Rethinking the European Union: Part Two

May 31, 2017


 

Part Two: What’s wrong with the European Union?

In Part One of this series of articles I charted how my general politics had evolved over quite a long period of time, and specifically how my understanding of the European Union had changed. In short how I went from being an active and enthusiastic supporter of the EU to having grave and deep doubts about it, and I went from thinking the EU was at the essential core of progressive politics in Europe to thinking that perhaps the EU was a major obstacle to progressive politics in Europe. During the referendum campaign in the UK, and in the aftermath of the Brexit vote, most liberal and progressive commentators defended the EU as an essential component of any progressive politics. Its faults, when acknowledged, were presented as being less important than its benefits, and on the whole progressive opinion views the EU project as being inevitable, benevolent and essential. However I think a strong case can be made that the EU negates and blocks the very core pillars of progressive politics, and that the EU model, including ‘ever deeper union’ is not the only possible ‘Europe’.

I want to concentrate on looking at two deeply flawed and critical parts of the current EU system, its non-democratic political system and its lack of material social solidarity. Not only are those flaws linked but they are central to any progressive project in Europe, and indeed central to any national progressive project. The two central pillars of any progressive project in any developed capitalist system must be firstly to create a truly democratic political system through which the people can on the one hand impose necessary restraints and limitations on the process of capitalist accumulation, and on the other hand also ensure that there is ample social provision to soften and civilise the social consequences of capitalist economic development. These two pillars combined are sometimes called social democracy and sometimes called democratic capitalism, but the labels don’t really matter. What matters for progressives is ensuring that there are large scale material programs of social solidarity and that the entire system (the private capitalist sector and the socialised non-capitalist sector) are firmly wrapped in a controlling democratic political system. So the two things that matter more than anything else are democracy and material social solidarity. I believe that if you look at the European Union objectively it is quite clear that it is not a democratic political system, it also indisputable that the EU does not (and probably can never) deliver a pan-European system of material social solidarity.

The strangulation of democracy in the EU system

I do not believe it is remotely possible to argue that the institutions of the EU are democratic and yet year by year, treaty by treaty, we are ceding more and more power to this undemocratic tier of government. This is very dangerous because in the process we are weakening the nation states of Europe, the only entities that so far have actually delivered both democratic political systems and large scale material social solidarity By continually shifting power upwards to the undemocratic political systems of the EU we are simultaneously drastically reducing the nation based arenas in which social democracy operates.

“We decide on something, leave it lying around, and wait and see what happens. If no one kicks up a fuss, because most people don’t understand what has been decided, we continue step by step until there is no turning back.”
Jean-Claude Juncker President of the European Commission

The entire European project, since its inception in the European Coal and Steel Community (ECSC) in 1951, has always been a completely top down political project, and as the European system has evolved from the ECSC, to the EC to the EU it has never been driven from below by popular demand or mandates. In fact it is noteworthy that when given the opportunity, how often the citizens of Europe have voted against the entire process. Virtually every time – there have not been many – that the voters have been allowed to express an opinion about the direction the Union was taking they have rejected it. The Norwegians refused to join. The Danes declined Maastricht, the Irish refused the treaty of Nice and the Treaty of Lisbon, the Swedes declined the Euro, France and the Netherlands declined the European Constitution. On many occasions almost the entire political class of the country in question were mobilised in favour of acceptance and the electorate, inundated with dire warning of the dangers of making the wrong decision, were promptly sent them back to the polls to correct their mistake. Mostly voters objections were simply bypassed. The operative maxim of the EU has become Brecht’s dictum: in case of a setback the government should dissolve the people and elect a new one. The only people ever asked whether they wanted to be part of the EU and ‘ever deeper union’, the citizens of the UK, promptly said no they didn’t. Currently the universal consensus amongst almost the entire main stream political class of Europe is that to hold referendums on either membership of the EU, or membership of the Euro, would be utterly reckless and such referendums must be avoided at all costs.

