What Next?

The Irish writer and political commentator Fintan O'Toole has built a nice sideline writing for the British liberal press. The key to his method is twofold: to situate his analysis in a broad Whig history where progress is undermined by reactionary conservativism, and to flatter his audience by reinforcing their prejudices and complimenting them on their own clear-sightedness. In his latest piece for the Observer, he lays the flattery on with a trowel. "Two huge things in the history of the EU would not have been completed in the way they were without the Brits: the single market and enlargement. The problem with both, indeed, is that Britain pushed them forward without quite understanding their political implications." Naturally, he implicitly excludes the readers of the Observer from the charge. As remainers, they always understood the political dimension. Indeed, that was what made you a remainer. In fact, O'Toole's understanding of the UK's relationship with Europe is wrong-headed and the implication of that, which I am happy to make explicit, is that too many remainers have never properly understood the economic dimension.

The first of these achievements is Margaret Thatcher's finest hour in liberal mythology (that is, the one that can be spoken of - we draw a veil of discretion over her defeat of the unions): "The single market is the EU’s great achievement – protecting it was, ironically, the overwhelming aim in the negotiations on future trade with the UK. It simply would not have happened, when it happened, if Margaret Thatcher had not pressed so hard. ... The problem was that Thatcher could never accept that the workings of a single market would have to be counterbalanced by common social, environmental and safety standards, with the political, legal and administrative capacity to enforce them". In a spooky parallel, Thatcher's most avid pupil suffers the same flaw in respect of EU expansion: "It was Tony Blair who later pushed for Romania and Bulgaria to be allowed to join. Here, too, the implications of a British policy were not really understood in Britain. It was not explained that free movement would mean more immigration from these countries. Or that the governance of a much bigger EU would inevitably have to be more closely co-ordinated".

Here we have an image of Thatcher as vigorous but blinkered and Blair as progressive but naive. The one oblivious to the consequences of her (necessary) actions; the other oblivious to the risks of his (excusable) idealism. The truth is that the former was far more sensitive to European geopolitics than this caricature allows - she was notoriously against German reunification, for example - while the latter was far more cynical about EU enlargement and expected it to put the brakes on ever closer union, a continuation of the strategy established under John Major. The key to Thatcher was her belief that the Single Market would lead to greater market coordination of the European Union - i.e. the dominance of the private sector - and thus a move away from the functional coordination of the Common Market, which reflected the postwar tradition of cooperation between systemically-critical industries across national borders and thus institutionalised the role of the state in economic planning. In this she showed the influence of Hayek and his classical liberalism on her brand of neoliberalism, which was always at a slight angle to the Ordoliberal tradition of Germany in which the state was a legitimate coordinator of the economy.

Likewise, Blair was merely continuing the long British tradition of seeking a balance of powers within Europe - now the vertical balance between integration and expansion, rather than the traditional horizontal balance between states - and doing so in a manner that simultaneously maintained the UK's role as a broker between the US and the EU (hence NATO expansion proceeded in parallel with enthusiastic British support). If Major and Blair were heavily influenced by Foreign Office thinking, Thatcher was less enamoured by that department's traditional postwar realism, and had been since the Falklands War. For her, the Single Market represented a significant step not only in transforming the European Union from a political to an economic project but also in establishing the dominance of the commercial dimension in foreign affairs. The relative decline of the FCO, which was made clear by the creation of the Department for International Trade in 2016, is a continuation of this mercantilist turn. That the DIT is headed by Liz Truss, an unreconstructed Thacherite, is quite appropriate.

The attitudes of Thatcher and Blair towards Europe were never opposed. For all the mood music - her xenophobia, his globalism - they were really two sides of the same traditional coin: a belief that the UK's interests were best served by promoting commercial cooperation and free trade in Europe while remaining as detached as possible from any political entanglements on the continent. This has been the strategy of the UK state since the late 18th century. The British empire was never profitable in isolation: for all the resources it generated, it wasn't sufficiently populated to provide a large enough market for British goods, particularly after the loss of the American colonies. The one populous part, India, could only be turned into a market by destroying much of its native industry, notably textiles, but didn't have the per capita wealth to support a significant market beyond cheap, low-margin manufactures. The UK has always relied on Europe (and, to a lesser extent, the informal empire of South America) to provide the purchasing power to sustain British industry. 

