Implications of the Euro: A critical perspective from the left

Baimb idge, Ma k (Ed.); Bu ki , B ian (Ed.); Whyman, Philip (Ed.) Book Implica ions o he Eu o: A c i ical pe spec i e om he le P o ided in Coope a ion wi h: Taylo & F ancis G oup Sugges ed Ci a ion: Baimb idge, Ma k (Ed.); Bu ki , B ian (Ed.); Whyman, Philip (Ed.) (2006) : Implica ions o he Eu o: A c i ical pe spec i e om he le , ISBN 978-0-203-69539-5, Rou ledge, London, h ps://doi.o g/10.4324/9780203695395 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/251161 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. So e n die Ve asse die Dokumen e un e Open-Con en -Lizenzen (insbesonde e CC-Lizenzen) zu Ve ügung ges ell haben soll en, gel en abweichend on diesen Nu zungsbedingungen die in de do genann en Lizenz gewäh en Nu zungs ech e. Te ms o use: Documen s in EconS o may be sa ed and copied o you pe sonal and schola ly pu poses. You a e no o copy documen s o public o comme cial pu poses, o exhibi he documen s publicly, o make hem publicly a ailable on he in e ne , o o dis ibu e o o he wise use he documen s in public. I he documen s ha e been made a ailable unde an Open Con en Licence (especially C ea i e Commons Licences), you may exe cise u he usage igh s as speci ied in he indica ed licence. h ps://c ea i ecommons.o g/licenses/by-nc-nd/4.0/ Implica ions o he Eu o To da e, c i ical analysis o he Economic and Mone a y Union p ojec has la gely been ad anced om he cen e- igh spec um o B i ish poli ics. Compa able ques ioning om he cen e-le , whils once a powe ul phenomenon, has mo e ecen ly ailed o ind a cohe en oice. Ye he Eu opean aul -line canno be cha ac e ised as a nea le – igh issue. The e a e no iceable di isions in opinion ac oss B i ish business, he ade union mo emen and wi hin he Labou Pa y. Implica ions o he Eu o o e s a unique insigh in o his key deba e om he ‘cen e- le ’, eu oscep ic iewpoin . This book p o ides a igo ous analysis o he salien economic and poli ical issues o conce n, such as: he economics o a single cu ency, employmen and social implica ions, in addi ion o issues o so e eign y and poli ical de e mina ion. The a gumen s p esen ed in his olume highligh he eme gence o a cohe en al e na i e o deepening economic in eg a ion as a pla o m o build a jus and equi able socie y. Con ibu ions a e d awn om leading academics, ade union leade s and p ominen poli icians, bo h om he Labou Pa y and he wide p og essi e le in B i ish poli ics. This in o ma i e and hough p o oking book will be indispensable eading o s uden s and p ac i ione s in economics, poli ics and in e na ional ela ions, as well as hose in e es ed in his highly con en ious opic. Philip Whyman is Reade in Economics a he Uni e si y o Cen al Lancashi e. Ma k Baimb idge and B ian Bu ki a e Senio Lec u e s in Economics a he Uni e si y o B ad o d. Also by Philip Whyman The Impac o he Eu o Deba ing B i ain’s u u e (co-edi o ) Economic and Mone a y Union in Eu ope Theo y, e idence and p ac ice (co-edi o ) Fiscal Fede alism and Eu opean Economic In eg a ion (co-edi o ) Sweden and he ‘Thi d Way’ A mac oeconomic e alua ion An Analysis o he Economic Democ acy Re o ms in Sweden B i ain and he Eu opean Union Al e na i e u u es (co-au ho ) Also by Ma k Baimb idge The Impac o he Eu o Deba ing B i ain’s u u e (co-edi o ) Fiscal Fede alism and Eu opean Economic In eg a ion (co-edi o ) Economic and Mone a y Union in Eu ope Theo y, e idence and p ac ice (co-edi o ) Cu en Economic Issues in EU In eg a ion (co-au ho ) B i ain and he Eu opean Union Al e na i e u u es (co-au ho ) Also by B ian Bu ki T ade Unions and Wages Implica ions o economic heo y T ade Unions and he Economy (co-au ho ) Radical Poli ical Economy The Poli ical Economy o Social C edi and Guild Socialism (co-au ho ) The Impac o he Eu o Deba ing B i ain’s u u e (co-edi o ) B i ain and he Eu opean Union Al e na i e u u es (co-au ho ) Implica ions o he Eu o A c i ical pe spec i e om he le Edi ed by Philip Whyman, Ma k Baimb idge and B ian Bu ki Fi s published 2006 by Rou ledge ma e and selec ion; he con ibu o s o indi idual chap e s Typese in Baske ille by Book Now L d B i ish Lib a y Ca aloguing in Publica ion Da a A ca alogue eco d o his book is a ailable om he B i ish Lib a y Lib a y o Cong ess Ca aloging in Publica ion Da a A ca alog eco d o his book has been eques ed ISBN13: 9–78–0–415–34952–9 (hbk) ISBN13: 9–78–0–415–38071–3 (pbk) Copy igh © 2006 Philip Whyman, Ma k Baimb idge and B ian Bu ki o edi o ial The Open Access e sion o his book, a ailable a www. and ebooks. com, has been made a ailable unde a C ea i e Commons A ibu ion -Non Comme cial- No De i a i es 4.0 license. 2 Pa k Squa e, Mil on Pa k, Abingdon, Oxon OX14 4RN Rou ledge is an imp in o he Taylo & F ancis G oup, an in o ma business 711 Thi d A enue, New Yo k, NY 10017, USA by Rou ledge Published 2017 This book is dedica ed by he edi o s o he memo y o he R Hon Lo d Sho e o S epney PC (1924–2001). Th oughou B i ish poli ics, whe he his iews we e accep ed o no , he commanded espec as a man o p inciple. Con en s Lis o illus a ions x No es on con ibu o s xii Fo ewo d by Da id Owen xix P e ace by B yan Gould xx Acknowledgemen s xx iii 1 The le and he eu o 1 PHILIP WHYMAN, MARK BAIMBRIDGE AND BRIAN BURKITT 2 The g ea deba e: he Labou Pa y and Eu opean in eg a ion 12 ANDY MULLEN PART I The economics o a single cu ency 37 3 Economic consequences o EMU o B i ain 39 JONATHAN MICHIE 4 Wha ype o Eu opean mone a y union? 52 MALCOLM SAWYER AND PHILIP ARESTIS 5 Economic pe o mance and he eu o 60 JANET BUSH 6 The eu o: an ou side ’s pe spec i e 71 PAUL ORMEROD 7 The ECB in heo y and p ac ice 77 MARK BAIMBRIDGE xi Con ibu o s B yan Gould was a Rhodes Schola a ending Balliol College, Ox o d. He se ed as Labou MP o Sou hamp on Tes (1974–9) and Dagenham (1983–94). He was a p ominen membe o Neil Kinnock’s Shadow Cabine , se ing as Shadow T ade and Indus y Sec e a y. He con es ed he 1992 Labou leade - ship elec ion and subsequen ly o med he Full Employmen Fo um o p omo e Keynesian economic ideas wi hin he labou ma ke . He esigned om John Smi h’s Shadow Cabine , in a dispu e abou Eu ope, and le B i ish poli ics in July 1994. He e u ned o his na i e New Zealand and ook on he ole o Vice- Chancello o he Uni e si y o Waika o, whe e he se ed un il his e i emen in 2004. His books include Goodbye o All Tha (Macmillan, 1995), Mone a ism o P ospe i y? (Macmillan, 1981), A Fu u e o Socialism (Jona han Cape, 1989) and Socialism and F eedom (Macmillan, 1985). He is a commi ed an i- ede alis and was a consis en c i ic o Labou ’s emb ace o mone a ism unde Jim Callaghan and Dennis Healey. Billy Hayes is Gene al Sec e a y o he Communica ion Wo ke s Union (CWU). P io o his, he had spen nine yea s as he Na ional O ice ep esen ing he union’s ou doo pos al membe s. He joined he Pos O ice, and he union, in 1974 and ook on a numbe o local esponsibili ies, including magazine edi o , TUC you h con e ence delega e, ades council nominee, union con e ence delega e and inally B anch Sec e a y. In 1992, ou mon hs a e being o ed on o he Na ional Execu i e, he was elec ed a Na ional O ice . Billy has been ac i e in he Labou Pa y o many yea s and held a ange o posi ions om Young Socialis sec e a y o GMC membe . He suppo s he Labou go e n- men , bu no un ese edly. ‘The e a e issues whe e we canno be a aid o c i icising he go e nmen ’, he says, ci ing as examples index linking o pensions and he epeal o an i- ade union laws. Billy has always ad oca ed less cen alisa ion o union s uc u es. ‘We need o lec u e less and hea mo e abou he eal impac o managemen ’s policies’, he says. ‘S i ing up apa hy is no a solu ion.’ Ma hew McG ego is Di ec o o he Cen e o a Social Eu ope, a cen e-le hink- ank. He was o me ly Campaign Manage o he ‘No’ campaign agains he eu o, a posi ion he held un il he campaign’s mo hballing ollowing he go e nmen ’s decision o ule ou eu o membe ship un il 2008 a he ea lies . He is also a lay ac i is in he T anspo and Gene al Wo ke s Union and is chai o he TUC Young Membe s’ commi ee. Joe Ma ino is Gene al Sec e a y o he Bake s, Food & Allied Wo ke s Union (BFAWU). He was elec ed a Shop S ewa d o he BFAWU in 1968 and was ac i e in he Shop S ewa ds and T ades Council mo emen s o ha pe iod. He was elec ed on o he Union’s Na ional Execu i e Council (1971–79) and became a membe o he baking indus y Na ional Nego ia ing Commi ee in 1973, se ing on ha body un il he mo e o local nego ia ions in 1983. In 1979 he was elec ed Gene al Sec e a y o BFAWU, aking o ice in No embe o ha yea , and in 1998 he was elec ed a membe o he Gene al Fede a ion o T ade Unions Na ional Execu i e Commi ee. As a membe o he Labou Pa y, and Con ibu o s x in line wi h he policy o his Union, he campaigned o a ‘No’ o e in he 1975 e e endum on Common Ma ke membe ship unde he Wilson Go e nmen and has since been ac i e in his a ea. Disillusionmen wi h he d i o ‘New Labou ’ led o his lea ing he New Labou Pa y a e almos 30 yea s o membe ship and he is now a membe o he Socialis Labou Pa y. Jona han Michie is P o esso o Managemen and Head o he Business School, Uni e si y o Bi mingham, UK. P e ious appoin men s include Head o he School o Managemen and O ganiza ional Psychology a Bi kbeck College whe e he also held he Sainsbu y Chai o Managemen ; oge he wi h senio academic pos s a he Uni e si ies o Camb idge and London and as an Expe o he Eu opean Commission in B ussels and in he Economic Depa men o he T ades Union Cong ess. His ecen books include The Handbook o Globalisa ion (Edwa d Elga , 2003), Sys ems o P oduc ion (Rou ledge, 2002), A Reade ’s Guide o Social Science (Fi z oy Dea bo n, 2001), The Changing Face o Foo ball (F ank Cass, 2001), Foo ball in he Digi al Age (Mains eam, 2000), The Poli ical Economy o Compe i i eness (Rou ledge, 2000), Inno a ion Sys ems in a Global Economy (Camb idge Uni e si y P ess, 1999) and A Game o Two Hal es? The Business o Foo ball (Mains eam, 1999). Aus in Mi chell has been he Labou MP o G imsby since 1977. P e iously he was an academic a Nu ield College Ox o d and a se e al New Zealand uni e si ies, and hen a ele ision jou nalis (BBC and Yo kshi e Tele ision). A o me Pa liamen a y P i a e Sec e a y, Opposi ion Whip, Membe o he T easu y and o he Ci il Se ice Selec Commi ee and F on Bench Spokespe son on T ade and Indus y, he cu en ly si s on he Ag icul u e Selec Commi ee. He p esen ed Ta ge wi h No man Tebbi on SKY om 1989 o 1998. His books include Back o he Fu u e Collec i ism in he Twen y-Fi s Cen u y (Ca alys P ess, 2002), Fede al B i ain in Fede al Eu ope? Enligh ening he Deba e on Good Go e nance (Kogan Page, 2001), The English Ques ion (Fabian Socie y, 2000), Fa ewell My Lo ds (Poli icos, 1999) and Las Time: Labou ’s Lessons om he Six ies (Bellew Publishing, 1997). Andy Mullen is a Lec u e in Poli ics a No humb ia Uni e si y. His esea ch ocuses upon he esponse o he B i ish Le o Eu opean in eg a ion om 1945 o 2002. He has ocused on he Eu opean policies o he Labou Pa y, he T ade Union Cong ess and he wide ade union mo emen , he Co-ope a i e Pa y, he G een pa ies, he Independen Labou Pa y, he Social Democ a ic Pa y, he Ana chis s, he Communis s, he na ionalis s, socialis pa ies, and le -wing p essu e g oups and hink- anks. He is he co-au ho o ‘Eu opean in eg a ion and he ba le o hea s and minds: New Labou and he eu o’ (Poli ical Qua e ly, 2003) and ‘Spinning Eu ope: p o-Eu opean Union p opa- ganda campaigns in B i ain, 1962–1975’ (Poli ical Qua e ly, 2005). Doug Nicholls is Gene al Sec e a y o he Communi y and You h Wo ke s Union (CYWU). He has held his posi ion since 1987 and is one o he wo longes se ing Gene al Sec e a ies in B i ain. Since he mid-se en ies he has x i Con ibu o s opposed he expansion o he Eu opean Union in o a single supe s a e. He was he ounding Sec e a y o T ade Unions Agains he Single Cu ency and EU Cons i u ion. He has w i en widely on all ma e s o do wi h he Eu opean Union, pa icula ly om a wo ke s’ and ade union pe spec i e. Th ough his union wo k he was able o ensu e a much mo e scep ical and c i ical a i ude was de eloped h oughou he B i ish ade unions and pa icula ly he TUC. He is a membe o he Agenda Commi ee o he c oss-pa y Cong ess o Democ acy and a membe o he Campaign Agains Eu o Fede alism and Labou Eu o Sa egua ds. Unusually, pe haps, o a ade union Gene al Sec e a y, he is a published poe and li e a y c i ic. Paul O me od is one o he ounding di ec o s o Vol e a Consul ing. He p e iously wo ked as an economic modelle and o ecas e a he Na ional Ins i u e o Economic and Social Resea ch, London (1973–80). He subse- quen ly le o be Head o Economic Assessmen Uni a The Economis newspape g oup (1980–2). Fo he pe iod 1982 o 1992 he was Di ec o o Economics and Depu y MD o Henley Cen e o Fo ecas ing. He was Visi ing P o esso o Economics a he Uni e si ies o London and Manches e (1983– 97). He is he au ho o bes -selle s Dea h o Economics (Fabe and Fabe , 1994) and Bu e ly Economics (Fabe and Fabe , 1998) and also o he o hcoming Why Mos Things Fail (Fabe and Fabe ). Da id Owen ained as a doc o be o e becoming Labou MP o a ious Plymou h cons i uencies be ween 1966 and 1992. He was appoin ed Minis e o he Na y (1968) be o e esigning om he Shadow Cabine in 1972 o e he Labou Pa y’s e usal o suppo B i ish en y o he EEC. Subsequen ly, he was appoin ed Minis e o Heal h (1974) and Sec e a y o Fo eign and Commonweal h A ai s (1977–9). In 1981 he was one o he ounde s o he Social Democ a ic Pa y, se ed as Depu y Leade (1982–3) and Pa y Leade (1983–7). The con inuing SDP was e-es ablished unde his leade ship in 1988, bu was inally wound down as a na ional pa y in 1990. He was c ea ed a li e pee in 1992. He wen on o become join au ho o he Vance–Owen Peace Plan o se le he con lic in Bosnia in he 1990s. He was un il ecen ly leade o he ‘No Campaign’ agains B i ish membe ship o he eu o. His books include Face he Fu u e (Cape, 1981), A Fu u e ha will Wo k (Penguin, 1987), A Uni ed Kingdom (Penguin, 1986), Human Righ s (Cape, 1978), In Sickness and in Heal h: The Poli ics o Medicine (Qua e Books, 1976), Nego ia e and Su i e (CLV Publica ions, 1988), Ou NHS (Pan, 1988) and Poli ics o De ence (Cape, 1972). Malcolm Sawye is P o esso o Economics a he Uni e si y o Leeds Business School, UK and Visi ing Senio Schola a he Le y Economics Ins i u e, New Yo k. His main esea ch in e es s include: aspec s o he Eu opean Union ela ed o mone a y union, such as he his o ical and ins i u ional amewo k o he EMU, he shaping o new ins i u ions like a Eu opean cen al bank, he de la iona y consequences o he EMU and he ype o ins i u ional amewo k necessa y o gene a e highe le els o employmen . He is Managing Edi o o Con ibu o s x ii In e na ional Re iew o Applied Economics and join edi o o In e na ional Pape s in Poli ical Economy. His books include The Eu o: E olu ion and P ospec s (Edwa d Elga , 2001), A Fu u e o Public Owne ship (Law ence and Wisha , 1999), The UK Economy (Ox o d Uni e si y P ess, 2001), Money, Finance and Capi alis De elopmen (Edwa d Elga , 2001), The Economics o he Thi d Way (Edwa d Elga , 2001), A Biog aphical Dic iona y o Dissen ing Economis s (Edwa d Elga , 2000), The Legacy o Michal Kalecki (Edwa d Elga , 1999), The Poli ical Economy o Cen al Banking (Edwa d Elga , 1998) and The Poli ical Economy o Economic Policies (Macmillan, 1998). Molly Sco Ca o is a Lec u e in Social Economy a he Welsh Ins i u e o Resea ch in o Coope a i es wi hin he Business School a he Uni e si y o Wales Ins i u e Ca di . She was educa ed a he uni e si ies o Ox o d (Poli ics, Philosophy and Economics), Open (MSc in Social Resea ch Me hods) and Abe ys wy h (PhD in Economics). She is also he G een Pa y’s Economics Speake , he Eu o Campaign Coo dina o o he G een Pa y and a membe o he No Campaign S ee ing G oup. She w o e Se en My hs Abou Wo k (G een Audi , 1996) and co-edi ed G een Economics: Beyond Supply and Demand o Mee ing People’s Needs (G een Audi , 1999). In 2002 she w o e a epo o he Associa ion o G een Councillo s on ‘Using Bes Value o Encou age G een P ocu emen in Local Au ho i ies’. She is also esea ching he impac o ca bon dioxide emissions educ ion on he na ional economies o ich and poo coun ies. Pe e Sho e was educa ed a King’s College, Camb idge, g adua ing in his o y, bu la e specialised in poli ical economy. He joined he Labou Pa y in 1948 and became head o he Resea ch Depa men in 1959, being elec ed o Pa liamen o he London bo ough o S epney in 1964. In 1967 he became he younges membe o he Cabine , jus h ee yea s a e en e ing he Commons. He la e became a Cabine minis e wi hou Po olio and Depu y Leade o he Commons. When Labou e u ned o powe in 1974, he was Sec e a y o T ade and in 1976 En i onmen Sec e a y. When Labou los he 1979 elec- ion, he was appoin ed Shadow Fo eign Sec e a y. Pe e Sho e wice con es ed he Labou Pa y leade ship, bu was de ea ed and e-dedica ed himsel o his mission o cu bing B i ain’s g owing in ol emen in Eu ope. He became Lo d Sho e o S epney when he e i ed om he Commons in 1997. He summa ised his belie s on Eu opean in eg a ion in Sepa a e Ways: B i ain and Eu ope (Ge ald Duckwo h, 2000). He died in 2001 du ing he p epa a ion o his collec ion, which is dedica ed o his memo y. Ma hew Wa son is a Senio Lec u e in In e na ional Poli ical Economy and Di ec o o he Poli ical Economy Resea ch G oup a he Uni e si y o Bi mingham, UK. He has deg ees in economics om he Uni e si y o Wales College o Ca di , he Uni e si y o S a hclyde and he Uni e si y o Bi mingham. His esea ch in e es s a e concen a ed in he b oad a ea o poli ical economy. Concep ually, hese include classical poli ical economy and he his o y o economic hough ; he genealogy o mac oeconomic heo y; x iii Con ibu o s gene al equilib ium economics; he poli ical e ec s o in e na ional inancial ma ke es uc u ing; he sociology o specula i e ma ke bubbles; he poli ical discou se and economic p ac ice o globalisa ion and he disciplina y pa a- me e s o con empo a y in e na ional poli ical economy. He has published Pos - Wa B i ish Poli ics in Pe spec i e (Poli y P ess, 1999) and Founda ions o In e na ional Poli ical Economy (Palg a e, 2004). Philip Whyman is a Reade in Economics a he Uni e si y o Cen al Lanca- shi e. He is he au ho /edi o o The Impac o he Eu o (Macmillan, 2000), Economic and Mone a y Union in Eu ope (Elga , 2003), Sweden and he ‘Thi d Way’ (Ashga e, 2003) and Fiscal Fede alism and Eu opean Economic In eg a ion (Rou ledge, 2004), An Analysis o he Economic Democ acy Re o ms in Sweden (Mellen P ess, 2004), and also o he o hcoming ex s: B i ain, he Eu o and Beyond (Ashga e), and ‘Thi d Way’ Economics (Palg a e Macmillan). He has published widely in lea ned jou nals and w i en a numbe o policy pape s, including submissions o he House o Lo ds Selec Commi ee on The Eu opean Communi ies (1996) and he House o Commons T easu y Selec Commi ee (1998). His esea ch in e es s include he impac o Eu opean in eg a ion upon labou ma ke s, iscal ede alism, in e na ional mone a y de elopmen s and he Uni ed Kingdom’s u u e ela ionship wi h he Eu opean Union. In addi ion, he has w i en ex ensi ely on he de elopmen o p og essi e poli ical economy, he e alua ion o he Thi d Way and he e olu ion o he ‘Swedish Model’. I is peculia o Labou go e nmen s ha hey ha e been bede illed by mis aken decisions o e he handling o mone a y policy. Ramsay Macdonald, as P ime Minis e , and Philip Snowden, as Chancello o he Excheque , om 1929 o 1931, should ha e le he gold s anda d much ea lie and de alued. Simila ly, Hugh Dal on and S a o d C ipps as Chancello s o he Excheque , in Clemen A lee’s pos -wa go e nmen , we e oo slow o de alue. The delayed de alua ion also damaged Ha old Wilson’s pe iod as P ime Minis e om 1964–70. Fixed exchange a e con ols ha e been one o he dominan issues o my 40 yea s in poli ics. I en e ed Pa liamen in he Ma ch 1966 Gene al Elec ion ull o idealism and hope ha a majo i y Labou go e nmen would end B i ain’s pos - wa economic decline. Ye by 20 July, in a mood o u e disillusionmen in he House o Commons, we we e old abou a de la iona y package which mean Labou was back in he same s op–go economic cycle which we had so o en a acked he Conse a i es o in lic ing. The decision no o de alue a e he 1964 Gene al Elec ion, some hing clea ly en isaged by he ou going Conse a i e Chancello , Reginald Maulding, was poli ically unde s andable. In o ice a e 13 yea s o opposi ion and acing he necessi y o an ea ly elec ion since Labou only had a majo i y o i e, i was qui e widely el ha o de alue would be poli ically haza dous. Bu in 1966 wi h a la ge pa liamen a y majo i y he e we e no c edible excuses. I was a lamen able ailu e o he go e nmen no o de alue in o de o pu sue economic g ow h. To oppose he go e nmen ’s e usal o de alue was o be labelled unpa io ic. Be o e he 1967 Labou Pa y Con e ence I and wo o he Labou MPs, John Mackin osh and Da id Ma quand, publicly ad oca ed de alua ion in a pamphle called Change Gea . We we e conside ed hen on he cen e igh o he pa y, and we joined wi h E ic He e and o he MPs clea ly on he le o o m a so-called ‘Snakes and Alliga o s’ g ouping o campaign o he de alua ion ha was la e o ced on he go e nmen in No embe o ha yea . Exchange a e policy should no be a le – igh issue in he pa y, no should p io i y o be gi en o he pu sui o economic g ow h. I is idiculous o see oday’s Labou F on Bench demanding ha all Labou MPs ha e a poli ical du y o go along wi h ea ly membe ship o he eu ozone, and once again we hea he a gumen o pa io ism being used agains he doub e s. E e since my expe ience in he 1960s I ha e been e y dubious abou exchange Fo ewo d R Hon he Lo d Owen xx Fo ewo d a e con ol sys ems, o e en when hey a e echnically capable o being adjus ed and a e no a ixed sys em, expe ience shows ha poli icians end o sh ink om making any downwa d adjus men , o ea o being depic ed weak and a ailu e. In 1972 Edwa d Hea h’s Conse a i e Go e nmen was unable o li e wi h he disciplines o he Snake o longe han six weeks. In 1978 P ime Minis e Jim Callaghan was de e mined o keep ou op ions open o e joining he Eu opean Mone a y Sys em. As Fo eign Sec e a y, wi h Denis Healey as Chancello , I helped nego ia e he dual ole o being membe s o he Eu opean Mone a y Sys em and being ee o decide la e i we wan ed o join he ac ual Exchange Ra e Mechanism (ERM). This was he o e unne o he Maas ich T ea y comp omise o e he eu o. In 1987, a e he Lou e Acco d, Nigel Lawson, as Chancello o he Excheque , in e ened by buying Deu chma ks o hold s e ling below DM3. I was a la gely undecla ed policy o shadowing he Deu chma k, which was e en ually uncapped in Ma ch 1988. I s main pu pose was o a es he all in s e ling bu i was also hoped by some ha i would demons a e ha s e ling was eady o join he ERM, which Lawson had wan ed o do since 1985. En y was e used by Ma ga e Tha che hen, and again when he ied a e he 1987 Elec ion. Wha shadowing demons a ed was no so much ha in e en ion was in la iona y bu ha he o e all policy, aking he exchange a e and in e es a es a he ime in o accoun , was no igh enough. Any go e nmen wi hin a loa ing sys em o exchange a es is wise o ese e o i sel he op ion o in e ening. Bu i should be a ely used. I is e y di icul o la en ou i a ional cu ency momen s while espec ing he eali y ha any in e en ion canno hold ou agains de e mined ma ke p essu es. As Leade o he SDP I had ad oca ed joining he ERM in he mid-1980s and hough he ules o e adjus men would be su icien when we joined in 1990. The inabili y o adjus wi hin he Economic and Mone a y Union (EMU), howe e , mean ha I and many o he MPs would ne e ha e suppo ed John Majo ’s Maas ich T ea y nego ia ion wi hou he B i ish op -ou om he eu o. I ha e ye o be con inced ha he UK can achie e sus ained economic g ow h wi hin a pe manen ly ixed exchange a e sys em. I needs o be emembe ed ha John Majo , and subsequen ly Tony Blai , only e y eluc an ly accep ed ha a decision o join he eu o had o be one o he B i ish people in a e e endum. They we e o ced in o his concession by public opinion. The Uni ed Kingdom’s ailu e o achie e a e alua ion inside he ERM in 1992 c ea ed much ha dship, and i demons a ed o me ha he design o he mechanism was lawed. Fo he Uni ed Kingdom i had sys emic ailings, wi h specula ion being a one-way be om which many specula o s sa ely made subs an ial sums o money. The Uni ed Kingdom would isk much by e-joining he ERM, e en o he EMU quali ying pe iod, wi hou special sa egua ds being in oduced in o he mechanisms. I is e y no iceable ha Labou Minis e s, when ad oca ing ea ly en y in o he eu ozone, e ade he ques ion o he ERM quali ying pe iod. They belie e ha i will be wai ed – bu ha may be oo op imis ic gi en he ule ha o he EU na ions aspi ing o join mus demons a e he s abili y o hei cu encies wi hin he ERM. Fo ewo d xxi When i became clea ha P ime Minis e Tony Blai was only wai ing o a change in he opinion polls o join he eu o, I made public in a speech in Manches e in Janua y 1999 my in en ion o campaign o s aying ou o he single cu ency. This was despi e conside ing mysel no longe a pa y poli ician, being a c oss-benche in he House o Lo ds. Tha decision was, howe e , always condi ional on any campaign being ully commi ed o con inuing membe ship o he Eu opean Union. La e I wen on o help c ea e New Eu ope (whose publica- ions can be accessed h ough www.no-eu o.com including he mos ecen pamphle by Geo ey Fi chew en i led Economic and Mone a y Union and he Eu opean Cons i u ion). Wi hou he ‘Yes o Eu ope, no o he eu o’ campaign, I belie e Tony Blai , a e he 2001 Gene al Elec ion, migh well ha e been able o swing public opinion and o hold and win a e e endum on joining he eu o – wi h e y ad e se consequences o he UK economy. I is pa icula ly impo an ha i a somewha simila campaign we e e e needed o be e i ed in he u u e i should ha e an e en s onge Labou Pa y elemen wi hin i s c oss-pa y mix. The o ch mus now pass on his issue om my gene a ion o a new wa e o poli icians whose poli ical u u e will be made in he yea s a e he 2005 Gene al Elec ion. Publica ion o his book a his ime seems o me, he e o e, e y imely in ha i s a s o build he b oad base o an economic as ingency abou he eu ozone. I delibe a ely do no use he wo d scep icism because ha has come o be unde s ood as emb acing hos ili y o ou membe ship o he Eu opean Union. I no e wi h in e es , and pleasu e oo, ha a las a signi ican numbe o Libe al Democ a MPs a e speaking ou abou he eu o and do no sha e he en husiasm o hei leade s, who like many New Labou leade s wan quick en y on poli ical g ounds as soon as public opinion allows a e he nex elec ion and ha e no qualms abou he economic consequences o en y. One o he majo successes o Labou in go e nmen since 1997 has been i s eco d o sus aining he economic g ow h which i inhe i ed and which es a ed so quickly a e No man Lamon , as Chancello , dug ou enough space o expo -led g ow h ollowing he debacle o ou o ced exi om he ERM. In pa , ha g ow h eco d has s emmed om he abili y o he go e nmen o se he in la ion a ge while he Bank o England’s Mone a y Commi ee se s he in e es a es. I ha e ne e excluded joining he eu o a some s age in he u u e, bu i should only be con empla ed i he eu ozone economies ha e come e y close o con e ging and he e is con incing e idence ha all he na ions wi hin he eu ozone a e i e ocably commi ed o policies ha will allow any such con e gence o be main ained. Hope ully he eu ozone coun ies will imp o e hei economic g ow h eco d, and he e is al eady some sign o imp o ed economic ac i i y in F ance, Spain and I aly. Bu he e is a long way o a el be o e he eu ozone economies con e ge. The July 2004 Repo o he Eu opean Commission, The Eu o Fi e Yea s On, says: ‘The a ailable e idence is in line wi h a posi i e impac o mone a y union on cyclical con e gences.’ Tha is a conclusion based on li le e idence. I was ubbished only a ew weeks la e by a Deu sche Bank esea ch no e – ‘Con a y o wha he Eu opean Commission says, we do no see ha he eu o economies ha e xxii Fo ewo d con e ged’ – and he no e wen on o say, ‘ he e a e cu en ly no signs ha g ow h di e ences ac oss he egion a e na owing’ and ha in ac ‘ he e ha e e en been signs o g ea e di e gence’. I goes on o ques ion implici ly he e y concep o he eu ozone by saying, ‘economic ins abili y in he eu o a ea is likely o be highe and end g ow h lowe han i would ha e been wi hou mone a y union’. The Ge man Bundesbank cu in e es a es in i e pe iods, esponding o ecession in 1967, 1975, 1982–3, 1987 and 1994–6. I is only because he Eu o- pean Cen al Bank (ECB) has o a ge in la ion in coun ies in e y di e en s ages in he economic cycle ha in e es a es ha e no been lowe in he eu ozone, and his inabili y o ha e lowe in e es a es in Ge many has been e y damaging. Some ha e calcula ed ha o help he Ge man economy g ow as e o e he las i e yea s, he in e es a e should ha e been nea e 1 pe cen han 2 pe cen . Fi e yea s ago I used o a gue ha hough he Uni ed Kingdom should s ay ou o he eu ozone he e was oo much poli ical capi al in es ed in i by o he eu ozone coun ies o he e e e o be any ques ion o some membe s wi h- d awing om he zone. I am no longe so su e o ha . I can imagine he eu ozone collapsing unde he weigh o i s own economic con adic ions. I am s eng hened in ha iew by an a icle in he Financial Times by Wol gang Munchau (6 Sep embe 2004), which wa ned ha e en ‘wi h he e o med s abili y pac , EMU will be mo e like an eccen ic club han an economic union’. He goes on o say ha : No ma e whe he he igge is high in la ion, a banking c isis o some o he channel, one common cause unde lies he ailu e o all mone a y unions: he lack o a poli ical union wi h he au ho i y o en o ce economic and inancial policy among i s membe s. I doub ha he eu ozone coun ies can ag ee o a a oughe egime o inc ease i s e ec i eness, bu i hey wish o do i hey a e ee o do so as long as hey do no y o impose ha egime on o he non-eu ozone EU na ions. On 13 Sep embe 2004 he ECB’s Chie Economis , O ma Issing, commen ing on he Commission’s a emp o elax he exis ing ules, said: ‘Wi hou he exis ence o a c edible h ea o sanc ions, he pac is losing i s bi e. As a esul he cu en si ua ion is in ole able.’ The B i ish public ha e no wish o emb ace ull poli ical union and e use, igh ly, o belie e poli ical leade s’ eassu ances ha he wo issues – poli ical union and he eu ozone – a e unconnec ed. So a , hose ese a ions, bo h poli ical and economic, ha e o es alled any a emp o ake he Uni ed Kingdom in o he eu o. The public suspec , co ec ly, albei in a ague way, ha o make EMU wo k poli ical union is necessa y. They suspec also ha he same poli icians a e misleading hem when hey p e end ha his new Eu opean Cons i u ion, on which again he poli icians ha e been o ced o concede a e e endum, does no ca y wi hin i some pa ing echniques o b ing abou poli ical union. The public a e igh o be suspicious. On he ace o i eu o membe ship and he new Cons i u ion a e di e en issues on which i is possible o ake di e en posi ions. This is why New Eu ope, while Fo ewo d xxiii commen ing on he Cons i u ion, has kep o he eu o as he co e campaigning issue and no emb aced he campaign agains he Cons i u ion. Bu i we a e o a oid ull poli ical union i is i ally impo an ha we e ain he independen conduc o o eign policy as a means o de e mining so e eign s a us. In ha con ex i is ele an o economic a gumen s, oo, o conside he p oposed new Cons i u ion. In my judgemen he Cons i u ion ails o ully p o ec ou abili y o conduc an independen o eign policy o e he nex ew decades. The es ablishmen o a new pos o EU Minis e o Fo eign A ai s will p obably pa e he way o e en ually es ablishing an EU Minis e o Economic A ai s. The Cons i u ion ails o make clea a p ecise delimi a ion o compe ence be ween he membe s a es and he Eu opean Union o e o eign policy, and ha is also he case o economic policy. The e will be enewed a emp s o gi e he Eu opean Union powe o e social secu i y and ax policy, no helped by he accep ance o wide- anging cons ain s by he Eu opean Union – h ough he language o coo dina ion in he T ea y – o e employmen policies and social policies. The isk – by a quali ied majo i y o e on he Council – ha he P esiden o he Eu opean Council could be double-ha ed wi h he ole o he P esiden o he Commission is he single mos dange ous po en ial powe in he new Cons i u ion. The go e nmen asse in hei Whi e Pape ha his could no happen, bu his is no he iew o o he s; o example, he Du ch go e nmen has speci ically old hei pa liamen ha i is bo h desi able and legally possible o double-ha he wo pos s. I i is done his would in e ec c ea e, by he backdoo , a poli ical union. Ensu ing ha he B i ish public iew emains ‘Yes o he EU, no o he eu o’ will be g ea ly helped i he le keeps he main enance o economic g ow h as high on i s poli ical agenda as i has in he pas . I do no p e end ha ha ing ou own cu ency is he only ac o in a g ow h agenda o B i ain, bu i emains as a as he eye can see a i al ing edien . I also belie e ha he social Eu ope, which he igh – pa icula ly in he Uni ed Kingdom – dislikes, can, i well judged, ein o ce indus ial s abili y and compe i i eness. I hope ha he new Commission unde he o me Po uguese P ime Minis e , José Manuel Ba oso, will demons a e he inne cohe ence and he con idence o concen a e on he all-impo an Lisbon agenda o economic and ma ke e o m ha does aim o he igh balance be ween social and compe i i e agendas. The e is no u gen need o a new Cons i u ion. The T ea y o Nice did all ha was i al o handle he g ea ly- o-be-welcomed enla gemen . The weigh ed o ing o mula ag eed hen is now o be changed by he new Cons i u ion, and his we a e cynically old by Gisca d d’Es aing was done in pa o make i less likely ha o he coun ies would o e o Tu key o en e he Eu opean Union in iew o i s la ge and g owing popula ion. The Eu o G oup did no wai o he Cons i u ion bu in Sep embe 2004 appoin ed one o hei numbe , he Luxembou g P ime Minis e , o chai he Eu o G oup o wo yea s. This immedia ely p o oked he F ench Chai man o he ECB o hi back saying, ‘I am e iden ly M Eu o’. I he Eu opean Council eally does wan o gi e up he six- mon h o a ing p esidency o he Council, i can appoin one o i s own membe s o chai he Council o wo yea s along wi h he g ouping o coun ies holding he 2Philip Whyman, Ma k Baimb idge and B ian Bu ki p o-Eu opean a he ime o he 1975 Re e endum on con inued membe ship, whils leading membe s o he Labou Pa y campaigned on bo h he ‘Yes’ and ‘No’ sides, wi h many o he con ibu o s o his book aking di e en iewpoin s. Mo eo e , as ecen ly as 1987, he o icial policy o bo h wings o he B i ish labou mo emen suppo ed wi hd awal om he Eu opean Union. Thus, a his o ical e iew o he pos -wa pe iod demons a es ha he e has been a consis en ‘p og essi e’ le c i ique o B i ain’s ole wi hin Eu opean in eg a ion. This book ocuses upon one mani es a ion o his ‘p og essi e eu oscep icism’, namely he a i udes o he le owa ds he cu en p ojec o c ea e an Economic and Mone a y Union (EMU) among pa icipa o y membe s a es o he Eu opean Union. Qui e simply, EMU is one o he mos a - eaching economic e o ms o he cu en gene a ion, and one ha he B i ish elec o a e will ha e he oppo uni y o endo se o ejec h ough a na ional e e endum, i he go e nmen o he day wan ed o apply o membe ship. In addi ion o he psychological impac o he in oduc ion o a new common eu ozone cu ency his ini ia i e would ha e a d ama ic impac upon he li es o B i ish ci izens. Ad oca es claim ha i would enhance compe i ion, h ough p ice anspa ency and comple ing he Eu opean Single In e nal Ma ke (SIM), he eby educing p ices o consume s and ensu ing a supe io alloca ion o esou ces as co po a e es uc u ing acili a ed a enewed global compe i i eness. The economic in as uc u e, mo eo e , has been es ablished o ocus upon he deli e y o low in la ion, and i is claimed ha his will esul in a supe io economic pe o mance o he UK economy. C i ics o UK pa icipa ion in EMU, in con as , poin o he combina ion o subs an ial ini ial ans e cos s and he dange o being apped wi hin a pe manen ly ixed exchange a e sys em, magni ied by he po en ially de la iona y impac o he mone a is -inspi ed ins i u ional and policy amewo k wi hin which he single cu ency has been in oduced. The ans e o signi ican economic policy ins umen s o he Eu opean Cen al Bank (ECB), designed o ope a e independen ly o all democ a ic in luence, has weakened he po en ial o na ional economic sel -go e nance, whils he a ge o p ice s abili y wi hou e e ence o all o he mac oeconomic goals is likely o unde mine p og essi e goals o ull employmen , social solida i y and he p omo ion o economic g ow h. Keynesian measu es a e u he cons ained by he S abili y and G ow h Pac (SGP), which places i m limi s upon budge de ici s and he eby es ic s he abili y o coun e - cyclical economic s a egy. This is qui e in en ional, based upon mone a is asse ions ha Keynesian economics no longe wo ks, i indeed i e e did. Howe e , p og essi e eu oscep ics a gue ha he loss o na ional economic au onomy, combined wi h he mul iple es ic ions ha EMU pa icipa ion places upon he pu sui o mac oeconomic policy, educes he scope o achie ing adi ional democ a ic socialis –social democ a ic objec i es. In sho , EMU membe ship, unde i s cu en ules and ins i u ional amewo k, would be an economic disas e o he UK economy, whils unde mining he democ a ic so e eign y o he B i ish people. The le and he eu o 3 The p og essi e eu oscep ical case es s, he e o e, la gely upon Keynesian a he han mone a is -neoclassical assump ions, so ha he ma ke economy is pe cei ed as expe iencing signi ican cases o ma ke ailu e and o cumula i e causa ion. Consequen ly, go e nmen in e en ion has he po en ial, i p ope ly di ec ed and accu a ely imed, o imp o ing economic pe o mance. P og essi e eu oscep ical economics he e o e ejec s he new classical assump ion o ime inconsis ency, which implies ha all go e nmen in e en ion wo sens hose ci cums ances i is in ended o imp o e, oge he wi h he mone a is belie in a long- e m equilib ium a e o unemploymen de e mined solely by labou ma ke ac o s. Mo eo e , i ejec s he iewpoin ha globalisa ion and he in e na ional ee low o capi al has ende ed na ional economic policy ins umen s impo en , so ha i is di icul (i no impossible) o main ain a dis inc i e mone a y policy and pu sue exchange a e managemen . I his we e ue, ying economic policy wi hin he mone a is EMU amewo k would make li le di e ence, since go e nmen au onomy would ha e al eady been e ec i ely e oded by he ex e nal economic en i onmen . The con ibu o s o his book clea ly ejec his iewpoin and base hei al e na i e ision upon ac i e go e nmen mac oeconomic policy, whe he wi hin a na ional o e o med sup a-na ional amewo k. In e ms o he poli ical ision exp essed by he p og essi e eu oscep ics ea u ed in his olume, he p edominan a gumen s ocus upon he impo ance o democ acy and so e eign y. The na ion s a e is seen as he bes a ailable means o empowe ing B i ish ci izens o de e mine hei own social and economic de elopmen . The EU is c i icised as exhibi ing a democ a ic de ici , whils he s a us o i s legi imacy, being based upon in e na ional ea y, claims p edomi- nance o e na ional sel -de e mina ion in hose a eas ha ha e been ceded o sup ana ional compe ence. The endency o he EU Commission o c i icise Go don B own’s cu en spending plans, despi e B i ain’s op -ou om ull membe ship o EMU, demons a es he dilemma nea ly: whe he he democ a ic le should p io i ise he egene a ion o public se ices o submi o he budge es ain s imposed as an in eg al ea u e o pa icipa ion in EMU. This book con ains con ibu ions om leading academics, ade union leade s and p ominen poli icians bo h om he Labou Pa y and he wide p og essi e le in B i ish poli ics. The ad an age p o ided by ea u ing di ec con ibu ions om he selec ed g oup o indi iduals a ises om he oppo uni y o compa e and con as hei a gumen s, assump ions and p o e ed al e na i es. Howe e , in e es ing hough he (some imes sub le) di e ences in emphasis p o e o be, he signi ican ea u e ha a ises om eading his olume is he deg ee o which he con ibu o s sha e a common pe spec i e ela ing o he impo ance o democ a ic sel -de e mina ion, a p e e ence o na ional economic managemen , o a leas he impo ance o secu ing subs an ial e o m o EMU’s policy and ins i u ional amewo k be o e sup ana ional collabo a ion becomes compa ible wi h p o- g essi e democ a ic socialis –social democ a ic objec i es. 4Philip Whyman, Ma k Baimb idge and B ian Bu ki Book ou line The book is (loosely) di ided in o h ee hema ic sec ions: i s , con ibu ions p ima ily conce ning he economics o a single cu ency; second, employmen and social aspec s; and, inally, issues o so e eign y and poli ical de e mina ion. In he o ewo d, Da id Owen p o ides a unique pe sonal insigh in o he de elopmen o he B i ish le ’s a i ude owa ds Eu opean mone a y in eg a ion. He commences by e iewing he ela ionship be ween adminis a ions since he 1920s and a ious exchange a e mechanisms, e alua es he ope a ion o EMU o da e and concludes ha ‘ he e is a long way o a el be o e he eu ozone econ- omies con e ge’. When analysing he u u e de elopmen s wi hin he Eu opean Union he no es, i s , he impo ance o sepa a ing he poli ically ocused Cons i- u ion om he economics o he eu ozone; second, ha he agenda o ‘social Eu ope’ is essen ial o ein o ce economic s abili y and compe i i eness. Finally, he welcomes he widening o EU membe ship o 25 coun ies. Owen’s o e all conclu- sion is ha ‘i would be be e o concen a e on making he exis ing ea ies . . . wo k mo e e ec i ely’. This would pe mi he EU o ‘g adually build i s own p agma ic consensus om he g ound’ a he han ‘accep a new, mo e highly cen alised and unce ain cons i u ional model o an al eady s ained and unse led Union in which many o i s ci izens a e al eady showing hei poli ical discon en ’. B yan Gould, who has obse ed he deba e wi hin he B i ish le om bo h nea and a , con ibu es he p e ace o his edi ed collec ion. Gould clea ly s a es his iew ha ‘as a policy issue, he eu o poses eal challenges, and eal oppo uni ies, o he le ’. He hen ou lines he key a gumen s ega ding he di icul ies o adop ing he eu o, oge he wi h he wide implica ion ‘ ha he Uni ed Kingdom’s decision on he eu o is impo an o Eu ope’ since i could ‘poin he way o a be e economic u u e o he Eu opean Union as a whole’. In pa icula , Gould emphasises he e y eal implica ions o economic managemen and he ine i able p essu es o poli ical union. The chap e by Andy Mullen, p o ides an in o ma i e backg ound o he la e con ibu ions h ough i s his o ical summa y o he changing a i udes and policy posi ions wi hin he B i ish Labou mo emen . Any s udy o con empo a y eac ions o Eu opean in eg a ion can only sa is ac o ily seek o analyse his phenomenon i placed in o a his o ical con ex , whe eby labou mo emen a i udes ha e oscilla ed sha ply om undamen al suppo o EU membe ship o ou igh opposi ion and subsequen ly o enewed, albei hesi an , en husiasm. Thus, he Labou Pa y opposed EU membe ship be ween 1971 and 1974, and again be ween 1980 and 1987, al hough, wi h he excep ion o Michael Foo , he pa y leade ship emained suppo i e o con inued EU membe ship h oughou mos o his pe iod. The ade union mo emen , howe e , emained la gely c i ical owa ds EU membe ship h oughou his en i e pe iod, un il he amous 1988 speech by Jacques Delo s o he TUC Cong ess p o oked a comple e e e sal. Subsequen ly he TUC, oge he wi h a numbe o leading indi idual unions, ha e been a he o e on o ad oca ing suppo o Eu opean in eg a ion. The le and he eu o 5 The second ea u e a ising om Mullen’s chap e ela es o he na u e o he many a gumen s o ged du ing he Eu opean deba e 30 yea s ago and hei con inued ele ance o he con empo a y deba e o e B i ain’s u u e ela ionship wi h Eu ope. Mullen s a es ha ‘ he undamen al issue is whe he he ongoing p ocess o Eu opean in eg a ion [ owa ds he objec i es o e e -close union] assis s o hinde s he ad ance o socialism’. In o he wo ds, he ques ions ha equi e an answe a e undamen al. Should p og essi e mo emen s in B i ain a ou a na ional o sup ana ional economic and poli ical s a egy? Is Eu opean in eg a ion he necessa y p e equisi e o he c ea ion o a p og essi e Eu opean s a egy capable o egula ing globalisa ion in such a way as o p omo e he in e es s o wo king people and hei amilies? O is he en i e p ojec designed acco ding o p o-ma ke , mone a is p inciples, and he e o e inconsis en wi h adi ional p og essi e-le objec i es, such as ull employmen , economic demo- c a isa ion and de eloping a wel a e s a e designed o decommodi y ci izens and p o ec he ulne able om he wo se excesses o ma ke de e mina ion? Many o hese hemes a e explo ed in g ea e de ail in he subsequen chap e s. The i s sec ion o he book seeks o p o ide a b oad o e iew o he key issues conside ed signi ican in e ms o hose p og essi e economis s who exhibi scep icism owa ds he bene i s o B i ish pa icipa ion in EMU. A i udes a y be ween hose who conside ha membe ship o he eu o can be compa ible wi h p og essi e objec i es i necessa y s uc u al and policy e o ms a e comple ed, and hose whose analysis leads hem o conclude ha pu sui o a na ional, p og essi e s a egy would p oduce supe io esul s. Jona han Michie highligh s he mone a is na u e o he Maas ich supe - s uc u e designed as a undamen al ea u e o EMU, in ended o empowe capi al a he expense o na ional go e nmen . EMU he e o e ep esen s one elemen o a neo-libe al s a egy o ‘ oll back’ he s a e. I has caused pa icipa o y membe s a es o pu sue de la iona y policies o mo e han a decade, wi h he esul ing high unemploymen and ising inequali y eminiscen o he disas ous e u n o he Gold S anda d in he 1920s and he esul ing G ea Dep ession. Rigidi y in economic ules c ea es di e gence in he eal economy, which gene a es social ensions and aises u he ques ions ha democ a s canno igno e. Hence, Michie concludes ha : Unless cu en Eu opean economic policy is eo ien a ed owa ds he objec i e o ull employmen . . . a he han being s uck on he myopic conce n wi h ze o in la ion, he ou e o wa d mus once again be based on independen na ional g ow h s a egies which would no only allow coun ies o help hemsel es, bu by doing so would help each o he . Philip A es is and Malcolm Sawye join Michie in p o iding a de ailed c i ique o he Maas ich e sion o EMU. They a gue ha he exis ing mone a is e sion o mone a y union is a om an ine i able consequence o es ablishing a common cu ency. The e o e he Eu opean sys em could ha e been designed qui e di e en ly. In pa icula , hey highligh he undemoc a ic ECB wi h i s oo limi ed 6Philip Whyman, Ma k Baimb idge and B ian Bu ki policy emi and inadequa e (sole) policy ins umen o in e es a es. Conse- quen ly, A es is and Sawye emphasise he ‘woe ul lack o ins i u ions and policies ope a ing a Eu opean le el o suppo he de elopmen o a success ul Eu opean economy’. Wi hou signi ican e o m, he au ho s conside ha pa icipa ion in EMU is unaccep able since i mi iga es agains he main enance o ull employ- men and he achie emen o p og essi e economic objec i es. Jane Bush concu s wi h he analysis p o ided in he p e ious chap e s h ough he iden i ica ion o he mone a is o hodoxy ha has domina ed Eu ope as he main cause o he sluggish g ow h and high unemploymen ha has plagued many con inen al Eu opean economies o mo e han a decade. Mo eo e , Bush iews EMU as ep esen ing ‘a ba e ing am owa ds ee ma ke economics’, and poin s o in e na ional p eceden s, mos no ably in Scandina ia, whe e i is he p og essi e o ces who oppose membe ship o EMU on he basis ha i h ea ens adi ions o gene ous social wel a e and labou ma ke p o ec ion. Bush concludes ha he e is ‘no p ospec ’ o success ul e o m o he SGP and he c ea ion o an ac i e ede al iscal policy. The e o e, o p og essi e economis s, Bush a gues ha EMU is a ally lawed and he combina ion o ‘con inued low g ow h, economic ins abili y and poli ical ensions will w eck he sys em in he yea s ahead’. Paul O me od adop s a di e en pe spec i e, seeking o examine EMU om he posi ion o a p ospec i e membe o he eu ozone; wi h pa icula emphasis placed upon less de eloped na ions om eas e n Eu ope, who ha e s uggled o comple e he ansi ion om quasi-command o ma ke economy. Acco ding o O me od’s analysis, EMU ein o ces cen alising endencies wi hin he EU, he eby exace - ba ing he lack o democ a ic alida ion; many o he key economic decisions a e aken by poli ical eli es, cen al banke s insula ed om democ a ic in luence and senio manage s o la ge co po a ions. Each o hese g oups has bene i ed om he EMU p ocess, ye discon en wi h he emo eness o decision-making p ocesses con inues o inc ease, as measu ed by he elec o al pe o mance o a numbe o poli ical pa ies ac oss he EU membe s a es. O me od singles ou he ECB o pa icula c i icism, sugges ing ha he sole economic ins i u ion es ablished o sus ain he eu ozone has been ‘designed o igh yes e day’s ba les’, due o i s obsession wi h in la ion and neglec o all o he economic objec i es. The chap e by Ma k Baimb idge builds upon his c i ique by p o iding a de ailed analysis o he ECB, in e ms o i s objec i es, ins i u ional s uc u e and policy e ec i eness. Ha ing no ed ha he Eu opean Union delibe a ely se ou o c ea e he mos independen cen al bank in he wo ld – no doub in luenced by he li e a u e claiming ha cen al bank independence om poli ical in luence acili a es i s an i-in la iona y policy – Baimb idge de elops a de ailed c i ique o his app oach, lis ing inconsis encies in he li e a u e and he likely hind ance o wide mac oeconomic policy coo dina ion. Thus, in conclusion, Baimb idge sugges s ha he con inued exis ence o an independen ECB would hampe he ealisa ion o a p og essi e economic s a egy, since i would ‘ensu e ha mone a is s emained in powe i no in o ice, because i would s ee he economy by inancial indica o s o he de imen o he eal economy’. The Gua dian’s Economics Edi o , La y Ellio , p o ides a sho , pi hy The le and he eu o 7 commen a y upon he inadequacies o he cu en EMU design and he need o he p og essi e le o pu sue an al e na i e app oach. Scep icism, a gues Ellio , is ‘ he bea ing hea o democ acy’, and he e o e he le should edisco e i s na u al endency o mis us he agenda se by poli ical and economic eli es by de eloping a