“If it’s a Yes, we will say ‘on we go’, and if it’s a No we will say ‘we continue”
Jean-Claude Juncker President of the European Commission on the 2005 French referendum that rejected the European Consitution

The European Project of which the EU is the latest stage has always been a top down project by the political elite. The dominant group in this project have been professional politicians from the democratic national systems. It is telling, though probably hardly surprising, that when given the opportunity to step outside existing democratic systems and create an entirely new political system the political class decided to build one where almost everything of import is both secret and immune to democratic oversight by conventional party politics and electoral processes. Most professional politicians find it immensely convenient to operate in a world free from transparency, oppositions and contested elections.

“There can be no democratic choice against the European treaties”
Jean-Claude Juncker President of the European Commission

When the proposed European Constitution was voted down by the citizens of France and the Netherlands in 2005 the EU political class simply bypassed the tedious business of winning a popular mandate and instead negotiated amongst themselves the Treaty of Lisbon which implemented the rejected constitution in all but name. The Lisbon Treaty produced a system of governance in the EU that is not even a facsimile of a democratic political system, but instead a weird and unprecedented melange of institutions that seems purposely designed to obscure and depoliticise decision making, and remove any real opportunity for democratic oversight.

The poltical system of the EU consists of:

• The European Council, which is a quasi-legislature of inter-governmental ministerial sessions, shielded from any national oversight, operating as a kind of upper chamber. This is by far the most powerful body within the European system. Although the politicians in the Council are members of national political parties they do not bring party politics to the Council, relations inside the Council are between national representatives.

Coreper, which is the powerful bureaucracy attached to the European Council. It is made up of special permanent representatives of the various member states civil services brought together, attached to and servicing the Council. Coreper functions as the key bureaucratic layer in the political leadership of EU and has a pivotal but largely hidden role in assembling agendas, working papers, reports and draft agreements for the Council. Prior to submitting any text to the Council for adoption Coreper attempts to achieve consensus agreement at its level through the ‘A’ list where the permanent representatives agree proposals and these then go through ‘on the nod’ by the Council without a vote and marked as unanimously agreed. It should be noted that Ministers on the Council do not see the text of proposals on this ‘A’ list merely the item title. About four fifths of all Council decisions are ’nodded’ through via the A-list system. The role and work of Coreper is hardly known outside of EU specialists, its deliberations are wholly secret and there is no democratic oversight of Coreper by either the national or European parliaments and no connection between its work and any political party.

• The President of the European Council is elected by the European Council by a qualified majority vote in secret deliberations for as fixed term. Generally unanimous support for the candidate is sought. When in office the President of the European Council is not attached to any political party.

• The European Commission is the body which proposes new legislation, draws up the EU’s annual budget and manages and supervises EU funding. The President of the European Commission is nominated by the national leaders in secret discussions and then must be approved by the European Parliament by majority vote. When in office the President of the European Commission is not attached to any political party. The individual Commissioners who are the equivalent of Ministers are nominated and appointed in a non transparent process by the President of the Commission in secret consultation with members state governments without reference to any national assembly. The Commissioners are not MEPs and are constitutionally detached from any connection to a political party. The European Parliament must approve the new incoming Commission as a whole but cannot vote on the appointment of individual commissioners.

• The European Court of Justice, a quasi-supreme court that acts as if it were the guardian of a constitution which does not exist. Unlike the US and UK supreme court no votes are recorded in the European Court and no dissent is ever set out in a judgement.

• The European Central Bank, which is constitutionally accountable to nobody and legally immune to democratic interference. Its staff, and it itself as a corporate body, are legally immune to criminal prosecution by any national legal system. The European Central Bank is the only central bank in the world which has no government behind it.

• The European Parliament is a pseudo-legislative lower chamber, in the form of a largely impotent elected assemble that has no permanent home, no power of taxation, no control over EU expenditure (it is merely confined to voting yes/no on the EU budget as a whole), no power to make executive appointments, no right to initiate legislation merely the ability to express a non binding vote for amendment or rejection of it, and to make a non binding request that the Commission prepare legislation. The European Parliament is the weakest of any of the EU institutions, and is the only elected body in the entire EU superstructure and the only one in which political parties have a formal role, although there are no pan-EU political parties.

