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How leaving the single market will crash the economy

ad_221423652_e1475423881572The British economy is extremely dependent on inflows of overseas capital. As a result, it is one of the last countries that should ever contemplate leaving the EU without a serious plan for reviving the economy with investment and trade. As we now know, no such plan exists, serious or otherwise. Instead the theme of the Tory party conference was not ‘Britain open for business’ or a similar claim of questionable authenticity. The message from the Tories was simply ‘foreigners go home!’.

Unfortunately, for the overwhelming bulk of the citizens of this country wherever they were born, the practical understanding of economics by major international investors is considerably greater than the leadership of the Tory party. Those overseas investors whose willingness to lend to Britain is decisive for living standards understand that any country whose government insists on cutting itself adrift from the world’s largest trading bloc, is reckless about its economic planning and which is determined to push out a section of its workforce vital to its prosperity will not hold the same attractions for investment as previously.

Chart 1 below shows the financial balances of different sectors of the economy over the last two quarters. The Rest of the World represents overseas investors, by far the biggest lender in the economy as a whole. In the first and second quarters of this year overseas investors lent the UK economy £26.5 billion and £29 billion respectively, much larger than in the same period last year. Without this lending the other sectors of the economy combined would have to sharply increase their own savings/reduce their borrowings. This would entail a sharp reduction in expenditure, either falling Consumption or falling Investment or both in order to bring the domestic sectoral borrowing and lending into balance.

Chart 1. UK Net Sectoral Lending, Q1 2016 and Q2 2016, £bn
CG + Central Government, LG = Local Government, PC = Public Corporations, FC = Financial Corporations, PNFCs = Private Non-Financial Corporations, HH and NPISH = Households and Non-profit sectors, RW = Rest of World
Source: ONS
Net borrowing from overseas is the necessary counterpart of the huge current account deficits the UK economy has been incurring. The current account is the sum of all payments between an economy and the rest of the world, comprising its net trade balance and its balance on financial transactions. The current account deficit reached a new record low at the end of 2015 at 7% of GDP, although it has since recovered modestly (which may be a seasonal effect).

The sharp deterioration in the current account balance has arisen because the persistent trade deficit has combined with a fall in the level of payments from overseas that the UK economy receives from its holding of overseas financial assets. This seem to be linked to the shrinking and international retreat of the UK-based banks in the wake of the financial crisis and their forced sale of overseas assets, or their most profitable assets.

Chart 2. UK Current Account Balance, as % of GDP
Source: ONS
The UK economy is therefore extremely vulnerable to any decline in an overseas willingness to lend. If this occurs it must be countered by a relative decline in living standards, a forced reduction in expenditure (private or public, Consumption or Investment) and higher interest rates to attract overseas investment, or some combination of these.

There is of course no zero bound on the lending of overseas investors to the UK. Instead of merely reducing their lending and/or demanding a higher interest rate to do so, they may become net sellers of the considerable UK assets they have built up over previous decades, pausing only to pick up some newly cheap assets on the way. The Government’s resumed privatisation programme beginning with its remaining stake in Lloyds Bank might fit this description. But this in turn would cause further structural outflows from the UK economy as the yield on those cheaply-purchased assets flows overseas.

This is the importance of the sharp recent decline in the value of the pound and the rise on the interest rates on Government bonds (gilts). The rise in gilt yields means that taxpayers are forced to increase their interest payments, primarily to attract overseas capital.

Sharp currency devaluations of this kind effectively reduce the international purchasing power of all income denominated in the domestic currency, in this case pounds. As a result, there will be improvement in the current account and trade balances, as imports become too expensive, some exports rise and the value of the yield on overseas assets increases when converted into pounds.

But this is in effect an enforced ‘improvement’. In popular phraseology, an economy living beyond its means has been forced to tighten its belt. Net domestic savings are negative, and overseas investors can choose not to lend to the UK economy. The occasion of this is the outcome of the Brexit vote and the Tory leadership’s determination to pursue ‘hard Brexit’.

It should be absolutely clear now to all except the wilfully ignorant that the current crisis actually impoverishes the overwhelming majority. All of these are Brexit effects, even before Brexit happens. The Tory party conference signalled that the priority would be anti-immigration, not pro-growth through the Single Market. Blocking access to the Single Market and attempting to lower immigration will both have the effect of lowering living standards further, even when the pound eventually finds a floor.