adical al e na i e o he mone a is -domina ed EU economic amewo k. Ellio a gues ha hose on he le who o e hei suppo o EMU, on he basis ha i is pa o a package leading owa ds a ‘social Eu ope’, a e ‘li ing in cloud-cuckoo-land’, since he ECB and EU Commission ha e, o a numbe o yea s, consis en ly ejec ed an expansiona y mac oeconomic pla o m o one based upon labou ma ke lexibili y and supply-side e o m. Ul ima ely, Ellio sugges s ha he eal choice lies be ween a p og essi e-le c i ique o con em- po a y Eu opean economic policy, based upon he impo ance o ac i e indus ial policy and mac oeconomic managemen , and a igh -o -cen e al e na i e, ocused upon ex ending Tha che ism ac oss he EU. The inal pape in he i s sec ion concludes wi h a chap e by he edi o s, which seeks o de elop a pos -Keynesian analysis o he EMU. Whyman e al. a gue ha membe ship o he eu o equi es he sepa a e o mula ion o money policy om na ionally de e mined iscal policy, leading o a esul an lack o policy coo dina ion. . . . The esul an slow-g ow h, high-unemploymen ou come will be u he exace ba ed by he ans e o mone a y policy o a Eu opean Cen al Bank. In pa icula , hey no e he ‘incompa ibili y be ween he mone a is model, upon which EMU is cons uc ed, and he possibili y o c ea ing an al e na i e economic s a egy g ounded in pos -Keynesian adi ion’. A pos -Keynesian amewo k is de eloped h ough discussion o disequilib ium and cumula i e causa ion; inc easing e u ns o scale and economic g ow h; agg ega e demand, ull employmen and ou pu capaci y; socialisa ion o in es men , oge he wi h he in e ela ionship be ween demand and supply side. F om his s andpoin ‘in o de o implemen pos -Keynesian economic policies, he Uni ed Kingdom needs o a oid he uni o m mone a y policy and he cons ain s upon budge a y measu es imposed by he adop ion o a single EU cu ency’. The second sec ion o he book is conce ned wi h he impac o EMU upon employmen and indus ial ela ions. The i s con ibu ion, made by B ian Bu ki , examines he widely held pe cep ion ha he eu o should be emb aced because i would enable he Uni ed Kingdom o enjoy he bene i s o pa icipa ing in he Eu opean Social Model (ESM). Howe e , Bu ki a gues ha he weigh o e idence om social policy esea ch is ha such an assump ion is p oblema ic. Fou di e en kinds o wel a e s a e ha e been iden i ied wi hin he Eu opean Union; o which o hese models, does he ESM ela e? The adi ional ESM equi es la ge wel a e expendi u e backed by public suppo o a posi i e s a e p esence in social policy, bu ensions exis wi hin he model om a democ a ic socialis pe spec i e. These a e su icien ly se ious o unde mine cen e-le a gumen s o UK membe ship o he eu o. A bes he ESM p o ides a numbe o 8Philip Whyman, Ma k Baimb idge and B ian Bu ki mino mic o pension and wo kplace bene i s, bu om wi hin a ailing mac o amewo k. Agg ega e demand managemen , a he han supply-side ‘ e o ms’ ha impose he cos s o s uc u al adjus men upon he mos disad an aged ci izens is he key o c ea ing a u u e socially inclusi e communi y. The chap e by Ma hew McG ego e iews he po en ial impac upon he wel a e s a e om eu o membe ship, ocusing upon he majo se ious law: he o e s. Labou o e s ha e consis en ly opposed he Uni ed Kingdom’s membe - ship o he eu o and show no sign o changing ha s ance. The answe ela es o wo king-class o e s unde s anding ha he economic e ec s o joining he eu o a ou weigh any poli ical conside a ions. The lexibili y ha economies need has, in Eu ope a leas , been based on egional and na ional planning accompanied by iscal and mone a y policy. In he eu o, hese le e s a e aken away and go e n- men s a e unable o eac quickly and e ec i ely. I is jobs, public se ices and wel a e ha Labou o e s a e in e es ed in, and i is he jobs, public se ices and wel a e policy sphe es ha o e he mos con incing case o s aying ou o he eu o. Vo ing ‘yes’ would lead o high unemploymen and low g ow h, whils o ing ‘no’ would p o ec he ad ances he Labou go e nmen has won and keep ou abili y o con inue building ou co ne o social Eu ope secu e. Labou o e s a e agains joining he eu o because i is no in he economic in e es s o people in his coun y. The nex con ibu ions come om indus ial ela ions p ac i ione s. Fi s ly, Joe Ma ino, he Gene al Sec e a y o he Bake s, Food & Allied Wo ke s Union (BFAWU) no es ha ade union suppo o Eu opean in eg a ion is based la gely upon he pe cep ion ha i was p e e able o he Tha che ism o he la e 1980s. Howe e , Ma ino poin s o he ac ha many o he an icipa ed ad an ages a e suscep ible o shi s in key pe sonnel in he EU Commission and he balance o poli ical powe ac oss he EU membe s a es. Thus, such social gains as ha e ac ually been made a e being wa e ed down by ecen ini ia i es championed, among o he s, by New Labou . Ra he like he ‘i e e sible’ gains umpe ed by he 1974 Labou Pa y mani es o, a neo-libe al d i in economic app oach h ea ens he modes social ad ances secu ed by he Eu opean Union. Ma ino u he sugges s ha he Eu opean Union a ou s he in e es s o capi al a he expense o wo ke s, and his is likely o become mo e appa en wi h he es ablish- men o EMU and as employmen p o ec ion is g adually disman led in a ou o lexible labou ma ke s. This chap e is complimen ed by ha o Doug Nicholls, Gene al Sec e a y o he Communi y and You h Wo ke s Union (CYWU) who a gues ha i is ime o ade unions o econnec wi h hei oo s in he democ a ic s uggle and ejec he EU al oge he . The d i e owa ds one legal and poli ical en i y unde one cu ency and cons i u ion has eached a c oss oads. These de elopmen s a e no socialis , no can hey be subjec o a p og amme o e o m om wi hin by socialis s. Whils ade unionis s ha e always suppo ed o he s in hei s uggles o na ional independence, we ha e been slow o apply his p inciple o ou sel es. I he e o e comes as a shock o ecognise ha we a e now being aken o e , wi h an ex e nal powe seeking o emo e ou na ional powe s and democ a ic s uc u es. Much o he slo enly hinking in he ade unions ela es o he seduc i e illusions o Eu opean legisla ion. The gene al p agma ism o ade unionis s, bo n o The le and he eu o 9 con inually nego ia ing be ween a ock and a ha d place, has dulled he sense o wha could eally be achie ed: huge capi al ese es o e-in es in manu ac u ing enewal and public se ices; he abili y o plan ou economy o ou sel es; an independen ene gy policy; go e nmen p ocu emen ha is exclusi ely B i ish based; employmen laws ha a e egula ed o i ou ci cums ances; axes and in e es a es le ied o sui ou pace o change. A hi d ade union Gene al Sec e a y, Billy Hayes o he Communica ion Wo ke s Union (CWU), a gues o he de elopmen o a le s a egy in Eu ope compa able o he ype o hegemony ha he neo-libe als ha e gained in he Uni ed S a es o Ame ica. The p ac ical ques ion is how o secu e he mos a ou able de elopmen o he EU in he con ex o con ending in e na ional o ces. Un o una ely, he le c i ique o he single cu ency has ye o sugges an al e na i e in which ex ended capi al ep oduc ion can be demons a ed. Whils de ending he ‘social gains’ o he EU he le has ye o demons a e wha pan- Eu opean economic policy can deli e he ma e ial basis o sus aining hese gains. A le s a egy would s a om he needs o hund eds o millions o people in Eu ope and billions ac oss he plane ; i s , o ou line an al e na i e economic policy o neo-libe alism; second, a la ge expansiona y economic block is an essen ial p econdi ion o a ‘social Eu ope’; hi d, o be a de ende in Eu ope o de eloping coun ies agains he Uni ed S a es; and, inally, o seek g ea e in eg a ion and coo dina ion o assis he s uggle and needs o he wo ke s and opp essed. Philip Whyman documen s he shi in B i ish ade union policy om opposing many aspec s o Eu opean in eg a ion owa ds en husias ic suppo o a ‘social Eu ope’ and subsequen accep ance o EMU. Whyman’s e alua ion o his shi sugges s he exis ence o a basic con adic ion be ween he eali y o EMU, i s mone a is amewo k and he p og essi e objec i es ha he ade union mo e- men belie es can be ad anced by suppo o EMU. Whyman poin s owa ds he ne cos o EMU membe ship, due o i s de la iona y in as uc u e and es ic ions upon coun e -cyclical policy, oge he wi h es ic ions upon public sec o expendi u e and he likely de e io a ion in public sec o p o ision and ela i e public sec o pay. Mo eo e , he no es he de e mina ion o leading igu es in he ECB, EU Commission and, no leas , he cu en B i ish Labou go e nmen , who ha e ejec ed he ‘old social model’, o achie e labou ma ke lexibili y. Whyman concludes ha he ade union case o suppo ing EMU is ‘ a ally lawed’, and ha he B i ish ade union mo emen should de elop an al e na i e s a egy o secu e i s goals – ei he h ough ba gaining wi h he Eu opean Union o acili a e necessa y s uc u al e o ms o ia he emphasis upon a na ional basis o social and economic policy. This sec ion concludes wi h a chap e by Ma hew Wa son, who no es he endency o he le o desi e he c ea ion o a ‘social Eu ope’ o coun e he ee ma ke globalisa ion o he Ame ican a ie y. Howe e , Wa son sugges s ha , in p ac ice, i is mo e impo an o de end na ional models and ha a simple ‘Eu ope e sus globalisa ion’ dicho omy is based upon he unjus i iable assump ion ha mos aspec s o Eu opean in eg a ion a e p og essi e in na u e, whe eas in eali y hey ha e ended o bind he abili y o na ion s a es o egula e capi al. Mo eo e , 10 Philip Whyman, Ma k Baimb idge and B ian Bu ki Wa son a gues ha EMU will cause a shi in he go e nance o Eu opean i ms, inc easing he impo ance o capi al ma ke s and diminishing he in luence o banks as he main sou ce o in es men inance. This, Wa son claims, will encou age he g ow h o sho - e mism and he eby unde mine he abili y o i ms o sus ain hei elemen o he Eu opean social ma ke app oach, whils he SGP squeeze upon public spending means ha he s a e will be unable o compensa e o his educ ion in social p o ec ion. The inal sec ion o he book is conce ned wi h poli ical issues o democ a ic de e mina ion and so e eign y. He e, a a ie y o academics and p ominen poli icians discuss he likely impac o EMU upon he goals pu sued by p og essi e- le poli ical mo emen s. Fo example he Eu opean Policy o he G een Pa y has changed signi ican ly o e ime. The sho - e m objec i e o he Ecology Pa y (1975–85) was wi hd awal, whils i s long- e m objec i e was he c ea ion o a ede al ‘Eu ope o Regions’. In 1988 he G een Pa y e e sed i s wi hd awal policy o one o ‘ e o m om wi hin’, ha is, main aining membe ship while seeking o undamen ally e o m he EU. In ligh o his, Sco Ca o de elops a ‘G een’ c i ique o EMU, which ocuses p ima ily upon i s o igins as a esul o p essu e om ‘big business’ – in ended o ein o ce ends owa ds globalisa ion, he expansion o ee ade and p omo e he ee mo emen o capi al. The esul is ha ansna ional co po a ions a e capable o ‘ba gaining’ wi h ade unions and go e nmen s o lowe axes (hence public spending) and labou s anda ds. Ins ead o pu suing his line, Ca o ou lines an al e na i e ision, based upon ‘localisa ion’ and u ilising mul iple ime-based local cu encies o keep liquidi y and pu chasing powe wi hin dep i ed communi ies. Ca o ejec s EMU on he basis o i s associa ion wi h e o s o suppo global- isa ion and inc easing in e na ional ade, since hese do no help he poo es na ions, whils being linked wi h o e -consump ion, obesi y and he des uc ion o he en i onmen . B ian Bu ki ad ances his deba e h ough combining he issue o EMU membe ship wi h B i ish democ acy and so e eign y. He a gues ha ede alis s a e seeking o ‘build a Uni ed S a es o Eu ope om he op down’, bu ha ‘such a p ocess o building a ede al union is he opposi e o how e e y o he na ion has been c ea ed’. In ela ion o he impac upon democ acy, Bu ki a gues ha ‘ he pa liamen a y democ acy de eloped and es ablished in B i ain is based upon he so e eign y o he people’ om which ‘ i e basic democ a ic igh s eme ge . . . each o which is undamen ally diminished by B i ish membe ship o he Eu opean Union’. This p ocess has commenced wi h powe s ‘subs an ially ceded o he Eu opean Union, whose Commission and Council o Minis e s a e nei he collec i ely elec ed no collec i ely dismissed by he B i ish people, o by he peoples o he EU coun ies pu oge he ’. In ela ion o so e eign y, Bu ki commen s: ‘such a majo change in he ope a ion o he UK cons i u ion ca ies p o ound implica ions o he exe cise o na ional so e eign y’. Fo example, he no ion ha so e eign y ‘can be “pooled” is an e iden absu di y. Powe can be pooled, bu au ho i y canno . “Pooling” is a dange ous concep , because i alsely implies ha au ho i y can bo h be e ained and gi en away simul aneously.’ The le and he eu o 11 The ollowing chap e , w i en by Aus in Mi chell MP, claims ha EMU ep esen s he la ges ‘assaul ’ upon na ional democ a ic so e eign y ha Eu o- pean in eg a ion has hus a in oduced. Claiming ha so e eign y is a ze o-sum game, and ha ‘pooling’ simply esul s in he loss o in luence o e key issues o na ional impo ance, Mi chell a gues ha EMU akes away he mos impo an economic ools om he con ol o B i ish pa liamen and people, whils he ac ha i is based upon in e na ional ea y means ha membe ship binds u u e go e nmen s o abide by policies o e which hey ha e only mino i y impac . Tony Benn’s con ibu ion o his book cen es upon a Bill he p esen ed be o e he House o Commons, in ended o es ablish a p og essi e ‘Commonweal h o Eu ope’. The p oposal was designed as a clea con as o he mone a is ins i u ional and policy s uc u e con ained in he Maas ich T ea y, which would unde mine democ a ic accoun abili y. The ‘Commonweal h’ al e na i e demon- s a es he ac ha p og essi e-le eu oscep icism can be compa ible wi h a s ong suppo o in e na ionalism. Ra he han Benn’s p oposals ep esen ing a na ow na ionalism, hey would ha e es ablished a coope a i e ela ionship be ween neighbou ing coun ies ha would be bo h ou wa d looking and acili a e ( a he han, like EMU, cons ain) p og essi e economic policy. The inal con ibu ed chap e o he book comes om he la e Pe e Sho e, who highligh s wha he desc ibes as New Labou ’s s a egy o downplaying he signi icance o EMU, e en hough i is, and always was, mean o be pa o a ansi ion owa ds a Uni ed (Fede al) Eu ope. Mo eo e , Sho e concu s wi h Mi chell ha EMU des oys he capaci y o u u e UK go e nmen s o use he powe o he s a e o in luence and con ol he UK economy. Ins ead, hese powe s ha e been ans e ed o unelec ed Eu opean ins i u ions, loca ed in B ussels and F ank u . In addi ion, e e ing o he loss o mone a y and exchange a e policy, Sho e concludes ha p og essi e-le policy equi es con ol o e he policy olls ha EMU akes away. The book concludes wi h a chap e by he edi o s ha seeks o ad ance he o e all a gumen and deba e con ained wi hin he con ibu ed chap e s. Whyman e al. a gue ha ‘ he na ional in e es o he Uni ed Kingdom equi es he implemen a ion o a long- un op -ou om EMU, gi en ha i s pa icipa ion is nei he ine i able no desi able’. In pa icula , ‘a decision o ejec pa icipa ion in he single cu ency would es o e o na ional go e nmen hose economic ins umen s essen ial o he managemen o i s economy’ such ha hey ‘will be able o pu sue a mo e balanced economic p og amme’. The i s policy ou lined conce ns ‘na ional mone a y au ho i ies seek[ing] a highe long- e m g ow h a e by p o iding a a ou able clima e o indus ial expansion h ough low in la ion. . . . Fiscal policy is used o suppo he mo e dominan mone a y policy by es aining in la iona y p essu es.’ A second policy in ol es he ‘ac i e use o iscal as well as mone a y policy’ whe eby ‘an app oach o his na u e would p obably be accompanied by an indus ial policy’. Finally, Whyman e al. ad oca e he e en ion o a na ional exchange a e policy since, ‘o e a pe iod he desi ed objec i es o exchange a e policy a e sho - e m s abili y and long- e m lexibili y. The dange s o a oid a e long- e m ixi y and sho - e m ola ili y.’ 18 Andy Mullen planning and public owne ship. Howe e , as Geo ge B own, he p o-EU Depu y Leade , explained, NEC suppo o he esolu ion was based on he unde s and- ing ha i such gua an ees we e ob ained, he pa y would conside joining he Eu opean Union. Once again, he pa y leade ship used he p ocedu al de ice o ‘quali ied accep ance’ o weaken an Annual Con e ence decision and o main ain he op ion o en y. Condi ional suppo o en y (1962–70) The 1962 Con e ence ag eed i e condi ions ha would ha e o be sa is ied be o e Labou would suppo en y: sa egua ding B i ain’s Commonweal h ade, ee- dom o pu sue an independen o eign policy, obliga ions o he EFTA, abili y o plan he economy and commi men o B i ish ag icul u e. Howe e , he NEC policy s a emen decla ed ha , i he i e condi ions we e sa is ied, B i ain should join. Du ing he Annual Con e ence deba e, Pa y Leade Hugh Gai skell s a ed ha en y would esul in he loss o Commonweal h ma ke s and ha ood p ices would ise. Poli ically, he wa ned ha he Eu opean Union was no me ely a cus oms union and ha poli ical in eg a ion would mean he end o 1,000 yea s o his o y. Howe e , B own a gued ha , on balance, he economic ad an ages o en y ou weighed he cos s, asse ing ha his iew in used he NEC policy s a emen . The policy o condi ional suppo o en y was he e o e biased in a ou o en y. Indeed, he pa y leade ship abled an amendmen in he House o Commons in No embe 1962 s a ing ha i would suppo en y, subjec o he i e condi ions. Howe e , F ench P esiden Cha les de Gaulle e oed B i ain’s i s applica ion in Janua y 1963. A he 1963 Con e ence, in an a emp o a oid pa y di ision be o e he gene al elec ion, he pa y leade ship ins i u ed he ‘ h ee-yea ule’ so as o p e en any deba e on he Eu opean Union. Consequen ly i was no deba ed again un il he 1967 Con e ence. The 1964 Gene al Elec ion mani es o s a ed ha al hough Labou would seek close ela ions wi h he Eu opean Union, i s p ima y esponsibili y was o he Commonweal h. Back in powe , P ime Minis e Ha old Wilson ea i med he commi men o he i e condi ions. Howe e , unde he in luence o p o-EU ci il se an s, Wilson began o shi in a ou o en y. In Decembe 1965 he accep ed A icles 25 and 46 o he Eu opean Con en ion on Human Righ s, e e sing he op -ou s nego ia ed in 1950. Taken as an execu i e decision using he Royal P e oga i e, nei he he Cabine no Pa liamen discussed he change, despi e i s cons i u ional signi icance. The 1966 Gene al Elec ion mani es o decla ed ha Labou would join he Eu opean Union, p o ided essen ial B i ish and Commonweal h in e es s we e sa egua ded. In No embe 1966 Wilson announced o he House o Commons ha Labou , ha ing e iewed i s Eu opean policy, had decided o explo e he po en ial o u he nego ia ions. Be ween Janua y and Ma ch 1967 B own and Wilson ou ed he Eu opean Union o mee ep esen a i es o he Six. The Eu opean Commission Vice-P esiden , Robe Ma jolin, published he EU The Labou Pa y and Eu opean in eg a ion 19 Medium Te m Economic Policy (MTEP) in Ma ch 1966. I s objec i e was o coo dina e membe s a es’ policies so as o ackle he egional, social and s uc u al inequali ies caused by in eg a ion. S ua Holland, economic assis an a he Cabine O ice, sen a memo andum o Wilson a guing ha he MTEP was Ma jolin’s a emp o ‘ge he F ench planning model adop ed by he EU’. Wilson was deligh ed, ‘because i mean ha Labou ’s Na ional Plan was no only compa ible wi h EU membe ship, bu could be ein o ced by he MTEP’ (Holland 1997: 2–3). A u he indica ion o Wilson’s shi was he Eu opean Technology Com- muni y (ETC) p oposal. In Ma ch 1967 Holland sugges ed ha Labou should e ise i s nego ia ing s a egy, ecommending ha i should suppo in e - go e nmen alism, endo se he MTEP and coope a e wi h he Six on ad anced echnology. Wilson subsequen ly sen Holland on a sec e mission o sound ou de Gaulle, who was amenable. In he mee ings ha ollowed, Wilson a gued ha an ETC ea y should be signed be o e any de ailed p og amme o coope a ion was ag eed, whils de Gaulle insis ed ha i should be c ea ed on he basis o speci ic p ojec s. Howe e , Wilson e used o make such a commi men . Re lec ing on his episode, Holland (1997: 10) concluded ha Wilson’s agenda was ‘classic Wilsonian sho - e mism. He appeased he igh by applying, and pleased he le by ailing in he a emp .’ In Ap il 1967 he Cabine o ed 13 o 8 o eopen nego ia ions. Labou subse- quen ly published a Whi e Pape se ing ou i s e ms. These included ansi ion a angemen s o he implemen a ion o he Common Ag icul u al Policy (CAP), plus sa egua ds on he balance o paymen s, Commonweal h ade and egional policy. In he House o Commons deba e ha ollowed, Wilson a gued ha , economically, indus y would p obably bene i om en y. Howe e , he acknowledged he p oblems posed by he CAP and he end o Commonweal h P e e ence. I was es ima ed ha he cos o li ing would inc ease be ween 2.5 and 3.5 pe cen , ha ood p ices would inc ease be ween 10 and 14 pe cen , and ha he ne cos o he balance o paymen s would be be ween £175 and £250 million pe yea . Poli ically, he dismissed he idea o a ede al Eu ope, whils , cons i- u ionally, he s a ed ha EU law would only ake p ecedence in ce ain a eas, claiming ha mos domes ic law would emain unchanged. Howe e , he conceded ha en y would in ol e he su ende o so e eign y, and ha , in u u e, B i ain would ha e o e ain om enac ing legisla ion inconsis en wi h EU law. Du ing he deba e 37 Labou MPs abled an amendmen opposing he Whi e Pape , a guing ha i ailed o uphold he condi ions laid down by he Annual Con e ence. Despi e a h ee-line whip, 35 Labou MPs o ed agains and 51 abs ained. Howe e , due o Conse a i e suppo , he Labou mo ion was app o ed by 488 o 62. B i ain’s second applica ion was o mally submi ed in May, wi hou a manda e om he Annual Con e ence. Du ing his pe iod an i-EU o ces es ablished he Labou Commi ee o he Fi e Sa egua ds on he Common Ma ke . B own se ou Labou ’s case o en y be o e EU ep esen a i es a a mee ing o he Wes e n Eu opean Union (WEU) in July 1967. He a emp ed o eassu e he 20 Andy Mullen Six ha he undamen al ea u es o he Eu opean Union would emain unchanged i B i ain joined by decla ing ha Labou was willing o accep he EU objec i es o economic and poli ical union. C i ically, only he p oblema ic issue o ag icul u e was ese ed o u u e nego ia ions. The NEC p esen ed a e ised policy s a emen o he 1967 Con e ence, s a ing ha he pa y’s conce ns abou en y had been allayed. The Annual Con e ence endo sed he policy s a emen by 4.1 million o es o 2 million, whils a esolu ion opposed o en y was de ea ed by 997,000 o es ou o 6 million, as was a ede alis esolu ion. Howe e , de Gaulle e oed B i ain’s second applica ion in No embe 1967. The 1969 Con e ence endo sed a Pa liamen a y Repo decla ing ha Labou was commi ed o en y and was eage o engage in u he nego ia ions. I adop ed an NEC policy s a emen decla ing ha he esul o any nego ia ions, and he inal decision, would be subjec o a pa liamen a y o e. The Annual Con e ence also ca ied a esolu ion con aining addi ional sa egua ds, on o eign policy, heal h and he wel a e s a e, which opposed he de elopmen o a nuclea -a med ede al Eu opean Union. Facing he possibili y o de ea , B own accep ed he esolu ion, subjec o quali ica ion. He s a ed ha he NEC would accep he esolu ion on he unde s anding ha he sa egua ds se ou in his WEU speech in July 1967 we e included in he esolu ion. C i ically, i should be ecalled ha he only issue ese ed o nego ia ion in his speech was ag icul u e; he e was no men ion o any o he sa egua ds. Labou published ano he Whi e Pape in 1970, conceding ha he conse- quences o en y would be e en mo e ad e se han he 1967 calcula ions. Food p ices, o example, we e expec ed o ise be ween 18 and 26 pe cen cumula i ely o e any nego ia ed ansi ion pe iod, compa ed o he es ima e o 10 o 14 pe cen in 1967. Ne e heless, he second leg o B i ain’s nego ia ions opened in Ap il, jus wo mon hs be o e Labou los he 1970 Gene al Elec ion. Labou ’s mani es o decla ed ha i would nego ia e om a posi ion o economic s eng h. Howe e , he mani es o con ained he eassu ance ha i sa is ac o y e ms could no be secu ed, hen B i ain could p ospe ou side he Eu opean Union. The NEC u ged he 1970 Con e ence no o change pa y policy jus because i was in opposi ion. I subsequen ly ea i med he decision o he 1969 Con e ence, and ejec ed a esolu ion ha was opposed o en y by 140,000 o es ou o 6 million. Opposi ion o en y on Conse a i e e ms (1971) The Conse a i es’ p incipal objec i e upon gaining o ice in 1970 was o secu e B i ish en y. I published a Whi e Pape in 1971 conceding ha ood p ices would ise and ha B i ain’s con ibu ion o he EU budge would become a bu den unless he CAP was e o med. Howe e , i neglec ed o men ion Economic and Mone a y Union (EMU), e en hough he Six had al eady pledged o c ea e a single cu ency by 1980. On he issue o so e eign y he e was delibe a e ob usca ion; he Whi e Pape s a ed ha he e would be no e osion o na ional so e eign y. The Labou Pa y and Eu opean in eg a ion 21 Labou held a Special Con e ence on he Eu opean Union in July 1971. A esolu ion pledging ha he NEC would p oduce a de ini i e esolu ion on en y, which he pa y could o e upon a he Annual Con e ence in Oc obe , was ca ied, whils an a emp o hold an immedia e o e was de ea ed. Al hough he Special Con e ence ag eed he