The EU governing body of institutions is complex and obscure. It currently has five different presidents (one for the Commission, one for the Council, one for the Parliament, one for the Eurozone group of finance ministers, and one for the European Central Bank). The more powerful a particular EU institution is the more likely it is to operate in complete secrecy. For example the Euro Group of finance ministers which effectively sets EU economic policy and is the main mechanism for managing individual national economic crises as and when the occur, operates with no minutes, no formal agenda setting procedures and with no agreed set of procedural rules, it is entirely an informal body and its deliberations are completely secret.

All of this complex of EU institutions is superimposed on a set of nation-states, which currently determine their own fiscal, social, military and foreign policies.

Clustered around this strange set of political and quasi political institutions is a sea of roughly 30,000 lobby organisations who burrow deep into the complex institutional interstices of the system to promote a vast range of interests. These lobby organisations blend into the system of Commission expert groups that ‘assist’ the Commission in formulating policy and which in the Commission’s own words “are not set up to engage in general debate with stakeholders or the public; rather, they provide a forum for discussion on a given subject and on the basis of a specific mandate involving high-level input from a wide range of sources and stakeholders that takes the form of opinions, recommendations and reports.” None of the activities of the lobbyists or the expert groups are open to transparent democratic scrutiny. Its a technocrat’s wet dream.

Alongside the general negation of democratic principles through bureaucratic suffocation and obfuscation (decisions emerge but the real origins of decisions or location of decision making is obscure) three other key characteristics stand out.

  • The replacement of open political negotiation and debate by diplomatic mechanisms

The vast majority of the decisions of the Council, Commission and Coreper concern domestic issues that were traditionally debated in national legislatures. But in the EU system these become the object of the sort of secretive diplomatic negotiations traditionally reserved for foreign or military affairs, where parliamentary controls were usually weak to non-existent and where executive discretion could operate untrammelled. What the core system of the EU effectively does is to convert the open agenda and politics of parliaments into the closed world of diplomatic negotiation. The European project, as a top down non-partisan project conceived between national governments, was the result of diplomatic negotiations and it it has never transcended those origins. The entire European projects from its beginnings in the ECSC right through to the EU has acted as the mechanism for a vast expansion of diplomatic process and methods into, and replacing, traditional partisan democratic practices.

  • The endless quest for a stifling consensus

Even though traditional diplomacy required stealth and surprise to work it did not preclude discord or rupture. Classically diplomacy involved the war of manoeuvre between parties capable of breaking as well as making alliances, of sudden shifts, in short it involved politics, politics conducted between states but politics nevertheless. In the disinfected universe of the EU this all but disappears as unanimity is always sought and on most significant issues usually achieved. At the top of the EU system any refusal to accept a prefabricated consensus is largely treated as if it were an unthinkable breach of etiquette. There are almost never any minority reports. Inside the powerful centres of power in the EU there is no room for the rough and tumble of disorderly and partisan political competition or even debate. The EU system is designed to deliberately stifle partisan politics and in the process it stifles public partisan political debate in any meaningful sense. The EU wants to close down politics rather than open it up.

  • The removal of political parties as the fulcrum of democratic politics

It is worth reminding ourselves of how central political parties are to the sorts of real democratic systems that exist at a national level in Europe. Historically the role of political parties was to organise the citizenry into blocs of opinion, often these blocs reflected pre-existing social blocs (such as religious denominations, organised labour, regional and sub national ethnic interests etc) and political parties both represented these blocs but also worked backwards into civil society to actually build and strengthen the blocs they represented. The optimum outcome for the democratic process was where the party system allowed clear cut alternative policy options to be put to the electorate, whether through a single party or a coalition of parties, representing the competing policy options. Traditionally parties were often important markers for social identity and often secured life long allegiance from citizens. Political parties are a critical and central component of democratic government because they allow party based government to exist.

Party based government has the following key characteristics:

▪ A party (or coalition of parties) wins control of the executive as a result of competitive elections based on a universal suffrage.

▪ Political leaders are recruited by and through parties.

▪ Parties offer voters clear policy alternatives.

