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Brexit, in or out, is far less important than investment to end the UK productivity crisis

BREXITThe latest official data show how far the UK economy is lagging behind other industrialised economies in terms of productivity, in this case output per hour worked. There is too a long-standing discussion amongst economists in Britain about the so-called ‘productivity puzzle’. There is a genuine crisis of productivity in Britain. But in reality there is no productivity puzzle at all. It is easily explained by the weakness of investment. In particular, the recent fall in in the stock of capital in the British economy explains the almost unprecedented decline in UK productivity.

Currently, debate in Britain is dominated by the possibility of ‘Brexit’. This is an error. Under current circumstances, whether Britain is in or out of the EU is a trivial matter in economic terms compared to the crisis of productivity. This is because, contrary to George Osborne (and those on the left who are confused and echo him) it is not possible for consumption, or wages to lead economic recovery. Sustainable increases in consumption require sustainable increases in output. Unless that is achieved by more people simply working longer hours, then it must come via increased productivity. Without it, living standards will fall. This will be the case in or out of the EU.

Yet the latest ONS data show that productivity is falling. It also shows how far the UK economy lags behind other industrialised economies. Fig.1 below shows the relative productivity performance of the UK economy versus the other countries of the G7. According to the ONS, UK GDP per hour worked in 2014 was lower than the rest of the G7 average by 18%. Within that, it was lower than both the US and France by 31% and lower than Germany by 36%. The sole G7 economy whose productivity is lower than the UK’s is Japan, which has been stagnating for 25 years.

Fig. 1 Productivity Trends in the G7 Economies

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This relative weakness is not confined to most of the G7. According to the ONS, UK productivity also lags that of Spain by 5%, Ireland by 30%, Belgium by 34% and the Netherlands by 45%.

The effects are twofold. If UK productivity is stagnating or falling, so will living standards. If relative productivity is declining the British economy will be less able to sell goods abroad, and its domestic industries will increasingly collapse through under-competitiveness. This is what is currently happening to the steel industry, for example.

The ‘productivity puzzle’

The purpose of all analysis or commentary should be to illuminate what is otherwise hidden or obscure. But economics differs fundamentally from the natural sciences in this key respect. No physicist has an interest in obscuring or denying the fundamental laws of physics, or in basing analysis on anything other than fundamental laws (although there is a strong interest in revising or reassessing them in light of new data).

However, in economics there are vested interests at work, social classes, whose enrichment or otherwise depends on economic outcomes. Therefore there is a very great material incentive to falsify or obscure the fundamental forces at work in the economy. This is why the fall in productivity has been a ‘puzzle’. Analysts and commentators have a false understanding of the fundamental laws of economics and attempt to fit empirical facts such as falling productivity into that false framework.

The official discussion of the crisis in productivity began with the Office of National Statistics (ONS) in 2012 and was later taken up by the Bank of England and many others. The timing was not coincidental as what had been a very weak recovery in productivity started to go into reverse from 2012 onwards. Productivity actually fell. This was by the worst performance for productivity of all recessions in the post-World War II era. It is almost unprecedented coming out of recession as Fig.2 below shows.

Fig.2 Productivity (output per hour) trends following recessions

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Source: ONS

The argument has been advanced that the crisis in productivity reflects the changing composition of output, with the decline of relatively high productivity sectors and the increase of low productivity ones. Specifically, it is said that the decline of North Sea oil output, as well as the crisis in financial services have depressed productivity while the allegedly low level of public sector productivity has the same effect. Using ONS data is it easy to refute these claims (Table 1 below).

Table 1
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* Workforce jobs figures, benchmarked to Labour Force Survey totals

Source: ONS

North Sea oil output (under Mining & quarrying) is the most productive sector of the economy, with output per hour worked 12 times greater than for the economy as a whole. It fell 7.3% during the recession, slightly more than the economy as a whole (since revised upwards). But as it accounts for just 2.7% of all output, arithmetically it cannot be responsible for the weakness of productivity as whole

The output of the finance sector is a very large component of the British economy, whose measured productivity level is approximately half as great as the economy as a whole. But its output fell slightly less than that of the economy, so its decline cannot be responsible for the productivity crisis.