The alternative is equally clear. The UK should not leave the Single Market and should embrace its essential component Freedom of Movement as both are decisive for future prosperity. Logically, it would be foolish then to leave the EU which simply means having no influence or vote in future developments and would probably entail a sharply increased Budget contribution. Brexit is making us poorer.

This article was first published by Socialist Economic Bulletin.


  1. John Penney says:

    Panic mongering “Guardianista neo liberalism ” pro EU nonsense , masquerading as in some way “Left Wing” at its most rabid !

    There are of course huge dislocation effects in the short and medium term deriving from both leaving the EU and the Single Market set-up. And having a bunch of Tory rabid neoliberal free marketeers in charge of negotiations on the UK future trading arrangements with both the EU and the rest of the world raises the real danger that , having potentially escaped the UK being embroiled in the ghastly sovereignty destroying entirely multinational Big Business benefitting TTIP trade deal (which may be dead anyway) or the similar ghastly deal with Canada, Fox and Davis now attempt to sign us up to TTIP type deals across the globe anyway. However, avoiding this is the perfectly normal task of Labour and other supporting politicians in the UK sovereign Parliament, and the trades union movement in mass campaigning.

    The author of this entirely laughably uncritically pro EU and Single Market article, is apparently entirely unworried by the decisively pro neoliberal, Austerity enforcing, privatisation-enforcing , “uberised work practices encouraging “, economy the EU project is now firmly embarked on. The Author is also apparently entirely content with the consequences for UK wages and conditions , and systemic weakening of collective bargaining power for workers, arising from an unlimited labour supply – a key plank of the neoliberal economic model, along with unfettered free capital flows.

    For radical socialists, of even a mild “Corbynite” hue, staying in the EU, or staying in the Single Market, would make the implementation of an even mildly radical Left Keynsian pro nationalisation, pro national economic planning, programme impossible . This is so even for very mild measures such as nationalising our railways, or nationalising the steel industry.

    It is far from ideal that we appear to be firmly en-route out of the EU AND the Single Market (which would enforce all the neoliberal economic restrictions on the UK as if we were formally still in the EU), under a Right Tory government. However , unless we have entirely given up on the idea that a radical Left UK government is possible in the future, leaving the straightjacket of the entirely undemocratic, neoliberal EU , is still an essential step to providing the UK working class with a nation state with the political sovereignty to pursue a radical Left economic and social agenda..

    1. C MacMackin says:

      I largely agree with this John, but on at least one point you are wrong: rail nationalisation is possible under the EU. Track, rolling stock, passenger services, and freight are all allowed to be publicly owned, so long as the track is owned by a different company than the passenger and freight (it could just be a subsidiary) and competition is allowed on freight. I’m certainly not pleased about the latter-most requirement, although it is still possible for a nationalised industry to have a near-monopoly on this (which I believe is still the case in Germany). None of this is ideal and the Left should try to avoid having to abide by such directives, but it is disingenuous to say that rail can not be nationalised. In fact, it would be considerably easier to nationalise it than, say, electricity and gas where the competition laws are even more stringent.

      We on the left should distinguish between being a member of the single market vs. having access to the single market. It is conceivable that the UK could have no tarriffs with the EU and perhaps even be part of a customs union without having to be full fledged members of the single market. Someone on the left (not me, as I have neither the time nor the expertise) needs to look at the various options available and explain what each would entail. Surely there is some option which would avoid most of the economic chaos predicted by this author without having to remain actual members of the EEA, bound by their competition rules? That said, we should also be very sober about the economic effects that Brexit will have and not sweep them under the rug. Some sort of Tory hard Brexit may well lead to higher interest rates, devaluation of the pound, loss of foreign investment, and a bad recession. Even a socialist Brexit on these terms might cause lasting damage, at least if done without a serious economic plan for rebuilding and recovery. Unfortunately, no one in the party (or, indeed, outside of it) has seriously sat down since Corbyn was elected to work out what this would entail. We should not try to minimise the risks of withdrawing from the Single Market just because we don’t like its rules.