▪ Public policy is determined by the party (or coalition of parties) in the executive.

▪ The executive is held accountable through parties.

Nothing like this exists inside the EU system. The EU system is designed to be, in the strict meaning of the word, non-partisan. The EU system has almost no role for political parties and there are no pan-European political parties. There is party representation inside the European Parliament but this really is just a talking shop which does not have sovereign power over the whole system and which cannot autonomously make binding laws of its own choosing (surely the fundamental purpose of parliaments) and does not control the purse strings.

In the EU’s own words

“The Commission has the legislative initiative. However, under the Treaty of Maastricht enhanced by the Lisbon Treaty, the European Parliament has a right of legislative initiative that allows it to ask the Commission to submit a proposal”

and

“The European Parliament may approve or reject a legislative proposal, or propose amendments to it. The Council is not legally obliged to take account of Parliament’s opinion”

Strikingly there is no European level party of opposition constantly scrutinising and criticising the work of the incumbent European government, and in fact there is nothing really resembling a government in a traditional sense. There is no party political opposition that tries to win a European election in order to depose the existing European (non) government and no chance that the (non) government of the EU can be removed because it is not really a government but more a permanent governing elite arranged in a complex system of interlocking institutions, only the weakest of which is open to party politics and electoral approval. This means elections can change essentially nothing, and there is no oppositional ‘government in waiting’ ready to replace it through winning a popular mandate. There is no way that national or European elections can really shift European governing policy except through insurgent populist political parties that seek to shake, disrupt or even topple the EU system. Hence the rise of the populist nationalist parties.

“Elections change nothing,”
Wolfgang Schäuble, German Minister of Finance

The lack of pan-European parties, the absence of political parties in the real powers centres of the system (the Council, the Commission and Coreper), the replacement of open and partisan debate by secretive diplomatic discourse, the endless striving for consensus all work to depoliticise, and therefore de-democratise the system that governs Europe. And all the time power and responsibility for more and more domestic issues that were traditionally debated in national legislatures is shifted up into this depoliticised and non-democratic space sucking relevance and power away from national assemblies. Is this a good thing? Is it progressive?

In recent decades the traditional national political party system in Europe has weakened, the external social blocs upon which parties rested have decayed (the decline of manufacturing driving the decline of trade unions and labour movements for example, the decline of religion as a defining identity, etc), which has meant a greater fragmentation of electoral results, the decline of voter share of the big parties, greater voter allegiance churn, the retreat of political parties from civil society engagement, and their transformation into professional marketing bodies designed to secure the vote of floating electors viewed as consumers or customers of tailored packages of political policies. Sometimes, like in Italy in 1992 and in France in 2017, the entire established system of political parties can founder and in the resulting vacuum new, popular but shallow governing blocs can form around charismatic leaders (Berlusconi, Macron), this results in a government built on a very weak party apparatus. This rarely results in good governance. A key factor in this decline of national political party vitality is the existence of a superior non-partisan and binding level of governance above national assemblies which makes for an ever smaller space for clear cut policy choices at a national level. Ultimately what is there for the Left and Right to argue over at a national level if economic policy is decided in closed and secret committee meetings in Brussels and Frankfurt? How important a factor the existence of the EU tier of government is in explaining the fragmentation and weakening of the party system in the nations below it is unclear. But its highly likely, I would argue, that the existence of a system that sucks relevance, power and the room to boldly manoeuvre around new policies, out of the national political level must inevitably weaken the political ecosystem at that level.

The complete absence of material social solidarity in the European project

I want to drill down in some detail into the question of social solidarity at the national and EU level because I fear too many progressives are bamboozled by the vacuous public discourse of the EU elite. Its important to understand the material reality of social solidarity in Europe.

I have lost track of the number of times friends have emphatically stated in conversation that the EU is a social democratic project, or that it somehow protects social democracy in member states. Nothing could be further from the truth. Fifty years after the Treaty of Rome, twenty five years after the Maastricht Treaty, seventeen years after monetary union there is still no system of European social solidarity. Stripped of its wafer thin layer of progressive sounding policy statements and declarations the actual cupboard of solidarity in the EU is utterly empty. There is no system of social democracy at an EU level and its absence from the free economic zone of the single market actually works to constantly undermine social democracy at a national level. I don’t believe there will ever be a pan-European system of social solidarity for reasons I explore below, and if that is true it has profound implications for progressive and Left political strategy in Europe.

