Larry Elliott is one of the very few reasoned Brexiteers I know and respect for their opinion. He explained much of his reasoning in the Guardian yesterday, saying:
Labour's current contortions over Brexit are evidence of the tension between these two worldviews. A chunk of the party — the bigger chunk — thinks the only way to counter the excesses of capitalism is at a supra-national EU level. Yet it is hard to square this belief with the 2007 Lisbon treaty, which commits member states to act in accordance with the principle of an open economy with free competition; frowns on state aid; and lays out disciplinary procedures for governments that run excessive deficits.
Larry believes, as some in Labour obviously do, that the answer is to reassert sovereignty over the state outside the EU. He adds, in support of this argument, that:
It is a big — and debilitating — modern myth that the neoliberal revolution of the 1970s and the 1980s weakened the power of the state. What actually happened was that parties of the right refashioned and repurposed the state to undermine the power of labour and strengthen the power of capital.
Larry is right in this: it is a theme I pick up in my blog on inequality today where I argue that the state has been captured to be an agent creating, rather than correcting, inequality.
He is right too to argue that this is based on the Right's correct perception that the state is still enormously powerful in the economy, and therefore worth fighting to control:
The enduring power of nation states was highlighted in the 2008 financial crisis, when it was only the willingness of governments to wade in with public money and taxpayer guarantees that prevented the entire global banking system from going bust.
So what does Larry suggest?
So here are the options. Parties on the left can carry on believing that capitalism can be tamed at a transnational level, even though all the available evidence is that this is not going to happen. They can seek to use the power of the state for progressive ends, even though this will be strongly resisted. Or they can sit and watch as the predators munch their way through their prey. Even for the predators, this would be a disastrous outcome.
Larry and I are on the same wavelength on that last point: also see my blog today. Maybe this is why we are both members of the Green New Deal Group.
What I do respect is that this is an argument. My question is whether it is viable. In the case of a hard Brexit I very much doubt it, and that remains a possibility. With a soft alternative I think it viable. But if Labour does embrace that then at the very least it has the duty to say so. Larry has set out how to do it. I'd welcome similar clarity from our Opposition.
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Hi Richard,
As all Brexits are not the same, neither are all memberships of the EU as Larry and yourself are well aware. So instead of looking at particular treaties like Lisbon, you need to look at the power dynamics within the EU. Several countries that have large deficits continue to defy the Commission on their budget deficits. The EU, Germany and Nordic countries tend to turn a blind eye as it is difficult to bark down France and Spain that need the fiscal space to grow out of their problems. So in the world of the EU, there always appears to be wiggle room as long as you play the game.
A recent study of US trade deficit of 3% suggested that 50% of that related to US transfers to tax havens! Surely this makes a mockery of deficit calculations. It probably can also be applied to EU countries as well. So does this in fact mean that deficits are a lot smaller and some countries are actually in surplus. This could also mean that German is so far in violation of EU rules as need for internal compensation grows even stronger. If Germany is 2% over surplus rules for a €3 trillion gdp, that is a lot of compensation even spread amongst the 27 EU countries! (I know that it will never happen).
Euan
Thanks
So you’re suggesting that the power of the UK state cannot be used for progressive ends in the event of a hard Brexit?
Depending on the terms of a soft Brexit, there’s reasonable chance that the power of the state *won’t be allowed* to be used for progressive ends.
Capital controls? Direct state support of industry? Renationalisation of utilities and railways? Restricting unlimited unskilled immigration?
Not sure the EU is keen on any of those, yet they may be what a future Labour Government wishes to implement.
My feeling is that Corbyn et al are keeping their powder dry, letting May and her government take the full-focus media flack for their shambolic negotiating behaviour, and taking Napoleon Bonaparte’s advice: Never interrupt your enemy when they are making a mistake.
That is Labour’s plan
But May will win with it
“But May will win with it”
I’m not so sure.
Firstly, on a parliamentary constituency basis, Leave vote would have translated into a majority of 169 seats, and won in a majority of Labour seats too.
That’s a constituency Corbyn cannot afford to ignore or alienate, and his position is very delicate as a result.
However, the latest Survation poll (the only one which predicted the last election result correctly) had Labour at 45%, 8 points ahead of the Tories, and May on a lower approval rating than Corbyn.
The swingeing local authority cuts due in April are going to result in even more public squalor which will be very directly felt by the general population.
I don’t see how May and the Tories can improve their ratings under those circumstances, but of course, as we know very well, surprises do happen.
a) “Frown upon state aid” is not the same as “Stop State Aid where it has demonstrable social benefit”. The frowning is about discouraging corruption at state level, not about stopping states reducing inequality, which is why the explicit flexibilities for its use exist in EU law, and why social value procurement is absolutely fine in EU law.
b) The 2007 treaty did not introduce the excessive deficit procedure. It was introduced by way of the ‘six pack’ in the wake of Sarkozy’s panicked Fiscal Compact response to the financial crisis/pre-election gambit, and engineered with Germany and its historical aversion to ‘Guld’. It has been withering on the vince since and is not really now an active restraint on governments who actually bother to get EU law.