The public sector is also widely held to be a low productivity sector, although measuring outputs from sectors such as health or education is done at market prices, which almost certainly undervalues them. The output of this sector initially rose during the recession, which is natural to cope with a rising population. But the total economy productivity crisis persisted after the recession and deepened from 2012 onwards. The combined output of the civil service, health and education sectors have all risen since then by a combined 5.4% between 2009 and 2012, according to ONS data. At the same time the public sector workforce has shrunk by 8.9% because of the austerity policy. There has therefore been a significant increase in public sector productivity, outstripping all other sectors of the economy.

The productivity crisis is not caused by the changing composition of output. It is a crisis of the private sector and embraces all sectors.

Much of the confusion on the source of the productivity crisis arises from an incorrect economic framework. One of the clearest expressions of this misunderstanding is as follows:

“Ever since the industrial revolution, economic growth has rested on the firm foundation of better use of buildings and machines and improvements in the level of output for every hour worked.” Chris Giles, Economics Editor of the Financial Times, Solving the productivity puzzle is key to government finances

This is the view that Total Factor Productivity (TFP) “the better use of building and machinery….” is the driving force behind economic growth. But this proposition is ridiculous when set in this historical context. The driving force behind economic growth is not that better use has been made of buildings and machines since the industrial revolution, but that there have been vastly more buildings, machines and other contributors to the productive capacity of the economy since that time. According to Bank of England data (Three centuries of economic data) from 1850 to 2000 the accumulation of productive capital has been twice as fast as the growth in output. This is entirely in line with the analysis of Adam Smith and Marx, who respectively argued that the ‘rise in stock’ or the ‘rising organic composition of capital’ exceeds the growth rate of output itself.

It is also not possible to explain the uniquely poor performance of UK productivity by reference to TFP or ‘better use of buildings and machinery’, as in a modern economy businesses based in Britain could simply learn those techniques and/or buy the technology from overseas to make better use of their existing stock of productive capital.

The reason for the calamitous decline in UK productivity is because it has been reducing the existing stock of capital in the economy.
Scrapping productive capacity

It is extremely rare for the level of productive capital to decline. The Bank of England data noted above records only two instances since 1850 in Britain when the capital stock fell, the first two years of World War I and in the Great Depression.

More usually, the capital stock grows. Indeed it is this drive to accumulate capital for the purpose of realising profits that gives capitalism its dynamic force and its capacity to raise the material level of society. However, all capitalist economies are determined by the realisation of profit, not by the accumulation of productive capacity for its own sake, or to raise the material level of society. Profit is the raison d’être. As a result, if profits are declining, or by scrapping unprofitable plant or machinery profits will increase, it is quite usual for productive capacity to be scrapped. Individual firms do this on a continuous basis. In exceptional periods there may be circumstances when capital in aggregate is being scrapped. This characterises the current period (Fig.3).

Fig. 3 UK Capital Stock Index
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The close correlation between the trend in capital stock and the level of productivity is shown in Fig.4 below. In fact the level of capital stock leads the productivity level by one year, so that the capital stock first fell in 2011 and the first recorded fall in productivity was in 2012.

Fig. 4 Capital Stock & Productivity
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Furthermore, this outright decline in the stock of capital is unique to the UK economy in the G7 currently. Among the economies for which there is data, since 2010 the US capital stock has risen by 4.1%. In Germany it has increasd by 2% and in France by 1.9%. Italy has increased by just 0.6%, and so is effectively unchanged. But in Britain it has fallen by 2.1%.

The relationship between the level of productive capital and the level of productivity is clear across the industrialised economies. If other factors are unchanged, the higher the stock of capital, the greater the level of productivity. This can be illustrated in Fig.5 below, which shows the trends in the capital stock in selected G7 economies.

Fig.5 Trends in Capital Stock in Selected G7 Economies
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This is almost a mirror image of the trends in productivity shown in Fig. 1 above. Changes in productivity track changes in the productive forces of the economy, led by the stock of capital. Over this period, the US has both the largest increase in capital stock and the greatest increase in productivity. The UK, which had previously been a relatively strong performer both in terms of the growth in productivity and the growth in capital stock, is now the sole economy shown where both productivity and the capital stock are falling.

Conclusion

There is no mystery around the ‘productivity puzzle’. It is a function of the weakness of UK investment in both absolute and relative terms. The decline in productivity is preceded 1 year by a decline in the capital stock. This declining capital stock is itself an extremely rare event. According to Bank of England data it has only occurred twice previously in Britain since 1850.