      1. John Penney says:

        You are underplaying on the ever rolling neoliberalism objective of the EU machine , C. Mac. in 2014 the EU decreed that by 2020 all EU rail systems must be out to full competitive tender. So it’s goodbye to those well run European state run rail systems in the long run. No doubt there will be lots of dodges , via supposedly separate company structures, as you detail, to avoid this in Germany and France – but the “everything must be run privately” core objective writing on the neoliberalism wall couldn’t be clearer.

        A Corbyn government trying to renationalise the rail system and exclude it from regular competitive tendering would face the full weight of EU retaliation and sanction.

        1. C MacMackin says:

          I was under the impression that this package was dead in the water, but now that I’ve checked it seems that I was wrong about this. It should be noted that this package has not actually been given final approval yet, but presumably it will be sooner rather than later. I stand corrected.

  2. Will Dodd says:

    John Penney. Your line: let it get worse for most least one day,if we ever get an alternative govt, they may find it easier to get better…
    Dreadful position.
    My interest is interests of ordinary people today .i will not support call for worsening of their already poor existence. For dome future nirvana.defeat breeds defeat.
    Yours is classic ultra left recklessness.which played a small role, but ideologically significant,in getting us in to this prolonged understanding of fundamental economics governing our economy.

  3. Karl Stewart says:

    Thanks for writing and posting this article, it’s very important that we focus on exactly what our remaining within the single market will mean for us going forward.

    It certainly seems that there’s a strong argument, from a business and finance sector perspective, for remaining with the single market, as the author of the above article has indicated.

    I expect that, given that these groups in society represent the most powerful influences on the Conservative Party, that the Government will find a way, by hook or by crook, to stay in the single market.

    But what reason is there for non business people to want to stay within the single market?

    “Inward investment” is cited here as the main reason for staying in, and yes, that benefits financial businesses, but there is an alternative to “inward investment” it’s public investment and/or full public ownership.

    Outside of the single market, we can enact a public procurement strategy which exclusively uses domestic manufacture, for example. We can nationalise steel and ban steel imports. We can renationalise energy, transport and communications and use public finance to invest heavily in major new infrastructure projects.

    Yes of course we need to keep trading with other countries, but this should be on a mutually beneficial basis, and on a people-first, not markets-first basis.

    We were prevented from adopting this type of programme inside the EU, and remaining within the single market would also restrict our ability to move in this direction (although I’m not entirely certain to what extent.)

    The author of the above has written a well-argued and clear case explaining why the finance sector wants to remain within the single market. And remaining within the single market is a perfectly valid viewpoint – there was nothing in the referendum to prevent us taking that course, or to prevent us keeping free movement of people.

    But my view is that I’d also like to see some focus on what we could do if we decided not to remain in the single market and to adopt a socialist-leaning strategy instead.

    On the question of free movement/migration etc, I really think we all need to prioritise the granting of permanent residency to all EU nationals who came here before the vote.

    It’s the right thing to do morally, and also, it would have an immediate effect of cutting out the revolting ‘go home’ abuse that some pig-ignorant individuals have been aiming at these people.

    Going forward, my personal view is that the same entry/residence criteria should apply equally to all non-UK citizens whichever country they’ve come from.

    I wouldn’t go as far as calling for total free movement, I do think there should be some restrictions preventing potentially dangerous people or those who would be harmful to society from entering, but as a general rule, my view is that people should be able to come here unless there’s a good reason why not.

    (What I’m getting at here is a ‘presumption principle’ along similar lines to the general ‘presumption of innocence’ in court.)

    But we should also be playing a more active role internationally to address refugee situations in a humanitarian way before they reach crisis point.

    For example, sending significant and substantial non-military humanitarian aid, food and medical supplies to acute situations such as Alleppo today, for example.

    Anyway, thanks again for the article, let’s hope this debate over the single market continues.

  4. Danny Nicol says:

    What a load of capitalist rubbish.

    We should be against the free movement of capital because it enables transnational corporations to run rings round democratically elected governments, not least by granting firms the freedom to relocate – and to use that as a potent threat against the State.

    We should be against the free movement of goods because a democratic socialist government will need selective import controls as a tool to defend its domestic industries.

    We should be against the free movement of services because it consolidates privatisation, making it impossible for Parliament to reverse.

