Labour's European dilemma

Traders on the London futures market booed and jeered Tony Blair as he accompanied the Australian Prime Minister and the presidents of Sri Lanka and Uganda on a tour of the City of London's financial markets.

One trader of British government debt said, "He's got a bit of a nerve coming down here after what Brown did to us on Monday. I lost a fortune." An article by Reuters commented that, "A hasty clean-up of the LIFFE floor prevented Blair from having to negotiate the usual piles of screwed up newspapers, old deal tickets and chocolate wrappers--but nothing could stop the cries of 'sell' as he passed the pits."

Such is the reliance of New Labour on media support that attempts are being made to deny that dealers booed and jeered Blair. Reuters has been banned from the exchange under pressure from Downing Street.

New Labour have no solutions to the crisis facing their big business backers. They are a weak government in palpable disarray over Europe. That city spivs, who every day cut deals which make or lose millions of pounds, should now attack Blair is indicative of the instability of the Labour government. Only months ago they were amongst its most fervent supporters. Labour is now coming up against the issue which, above all, others divided and eventually led to the collapse of the Tory party. In this New Labour only reflects the deep divisions in the British ruling class.

On September 26, the Financial Times reported an unnamed minister predicting that the government was moving closer to European Monetary Union (EMU) and would join soon after the first countries, led by Germany and France, launch the euro in 1999. Share prices shot up in a jubilant response. Then, Chancellor Gordon Brown gave an interview to The Times newspaper on October 18, indicating that Britain would not join EMU within the lifetime of the present Parliament, which could continue till 2002.

Brown had the misfortune to be opening the new Stock Exchange computer trading system the following Monday. When he started his speech the giant screen behind him turned red as share prices dropped because of the policy reversal.

The media attacked the government for indecisiveness and focused on divisions between Blair and Brown over EMU. In the weeks before Brown's about-turn, The Sun, The Times and the News of the World ran stories headlined, "Don't give in to the Germans Mr Blair", "Germany will be the boss" and "Beware EMU ambush". They portrayed Blair as a reluctant EMU supporter opposing a conspiracy of Cabinet Ministers trying to force it through. The Murdoch press demanded that, in return for continued support, Blair must not call the next general election on the issue of support for European Monetary Union. A completely separate referendum should be called later, when Murdoch would oppose joining.

Brown's attempts to steady the market in London, by delivering to Parliament a definitive statement of intent regarding EMU, coincided with a world-wide crash. As he stood at the despatch box the shock wave from Hong Kong hit London, before it rolled on to New York.

EMU and the European trade bloc

The necessity to develop a trade bloc based on a single currency to meet the challenge of the United States and Japan conflicts fundamentally with the national system of rule that has been used for centuries to defend the profit system.

New Labour was promoted by big business to make a "fresh start" in Europe after years of Tory rule and appointed BP chairman Sir David Simon as a minister to promote "flexible labour markets" throughout the EU. Blair believed that 18 years of attacks on the working class by the Tories enabled him to smugly promote the virtues of "competitiveness" to the European ruling class. But the temporary advantages gained by British capitalists in the last decade or so are rapidly being lost.

Industrial restructuring is taking place throughout the EU. Jobs are being downsized at a faster rate than under Thatcher in the 1980s. In western Germany, nearly two million industrial jobs have been lost since 1991 and official unemployment stands at a record 4.3 million in the country as a whole. Huge European-wide mergers are taking place. On one day in October a record six mergers took place worth a total of $130bn. Massive privatisations are also going through, such as the French and Italian telephone companies.

British big business, especially the City speculators, are desperate for their share of the booty but there is virtually nothing left to privatise. British manufacturing industry, which has been reduced from employing 7 million in 1979 to about 4 million today, relies on exports to Europe produced by low paid jobs. One quarter of the manufacturing sector is foreign owned and 40% of inward investment into the European Union (EU) goes to Britain, worth £160bn. Outside of the European Monetary Union, these advantages for the profit system in Britain would dry up. General Motors/Vauxhall have said that failure to enter may provoke relocation, while Toyota made a similar threat prior to the election.

