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Democracy is what’s missing

BREXITSimon Wren-Lewis, with whom I usually have little difficulty in agreeing, has published a blog in recent days in which he explains why, in his (and others’) views, it is impossible to play a full part in the global economy – in other words, to enjoy free trade – while maintaining the full powers of self-government that one would usually expect in a mature and democratic nation state.

He links this point to the Brexit vote, in order to suggest that the obligations that must be accepted in return for free trade (or – in the Brexit case – access to the single market) must necessarily entail a diminution in the powers of self-government.

He is of course right to say that free trade often requires individual governments to make concessions concerning domestic policy, if only because the maintenance of various non-tariff barriers, such as subsidies and other preferences given to domestic producers, will run counter to the goals that are sought through free trade. But such concessions are a fairly normal incident of trade relations and would not usually be considered, when approved by a democratically elected government, as implying a substantial derogation from national sovereignty.

It should be conceded straightaway that there are modern versions of supposed free trade that do indeed collide rather directly with the normal concept of self-government.  The Transatlantic Trade and Investment Partnership (TTIP) and its Asia-Pacific equivalent (the TPPA) both masquerade as free trade deals but represent in fact major additions to the powers of international corporations at the expense of elected governments.

That is why they have been opposed by so many – and Simon Wren-Lewis is right to signal, by implication at least, the incompatibility between such arrangements and the usual principles of democratic self-government. Faced with that choice, most informed citizens seem so far to prefer self-government.

But are the concessions negotiated as a matter of course between sovereign governments really incompatible with the concept of self-government?  National governments, even the most powerful, are of course necessarily constrained by all kinds of limitations, including the demands made by other countries.  That is the nature of the real world.

But there is a world of difference between that situation – analogous, as Wren-Lewis points out, to how relations between individuals are managed – and the proposition that governments should not just negotiate (after careful consideration of their own interests, as individuals would do), but should hand over in its entirety to a completely different (and unelected) authority the power to decide for them, in advance and en bloc, what concessions should be made, and what interests should be sacrificed to those concessions.

It is the by-passing of elected governments that is, after all, at the heart of the objections to the TTIP and the TPPA – and it is clear that voters in Britain (and in other countries like New Zealand) are in no doubt that the power to decide what concessions should be made, in return for what benefits, should remain with their elected governments and should be exercised on a case-by-case basis.

It is also clear that the same distinction was an important factor when voters came to make up their minds as to whether they were happy to see the EU exercise the powers that had hitherto been exercised by their own elected governments.  The issue was not, in other words, whether or not concessions should be made in return for free trade, but who should make them and whose interests should they represent.  Would the decision-makers, above all, consult and reflect the views of voters who had been confident in their belief that they had elected governments to protect their interests?

No country is more experienced than the UK in negotiating the unavoidable give-and-take of international diplomacy and economic relations.  We do not need reminding that such negotiations require commitment and careful judgment.  That is why the constant efforts from some quarters to undermine our negotiating position in the forthcoming Brexit talks by urging that it should be abandoned or reversed give comfort to those we are to negotiate with and are potentially so damaging to our interests.

Simon Wren-Lewis has done us a favour – perhaps inadvertently – by reminding us that the important decisions that have to be made if we are to secure our objectives – in trade, as in other spheres – could be inimical to democracy and self-government, unless decided by a government elected for the task.

He may not quite have grasped, however, that those who voted for Brexit got there before him.  The import of their decision is that important issues need to be decided by democratic institutions – and in particular by elected governments.  The first requirement is, in other words, that the proper democratic framework exists; it is only when that democratic process is in place that we can use it to consider and approve the concessions that might be made to other interests in our name.

We don’t resolve these issues by first conceding to undemocratic institutions, like the EU, the power to decide issues which are properly the preserve of elected governments.  The democratic process should not be seen as an inevitable and acceptable casualty of free trade arrangements but as the only mechanism by which the concessions needed to secure them are made acceptable.

Bryan Gould is a former Labour MP and former member of the Shadow Cabinet.

12 Comments

  1. SimonB says:

    Letter from New Zealand

  2. David Pavett says:

    Bryan Gould says that Simon Wren-Lewis claims that free trade is incompatible with exercising “the full powers of self-government that one would usually expect in a mature and democratic nation state”. What SW-L actually says is “You cannot be a champion of free trade, and have sovereignty in the form of taking back control” which is subtly but significantly different. SW-L adds “It is not a contradiction, of course, if you are happy to accept the regulatory standards of the US, China or India”.