After the Second World War, the UK initially kept aloof from Europe not because it hoped to preserve the empire (in practice, decolonisation rarely interrupted access to resources) but because Europe had little purchasing power. The initial moves towards continental integration, notably in coal and steel, were aimed at rebuilding industrial capacity after the depredations of the war years. For Britain, whose industrial capacity was largely intact at the end of hostilities, this offered little immediate gain. The eventual decision to join the Common Market was prompted by Europe's recovery in the 1950s: the Wirtschaftswunder of Germany and parallel rapid growth in France, Italy and the Benelux countries, which continued into the 1960s. Charles De Gaulle's political spite delayed the UK's accession by a decade, but this didn't alter the trajectory of the British economy. By the mid-70s, manufacturing was already in decline and the service economy was growing. 

In this light, the UK's decision to join the EEC was not merely pragmatic but forward-looking, and the focus on both deepening the economic relationship and expanding its geographical scale was strategically sensible, even if it was combined with a continuing wariness over closer political and currency union. When commentators like O'Toole point to the UK's championing of the Single Market as some sort of paradox, particularly in the person of Margaret Thatcher, they simply reveal their own shallow understanding (or, more cynically, their pandering to the illusions of remainers). If we follow the logic of this, Brexit needs to be decoded as a conscious economic choice on the part of the British people, not dismissed as an atavistic spasm or the consequence of decades of political naivety. The most credible explanation has nothing to do with free trade or global markets, let alone the emergence of novel technologies and industries. It is simply a rejection of the neoliberal dispensation of the last 40 years: the relative decline of the North and Midlands; the low-wage, precarious labour market; the worsening wealth and housing inequality. This may be motivated in part by nostalgia, but it is none the less a vision of a better future. The question is: how do we get there?

The left has historically been more realistic about the economic dimension of the UK's relationship with Europe, however its willingness to articulate an alternative hasn't advanced much beyond the AES of the 1970s or more recent riffs on that such as the "foundational economy" and universal basic services. Today, whether the perspective is backward-looking, such as David Edgerton's plea for a "bonfire of national illusions", or forward-looking, such as Larry Elliott chiding Labour for its "inability to envisage what a progressive government could do with Brexit", there is a common tendency to be sketchy about the UK's future economic strategy. The dominance of the City of London is accepted, or even lauded as a "specialism", rather than acknowledged as the product of state design. Low productivity and poverty wages are attributed to cheap labour, rather than an investment strike that has persisted for two decades. Brexit restores the potential for a planned national economy, but planned for what purpose beyond bromides such as "a better country"? Labour's 2019 manifesto pointed towards a more coherent vision, but we can be pretty sure its next one will be much less ambitious.

If today marks a pivotal moment in British history, what's remarkable about it is how vague the visions of the future are. Obviously the Prime Minister wasn't going to provide anything beyond bumptious waffle, but you'd have expected something more concrete from the Tories than glib phrases like "global Britain" and "levelling-up". This vagueness, like the associated retreat to the comfort of the Thatcherite past, suggests a lack of vision. The government really does look like it's going to be making it up as it goes along, much as it has done with the management of the pandemic. Those who think that the agreement signed with the EU suggests the UK has little intention of diverging on standards or state aid are probably correct. There doesn't appear to be a plan to do anything other than maintain the status quo, with perhaps a little more cronyism and public investment theatre at the margins. For its part, Labour under Keir Starmer seems happy to have its agenda shaped by the Tories (which, as Edgerton notes, is its historic default). For all the noise of the last five years, the political implications of Brexit appear nugatory, and that's because there is no economic strategy.