Friday, June 3, 2016

Brexit, Sovereignty and the Market

The current EU referendum campaign in the UK is probably no political theorist's ideal of how democracy should work. The debate has been suffused with at best tendentious interpretations of how the EU works and the likely consequences of leaving, at worst with outright lying. Somewhere in the middle there is a copious amount of bullshit, as politicians and voters try to make sense of things they do not understand, give up, and resort to meaningless and often contradictory verbiage. In short, Habermas must be tearing his hair out.

There are plenty of good reasons why most people misunderstand, or know next to nothing, about the EU. Most of what it does is dry, technical and frankly boring. It makes little attempt to engage with the citizens who will experience its decisions, and national level politicians have little incentive to improve citizens' understanding, given their propensity to use the EU to deflect the blame for national problems. But I submit there is a more fundamental reason why the EU is so ill understood, and that is to do with our understanding of political economy - how politics and markets interact and constitute each other - more generally.

The EU is primarily a market. The key founding principles which Brexiters are most concerned about are its 'four freedoms', and in particular the freedom of movement of people (very few seem bothered about movements of capital, goods and services). These are constitutive of the European single market, and inform a body of legislation whose purpose is to ensure that national governments cannot subvert the market by introducing protectionist measures that will undermine competition, usually to the benefit of national producer interests. EU rules are pretty much all about doing this, and establishing common minimum standards so that competition does not lead to nefarious social consequences such as risks to workers' and consumers' health, fraud, pollution and so on. Its interventions in social policy are pretty limited, except in that discrimination in social provision on the grounds of nationality is outlawed.

Because the EU is all about freeing up markets from protectionist rules, it is actually far less threatening to the UK government's autonomy than that of other governments, because our political economy is already built on rules to facilitate the operation of market forces. Worker protection is amongst the lowest in Europe, and this is one of the reasons why the UK is an attractive destination for economic migration: our labour market is very open, particularly to workers who are prepared to work for low wages. Hiring and firing rules are very loose, unions are weak and worker organization actively discouraged, there are no automatic wage indexation arrangements, and welfare provision is not very generous by European standards. So if EU rules are so consistent with the UK's own institutions, why is there such hostility towards the EU?

The Brexit movement, and in particular that element of it that is concerned primarily with migration, is - usually implicitly - in fact demanding constraints on the market. Even the use of the term 'sovereignty' reveals that the power of the government of a nation state to regulate social life in whatever way it chooses is a value to be protected from outside interference. Unfettered market forces produce uncontrollable movements of money, goods, services and people across borders. Sovereignty is the right to put brakes on those movements. It is the right to curb, control or even suppress the market.

There is a deep contradiction within the Brexit campaign, and that is the contradiction between those who - for reasons of ignorance or ideology - argue that the EU is a restraint on free trade and the market, and those who - sometimes without realizing it - demand that our government protects us from unfettered markets. Brexiters who argue that uncontrolled migration makes Britons poorer are in effect demanding labour market protections to replace those that were removed by their heroine Margaret Thatcher. Thatcher herself, of course, encountered this contradiction in the late 1980s, when realizing that the single European market she had initially championed brought with it the need to regulate economic activity at the European level, thus undermining British 'sovereignty'.

Faced with this contradiction, even Thatcher's love of free markets ceded to the greater value of national autonomy. The Brexiters in the Conservative Party are banging their heads against the same contradiction today. The resulting confusion is not edifying, and the Leave campaign's intellectual case is embarrassingly thin. In her Bruges speech, Thatcher famously said 'We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level'. Since then, the EU has been rolling back the frontiers of the state across Europe. Ironically, her successors on the Tory right now want them re-imposed at the national level, in the form of migration controls. But there appears to be no way of doing this without renouncing full access to the European single market, which would restrict Britain's ability to trade.

This confusion gives rise to the utopian, if not entirely fanciful, nature of much of the Brexit discourse, and explains why few credible intellectuals have offered their support. However, western publics are in the mood for a nostalgic form of utopia, as can be seen in the US, Austria, France and many other countries where far-right nativism is taking off. Betting markets suggest Remain will win, but Brexit is far from impossible. What is impossible is squaring the circle between free markets and the closure of borders.