The puzzle arises only because there is a mystification of the driving forces behind productivity growth and economic growth in general. In the first instance, after the division of labour, growth is driven by the amount and quality of capital in productive in use in the economy.

In the UK productive capacity is being scrapped. This is not because there is no unsatisfied demand in the UK economy. On the contrary, there is both a scarcity of necessities, such as in housing and healthcare and other areas, as well as a large trade deficit. The productive capacity is being scrapped because its owners cannot make profits, or do not anticipate sufficient profits in a situation of growing competition and sluggish growth in consumption, for example in the steel industry. To survive and prosper, the owners of the UK steel industry would have to leap towards the front of global productivity or technical quality through very large scale investment and they are unwilling or unable to do so.

A reduction in the stock of capital is one way in which capital can overcome declining profitability. Marx identified some of the others as increasing the working day, which is happening in the UK and US but not elsewhere. Other factors which can offset falling profitability are a reduction in the cost of capital goods (the means of production), a reduction of (real) wages, increasing the division of labour through the growth of foreign trade or by boosting profits through increased financial speculation.

Many of these factors are at work in a number of countries. But Britain is the only G7 country where the capital stock is actually falling. The other OECD economies where the capital stock has fallen are Denmark, Greece and Slovenia. It is possible Britain may be a harbinger of more general international trends.

For now though, this weakness puts the British economy in a uniquely vulnerable position in the global slowdown. So it is no exaggeration to say that under current circumstances the need for state-led investment to rescue the economy and living standards from renewed crisis is more acute in Britain than elsehwere in the G7 economies. When John McDonnell says, “our mantra is investment, investment, investment,” this is exactly what is required to stave off renewed economic weakness.

This article first appeared at Socialist Economic Bulletin

Image copyright: image by Ton Snoei ID 40559217 www.123rf.com

39 Comments

  1. John Penney says:

    This is a very, very, important article. It is quite clear for those who are prepared to dispassionately look at the evidence , as contained in Michael’s article, that without massive state-directed productive investment, and rebuilding of our manufacturing base (on the “German sectoral model” ) – by a government prepared to take on the deeply ingrained destructive asset stripping dynamic of current UK Big Business practice – the UK economy is doomed to ever more rapid decline.

    This will only be possible from a radical Left government, prepared to take direct control of the “Commanding Heights of the economy” – old Clause 4 style, and implement a radical economic regeneration programme guided by a comprehensive , democratically derived, National Plan.

    Somehow (in the face of a hostile mass media and a neoliberal PLP majority) the Corbynite Left Labour Party has to build a mass narrative which replaces the entirely hollow ” racist xenophobia and flags patriotism” of the Tories with an understanding that the UK as a multi nation state can only be saved from eventual utter impoverishment collapse by exceptionally radical restructuring of our entire economic base.

    The danger is that, a la the French National Front’s current very persuasive “pseudo Leftish National Autarchy Schtick” (the NF is as nominally “right on” in its rhetoric about TTIP as we are on the Left !) , if the Left doesn’t take possession of the “national economic salvation” narrative – the radical Far Right will do so instead.

  2. John P Reid says:

    Yes there’ll still be foregn investment if we stay in,but the British state building industries, with utilities,that we can create outside the EU is more important

  3. David Ellis says:

    Working people turn to Labour for opposition to Cameron and the Tories. The decision to vote with Cameron and for the neo-liberal and austerity mad EU will have far more impact on their consciousness than all the tripe about investment. A forty year opposition to the EU and its predecessors has been overturned and the reins of the party handed back to New Labour stalwarts who will spend the next four months destroying Labour’s core vote as they did in Scotland when they collaborated with Cameron in his independence referendum. Nothing that Corbyn or McDonnell say from now on will be believed at least not by the people that really count.

    1. John Penney says:

      Don’t actually trouble yourself with the substance of this article, David – (it’s about the UK’s productivity crisis – whether we stay in – or leave the EU) just crank out the same old, same old, ultraleft , Dave Spart, clichés.

      I don’t believe for a moment you actually read this important article you lazy man.

      1. David Ellis says:

        The article says that the issue of productivity is more important than the issue of Brexit. I addressed that issue. Labour’s support for Cameron and the EU will mean that what ever they have to say about investment will now count for nothing. I’m guessing being ultra-left for you means not crawling up the arse holes of left opportunists mainly because you are one yourself.

