SocialismToday           Socialist Party magazine

Issue 225 February 2019

Socialism Today 225 - February 2019Lexit is not enough

The recent book by Costas Lapavitsas, The Left Case Against the EU, calls for a rupture with the capitalist European Union and its institutions. But it does not provide an all-rounded programmatic guide for the workers’ movement to the questions posed by the issue of the EU, argues CLIVE HEEMSKERK, particularly important now in the context of Brexit.

The Left Case Against the EU

By Costas Lapavitsas

Published by Polity Press, 2018, £14.99

Costas Lapavitsas is a radical economist who, for eight tumultuous months in 2015, was also an MP in the Greek parliament, as the newly-elected government led by Syriza – the Coalition of the Radical Left – was confronted with the austerity demands of the infamous troika: the European Commission, the European Central Bank, and the IMF.

Lapavitsas was elected in January 2015 as part of the mass response in general strikes, demonstrations and huge social struggles against the years of misery suffered by Greek workers and the big majority of the middle class after the economic crisis of 2007-09 and the EU-organised bail-outs of 2010-12. On entering parliament he at once came into conflict with the leadership of Alexis Tsipras and his finance minister Yanis Varoufakis, supporting the Left Platform within Syriza which advocated a default on the Greek debt and immediate exit from the eurozone.

After the ultimate capitulation of Tsipras, signing up to the vicious terms of a third bail-out despite the mass rejection of further austerity in Greece’s July 2015 referendum, Lapavitsas was among the 25 Left Platform MPs who founded the Popular Unity party. Popular Unity contested the general election that followed in September on a programme for a left exit – Lexit – from the euro but, falling 7,600 votes short of the 3% threshold to win representation, ended up with no seats. Lapavitsas returned to academia and has written this book against the EU, drawing on his experiences of what was a critical testing ground for different radical and socialist ideas. Notwithstanding its important flaws, it is particularly relevant for labour movement activists in the context of Brexit and a possible future Jeremy Corbyn-led government.

The book is scathing about Tsipras and, especially, Varoufakis who, having learnt nothing from the Syriza episode, toured Britain to support a remain vote in the 2016 EU referendum and still argues for a programme of ‘reforming the EU’. But Lapavitsas, as he denounces the economic, financial and legal-political framework underpinning the EU and its institutions, doesn’t present a sufficiently rounded-out analysis.

In his concluding pages he does sketch out elements of a socialist programme based on nationalisation of the banks and "public ownership of key resources". The book’s very last paragraph says: "If capitalism was challenged domestically, several forms of socialist federal integration would become possible in Europe". But, generally, the issue is posed as "a rupture with the transnational institutions of the EU" being the first "crucial step". This puts the tasks the wrong way round. The danger is that the actual power of the EU is exaggerated and, without a concrete programme to deal with the immediate issues a workers’ government would face, the working class could potentially be demobilised, feeding the idea that the situation is hopeless.

Exaggerating the EU ‘juggernaut’

Although the EU founders dreamt of establishing a ‘united states of Europe’, at a fundamental level the EU is not a state at all but a treaty-based alliance between the different national capitalist classes of its member states. Each agreement, from the 1957 Treaty of Rome that created the European Economic Community (EEC) onwards, has pursued the development of a Europe-wide regulated market while attempting to enhance the club’s ability to project its members’ interests as a coherent regional bloc. However, that does not make the EU, as the EEC was incorporated into in 1993, a state power.

Particularly since the collapse of Stalinism in Russia and eastern Europe – a grotesque caricature of a socialist planned economy rotted by the internal contradictions of bureaucratic rule – there have been powerful economic and geopolitical pressures pushing the national capitalist classes of Europe together. In the increasingly multi-polar world that has emerged over the past 30 years, the pressure has been on to develop the EU as a unified power, to engage on equal terms with the US, China, Japan, the now capitalist Russia, and the emerging economies.

But, because of the two pillars on which the capitalist system is based, the private ownership of the means of production and the nation state – which are not only economic entities but social and political formations with features such as territorial boundaries, language, culture, etc, not moulded by purely economic forces – there have remained counter-pressures to achieving European unity. The essential character of the EU as an agreement between the different capitalist classes – a far-reaching agreement but still subject to the power play between its component nation states – has not changed.

Yet littered throughout the text, Lapavitsas makes references to the EU as a "transnational juggernaut", a "veritable machine… for the relentless application of neoliberal ideology across Europe". It possesses, he argues, "a complex administrative machinery… employing a large bureaucracy". It has "mountains of legislation", backed by "the transnational presence of the European Court of Justice". This is used by "the neoliberal machine in Brussels", he writes, to enforce the "harmonisation of national legislation on the presumption of the superiority of EU law".