sugges ed p ocedu e and ime able, he NEC p e- emp ed he Annual Con e ence by launching a ‘no o en y on To y e ms’ campaign. The 1971 Con e ence endo sed he policy ecommended by he NEC, namely opposi ion o en y on Conse a i e e ms, by 5 million o es o 1 million. An amendmen in a ou o holding a e e endum be o e joining was de ea ed by 4.2 million o es o 1.9 million, whils a esolu ion ad oca ing a Uni ed S a es o Eu ope was de ea ed by 3 million o es o 2 million. James Callaghan concluded he deba e on behal o he NEC and pledged ha , when elec ed, Labou would enego ia e he e ms. The Pa liamen a y Labou Pa y (PLP) ollowed he Annual Con e ence by o ing o oppose he e ms by 159 o 89. The House o Commons deba ed a Conse a i e mo ion in a ou o en y in Oc obe 1971. As a esul o a sec e alliance be ween he Conse a i es and he 69-s ong p o-EU wing o he PLP, 356 MPs o ed o en y wi h 244 agains in he inal di ision on 28 Oc obe . In Janua y 1972 he go e nmen signed he T ea y o Accession and published he Eu opean Communi ies Bill. The e we e 104 di isions du ing he Bill’s passage and, al hough go e nmen majo i ies ell o single igu es se e al imes, no one o e was los . Using he guillo ine measu e o expedi e i s passage, he Bill was passed on 17 Oc obe 1972. B i ain joined he Eu opean Union on 1 Janua y 1973. Renego ia ing he e ms (1972–74) Labou ’s a acks on he Conse a i e go e nmen ollowing accession ocused on he ac ha i possessed no manda e o en y, as he B i ish people had no been consul ed. Du ing his pe iod Tony Benn launched his campaign o a e e endum on en y. In Ma ch 1972, ollowing he F ench decision o hold a e e endum, he Shadow Cabine accep ed Benn’s p oposal by 13 o es o 11. In Ap il he PLP o ed 129 o 96 in a ou , p omp ing p o-EU Cabine membe s, including Roy Jenkins, o esign. The 1972 Con e ence ea i med he pa y’s opposi ion o en y, whils ag eeing a new policy o enego ia ing he e ms. The NEC policy s a emen lis ed he six issues upon which Labou would enego ia e: he CAP, he EU budge , powe s o e iscal, indus ial and egional policy, capi al con ols, he p o ec ion o Commonweal h in e es s and alue-added ax (VAT). The documen s a ed ha i enego ia ions we e success ul Labou would pu he decision o he people a a gene al elec ion o e e endum. The policy s a emen was adop ed by 3.4 million o es o 1.8 million. A esolu ion suppo ing a boyco o EU ins i u ions was ca ied by 3.3 million o es o 2.8 million, whils a esolu ion calling o a u u e Labou go e nmen o wi hd aw was de ea ed by only 118,000 o es ou o 6 million. Gi en he scale o opposi ion o he Eu opean Union wi hin he pa y, Wilson 22 Andy Mullen was conce ned ha he 1973 Con e ence would o e in a ou o wi hd awal. He w o e in his memoi s: ‘I had o lay my leade ship on he line, and made i clea ha I would esign and ace he Pa y wi h he elec ion o a new Leade i he NEC ecommended Con e ence o bind us o a policy o wi hd awal’ (Wilson 1979: 51). His h ea was e ec i e. The NEC suppo ed a esolu ion in a ou o a boyco and he holding o a e e endum, which was ca ied by 5.2 million o es o 945,000. Howe e , a esolu ion ad oca ing wi hd awal, ollowed by he cons uc ion o a socialis uni ed Eu ope, was de ea ed by 516,000 o es ou o 6 million. In Decembe he PLP o ed o boyco EU ins i u ions by 140 o 55. The Feb ua y 1974 Gene al Elec ion mani es o se ou Labou ’s objec i es o he enego ia ions: e o m o he CAP and EU budge , opposi ion o EMU, he e en ion o powe s o e he B i ish economy, he p o ec ion o Commonweal h in e es s and opposi ion o VAT ha monisa ion. Callaghan launched he enego ia ions in Ap il. The Oc obe 1974 Gene al Elec ion mani es o s a ed ha , wi hin 12 mon hs, a Labou go e nmen would gi e he people he choice, h ough he ballo box, on whe he o e ain membe ship o wi hd aw. The NEC suppo ed a esolu ion a he 1974 Con e ence insis ing upon balance in a u u e e e endum, in e ms o inance and media suppo , be ween he an i- and p o-EU campaigns. The esolu ion was ca ied. Howe e , a second esolu ion ad oca ing addi ional sa egua ds on capi al con ols, Commonweal h ade, de ence, ood subsidies, labou mo emen s, pa liamen a y so e eign y, public owne ship, axa ion and s a e aid was also ca ied, by a majo i y o 158,000 o es ou o nea ly 6 million. Wi hd awal (1975) Following he conclusion o he enego ia ions in Ma ch 1975 he Cabine o ed by 16 o 7 o accep he e ised e ms o membe ship. In Wilson’s absence, he Cabine also ag eed o allow minis e s o o e agains he go e nmen . The NEC o ed 18 o 11 agains he ou come o he enego ia ions, p omp ing Wilson (1979: 106) o h ea en esigna ion again. Policy-wise, he pa y leade ship and he NEC we e opposed, whils he PLP was spli . In Ap il a House o Commons mo ion in a ou o s aying in he Eu opean Union was ca ied by 396 o 170, mainly due o Conse - a i e suppo . On he Labou side, 145 MPs o ed agains , 137 o ed o and 33 abs ained. The pa y held ano he Special Con e ence in Ap il, whe e he NEC documen in a ou o wi hd awal was adop ed by 3.7 million o es o 1.9 million. Du ing he 1975 Re e endum, B i ain in Eu ope led he Yes campaign, while he Na ional Re e endum Campaign uni ed opponen s o he Eu opean Union. The Yes campaign enjoyed a numbe o c i ical ad an ages. I was suppo ed by he go e nmen , was backed by mos o he business sec o , he ci il se ice and he media, and ecei ed mo e money. Labou g an ed he Yes and No campaigns a o al o £125,000 o publici y. Howe e , he Yes campaign managed o aise an addi ional £1.8 million, whe eas he No campaign me ely secu ed an ex a £8,610. On 25June, 67.2 pe cen o ed Yes and 32.8 pe cen o ed No. Following he o e he PLP e e sed i s boyco and sen ep esen a i es o he EU ins i u ions. The Labou Pa y and Eu opean in eg a ion 23 Re o m o he EU (1976–79) The 1976 Con e ence deba ed he NEC policy s a emen on di ec elec ions o he Eu opean Pa liamen . The documen insis ed ha he e was no manda e o di ec elec ions, as i had no been men ioned du ing he 1975 Re e endum. I u he a gued ha he pa y should oppose such elec ions because he Eu opean Pa liamen cons i u ed a h ea o Wes mins e . I was ca ied by a majo i y o 4 million o es o 2.2 million. The 1976 Con e ence also endo sed a adical Keynesian p og amme, e med he Al e na i e Economic S a egy (AES). In Ap il 1977 Labou issued a Whi e Pape on al e na i e elec o al sys ems o Eu opean elec ions. I made no ecommenda ion and ag eed o hold a ee House o Commons o e. Following a se ies o di isions, MPs o ed by 321 o 222 o ejec p opo ional ep esen a ion in a ou o 78 single-membe cons i uencies. The Cabine me in July o discuss a policy pape p oduced by Da id Owen, which accep ed membe ship, ejec ed a Eu opean ede a ion and suppo ed enla ge- men . The pape was suppo ed by a majo i y o he Cabine . The 1977 Con e ence adop ed he NEC policy s a emen , which ea i med he pa y’s opposi ion o sup ana ionalism and e-emphasised he h ea posed by he Eu opean Union o i s indus ial s a egy. The policy s a emen ei e a ed he 1976 Con e ence decision o seek speci ic de oga ions om EU law on ene gy, egional and social policies, and anspo . I pledged o e o m he EU aid policy, he CAP and he CFP. I also pledged o oppose di ec elec ions, he EMS, EMU and ax ha monisa ion, including VAT. A esolu ion calling o he undamen al e o m o he CAP was ca ied. Howe e , ollowing a plea o main ain pa y uni y, he 1977 Con e ence ejec ed wo amendmen s, one o which called o B i ain’s wi hd awal om he CAP. I also ejec ed a esolu ion calling o ano he e e endum on membe ship, and emi ed a esolu ion in a ou o amending he 1972 Eu opean Communi ies Ac o es o e pa liamen a y sup emacy. In 1978 he Eu opean Council ea i med i s commi men o EMU, launching a new sys em o mone a y coo dina ion: he Eu opean Mone a y Sys em (EMS) and i s Exchange Ra e Mechanism (ERM). Callaghan (1987: 493) decla ed ha he ‘ a ou ed he gene al idea as likely o b ing mo e o de in o he cu ency ma ke s o Eu ope and he wo ld’. Howe e , he complained ha : ‘many people in he Labou Pa y emained suspicious o wha hey hough was oo close an en angle- men wi h Eu ope, and his, coupled wi h my own and he T easu y’s belie ha s e ling was oo high o make ou en y ad an ageous’ led him o ejec ERM en y. In Oc obe he NEC ejec ed he EMS by 16 o 9. The 1978 Con e ence ejec ed wi hd awal in a ou o a policy o e o m o he Eu opean Union. The Annual Con e ence ca ied a esolu ion calling o he nex Labou mani es o o include a commi men o amend he 1972 Eu opean Com- muni ies Ac so as o es o e pa liamen a y so e eign y. The esolu ion ejec ed EMU and suppo ed he e o m o he Eu opean Union. I was ca ied by 4.85 million o es o 1.64 million. Callaghan used he leade ship e o o e policy, so o en used by Wilson, o emascula e he policy decisions o he 1978 Con e ence when d a ing he 24 Andy Mullen mani es o o he 1979 Gene al Elec ion. I decla ed ha Labou would seek he undamen al e o m o he Eu opean Union. I suppo ed enla gemen , pledged o e o m he CAP and he EU budge , and p omised o amend, i necessa y, he 1972 Eu opean Communi ies Ac so as o sa egua d pa liamen a y so e eign y. Unde Benn’s leade ship he NEC d a ed he mani es o o he 1979 Eu opean elec ion. Ca ied by 19 o es o 4, i wa ned ha , in he absence o undamen al EU e o m, he pa y would adop a policy o wi hd awal. In he i s di ec elec ions o he Eu opean Pa liamen , h ee weeks a e Labou ’s gene al elec ion de ea , Labou gained 17 Membe s o he Eu opean Pa liamen (MEPs), compa ed o he Conse a i es’ 60 MEPs. Wi hd awal (1980–87) The Eu opean policies o he Annual Con e ence and he pa y leade ship con e ged unde Michael Foo . The 1980 Con e ence suppo ed a esolu ion decla ing ha he e had been no p og ess in e o ming he Eu opean Union and ha Labou should include a policy o wi hd awal in i s nex mani es o. The esolu ion was ca ied by 5 million o es o 2 million. A he 1981 Con e ence an a emp o in oduce a commi men o hold a e e endum be o e wi hd awing was de ea ed by 5.8 million o es o 1 million. The 1983 Gene al Elec ion mani es o duly included he pledge o wi hd aw, wi hin he li e ime o one pa liamen . The mani es o o he 1984 Eu opean elec ion acknowledged ha B i ain would emain a membe o he Eu opean Union o he e m o he nex Eu opean Pa liamen , bu pledged ha Labou would igh o ge he bes deal o B i ain wi hin i . I called o he undamen al e o m o he Eu opean Union, opposed he ceding o any addi ional powe s o he Eu opean Pa liamen , ejec ed he EMS and ese ed he op ion o wi hd awal. Howe e , i also included a 10-poin ac ion plan ha ecognised he po en ial con ibu ion o he Eu opean Union o Labou ’s p og amme. In he second di ec elec ion o he Eu opean Pa liamen , Labou gained 32 MEPs compa ed o he Conse a i es’ 45 MEPs. The Eu opean Commission’s plan o c ea e a Eu opean single ma ke by 1992 se ed o accele a e he p ocess o Eu opean in eg a ion. Conse a i e P ime Minis e Ma ga e Tha che suppo ed he c ea ion o a single ma ke , belie ing i would lead o a ee ma ke and a ee ade a ea. Wi h Labou opposed, he House o Commons o ed by 270 o 153 o inco po a e he EU Single Eu opean Ac in o B i ish law. Labou ’s 1987 Gene al Elec ion mani es o con ained no e e ence o wi hd awal, al hough i emained o icial pa y policy. Ins ead, i s a ed ha Labou ’s aim was o wo k cons uc i ely wi h he Eu opean Union o p omo e economic expansion and comba unemploymen . P o-membe ship (1988–) The a emp o change he pa y’s wi hd awal policy began in 1983, ollowing Labou ’s gene al elec ion de ea . Once again, Holland was ins umen al in The Labou Pa y and Eu opean in eg a ion 25 changing he pa y leade ship’s posi ion. The Ou o C isis P ojec , composed o economis s and Eu opean socialis pa y ep esen a i es, was ounded in 1981. The esul ing Eu o-Keynesian p og amme, known as he Eu opean AES, ecommended ha membe s a es should pu sue a policy o coo dina ed e la ion. Pa y Leade Neil Kinnock wished o suppo he p ojec as means o changing he pa y’s pe cep ion o he Eu opean Union. Holland ag eed o help Kinnock by p omo ing he Eu opean AES. He w o e an a icle o Kinnock, publish in New Socialis , he pa y’s jou nal, b ie ed he Socialis Campaign G oup and he T ibune G oup o Labou MPs, ob ained he suppo o John P esco , ex-leade o he Eu opean Pa liamen a y Labou G oup, and joined he NEC In e na ional Sub-Commi ee. Kinnock was also in luenced by John Ea well, his economic ad iso , and by John Smi h, he p o-EU Shadow Chancello . Ea well belie ed ha ‘ he collapse o he B e on Woods Sys em had led o a de la iona y bias’ and ha ‘an exchange a e sys em in Eu ope was he means o mi iga ing hese de la iona y e ec s’. He also belie ed ha ‘ he la ge scale and scope o Eu opean ma ke s could p o ide a s imula ing en i onmen o B i ish indus y, pa icula ly he inancial se ices’, ha is he Ci y o London.3 Kinnock la e decla ed ha ‘ he ejec ion o he wi hd awal policy by he o e s was clea and absolu e’. Howe e , ‘because an i-Eu opeanism was qui e deeply oo ed in pa s o he mo emen , pa icula ly he ade unions, he change had o be achie ed by deg ees a he han by a sudden shi ’. This was because ‘as Labou had al eady demons a ed, pa ies we e se iously in dange o c acking and hen c umbling o e he issue o Eu ope i he ma e was no handled wi h ca e as well as de e mina ion’.4 Kinnock’s chosen ehicle o changing pa y policy was he Policy Re iew, es ablished ollowing Labou ’s 1987 Gene al Elec ion de ea . Se en policy commi ees we e c ea ed, including he Mode n Wo ld Commi ee, which was esponsible o Eu opean policy. Commi ee membe Regan Sco e ealed ha Kinnock ‘packed he commi ee wi h p o-Eu opeans’ o achie e his ‘new policy o condi ional engagemen ’.5 The mac oeconomic commi ee conside ed he economic aspec s o Labou ’s Eu opean policy and was chai ed by B yan Gould. He was c i ical o he Ci y’s in luence o e economic policy, an opponen o he ERM and an a den de ende o he use o he exchange a e as an ins umen o policy. Howe e , ou manoeu ed by p o-EU membe s such as Go don B own, John Ea well and John Edmonds, Gould and his epo s we e sidelined. P o-EU o ces, ha ing secu ed Kinnock’s U- u n and ma ginalised po en ial opponen s, we e eady o change pa y policy. Thei oppo uni y came in 1988 when he Eu opean Commission P esiden , Jacques Delo s, add essed he T ades Union Cong ess (TUC). The big ade unions, commanding a majo i y o Cong ess o es and a ac ed o he p omise o a ‘social Eu ope’, e e sed he wi hd awal policy o he TUC. Th ee weeks la e hey o ed o change Labou ’s policy. The 1988 Con e ence endo sed he i s Policy Re iew epo , which suppo ed EU-wide employmen s anda ds plus he coo dina ion o membe s a es’ o eign, indus ial, egional and social policies. I also ca ied a esolu ion 26 Andy Mullen s a ing ha Labou , in conjunc ion wi h o he pa ies, should use he Eu opean Union o p omo e democ a ic socialism. A second esolu ion calling o a u u e Labou go e nmen o amend he 1972 Eu opean Communi ies Ac was emi ed. I had aken se e al yea s, bu he pa y leade ship had inally secu ed a p o- membe ship policy. In he pos -1988 pe iod, judged in e ms o Eu opean policy, he Annual Con e ence has been pa icula ly complian , consis en ly suppo ing he p o-EU posi ion o he pa y leade ship, as shown in Table 2.1. The end is e lec ed in he d ama ic all in he numbe o c i ical esolu ions and amendmen s submi ed o he Annual Con e ence in he pos -1988 pe iod (13) compa ed o he 1947–87 pe iod (187) (see Table 2.2). I is mani es in he dea h o c i ical speake s du ing Annual Con e ence deba es on he Eu opean Union: jus 10 in he pos -1988 pe iod compa ed o 199 in he 1947–87 pe iod (see Table 2.3). I is also e iden in he con as be ween he wo pe iods in e ms o he pa y’s discou se on Eu opean in eg a ion, illus a ed by Tables 2.4, 2.5, 2.6 and 2.7.The la e poin is discussed in mo e de ail below. Labou en e ed he 1989 Eu opean elec ion on a p o-EU pla o m, gaining 45 MEPs compa ed o he Conse a i es’ 32 MEPs. The 1989 Con e ence endo sed Table 2.2 Numbe o esolu ions and amendmen s on he EU submi ed by a ilia es o he Labou Pa y Annual Con e ence (1947–97)* Yea s Wi h- An i- Opposi ion wi hou Neu al Condi ional P o- Re o m Fede al- d awal EU sa egua ds, o opposi ion o suppo o EU o EU is om (a) EU ea ies EU EU (b) Te ms o en y/membe ship (c) Speci ic EU policies 1947–87** 30 66 91 19 14 29 2 36 1988–97 0 0 13 4 5 37 9 0 Sou ce: Labou Pa y Annual Con e ence Agenda. No es ** A ilia ed o ganisa ions include cons i uency Labou pa ies, socialis socie ies and ade unions. ** Does no include da a o he 1962 Con e ence, which is no a ailable. Table 2.3 Numbe o speake s and hei s ance on he EU du ing Labou ’s Annual Con e ence deba es (1947–2000) Yea s Wi h- An i- Opposi ion wi hou Neu al Condi ional P o- Re o m Fede al- d awal EU sa egua ds, o opposi ion o suppo o EU o EU is om (a) EU ea ies EU EU (b) Te ms o en y/membe ship (c) Speci ic EU policies 1947–87 53 59 87 14 26 80 2 23 1988–2000 0 3 7 1 1 93 2 0 Sou ce: Labou Pa y Annual Con e ence Repo . Table 2.4 P o-EU a gumen s du ing Labou ’s Annual Con e ence deba es (1947–87) A gumen s F equency ●EU p o ided B i ain wi h a bigge home ma ke 21 ●Socialis s and ade unionis s in he EU wan ed B i ain o join/s ay in 14 ●EU was in e na ionalism in ac ion 12 ●En y/membe ship would aise he B i ish s anda d o li ing 10 ●EU was a means o con ol mul ina ional companies 9 ●‘Socialism in one coun y’ was impossible 8 ●Wi hd awal was a dange ous policy ( isking he loss o jobs and ade) 7 ●En y/membe ship would inc ease economic g ow h a e in B i ain 7 ●B i ain would lose in luence ou side he EU 7 ●EU enjoyed be e wages and wo king condi ions han B i ain 6 ●EU ep esen ed B i ain’s des iny/ u u e 6 ●The e was no al e na i e o he EU; i was ine i able 4 ●EU p esen ed an oppo uni y o socialism 4 ●B i ain would bene i om EU egional and s uc u al unds 4 ●EU p o ided mo e aid o de eloping coun ies han B i ain 4 ●EU ensu ed peace in Eu ope 5 ●EU membe s a es enjoyed highe wel a e bene i s 5 ●B i ain was al eady pa o Eu ope; he key ques ion was wha so o Eu ope 4 ●T ea y o Rome was no opposed o economic planning, na ionalisa ion and s a e aid 4 ●EU helped o con ain B i ish na ionalism and xenophobia 4 ●Na ional so e eign y was an ou moded concep 3 ●EU was a ac ha needed o be accep ed 3 ●Commonweal h coun ies wan ed B i ain o join he EU/s ay in 3 ●Ma ke s o he Commonweal h and Eu opean F ee T ade Associa ion we e no su icien 3 ●B i ish home ma ke was no su icien 2 ●EU was no a h ea o na ional so e eign y 2 ●EU would enable B i ain o gain independence om he Uni ed S a es 2 ●EU membe s a es had highe le els o public owne ship han B i ain 2 ●B i ain would be poo e ou side he EU 2 ●En y/membe ship would lead o an inc ease in B i ish expo s 2 ●En y membe ship would bene i he B i ish wo king class 1 Sou ce: Labou Pa y Annual Con e ence Repo . Table 2.5 An i-EU a gumen s du ing Labou ’s Annual Con e ence deba es (1947–87) A gumen s F equency ●En y/membe ship esul ed in highe ood p ices 34 ●Common Ag icul u al Policy was damaging o B i ain 33 ●En y/membe ship wo sened B i ain’s balance o paymen s and ade de ici p oblems 33 ●EU was capi alis 28 ●P o-EU o ces eso ed o decei /p opaganda 27 ●EU unde mined pa liamen a y democ acy 25 34 Andy Mullen Eu opean and US models o capi alism. Those sec ions ha e he e o e e u ned o a posi ion o suppo ing a Eu opean socialis s a egy, as e ealed in he adically al e ed discou se o Labou Pa y deba es on he Eu opean Union om 1988 (Tables 2.6 and 2.7). In addi ion o hese gene alisa ions, a numbe o speci ic ac o s can be ad anced o explain he ‘ ec onic’ shi om a p o-Eu opean in eg a ion posi ion o an an i-EU s ance in he 1960s and 1970s: ● he g owing in luence o he an i-EU Communis Pa y wi hin he Labou Pa y; ● he shi ing balance o powe wi hin he pa y in a ou o he an i-EU le ; ● he ole o in luen ial indi iduals such as Tony Benn, he leade o he le who was p o-EU in he mid-1960s and an i-EU om he 1970s, and S ua Holland, co-a chi ec o he AES. Simila ly, a numbe o speci ic ac o s can be ad anced o explain he ‘ ec onic’ shi om an an i-EU posi ion o a p o-EU s ance in he 1980s: ● he de ea o an i-EU o ces in he 1975 Re e endum; ● he shi ing posi ion o he pa y leade ship in a ou o he Eu opean Union – Ha old Wilson om 1965 and Neil Kinnock om 1983; ● he sub e ing o o icial policy, using p ocedu al de ices a he Annual Con e ence (‘quali ied accep ance’ and he ‘ h ee-yea ule’), he powe s o pa onage (Policy Re iew commi ee membe ship) and pa y loyal y (Ha old Wilson’s h ea s o esigna ion and James Callaghan’s e o o e he mani es o) o secu e a p o-EU policy; ● he de ea o he an i-EU le in he 1983 Gene al Elec ion; ● he pe cei ed edundancy o na ional Keynesianism, ollowing he 1981–3 ‘Mi e and expe imen ’ in F ance and he subsequen demise o he AES; ● he associa ion o Labou Pa y ‘mode nisa ion’, unde Neil Kinnock, John Smi h and Tony Blai , wi h ‘Eu opeanisa ion’; ● he allu e o he ‘Eu opean social model’; ● he ‘con amina ion hesis’, whe eby he le ea s he label o ‘li le Englande ’ and hus associa ion wi h he an i-EU posi ion o he igh (Ramsay 1997); ● he end o he Cold Wa and he pe cei ed de ea o socialism; ● he e ea om Ma xis /class analysis o he EU; ● he changes in public opinion, and Labou Pa y opinion, b ough abou by p o-EU p opaganda campaigns (Mullen and Bu ki 2003, 2005); ● he in luence o he Uni ed S a es o Ame ica, which suppo ed Eu opean in eg a ion and B i ish pa icipa ion in he Eu opean Union du ing he Cold Wa , and which exe ed i s in luence by co e ly suppo ing elemen s o he p o-EU le (Wil o d 2003); ● he low salience o he Eu opean Union as an issue o he gene al public, which made i easie o change policy. The Labou Pa y and Eu opean in eg a ion 35 Conclusion I is clea ha Eu opean in eg a ion has been con en ious o he Labou Pa y and ha he pa y emains di ided on he issue. Howe e , he balance o a gumen a ou s hose who a e scep ical o and/o opposed o he Eu opean Union. The socialis case agains he Eu opean Union, and B i ish pa icipa ion in u he Eu opean in eg a ion, es s on ou p incipal a gumen s. The i s a gumen is he economic and poli ical cos o B i ish membe ship o he Eu opean Union, bo h his o ically and in con empo a y e ms. Al hough no go e nmen has conduc ed a e iew o he cos s and bene i s o membe ship, Ba a B own (1974), Bu ki (1974), Holland (1975), Benn (1980), Bu ki e al. (1992, 1996, 1997) and Ellio and A kinson (1998) assessed he economic cos s. These included EU budge con ibu ions, he cos s o he CAP, he Common Fishe ies Policy (CFP) and ERM membe ship, impo pene a ion and he subsequen loss o manu ac u ing jobs, he loss o o e seas ma ke s and he cumula i e ade de ici . Two s udies ied o pu a igu e o hese cos s. The i s , by Jay (1968), es ima ed he p obable economic cos a be ween £600 and £1,000 million pe yea . The second, by Podmo e and Ka z (1998), es ima ed he combined cos o EU budge con ibu ions, EMU and ERM membe ship, and he cumula i e ade de ici be ween 1973 and 1997 a £255 billion. This o al did no include he cos s o he CAP, he CFP, impo pene a ion and subsequen loss o manu ac u ing jobs, o he loss o ma ke s in he es o he wo ld. Bu ki (1975), Benn (1980, 1982), Bu ki e al. (1992) and Benn and Hood (1993) e iewed he poli ical cos s and concluded ha he Eu opean Union unde mined democ acy, na ional so e eign y and B i ain’s capaci y o sel -go e nmen . Mo e ecen ly, Milne (2004) es ima ed he cu en ecu ing annual ne di ec cos o membe ship a 3–5 pe cen o g oss domes ic p oduc . The second a gumen is he illusion o he ‘Eu opean social model’ and he alse choice be ween his and he US model o capi alism. Ac oss he Eu opean Union, public sec o s and wel a e sys ems a e being sys ema ically p i a ised and disman led by membe s a es as a esul o he Single Ma ke , eu o and enla gemen p ojec s. In sho , he Eu opean Union is pu suing a neo-libe al a he han a Keynesian p ojec , unde which mul ina ional companies (MNCs) a e he d i ing o ce. Balanyá e al. (2000), o example, ound a signi ican ela ionship be ween he ecommenda ions o epo s p oduced by Eu opean Round Table o Indus ialis s (ERT), composed o cap ains o indus y om EU-based MNCs, and he policy and ea y ou pu o he Eu opean Union. Simila ly, Lucas and Hines (2000) highligh ed he ole o he ERT in he enla gemen p ocess. A bes , he Eu opean Union places conside able cons ain s on go e nmen al eedom o ac ion, mani es in he eu o (SGP) ules o example. A wo s , he Eu opean Union could o e ule and block he implemen a ion o a socialis p og amme manda ed by he B i ish elec o a e. The hi d a gumen is he di icul y, i no impossibili y, o cons uc ing a democ a ic Uni ed S a es o Eu ope, modelled on he Uni ed S a es o Ame ica, wi h a sup eme pa liamen , sena e, cou o jus ice and ede al bank. The 36 Andy Mullen Eu opean Union lacks a common cul u e and language, whils he e is insu icien popula ion mo emen o c ea e a single, uly Eu opean, poli y. Fu he mo e, Eu opean pa liamen a y cons i uencies a e la ge and he e o e emo e om o e s. Consequen ly, he public is unlikely o pay he addi ional, and subs an ial, EU-wide axes necessa y o und a ede al go e nmen . Fu he mo e, coali ion poli ics and majo i y o ing in an all-powe ul pa liamen could sub e he will o he B i ish people. I he Uni ed S a es o Eu ope model was a eal possibili y, a powe ul case could be made o he o ma ion o a Eu ope-wide socialis pa y o pu sue a Eu opean socialis s a egy. Howe e , his is no he model ha is on o e . The Eu opean Union is a hyb id o ede al and in e go e nmen al o ms ha aims o ele a e powe and decision making away om o dina y people, hus insula ing i om democ acy. C ucially, he choice o a Eu opean Union un by unelec ed banke s and bu eauc a s, o a democ a ically elec ed ede al Eu opean go e n- men , has ne e been o e ed o he B i ish people. The ou h, and possibly mos compelling, a gumen is he undemoc a ic na u e o he Eu opean Union. B i ain’s accession o he T ea y o Rome, pa icipa ion in he Single Ma ke and possible adop ion o he eu o and Eu opean Cons i u ion all in ol e he su ende o democ a ic con ol o he unaccoun able Council o Minis e s and he unelec ed Eu opean Commission and Eu opean Cen al Bank. As no ed by Ca ey (1995: 18): The wen ie h cen u y has been cha ac e ised by h ee de elopmen s o g ea poli ical impo ance: he g ow h o democ acy, he g ow h o co po a e powe , and he g ow h o co po a e p opaganda as a means o p o ec ing co po a e powe agains democ acy. The his o ic objec i e o he Labou Pa y, howe e , is o ex end democ acy a he local, na ional, Eu opean and global le els, no o pa icipa e in cu ailing i . The socialis p ojec equi es he undamen al e o m o he Eu opean Union and/o he wi hd awal o B i ain and o he s in o de o cons uc a sys em o olun a y coope a ion amongs democ a ic, independen na ion-s a es. Whe he his objec i e can be achie ed is a ma e o deba e. Wha is clea , howe e , is ha he long-s anding di ision o he Labou Pa y o e Eu opean in eg a ion will con inue. No es 1 An ex ended e sion o his chap e , which e alua es he Eu opean policies o he T ades Union Cong ess and he wide B i ish le , can be ound a www.andymullen.com. 2 Fede alis suppo e s included Clemen A lee, Fenne B ockway, G.D.H. Cole, Richa d C ossman, Michael Foo , Lo d Philip Lo hian, R.W.G. Mackay, Ian Mika do, R.H. Tawney and Ha old Wilson. 