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The EU in the UK's rearview mirror - or is it?

By: 
Richard Wolff

MJ: This is Letters and Politics, on Pacifica  radio, I’m Mitch Jeserich. There’s been a lot of political turmoil in Europe not just in the past few days but in the past few weeks. After Britain voted to leave the European Union, global markets have taken a dive and the English pound has also seen its biggest devaluation in years, causing the UK government to move slower than reported and has even caused calls for a second referendum.

England’s neighbor France has had major demonstrations in the streets for weeks now as France’s socialist government considers changing labor laws and Spain on Sunday held its second major election in six months as an attempt to produce a majority coalition to run its parliament. It failed.

Well to talk about all that’s happening in Europe the economic side of it and why we should care and how it may affect us, I’m joined by Richard Wolff. Richard is a professor of economics at the New School in NYC and also professor of economics emeritus at the Univ of Massachusetts Amherst. He is the host of the radio program Economic Update that can be heard on Pacifa radio. Professor Wolff has just returned from France. He joins me over the telephone

MJ: I remember from the time we first started having you on my radio program, Letters and Politics. This was right after the recession, and I remember you always warned about what kinds of politics can come from the Right, and also the Left, out of great economic turmoil. Well here we are, maybe eight years later. In a way, you called what we’re seeing now some eight years ago.

RW: Well it’s kind of you to remind the audience, giving me a chance to do a perpetual I told you so routine, but in any case, the reason it seemed so clear to me back then, was that I felt that the economic crash of 2008 was not your run of the mill business cycle, not one of those downturns that lasts six to eighteen months and then the economy comes roaring back. We’ve had that kind of economic downturn but it struck me that the one in 2008 was the end of an era, was the end of a period of thirty or forty years in which things had radically changed.

Wages in America have stopped going up for those thirty years. The standard of living hadn’t collapsed because people substituted borrowing for what in the past had been rising wages, but that is not sustainable, and I kind of felt that there was a massive denial that this was the case and it was clear to me that we were in for a long period of economic decline, masked for a while by the debt, but eventually when you couldn’t borrow anymore because your underlying economic situation wasn’t improving, then the house of cards would come crashing down.

And you know, the political side of it is, if you don’t face up to the economic problems you have as a culture as a nation, as an economy, if you keep postponing it and papering it over with debt or other veneers, then when the day of reckoning comes, it’s a more bitter and painful experience as it has now been for a few years. That is driving millions of people, in all the countries of Europe and here in the United States into rethinking their political positions, being more and more angry at the same old, same old politics and moving to find another way of expressing their demand for something to change, since the existing situation seems so dire and the future so grim, and I think that’s what you are seeing across the board.        

MJ: And we’re talking the world over here. It’s important to remember that the so-called  Arab spring     which has turned to an Arab winter, began with economic issues in Tunisia and also in Egypt, we have what’s happening in Europe now that we’ll talk about here in a moment; the rise of Donald trump and Bernie sanders here in the United States. It’s becoming clearer to me now, with all of this news about the UK voting to leave the European Union, and what that means for many of the institutions that have been in place, that it just really underscores that this recession that happened in 2008,  this is really a seminal moment in our lives today, not so different from even 9/11.

RW: Absolutely, I would say it’s a bigger more momentous event than 9/11. I would say it’s closer to the crash of 1929 which ushered in, on the righthand side of the political ledger, Adolph Hitler and all of that on the one hand and ushered in on the other, modern social democracy whether it took the US form of the New Deal or the European form of the welfare states that still are the prevailing structure of Europe. It changed European history. It led directly to the conflicts of WWII. Nothing could be more profound in how it’s shaken world history but above all, Europe’s. And yes you see an exactly parallel situation now. You’ve rolled back the social democracy, you’ve rolled back the New Deal, you have deregulated the capitalism that got regulated in view of its failure in the 1930's and what you have almost on cue, is the collapse again of an unregulated, freed up capitalism that has a boom in the initial phase and then a major bust which is what we are living through and once again, masses of people, bitterly upset by what’s happening to them, trying to find a way to push back. They either find it on the Left, that would be Bernie Sanders here, or Jeremy Corbin, the new leader of the Labor Party in England, or a host of new political left wing initiatives such as the Podemos party that did real well in the elections in Spain both yesterday and earlier, but you also have the right wing, the Golden Dawn in Greece, the rise of the anti-immigration kinds of movements, that were important in the British Brexit vote and so on, and you’re playing this all out. The only real amazing thing for me watching this sad replay is that the lesson that we have an economic system that produces these catastrophes for us, that we ought to be debating and questioning because of its repeated production of these outcomes, seems to still be something that most people are afraid of engaging as the problem for us to solve.