The financial sector has benefited as the European centre for every aspect of wheeler-dealing in shares, currencies, commodities, etc. Frankfurt, with the euro controlled by the European Central bank, will become an increasingly powerful competitor to the City of London the longer Britain stays out of EMU.

The immediate problem facing the British ruling class and causing Labour to delay EMU entry is the disparity between the British economy and that of Europe. Britain is tied more closely to the US dollar and is entering a recession just as the rest of Europe pulls out of it. The historic preponderance of finance capital, with millions of working people having mortgages and pensions, means British interest rates are about 7% compared to 3% in Germany. To close this gap could mean slashing £20bn a year in public spending, threatening even bigger cuts in welfare state spending and runaway inflation. The world money markets are far larger and more powerful than the combined assets of the central banks and are out of the control of any national government. In 1992 they moved against the pound and forced it out of the European Exchange Rate Mechanism, the predecessor to full blown monetary union. Once again they are poised to exploit all the weaknesses of the British currency.

Deepening class divisions

Divisions in the ruling class over Europe go much deeper than financial considerations. Repeated warnings of the dangers of a loss of national sovereignty represent far more than a hankering after the days of the British Empire. Especially in the period after the Second World War national institutions, the welfare state, Parliament and the reformist politics of the Labour Party and the trade unions were crucial in maintaining the rule of capital. Abandoning this system of rule and moving into uncharted waters is a decision that cannot be taken lightly.

Last year, Dennis Healey, Chancellor of the Exchequer in the 1974-79 Labour government, warned against too fast a move into EMU: "I think it is likely to be a disaster... People are beginning to see that the kind of economic policies, domestic as well as international, being followed by many western countries -- together with the changes in the organisation of business that produce downsizing of work-forces -- will cause a tremendous social backlash in the next ten years... The case against purely financial criteria is that it will mean rising unemployment and deepening social division."

These dangers for the ruling class are highlighted in a newly published book on the class struggle in Britain, A Class Act - The Myth of Britain's Classless Society by Adonis and Pollard. They write: "Class divisions are intensifying as the distance between the top and the bottom widens and the classes at both extremes grow in size and identity." The book refers to the emergence of "a super class" -- a new and elite professional and managerial upper class made up of the top earners in business, industry and banking along with the lawyers, accountants, barristers and management consultants who make £200,000 a year plus, advising them. This group has come "to believe in the justice of its wealth and status". It has "an increasingly separate life-style and self-consciousness" and is "pulling away from the swathe of lower paid professionals". Nor have class issues vanished for the mass of the population who have found their living standards under attack. In the 1960s, 60% of the population believed there was a class struggle, whereas in 1995 a Gallup poll showed this had increased to 81%.

It is this rapidly growing polarisation, which will bring the question of social equality to the fore in the minds of millions of working people, that Healey is warning about. The pressure from the global economy means all of Europe is witnessing the same growth of class divisions. Healey is advising caution whilst other sections of the ruling class, including many of the disparate remnants of the Tory party, are advocating a retreat into the nation state. This perspective reflects the interests of the most backward sections of the ruling class who are afraid of being swamped by European competition. In the present deteriorating social conditions it can only breed reactionary anti-European chauvinism.

A capitalist monetary and trade bloc in Europe cannot be answered by the policy of defending the nation state, even when it is put forward by those like Arthur Scargill and Tony Benn who call for a return to old-style reformism. Not only would such a separation of Britain from the world economy plunge society back into a dark age, such policies can only pit British workers against their European brothers and sisters, reviving the conflicts which led to two World Wars.

The Socialist Equality Party opposes the European Union of big business by advocating the programme of a United Socialist States of Europe. The development of the productive forces and the provision of a decent standard of living for millions demands the removal of all national barriers and the integration of the economy throughout Europe. We call for the commanding heights of the economy--the banks, transnational corporations, utilities and transport system--to be put under public ownership and the democratic control of the working class.

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