperialists will provide to these sections of society. As The Guardian’s coverage of “Generation Y” makes clear, the younger sections of this layer already face proletarianisation, declining incomes & poor privately-rented accommodation (Barr & Malik, 2016). The remain campaign made its focal point the lynchpins of this class’ security, barely even paying lip service to the growing levels of acute poverty faced by the poorer sections of the British working class & migrants. A pro-Imperialist line followed (Brickley, 2016).

This is not to make the remain campaign sound more sophisticated than it actually was. The centre of debate during the EU referendum stood around immigration policy: such was the drum that Farage & Boris beat, & such was the march of both leave & remain alike. An absurdly grotesque onslaught of anti-immigration propaganda, blaming migrants for the poverty faced by the working class flowed from the leave campaign. That the centre of the EU referendum debate was racism shouldn’t be remotely surprising to us. The reliance of the British bourgeoisie on xenophobia to appeal to the British working class is nothing new. Neither is that the liberal media attempt to paint such racism as working class ideology, despite its clear origin amongst the ruling class (Yaffe & Brickley, 2016).

Such propaganda succeeded in its aim. On 23 June the leave campaign won the referendum with 52% of a 72.2% turnout. The £ plummeted to its lowest level in 31 years & £120bn was temporarily wiped off the value of Britain’s leading shares. Moody’s & Standard & Poor’s downgraded Britain’s credit rating. The BoE stepped in, promising to do whatever was needed to calm the waters & setting aside £150bn for a possible bank bailout (Yaffe & Brickley, 2016).

References:

Note: Dates given are that of original publication of the text wherever possible. This applies particularly to Lenin.

Asthana, A. & Mason, R. (2016). Barack Obama: Brexit would put UK ‘back of the queue’ for trade talks. The Guardian. [online] Available at: http://goo.gl/Hf9ebL [Accessed 24 Jul. 2016].

Barr, C. & Malik, S. (2016). Revealed: the 30-year economic betrayal dragging down Generation Y’s income. The Guardian. [online] Available at: https://goo.gl/o0nh9V [Accessed 24 Jul. 2016].

Bell, J. (2015). Approaching the Eurozone Crisis. [Blog] Notebook. Available at: https://goo.gl/V4I6hr [Accessed 23 Jul. 2016].

Brickley, C. (2016). The Brexit crisis. [online] RCG. Available at: http://goo.gl/dDyxSF [Accessed 24 Jul. 2016].

Kenealy, D. (2016). EU referendum: how did we get here?. [online] David Hume Institute. Available at: http://goo.gl/eVvJKB [Accessed 24 Jul. 2016].

Lenin, V. (1915). On the Slogan for a United States of Europe. [online] Marxists Internet Archive. Available at: https://goo.gl/tupkXs [Accessed 22 Jul. 2016].

MacAskill, E. & Weaver, M. (2016). Leaving EU would undermine Britain’s security – ex-MI5 chief. The Guardian. [online] Available at: http://goo.gl/Qm3mEo [Accessed 24 Jul. 2016].

Mortimer, C. (2016). EU referendum: Second World War veterans come out against Brexit. The Independent. [online] Available at: http://goo.gl/3RRJwu [Accessed 24 Jul. 2016].

Watt, N. (2015). David Cameron may bring EU referendum forward to 2016. The Guardian. [online] Available at: http://goo.gl/7LYT4I [Accessed 24 Jul. 2016].

Yaffe, D. (2006). BRITAIN: Parasitic and decaying capitalism. Fight Racism! Fight Imperialism!. [online] Available at: http://goo.gl/AlqmJo [Accessed 22 Jul. 2016].

Yaffe, D. (2012). Greek resistance stalls European imperialist agenda. Fight Racism! Fight Imperialism!. [online] Available at: http://goo.gl/yr3qbT [Accessed 22 Jul. 2016].

Yaffe, D. (2013). European Union and Britain: Tories self-destructing over Europe. Fight Racism! Fight Imperialism!. [online] Available at: http://goo.gl/TnmSa1 [Accessed 23 Jul. 2016].

Yaffe, D. (2015). British economy: a weak link in the imperialist chain. Fight Racism! Fight Imperialsim!. [online] Available at: http://goo.gl/qcazma [Accessed 22 Jul. 2016].

Yaffe, D. & Brickley, C. (2016). EU referendum – The position of communists with a new introduction analysing the result. [online] RCG. Available at: http://goo.gl/feHtVI [Accessed 22 Jul. 2016].

Wright, O. (2016). EU renegotiation: What David Cameron wanted – and what he really got. The Independent. [online] Available at: http://goo.gl/FtDFNV [Accessed 23 Jul. 2016].

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