    BG then explains his case in a way that makes it into a non-argument dressed up to look like a refutation. He accepts that “free trade often requires individual governments to make concessions concerning domestic policy … But such concessions are a fairly normal incident of trade relations and would not usually be considered, when approved by a democratically elected government, as implying a substantial derogation from national sovereignty”.

    Everything here depends on the force if “would not usually be considered”. If it means that must people understand and accept that trade deals can impose limitations on domestic policies then he is saying exactly the same as SW-L who discusses the case of Swiss-EU relations and concludes that

    So we see in Switzerland, and perhaps we will see in the UK, that parliamentary democracy can be compatible with trade integration … deep trade integration (the pressures from which will continue, as Richard Baldwin outlines) puts pressure on the ability of nation states to decide on their own laws, but a democratically negotiated compromise is possible.

    SW-L’s point is that the “take back control argument” of the main Brexit campaign was phoney in that its leading protaginists will be more than ready to promote aggressive free trade policies which concede limitations on our democracy. Anyone who thinks that the likes of Liam Fox and Boris Johnson will give two hoots about such concessions has probably not been following events very closely.

    In his enthusiasm to argue up the positive nature of Brexit BG falls back on appeals to British uniqueness. In his last piece on Left Futures he even was even starry-eyed about a classless view of our national history:

    The British have always valued their independence – and, translated into modern terms, that means the value attached to self-government and democracy. … Much of the impetus behind the decision to leave the EU came, in other words, from that long-standing British commitment to running their own affairs, without interference from Continental powers. …

    To which he now adds

    No country is more experienced than the UK in negotiating the unavoidable give-and-take of international diplomacy and economic relations.

    What we need to do now is to stop rehearsing the remain/leave arguments and trying to score points with that. Instead we need to look at the reality of where our free traders are going to try to take us and to recognise that it will have nothing to do with “giving back control” to the British electorate.

    1. James Martin says:

      “SW-L’s point is that the “take back control argument” of the main Brexit campaign was phoney in that its leading protaginists will be more than ready to promote aggressive free trade policies which concede limitations on our democracy. Anyone who thinks that the likes of Liam Fox and Boris Johnson will give two hoots about such concessions has probably not been following events very closely.”

      Indeed David. However surely it is about what the *potential* of a future Labour government could be rather than what the current Tory one is likely to do? If the Tories under Churchill had won in 1945 then we would not have had the NHS as Labour made it, we would not have had the welfare state as Labour shaped it, and we would surely not have had the nationalisation of 20% of the economy and key things like the mines and railways as happened under Atlee. But the nature of British sovereignty at that time allowed all those things to be done by that ’45 government, things that could not now be done as a member state of the EU as they would effectively be illegal (particularly following the Lisbon Treaty).

      And surely that is the key here, out of the undemocratic pro-privatisation EU a progressive socialist Labour government could do so much more than if we were still trapped inside it. And yes, of course globalisation since 1945, the huge growth in power of the multinationals and financial institutions at the expense of national governments has given us some new and different problems to overcome, but a restored national sovereignty combined with genuine internationalism is surely the best starting point for the next Labour government is it not?

      1. David Pavett says:

        It wasn’t really my intention to make an argument about the progressive potential, or otherwise, of Brexi but to point how weak Bryan Gould’s argument is in the above piece.

        Since you raise the issue of potential released by Brexit I would like to say that is very likely that (1) the UK will now enter into damaging trade agreements with even less scrutiny than is the case in the EU, (2) the UK government will be less likely than the EU to stand up to US corporations and will be in less of a position to do, (3) the likely haemorrhage of financial services from the UK to the EU would exacerbate our poor economic outlook, (4) the implications on environmental issues are also very worrying – something which has not received much attention left-wing debate.

        I would also be rather more circumspect about the achievements of the post-war Labour government. Take a broader view. Welfare states were created across western Eurpope whether under conservative or social democratic governments. Same goes for nationalised industries. Both were needed for reconstruction and to neutralise the Soviet challenge. Nationalisation is not inherently socialist. And let’s remember too that despite riding on an a widespread desire for social change Labour got less than half the popular vote and was voted out six years later (albeit with a marginally improved percentage of the vote).

        Finally, I wonder about the international dimension of all this. There is a lot of left talk about Britain striking out in a socialist direction with its sovereign powers as if it could punch a hole in the framework of global capitalism on its own, without the need for international solidarity. It’s strange that this is missing from the debate.