What is social solidarity? Ever since WW2 in the western liberal democracies the state has delivered very large national income transfers through the provision of social and welfare programs such as unemployment and sickness benefits, free health and education, and old age pensions. Some of these programs are selective and some are universal but even the selective ones are available to all citizens if their personal circumstance change. Even the so called neoliberal revolutions of the 1980s didn’t really dent the scale of social transfers that occurs routinely within the nations of Europe.

These social transfers are a huge, but varying, percentage of GDP across the EU, as governments of all member states routinely use the tax system (even if it is in the form of obligatory social insurance schemes) to collect money from the richest citizens and transfer it to the poorest citizens. This is a gigantic program of social solidarity. Inside the nations of Europe it is widely accepted across the political spectrum and by most citizens that their nation’s state has significant responsibilities to look after it’s citizens. People expect their country to look after them and to do so by spending lots of money collected from other, better off, citizens of their own country.

Data from Eurostat shows that in 2011 the average social protection expenditure as a whole in the EU was just over 28% of GDP. Over time this percentage goes up and down a bit but not by much. That means that as a matter of course somewhere between a quarter and a third of national income in the EU is being redistributed from the richer to the poorer citizens, but these transfers are ring fenced inside the nation states of the EU. There are no social transfers of any substance across national borders.

Within the EU the level of social spending varies from nation to nation, mostly the richer countries spend a higher proportion of their income on social spending, and the highest spender (Denmark) spends twice as much proportionally as the lowest spender (Latvia). The total annual GDP of the European Union is around 15 trillion euro and the total amount spent annually on social solidarity is around 4.25 trillion Euro (both these figures change from year to year but their relative size stays roughly the same). All that spending is financed by revenues collected within the various nations of the EU. To repeat – none of it is transferred across national borders.

How does this compare to social spending at a pan-European level by the EU? The total EU budget for 2016 was only a tiny 155 billion euro. The biggest chunk of that budget (40%) goes on the Common Agricultural Program, the next biggest chunk (a bit over 30%) goes on social cohesion, then comes competitiveness, external aid and admin costs, with a small amount spent on security. The EU doesn’t have specific budget categories for social spending and it is just about possible to argue that some of the cohesion spending could be counted as social transfer spending (the European Social Fund for example), perhaps some of the CAP spending (if the recipient is a poor farmer), and that none of the competitiveness, external aid and admin costs count as social transfer spending. But lets be generous, lets count all the EU spending as social spending, how does that stack up against the social spending inside nations?

As we have seen total social spending in Europe, inside nations, comes to around 4,244 billion Euro. The total EU budget is 155 billion euro. Even if we counted all EU spending as being social spending that means the EU delivers only around 3.6% of social spending inside the EU. In reality of course the EU budget is spent on many things that could not be counted as social spending such as admin, external aid, competitiveness, most of the CAP, etc. So in reality is quite likely that, even if with the broadest definition and the most generous calculation, the EU only delivers around 1% of the social spending in the EU.