Nothing in Larry’s argument is either workable or necessary, and he has dug himself into a hole he can’t get himself out of.
Larry has an argument
I admit I am struggling to find yours
It was really just about him being factually wrong, but forget it.
I think you were splitting hairs to no net effect
It was an interesting article from Larry and I suspect Jeremy Corbyn would support his view that it would be easier to transform the British economy outside the EU rather than change the mind set of the Franco/German neoliberal establishment. But the Lisbon Treaty is not quite the straitjacket it appears. It is possible to maintain a social democratic national polity within the framework of the EU, as Sweden has shown, and especially if you control your own currency. Many of us still think we will lose far more in trading rights and open borders by leaving than the alleged freedom of action we might achieve on our own.
There is a lot of evidence for that
Which is why soft Brexit may be a completely viable compromise in my opinion
I voted remain. I’ve learned a lot about the reality of economics since from a wide variety of sources, Richard’s excellent blog among them. Now I’m completely convinced that Larry’s viewpoint above is correct and I would vote leave in the hope a truly progressive government arises in the near future and uses the newfound freedom from the EU to make truly progressive policy choices.
This view is shared and expanded upon convincingly in Reclaiming the State by William Mitchell and Thomas Fazi. For me at least they have found the progressive movement’s missing ingredient – that is precisely the knowledge that the state is actually still powerful enough to deliver whatever the citizens want as long as they have access to the real resources to make it happen.
Thanks
I’m very much in agreement with Larry Elliot on this (FWIW I’ve posted as much here on a number of occasions – thanks for the opportunity).
I think a relatively soft Brexit would probably be in the countries interest in the short term as long as there’s sufficient scope for the kind of interventions that we’ll need come GFC2. Mr Shigamitsu lists some of the tools we’ll need.
I don’t, however, necessarily fear a hard Brexit either – I’ve never fully understood why everyone expects that a period of disaster capitalism will necessarily follow – a teetering Tory government will have huge problems instigating it – and even if they manage it, outside the EU it’ll only take one election for a properly left-of-centre government to address the damage – and actually have the chance to address the harm they are doing right now.
I think 5% of GDP disappearing could be pretty catastrophic for a while
And I fear for Ireland and many other relationships
I also happen to think we cannot survive without cooperation
Hard Brexit is a nightmare – and it is impossible to think otherwise at any level I can imagine
Soft with significant remaining cooperation may work
‘Brexit’ only made any sense if there was the probability of a truly radical UK government able and willing to implement a Bill Mitchell-style macro-economic programme. If that was the situation then I might also have voted to leave. Ofc predicting the longer-term future is a mug’s game but, thus far, nothing has persuded me that a Corbyn administration would have either the cajones or even the knowledge to bring about successfully such a radical and sustainable programme of change. At best we might expect some sort of new-Keynsian approach which effectively is just more ‘fudge’. It would be slightly less anti-State than the current Tories prefer. And, whatever it is, it would be irrationally & emotionally torn to shreds by the MSM, opening the door again for the Conservatives to ‘take back control’.
So, on balance I think I’m with you Richard (and others) on this. Larry Elliott has a dream. As George Carlin famously said in a different context: “That’s why they call it the American Dream, because you have to be asleep to believe it.” The Neolibs control the major levers of power, incl. ‘popular opinion’ – for the foreseeable future. Would that it were otherwise.
@ John D,
“‘Brexit’ only made any sense if there was the probability of a truly radical UK government able and willing to implement a Bill Mitchell-style macro-economic programme”
With the exception of the Job Guarantee, MMT is a description rather than a prescription, and as such is more or less politically agnostic.
Which, if I’m not mistaken (???), is where Richard takes issue with some of its advocates.
Armed with a knowledge of MMT, you can either a) continue exactly as is, prolonging the status quo, or b) use the power of money creation to change the country for the good of the majority, rather than the minority, of its population.
(Abba Lerner, and his Steering Wheel analogy).
Seeing as Corbyn’s Labour Party profess to want the latter, and appear to be considering the options for State aid and re-nationalisations, I would be surprised if there was no awareness whatsoever of the potential that seeing the economy through an MMT lens can offer.
I would say that, especially in the light of Brexit, it is also urgently incumbent on anyone who has knowledge of, and support for, MMT to proselytise its benefits as widely as possible, rather than simply give up, and pray that nanny, in the form of a rampantly neoliberal EU, can offer a little bit of palliative care, in the face of aggressive and terminal economic injustice.
In other words, keep up the good fight and don’t give up!