        In actual fact the solution to austerity is not investment or stimulation or borrowing. Over production is the problem and both those approaches have an identical effect i.e. they make over production worse. Economic consolidation is what is needed via socialist revolution across Europe and indeed the world.

        1. John Penney says:

          Sadly ,your understanding of economics is actually zero, David. Mouthing endless , simplistic Marxism for Dummies slogans about “over production” achieves nothing. Other than to show you have no idea at all what is going on in the UK and global economy.

          1. David Ellis says:

            That comment alone shows you up as nothing more than a troll.

      2. David Ellis says:

        It was only a few short months ago you were building an ultra left alliance of centrist losers to smash Labour at the ballot box whilst arguing against any sort of socialist programme which shows that your ultra leftism is just a cover for opportunism.

  4. James Martin says:

    But doesn’t ‘Brexit’ make it easier for a socialist government to control investment, particularly when nationalising things such as rail and utilities which would not be possible if we remained in the EU?

  5. Karl Stewart says:

    James and David are quite right, within the EU, any future left-wing government attempting to direct significant state investment into socially useful manufacturing as part of a comprehensive alternative economic and political strategy would find itself prevented from doing so by the EU, which is constitutionally committed to neo-liberalism, privatisation and big business.

    Has the author of the above article heard of Greece?

    It’s not ‘brexit’ we need, it’s ‘Lexit’ – we need to Exit Left.

    We need to Exit Left and encourage our comrades in other nations to join with us.

    1. Jim Denham says:

      “Has the author of the above article heard of Greece?” : yes: a left-wing government obstructed from implementing left-wing policies is rather different from a Tory government that wants to free itself from EU “red tape” (ie workers’ rights): geddit, Karl?

      “It’s not ‘brexit’ we need, it’s ‘Lexit’ – we need to Exit Left”: dream on, Karl: while people kile you and the ‘Morning Star’, insofar as you have any influence whatsoever (which is thankfully, not much) give “left” cover to the racists and xenophobes of the mainstream anti-EU movement. Thank goodness Corbyn, Labour, the TUC and Unite have seen sense.

  6. Danny Nicol says:

    If the author regards the EU issue as irrelevant, then he also regards the extension of public ownership as irrelevant, since EU law

    (1) mandates open markets in energy, post, telecommunications and (soon) railways thereby precluding sectoral nationalisation,

    (2) prohibits nationalisation of firms based in other Member States and

    (3) allows corporations to challenge any public monopoly on competition grounds.

    Does the author seek a Keynesianism bereft of public ownership? Is his idea of Corbynomics?

  7. Danny Nicol says:

    There’s an article on the Independent website reporting that Jeremy now wants to change the EU to eliminate liberalisation and TTIP.

    No conception of the requirement of unanimity among the Member States governments in order to secure these changes!

  8. Karl Stewart says:

    John Penney is also right to say that this is an important article.

    Minus the notion that EU membership is irrelevant, the rest of the article is indeed very informative, with plenty of statistical data to back up the various points made.

    The author constructs a strong and logical case for serious and significant state-led investment.

    What a pity then, that the effectiveness of his article is then reduced significantly by the trite statement about the EU at the start of the second par.

    The assertion that discussion of our EU membership is an “error” and that our EU membership is “irrelevant” to discussion of economic strategy is just that, a crude assertion which is not substantiated by any further argument or by any data.

    Indeed, this trite observation is so out of keeping with the remainder of the article that one wonders if it was added by someone else?

    1. Peter Rowlands says:

      Yes, I completely agree – it would be useful if the author could clarify. It could be that he just meant that In or Out would not have a major effect on productivity, in which case he is right.

    2. Jim Denham says:

      Johnny Paranoia comes to call, eh Karl? Brexiters do tend to suffer from that.

      1. Karl Stewart says:

        I’m a ‘Lexiter’ not a ‘brexiter’

  9. David Ellis says:

    Jeremy Corbyn is making a massive pig’s ear of this EU Referendum Campaign.

    1) He’s ditched 40 years of Left Labour opposition to vote Remain and for the EU’s neo-liberalism, austerity and Cameron’s reforms. It was only when New Labour completely embraced the EU that UKIP really take off and now the Labour Left are on board too that will almost certainly mean the end of Labour in England and Wales as it was for it in Scotland when it collaborated with Cameron over independence.