 
More than 99% of social spending is still financed and distributed inside nation states. This is a very important fact that says a great deal about the current political terrain in the EU and the resulting constraints on progressive political strategy. Even though there has been a strong commitment for a long time amongst the EU elite to building an ever deeper union, to political and fiscal union, nothing of any substance has actually been implemented. The reason pan-European social solidarity (fiscal union) has not happened is because any attempt to introduce any meaningful level of fiscal union would be promptly and strongly rejected by EU citizens (particularly in the richer countries who would be paying taxes to finance any new pan-European system of social solidarity) who would throw out of office any party who tried to do it. European citizens do not want to send big chunks of their taxes to be spent in other countries. At the same time the entire arc of reform and restructuring since the Maastricht Treaty twenty five years ago has completely failed to build a pan-European democratic system. This is partly because not having a functioning democratic system running the EU makes life much easier for the elites that currently run the EU system, not least because a truly functioning, vibrant and partisan democratic space at an EU level would probably paralyse such a vast and complex endeavour. But the main reason is that there is simply none of the necessary organic foundations for such as system, the sort of deep foundations composed of the very building blocks of national identities (ethnicity, language, cultural institutions, shared political traditions and parties, foundation myths), that underlie national democracies. The EU elites have been happy to cobble together a non-democratic, non-transparent and non-accountable elitist European political system that is functional but which is a system that is entirely ill-equipped to legitimise, politically manage or effectively administer the sort of significant levels of taxation and spending necessary to deliver a pan-European system social solidarity. To run a pan-European system of social solidarity would require increasing the EU’s budget at least 20 or 30 times. There is not a single part of the existing machinery of the EU that is even remotely ready for such an undertaking, and certainly no democratic mandate to proceed with such a project.

Although the EU has utterly failed to deliver a political union founded upon a new system of pan-European democracy and social solidarity, it has been almost completely successful in delivering freedom for capitalist enterprise to operate freely across the entire EU. There is nothing wrong in principal in creating a single economic space in Europe as long as it is accompanied by the creation of a matching democratic social space of solidarity. The problem is that the hard won democratic checks and constraints on capital which were secured via prolonged democratic struggle at a national level have not been replicated at a Union level. And without an enveloping democratic system it is impossible to deliver material social solidarity across the new economic space of the single market. The only way to civilise capital is to enmesh it within a democratic political system and thus mitigate and constrain the social damage that can result from the dynamics of unconstrained capital accumulation.

We now have in European a huge open space for capital to move workers, factories, production, goods and services around more or less at will. But the social costs of what capital does (say emptying a weaker national economy of all its skilled workers whilst flooding another national economy with millions of migrant workers, or shutting factories down in order to relocate them to a low wage country) all have to be dealt with at a national level. If a nation in the EU, utterly open as it is to the transient moves of capital, suffers say mass unemployment or a collapse of tax revenue it is the nation itself that has to find the resources for local social solidarity, it is the nation that has to pay the pensions, welfare benefits and fund the health care, not the EU. Because there is no EU social solidarity, and because the individual nations have to finance their entire social spending from internal national resources, there are huge differences across the EU between the amounts that various nations spend on the care of their citizens. The highest amount spent per citizen on social solidarity, in Denmark, is fifteen times the amount spent per citizen in the lowest spender, Bulgaria. Europe is not a single social space, it is nowhere near being a single social space, and yet it is a single space for capital.

The reason why the absence of any cross border material social solidarity (the lack of any ‘fiscal transfers’ to use the ghastly EU jargon) matters so much is that it shows that the very foundations of social democracy and solidarity lie inside nations and its conditions of existence do not yet exist at an international level. The fact that after fifty years of the European project, after immense political effort, it is still impossible to get the citizens of any nation in European to agree to donate a chunk of their taxes to the material support of citizens in another European country is the definitive demonstration that the existing systems of national social solidarity in EU nations are all built on top of the institutions of the nation state. It tells me that I have woefully underestimated the importance of the nation state in the building of mass democracy and of material social solidarity (the two things are of course intimately connected). It follows that if indeed the nation state is the necessary foundation of both democracy and social solidarity then to weaken it by building a new layer of undemocratic transnational government above it is to weaken democracy and social solidarity. And that is exactly what has happened through the implementation of the EU project. In reality the EU is a huge new free space for capital with a paper thin layer of government above it. This tiny EU state system is not under democratic control and its primary function is to ensure that markets and businesses in this huge open economic space can operate efficiently and more or less freely. In reality the European Union is the most ambitious and largest experiment in neo-liberalism in the world, albeit in its Ordoliberal variant.

All social solidarity is restricted to operating inside nation states. There is no social Europe and there is no democratic government of the EU.