    And we should be against the free movement of persons because there is nothing socialist about a free market in labour, added to which it discriminates fundamentally on the basis of race.

    “Socialist Economic Bulletin”? Only if capitalism is the new socialism!

    1. Danny Nicol says:

      …Added to which one cannot envisage a European single market without preserving the commitment to the prohibition of State Aid which distorts the single market. This strangles much of a Keynesian, let alone socialist programme, at birth.

      Nor is adherence to the single market likely without a continuation of a commitment to the liberalisation directives which keep our energy, postal and telecommunications sectors (and quite likely the railways as well) in the private sector. Not only are these crucial sectors in themselves, but they are the first and most obvious targets for nationalisation, robbing us of the sole credible foundation to an ongoing programme of public ownership to replace capitalism.

      “European single MARKET” – the clue is in the name, comrades!

  5. James Martin says:

    I agree with other posters, what an awful pro-capitalist load of tripe this article is, I suspect even the Guardian’s CiF would wince at running something like this. It’s a shame as I remember the days what the SEB used to have writers that at least had a bit of a go at being socialists and arguing for socialist alternatives to capitalist models, rather than trying to bind us to one wing of capital against another (as in this case, it reminds me in fact of the history of working class activists getting sicked into supporting either the protectionist Corn Laws or Free Trade rather than socialism against either capitalist model).

    But even on a capitalist outlook this article is misguided. First it assumes that there will be no trade agreement with the EU post-Brexit (highly unlikely), that UK financial institutions will cease to be seen as viable against those in the EU (highly unlikely) and that devaluation and inflation are inherently bad for capitalism when in fact it was a combination of both, but particularly inflation that eroded state debt (particularly the huge debts from WWII) and allowed for investment and growth as a result. Indeed, again for the average capitalist I would contend that some devaluation and inflation to follow is much preferable to a further extension of QE and the madness of negative interest rates and ‘helicopter money’ that is now seriously being talked about in financial circles.

  6. David Pavett says:

    I agree with the complaints about this article. It is a illustration of how far the left still is from any coherent socialist critique of society. It also shows just far Labour to the right in recent decades.

    In 1974 the Labour election manifesto, in line with Keynesian thinking, said “Equally we need an agreement on capital movements which protects our balance of payments and full employment policies”.

    Now in 2016 we have had two articles telling us how important the free market four freedoms (free movement of capital, labour, goods and services) of the EU are to our economic survival. This has never been debated in the party but it seems to be solidifying as Party policy. (Shadow Brexit minister questioned free movement of people and was criticised for that on this website). That doesn’t look like putting the members in charge of the party.

  7. Jim Denham says:

    At least some people round Corbyn seem happy to give the Tories an easy ride on Brexit, on the pretext of respecting the 23 June referendum vote. The labour movement should fight to conserve freedom of movement, to maximise common cause with workers across Europe, and minimise new barriers between countries. And such are the tensions and wobbles in the ruling classes about Brexit that a strong Labour stance could win real successes.

    It is not a matter of undemocratically circumventing a majority. It is reasonable, predictable, obvious that the balance of opinion on an actual Brexit formula will be different from the balance on 23 June, when what “Brexit” meant was vague. The 23 June vote does not oblige Labour to become helpful when the Tories find it a Brexit formula difficult. And if, after a Brexit formula has proved unpopular or unattainable, the 52-48 balance on 23 June swings to a different outcome, there is nothing undemocratic about that.

    The tensions and wobbles are not only within Britain. Europe will not stand still while the British government negotiates on Brexit.

    German chancellor Angela Merkel has offered the softest tone on possible terms, but Germany goes to the polls in 2017, probably in September, and the right-wing nationalist AfD party is currently running around 15%.

    Before that, France will have a presidential election in April-May 2017, where Marine Le Pen of the neo-fascist Front National is likely to do well.

    Italy can theoretically go without elections until 2018, but prime minister Matteo Renzi does not have a majority in parliament and his Democratic Party is being nearly outstripped in the polls by the maverick populist Five Star Movement.

    Hungary, Poland, the Czech Republic, and Slovakia, which work together in the EU as the “Visegrad Group”, and are anxious about their many citizens working in Britain, have said that they will be “uncompromising” in the Brexit talks. They have threatened to veto an EU-British deal if they don’t like it.