‘ also happen to think we cannot survive without cooperation’
but we need a different type of cooperation -i.e. the non-cooperation we have at present in the EU which is all about maintaining the hegemony of a finacialised elite.
My own view is that Brexit is a useful displacement activity for the Tories’ ghastly economic incompetence and its persecution of its own vulnerable citizens which has bordered on the fascistic.
We need to establish a social Europe and for heaven’s sake, what we have now is an utter travesty of the vision of Monet and Schuman.
Corbyn is correct to keep returning the debate to the funadamentals:
Housing
Homelessness
Inequality
The destruction of Welfare
Infrastructure renewal
Job Creation
Education health.
Get the hell out of the EU plutocracy/kakocracy and Britain could show the world what fiscal policy can do and be a true leader in Europe. The worst outcome is Brexit with more of the same ideology.
It was only fiscal expansion in Spain (beyond the 3% absurdity) that allowed it to reduce youth unemployment from 51% to 39-still bad enough!
The EU is showing no sign of change and continues to supervise a whole generation of wrecked lives and hopes. It is also fostering the rise of the Right in countries where we would never have dreamed of it happening.
The ‘populist’ right has no answers and I am sceptical of ‘socialism in one country.
We can’t be sure but I would wager that the generation which has been penalised, will soon speak with a louder voice. The neo-liberals now have to try to prove their arguments and not just appeal to authority and to the status of central bankers, politicians and commentators. There be a tipping point in the near future -as happened when the ‘monolithic’ Soviet bloc fell apart in about five years or so.
‘but I would wager that the generation which has been penalised, will soon speak with a louder voice’
Unfortunately that’s looking doubtful, Ian. The country is very divided with poll after poll showing a solid 40% support from the Tories (largely older people who have some assets to white-knuckle and don’t want change). This type of stalemate could go on for years.
The economic myths still hold sway as ever. Depressingly, I think neo-liberalism has got some legs still.
So the fight goes on! What worries me most about the EU at present is that the abysmal failure of the Left is allowing the Right to strengthen; so despite the argument that the EU is necessary because it has ‘prevented war’ (but not the ‘banks-not-tanks’ version) the combination of monetarist dogma and immigration is lighting a fuse.
The Left is failing in nearly all EU countries, particularly Holland and Germany.
@Ian Stevenson,
“We can’t be sure but I would wager that the generation which has been penalised, will soon speak with a louder voice.”
I wish. The trouble is that this is a generation which has known nothing but the culture of individualism. If you can’t find a good job it’s obviously because you haven’t worked hard enough, trained in the right skills, or have insufficient ‘belief in yourself’.
I’m not sure there’s anything like a politicised awareness of the system itself being entirely corrupt as there was, before my time, in the 60s.
It’s hard to fight back if you’re not clear about who or what your enemy is.
There’s little to no evidence of real collective action beyond the occasional student protest, sometimes encouragingly effective (UCL rent strikes), but more often just about pointless identity politics (Rhodes must fall).
Without wishing to come over all UKIPy, I would also be concerned that the large cohort of young transient foreign workers, whether in cities or rural locations, are more likely to keep their heads down and not combine to make demands of their employers or national or local governments, and because many of them won’t have a vote, are unlikely to embrace formal politics to demand change, even at workplace level, especially given the atomised, precarious and fragmented nature of workers’ positions in the gig economy.
The problem with this is that I believe it misunderstands the reasons for Brexit.
Larry Elliott’s argument, I believe, fails to understand the nature of the problem in Britain. There are certainly different reasons that motivate Brexiteers, but although there may be marked differences they also share a similar characteristic; they share the underlying suspicion of the EU that was expressed by Sir Richard Dearlove in an interview that we discussed on another thread.
This perspective has a very long history, especially in England (it goes back at least as far as the fear of ‘Universal Monarchy’ in the 17th century), and it underpins the British ‘balance of power’ aspiration in Europe (something of a euphemism for a deeper, British, self-interest, exceptionalist manipulation of Euroean politics); and to which I believe Britain, probably over-optimistically, aspires to return. It is a wretched ideology, and I deplore it.
When I first read Elliott’s piece I though that it was a bit negative.
However, I’ve read it a few times and now I think that it is a very objective piece of writing. He is not denigrating Corbyn at all, but he is issuing a timely summing up of where we are and where we could go next. It is a very realistic view in my opinion.
Yes – May will continue to make mistakes and her wayward party will look as though it is in a death spiral. The only way things might pick up if BREXIT is stopped dead. It will not be (it seems like that to me anyhow).
I would prefer that with a soft BREXIT, Corbyn and Co reconfigure British society/the economy by becoming the ‘courageous state’ that Richard talks of and seek to influence European neo-liberal thinking that way. That would be a good basis from which to re-integrate gradually with Europe (no more of these false, manufactured clashes that the UK has with Europe that satiate the euro blood lust of the Tory anti EU brigade ) after a soft BREXIT and also act as a beach head for efforts to push back neo-liberal thinking in the Euro zone.