The crucial role of the nation state

All successful nation states are very powerful imagined communities. This concept of a national state, a form of state only recently invented, as an imagined community was developed by Benedict Anderson in his ground breaking book ‘Imagined Communities: Reflections on the Origin and Spread of Nationalism’, which explores the conditions of production of imagined communities of a new kind – nation states. I am not going to reiterate his complex arguments here – read the book it’s very good – but suffice to say Anderson shows how nation states create a powerful sense of imagined community through deep and material processes which were bound up with modernity, the rise of industrial production and urban living, the spread of literacy and mass culture, big improvements in the means of communication, and eventually the rise of political parties, wars against outsiders (‘the others’) increasingly fought with mass armies of citizens in uniform, and then – for the lucky – the development of democratic political systems. Anderson makes a persuasive case that national states are really complex systems with very deep material roots (see for example Linda Colley’s excellent book on the forging of the British national identity).

The nation states in Europe are integrated economic, democratic and social spaces with deep material roots and support structures, and their top layer of governance are democratically elected parliaments or presidents through which parties directly control the executive. The people who sit at the top of the executive machinery are almost entirely elected politicians and almost all are there because they have been placed there by a political party that has won power through elections. The parties in power can be sacked regularly through open competitive elections, and there is always a party political bloc of opposition which openly challenges the incumbent party government and seeks to topple it through elections. This democratic system in European nation states sits on top of, and depends for its legitimacy upon, a deep sense of national identity. In the nations of Europe a long historical process has created a rich fabric of national identity, shared creation myths, shared cultural totems and a profound sense of belonging which are bedrocks of the various systems of national social solidarity.

Because each of the nations of Europe are each a single space of national social solidarity their citizens have universal social rights and there is a single material system of social solidarity that covers the entire country. This has big and very important consequences. The various national systems of social solidarity are financed through single integrated fiscal systems which finances key social benefits (such as pension payments, social security and welfare payments, education costs etc) from central pools of national tax revenues. What an integrated fiscal and social solidarity system really means is that tax revenues are constantly collected from the richer regions of the nation and then they flow to the poorer regions. This is mostly done in an entirely invisible process, there are no entries in the national budget showing how much money London for example is paying in taxes, or how much of these taxes are flowing out London or how much a poorer region, for example Devon and Cornwall, is receiving from London.

In fact London, the richest region in the UK (and indeed in the EU), contributes about 30% of the total tax income of the UK government. London generates as much tax as the next 37 biggest cities in the UK put together. A recent report by the Office of national Statistics for the first time broke down tax revenue collection and spend by region, and the report shows that almost all areas of the UK are in net deficit in terms of public spending (more is spent locally than is collected by local taxes) and that London makes a vast contribution of tax revenue that is spent elsewhere in the UK. In fact annually London and the Southeast contributes about £41.5 billion in tax revenues to fund public spending in the rest of the UK, which is approximately £800 million per week. So every week hundreds of millions of pounds flow out of London and, via the state, into the poorer regions of the UK but none one of this has much political consequence because the basis of this massive flow of funding from London to the poorer regions of the UK is the very strong sense of national social solidarity still operating in the UK. This sense of social solidarity was weakened by the Thatcherite political project, has been weakened by mass migration, and is being very seriously undermined by current political projects like Scottish nationalism, but the national system of social solidarity in the UK is still pretty strong. Nobody is seriously proposing that London’s tax income should be withheld from financing the pension payments in Wales or Yorkshire for example. This system of British national and integrated social solidarity, just like all the other systems of national social solidarity inside other European nations, has important consequences for the poorer regions of the country. Most important is that the system operates as a vast safety net preventing regional economic decline from spiralling downward and it maintains a basic level of demand in the economy even in the poorer regions. No matter how poor, or even bankrupt, a British region becomes its pensioners, teachers, the unemployed, doctors and nurses etc, will still be paid because their benefits and wages are not dependent on being financed from the limited tax revenues of just the poor region itself. There is no such guarantee for the constituent nations of the EU.