MJ: I do want to dive in to what is happening in Spain, France which you just returned from, and also the Brexit vote as well, but in lieu of potentially getting lost in the big picture here, we’ve seen the constant chipping away of the things we got out of the New Deal and also post WWII era programs, really in the 1970's and then the 1980's -  do you see this Brexit vote and the threat to the European Union as part of the continuum of what we’ve been seeing since the 1970's?

RW: Absolutely. I think what you’re going to see is a continued effort by the business community, the large multinational corporations, particularly the financial wing of it, the banks, insurance companies and so on. They are determined to push ahead with their program, which is to reduce government spending on social welfare, to reduce taxes, particularly on themselves, to lower wages, to move production away from western Europe and North America on the one hand and into the lower wage areas of China and India and Brazil on the other. They’re just pushing ahead under the mistaken belief, at least I think it’s a mistake, that the mass of people are simply quietly going to accept the decline in public services, the decline in the support they get from their government, the decline in their wages, the growing insecurity of  their jobs and the growing indebtedness of their children, trying to get a college education.  The whole package! They keep thinking they can go ahead and do it more and more despite the fact that you are now seeing major pushback of the masses of people, leftwing in those areas where the Left is strong, rightwing in those areas where it isn’t, and yet again, there is this replay, that the folks who control the mass media seem to want to pretend isn’t a replay, doesn’t have historical antecedents and has to be looked at through this or that specific situation and its details rather than as part of a larger political process.

MJ: All right, let’s look at some of these things, the whole world has been talking non-stop about Great Britain’s vote to exit the European Union. Richard Wolff, I know that you know, that the Left is divided on that very issue. Do you see the exiting from the European Union  as part of this process that’s happened over the last thirty or forty years? What do you think about the debate on the Left about the European Union and the UK? Is it an anti-immigration sentiment, a xenophobic sentiment or an issue of national identity?  But there have been those on the left who said that the EU has been an entity that’s been pushing neoliberal ideas and that it was better to get out of the EU. How do you see this debate?

RW: I think both sides are fastening on one aspect of a complicated reality, Let’s give them both their due. There is no question that the continental European countries led by Italy and France and Germany and so on,  have a much more developed social welfare, or if you like it, a democratic socialist system than the British do. There’s no question about it, and it’s been that way for a long time. Therefore it’s not surprising that a sizeable part of the British Left feels that they want for Britain the very things that the Europeans in the United European Union have already achieved. That is, much more in the way of government support for people’s well being, much more in the way of government services, much friendlier rules and regulations for the relationship between employer and employee, and on and on. So of course there is a part of the Left which wouldn’t want the British to move away from the European Union. They already oppose the degree to which Britain goes to the US for its model rather than to continental Europe so they would want to stay in the European Union. But by the same token, there are other parts of the British Left who like to point out that the EU is now clearly controlled by political and economic forces that are undoing those very virtues that the other part of the Left celebrates in Europe. They’re cutting social welfare, they’re lowering taxes etc.

Look, in France, there’s a demonstration every day in Paris over the effort of a socialist government to change the rules of employment in favor of the employers as against the employees, the very people whose votes got the socialist government into office. This is a bitter struggle, and so there are folks in England who are saying; “we should get away from the EU because the direction it’s going, even, if it does have more social welfare than we have here in England, but its going in a direction that we don’t want any part of and we would have a better shot of making a better Britain if we weren’t under the thumb of a European Union so controlled as it currently is by people who are dismantling the very things we stand for”.

That debate existed before the vote, it exists now after the vote. I don’t want to denigrate the vote - it’s an important historical moment, but it really doesn’t change very much.