In fact, the main legislative and executive EU institutions, the European Commission, the Council of the EU, and the European parliament, have fewer than 45,000 staff, less than the employee headcount of some English county councils. The austerity policies since the 2007-09 financial crisis were not, as Lapavitsas asserts, "determined by professional politicians and technocratic experts inhabiting the core institutions of the union", but by the governments of the 28 different nation states of the EU. While the EU does facilitate collaboration between the capitalists to exploit the working class on a continental scale, it is not a ‘super-state’, as rabid Tory Brexiteers maintain – and also, unfortunately, some on the left.

Shifting responsibility

It is correct to recognise, as Lapavitsas does, the disparity in power between the different member states – he refers to an EU inner core, "among which Germany enjoys a hegemonic ascendancy", and "several peripheral groupings". However, a hierarchy of powers is a general feature of global capitalism, not unique to the EU. Most importantly, while the EU institutions provide the framework through which the power relations between the different national governments are mediated, this does not make the EU itself a state power, able to "impose neoliberal reforms" upon member states.

Friedrich Engels, Karl Marx’s long-term collaborator, famously wrote that the state included "institutions of coercion of all kinds" but, in the last analysis, exercised its power through ‘special bodies of armed men with prisons’. EU laws would undoubtedly be used, for example, to entangle a future Corbyn-led government in distracting legal battles if Britain were to remain within the bosses’ club. It was a mistake – and a warning for the future – that in 2016 Jeremy Corbyn did not repeat the stand he took against the EU in the 1975 referendum, looking instead to conciliate the Blairites, the organised representatives of capitalism within the Labour Party. In the binary choice presented in the referendum, the Socialist Party refused to give a vote of confidence to the capitalist EU and voted leave. But we did not exaggerate its power. ‘EU law’ could not prevent a Corbyn government, backed up by a mass movement, from implementing socialist policies. Ultimately, the EU has no tanks.

This is not an academic issue. What the real character of the EU is has importance for how the workers’ movement confronts the question of the EU in its day-to-day struggles, programmatically in its trade union organisations and political parties, and how a workers’ government would deal with it.

So when Lapavitsas says, for example, that "national electorates were allowed to vote for any party they wanted as long as the same array of economic and social policies were adopted in the end", he is being one-sided. Was the capitulation of the Syriza government elected in January 2015 really foreordained by ‘the power of the EU institutions’? If a Corbyn-led government had emerged from the 2017 general election would there not have been the opportunity for the labour movement to fight for it to adopt a different ‘array of economic and social policies’ – socialist policies – regardless of EU law?

Exaggerating the ‘EU juggernaut’ can potentially encourage passivity and a mood of fatalism. It removes the responsibility to struggle from the leaders of the workers’ organisations and left parties to suggest that it is "external forces [that] shape national tax, tariff, subsidy, credit and money policies". Fundamentally, what the Syriza government lacked was not permission from "external forces" – the EU institutions – to implement socialist policies like capital controls and nationalisation of the banks, but a clear programme, and the will to carry it out, to take decisive measures against capitalism in Greece and appeal to the European working class for support.

The same choice will face a possible Corbyn-led government too, whether it comes to power before or after the Brexit process is concluded. Brexit, after all, is merely a summary term for renegotiating treaty relations with 27 other nation states who are still, at present, members of the EU club – a task that would face an incoming Corbyn government whether Britain is formally within the EU or not.

Is ‘no negotiations’ a principle?

The most important Brexit policy Jeremy Corbyn could adopt would be to declare that a government he leads would take whatever decisive socialist measures are necessary in defence of the working class, and that he will reopen negotiations with the EU on that basis. Negotiating with the EU, or individual capitalist states, is not a question of principle.

As Socialism Today wrote in the aftermath of the 2016 referendum: "This should be accompanied by an enabling declaration that all EU treaty provisions and regulations which go against policies that advance working class interests – like the rules on state aid or the posted workers’ directive – would no longer apply and that any attempts by the EU institutions to legally enforce them would be annulled". (Corbyn’s Brexit Opportunity, Socialism Today No.201, September 2016)

A socialist programme for how to deal with the EU, we went on, "starting on the national terrain, refuses to accept the limits prescribed by the EU. It proposes bold socialist measures to take control of the domestic economy and builds concrete international workers’ solidarity and collaboration. But it relegates to a secondary if not tertiary consideration the observing of EU institutional ‘formalities’ when they impede bilateral international agreements. That is the opportunity which has opened up for a Jeremy Corbyn-led Labour Party after the Brexit vote, if a clear socialist and internationalist position is adopted".

Lapavitsas does not pose the issue like this, however. He insists that the "two fundamental reasons" for the capitulation of the Syriza government in 2015 were "the rigid institutional structure", and "the absolute ideological hostility" towards left-wing policies, "of the mechanisms of the EU and the EMU". This is looking in the wrong direction.