The great British economist Wynne Godley who died in 2010 wrote a short article in the London Review of Books in 1992 entitled “Maastricht and All That”. The article is an astonishingly prescient critique of the deep design flaws in the plans for European Monetary Union as contained in the Maastricht Treaty. Here are a few excerpts:

“The incredible lacuna in the Maastricht programme is that, while it contains a blueprint for the establishment and modus operandi of an independent central bank, there is no blueprint whatever of the analogue, in Community terms, of a central government. Yet there would simply have to be a system of institutions which fulfils all those functions at a Community level which are at present exercised by the central governments of individual member countries.

Another important role which any central government must perform is to put a safety net under the livelihood of component regions which are in distress for structural reasons – because of the decline of some industry, say, or because of some economically-adverse demographic change. At present this happens in the natural course of events, without anyone really noticing, because common standards of public provision (for instance, health, education, pensions and rates of unemployment benefit) and a common (it is to be hoped, progressive) burden of taxation are both generally instituted throughout individual realms. As a consequence, if one region suffers an unusual degree of structural decline, the fiscal system automatically generates net transfers in favour of it. In extremis, a region which could produce nothing at all would not starve because it would be in receipt of pensions, unemployment benefit and the incomes of public servants.

What happens if a whole country – a potential ‘region’ in a fully integrated community [Godley is referring to the EU here] – suffers a structural setback? So long as it is a sovereign state, it can devalue its currency. It can then trade successfully at full employment provided its people accept the necessary cut in their real incomes. With an economic and monetary union, this recourse is obviously barred, and its prospect is grave indeed unless federal budgeting arrangements are made which fulfil a redistributive role.

If a country or region has no power to devalue, and if it is not the beneficiary of a system of fiscal equalisation, then there is nothing to stop it suffering a process of cumulative and terminal decline leading, in the end, to emigration as the only alternative to poverty or starvation.”

Back in 1939 in his essay ‘The Economic Conditions of Interstate Federalism’ Friedrich Hayek, the economist who directly influenced and contributed to the intellectual foundations of Thatcherism, set out the current logic of European monetary union with prescient clarity. Hayek correctly thought that a federation of states would only be able to weakly ‘interfere’ in the operation of the market, and that this interference would be much weaker than that of nation states where political legitimacy conferred by national identity would support far more robust interventions. For Hayek the idea of a federation of nations undermining government ‘interference’ in the market was a good thing, but for any social democrat it surely would be a bad thing. Here is what Hayek had to say:

“Although, in the national state, the submission to the will of a majority will be facilitated by the myth of nationality, it must be clear that people will be reluctant to submit to any interference in their daily affairs when the majority which directs the government is composed of people of different nationalities and different traditions. It is, after all, only common sense that the central government in a federation composed of many different people will have to be restricted in scope if it is to avoid meeting an increasing resistance on the part of the various groups which it includes. But what could interfere more thoroughly with the intimate life of the people than the central direction of economic life, with its inevitable discrimination between groups? There seems to be little possible doubt that the scope for the regulation of economic life will be much narrower for the central government of a federation than for national states. And since, as we have seen, the power of the states which comprise the federation will be yet more limited, much of the interference with economic life to which we have become accustomed will be altogether impracticable under a federal organisation.”


 

In this article on the deep architectural flaws of the European Union I have focussed on the twin pillars of democracy and social solidarity because those are the two key pillars of social democracy. I could have written an equally scathing critique of the deep flaws of the single currency system, but I have covered that in a great deal of detail in previous articles. What I wanted to achieve in this article was to open people’s eyes to the actually existing European Union. During and after the referendum I heard countless comments of gushing support for the EU from people on the Left and to me it often felt like they were describing, and defending, a European Union that didn’t actually exist, an EU of our dreams, but not the real EU we actually have. The Union we actually have is one that has delivered almost complete freedom for capital to operate unrestricted across the entire continent but which is administered by a tiny, undemocratic, secretive and obscure state apparatus. At the level of the Union there is almost no democracy, there is almost no open partisan political and electoral contests for real power. There is also no system of Union level social solidarity. As a result the political, economic and institutional terrain of the Union is deeply inimical to social democracy and to the crafting of a European progressive political project.

In the next article I want to chart in more detail the political terrain that has been created by the EU and explore some of the strategic options open to the European Left.

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