British business is trying to make money and they will do it under the rules of not being part of the EU just as before they were trying to do it under the rules of the EU. Their attitudes toward their workers isn’t going to change as a result of this vote. Their strategies will be adjusted but they will be adjusted toward the same objectives they always had. In a way, if I can interject my own perspective, this whole thing was a massive distraction.

Remember it was Mr. David Cameron the Prime Minister who made the decision to call such a referendum. He didn’t have to do that. The law doesn’t require it. That was a political calculation on his  part that with growing British resentment against the austerity program that they have instituted in England since the crash of 2008, that it would be clever for him politically, he thought, to distract the British people into this vote about going in or going out. He was very confident that the British would stay in, that he and the big newspapers and the big banks and all the rest would either persuade or terrify the British people to vote to stay in, so it was a nice way to distract people from something that was bad for him politically since he had imposed the austerity and that would at least give him another year or two of distraction, a vote  that he would ”win” and he would be more secure in his power. What he didn’t understand was the growing anger, resentment and bitterness of the British people, small businesses, working people particularly, against what they saw happening, a growing gap between rich and poor. Look, the very things that we see here in the United States, they also saw, and Mr. Cameron had to learn the hard way, that he had produced by his austerity, a groundswell of opposition that would take whatever mode of expression was available, namely this referendum, to send an unambiguous message, “we don’t want you in power, we don’t like you in power, we don’t believe what you say, we want you out”. I think that’s exactly the same message that the very same sorts of people have said to the established leadership of the Republican Party by rejecting all of their candidates in favor of this unusual, this different kind of guy, Mr. Trump. I think it’s likewise what a fuel to everyone’s amazement is the support of Bernie Sanders as a welcome alternative to the same old same old represented literally by the Clinton family, in this case the female rather than the male, which is also seen building resentments and I think you’re seeing it everywhere in Europe, only the details of each country makes the form of it adjust to those details, but the underlying process is everywhere the same.

MJ: Richard Wolff, let’s talk a little more about France. There have been major demonstrations for weeks now in France, sometimes with clashes with the police, tear gas, we’ve seen the photos here in the US. What France is trying to do, and the socialist government has moved on is what the New York Times has characterized as slightly easing labor protection, to make it easier to hire and fire, but just by a degree according to what I read in the NYT. Is what’s happening in France connected to the EU and connected to this larger story of what were seeing about issues surrounding the European Union? Is the EU pushing the socialist government to enact this law?

RW: Absolutely! Indeed, nothing could be clearer because in the last two or three weeks for example, leading EU officials from the headquarters in Brussels, have traveled to Paris and appeared in photo ops with Mister Holland, who is the Prime Minister in France now, and celebrated and congratulated Mr. Holland for his courageous efforts to modernize, to update and to make these long  overdue changes, so yes, Mr. Holland has sought, and the EU has been eager to cooperate, in saying that what he is doing is exactly what the EU wants. Let’s be real clear what Mr. Holland, who’s a socialist by the way, and whose socialist party controls the government in France, let’s be real clear what he’s proposing  - by the way he could not go through the French parliament to get those rules voted on, because he didn’t have enough votes, even though his party controls the parliament, he didn’t have the votes to get it through, so he had to use a parliamentary maneuver, giving him the right under certain interpretations of the French constitutional system, to impose these rules under an act of the President whereas normally this would have been done with a parliamentary approval. It shows you how questionable it all is, but in any case, the proposal that they’re fighting about in the streets of Paris, would give employers the right to mandate overtime, to change the hours of the contracts they have with workers, to adjust  downward, the wages that they pay, particularly, for such overtime, and to reschedule workers. This is seen by the working class in France, and it’s very clear by all the polling, because the majority of all the French people, at least half of the French people are very much in sympathy with the strikers and the demonstrators in the streets, this is seen as pushing, what the French call the neoliberal agenda, the agenda of the EU, to lower the standards of living of the mass of people, to raise the profitability of business in that part of the world in Europe, and they won’t have anything to do with it.