He attacks Tsipras for promising, prior to Syriza’s victory in 2015, that "tough negotiations" with the EU could lead it to reverse its austerity demands. He lambasts the Syriza leadership for telling "the Greek people that it would ‘tear up’ the bail-out agreements, while also keeping the country in the eurozone and avoiding a break with the EU… How the Greek negotiating team could maintain these deeply contradictory positions simultaneously was entirely unclear". His conclusion is that "there can be no disobedience from within, no ‘creative ambiguity’ in negotiations, no attempt to force the mechanisms of the EMU to relent… This is a hopeless path that leads to certain defeat".

He does say at one point that there would "have to be domestic programmes that directly challenged the power of capital". But what is presented as decisive is "a rupture with the transnational institutions", "a break", "an upheaval", "rejection". Once again, exit from the EU institutions is posed as the key task: "That is the only positive lesson for the European left from the debacle of Syriza". But this is not a sufficiently concrete programme for the workers’ movement.

Socialism Today 225 - February 2019

The euro and the EU

A workers’ government coming to power in one of the countries within the eurozone, the European monetary union (EMU) of 19 of the 28 EU member states, would face a more complex situation than in those outside the euro with their own currencies. There would be no prospect of a long-term ‘peaceful co-existence’ within the EMU. Exit would be posed, but that does not exhaust the question of what programme would have to be pursued.

The goal of monetary union had been present from the earliest days of the EEC, with the Committee of Central Bankers established in 1964. The need to manage exchange rates between the member states was given further impetus by the volatility created by the collapse from the late 1960s of the post-war Bretton Woods global system of fixed exchange rates around gold and the US dollar. The problems faced by the European countries were immortalised in US president Richard Nixon’s secret taped dismissal of concerns about the Italian currency: "I don’t give a shit about the lira!" But it was not until the new world situation that developed after the collapse of Stalinism – pushing the different national capitalist classes of Europe together to attempt to compete with the US hyper-power in a temporarily favourable economic and political conjuncture – that the conditions were in place for the euro to be established.

The achievement of a common currency managed by one central bank – the ECB – has, as Lapavitsas correctly says, "led to the creation of a gigantic monopolist over the final means of payment across much of Europe". When the 2008-09 crisis broke and Greece, Portugal and Ireland were shut out of the international financial markets, the ECB was in a powerful position as the provider of liquidity to private and public banks in difficulties. That power was brutally wielded, as Lapavitsas graphically recounts in the chapter, ‘Greece in the Iron Trap of the Euro’.

The ECB provided liquidity to Greek banks through refinancing operations and the Target2 system of interbank settlements between the national central banks of the eurozone. Loans to fund Greek public debt were organised by the troika in two bailouts in 2010 and 2012 – in which it was estimated that only 4.5% of the funds went to finance the deficit on the current spending of the Greek government on public services, etc. The rest went in debt servicing payments primarily to foreign lenders. The loans were made conditional on the government – the social democratic Pasok party in 2010, and the national unity government between Pasok and the conservative New Democracy under the non-party technocrat Lucas Papademos in 2012 – agreeing to swingeing public spending cuts, privatisation, labour market reforms limiting union rights and collective bargaining, and other draconian austerity measures.

The result was a collapse in economic output by nearly 7% in both 2011 and 2012, with adult unemployment reaching 27% in 2013. The total contraction of over 25% from 2008 to 2016 was worse than any economic depression in an advanced capitalist country since that which followed the crash of 1929.

The currency question

Does this mean that a workers’ government in a eurozone country would be powerless against the ECB? Not at all. Lapavitsas agrees that states have the ability to issue fiat money – money not backed by a physical commodity like gold – "with no obligatory convertibility into anything other than itself". "This self-referential relationship", he goes on to explain, "rests on the authority of the state and tremendously augments its power to intervene and shape economic policy". Indeed.

Bank notes and other physical or electronic monetary tokens aid the recording and distribution of material values but, from a national economic standpoint, ultimately have no effect on the aggregate of products, the limits of which are the available mass of material values. No economy, of course, exists in national isolation and to participate on the world economic arena it would be necessary for a government to hold reserves of a tradable currency. But the point is that membership of the eurozone in and of itself would not prevent a workers’ government from nationalising the banks, introducing capital controls, issuing a transitional domestic currency – which would effectively be an alternative means of payment – and implementing the other steps necessary to take control of the main levers of the economy. Such measures would be pursued not as a self-sufficient solution but as the first act in an international struggle for socialism – including the call for a socialist united states of Europe, probably posed, in the first instance, as an alliance or confederation of independent socialist states.