    Greece’s prime minister Alexis Tsipras is trying to pull together another subgroup in the EU, organising a “summit of Southern Europe” on 9 September with Cyprus, Malta, Portugal, Spain, France, and Italy.

    In short, hardly any EU government will be easy, confident, and relaxed about the negotiations. Many are worried about rising right-wing populist nationalism in their countries. All are anxious about reconsolidating the EU in the wake of economic turmoil and stagnation, impasse on refugees, and popular disaffection. None wants to help demonstrate that quitting the EU is an easy option.

    The Tories are in strife. Prime Minister Theresa May’s firm-sounding but empty announcements that “Brexit means Brexit” suggest that she is trying to build cover for a “soft Brexit”, as close to the “Norway option” of European Economic Area membership (effectively, semi-membership of the EU) as she dares go.

    Her Tory party conference speech called for “free trade, in goods and services… British companies [to have] the maximum freedom to trade with and operate within the [EU] Single Market”. She has had the Northern Ireland minister declare a will, somehow, to avoid reimposing controls on the border between Northern Ireland and the Irish Republic, which is due to become a British-EU border.

    When Brexit minister David Davis said on 5 September that it was “improbable” that Britain could stay in the Single Market, May immediately slapped him down, saying that Davis was expressing personal opinion and not government policy.

    There is pressure on May from big business for a “soft Brexit”. Worried about anti-immigrant talk from May, and the Tories’ quickly-retracted plan to compel companies to list their non-British employees, CBI chief Carolyn Fairbairn said on 10 October than the Tories were drifting into a “hard Brexit” which “added up to a very negative environment for business”. “The door is being closed, to an extent, on the open economy”. In an open letter to the government, co-signed by other business groups, Fairbairn says: “barrier-free access to the EU’s Single Market is vital to the health of the UK economy, especially to our manufacturing and service sectors. Uninterrupted access for our financial services sector is also a major priority”. The option favoured by some Tories, and listed as a possibility by Davis, of “leaving the EU without any preferential trade arrangement and defaulting to trading by standard World Trade Organisation rules” should be “immediately ruled out under any circumstances”.

    May has said that Brexit negotiations will start before March 2017. They then have a fixed two-year span. The CBI says it is probable that the negotiations will not be complete within the two years, and is horrified by the prospect of Brexit then being triggered without a deal. “The Government should therefore secure agreement of a transitional period” in which status quo can continue until the deal has finalised.

    Whether the EU will agree to that is another matter. At the Tory conference, a number of ex-ministers came out in open opposition to May, who has a Commons majority of only 16. Anna Soubry and Nicky Morgan have joined with former Labour leader Ed Miliband and former Lib-Dem leader Nick Clegg to say that there is “no mandate” for leaving the single market and to demand a parliamentary vote on the stance that the government will take into Brexit negotiations.

    The fundamental socialist stance should be: reduce borders, not raise them. Fight for free movement. Maximise working-class solidarity across borders and among workers of different origins within the same country.

    1. James Martin says:

      “The fundamental socialist stance should be: reduce borders, not raise them. Fight for free movement. Maximise working-class solidarity across borders and among workers of different origins within the same country.”

      Except of course the AWL like the rest of the EU-supporting liberal numpties want to do this in an entirely racist way as reducing borders only applies to EU member nations and not anyone else (including countries that have far closer ties with the UK), so what you have in effect is a racist position on border controls where essentially white Europeans have free access to the UK, but black and asian people from outside the EU don’t. Perhaps in Denham bothered to write his own reactionary nonsense rather than cut and paste someone else’s he might spot that himself.

      1. Jim Denham says:

        What noinsense, James!

        As though erecting new borders within Europe will in some way lessen racism towards non-EU black and Asian people!

        You remind me of those union bureaucrats who oppose one-day strike action on the grounds that only an all-out, indefinite strike will do.

        And, of course, we’re already seeing the practical effects of Brexit as regards “foreigners” and identifiable ethnic minorities (whether from the EU or not): a massive and lasting increase in racist attacks and abuse.