The CGT, which is roughly the French equivalent of the AFL CIO has organized these strikes. They are not wildcat strikes or manifestations by people who are outside of the union movement or opposed by the union. On the contrary, the biggest movement now is the CGT, the general confederation of Labor in France, a union of unions, that is very effective and has been for a long time in France, that is confronting the socialist government. They are basically saying, shame on you, you call yourself a socialist who acts in the name of the working class, to advance its needs and interests and here you are slavishly carrying out the demands of the business community in a way that is blatant and explicit and we’re going to fight you and we’re gonna fight you in a way that you’re not going to be able to escape and you’re not going to be able to pretend that it is not going on and is being done by some group of students or radicals. No, no, this is a basic question of which way France goes and it’s just as much the struggle in France as it is in England except in England it takes the form of this vote about entering or leaving the EU whereas in France it’s in the streets, as so often is the case in France, because that’s the way that French people see themselves able to shape what happens politically.

MJ: Is there a sentiment in France by people protesting this labor law, to also exit the EU? 

How do you reconcile these two? How do you see what is happening in France and what has happened in Great Britain?

RW: No, it’s not the Left in France that is eager to leave the EU. In fact there’s very little movement in that direction. What the French Left wants is to have their own government, that is, the French government, be a leading force in changing the EU from a unified Europe that serves big business into a unified Europe  that serves the majority, the working class, first and foremost.

Inside France, there is a huge movement to get out of the EU, to withdraw France, but in the French situation, that’s the right wing. In a way it’s quite like Britain, the right wing in Britain, the anti-immigrant forces in Britain, the businesses who think they are going to to make more money if Britain leaves the EU, they got together and became the force that got the vote to come out that way.

In France it’s the national Front, a right wing movement led by Marina Le Pen, and she and her movement denounced the role of immigrants in France, want to make France for the French again, built on the rage and anger of the French working class that is likewise suffering under an austerity, rather like the British. They want and hope that they, the right wing, can cash in on the anger and resentment of the mass of the people, but they are confronted by a powerful left wing, which has focused their struggle not on in or out of Europe, which they take to be a secondary issue, but on the direct question of job security, wages, the things they believe are uppermost in the minds of the French people. If there is now going to be a demand for the French to have a referendum, It will be put forward by Le Pen and the right wing in France and it will be in all likelihood vigorously resisted by the Socialist government and by all the forces on the Left.

MJ: Do you think there will be other countries, (I guess once the UK gets out there will be 27 countries), do you think there will be other countries to follow Great Britain?

RW: There already have been announcements by various political forces, including very strong ones,  that that’s exactly what they plan to do. Every country in Europe has people who are angry and upset by what the unification of Europe has meant.

Let’s remind everybody, that in the 1990's as the unification was heating up in Europe, enormous promises were made to the people in each country who had to vote on whether to become part of the EU, that voting to become part of the EU would bring them prosperity, job security, an improved standard of living, more transparent government and a long laundry list of wonderful things.

Well, whether it was that those were simply untrue commitments from the beginning, or whether you might want to argue as some do that they were sincere, but that the crash of global capitalism in 2008 wiped away all those promises, because it wiped away the ability to deliver on all of them, whichever way you go, the reality has been, since 2008, being part of the European Union has been an economic disaster for the mass of people. The wages have gone down, the benefits have gone down,  government support has gone down, everywhere that people look, they see that the European Union has not only not delivered on its promises but has delivered the opposite of them and then as I said in the beginning, then the only question left is; how do people aggrieved by all of this, how do they understand what their problem is?

If they think that being a member of the European Union is their problem, then for sure, they will go and join a right wing organization, or for that matter even a left wing one whose position is let’s go ahead and leave the EU. If they believe instead, that the problem is the immigrants, all those poor people from Asia, Africa and elsewhere that are moving into Europe because economic conditions are even worse in their societies, well then they will go to the rightwing and they will become part of an imaginary universe in which expelling immigrants, is suddenly going to transform them and their situation.

And finally, if it’s people who are trained economically a little bit and can see the problem isn’t whether you are in or out of the EU but is rather what is this relationship between the business interests who control that union and the working conditions of the mass of people, those kinds of people are not going to be very excited about these issues because they will believe that what holds their economic future in its hands is the strength of labor relative to capital and not a debate about this or that national boundary.

MJ: How do you come down then on what happened in the UK? Is it significant?

You did say earlier that when David Cameron called for the referendum that it was a distraction. Do you think it remained a distraction? Is it still a distraction?