The technical infrastructure already exists for capital controls – limiting the amount of money that can be brought into and out of a country – or creating a new currency; most of it could be performed electronically through current software. After the Syriza government’s capitulation it was revealed that Varoufakis actually had plans for a parallel payments system, using tax file numbers to create PIN accessed accounts which would have allowed the payment of pensions, public-sector wages, and other transactions with the state. The issue is not a technical one but one of the programme of a workers’ government and the mobilisation of the working class to defend its implementation.

Lapavitsas ridicules the "clever technical plans" of Varoufakis which – and this was their critical weakness – were prepared behind the backs of the working class. But it is insufficient just to say that tackling the currency crisis would have meant "actively building mass support and preparing to confront the violent reaction of domestic and foreign interests". Yes, but what means of payment – currency tokens – would be used to record and distribute goods and services as the struggle unfolded?

Not unimportant in this respect was the dual consciousness of the Greek workers and middle classes towards the euro and the EU. Lapavitsas describes how the euro was "associated with modernity, progress, and the future" in what was perceived as, in his words, "a small peripheral country". The first few years of Greece’s membership of the eurozone had been "marked by a false sense of prosperity", he argues, with "burgeoning domestic credit expansion by the Greek banks" taking advantage of the low nominal and real interest rates within the eurozone to obtain liquidity cheaply. All this meant that there was deep apprehension about giving up the euro alongside a burning rage at austerity.

This dual consciousness was summed up during the July referendum campaign. Opinion polls continued to show substantial support – 70% in one – for keeping the euro while the actual plebiscite recorded a 61% vote against the troika’s austerity demands. A bald call for exit was not enough to point the way forward – and, in the days after 15 July, rally the workers’ movement which had shown its defiance in the referendum to oppose Tsipras’s abrupt and abject capitulation.

Brexit lessons

"The surrender and about-turn of Syriza is truly a dark chapter in the history of the European left", writes Lapavitsas. "The first step in accounting for it", he goes on, "is to consider the outlook of the Greek working and lower middle classes". They were "prepared to contemplate radical steps. To find political leadership [however] they instinctively and immediately looked to the left, and that is where the problem lay".

What more could the Greek masses have done to resist austerity? From 2010 until Syriza’s victory in 2015 workers came out in 40 or so general strikes. There was a wave of workplace occupations, showing both the determination to fight and giving a glimpse of how a democratic plan could have been drawn up with workers’ control and management of the economy. Significant social struggles erupted throughout the country, particularly in 2011-12, including the movement to ‘occupy the squares’ of Greek towns and cities.

Electorally, the established parties of the Greek ruling class were shattered with Syriza – until 2012 "a tiny and untried party of the left", as Lapavitsas describes – sweeping to power in 2015. The will to struggle was shown again in the massive vote against the troika’s memorandum in the July 2015 referendum despite, as Lapavitsas records, the "legions of outlandish claims… including food shortages, lack of medicine, and violent unrest in the streets with looting and arson" made by the Greek ruling class.

Syriza had won in January 2015 with 2.245 million votes, in an election with a 63.6% turnout. Another 390,000 or so went to left or anti-austerity parties, including the Communist Party of Greece (KKE). Yet, despite the failures of the Syriza leadership in the intervening period, six months later nearly a million extra votes were won to reject the troika’s austerity demands in the referendum – 3.558 million for No, 2.245 million for Yes, in a 62.5% turnout. The problem was not the masses’ determination to fight but the role of the leadership of the workers’ organisations – and the absence of a Marxist nucleus with a concrete programme able to point a way forward at each phase of the movement and with sufficient roots in the working class to become a subjective factor in the struggle.

Now a new chapter is opening in Britain, with the possibility of a Corbyn-led government in a stand-off with the institutions of the EU. Lapavitsas publically supported Jeremy Corbyn’s leadership challenge in 2015 and writes that "an answer for Britain – and a pointer for the rest of Europe – could be provided by the Labour Party".

However, he does not accompany this with the necessary warning that, over three years on, Corbyn’s leadership victory has still not been consolidated. The political and organisational legacy of Tony Blair’s New Labour party has not been exorcised. The Blairite fifth column, aided by some ‘left’ figures who still look to the EU bosses’ club as a progressive force, have used the issue of Brexit to regroup and build up opposition to Corbyn. Not accidentally, all of the 71 MPs who announced support for a second referendum to stop Brexit on the day of Labour’s first no-confidence motion in Theresa May had been part of the leadership coup attempt against Jeremy Corbyn in 2016.

Britain is still the fifth or sixth largest economy in the world. Events could be more protracted than in Greece, although no less turbulent. But unless the opportunities are taken to forge a mass working-class party out of the Corbyn phenomenon, including defending a socialist and internationalist alternative to the EU bosses’ club, the danger remains that there could be a Syriza-in-the-North-Sea episode ahead, and the prospect of a Greek-style defeat.

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