    2) His supporters are more interested in Cameron’s insult about his clothes than the referendum campaign and are saying next to nothing about it pretending it’s not happening.

    3) Yesterday he went to the Trident March instead of the Labour Remain Campaign Launch which means that though Labour will suffer for supporting Cameron they will not gain any credit for delivering a Remain vote as some sort of compensation. Cameron’s plan is to absolutely deny Corbyn any credit for his victory and Corbyn is helping him.

    4) Corbyn has handed the leadership of the Labour Party back to New Labour for the duration of this campaign so that they can go around destroying the Labour vote as they campaign for the EU and Cameron’s reforms.

  10. gren stach says:

    The EU is relatively unimportant to this argument because the UK retains control over its capital investments:
    the City
    Infrastructure
    Factory and manufacturing infrastructure
    In our out of the EU, the UK must tackle its investment problem and work out how to stop the City stealing hand over fist for offshore finance corporations
    It is worth noting that the lack of investment in the UK is directly linked to its inflated real estate pricing and its overpayments to executives and shareholders; none of this is controled by the EU and is specifically excluded under the proposed changes to the rules for the UK. It is precisely these problems that have led to the UK announcing this week that it will be making further cuts to the poor and vulnerable

    1. Danny Nicol says:

      Here is a blog post on public ownership and the possibilities of EU reform.

      It appears to be considered too left-wing for publication in this blog so I have had it published on a scholarly blog instead.

      https://ukconstitutionallaw.org/2016/02/29/danny-nicol-is-another-europe-possible/

    2. Danny Nicol says:

      It’s not actually the case that the UK retains control over its cap[ital investments. For example you instance “factory and manufacturing infrastructure”. Apart from anything else, such investment is vetted by the European Commission for its compatibility with the single market. If the Commission acquits a national government of having granted unlawful aid, rival corporations (for instance those based in other Member States) can apply for judicial review of that decision before the EU’s Court of Justice. This has given rise to a large body of jurisprudence on state aid law. Infrastructure is not wholly a UK competence either, being covered by EU public procurement law and non-discrimination. All sectors are subject to EU freedom of establishment which prohibits nationalisation of firms based in other Member States.

      To sum up the idea that there are no-go areas for the EU within the economy usually turns out to be mistaken.

  11. J.P. Craig-Weston says:

    Productivity is one of those terms used far to glibly without much critical thought so I looked it up, to remind myself:

    A measure of the efficiency of a person, machine, factory, system, etc., in converting inputs into useful outputs.

    Productivity is computed by dividing average output per period by the total costs incurred or resources (capital, energy, material, personnel) consumed in that period. Productivity is a critical determinant of cost efficiency

    In a country that now has almost no productive, (adds value,) industry left, has 3-6 million people currently unemployed; at least 2 million younger worker classified as not unemployed in compulsory education or training etc and so on it’s difficult to understand what, in terms of things actually being produced; productivity actually refers to anyway ?

    But I thought that point made about the bias and agendas, (and therefore potential unreliability of,) of various economic analyses was very well made indeed.

    And the ONS has moved the statistical goalposts more times than Tony Blair has said, “trust me on this.”

    My instinct, (and I’m prepared to be contradicted or corrected on this, in fact I’d welcome it,) is that this is really, (here and in and other countries cited, such as Spain, Ireland and the Netherlands,) indicative of the real levels of persistent structural unemployment that have been created by the loss of our manufacturing base and that it not for nothing that the UK is sometimes referred to as the Detroit of Europe.

  12. Bazza says:

    I actually do read all of these posts and find them interesting.
    As a left wing democratic socialist I always start from the premise that it is the labour of the working billions that creates the wealth and makes societies work and we should get our share of the wealth back.
    But I have agreed with the author for several years now that we need state-led public investment too!