My only problem with Larry’s piece is his seemingly disparaging comments about the international scene – especially when we consider the efforts of say Richard & Co concerning country wide reporting.
There have been set backs but the biggest recalcitrant – America – may be seeing its influence in the world waning because of its President? Russia will just want to continue to sow chaos. And what of China and its interesting mix of communism and capitalism – corruption being a problem with both. So to Richard and his colleagues I say just keep at it.
Larry is wise to remember that neo-lib tendencies everywhere are creating pressures on ordinary people around the globe. It is true that the resulting frustration and anger are finding outlets in increasingly nationalistic activism but this does not necessarily mean that this can be sustained. These nationalistic tendencies only end up showing their true face in the long run – look at Trump and his recent tax breaks to the rich – again! In the world of right wing nationalism, the ‘new boss’ tends to be the old boss as Townsend and Daltrey warned us. The self destructive element of capitalism is still there and can still be exploited by the Left.
So Elliott is right – and maybe he has read Richard’s book – it is time for the courageous state now in the UK to rear its head. Labour must now start to lead the debate. As soon as the ideas of MMT et al are challenged then they must keep up the pressure as all I feel is happening is that they raise the issue, it is then pooed-pooed and the Left goes quiet. Not any more. They – and all progressives – must go back into the fray and keep the better society we can achieve in the spotlight – permanently.
Larry has read it…
Pilgrim why do you think “Russia will want to just continue to serve chaos”?
Don’t tell me you’ve fallen for all the nonsense about Russia pulling the strings in western elections. I think Russia wants to be left alone to do its own thing developing its own economy without NATO, US and EU meddling with its affairs and those of countries on its borders.
If we could reach a mature accommodation with them the world would be a better place for everyone.
Why would Russia not want to influence Western elections?
I suspect like that like many other countries, USA and UK chief amongst them Russia would like to be able to influence election results in other countries. It is the claim they actually achieve that by whatever means they use that I find laughable. Certainly no evidence has been produced. The evidence falls on the side that some western politicians find such claims useful in diverting press and public attention from real issues.Let the state that is without sin cast the first stone.
You mean using social media has no value in persuading people to do things?
Really?
Have you noticed the amount spent on advertising on it?
Please pull the other one
Phil
I’ve not fallen for anything mate but you might want to look at Adam Curtis’ more recent films on who Putin works with in Russia to help sustain his government. There is evidence to suggest that Putin even backs the opposition parties in Russia as a means to try to put across that Russia is a democracy in the Western sense. He is a clever man with some fiendishly clever people working for him.
But I tell you what – I totally agree with your sentiment that seems to suggest that we work more closely with Russia. The trouble is that we can’t get closer because the Americans would have a mardy and take their balls home.
I still think that if Europe had reached out to the USSR when The Wall came down things would be different to day. In their hour of need Russia was sold neo-liberal shock therapy on its economy instead led by our ultra capitalist cousins in the USA.
The result was chaos and destruction which saw millions become unemployed, public sector workers unpaid, national industries privatised, the formation of oligarchs and the destruction of the Soviet state. Russia was basically shafted by the West.
This was a nation that has at various times in its history either tore itself apart or faced down aggressive foes at terrible cost. It was proud. And the West treated it like s**t and then rubbed Russia’s face in the mud.
No wonder todays’ Russia is so angry and still has issues with the West. No wonder it told the IMF to get lost when it was asked to pay back a loan (yes – a loan – the Western rent seeking way with everything these days).
I hope that one day the West (or even the little old UK) says something that needs to be said to Russia: We’re very sorry. Please forgive us and lets start again.
Pilgrim thanks for your full response which I very much agree with. Richard all sides on most issues are using social media. I don’t look at the adverts and i’d be surprised if many do, so I suspect their influence may not be great. The real problem the West has are the blogs and news channels which provide alternative and eye opening points of view that cannot be found in western MSM. People can form their own view on the persuasiveness of these ideas and the accuracy of the facts that underlie them, but the fact is that intelligent comment from all sides is welcome to intelligent people. When facts change, views should change and that is anathema to those seeking to control particular narratives.
I have always been reluctant to agree that advertising has no impact. I first remember hearing this claim at University from the person who said that he was quite indifferent to the impact of any advertising upon him, but was the biggest fashion victim at the same time.
I do, of course, agree that all sides use social media, and why not? But what I am not sure about is how this has any impact upon your argument. I doubt that anyone who reads this blog would doubt that the media has always been used to distort people’s opinions. But, in that case, why is it wrong to presume that the Russians aren’t trying to do so using any means available to them?