RW: I’m afraid I do. I think that this is a tremendous event, not because in and of itself it has that many consequences. I should underscore here Mitch, this is not over. If it had been over, then today we would be reading about the formal negotiations, that have started based on that referendum, to exit the EU on the part of Britain. They announced instead that there are no formal negotiations but all the British think they need to do now is have some “informal” negotiations.

That is not a minor matter.

That means everything is now about to be slowed down. I’ll give you another example.

The logic if you are going to resign as Prime Minister is to announce that in view of this vote, you have lost the confidence of the people of Britain, which Mr. Cameron clearly has, so he is going to resign on Monday morning. Instead he announced he’s resigning in OCTOBER! What? Why does it take you all these months to figure out what just happened? Everyone in the world knows what just happened.

MJ: Could it add instability to resign right now, after this vote

RW: Well it’s kind of a touchy question. It strikes me that it adds enormous instability that he doesn’t resign. It raises the question, and you can already see it in the financial press, have the conservatives decided that they are going to try for another election? Are they going to try to come up with some excuse? Are they going to use the letter of the law, which says by the way  that the referendum is an advisory to the parliament. It is not a binding referendum.

In other words, the law of the UN doesn’t require that this advice given by the people’s vote be taken. All of these measures on his part, are leading to a notion that we’re going to have terrible instability because we’re not going to know what we thought we knew when the results of that election were announced, namely, Britain is out. It turns out that the folks who don’t want that are going to seriously consider, they are already doing that, whether they have a shot by hyping whatever the negative possibilities of this vote are; hyping it to their own people so that maybe they can find a way to wangle another election or even an excuse to ignore this referendum and proceed as they were doing before with nothing more than the cosmetic change. Instead of Mr. Cameron as the head of state, some other Conservative Party politician, will step in and promise this or that. So the whole thing is an ongoing struggle.

Let me be as clear as I can. There are business interests in Europe and even in England that want the British  to remain part of the European Union. Those are concentrated in the City of London, which is the financial center of the entire European Union. Germany may be the most powerful manufacturing center and the richest single market but the financial core of business in Europe is concentrated in London and they want to be part of Europe because that is their business. They have been doing everything they can to support all of this. What they didn’t count on was the damage they have done to the mass of British people coming back to hurt them as it has now but they’re not going to give up simply because they lost this vote. They’re going to regroup, they’re going to refigure their strategy, and they’re going to try to hold on to what is their profitable business in Europe and they’re going to try to hold on to their ability to dictate what goes on inside of Britain to their advantage. They’ve been doing it very profitably for the last thirty or forty years and you can be very sure that this vote doesn’t prevent them from continuing.

It just sets a new set of circumstances that they hadn’t foreseen. And that’s why in my judgment, we are going to see nothing more than continued struggles. We’re going to look back on this vote, not as an unimportant event, but as part of a process, a step, in which some sides won and some sides lost, and now everyone who was fighting before will continue to fight, pretty much for the same goals, but under the new conditions, which are highly uncertain, in terms of how, where, when and to what degree this vote will actually be carried out by the people inside the British government. That’s an issue of struggle that you can already see.

MJ: Can this be akin to what we call disaster capitalism? Obviously there’s no hurricane or no tornado but everything has been shaken up

RW: Yes. The way I see it, we are toward the end of a very serious change in world capitalism that is not anywhere nearly as well understood as it should be.

Starting back in the 1970's, capitalism kind of made a decision, and this is the big companies whether they’re in England or Germany or Japan or New York. They made a decision that they can make a great deal more money by disconnecting themselves from working classes whose wages had been pushed up by decades of union struggle and Great Depression and so on, and they would do that in two ways. The first one, move production out of the countries in which these industries had grown up. You might have been born and become big in Britain or France or the United states but starting in the 1970's, you said goodbye to wherever you had grown strong. You’re going to move to China, India, Brazil and so forth, where you could pay workers a small fraction of what they cost in your own country. And the second thing they did was with the same objective, to replace workers with machines. Computers, computer driven machines and ultimately robots driven by computers.

And this meant that the mass of workers suddenly discovered that their decades of struggle to get .a high wage, had had the perverse consequence of giving their employers enormous incentives to substitute machines for them or to go to countries where they could pay much less.