  13. David Ellis says:

    The worse things about the pro-EU left is not that they are going to vote for the EU’s neo-liberalism, its fundamentalist approach to austerity and Cameron’s anti-working class `reforms’ or even that they are describing this bosses’ alliance against the European working class as some kind of manifestation of proletarian internationalism but that they are inculcating the illusion in the labour movement that capitalist institutions such as this can and will endure. In fact the EU is already breaking apart and the age-old geopolitical divisions along the usual Axis and Allies lines are clearly re-emerging. If capitalism is historically contingent then that goes treble for the various lash-ups and alliances of the capitalist class. But the opportunist left has forgotten that and wants you to forget it too because it no longer believes that capitalism is historically contingent. Cameron’s `reforms’, again that they are going to vote for, and the way he went about achieving them, have accelerated the inevitable process of disintegration which will occur even if the UK does vote to Bremain. Anyway the most immediately disastrous outcome of all this will be the recommencement of the pasokification of the Labour Party. Now that the Labour Left have joined New Labour in embracing the EU, a betrayal that ranks up there with German Social Democrats voting for war credits in 1914, it is likely that Labour will be eradicated electorally in England and Wales as it has been in Scotland where a disastrous and unprincipled collaboration with Cameron had the inevitable result.

  14. Jim Denham says:

    By Johnny Lewis (posted at Shiraz Socialist):

    Those on the left wishing to leave the EU need to be able to answer two questions: whether Brexit will benefit unions and workers in any practical sense, and whether the “left exit” campaign will help develop workers’ consciousness and the left politically. When leaving is put in such sharp terms the idea of a left wing exit rapidly falls apart, particularly around the consequence for unions.

    Unions can only progress member’s interests in two ways: industrially and through legislation. As unions’ industrial power has declined so the importance of pro-union legislation has increased. Seen as a totality such legislation creates a floor below which unions and workers’ rights cannot fall. With one major exception (TU recognition) all such post 1980 legislation originates from the EU.

    It is the case our floor of rights is weaker than many other European counties, a cumulative effect of the way European laws have been introduced in the UK the Posted Workers Directive being a case in point. This has recently been cited by some as an example of legislation which divides workers, in reality the Directive gives member states latitude to determine what constitutes the minimum rate of pay. The Blair Government set the rate at the minimum wage creating a two tier workforce while in Ireland they linked the Posted workers rate to the ‘going rate’ set by collective bargaining. While we may blame many things on the EU the vast majority of problems unions have with EU legislation is a consequence of how successive UK governments have enacted EU legislation.

    However weak the present floor of rights may be post-exit would see the Government dismantle our present laws further eroding unions abilities to defend members and further worsening workers terms and conditions. The consequence of this pulling apart of the floor would also fire the starting gun for a European wide race to the bottom as E.U. countries were forced to compete with the rock bottom wages of UK workers. What possible benefit can unions and workers derive from such a development? On this fundamental level of workers’ rights those who wish to leave do not have a leg to stand and so tend to keep quiet on this pivotal matter, unlike the populist right.

    The major argument put forward by the exit camp which directly purports to have workers interest at heart comes from UKIP. They argue foreign labour has reduced wage rates, hence ending immigration will resolve low pay. Such demagogy shifts the blame for the decline in wages from the employer and government to ‘the foreigner’ it also writes out any role for unions in bidding up wages.

    We can see from the floor of rights question to the populist rights use of the decline in wages there are no trade union based reasons for exit, unless someone wished to contend the floor of rights was irrelevant or believed the Tories will leave it intact. As for those wishing for a left exit, it is inconceivable that could blame migrants for low wages.

    Unable to put forward any trade union based rationale for exit those advocating Brexit can only do so from a political perspective. While it’s quite permissible to claim their political reasons for exit ‘trump’ the trade union reasons for remaining, for sure such arguments better be extremely compelling, while the arguments they put forward may be many things compelling is not one of them.

    The left’s political arguments for exit are not straightforward as they do so from a number of different political standpoints. Here I consider the arguments advocated by many of the far-left.

    Until the late 60’s all of today’s far-left supported what was the EEC, by the 1975 referendum most had shifted their position to a no vote, this about face arose from a desire to relate to the massed ranks of the virulent anti – EEC Labour Party/ CP and trade union left.

    Today this rationale has long been forgotten morphing into something far more esoteric. Their argument for exit has two main components the first part holds the EU is an emerging imperialist power and therefore needs to be resisted the second puts forward the view that an exit would precipitate a crisis in the UK and within the EU, making it easier for workers to struggle against austerity.