  8. Mervyn Hyde says:

    I do get bewildered about all the talk of trade deals. Our balance of trade has been in perpetual and increasing imbalance ever since Thatcher dismantled our manufacturing base.

    We are a net importer of other peoples goods, the talk of exporting our way in the world with a shrinking world market and none of the means achieve it is farcical in the extreme.

    Thatcher claimed in the Eighties and nineties that the City of London was our great salvation that would ensure a secure future for everyone, as anyone with an iota of common sense would understand was cloud cuckoo land, followed by the crash.

    A dyed in the wool Tory work colleague always retorted when the obvious confronted us, that “we live in a bullshit world” the trouble is the bull-shitters expect us to believe every word they utter.

    These graphs depict the history of our trade deficits going back to 1955. noting how the Tories have always destroyed any gains created by Labour, until Thatcher completely put the tin hat on ever recovering any trade imbalances.

    The reality is that we need a new paradigm, simply called self sustainability, in that we create our own industrial strategy brought into being through money creation, that serves peoples needs when and where it is needed.

    The idea that there is such a thing as private enterprise should by now be abundantly apparent, that it doesn’t exist here.

    We do not need inward investment, we do not need to borrow money, we do not need the protection of Market based ideological regulations from the EU, we just need to govern for and on behalf of the people in this country.

    Poverty is a political policy exercised in the interest of a tiny world elite, when we wake up to that, we can start working for people instead of being manipulated by an unrepresentative minority.

    1. David Pavett says:

      Our balance of trade has been in perpetual and increasing imbalance ever since Thatcher dismantled our manufacturing base.

      You seem to be referring to the balance of trade in goods (as opposed to the balance of trade in services) since you talk about the dismantling of the manufacturing base.

      The balance of trade was running a deficit long before Thatcher. It actually went positive for three/four years under her. It’s deficit actually went positive for a few years under Thatcher and again for a few years under Major. However its journey into the negative was most pronounced and consistent under Labour.

      The balance of trade in services is a quite different story. It started to boom just before Mrs T came to power. It continued to boom under her watchful idea and has done so ever since.

      The Balance of payments in includes both trade in goods and in services.

      1. Mervyn Hyde says:

        This graph shows the current account deficits over the same period, meaning accounting for both goods and services.

        Most economists ignore blips on a graph and look at trends which show the general direction of travel.

        1. David Pavett says:

          I don’t think you have responded to my points but taking your point about blip consider the graph of current account deficits as a percentage of GDP (from the source you reference).

          If you smooth this graph out a bit more what you see is a continuous decline which doesn’t particularly pick out the Thatcher years.

  9. Karl Stewart says:

    Ok, so we’ve seen and discussed the financial-capitalist argument for the UK’s economic future, how about finding someone who can write an equally well-argued case for a socialist economic strategy?

    1. Verity says:

      I agree that we need an industrial and finance strategy with detailed policies for a socialist alternative. At the moment we probably have some (agreed) components as an outline, but a desire by the ‘dominate ‘Labour voice’ to accept (the very expensive) total single market constraints, limits progress for widespread agreement. It is an important weakness since acceptance of membership of the single market as a decision is hardly in the hands of the UK government (Conservative or otherwise). It is what you can get by argument and persuasion and what others see as necessary/essential. It depends on the willingness by others to agree ‘free trade’ in at least some sectors. Whilst tariffs in some areas present some UK sectors with economic problems, tariffs in some sectors are marginal and pretty problem free. I must admit, I always thought industrial and employment protection was a necessary component of control for socialist planning.

      There are some elements of this strategy about which the Left could agree if we could restore governmental controls over the areas and levels of selected state intervention. These are: the creation of more balanced economy both by sector and geography; the use of a National Investment Bank for selected interventions and the means to finance it; the revival of targeted areas for the training to meet supposed skills shortfall. Unlike the article and the dominate Labour voice, this suggest an end to the free market in labour (as well as other areas).

      However on the of skill shortages, we have all known a few of the hundreds of thousands if not a million highly skilled (largely older) employees who were encouraged to early retirements/redundancy by relatively generous financial returns under the grand Labour ‘company agility’ years. The supposed skills shortage often amounts to skill shortages AT THAT PARTICULAR PRICE and with those ‘stubborn and less adaptable’ attitudes (unlike possible and fresh labour, i.e. the HIgher Education and Health sectors). The years of constant and irrelevant reorganisations did little to add, and much to harm, skill retention and productivity.