3 Co espondence om John Ea well, 20 No embe 2003. 4 Co espondence om Neil Kinnock, 29 Janua y 2003. 5 In e iew wi h Regan Sco on 8 Oc obe 2002. Pa I The economics o a single cu ency 3 Economic consequences o B i ain Jona han Michie In oduc ion Eu ope seems s uck wi h high le els o unemploymen as we en e he wen y- i s cen u y, wi h all he economic and social mise y which goes wi h ha . The blame is pu al e na i ely on ‘ igid labou ma ke s’, a ‘ oo cos ly wel a e s a e’, o new echnology – almos anywhe e excep on go e nmen economic policy. Ye he go e nmen s o he Eu opean Union ha e been delibe a ely pu suing de la iona y, low-g ow h, high-unemploymen policies, i s unde he auspices o he Maas ich con e gence c i e ia and now unde he pos -Single Cu ency ‘S abili y Pac ’. The esul ing unemploymen should come as no su p ise. Simila policies we e pu sued in B i ain unde he gold s anda d1 o he 1920s, wi h pa allel esul s in e ms o de la iona y go e nmen economic policies and he c ea ion o mass unemploymen (Ki son and Michie 1994). I seems ha no hing has been lea ned. The wo ld economy only managed o pull i sel ou o he G ea Dep ession2 in he 1930s by abandoning ixed exchange a es, cu ing in e es a es and boos ing g ow h. Ye when simila policies we e ad oca ed p io o 16 Sep embe 1992, when B i ain was o ced ou o he ERM agains i s will by he cu ency specula o s, such policies we e denounced as ‘an i-Eu opean’. Bu i does ou Eu opean pa ne s no a ou s o ha e ou economy in ecession, any mo e han we a e cu en ly being helped by ou EU pa ne s pu suing es ic i e policies. Unless cu en Eu opean economic policy is eo ien a ed owa ds he objec i e o ull employmen , emb acing an ac i e indus ial and egional policy, a he han being s uck on he myopic conce n wi h ze o in la ion, he ou e o wa d mus once again be based on independen na ional g ow h s a egies which would no only allow coun ies o help hemsel es, bu by doing so would help each o he . Compe i i e de la ion, no compe i i e de alua ion, was he eal ‘begga my neighbou ’ policy o he 1990s. As he economis Joan Robinson pu i : ‘O all bad- neighbou ly conduc among ading na ions, he wo s is o go in o a slump’ (Robinson 1966). The ERM The Exchange Ra e Mechanism (ERM) o he Eu opean Mone a y Sys em (EMS) ied o b ing na ional cu encies mo e o less in o line. B i ain joined he ERM in 40 Jona han Michie Oc obe 1990. The pound was pegged a 2.95 Deu schma ks. This was oo high a a e, making goods p oduced in B i ain ela i ely expensi e compa ed o goods p oduced elsewhe e. This means ha ma ke sha e is los ab oad, bu also a home as impo s become mo e compe i i e agains domes ically p oduced goods. The o e alued a e a which he pound was pegged in he ERM he e o e caused ma ke s o be los and p oduc ion o be cu back, wi h i ms going o he wall and wo ke s being sacked. Why hen was an o e alued exchange a e chosen by he go e nmen when hey en e ed he ERM? In pa i was o he s a ed objec i e o squeezing in la ion; wha was no s a ed is he ou e by which i was hoped i would wo k, by delibe a ely making hings ha d o B i ish i ms, he eby o cing hem o y o cu cos s by u ning on hei wo ke s, cu ing wages and o cing inc eased wo k p essu es. This is no he i s ime ha go e nmen s ha e allowed he cu ency o be o e alued in his way. Wins on Chu chill as Chancello ook B i ain back on o he gold s anda d in he 1920s a an o e alued a e, wi h Keynes wa ning a he ime, in his pamphle The Economic Consequences o M Chu chill, o he disas ous likely consequences o his policy, consequences which we e o include he Gene al S ike o 1926 (Keynes 1925). Simila ly, he i s Tha che ecession o 1979–81 was exace ba ed by he high exchange a e caused no only by he coming on s eam o No h Sea oil, inc easing he demand om o e seas o s e ling wi h which o buy ha oil, bu also by he high in e es a es which ollowed om he go e nmen ’s mone a is policies. Tha che ’s a emp s o educe money supply g ow h we e pu sued h ough inc easing in e es a es, aimed a educing he amoun people would hen wan , o be able, o bo ow. Bu he high in e es a es also a ac ed money in o he coun y, pushing up he exchange a e (Michie 1992). In he in e -wa pe iod B i ain was indeed o ced o abandon he gold s anda d. And he exchange a e simila ly ell a e 1981, dep ecia ing nea ly 30 pe cen by 1986 and helping o uel he eco e y. Likewise, he o e alued a e a which Chancello Majo en e ed he ERM mean ha ou membe ship was always doomed o ailu e. Ye hose who poin ed his ou a he ime we e dismissed ou o hand. I was said amongs o he hings ha i s e ling le he ERM hen in e es a es would ha e o ise; his p o ed alse. The leade ship o all h ee majo poli ical pa ies suppo ed con inued membe ship a he o e alued a e. E en i his had been a genuine op ion, i would ha e been a disas ous one. Bu in eali y i was no e en an op ion. I was unsus ainable. As B yan Gould has a gued, B i ain’s ERM membe ship was i ia ed by a leas h ee policy mis akes: Fi s , we chose a plainly o e alued pa i y. This was no an acciden , bu a delibe a e a emp o use o e alua ion as a means o bea ing down on cos s and imposing a coun e -in la iona y discipline. The esul , o cou se, was so o en eeble ou p oduc i e economy ha he gap be ween he exchange a e dec eed by he ERM and he a e ha could be jus i ied by he pe o mance o he eal economy widened inexo ably and e en ually became unsus ainable. Second, he obliga ions imposed by ERM membe ship we e asymme ical. The whole bu den o s aying wi hin he pa i y bands ell upon he weake Economic consequences o B i ain 41 economies, who ound ha , in a ain a emp o main ain sho - e m compe i i eness and o sho e up hei cu encies, hey we e obliged o y o cu cos s h ough de la iona y measu es like high in e es a es and cu s in public in es men . The Ge mans, on he o he hand, whose app ecia ing D- Ma k pu cons an p essu e on he pa i y bands, ecognised no obliga ion o b ing hei cu ency back in o line by e la ing and cu ing in e es a es. I was o his eason ha he ERM became a de la iona y engine. I was no acciden ha wes e n Eu ope became he wo ld’s unemploymen black spo . Thi d, he ERM i sel changed in na u e. I ceased o be a ‘c awling peg’ a angemen – a sensible means o secu ing g ea e exchange a e s abili y by damping down excessi e ma ke ola ili y. I became ins ead he essen ial p econdi ion o and means o he ansi ion o a single cu ency. As a esul , no adjus men s could be pe mi ed. The pa i ies had o be se in conc e e. Such in lexibili y was ine i ably sha e ed in o agmen s by he shee o ce o economic eali ies and ma ke p essu es. (Gould 1993) So he p oblems o he ERM lay deepe han jus ha ing joined a he w ong a e. I was a high-unemploymen mechanism, because all he p essu e was on he weak economies o ake ac ion, a he han on he s ong ones.3 And wo se, ha ac ion was designed mo e o p op up he cu encies o he weak economies han o s eng hen hose economies’ p oduc i e po en ial, which is he only sus ainable basis o main aining a heal hy cu ency. Inc eased in e es a es we e o de ed. These dep ess in es men plans and lea e he economy in ques ion u he weakened. Ye i is mos likely he weakness o he economy ha unde lay he weakness o he cu ency in he i s place. So a weak economy p oduces a weak cu ency; he ERM hen equi es he go e nmen in ques ion o aise in e es a es; and inc eased in e es a es squeeze he coun y’s economy, lea ing i s ill weake .4 The Maas ich T ea y The h ee key poin s o he Maas ich T ea y we e as ollows: All powe o he cen al banke s The Cen al Bank would be independen ,5 ha is independen o any democ a ic in luence, con ol o accoun abili y. The elec o a e o B i ain and o he Eu opean Union would no longe be able o decide on, o e en in luence, mone a y policy. Indeed, such in luence would be ou lawed. This is undamen ally undemoc a ic. I is ue ha he Bank o England was made independen by he Labou Go e nmen elec ed in 1997, bu he Chancello Go don B own a leas pledged ha new mechanisms would ensu e ha he Bank would ne e heless be accoun able (al hough i is ue ha a he ime o w i ing he p oo o his is ye o be seen). 42 Jona han Michie P ice s abili y No only would he cen al banke s be independen o he elec o a e, hey would be cons i u ionally p e en ed om p io i ising ull employmen ; hei one p ima y objec i e would be o achie e and main ain ‘p ice s abili y’ ( his is e e ed o se e al imes; see, o example. A icle 3a). E e y hing else would ha e o be seconda y, ‘wi hou p ejudice o his objec i e’ (o p ice s abili y – same A icle). Why, hen, did he T ea y’s d a e s ha e such a mania o p ice s abili y? And should we objec o his? The idea o p ice s abili y is o en p esen ed as p e e able o in la ion because i would be mo e s able, in he sense ha i would be easie o hold in la ion a ha ze o (o low) a e han i would be o hold in la ion s able a ound a highe a e. Bu he e is no eason why his should be so. The in la ion a e is he a e age o housands o p ice mo emen s, some alling, like he p ice o pe sonal compu e s a he momen , some s able and some ising. I ze o in la ion is achie ed i would no be because p ices we e s able, bu because hese mo emen s happened o cancel each o he ou on a e age. And he e is no eason why ha a e age a e o in la ion should emain s a ic jus because i was p e iously a e aging a a alue o ze o o 1 pe cen , a he han say 7 o 8 pe cen . A a mo e p ac ical le el, he eason o he Maas ich T ea y’s p eoccupa ion wi h he a e o in la ion is because i a ose om he delibe a ions o he Delo s Commi ee (composed la gely o banke s) be o e he Eu opean Union’s economy slumped in o i s ea ly 1990s ecession. In pa , hen, Maas ich was jus yes e yea ’s T ea y, ocusing on issues o he 1980s when wha is needed a e policies o expansion and employmen . The o he p oblem wi h he T ea y – and now wi h he pos -Single Cu ency ‘S abili y Pac ’ – is ha he goal o s able p ices is no o be pu sued h ough posi i e in e en ionis measu es, such as p ice con ols o he eju ena ing o indus y, which migh allow cos inc eases o be abso bed by p oduc i i y inc eases a he han being passed on in highe p ices. The way ha p og essi e economic policies can help ackle in la ion a e se ou in de ail by Deakin e al. (1992), bu he key poin is ha low in la ion should be pu sued on he basis o a s ong economy which can abso b cos inc eases (see also Michie and Wilkinson 1992, 1993). The T ea y ins ead limi s he economic policy op ions o he ee ma ke pu sui o mone a ism, plus a e capping. Na ional a e capping Go e nmen bo owing in membe s a es is capped a 3 pe cen o na ional income (GDP). Simila ly, go e nmen deb mus be kep below 60 pe cen o GDP. I GDP alls – as i did in B i ain h oughou 1991 and 1992 – his could equi e deb o be cu in line, which could exace ba e he decline in na ional income i sel . Also, he Maas ich T ea y se s he deb c i e ion in e ms o g oss a he han ne deb – ha is, o ally igno ing all asse s. This is a e y na ow iew o he go e nmen ’s balance shee . In e ec , i o bids go e nmen s o ake accoun o e en hei mos liquid asse s in se ing iscal policy. Selling asse s o pay deb ( o example, h ough p i a isa ion) – which in eali y lea es he go e nmen no be e Economic consequences o B i ain 43 o , since hei asse s will ha e allen – is seen as an imp o emen . Indeed, he si ua ion is e en wo se han his, because unde he Maas ich condi ions he go e nmen ’s pe o mance is hough o ha e imp o ed e en i i sells o asse s o less han hey a e wo h. The amoun o money b ough in om he sale, howe e low, is seen as pu e gain in educing g oss deb , while he loss o he asse is o ally igno ed. Maas ich and he al e na i es On al e na i es, i s , he e is no eason o ha e any such ules; he Uni ed S a es o Ame ica does no pu any such ules on i s s a es, and he B i ish Go e nmen ne e used o pu such ules on i s local au ho i ies un il he Conse a i e go e n- men s o he 1980s in oduced a e capping. Second, on iscal edis ibu ion, he MacDougall Repo (Commission o he Eu opean Communi ies 1977) sugges ed ha a Communi y budge equi alen o 7 pe cen o GDP would be necessa y jus o ackle 40 pe cen o exis ing inequali ies, ye he budge a p esen is se a 1.27 pe cen ; he mo e ambi ious p oposal ejec ed a he 1992 Edinbu gh summi was o his o ise o only 1.38 pe cen . The e would be some hing o be said o c ea ing a new supe s a e, wi h a single go e nmen , iscal policy, indus ial policy and so on. One a ac ion would be he powe o in e ene in he economy o o ce h ough socially bene icial ou comes. Bu i is qui e dishones (o else nai e) o p esen Maas ich o he Single Cu ency as ep esen ing any hing along hese lines. I ep esen s he p ecise opposi e: an a emp o oll back he s a e on a Eu opean scale, o gi e capi al ee eign. I is some imes a gued ha he powe o he in e na ional ma ke s o dic a e o na ionally elec ed go e nmen s is such ha no one coun y can any longe de end i s cu ency. Bu his is ha dly new. I is ue ha his powe has been boos ed in ecen yea s by he ee-ma ke , de egula o y policies pu sued by go e nmen s. Bu p obably he clea es example o such a p ocess, designed o inc ease he powe o mul ina ional capi al and inancial ma ke s, has been he p og amme o inc eased Eu opean Communi y/Union in eg a ion. I is qui e w ong o in e p e his p ocess as a eac ion o he inc eased powe o mul ina ional capi al. On he con a y, he Single Eu opean Ma ke p og amme6 and he single cu ency ha e shi ed he balance away om go e nmen s and in a ou o p i a e capi al. To espond e ec i ely o he challenges o g ow h and employmen will equi e he exac opposi e o e e y hing ha he single cu ency p ocess ep esen s. The single cu ency inc eases he le e age o in e na ional ma ke s o beha e exac ly as hey wish, and p e en s elec ed go e nmen s om pu suing he policies on which hey we e elec ed – unless o cou se hese happen o coincide wi h he in e es s o hose inancial ma ke s. And his is he e o e likely o happen: he policies o poli ical pa ies will become de e mined less and less in esponse o people’s aspi a ions and mo e and mo e by wha is deemed accep able o he con inued undis u bed ope a ion o in e na ional inancial ma ke s and mul ina ional co po a ions. 50 Jona han Michie cen al bank dedica ed o he achie emen o p ice s abili y. The emphasis has o be shi ed owa ds es o ing ull employmen . Conclusion Unemploymen in Eu ope is due o he in e ela ion be ween mac oeconomic policy, balance o paymen s cons ain s and de-indus ialisa ion. The idea o pu suing ac i e mac oeconomic and indus ial policies has gi en way o an adhe ence o mone a ism, p i a isa ion and labou ma ke de egula ion. Ye he esul ing g ow h in low pay, po e y and unemploymen has, i onically, placed an inc easing bu den on he public pu se. A he same ime, p oduc i e e iciency is ha med by he esul ing ins abili y in he labou ma ke – pa icula ly wi hin he inc easingly low-paid sec o s – and he loss o incen i es o p oduce s o upg ade hei p oduc i e sys ems. A icious ci cle o low-wage, low-p oduc i i y, low- in es men ac i i y is gene a ed, leading o loss o compe i i eness and g owing unemploymen , wi h he inc easing bu dens on he excheque p o oking ye u he mo es down he ecessiona y spi al (Michie and Wilkinson 1994, 1995). An al e na i e agenda would include, i s , pushing o global expansion a he han being he mos o hodox, 1920s-s yle block in he wo ld. Second, he e a e a se ies o measu es (such as e-es ablishing exchange con ols) which he e seems li le hope o ge ing adop ed, bu , o pa aph ase Keynes, jus because people won’ lis en o sense is no excuse o alking nonsense. The ac ha such policies would be an imp o emen on he cu en s a e o a ai s should s ill be poin ed ou . Thi d, he e a e hings which would appea accep able o call o e en in oday’s ee- ma ke clima e, such as keeping he go e nmen esponsible o mone a y policy a he han handing i o e o unaccoun able cen al banke s; keeping he go e nmen esponsible o iscal policy, i,e. abandoning he Maas ich T ea y’s es ic ions; keeping he possibili y o cu ency ealignmen s in he e en o one membe s a e’s ou pu becoming uncompe i i e, a he han adop ing a single cu ency; and es o ing he igh o pu sue in e en ionis indus ial policies which a e inc easingly alling oul o ee-ma ke dic a s om B ussels. In o he wo ds, membe s a es should pu sue hose indus ial, in e es a e, exchange a e and iscal policies ha we e in o ce be o e mos o hem became ou lawed by he Maas ich T ea y. Wha is w ong is he ee ma ke , laissez- ai e cha ac e o he p ocess o Eu opean in eg a ion a p esen . So he basic poin abou wha needs o be done is ha Eu opean go e nmen s and he Eu opean Commission should s op in oducing 1920s-s yle policies and ules; he coun ies o Eu ope should hen pu sue in e en ionis policies o ackle unemploymen e c., and should coope a e in e na ionally o e i . The powe o in e na ional capi alism o dic a e o na ionally elec ed go e nmen s is no new, al hough i is ue ha i has been boos ed in ecen yea s by he ee-ma ke , de egula o y policies pu sued by go e nmen s. P obably he clea es example o such a p ocess, designed o inc ease he powe o mul ina ional capi al and inancial ma ke s, has been he p og amme o inc eased Eu opean Economic consequences o B i ain 51 Communi y/Union in eg a ion. I is qui e w ong o in e p e his p ocess as a eac ion o he inc eased powe o mul ina ional capi al; on he con a y, he Single Eu opean Ma ke p og amme and now he single cu ency ha e hemsel es delibe a ely shi ed he balance away om go e nmen s. EMU is a hea a poli ical p ocess ha will p e en go e nmen s – whe he a na ional o EU le el – om pu suing policies o p omo e economic and social wel a e. Such a scena io is no mo e sus ainable now han when i was las in place, namely in he 1920s and 1930s. I is likely o come o he same unpleasan end, wi h indi idual coun ies being e en ually o ced o ake ac ion ega dless o he powe o in e na ional capi alism. Bu wi h he Eu opean poli ical eli e so wedded o he laissez- ai e poli ics o he single cu ency, any a emp by he popula ion o insis ha hey should be allowed o exp ess poli ical p e e ences isks aking ugly na ionalis ic o ms – agains he ‘in e na ionalism’ o he Eu opean cen al banke s and he en i e exis ing poli ical eli e. No es 1 A coun y is said o be on he gold s anda d when i s cen al bank is obliged o gi e gold in exchange o any o i s cu ency p esen ed. 2 The ‘G ea Dep ession’ e e s o he global ecession o 1929–32. 3 Mo e esponsibili y should ha e been placed on hose coun ies whose cu encies we e a he op o he cu ency ange o ake ac ion, a he han ha e he bu den alling on hose economies al eady in di icul y. The s onge economies could cu in e es a es and boos go e nmen spending. As hei economies expanded, hey would be likely o impo mo e. And as hei cu ency is o e ed on he o eign exchange ma ke s o pay o hose impo s, i s p ice agains o he cu encies would end o decline back owa ds i s cen al a e. 4 On he impo ance o c ea ing indus ial capaci y as a p og essi e way o o e coming balance o paymen s and in la ion cons ain s see Michie and G ie e Smi h 1996, in pa icula he chap e by Ki son and Michie (1996b), and also Ki son and Michie 1996a. 5 See o example he ‘P o ocol on he S a u e o he Eu opean Sys em o Cen al Banks and o he Eu opean Cen al Bank’ a he end o he Maas ich T ea y. 6 The Single Eu opean Ma ke (SEM), also known as he In e nal Ma ke o simply ‘1992’, consis ed o a ime able o 300 measu es ag eed a he Milan EC summi o 1985 in p epa a ion o 1 Janua y 1993. Also known as he Cock ield plan a e Commis- sione Cock ield. 7 The a gumen ha balance o paymen s de ici s do no ma e , o ha hey would be elimina ed wi h a single cu ency, a e comp ehensi ely demolished by he con ibu ions in The Economic Legacy (Michie 1992) om B ian Reddaway, om Ken Cou s and Wynne Godley, and om John McCombie and Tony Thi lwall. 8 Fo a ull c i ical assessmen o he Delo s Whi e Pape , see G ie e Smi h (1994). 4 Wha ype o Eu opean mone a y union? Malcolm Sawye and Philip A es is In oduc ion The c ea ion o a mone a y union ine i ably in ol es he use o a single cu ency o he paymen o axa ion and ha p ices, wages e c. a e denomina ed in ha cu ency. Fu he , a single cu ency ine i ably in ol es he c ea ion o a single mone a y au ho i y (cen al bank) wi h he powe o se mone a y policy. Bu he e is li le else ha ollows ine i ably om he c ea ion o a mone a y union. The e a e, hough, a hos o economic policy and ins i u ional a angemen s which su ound he eu o and i s in oduc ion and which would ha e p o ound consequences o he e ec i eness o he single cu ency and, mo e gene ally, he economic well being o he Eu opean Union. In his b ie chap e we indica e some o he ea u es o he ins i u ional and policy a angemen s su ounding he implemen a ion o he eu o and hin a some al e na i e ones. One pa icula and no able ea u e o he c ea ion o he Eu opean Mone a y Union is ha in e ec he only economic ins i u ion which has been c ea ed a he Eu opean le el is he Eu opean Cen al Bank (ECB). The c ea ion o o he ins i u ions a he Eu opean le el has been no iceable by hei absence. A u he ea u e o he EMU is he cons ain s which a e imposed on na ional go e nmen s in espec o budge de ici s and go e nmen deb . Speci ically, he e a e limi s on budge de ici s o 3 pe cen o GDP, and ailu e o mee ha equi emen could lead o a se ies o ines depending on he deg ee o which he de ici exceeds 3 pe cen . The S abili y and G ow h Pac , which has been ag eed o go e n he ope a ion o he eu ozone, de ails ‘escape’ clauses which allow a membe s a e ha has an excessi e de ici o a oid sanc ion in he e en o an economic down u n. Ne e heless, his uppe limi o 3 pe cen o GDP o budge de ici s means ha , du ing he cou se o he business cycle, budge s may well be in su plus o small de ici (gi en he la ge swing in he size o de ici s du ing he business cycle), and na ional go e nmen s will be es ained in esponding o ecessions. The S abili y and G ow h Pac and he Maas ich T ea y (along wi h he con e gence c i e ia o membe ship o he eu o) e lec a pa icula neo-libe al agenda. The Maas ich T ea y, which p o ides he ins i u ional amewo k o he in oduc ion o he single cu ency, was signed in la e 1991, a ime when neo- libe al ideas held sway and poli ical powe was gene ally held by he igh . Wha ype o Eu opean mone a y union? 