    The ‘imperialist’ argument is bound up with a view of a world divided into two camps the imperialist and anti-imperialists, included in this latter group is Russia, indeed Russia is viewed as the bulwark, the vanguard in the struggle against imperialism. This understanding of imperialism is a continuation of the way Stalinism divided the world between those who supported the ‘Soviet’ block and the imperialist west. This left advocacy of this reworked Stalinist world view removes any critical assessment of what a state or movement’s attitude is towards national self-determination or towards a counties working class and its labour movement, substituting a criteria which backs sates and movements based on their opposition to the west. On a global scale this has seen them back Russian’s imperialist aims in Crimea and support for the butcher Assad.

    As a general understanding of imperialism it is deeply flawed, set within an EU context it is risible, once its Marxian flourishes are removed we are left with a prosaic point which boils down to wanting to leave the EU because its capitalist. It should be added that this fatuous view seems to be the cornerstone of all on the left who wish to exit. One may legitimately ask given the EU is constituted by 28 capitalist states who, by and large, pursue neo liberal polices, many of whom, the UK included, are real not proto imperialist powers what else could this institution be other than capitalist?

    So if the imperialism rationale fails to run, what of the second element in their argument the idea that leaving the EU will destabilise capitalism? This idea represents the politics of my enemy’s enemy is my friend and is more akin – in its consequences on unions and workers, to anarchism or nihilism than trade unionism, or socialism, let alone a Marxian standpoint.

    Although it is impossible to say what level of destabilisation exit will have on capital we can say with certainty it will have a detrimental impact on unions and the working class. Moreover the impact of a serious downturn caused by exit is likely to have precisely the opposite effect to what its left advocates believe will happen. Rather than helping the fight against austerity, attacks on unions and workers will be intensified while the labour movement will be divided and unable to respond as a direct consequence of the political chaos exit will sow within its ranks. In truth such chaos will not be down to the left’s intervention, rather an exit victory will build an insurgent populist right and it is that which the movement, particularly the Labour Party will have to contend with.

    Across Europe and North America globalisation is causing a rising level of hopelessness among large sections of the working classes who are being galvanised into activity by the demagogy and programme of the populist right. The common denominator across all these movements, and what roots them in workers consciousness is the appeal to their respective nationalism.

    The referendum should then not be seen solely as being about in or out it is also an episode in the formation of this right-wing. Not least because the working class base of the exit campaign are not concerned with which model of capital accumulation best suits the UK, or for that matter the decline in workers’ rights rather the referendum is a lightning rod for hitting back against the causes of their social malaise, whether it is about politicians not listening, their growing impoverishment, or their belief that exit will reverse Britain’s decline not least by stopping immigration. In voting for exit these workers will not have been influenced by the incoherent arguments of the left rather they will cast their vote bound hand and foot to the reactionary leaders of the out campaign.

    Once the impact of destabilisation on the working class is grasped and the wider political impact on working class politics is comprehended it is very far from the case that our enemies’ enemy, in this instance UKIP, is our friend, or maybe I fail to see the big picture because I fail to understand the dialectic.

    The above is not to endorse the EU as it is today – far from it: those who advocate leaving are right when they speak about its undemocratic nature. In fact those on the left within the unions not only largely agree about the limits of the EU but also know what to do about its shortcomings; our problem is we have not done it.

    Organising industrially and politically is our answer, it is our answer to the limitations of the Posted Workers Directive it is our antidote to blaming foreign workers and on a pan European level it is our answer to the present limitations of the EU. For those of us who wish to remain we need to use the existing European wide union and political institutions and networks to campaign not only to democratise the EU but also to fight for our Europe a social Europe. Our starting point however is to ensure we stay in.

    1. David Ellis says:

      Is there any bourgeois institution whose arse Jim Denham’s tongue is not lodged up? From the American military to the bosses’ EU to Israel he loves them all. Generally he believes along with the AWL that imperialism far from being the most reactionary counter-revolutionary enemy of humankind force on the planet is actually a force for good.

      1. Jim Denham says:

        ” Generally he believes along with the AWL that imperialism far from being the most reactionary counter-revolutionary enemy of humankind force on the planet is actually a force for good”: read the Communist Manifesto, you imbecile, Elis!

    2. Karl Stewart says:

      Jim, the EU did not invent the notion of workers’ rights.

      The Tolpuddle Martyrs formed a union well over a century before your precious EU was ever thought of mate.