  3. Karl Stewart says:

    What we on the left need to do is stop being mere spectators of developments and actually seize the initiative ourselves with a robust Labour Brexit programme.

    Yes of course Brexit could go horribly wrong – and it will if we on the left continue to be passive watchers – but there is also the potential for some significant steps in a positive direction as well.

    1. David Pavett says:

      Karl, it would be helpful if you could indicate the areas in which you see a potential for significant steps in a positive direction.

      1. Karl Stewart says:

        Public intervention in the economy is the key area David. Without the neo-liberal restrictions of the EU, we can now, for example, renationalise rail, mail, energy, steel and other key strategic industries.

        We can also ban imports and introduce strict public procurement regulations to protect and nurture our own industries.

        This can lead to a return to high-quality manufacturing jobs, which will mean a higher standard of living in the various industrial areas of the UK.

        We can rollout a huge programme of house building, which will resolve homelessness and also generate new jobs in construction.

        If we make the right decisions now, then leaving the EU will have been the best decision we ever made.

        1. Rob Green says:

          That really is delusional socialism in one country territory but at the same time you bang on about protecting German, French and Polish workers against Brexit.

          A true socialist policy would include:

          Immediate invocation of Article 50;

          No negotiations with the wretched EU;

          For a regime of full-employment by which ever individual who cannot find their own job is bought into the local workforce to share in the productive work;

          A state bank with a monopoly of credit lending at base rate to small business and facilitating social investment in accordance with a democratic plan;

          Socialisation of the property and mega-profits of the corporations and the super rich;

          Worker-elected managers and leaders to replace Fat Cat Bosses;

          Repeal of all anti-union legislation;

          Federation of sovereign nations to replace Westminster Union;

          A New European Settlement based on the interests of workers that leaves the neo-liberal bosses’ EU in the dust.

  4. John Penney says:

    A very interesting article in The New Statesman today, from Vince Cable of all people ! The article :
    http://www.newstatesman.com/politics/uk/2017/01/why-its-time-end-eu-free-movement , obviously written from an entirely pro capitalist perspective , nevertheless challenges both unlimited freedom of movement of labour, AND capital !

    Needless to say , as a free enterprise enthusiast , Cable has no more idea how to achieve this ” greater control” than do those on the Labour Right spouting about “immigration controls”. Since only a radical left comprehensive economic planning programme could encompass serious labour supply forward planning as part of the required restructuring of our economy away from its ever growing low wage-low skill sectors.

    Nevertheless, opportunistic as Cable’s contribution is, I think it is yet another “bellwether” sign of a shift in the previous neoliberal globalist narrative of even a senior Lib Dem, towards one more focussed on the UK nation state. Not necessarily a “progressive” development at all in itself, but one the UK Left better get alongside with a clear radical Let post Brexit agenda, or we will be simply relegated to political irrelevance .

  5. This discussion should encompass the role of capital in supporting trade exchanges and the impact on that of the rise of intangible capital. Trade was once seen as a win-lose game which involved capturing as much capital as possible in the form of gold and silver. This line of thinking was replaced by the idea of comparative advantage: total wealth is increased for everyone by economies specializing and freely trading. But mutually-beneficial trade in tangible goods is impossible between capital-rich and capital poor economies. The response has been systems of managed “free trade” of which the EU is the largest exponent. It was inspired by the idea that growth and the capital accumulation necessary for industrialisation (tangible good manufacturing capacity) could be accelerated by increasing net exports. The viability of such arrangements, and not just in the EU, is being undermined by the rise of services in general and the supremacy of intangible (non-physical capital) in the capital mix in particular. Intangible capital has no physical characteristics and consequently can be moved easily and quickly. The surpluses produced by low-income EU countries have been systemically converted into intangible capital and electronically shifted to high-capital economies in the EU and elsewhere. Inevitably, the workers of those countries have followed the intangible capital flow with the result that poor EU countries are losing an unsustainably high proportion of its youngest and most talented people. The revolution across the EU in the mode of production from the manufacture of tangibles to the creation of intangibles demands a new approach. This must involve increasing the proportion of investment in tangible capital – houses, schools, hospitals, roads, ports, power stations, water plants and telecoms systems in low-income EU countries — to encourage value-creating service workers to remain. The state can and should do this, but its ability to raise the requisite money by taxing corporations holding mainly intangible capital is diminishing. Action is therefore needed to end or reduce the ability of corporations to exchange intangible assets for tangible ones. That can be done through legislation requiring any company doing business to be locally-registered and to hold a minimum of 50 per cent of its balance sheet assets in tangibles (this could include investments in infrastructure funds). There would be three clear benefits: a reduction in the incentive for skilled people to leave economies that need them; stimulation to local tangible capital good manufacture and the increased capacity of the authorities to tax corporations. Greater tangible capital investment will have the additional benefit of reducing the disadvantages in tangible good trade that EU customs barriers are designed to address. It will increase the proportion of service industry output in GDP and that will reduce the significance of trade since most services are not internationally-traded. In short, efforts to reach constructive trade arrangements within the EU and between the EU and other countries will fail unless cross-border capital movements are drastically reduced. Trade and capital need to be addressed together. The free movement of capital (combined with restrictions on the free movement of workers some in Labour are now suggesting) is the opposite of what a services-dominated economy like the UK’s needs.