      Outside of the Labour Party single market/partial market paralysis, we do have an outline of a strategy. I agree though it is the details policy development that is needed.

  10. Verity says:

    Wow, what a shocker of an article.

    I am surprised that it found its way onto this site. In some ways though it has been a good education for me, since I hadn’t realised the extent of the deterioration of the word ‘Socialist’ to that which could be welcomed by the Chris Leslies or Rachel Reeves of the world. I also suspect that there are some Conservatives who would feel comfortable with its content. I do read material from the ‘Socialist Economic Bulletin’ perhaps now I can shorter my reading list by give it a lower priority since it offers little by way of an alternative perspective. Although perhaps I should have perceived that the extent to which the dominant (utopian) Labour vision of Corporate inspired EU inspired has dulled and substituted for a Left alternative.

    What does the article say?

    1. ”The British economy is extremely dependent on inflows of overseas capital”.

    Yes true. Surely that suggests the need for a Left inspired solution that makes the UK less dependent. Such a move would be bring greater stability and control in the economy, not a helpless adherence to any roots the market throws up.

    2. “Net borrowing from overseas is the necessary counterpart of the huge current account deficits the UK economy has been incurring”.

    Yes true, surely that suggests state interventionist measures to rebalance the economy not a capitulation to the specialization implicit to the EU vision/demands

    3. ”The sharp deterioration in the current account balance has arisen because the persistent trade deficit has combined with a fall in the level of payments from overseas that the UK economy receives from its holding of overseas financial assets”

    Surely that suggests a strategy that benefits the people of the UK as opposed to the “UK economy (in the form of predatory finance) is receiving”.

    4. ”….should embrace its essential component Freedom of Movement as both are decisive for future prosperity”

    Yes of course, there should be no responsibility to train its own workforce as it can always be salvaged form other economies which can hardly deal with the loss. Under Labour’s obscure and liberal mantra of ‘education, education, education’ the UK economy completely failed to train any of its own workforce in almost all sectors for decades. The training sector in UK businesses UK has been almost completely eliminated without being noticed. University graduates (devoid of training opportunities) who are generally without commensurate employment have generally replaced a once valued sector. The cost has being shifted to the state and individual families. The EU does not require/expect any business commitment since we all need our ‘individual freedoms’ to pursue the best for ourselves. Sod the only effective administrative means for state intervention – national parliamentary. The EU has its (parochial) wider European vision, devoid of any interest in national economic development.

    The major fault line in this article is that, it takes as a given, that there is a UK economy for us all. ‘We are all in this together’ and by extension, the illusory European wide workers solidarity pretends to have meaning. The dominant EU vision that, ‘we Europeans’ are not made up of classes/economic sectors with differing interests – we are after all citizens of this ‘bigger than one nation’, illusory vision.

    1. David Pavett says:

      I hadn’t realised the extent of the deterioration of the word ‘Socialist’ to that which could be welcomed by the Chris Leslies or Rachel Reeves of the world.

      The word is now virtually without meaning in Labour discourse. I have written something in this that I will offer to Left Futures. It is not only surprising, as you say, that this article was thought useful for a Corbyn-supporting website but also that it was originally published in Ken Livingstone’s Socialist Economic Bulletin.

      Perhaps Tim O’Leary will join this discussion thread to show that the critics here have got it wrong. Although, given that most authors on this website don’t feel the need to answer questions and criticisms holding one’s breath while waiting would perhaps be unwise.

  11. Jim Denham says:

    Someone called John Rogan (who I don’t know personally) has recently posted this comment at Shiraz Socialist. It’s about the Socialist Party’s opposition to free movement of labour, but could equally well apply to the Morning Star/CPB and most “left” anti-EU people who use a variation of the “closed shop” argument to support restrictions on immigration:

    ““It is why, for example, the unions have historically fought for the closed shop, whereby only union members can be employed in a particular workplace, a very concrete form of ‘border control’ not supported by the capitalists.

    The alleged benefits of the ‘free movement of labour’ are in reality a device for the bosses to exploit a vast pool of cheap labour, which can then be used to cut overall wage levels and living standards”. – Socialist Party.