      Ever heard of the Matchgirls Strike in east London at the turn of the 19th/20th century?

      Dockers, miners, shipworkers, engineers municipal workers, all formed unions and fought for better pay and conditions over the years.

      The EU did not invent workers’ rights – our rights were fought for and won by our forefathers over many years of hard struggle.

      And when we leave the EU, we’ll continue fighting for our rights and hopefully we can encourage working people in other EU member states to leave this rotten capitalist multinational and join with us in building a better international system of trade along with people around the word.

      If you choose a ‘lesser evil’ you’ve still chosen an evil – let’s fight for something better instead.

      1. Jim Denham says:

        Karl: you are either deliberately dishonest or just plain stupid: the EU is not -to me- “beloved”: I’m fully aware of its defects and shortcomings. Now try answering the questions posed in Johnny Lewis’s post – in particular, this:

        “Unions can only progress member’s interests in two ways: industrially and through legislation. As unions’ industrial power has declined so the importance of pro-union legislation has increased. Seen as a totality such legislation creates a floor below which unions and workers’ rights cannot fall. With one major exception (TU recognition) all such post 1980 legislation originates from the EU.”

        1. Karl Stewart says:

          Jim, do you think the UK trade union movement is stronger or weaker today than it was before the UK entered the EU?

          1. Jim Denham says:

            Do you understand elementary concepts like causality not being the same as correlation, Karl? Are you aware of how capitalism develops? I’m a jazz fan: jazz was much more popular before Britain joined the Common Market: obviously, therefore, the Common Market is responsible for the decline in the popularity of jazz.

            Grow up (politically) and educate yourself, Karl!

          2. Karl Stewart says:

            If people on the right were claiming that EU regulations were favourable to jazz, and that jazz music could only benefit from our remaining in the EU, then it would be both relevant and reasonable to argue to the contrary.

          3. Karl Stewart says:

            Jim, the Labour right (and also what used to be referred to as Labour’s ‘soft-left’) is making the argument that the EU is the primary custodian of workers’ rights a central argument in their case to remain.

            So to counter that argument with real evidence that workers’ rights were not the invention of the EU, and are not dependent on our EU membership is both valid and relevant.

            Every ‘right’ that the pro-EU left claims was given to workers by the EU already existed here in the UK before our entry, and that workers here fought for over many, many years of hard slog.

            With regard to the paragraph from the Jonny Lewis/ Shiraz Socialist article that you ask me to respond to, I’d say it draws a crude and simplistic distinction between ‘legislation or industrial strength’.

            Legislation, without shopfloor organisation to enforce it becomes almost abstract.

            For example, the various ‘rights’ that the pro-EU camp continually refer to are, in the main, individual rights, all of which contain loopholes which allow any employer to either evade completely or exclude groups within the workforce from.

            By contrast, the rights that have been won by the working-class movement over the years are collective rights, won through collective struggle – and which the employer has been forced to concede.

            All of these rights will continue to exist as long as our movement continues to have the collective strength to enforce them.

        2. David Ellis says:

          Anybody who alienated the defence of their rights to the bosses’ EU be they workers, unemployed, sick, disabled, minorities will have found those rights virtually eradicated over the last 20 years or so.

          Did the EU or its predecessors defend workers against Thatcherism, did it defend the welfare state from Blairism, has it lifted a finger for workers in their struggle with Cameron and what must be the most vicious government this country has seen since the 19th Century? To ask the question is to answer it.

    3. David Ellis says:

      If you want to know what the opposite of a neo-Stalinist is it’s a neo-Shachtmanite. Two opposite sides of a coin but still both the side of a coin. Fighting each other from two bourgeois perspectives like they were Germany v Britain in the war or something. One supports Putin, Assad, Tehran, Abbass whilst the other goes with America, the EU, and Israel.

      1. Jim Denham says:

        “If you want to know what the opposite of a neo-Stalinist is it’s a neo-Shachtmanite”: agreed, Ellis. And us neo-Shachtmanites also (together with others) also fight all forms of racism, including anti-Semitism, within the workers’ movement.

        1. David Ellis says:

          You are a zionist. A racist by definition.

          1. Jim Denham says:

            Ellis: you are beneath contempt in every respect. I have no intention of engaging with scum like you.

          2. David Ellis says:

            You are the shit on my shoe mate.

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