  6. Mervyn Hyde says:

    I am shocked to say that the contributions so far have rounded up the real dilemma we face. There is no way that our interests will be served either inside the EU or the negotiations carried by Neo-Liberal Tories.

    The facts are that inside or outside the EU we are controlled by Neo-Liberal governments.

    The other major factor is that we are a net importer not exporter and to delude ourselves that we can gain any economic advantages in trade is a mythological farce.

    When we consider the emerging nations and modern technology it is clear that investment is never going to end up in the west, Global Capitalism is not concerned about people and their interests only how they can extract as much profit to themselves. They constantly declare they are not charities and are responsible only to their shareholders.

    On top of all that we live in a world of finite resources with China and India alongside places like Africa that are developing their own so called markets; which mean their productive capacity will outstrip anything we can do. We are a tiny nation with a miniscule unit cost capability. Russia, China, and India are ahead of us in joint research projects meaning whilst we have been contemplating our navels they have been getting on with the real world.

    Britain has been languishing in a world of self delusion, and our own brand of Neo-Liberal politicians have been securing their own futures whilst selling the rest of us down the river.

    They have achieved their deceit by constantly attacking the achievements of working people, claiming that under investment and their maximisation of profit is all the fault of the British worker. The mass media have constantly attacked education when education standards have increased since comprehensive schools were introduced. Since the 1970s people have been hoodwinked into believing that we must pay our way which has been the excuse to privatise our public services and stealing public assets. Whilst since the 1980s our current account has been averaging £3-£4 billion deficits month in month out.

    If we are to survive then we need a self sustaining economy, that means a socialist planned economy, serving the interests of people and a total rejection of capitalism.

    We do not need to trade with the rest of the world, we aren’t doing it now anyway.

  7. Bazza says:

    Nation states should control labour supply and capital supply – whilst we are in a capitalist world we may accept ‘good capital’ – productive investment with good wages and reject ‘bad capital’ – cheap labour, zero hours, dodgy industries and services.
    As socialists we do this to benefit working people but fascinating with the likes of Trump and the capitalists cronies he is surrounding himself with in the US (all of whom including Trump have made a living legally nicking the surplus labour of working people) and they say want to repatriate US capital – but take US car manufacturing TNCs for example and Mexico.
    US car companies in Mexico pay 8 dollars an hour whilst in the US it is 60 dollars an hour – US car companies are also often given 10 year payroll tax holidays and some US TNCs are given free land (Guardian 6/1/17) and BMW was given incentives of 115m dollars to locate a plant in a Mexican area – so will the kind hearted capitalists repatriate to lose profit?
    Perhaps capital knows a loyalty to no country, only to profit.
    So brothers and sisters Trump may end up being a useful idiot.
    With what 400 US bases in South Asia he has also threatened that they should pay to be surrounded (they protect capital) so refusing to pay could be interesting.
    Perhaps there are 3 political barbarians now in the World – Trump, Putin (who seems to have little concern about the loss of non-Russian life) and the bourgeois ‘socialist’ Chinese leader (whilst the UK has a mediocre PM who tries to pretend to working people that they care about them when they rule for the rich and powerful) and of course there are the fake religious barbarians of so-called IS et al.
    I would hope left wing democratic socialists in every country can articulate our narrative to offer hope – after all it is the working billions who really create the wealth and make societies work and THEY really have the power in their hands and brains – if only they would realise it.
    Yours in international peace & solidarity!

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