    The SP better be careful as this type of argument is not new and can lead to very dangerous conclusions.

    I recently read an obituary of Syd Bidwell who was a Labour MP and had been a Trotskyist. Included in the article was the following – (an account of vicious racism from railway trade unionists, opposed by Bidwell, in the 1950’s)

    If the SP (and others) start to argue that immigration controls for the defence of “British jobs” are a form of “closed shop”, then, after Brexit, the logical conclusion would be that this “closed shop” should be strengthened. Namely, EU residents and other immigrants should go back home and let British workers have the British jobs.

    By the way, I’m not in favour of unrestricted immigration myself to be honest but where borders have come down (as in the EU), it should bee seen as a progressive development and should be supported and defended.

    1. Karl Stewart says:

      JimD, you say you’re not in favour of unrestricted immigration, so what do you think entry/residence restrictions should be based on?

      1. David Pavett says:

        Equally, a question to you Karl is “Is there no upper limit to the amount of immigration you would find consistent with social planning for housing, sevices, health, education etc. Half a million p.a., one million p.a., two million p.a.?”

        Do you really believe that no effort should be made to regulate large-scale movements of population?

        1. Karl Stewart says:

          Hi David, my view, as I put forward earlier, is that we first need to prioritise the granting of permanent residency to EU nationals who came here before the EU vote.
          I really think every discussion on this issue should start with that, and it’s frankly inhumane that we still haven’t achieved this very basic right for this group of people. We have to keep the pressure on for this.

          Secondly, going forward, I think we need to establish the principle that future entry/residence criteria for non-UK nationals should apply equally to all, regardless of their country of origin. I see that as another, very basic, principle of equal treatment for all.

          As to future restrictions, or what those entry/residence criteria should be, my personal view is that I’d want to see these restrictions applied to individuals whose entry into the UK could be dangerous, or harmful to society.

          So, in my view, rather than a ‘numbers’ based system of restrictions, or a ‘country of origin’ based system, I’d be in favour of one which denies entry where there is good reason to suspect harm from that entrant.

      2. Jim Denham says:

        “JimD, you say you’re not in favour of unrestricted immigration, so what do you think entry/residence restrictions should be based on?”:

        Karl: I didn’t say that: I was quoting John Rogan.

        I am against *all* immigration controls.

        1. C MacMackin says:

          I’d be genuinely interested to hear how you’d respond to David’s points, made here and elsewhere, about the feasibility of full employment and adequate provision of housing, healthcare, and other public services with completely free movement. Idealistically I would like to endorse free movement, but I just don’t see how it can be feasible. I’d be delighted to be convinced otherwise.

  12. Peter Rowlands says:

    I share the criticism of this piece, as no alternative to the status quo is offered, although what the author predicts is likely to happen without strong countervailing policies which are unlikely to be introduced by the Tories. Indeed the situation could be far worse if foreign vehicle manufacturers relocate to the EU and the City loses its position as Europe’s financial centre.
    Only radical left wing measures can counter this, and we are talking here about controls on both the movement of capital and labour.The former is crucial, and capital flight is the biggest danger facing an incoming Labour government.But if we are out of the EU there is no point in retaining freedom of movement for EU citizens – indeed, it is arguably racist to do so if white Poles are admitted and black Nigerians aren’t. ( I take it that no one is arguing for the complete scrapping of all immigration controls).
    I find JC’s policy on this incoherent.Can we please develop some sensible policies here.They may be needed.

    1. Jim Denham says:

      “indeed, it is arguably racist to do so if white Poles are admitted and black Nigerians aren’t”. Peter, a question:

      How does excluding “white Poles” help “black Nigerians”?

      Indeed, the climate of bigotry and racism that’s been created by Brexit has resulted in attacks and abuse directed towards *all* “foreigners” (ie non-Brits and non Brit-looking people) regardless of whether they’re Poles, blacks or Asians.

      A carnival of reaction, as some of us predicted.

      1. Peter Rowlands says:

        If we reach a situation in which it is no longer necessary to allow free movement from the EU then of course it would be racist to maintain it for the EU and not for the rest of the world.
        The alternative, free movement for all, is not feasible.

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