That has destroyed the labor market for the mass of people, It has diminshed their wages, diminished their benefits, it has made big corporations unwilling to pay taxes to a country they are basically leaving, and the end result is a long term decline in capitalism in the West where it was born and an increase of the capitalist well being in the places to which it has moved, namely China, India and Brazil.

To give you a simple statistic, the real wages in England are lower today than they were in 2004 or 2005. That is the economic crash has really whacked the British working class. In China, by contrast, the average real wage of a Chinese worker has doubled over that same period, so you could not have a starker differentiation. But nothing has prepared the working classes of the West, of France or Britain or the United States, to understand this process, to see it, partly because it’s too dangerous politically, to understand that while you have to borrow money so your kid can get a BA degree which is less useful to getting a job than it has ever been. that this has to do with profit driven decisions by major corporations. To explain that to the American people carries the unfortunate consequence of identifying where the problem lies, and therefore where the solution lies, and because that’s ideologically impossible in the West, you have these endless scapegoats that are substituted. It’s the immigrants, it’s the EU’s bureaucracy or it’s the bad politician. If you vote him out and vote the other one in, it will make a difference.

None of these explanations work, none of the policies built on them have succeeded, because this is all a kind of shadow boxing, that we have a fundamental economic system that works this way, it always has and it keeps going in the direction it is programmed to go unless and until masses of people get up and say we won’t stand for it anymore. That’s what the French unions are doing in the street. That, in a peculiar indirect way, is what the people of Britain did when they voted to get the British out of the EU, with their different understandings, they are trying to improve their situation, now that eight years of economic crisis have finally driven home the fact that we are in a bad historical period with the capitalism we have, and it doesn’t look like it’s getting any better and you must be willing to look at very unusual directions of change, Sanders and all of that or else there is nothing but more decline in our future.

MJ:  And change everywhere. The Middle East is looking very different and we’re seeing what’s happening now in Europe. Do you see this as the end of the post WWII era, or the unraveling?

RW: Yes clearly for me, it’s an unraveling that started with the decision of major businesses to break out of the consensus that came out of the last great collapse of capitalism. In the 1930's, everyone understood that capitalism was a badly broken system and everybody agreed, except for the big capitalists of course, that government  had to come in and rescue it, whether it was Franklin Roosevelt here or the Labor party in Britain after WWII or the social democratic upheavals in Europe across the middle of the 20th century. Everywhere it was understood, that government had to restrain, government had to control, government had to regulate capitalism if it wasn’t going to plunge us into depressions.

The people who didn’t like this were the capitalists who didn’t want to be regulated, didn’t want to be tied, didn’t want interference with their way of making money, becoming profitable, growing. Starting in the 1970's, they felt strong enough, that with the memory of the depression far enough back in people’s minds, they could finally resume the kinds of capitalism they wanted.

Margaret Thatcher and Ronald Reagan were the emblem carriers of this commitment, they were voted into office by the business community to do that and they did it. They deregulated, they cut the taxes on business, they did the whole program and they thought in their way that this would make capitalism vibrant again. Well it did, it made it vibrant again. but unfortunately it also unloosed its self destructive tendencies, which have now come to a head, and now we are back to square one.

We’re in a capitalism that doesn’t work for everyone, that is not delivering the goods, it is mostly delivering the bads, and you’re back then to a situation of oh my goodness, what are we going to do now? And the sad thing is that where you had a strong Left in Britain and France, to give them a progressive way out of the Great Depression of the thirties, in the aftermath of the war, the business community destroyed the Left, demonizing communists and socialists, diminishing their labor unions, so now when capitalism collapses again in 2008, you don’t have the union strength or the socialist strength or the Communist strength to provide a  progressive way out, and so we’re seeing,  blaming immigrants, or blaming politicians in Brussels or other kinds of distractive scapegoating, because we don’t have the institutional framework to face that it is a problem of capitalism, and that maybe, if the government control that was how we tried to solve the problem in the thirties didn’t work, over the long run, then maybe we are confronted finally with the question of system change.

Get to a system that doesn’t work this way, get to a system that doesn’t put profit ahead of everything else and then maybe we won’t have this endlessly repeated cycle of crises that is now becoming so oppressive.        

(Transcription by Paul Palmer)