53 Neo-libe al ideas s ill p e ail hough pe haps a e in some decline, as e idenced by he elec o al ic o ies o cen is pa ies in many o he EMU coun ies. Bu he neo-libe al agenda has moulded he en i onmen wi hin which he eu o will be in oduced. The eu o (a leas o hose 12 coun ies which ha e signed up) is embedded wi hin an ins i u ional and policy se ing which we ha e elsewhe e desc ibed as ‘new mone a ism’ (A es is and Sawye 1998). I is he implici a gumen o his chap e ha economic policies e lec ing such neo-libe al agenda will no be success ul. This chap e is o ganised in o h ee main sec ions. Fi s , he ole o he ECB is c i ically examined. I is a gued ha he ECB is undemoc a ic and has been gi en oo na ow a emi . Fu he , he policy ins umen a he disposal o he ECB ( ha is in e es a es) is inadequa e o he pu pose o con olling in la ion (o indeed any hing else). Second, he e is a woe ul lack o ins i u ions and policies ope a ing a he Eu opean le el o suppo he de elopmen o a success ul Eu opean economy. Speci ically he e is a lack o a Eu opean le el iscal policy (o e en coo dina ed iscal policies ac oss na ions) which could be used o smoo h luc ua ions in economic ac i i y o e ime. Thi d, he e is no se ious a emp o educe dispa i ies be ween egions (in e ms o unemploymen , employmen , income e c.). The e has been a speci ic ejec ion (a he Nice summi in No embe 2000) o he de elopmen o a Eu opean-le el social secu i y sys em. Eu opean Cen al Bank The c ea ion o a so-called independen Eu opean Cen al Bank was much in line wi h he economic doc ine which we ha e elsewhe e (A es is and Sawye 1998) desc ibed as he ‘new mone a ism’.1 The essen ial ea u es o new mone a ism a e: 1 Poli icians in pa icula , and he democ a ic p ocess in gene al, canno be us ed wi h economic policy o mula ion wi h a endency o make decisions which ha e s imula ing sho - e m e ec s ( educing unemploymen ) bu which a e de imen al in he longe e m (no ably a ise in in la ion). In con as , expe s in he o m o cen al banke s a e no subjec o poli ical p essu es o cou sho - e m popula i y and can ake a longe - e m pe spec i e whe e i is assumed ha he e is a con lic be ween he sho e m and he long e m. 2 In la ion is a mone a y phenomenon and can be con olled h ough mone a y policy. The money supply is di icul (o impossible) o con ol di ec ly, bu he cen al bank can se he key in e es a e ( he ‘ epo’ a e) o in luence mone a y condi ions, which in u n in luence he u u e a e o in la ion. 3 The le el o unemploymen luc ua es a ound a supply-side de e mined equilib ium a e o unemploymen , gene ally labelled he NAIRU (non- accele a ing in la ion a e o unemploymen ). The le el o he NAIRU may be a ou ably a ec ed by a ‘ lexible’ labou ma ke , bu i is una ec ed by he le el o agg ega e demand o by p oduc i e capaci y. 54 Malcolm Sawye and Philip A es is 4 Fiscal policy is impo en in e ms o i s impac on eal a iables and as such i should be subo dina e o mone a y policy in con olling in la ion. I is ecognised, hough, ha he go e nmen budge posi ion will luc ua e du ing he cou se o he business cycle, bu in he con ex o an essen ially passi e iscal policy. The independen ECB is gi en he ask o using mone a y policy o con ol in la ion. Fiscal policy is la gely neu e ed and cons ained by he 3 pe cen limi on budge de ici s wi h no EU-le el iscal policy. The e a e (a leas ) h ee basic objec ions o he manne in which he ECB has been se up. Fi s , he e is he essen ially undemoc a ic na u e o he ECB in he name o p o ec ing i s independence. A icle 107 o he amended T ea y o Rome s a es ha : When exe cising he powe s and ca ying ou he asks and du ies con e ed upon hem by his T ea y and he S a u e o he ESCB, nei he he ECB, no a na ional cen al bank, no any membe o hei decision making bodies shall seek o ake ins uc ions om Communi y ins i u ions o bodies, om any go e nmen o a Membe S a e o om any o he body. The Communi y ins i u ions and bodies and he go e nmen s o he Membe S a es unde ake o espec his p inciple and no o seek o in luence he membe s o he decision making bodies o he ECB o o he na ional cen al banks in he pe o mance o hei asks. This p ecludes in luence om say he Eu opean Pa liamen on he decisions o he ECB, e en hough he ECB is he only Eu opean-le el economic policy- making body. Second, he objec i e gi en o he ECB when se ing mone a y policy is he achie emen o low in la ion. Objec i es such as a high le el o economic ac i i y, low unemploymen o e en he ex e nal alue o he eu o a e o be conside ed. I he ‘new mone a ism’ we e alid, his would no ma e since i is deemed ha mone a y policy does indeed con ol in la ion, and ha he le el o unemploymen is una ec ed by mone a y policy. Bu in he eal wo ld, he se ing o in e es a es has a di e en ial impac ac oss egions and na ions, and can ha e an in luence on he exchange a e (and he eby on expo s and impo s). Di e ences in in la iona y expe ience and he a e o unemploymen ac oss egions and na ions make i likely ha in e es a es will be pu up when in la ion appea s in one pa o he Eu opean Union e en when o he egions a e no expe iencing in la ion and when he le els o unemploymen a e high. Thi d, he in e es a e is a weak policy ins umen o use o he con ol o in la ion. The ex en o which in e es a es in a single coun y (o in his case in he Eu opean Union) can be a ied ela i e o in e es a es in o he coun ies is hea ily ci cumsc ibed. I is di icul o belie e, o example, ha eal in e es a es could be main ained 2 pe cen abo e o below he eal a e o in e es in he Uni ed S a es o Ame ica. Fu he , he ex en o which in e es a es can in luence he a e Wha ype o Eu opean mone a y union? 55 o in la ion is small. This means ha he eu ozone is le wi h li le o coun e any upsu ge in in la ion. A he p esen ime, wi h in la ion subdued, his may no be a se ious conce n, bu any upswing in in la ion, whe he gene a ed wi hin he Eu opean Union o mo e widesp ead, would p esen se ious di icul ies. I is impe a i e ha he sole economic policy make a he Eu opean Union le el is b ough unde democ a ic con ol, and ha he objec i es o be pu sued by he ECB a e b oadened o include high le els o employmen and economic ac i i y. Bu his should be done wi h he ecogni ion ha mone a y policy is no an e ec i e way o guiding he economy. Fiscal policies and edis ibu ion The adop ion o a single cu ency by eu ozone coun ies clea ly emo es he possibili y o a ia ion in he alue o hei domes ic cu ency. Changes in he exchange a e can allow a coun y o o se di e en ial shocks and di e ences in economic pe o mance. I may be ques ioned how a a coun y can de e mine i s own exchange a e in he globalised inancial ma ke s, hough since an exchange a e is he ela i e alue o one cu ency in e ms o ano he i is a ely he case ha one coun y can comple ely de e mine he alue o i s own cu ency. I is also he case ha exchange a es ha e been highly ola ile since he b eakdown o he B e on Woods sys em, and ha exchange a es ha e di e ged signi ican ly om pu chasing powe pa i y (see, o example, K ugman 1989; Rogo , 1996). Ne e heless, a ia ion in he exchange a e (whe he in he con ex o a ixed o a lexible exchange a e sys em) does p o ide an adjus men sa e y al e o di e - en ial shocks and economic pe o mance, e en hough he sa e y al e may no always wo k quickly (in he case o ixed exchange a es) o may o en be aul y (in he case o lexible exchange a es). I is clea ha he e a e ew, i any, mechanisms wi h he S abili y and G ow h Pac and he single cu ency o a coun y o egion o adjus o di e en ial shocks and economic pe o mance. The abili y o na ional go e nmen s o s abilise hei own economies becomes mo e ci cumsc ibed h ough he equi emen s o he S abili y and G ow h Pac and he limi s on he size o budge de ici s. I is o en poin ed ou ha mos single-cu ency zones in ol e a cen al o ede al go e nmen ax and public expendi u e p og amme, which is subs an ial ela i e o na ional GDP, and a go e nmen budge , which can un signi ican de ici s.2 The ax and public expendi u e p og amme gene ally in ol es edis ibu ion om iche egions o poo e ones, whe he as an au oma ic consequence o a p o- g essi e ax and social secu i y sys em o as speci ic ac s o policy. The edis i- bu ion ac s as a s abilise wi h nega i e shocks leading o lowe axa ion and highe social secu i y paymen s in he egion which is ad e sely a ec ed. Wi h he emo al o exchange a e a ia ions as an adjus men mechanism, i could be expec ed ha economies would adjus o di e en ial shocks and economic pe o mance h ough a a ie y o o he ou es. These would include (in esponse o a nega i e shock) declines in economic ac i i y, educ ions in li ing s anda ds and ou wa d mig a ion. The e is hen a equi emen o he de elopmen o a la ge 56 Malcolm Sawye and Philip A es is EU ax base wi hin a p og essi e ax sys em and he use o he ax e enue in a edis ibu i e manne . The p oblem o unemploymen will be pa icula ly se ious in hose cases whe e go e nmen s ha e chosen he w ong exchange a e a en y. An o e alued en y exchange a e will mean an ex ended pe iod o ecession o accommoda e i s e ec s, which emana e om he absence o he adjus able exchange a e sa e y al e. This is accen ua ed by he i ual absence o iscal ans e s, whe he au oma ic o disc e iona y, om he ela i ely ich egions o he ela i ely poo ones. The e is clea ly no a ax and social secu i y sys em ope a ing a he EU le el which would make ans e s be ween ich and poo in an au oma ic manne , and p o ide an elemen o iscal s abilisa ion. The expendi u es on egional aid (s uc u al and cohesion unds) and o a lesse deg ee ag icul u al policies do make some ans e s om ich o poo , bu on a e y limi ed scale. In sho , he Eu opean budge is nei he on a su icien scale no o he igh design o p o ide signi ican in e egional insu ance in he EMU (Fa as 1998). The s uc u e o axa ion and public expendi u e (and he balance be ween hem as e lec ed in iscal policy) can edis ibu e income (depending o cou se on he deg ee o p og essi i y o he ax sys em and he ways in which public expendi u e is alloca ed) in wo pa icula ways. Fi s , i can in e ec edis ibu e income o e ime – axes ise when income ise, all when income alls. This is he well-known s abilising e ec o a p og essi e ax sys em. Second, iche egions end o pay highe le els o ax and (pe haps) ecei e lowe le els o public expendi u e. The e is a edis ibu ion be ween egions – some o his edis ibu ion may be a delibe a e design o public expendi u e and some a by-p oduc o a p og essi e ax sys em. The EU le el o public expendi u e is es ic ed o a ound 1.5 pe cen o he GDP o he Eu opean Union, and he e is a equi emen ha he EU budge is balanced so ha axa ion aised h ough na ional go e nmen s is exac ly equal o he le el o expendi u e. Whils he e is some edis ibu ion (e.g. in he o m o egional policy), i is ine i ably a he mino , gi en he size o he o e all budge (and also he size o he common ag icul u al policy wi hin ha ). The MacDougall Repo (1977), w i en o he Eu opean Commission, ega ded a EU-le el budge o a ound 7.5 pe cen o GDP as necessa y o p o ide adequa e s abilising p ope ies. Fiscal policy a he EU le el (whe he ope a ed by he Eu opean Commission o h ough he coo dina ion o na ional iscal policies) could make a subs an ial con ibu ion o he e ec i e ope a ion o he single cu ency. This would be o (a leas ) h ee easons. Fi s , he e is no pa icula eason o hink ha he le el o agg ega e demand gene a ed by he p i a e sec o will be su icien o c ea e o o main ain high le els o economic ac i i y. Indeed, cu en ly many o he EU economies su e om high le els o unemploymen and insu icien demand (in pa c ea ed by he d i e o iscal o hodoxy o ul il he Maas ich T ea y c i e ia). The e a e occasions (such as he USA cu en ly) whe e p i a e sec o demand is high, wi h low sa ings and/o high le els o in es men , so ha he esul ing p i a e sec o de ici is hen ma ched by a public sec o su plus. We may e e o he ollowing na ional income accoun s iden i y o make he poin : Wha ype o Eu opean mone a y union? 57 (I – S) + (X – M) = (T – G), whe e I is in es men , S is sa ings, X is expo s, M is impo s, T is axes and G is go e nmen expendi u e. Posi i e alues on he le - hand side, i.e. ne p i a e dissa ings and expo su plus, a e ma ched by posi i e on he igh -hand side, i.e. budge su plus. Bu he e will be o he occasions when p i a e sec o demand is low, and he e is he equi emen o budge de ici s o main ain demand. Second, iscal policy p o ides an addi ional policy ins umen (in addi ion o mone a y policy) h ough which he le el and composi ion o agg ega e demand can be in luenced. The ‘one-club’ na u e o mone a y policy has o en been no ed, and also he deg ee o which a uni o m policy is applied ac oss di e se economic si ua ions. Thi d, he ex en o ade be ween he Eu opean Union and he es o he wo ld is ela i ely low, pa icula ly as compa ed wi h he in e na ional ade o he coun ies which will compose he eu ozone, o much o he ade by one EU coun y is wi h o he EU coun ies. Fiscal policy (and indeed any policy which leads o demand expansion) may ha e limi ed e ec domes ically as he demand spills ab oad. Bu his is no he case o he Eu opean Union, and he impac o iscal policy on domes ic demand and hen he le el o economic ac i i y can be expec ed o be subs an ial. Dispa i ies The single Eu opean cu ency will come in o being agains he backg ound o high le els o unemploymen ac oss Eu ope (9.0 pe cen a he ime o w i ing in ea ly 2001) and wi h eno mous dispa i ies: unemploymen a es anging om 2.6 pe cen in he Ne he lands h ough o 14.6 pe cen in Spain. A e age g ow h o GDP pe capi a anges om 1.9 pe cen (Aus ia) o 5.9 pe cen (I eland), i.e. by a ac o o 3. These dispa i ies a e deep sea ed and much mo e han he empo a y dispa i ies h own up by economies a di e ence s ages o he business cycle. These dispa i ies aise many ques ions: o example, can a mone a y union unc ion economically and poli ically in he ace o such dispa i ies? Fu he , wha a emp s should be made h ough economic policies o educe hose dispa i ies? Also lying behind hose dispa i ies a e conside able di e ences in he ins i u ions o he na ional economies such ha he economies beha e and pe o m di e en ially, and such ha a single policy measu e ( o ins ance, a change in he eu o a e o in e es ) would ha e qui e di e en e ec s on he na ional economies. The p esen dispa i ies in egional unemploymen le els (and also in labou ma ke pa icipa ion a es) wi hin he Eu opean Union would sugges ha e en i ull employmen we e achie ed in some egions, he e would s ill be e y subs an ial le els o unemploymen in many o he s. In he p esence o such dispa i ies in unemploymen , he achie emen o a low le el o unemploymen o e all (no o men ion ull employmen ) would be well-nigh impossible. In la iona y p essu es would build up in he ully employed egions e en when he less p ospe ous egions we e s ill su e ing om signi ican le els o unemploymen . In e es a es would hen ise o dampen down he in la iona y p essu es in he 58 Malcolm Sawye and Philip A es is p ospe ous egions wi hou conside a ion o he con inuing unemploymen in o he egions. Eicheng een (1997) o e ed he sugges ion ha he Eu opean In es men Bank (EIB) can bo ow o -budge o pe o m ax-smoo hing unc ions, howe e , his would exceed he EIB’s p esen emi .3 A icle 198e o he Maas ich T ea y s a es ha : The ask o he EIB shall be o con ibu e, by ha ing ecou se o he capi al ma ke and u ilising i s own esou ces, o he balanced and s eady de elop- men o he common ma ke in he in e es o he communi y. Whe he he unc ions o he EIB can be enla ged o include s abilisa ion policy (dis ibu ion o e ime) is ex emely ques ionable. Howe e , i can en ail edis ibu ion ac oss coun ies, and i is speci ically his unc ion which should be expanded and s eng hened om i s p esen o m whe e assis ance is only in he o m o loans and gua an ees. The e o e, a u he ecommenda ion would be o ha e a e amped EIB o supplemen he ac i i ies o he ECB, wi h he speci ic objec i e o enhancing in es men ac i i y in hose egions whe e unemploymen is acu e (A es is e al. 2001). Enhanced in es men ac i i y will, hus, aim o educe he dispe sion o unemploymen wi hin he amewo k o educing unemploymen in gene al. This could be achie ed h ough encou aging long- e m in es men whene e his is necessa y by p o iding app op ia e inance o i . We sugges an o e haul o he EIB’s emi because o he changing en i onmen in which i ope a es. As highligh ed by Honohan (1995), he EIB was es ablished a a ime when na ional capi al ma ke s we e less de eloped han a p esen . Now, howe e , many lende s o loanable unds compe e wi h he EIB, and in his espec i s public policy ole is sh inking. Despi e his end, he e s ill emains scope o ex end he EIB’s public policy ole. In pa icula one a ea o possible in e en ion has been iden i ied. The case o a e amped and ex ended EIB is based on h ee conside a ions. Fi s , he e is a need o di e en ia ed policies, which will enable he less p ospe ous egions o ca ch up wi h he mo e p ospe ous ones; his in u n will enable highe a e age le els o employmen and economic ac i i y. Second, he o ces o cumula i e causa ion in he con ex o a single cu ency and ma ke will end o s imula e in es men in he mo e p ospe ous egions a he han in he less p ospe ous ones. Thi d, he high se -up cos s o en u e capi al p ojec s and he disp opo iona e numbe o small i ms in he EU pe iphe al a eas (which gene ally expe ience highe le els o unemploymen ) p o ides scope o he p o ision o subsidies o en u e capi al ac i i ies because cos s a e mainly independen o he scale o bo owing (Honohan 1995). Summa y and conclusions A single cu ency wi h a cen al bank as he only policy-making ins i u ion would, we a gue, be unaccep able. We would also suspec ha i is an uns able a ange- Wha ype o Eu opean mone a y union? 59 men . The ECB will be unable o con ol in la ion, and he se ing o in e es a es will ine i ably disad an age some egions and na ions. The anspa ency o he single cu ency will be a anspa ency no only o p ices bu also o li ing s anda ds and le els o unemploymen . I is an open ques ion as o whe he an economy wi h he deg ee o di e si y (o economic pe o mance and o economic ins i u ions) such as he Eu opean Union can ope a e e ec i ely wi hou policies which ecognise hose dispa i ies and which seek o mi iga e he e ec s o he dispa i ies and o educe hem o e ime. C ea ing a single cu ency wi h he only EU-le el ins i u ion o he ECB and o impose on ha single cu ency a se o policy a angemen s which a e de la iona y in na u e a e no good omens o he success ope a ion o he Eu opean economies. The unc ioning o a single cu ency will equi e he de elopmen o ede al le el policies and ins i u ions. No es 1 This ‘new mone a ism’ has, o cou se, in ec ed ‘new Labou ’, as e lec ed in he i le o ou pape ‘New Labou , new mone a ism’ (A es is and Sawye 1998). 2 The CFA zone in F ancophone Wes A ica is an excep ion. 3 The T ea y o Rome c ea ed he EIB in 1959. I speci ically ocused on he inancing o in as uc u al and o he ixed capi al o ma ion p ojec s. The scale o i s ope a ion has been e y small (see Eicheng een 1997). 66 Jane Bush limi he annual g ow h o public spending o only 1 pe cen in eal e ms. Days a e Hunga ians o ed o e whelmingly o join he Eu opean Union, hei p ime minis e e ealed a subs an ial p og amme o public-spending cu s, including cu s in heal h ca e. In 2002 Hunga y’s de ici ballooned o 9.4 pe cen o GDP. To mee he eu o en y c i e ia, i has o all o no mo e han 3 pe cen o GDP. The e is no escape om a ch onic slowdown ahead, led by iscal e enchmen . In i s end-2000 su ey o he egion, he Eu opean Bank o Recons uc ion and De elopmen (EBRD) iden i ied he impossible ci cle ha cen al and eas e n Eu opean economies a e being o ced o squa e i hey a e o comply wi h he membe ship ules o he Eu opean Union and Economic and Mone a y Union. I acknowledged ha ‘ apid g ow h o e a sus ained pe iod is necessa y o he accession coun ies o ca ch up wi h he EU a e age o p oduc i i y and li ing s anda ds’. In 2001 he a e age income pe head in he en accession coun ies was only 40 pe cen o he EU a e age. Howe e , he EBRD said, ‘a he same ime hey will be subjec o he demands o he S abili y and G ow h Pac and, o hose coun ies s i ing o ea ly adop ion o he eu o, he Maas ich c i e ia’. I no ed ha he ‘looming equi emen o a gene al go e nmen budge ha is close o balance o in su plus in he medium e m u he poin s o he need o ea ly iscal consolida ion in many o he accession candida es’. Fiscal consolida ion is economis -speak o cu ing budge de ici s ei he h ough lowe public spending o highe axes. As in wes e n Eu ope, eas e n Eu ope is coming unde p essu e o cu unemploymen no h ough he pu sui o highe g ow h bu h ough ‘ ee ma ke e o m’. Qui e simply, wo ke s in high unemploymen a eas will be expec ed o see hei wages and condi ions slashed un il hey ‘p ice hemsel es back in o he ma ke ’. Poland, o example, is planning o make i s Labou Code mo e lexible. In Ge many, on he same day as he Ins i u e o Labou Ma ke Resea ch issued i s es ima e o 7.2 million unemployed, he go e nmen announced cu s in unemploymen bene i en i lemen . Ins i u ional chaos – he o cing mechanism o poli ical in eg a ion I is no an exagge a ion o sugges ha mac oeconomic policy has been se on maximum squeeze p ecisely because his will enginee a c isis which will be a ca alys owa ds mo e lexible ma ke s – he aim o neo-libe als – and, i his e o m p og am ails o li e up o expec a ions (as hose who wan o o ce he pace o Eu opean poli ical in eg a ion quie ly hope), adically change he ins i u ional s uc u e o EMU. Romano P odi, P esiden o he Eu opean Commission, came close o admi ing his in an in e iew wi h he Financial Times on 4 Decembe 2001. He said: I am su e he eu o will oblige us o in oduce a new se o economic policy ins umen s. I is poli ically impossible o p opose ha now. Bu some day he e will be a c isis and new ins umen s will be c ea ed. Economic pe o mance and he eu o 67 The a gumen seems o be ha he eu o would damage Eu opean economies wi hou poli ical change and is he e o e a use ul o cing mechanism. This is social enginee ing on a g and scale: T o sky in B ussels – cause economic chaos and hope o a posi i e poli ical ou come. Di e gence is ac ually he no m in cu ency unions and he dispa i ies in Eu ope a e d ama ic compa ed wi h hose o he Uni ed S a es, making he igidi ies o he eu o sys em e y wo ying indeed. In he Uni ed S a es, unemploymen anges be ween 2 pe cen and 6 pe cen . In 2001 Eu os a igu es showed a ange in unemploymen a es in he Eu opean Union o 1.2 pe cen o 33.3 pe cen . In he en accession coun ies, he ange was simila , be ween 2 pe cen and 32.8 pe cen . One qua e o EU egions and nine ou o en o he en accession coun ies had GDP below 75 pe cen o he EU a e age. And he a e age woman in he Eu opean Union ea ns a qua e less han a man. In la ion a es ha e a ied wildly in he eu ozone (Figu e 5.5). Con e gence is no he answe – no economies o egions e e mo e in p ecise locks ep wi h each o he and he me e exis ence o mone a y union, as some o i s ad oca es a gue, does no o ce hem so o do. Wha is needed – and wha he US mone a y union de eloped – is inc eased lexibili y in o he a eas. P o esso Robe Mundell who won he Nobel P ize in economics o his pape on ‘op imal cu ency heo y’ concluded ha h ee ing edien s a e needed o make a mone a y union wo k: labou mobili y, de egula ed labou ma ke s and a edis ibu ion mechanism h ough a ede al budge . In Eu ope’s mone a y union, none o hese cu en ly exis s. Labou mobili y in he Eu opean Union is 27 imes less han in he Uni ed S a es o Ame ica, acco d- ing o he Eu opean Commission; mo es o make labou ma ke s lexible ha e ounde ed in he ace o popula Eu opean suppo o a consensual social model; and he eu ozone iscal amewo k is incapable o playing a ebalancing ole. In well- un economies, mone a y and iscal policies wo k in ha mony. In B i ain, e en wi h an independen cen al bank, an obse e om he T easu y si s Figu e 5.5 UK and eu ozone membe s’ in la ion, ha monised index o consume p ices (HM T easu y). ▲ ▲ 68 Jane Bush in on in e es a e mee ings. Be o e he Chancello un eils his annual budge , p i a e soundings o he Bank o England a e aken o asce ain whe he he package will impac on in e es a es. In he eu ozone, such coo dina ion is p ecluded by a ho ibly lop-sided ins i u ional se -up. A s ic ly independen Eu opean Cen al Bank uns mone a y policy. Bu he e is no single ins i u ion o un iscal policy o he simple eason ha membe s a es we e no p epa ed o gi e up con ol o ax, spending and bo owing decisions, desc ibed by a ch-eu ophile o me chancello , Kenne h Cla ke, as ‘ he co ne s one o democ acy’. Pu blun ly, he ECB could make b illian judgemen s in se ing he eu o in e es a e – bu , i poli icians play as and loose on he iscal side, he sys em will s ill be uns able. So he G ow h and S abili y Pac was ag eed, limi ing go e nmen s a all imes o budge s o 3 pe cen o GDP o less o ace ines. As is now well known, he GDP, in p ac ice, is unwo kable and damaging. The elemen al law is ha i is no en o ceable. The heo y is ha ‘pee p essu e’ and a slap on he w is om he Eu opean Commission would o ce membe s a es o comply. In p ac ice, smalle coun ies wi h less clou ha e kep o he ules and big coun ies ha e lou ed hem e e mo e ecklessly. The p ime minis e o F ance, which has al eady bu s he GDP’s limi s, is dismissi e. He said ecen ly: ‘My i s du y is employmen and no o sol e accoun ing equa ions and do ma hema ical p oblems un il some o ice o o he in some coun y o o he is sa is ied.’ The second p oblem is ha he GDP equi es membe s a es o do exac ly he w ong hing when hey hi ough economic wa e s. Ins ead o empo a ily aising bo owing – as Go don B own has done in B i ain, wi h he e ec ha g ow h is beginning o eco e – eu ozone membe s ha e o cu bo owing and spending and aise axes. Take he Ne he lands. I eco ded a GDP con ac ion o 0.5 pe cen in he second qua e . Ye in Sep embe i announced public spending cu s o he equi alen o US$12.4 billion. As Romano P odi, P esiden o he Commission, said o he GDP, i is ‘s upid. The G ow h and S abili y Pac will ha e o be loosened bu wha is cu en ly on he agenda is me e inke ing. EMU’s iscal black hole Mone a y unions do no need ma ginal iscal lexibili y; hey need huge lexibili y. This b ings us back o P o esso Mundell’s hi d condi ion o a success ul cu ency union – a ede al budge o ac as an au oma ic s abilise . In he Uni ed S a es o Ame ica, some 25 pe cen o US GDP is a ailable o edis ibu e esou ces au oma ically h ough he ans e o ax e enues in p ospe ing s a es o he unemploymen bene i in s agna ing s a es. Fo e e y $1 all in a s a e’s GDP, 40 cen s will be paid om he ede al budge . This is he glue ha has kep he US mone a y union oge he . No such sys em exis s in Eu ope. The EU budge is 1.27 pe cen o EU GDP and hal o ha goes on ag icul u al subsidies. This is wholly inadequa e and he e is no ealis ic p ospec o change because o poli ical opposi ion o paying a highe p opo ion o axa ion o he Eu opean Union. A e a Belgian p oposal in mid- Economic pe o mance and he eu o 69 2001 o a new EU ax, e en he mos commi ed Eu opean in eg a ionis s we e ho i ied. The Du ch inance minis e obse ed: ‘The las ime a new ax was launched in he Ne he lands i esul ed in he Eigh y Yea s Wa . I am no su e a new ax o he EU would be much be e his ime.’ Pos -enla gemen , I suspec opposi ion o paying a highe p opo ion o axes di ec o he Eu opean Union will be e en mo e en enched as wes e n elec o a es baulk a hei ax eu os being used o subsidise ela i ely poo new en an s. So, he e is a solu ion o bo h he p oblem o iscal en o cemen and edis i- bu ion, bu i is a poli ical non-s a e . The eu o needs a single iscal au ho i y, unning a ede al budge . In i s submission o he Con en ion on he Fu u e o he Eu opean Union, he Commission p oposed i be ha au ho i y, an ‘economic go e nmen o Eu ope’. Bu he d a EU cons i u ion, in i s cu en o m, keeps na ional e oes o e axa ion. Popula poli ical opposi ion o cen alisa ion o he Eu opean Union – mos ecen ly exp essed in he decisi e Swedish ‘no’ o e o he eu o – will ensu e his con inues o be he case. The e is, qui e simply, no p ospec o a wo kable iscal policy in EMU and his lea es he eu o in limbo. I suspec ha con inued low g ow h, economic ins abili y and poli ical ensions will w eck he sys em in he yea s ahead. Is e en a pe ec mone a y union wo h he ouble? As a pos sc ip o wha I belie e is a ue desc ip ion o he ex ao dina y economic and poli ical aul lines in he eu o p ojec , le me look inally a whe he , in insically, i is wo h so ing ou his mess on economic, a he han poli ical, g ounds. The undamen al economic a gumen o eu o ad oca es is ha a single cu ency is needed o comple e and pe ec he Single Ma ke . Tha heo y is, in i sel , lawed. Bea in mind ha he iches s a e in Asia is Singapo e, a small island wi h no na u al esou ces and wi h i s own cu ency. The iches coun y in Eu ope is Swi ze land, which is no e en a membe o he Eu opean Union, le alone he eu ozone. The u h is ha membe ship o he Single Ma ke and membe ship o he eu o is a sepa a e ma e . One, e en in he iew o he Eu opean Commission, is a mo e po en ially aluable o i s pa icipan s han he o he . The Commission’s Ceccini epo in he la e 1980s pu he gains o belonging o he Single Ma ke a some 4 o 6 pe cen o GDP; (a pos -mo em on his analysis a couple o yea s ago admi ed ha only a ound 20 pe cen o hese gains had ac ually ma e ialised). In 1990 ano he epo by he Commission i led ‘One Ma ke , One Cu ency’ concluded ha joining he eu o would p oduce a gain o 0.5 o 1.5 pe cen o GDP. I is qui e likely ha , o B i ain, he ac ual igu e would be subs an ially lowe han his. The Commission had a igu e o 0.4 pe cen o ansac ions, including lowe ansac ion cos s and lowe exchange a e ola ili y. Howe e , his was an es ima e o an a e age EU coun y and B i ain is a la ge economy han a e age and ades less in he Eu opean Union han he a e age. Qui e p ope ly, he e o e, his componen could be educed o a ound 0.2 pe cen . Then he Commission had a gain o 0.3 pe cen om mo e p ice ce ain y and less p ice disc imina ion. 70 Jane Bush This is highly con en ious gi en ha inc easing use o he In e ne means ha he e is e y li le lack o anspa ency in cu en p ices and ha we li e in a low in la ion wo ld. The es o he Commission’s pu a i e gain om membe ship o he single cu ency comes om he heo e ical ex a in es men and ou pu gene a ed by he i s wo componen s, an e ec o some 0.7 pe cen . Gi en he analysis abo e, le us cu ha by hal . So, a c edible case can be pu o he gains o membe ship o he eu o o he Uni ed Kingdom being only a ound 0.5 pe cen o GDP. The e con inues o be a case o emaining a membe o he Single Ma ke , bu he case o joining he eu o seems laughably i ial compa ed wi h gi ing up con ol o bo h mone a y and iscal policy and so aking a subs an ial s ep owa ds a a mo e cen alised, emo e poli ical sys em ha , hus a , does no ha e he consen o he peoples o Eu ope. 6 The eu o An ou side ’s pe spec i e Paul O me od In oduc ion In his chap e I wan y o look om he pe spec i e o , say, a new o candida e membe o he Eu opean Union as a whole: one o he coun ies o eas e n Eu ope which has been s uggling o adjus o he concep o a ma ke economy, o he eali ies o he wo ld economy; o , mo e gene ally, one o he coun ies in Sou h Ame ica o Eas Asia which, whils no despe a ely poo , a e s ill a long way behind wes e n Eu ope in e ms o li ing s anda ds. Wha does he eu o ha e o o e o coun ies which ha e he po en ial o mo e owa ds wes e n Eu opean li ing s anda ds, bu which ha e no ye ound he elusi e mix o ins i u ional a angemen s and incen i es which gene a es such a p o usion o weal h? Wha migh he eu o seem like o a poo e coun y wi h aspi a ions o become ich? Many coun ies a e anxious o join he Eu opean Union, and we can immedia ely see why in Table 6.1. This shows he GDP pe capi a o G eece, I eland, Po ugal and Spain in 1975 and in 2000. The able does no show he aw da a, bu hei pe capi a GDP ela i e o he ich EU co e o F ance, Ge many, I aly and Benelux. In 1975 hese ou coun ies we e ai ly poo , on he inge o wes e n Eu ope. By 2000 hey had s a ed o mo e owa ds he income le els o he EU co e. All coun ies in he Eu opean Union g ew in absolu e e ms be ween 1975 and 2000, bu he ‘F inge Fou ’ o 1975 g ew mo e apidly. I canno esis men ioning ha he easies way o ge his da a on he web was om he CIA’s si e. The US go e nmen o e s speedy access o la ge amoun s o Table 6.1 Pe capi a GDP ela i e o he EU co e (%) 1975 2000 G eece 55 65 I eland 55 90 Po ugal 55 65 Spain 70 75 Sou ce: CIA. 72 Paul O me od da a o ee – in con as o Eu opean agencies such as Eu os a whose si es end o be slow o access and who cha ge o almos e e y hing. In e ms o encou aging he use o new echnology, he e is a lesson he e. Bu he key poin abou Table 6.1 is ha membe ship o he Eu opean Union has posi i ely bene i ed i s poo e membe s a es. The e is a s ong incen i e o o he s o join. Ye he eu o canno ha e played much o a ole in enabling hese coun ies o s a ca ching up wi h he a luen co e in e ms o li ing s anda ds. A simple bu e y impo an eason is ha he eu o did no exis un il 1999. The ca ch-up has happened in pa because o he dis ibu ion o subsidies om he iche coun ies, and in pa because o he inc easing in eg a ion o Spain, Po ugal and so on wi h he wide EU ma ke . O cou se, i is a gued now ha he eu o will in ensi y his p ocess, by educing ansac ions cos s and p omo ing p ice anspa ency. Whils his is ue, i is much less impo an han he need o comple e he p ocess o implemen ing he concep o he single ma ke . The e a e s ill a oo many ba ie s o ade and compe i ion ac oss he Eu opean Union. To gi e one example: he puni i e ai a es on mos Eu opean ou es a e due o he willingness o he Commission o allow, by one means o ano he , a succession o massi e subsidies o con inue o be paid o ine icien na ional ca ie s. Ano he example is he mobile phone, and he ailu e o es ablish common s anda ds ac oss he Eu opean Union. Ene gy spen on in oducing he eu o could ha e been be e spen on emo ing ade ba ie s and comple ing he single ma ke . The s iking ea u e abou he pas hal -cen u y o so is ha a subs an ial numbe o coun ies, p incipally in Asia, ha e seen apid expansions o hei li ing s anda ds – i s o all Japan, hen coun ies like Sou h Ko ea and Singapo e, Malaysia and Indonesia and now India. I is p ecisely hose coun ies which ha e emb aced he concep o globalisa ion and inc easing in eg a ion wi h he es o he wo ld which ha e done well. I is s a es such as Bu ma, No h Ko ea and A ghanis an, which ha e cu hemsel es o , which ha e gone backwa ds. So membe ship o he Eu opean Union o e s he bene i s o globalisa ion, o eady access o a huge ma ke . In addi ion, membe ship gi es a clea badge which ce i ies c edi wo hiness and poli ical s abili y. This enables coun ies o a ac di ec in es men om o e seas. Fu he , he Eu opean Union p o ides la ge subsidies o help cushion he shocks which such in eg a ion ine i ably b ings. Bu i is no clea wha bene i s he eu o as such, a he han membe ship o he Eu opean Union, b ings. Indeed, a case can be made ha on balance i hinde s a he han helps Eu ope. Ce ainly, in he ole o a new o candida e membe o he Eu opean Union, I would be conce ned. The emphasis on he eu o a he han he single ma ke would make me wo y ha ba ie s o he hings I p oduced migh no come down as apidly as I would like. Indeed, his is a a om hypo he ical concep , as is shown by he deba e on how much mobili y o labou will be allowed om he eas e n Eu opean coun ies once hey a e in he Eu opean Union. An immedia e conce n a ises om he wide poli ical economy con ex , a he han he na owe ocus on echnical economics. The e is legi ima e conce n abou The eu o: an ou side ’s pe spec i e 73 he impac o globalisa ion on he democ a ic p ocess. La ge co po a ions, i is el , a e aking decisions which in luence people bo h much mo e s ongly, and a he same ime mo e emo ely, han do elec ed go e nmen s. Much o his wo y is misguided and o en se iously misplaced. Ne e heless, he e is a sense o unease abou he emo eness wi h which decisions a e aken. Un o una ely, he eu o b ings wi h i i s e y own democ a ic de ici . I is by no means clea ha he elec o a es o wes e n Eu ope would ha e gone ahead wi h he eu o p ojec i i had been submi ed o e e enda. We know ha he only coun y whe e a o e was pe mi ed ecen ly, Denma k, ejec ed membe ship. This was despi e he o e whelming suppo o en y on he pa o he poli ical es ablish- men and he media. No o he Eu opean go e nmen da ed o pu he ques ion be o e i s elec o a e in he immedia e un-up o he in oduc ion o he cu ency. New and aspi an membe s o he Eu opean Union in eas e n Eu ope a e o cou se no s ange s o he idea o ha ing c ucial decisions aken on hei behal by he poli ical eli e. Bu he lack o democ a ic alida ion is, I belie e, a po en ially se ious p oblem o he eu o. Ac oss wes e n Eu ope, we ha e al eady seen he g ow h o pa ies ou side he poli ical mains eam in many o he membe s a es. Discon en wi h he emo eness o he Eu opean Commission appea s o be a common ea u e o he o he wise widely dispa a e pla o ms o such pa ies, some o which a e a he disag eeable. The c ea ion o he eu o ein o ces cen alising endencies wi hin he Eu opean Union. Spain, a e all, is no Slo enia, bu a s ong and powe ul economy. Bu jus how much in luence does he go e no o he Spanish cen al bank ha e on decisions aken a he Eu opean Cen al Bank (ECB)? I hink we all know he answe . The eal dange , I would eel looking om he ou side, in joining he Eu opean Union and he eu o is ha my oice would simply no be hea d a all. In any ad e se ci cums ances, he eu o p ojec would be adminis e ed solely in he in e es s o he EU co e. Bu e en om a F ench o Ge man pe spec i e, he pa icula way in which he ules o ope a ion o he ECB ha e been amed may p o e a handicap. The obsession wi h in la ion and he ap o he iscal s abili y pac may p e en he ECB om ollowing po en ially expansiona y policies du ing any economic down u n. Coun ies ou side he Eu opean Union equi e no only access o EU ma ke s i hey a e o e en ually p ospe , bu hey equi e a heal hy g ow h a e in he de eloped wo ld o which he Union is such a majo pa . Down u ns in he de el- oped wo ld a e o en e lec ed in much sha pe ecessions elsewhe e. A squeeze on expo ea nings in ha d cu encies can be magni ied sha ply in he domes ic economies o he de eloping wo ld. Fo example, in he gene al wo ld slow-down be ween 1980 and 1982, he EU 15 g ew in eal e ms by only 1 pe cen . Bu g ow h in bo h A gen ina and B azil was sha ply nega i e, a –11 and –8 pe cen espec i ely. The ole o ins i u ions, o he p ocess and ules unde which economic agen s ake decisions is in my iew absolu ely cen al o how economies pe o m. Un o una ely, he ules go e ning he ope a ion o he ECB ha e been designed o 74 Paul O me od igh yes e day’s ba les. The comple e ocus on he con ol o in la ion is se iously misplaced. As a esul , he p ospec s o ou pu g ow h in he Eu opean Union, and hence in he de eloping wo ld, may be a ec ed ad e sely. Think back – well, some o us can – o he da k days o 1973. Since he ea ly 1950s in la ion a es had been e y simila in all wes e n coun ies. E en in 1973, wi h huge in la iona y p essu e om wo ld commodi y p ices, and a highe absolu e le els o in la ion, his s ill ob ained. In la ion in mos coun ies was in he ange 6–8 pe cen , wi h I aly being somewha highe a 10 pe cen . Following he oil shock, in la ion ose sha ply e e ywhe e in 1974, eaching o e 12 pe cen e en in Ge many. Bu by 1975 a huge dispa i y in in la ion a es had occu ed. In B i ain, in la ion was 21 pe cen , in I aly 16 pe cen and in Ge many jus o e 4 pe cen . A g ea deal o economic policy since hen has a emp ed o deal wi h hese disc epancies, which a ose, a e a long pe iod o con e gence, in a pe iod o only 18 mon hs. Policy make s emain obsessed wi h his pe iod, which is a mos unusual one. In gene al, he wes e n economies ha e seen ex emely low a es o in la ion. I a ies, o cou se, om yea o yea , bu on a e age i has been low. E en in he wo decades o ull employmen in he 1950s and 1960s i was only a ound 3 pe cen . Wi h he excep ions o wa ime and he unique ci cums ances ollowing he 1970s, i has usually been e en lowe . Low in la ion is he no m, and he opening yea s o he wen y- i s cen u y a e no excep ion o his ule. Low in la ion exis s because o app op ia e ins i u ions and s uc u es. These a e e y complex bu can be desc ibed e y simply. Fi s , he s uc u es o capi alism, o a much highe deg ee han any o he p e iously o ac ually exis ing social and economic sys em, encou age inno a ion. Second, he e is he exis ence o compe i ion in he p oduc ma ke s. I do no mean by his he idealised wo ld o pe ec compe i ion in economic heo y, bu we canno igno e he subs an ial amoun o compe i ion which he e is in mos p oduc ma ke s. These wo ac o s se he gene al amewo k o low in la ion. I is no an acciden ha he hype in la ions, when in la ion eaches millions o pe cen , we ha e seen ha e only aken place in a es ic ed se o ins i u ional se ings: in siege economies, in wa ime and in socie ies in which he ab ic o ci il socie y is ex emely s ained – Ge many in he 1920s, a ious cen al Eu opean s a es a he end o he Second Wo ld Wa , Balkan economies in he 1990s a e some examples o hype in la ion. All hese we e socie ies unde massi e s ain. We could hink o some Eu opean coun ies, such as B i ain and I aly in he mid- 1970s, as e y mild examples o his la e phenomenon. A mone a is migh well say ha i esponsible mone a y policies could p o e s onge han hese wo ins i u ional ac o s. In a logical sense, his is i ially ue. Bu in p ac ice we ne e , e e obse e a cen al bank in an o de ly, peace ime wes e n socie y expanding he money supply by one million pe cen , e en assuming he e we e enough helicop e s in he wo ld o sca e i wi h. I is much ha de o imagine a coun e - ac ual in which his happens han i is o imagine he wo ke s o B i ain and I aly being disciplined by mone a y policy in 1974. The eu o: an ou side ’s pe spec i e 75 An implica ion o his is ha de ailed, sho - e m a ge ing o in la ion a es is mo e o less meaningless. We should decide he kind o in la iona y egime we a e in – a low one a p esen – and no wo y abou yea -on-yea luc ua ions. The ECB should be a mo e conce ned wi h ou pu g ow h han wi h in la ion. The lack o any s able ela ionship be ween he g ow h in demand and in la ion in he Eu opean Union is shown in Figu e 6.1. This plo s he annual a e o in la ion in he EU 15 agains he a e o g ow h o eal GDP o e wha migh be e med he ‘ ansi ion’ pe iod o 1971–94. In la ion ose in he ea ly 1970s, was g adually con ained and by he mid-1990s had allen o unde 3 pe cen . The s iking ea u e o he cha is he lack o any ecognisable pa e n in he ela ionship be ween in la ion and g ow h. The pic u e is he same i he g ow h in he p e ious yea is used ins ead. Ye policy make s con inue o ac as i as e g ow h leads au oma ically o highe in la ion. In eali y, as g ow h can coincide wi h low in la ion, he Uni ed S a es o Ame ica in he 1990s being bu he la es example o his. I is he misplaced emphasis on con aining in la ion which is my main conce n abou he ope a ion o he eu o. I his has he e ec o es ic ing ou pu g ow h in he Eu opean Union, he de eloping wo ld is likely o su e e en mo e han he Union i sel . Fa om assis ing he es o he wo ld, he eu o may damage i . The po en ial pa allels wi h he G ea Dep ession o he 1930s and he policies o cen al banke s a e oo close o com o in he p esen ci cums ances. So, o e all, i I we e a po en ial EU membe I would say ha he case o joining emains e y s ong. Bu his is because o he access gained o he eno mous EU Real GDP In la ion 012345 4 6 8 10 75 93 81 82 80 91 92 94 87 88 89 86 85 90 84 83 74 77 73 76 72 79 71 78 Figu e 6.1 In la ion and eal GDP g ow h in he EU15 (%). 82 Ma k Baimb idge no allow he op imal a e o in la ion o be p ecisely de ined; i indica es he need o an in la ion objec i e embodying a su icien sa e y ma gin agains de la ion. In esponse o his c i icism he ECB (2003) sugges ed ha in la ion objec i es abo e 1 pe cen p o ide su icien sa e y ma gins o ensu e agains hese isks.1 In ela ion o he i s pilla , i s key cha ac e is ic is he announcemen o a e e ence alue o he annual g ow h o M3. Hence, he ECB seeks o communi- ca e he medium- e m ocus o mone a y policy o he public, as i elie es he cen al bank om esponding o sho - un luc ua ions in inancial and o he a iables (ECB 2003). Fu he mo e, by signalling con inui y o he Bundesbank’s s a egy, he ESCB hoped o quickly es ablish c edibili y ( on Hagen and B ückne 2002). Howe e , he ole o money and mone a y analysis has gene a ed con o e sy ega ding he obus ness o he chosen leading indica o ’s p ope ies wi h espec o p ice de elopmen s, on he g ounds ha he co ela ion be ween money g ow h and in la ion appea s o ha e declined o e ime in pa allel wi h es o ed condi ions o p ice s abili y (Begg e al. 2002). In his con ex , he necessi y o announcing a e e ence alue o money g ow h has also been que ied, oge he wi h he use ulness pe se o a sepa a e ‘money’ pilla (S ensson 2003). In con as , he second pilla consis s o an assessmen ega ding u u e p ice de elopmen s (ECB 1998). Ini ially, i ep esen ed he analysis o sho - un p ice de elopmen s based on measu es o eal ac i i y, wage cos , asse p ices and iscal policy indica o s, oge he wi h indica o s o business and consume con idence (ECB 1999). Howe e , no amewo k was speci ied as o how hese a iables would be used o assess p ice de elopmen s, no was any guidance gi en on he ela i e weigh o he a iables in such assessmen s. I is he e o e an opaque pa o he ESCB’s s a egy, being oid o sys ema ic analysis and being ully disc e iona y ( on Hagen and B ückne 2002). Fu he mo e, Gaspa e al. (2001) sugges ha he analysis is now o ganised in he o m o a mac oeconomic p ojec ion, al hough he ECB does no p o ide con idence in e als o i s p ojec ions (Gali 2001). Finally, acco ding o he ECB (2003), he wo pilla s a e used in pa allel in mone a y policy decision making. Howe e , he e is no indica ion o wha hei ela i e weigh s a e, hus esul ing in an incomp ehensible s a egy, as Issing e al. (2001) pa ially acknowledge. Al hough he e is no hing ha would make he use and e ela ion o he ela i e weigh s o he wo pilla s impossible, he eason why he ECB has so a denied he public anspa ency o i s s a egy is mo e likely ela ed o he in e nal decision-making p ocesses ( on Hagen and B ückne 2002). Labou ’s esponse o cen al bank independence Whe he o no B i ain has an independen cen al bank may seem an obscu e ma e . Bu i is no . I is c ucial o de e mining whe he a Labou go e nmen can deli e on a ange o policies om he basics o g ow h and jobs o wide issues o social jus ice. The cause o cen al bank independence became a 1990s bandwagon ha a g ea many people sc ambled o join. Fo ins ance, wo o me Conse a i e Chancello s o he Excheque , Nigel Lawson and No man Lamon , oge he wi h ex-T easu y Chie Si Pe e Middle on, p essed he case o an independen Bank The ECB in heo y and p ac ice 83 o England a e hei espec i e depa u es om go e nmen . Indeed, o hose s ill clinging on o he emnan s o mone a ism, hey disce ned ha an independen cen al bank would be he ideal way o secu ing he mone a is legacy beyond he 1980s. An independen bank would ensu e ha mone a is s emained in powe i no in o ice, because i would s ee he economy by inancial indica o s o he de imen o he eal economy. Hence, hey belie e ha cen al bank independ- ence would lock mone a ism and mone a is p io i ies in o he sys em ega dless o whe he Labou came o powe . Howe e , pe haps he g ea es ca as ophe in his a ea was he nea uni e sal accep ance by Labou poli icians and policy ad iso s o he me i s ega ding cen al bank independence. Many we e swayed by he numbe o commen a o s who w o e a ou ably on he subjec , a guing ha his p o ided he medicine o B i ain’s economic malaise; o he s equi ed li le con incing, such as p o-EU en husias s who happily accep ed ha as pa o he TEU i mus be good; whils a inal g oup we e a ac ed by he idea o being able o impose a high in e es a e egime ia an independen cen al bank wi hou ha ing o answe o he public o o he Labou mo emen o he consequences. Thus, h ough his unholy alliance he New Labou hie a chy accep ed wi h li le ques ion he concep o cen al bank independence upon gaining powe in 1997; one o i s i s ac s was o g an he Bank o England ‘ope a ional independence’ ega ding he se ing o in e es a es in acco dance wi h an in la ion a ge . Howe e , he Labou Pa y canno accep his con empo a y swing in opinion i i is o emain ue o i s undamen al belie in social jus ice (see Bean 1993; Hol ham 1993). The concep o an independen Bank o England, o an independen ECB, essen ially seeks o e e o he p inciples o he gold s anda d, unde which he le el o money wages was compelled h ough he a e o in e es o adjus o he ope a ion o he inancial sys em. Thus s uc u es o social p o ec ion become open o unde mining by he ope a ion o unaccoun able ma ke o ces. Independen cen al banks, na ional o con inen al, a e cu en ly being ad oca ed as he ehicle o implemen his sea change in he class s uggle. Socialis s, on he o he hand, mus con inue o asse he p imacy o democ a ically accoun able con ol o e he money supply, in o de ha he goals o ull employmen , ising li ing s anda ds and dis ibu i e jus ice can be pu sued. O he wise he business and moneyed in e es s, which con ol c edi lows and de e mine inancial con idence, will exe a silen e o h ough he ‘independen ’ cen al bank o e he ange and cha ac e o go e nmen ac ion deemed o be ‘pe missible’. The exe cise o such a e o would mean pe manen de la ion and ins i u ionalised highe unemploymen h oughou he Eu opean Union and he Uni ed Kingdom. Conclusion The heo e ical and empi ical e idence su eyed in his chap e sugges s ha he c ea ion o an independen cen al bank is a mo e inely balanced exe cise han is equen ly po ayed, in pa icula gi en na ional economies which con inue o expe ience a ying economic cycles and possess di e gen economic s uc u es. 84 Ma k Baimb idge Mo eo e , he in e es a e decisions aken by cen al banks a e amongs he mos sensi i e ac ions deployed in a mode n economy, in luencing g ow h, li ing s anda ds, he le el o unemploymen and he cos o c edi and mo gages. The ECB’s p oblems a ise om i s lack o democ a ic accoun abili y, anspa - ency and democ a ic legi imacy as well as om i s a bi a y objec i es, ques ion- able economic philosophy and he po en ial o in e mi en con lic wi h he na ional go e nmen s whose des inies i possesses conside able in luence o e . An al e na i e model o a democ a ically accoun able and con olled ECB, ope a ing in coo dina ion wi h a combina ion o na ionally de e mined iscal policies, o a newly es ablished ede al au ho i y, would p o e a mo e e ec i e and desi able model o EMU. No e 1 This is also in line wi h he p ac ice ollowed by all o he cen al banks o he majo de eloped coun ies ha ha e speci ied nume ical alues o hei objec i es; all ha e a mid-poin abo e 1 pe cen . Fo example: he Bank o England: 2.5 pe cen (RPIX index, app oxima ely 1.75 on a e age in HICP e ms); S e iges Riksbank: 2±1 pe cen (CPI); No ges Bank: 2.5±1 pe cen (CPI); Bank o Canada: 1–3 pe cen (CPI); Bank o Aus alia: 1–3 pe cen (CPI); Rese e Bank o New Zealand: 1–3 pe cen (CPI). The Fede al Rese e Sys em and he Bank o Japan ha e no speci ied a quan i a i e de ini ion o hei p ice s abili y objec i es. The Swiss Na ional Bank has adop ed a de ini ion o p ice s abili y ha is equi alen o ha o he ECB. 8 The le mus wake up – Eu ope isn’ wo king La y Ellio His o y, says Tony Blai , is on his side. Back in 1975, Labou u ned public opinion a ound o e Eu ope, and i Ha old Wilson could do i hen, Blai sees absolu ely no eason why he can’ do i now. I no hing else, you ha e o admi e he p ime minis e ’s con idence, bu he is deluding himsel i he hinks he condi ions in he mid-1970s a e e en emo ely he same as hose oday. Wilson had he leade ships o all h ee pa ies on his side, oge he wi h business and he p ess. I onically, howe e , Wilson’s ump ca d was ha he was p esiding o e one o Eu ope’s mos dys unc ional economies. Fo hose no old enough o emembe , 1975 was he yea o s ag la ion – unemploymen was ising and in la ion hi a pos -wa peak o 27 pe cen . The o e o e whe he B i ain should pull ou o he Eu opean Economic Communi y came less han 18 mon hs a e he coun y had been pu on a h ee-day week, and p uden amilies s ill kep a heal hy s ock o candles in case he ligh s wen ou . Bu i was no jus ha B i ain’s pe o mance was so dismal; i was ha Eu ope was doing much be e . Ge many was Eu ope’s powe house, wi h i s eco e y symbolised by he spanking new s adium buil in Munich o he 1972 Olympics. Vo e s looked ac oss he Channel and came o he ob ious conclusion: Eu ope wo ked and B i ain didn’ . In hose ci cums ances, i was no di icul o pe suade he elec o a e o ha e second hough s. The compa ison wi h 2004 is s a k. Back in 1975, B i ain was abou o ge an unwelcome isi om he In e na ional Mone a y Fund, which insis ed on deep and unpopula cu s in public spending as he p ice o a escue package. Today i is he eu ozone ha is he a ge o he IMF’s c i icism; i has conce ns abou B i ain’s housing ma ke , bu says Eu ope is he one pa o he wo ld le un ouched by he global eco e y. Economic condi ions, i says, emain win y and jus i y lowe in e es a es o s imula e g ow h. When e en he IMF is u ging cheape bo owing, you eally ha e go p oblems. None o which is o a gue ha all is wonde ul wi h B i ain’s economy. Those who poin o he whopping ade de ici , he wi he ing o manu ac u ing and he moun ain o consume deb a e igh o be conce ned ha he good imes migh no las o e e . Bu he signs a e ha , o he nex couple o yea s a leas , B i ain will con inue o enjoy as e g ow h and lowe unemploymen han he single cu ency bloc. ‘In con as o he eu ozone, mac oeconomic pe o mance in he 86 La y Ellio UK emains s ong and he main isk o he ou look is he possibili y o an ab up co ec ion in he housing ma ke ’, he IMF says. I likes he way he Bank o England has handled in e es a es and p aises B own o using highe public spending o unde pin g ow h. Fo a na ion ha has ended o be indi e en , i no down igh hos ile, o he idea o close poli ical in eg a ion in Eu ope, all his ma e s. The idea ha B i ain isked missing ou on a big pa y happening on he o he side o he Channel p o ed a compelling a gumen in 1975, bu i lacks he same punch oday. Indeed, gi ing ex a powe s o a Eu ope ha is s uggling si s oddly wi h he go e nmen ’s app oach o ailing schools and unde pe o ming hospi als. This p oblem haun ed Blai as he con empla ed whe he o hold a e e endum on he eu o, and in he end he decided – almos ce ainly co ec ly – ha he could no hope o con ince o e s ha joining he single cu ency was i al o B i ain’s u u e p ospe i y a a ime when he eu ozone was doing so badly. The same will apply o any campaign on a cons i u ion; he go e nmen may ind ha a gene ally qui e con en ed public ejec s he a gumen ha a Eu ope o 25 na ions equi es changes o he ela ionship wi h B ussels and will simply ask: ‘I i ain’ b oke, why ix i ?’ O cou se, hose p essing o a yes o e will say ha B i ain will be b oke unless i suppo s he cons i u ion and (e en ually) joins he eu o, bu he conse a ism o he elec o a e should no be unde es ima ed. The e is an al e na i e scena io, which is ha he p ophe s o doom a e igh abou Labou ’s economic ‘mi acle’ being buil on sand. Should he e be an almigh y c ash in he p ope y ma ke which pushed he economy in o ecession and sen unemploymen su ging back abo e a million, hen i migh be possible o deploy he 1975 a gumen . This would be good news o Kenne h Cla ke, Michael Hesel ine and o he Conse a i e p o-Eu opeans, bu i would pu a jeopa dy Blai ’s chances o winning a hi d elec ion. In sho , he p ime minis e is in a bi o a ix. I he economy s ays s ong he s ands o win he elec ion, bu lose he e e endum. I he economy blows up, he wouldn’ be in a posi ion o hold a e e endum because he will ha e been kicked ou o Downing S ee . Two conclusions can be d awn om he ecen spa be ween Go don B own and he Eu opean Commission o e iscal policy. The i s is ha he S abili y and G ow h Pac is in a e s. The second is ha hose who should be suppo ing he demise o his mone a is elic isk being on he w ong side o he a gumen . The a gumen s used o de end he Pac a e no new. Si Geo ey Howe was ully acquain ed wi h hem when in he sp ing o 1981 he igh ened iscal policy du ing he dep hs o B i ain’s wo s pos -wa ecession. This was mone a ism’s momen . Howe jus i ied he budge squeeze by a guing ha highe de ici s would lead o an inc ease in he money supply. Tha , acco ding o Mil on F iedman’s disciples, mean highe in la ion. They hailed he chancello ’s ac ion as a wise mo e which yoked oge he he wo cen al pilla s o mone a ism: con olling he money supply and balancing he budge . G ow h s a ed o pick up sho ly a e wa ds. QED. No e e ybody saw hings his way. The Times p in ed a le e signed by 364 The le mus wake up – Eu ope isn’ wo king 87 membe s o he g ea and good o he economics p o ession. They iewed M s Tha che ’s ideas as eac iona y, de la iona y nonsense and wa ned ha igh ening iscal policy in a slump would hold back eco e y and ha unemploymen would con inue o ise (as i did, o ano he i e yea s). Wha e e he igh s and w ongs o his a gumen , by he ime o he second big Conse a i e ecession in he ea ly 1990s, bo h o mone a ism’s main ene s had been di ched. The money supply was no longe a ge ed and big budge de ici s we e amassed. Two bou s o high unemploymen pu paid o alk o balancing he budge , al hough one way o sa ing money was ound – cu ing capi al spending on B i ain’s in as uc u e. The cumula i e e ec o his neglec – exace ba ed by Labou ’s pa simony in i s i s e m – is now gla ingly e iden . Fo una ely, since he dea h o mone a ism he Uni ed Kingdom has ound a be e way o achie e heal hy public inances. G ow h has a e aged 3 pe cen a yea and unemploymen has allen. The esul has been ha he a io o public deb o GDP has d opped o abou 30 pe cen and he budge on cu en spending was in su plus o o e ou yea s. The go e nmen decided o exploi his s ong iscal posi ion by pledging o bo ow money so ha i can double ne in es men o 1.7 pe cen o GDP by 2003–4. E en so, his will only epai a small ac ion o he damage caused by yea s o neglec , aking ne in es men back o he le els o 1989, Tha che ’s las ull yea in powe , and s ill well below he a e age o he Eu opean Union as a whole. So wha ’s w ong wi h ploughing money in o he na ion’s in as uc u e, you migh ask. No hing, p o ided you accep ha he e a e posi i e e u ns o be made on in es men in capi al in as uc u e in a coun y like B i ain, which has a e y sound iscal posi ion. Bu – o cou se, he e is a bu – M P uden ’s plans a e seen as no p uden enough by he Eu opean Commission, which iews he in en ion o bo ow 1.2 pe cen o GDP (£10bn a yea in eal money) as a b each o he S abili y and G ow h Pac , which equi es membe s a es o keep hei budge s in he black. B own wen ballis ic when he Commission published i s iews. The go e nmen has a manda e o wha i is doing, ha ing ough and won he 2001 Gene al Elec ion on he issue o inc easing spending on public se ices. Mo eo e , i is clea ha he go e nmen ’s iscal se -up is a mo e lexible and app op ia e o cu en economic condi ions han he S abili y and G ow h Pac , unde pinned as i is by he same mone a is belie in balanced budge s ha ga e us he 1981 budge . B i ain’s iscal ules dis inguish be ween cu en and capi al spending, and ensu e ha public inances a e sus ainable o e he economic cycle as a whole. The Pac does nei he . B own is no he only inance minis e o ealise ha he e a e se ious laws in he Pac . A mee ing o Eu opean Union economic and inance minis e s las summe ag eed a new code o conduc o in e p e ing he Pac , including he need o ake in o accoun he s a e o he economic cycle, whe he he le el o public deb is sus ainable and he case o highe spending on in es men . The Commission, o easons bes known o i sel , igno ed all his and p oceeded o in e p e he Pac igidly when i looked a he s a e o EU budge de ici s. 88 La y Ellio In B i ain’s case, he e was some jus i ica ion o conce n. The me hod o calcula ing whe he a coun y’s iscal policy is en e ing he dange zone akes accoun o how ola ile he economic cycle is and how esponsi e he de ici is o changes in g ow h. B i ain has seen gy a ions in he economic cycle, and i s low ma ginal ax a es mean ha he de ici is sensi i e o changes in GDP. As such, he Commission belie es ha he UK de ici should be 0.5 pe cen o lowe , jus o be on he sa e side. B own a gues ha his akes no accoun o he changes made o UK iscal policy since 1997, and i implemen ed would o ce him ei he o aise axes o cu public spending o an unaccep able deg ee. Balancing he budge would mean educing he planned de ici by 1.2 pe cen o GDP – abou £10bn a yea . This is he inexo able logic o he Commission’s posi ion, despi e i s a emp s o w iggle o he hook. This is whe e he un eally begins, because a his poin an a cane a gumen abou iscal policy becomes in e wined wi h he ques ion o eu o en y and he iming o a e e endum. The G ow h and S abili y Pac is dumb economics. I was a 30 pe cen de alua ion and lowe in e es a es ha p omp ed eco e y in B i ain om he slump o he ea ly 1980s, no Howe’s mone a is budge . One hing Eu ope’s economy ce ainly does no need a p esen is a p o-cyclical iscal policy. As a as B i ain is conce ned, dogged suppo o he Pac is e en dumbe poli ics. Roo -and-b anch e o m o he Pac would make i easie , no ha de , o con ince a scep ical public o he dubious bene i s o eu o membe ship. F om B own’s poin o iew, he p ospec o B i ain coming unde p essu e o cu public spending i i joined he single cu ency is a se ious issue. Mos Labou suppo e s would ag ee; hey ind i di icul o accep he idea ha he na ional in e es would be se ed by u he needless cu s in planned spending on he public in as uc u e. Union leade s, pa icula ly hose s ongly ep esen ed in he public sec o , a e becoming decidedly wi chy. All his is deeply unhelp ul o hose who belie e ha i is he T easu y’s job o igno e he dubious economics o mone a y union and ubbe -s amp an ea ly eu o e e endum. Opponen s o mone a y union a e supposed o be o hing igh -wing xenophobes, no ade unionis s and Labou o e s anxious abou public spending cu s esul ing om he applica ion o ou da ed mone a is dogma. As such, B own’s en i ely jus i ied insis ence ha he Commission back o has been g ee ed os ily by hose who would ha e been up he e on he ba icades wi h he 364 an i- Tha che i es in 1981. They a e now in he con used posi ion o ying o d aw a dis inc ion be ween wo kinds o spending cu s: Conse a i e spending cu s ( eac iona y and bad) and Eu opean commission ones (p og essi e and good). Scep icism is ha d-wi ed in o he le . I is scep ical abou he claims made o he p i a e inance ini ia i e. I is scep ical abou he go e nmen ’s claims o weapons o mass des uc ion in I aq. I is scep ical abou ickle-down economics, he need o build o e he g een bel , GM oods and he Wo ld T ade O ganisa ion. Nobody ba s an eyelid a any o his. Scep icism is he bea ing hea o democ acy; i is wha in o ms he app oach o a Je emy Paxman when con on ed by a cabine minis e . Scep icism is seen as igh and p ope in all a eas o policy The le mus wake up – Eu ope isn’ wo king 89 ba one. Tha , o cou se, is Eu ope, whe e scep icism is iewed as ha mos heinous o sins – a e nisa ion wi h he swi el-eyed loonies o he igh . This esponse is u ile and da . Scep icism abou he Eu opean Union is ine i able and long o e due, pa icula ly on he le . Le ’s ake a ew examples. Who among us is no scep ical abou he Common Ag icul u al Policy, which cos s e e y amily o ou an ex a £16 in dea e ood bills and s un s he de elopmen o poo coun ies by denying hem access o Eu opean ma ke s? Aid agencies such as Ox am ha e been ou spoken in he need o adical e o m. And how abou he Common Fishe ies Policy? We e no he en i onmen alis s igh when hey said i would esul in he wa e s o he No h Sea being hoo e ed d y by ac o y awle s? And hen he e’s g ow h and unemploymen . Mo e han a decade ago he Keynesian le in B i ain wa ned ha a Eu opean cen al bank wi h a de la iona y manda e would esul in weak g ow h and leng hening dole queues, and hey we e absolu ely co ec . Some o he smalle coun ies in Eu ope – I eland and Finland, o example – ha e be e ecen eco ds han he Uni ed Kingdom, bu o e all he pe o mance o he 12-na ion eu ozone has been di e. I is 12 yea s since i enjoyed as e g ow h han B i ain, and he esul has been a big di e ence in unemploymen : below 5 pe cen in he Uni ed Kingdom, almos 9 pe cen in Eu oland. Wha a e we o do in he ace o such igu es: exp ess scep icism abou he claims made o he eu o o shu up? The answe o many on he p o-eu o le is ha he aid agencies, he g eens, he an i-globalise s and he Keynesians should pipe down. Yes, hey say, Eu ope has i s aul s, bu he e a e good easons o he le o suppo i . These a e se ious a gumen s and a e wo hy o se ious conside a ion. One is ha Eu ope is he only se ious bulwa k we ha e agains he Ame icanisa ion o he globe. A second is ha Eu opean capi alism is gen le han i s apacious Anglo- Saxon cousin ac oss he A lan ic. A hi d is ha Eu ope lea es B i ain o dead when i comes o oads, ailways and he public ealm in gene al. Finally, close in eg a ion has mean ha hal a cen u y o wa has been ollowed by hal a cen u y o peace. To ake he las a gumen i s , he no ion ha Eu ope has o mo e close oge he in o de o p e en wa has always seemed as dubious as he idea ha i was all due o he bomb. A mo e likely explana ion is ha he nine een h-cen u y balance o powe – which b oke down in he i s hal o he wen ie h cen u y – was ec ea ed in a new o m by he pos -wa US–So ie Union duopoly. The p oblem wi h he i s h ee a gumen s is ha hey all es on he same p emise, and ha is a s ong economy. Poli ical clou is a unc ion o economic clou , and Ame ica’s lead o e Eu ope has been widening in ecen yea s. Eu ope’s social democ acy h i ed in an e a when he Ge man economy was humming along a 5 pe cen a yea and F ance had he lowes unemploymen a e in he wes ; i is an una o dable luxu y when he eu ozone is g owing by 1 o 2 pe cen a yea . Ge ha d Sch oede and Jacques Chi ac know ha – which is why hey a e being o ced o emb ace lexible labou ma ke s and wel a e e o m. Those on he 90 La y Ellio le who hink ha Eu ope is a e uge om US-s yle labou ma ke s a e li ing in cloud-cuckoo-land, because wi h he ECB and he Eu opean Commission eschew- ing expansiona y mac oeconomic policies, he only al e na i e is g ea e lexibili y and supply-side e o m. P edic ably enough, his is causing app ehension, p omp ing he Ge mans, o example, o sa e a he han spend, hus leading o e en lowe le els o g ow h and e en sh ille calls o oo -and-b anch economic e o m. And o e s a e now s a ing o ask some sea ching ques ions, ac oss Eu ope and no jus in B i ain. In he end, he e is a simple choice. The e can be a le -wing c i ique: Eu ope has a s ong manu ac u ing base and an imp essi e s ock o human and physical capi al, bu needs o g ow as e and elocalise powe . O he e can be a igh -wing c i ique: i needs a solid dose o Tha che ism o buck i s ideas up. The s a us quo is no an op ion, because clea ly Eu ope isn’ wo king. Those who p e end i is a e in ca ego y-one denial. 9 A pos -Keynesian s a egy o he UK economy Philip Whyman, B ian Bu ki and Ma k Baimb idge In oduc ion Pos -Keynesians a gue ha he le el o ou pu and employmen depends upon he in e ac ion be ween o al spending and he economy’s capaci y o p oduce. Thus a c ucial p oblem wi h ma ke capi alism is ha i possesses no mechanism ha gua an ees ha ou pu and spending decisions always coincide. The e o e eno mous scope exis s o go e nmen mac oeconomic policy o ini ia e, pu sue and implemen s abilisa ion h ough he budge a y mone a y measu es. The po en ial o gene a e a pos -Keynesian s a egy will, howe e , be hwa ed i he Uni ed Kingdom pa icipa es in Eu opean Economic and Mone a y Union (EMU) wi hin he Eu opean Union (EU). Membe ship equi es he sepa a e o mula ion o money policy om na ionally de e mined iscal policy, leading o a esul an lack o policy coo dina ion p ejudicial o he cons uc ion o a pos - Keynesian economic amewo k. The esul an slow-g ow h, high-unemploymen ou come will be u he exace ba ed by he ans e o mone a y policy o a Eu opean Cen al Bank (ECB), whose sole legal objec i e is he pu sui o p ice s abili y. This chap e he e o e seeks o de elop an al e na i e pos -Keynesian s a egy o he Uni ed Kingdom based upon a long- e m op -ou om he eu o. I s undamen als a e achie ing a compe i i e exchange a e, highe in es men , a social con ac o es ain in la iona y p essu es ia planned edis ibu ion, he ein oduc ion o exchange con ol h ough a ansac ions ax on dealings un ela ed o ade and he pu sui o an ac i e indus ial policy o inc ease he long- un compe i i eness o B i ish indus y whe e i al eady possesses a compa a i e ad an age. A c ucial idea in oduced by Keynes (1936) in o he co pus o economic hough is ha he le el o ou pu and employmen unde ma ke capi alism depends upon in e ac ion be ween o al spending and he economy’s capaci y o p oduce. Decisions o p oduce a e made p ima ily by p i a e p o i -making i ms; p oduc ion, he sou ce o employmen , akes place only i companies an icipa e a ma ke in which goods and se ices can be sold a a p o i . I demand is insu icien , p oduc i e capaci y will s and idle and people will be wi hou jobs. The e is no au oma ic mechanism which gua an ees ha ou pu and spending decisions always coincide. 98 Philip Whyman, B ian Bu ki and Ma k Baimb idge Only he s a e could emain impe ious o specula i e inancial gain, and he e o e app o e su icien p ojec s ‘so as o p ese e s abili y o agg ega e in es men . . . a he igh and app op ia e le el’. When p essed by ellow economis s in 1943 how a he would socialise in es men , Keynes eplied, ‘ wo- hi ds o h ee-qua e s would be indi ec ly in luenced by public and semi public bodies’. Thus ull employmen could be secu ed h ough he es ablishmen o a Na ional In es men Bank (NIB) cha ged wi h he s a egic egula ion o he agg ega e low o in es - men . This would ensu e ‘an adequa e demand o hem, pa ly by making hem a ailable a a a e which would a ac a su icien demand, and pa ly by s imu- la ing he unde aking o pa icula in es men p ojec s’. Mo e ecen p oposals o his ype ha e ad oca ed he democ a ic con ol o capi al o ma ion h ough pension- und o employee in es men - und socialism (Bu ki and Whyman 1995). They a e only easible ou side he cons ain s imposed by membe ship o EMU. In e ela ionship be ween demand and supply side The ela ionship be ween agg ega e demand and agg ega e supply is one o he mos signi ican insigh s o eme ge om pos -Keynesian hough (Sawye 1995). Whils a high le el o agg ega e demand is a necessa y p econdi ion o he ull employmen o esou ces, i is insu icien i he economy su e s om supply-side de iciencies. Fo example, ac i e labou ma ke policy is ad oca ed whe e skill sho ages and labou ma ke bo lenecks h ea en o des abilise he economy. T aining and educa ional p og ammes can ma ch skills o he demand o labou , whils employmen se ices enhance he e iciency o he sea ch p ocess (Laya d e al.1991; Meidne 1985; T eho ning 1993). Simila ly, incomes policy and/o he coo dina ion o wage ba gaining can deli e a supe io ade-o be ween in la ion and unemploymen compa ed o decen alized, de egula ed ba gaining in hose economies whe e ade unions a e p esen .1 Th ough in e nalisa ion o he cos s o imp ecise wage le els in o he decision-making pa ame e s o all pa ies o he nego ia ions, he e is an inc eased likelihood o eaching a comp omise be ween labou and capi al o e hei espec i e sha es o na ional income, wi hou damaging in e na ional compe i i eness, g ow h and employmen . Mo eo e , he deg ee o which wage ba gaining is coo dina ed is associa ed wi h eal wage lexibili y, because cen alised s uc u es p o ide a mo e lexible adap a ion o ma ke condi ions. UK economic policy ou side EMU The policy impe a i es imposed upon he s a e by cumula i e causa ion and ech- nology gaps a e unlikely o be achie ed o e he whole o he Eu opean Union’s membe s a es, as hey possess di e en ade cycles, economic s uc u es, his o ies, languages and cul u es. Ad anced capi alis economies a e inhe en ly uns able; le o hemsel es, hey canno main ain ull employmen esou ces while being ma ed by inequali ies in he dis ibu ion o ma ke powe , income and weal h. Un e e ed ma ke o ces ia cumula i e causa ion end o exace ba e hese Pos -Keynesian s a egy o he UK economy 99 ins abili ies and dispa i ies. Conside able scope exis s o go e nmen in ol emen in ini ia ing, pu suing and implemen ing economic policies; on he demand side insu icien agg ega e demand and ins abili y o in es men a e he key p oblems o esol e, whils on he supply side, planning o p ices and incomes, aining, and ac i e indus ial measu es o di ec in es men o esol e any balance o paymen s p oblems a e cen al. The p ospec o a EU-wide s a egy o achie e hese objec i es is emo e, al hough sup ana ional di ec i es may p e en he implemen a ion o e ec i e, na ional policies. In o de o implemen pos -Keynesian economic policies, he Uni ed Kingdom needs o a oid he uni o m mone a y policy and he cons ain s upon budge a y measu es imposed by he adop ion o a single EU cu ency. A long- e m op -ou will p o ide he Uni ed Kingdom wi h g ea e economic lexibili y. The e o e, he c ucial issue becomes: wha amewo ks is needed o he o ma ion o mac oeconomic policy in an op -ou B i ain? The ini ial s age is a na ional in o ma ion campaign o acquain he public and indus y wi h he oppo uni ies c ea ed by, and he dange s a e ed h ough, op ing ou . I should be suppo ed by a de ailed s a egy o each UK go e nmen depa men , enabling hem o iden i y he ade, inancial and in es men oppo uni ies a ising om he c ea ion o a eu o- bloc. Fo ins ance, he Ci y o London will be able o ade in eu obonds, whils B i ish manu ac u ing and se ice companies will enjoy compe i i e ad an ages om being ee o he cos s o con e ing o, and implemen ing, he eu o. A decision o ejec pa icipa ion in he single cu ency es o es o na ional go e nmen hose economic ins umen s essen ial o he managemen o i s economy. The e o e, democ a ic accoun abili y is e-es ablished, because ci izens can once again enjoy he oppo uni y o choose he economic s a egy pu sued by he go e nmen o he day, a he han i being dic a ed by unelec ed cen al banke s. Mo eo e , go e nmen s will be able o de elop a balanced economic p og amme, pu suing he mul iple objec i es o ull employmen , apid economic g ow h and a sus ainable balance o paymen s as well as low in la ion. The oppo uni ies a e subs an ial. A pos -Keynesian economic s a egy seeks o achie e bo h in e nal and ex e nal balance. In e nal balance e e s o mo e han he Maas ich a ge o p ice s abili y. Acco dingly agg ega e demand managemen could educe unemploymen , whils a mix u e o budge a y and mone a y measu es, a p ices and incomes policy, he e- in oduc ion o c edi con ols and coo dina ed na ional wage ba gaining could es ain in la ion. Al hough di ec con ols a e unpopula wi h o hodox economis s, who p e e he supposed alloca i e e iciency o ee ma ke s, he eali y o s icky p ices wi hin oligopolis ic ma ke s c ea es he po en ial o go e nmen s o inc ease employmen and g ow h. Mo eo e , a majo i y o he wo ld’s na ions s ill e ain capi al con ols as pa o hei economic managemen , whils I eland’s ecen ema kable g ow h was acili a ed by social con ac s wi h he ade unions. The pos -Keynesian app oach s esses a posi i e ole o go e nmen ac ion o enhance he compe i i eness o UK indus y. The analysis by El is (2000) o ade lows demons a es ha B i ain enjoys a compa a i e ad an age in inancial and media se ices, and in hose a eas o manu ac u ing which ely upon a high deg ee 100 Philip Whyman, B ian Bu ki and Ma k Baimb idge o scien i ic inno a ion, such as elecommunica ions, pha maceu icals, ae ospace, ene gy explo a ion and gene a ion, biochemicals and compu e - ela ed ac i i y. The in e na ional p ice s uc u es o hese ad anced- echnology commodi ies a e almos all denomina ed in US dolla s, so ha B i ish i ms and expo s will su e in EMU should he eu o dep ecia e in alue agains he dolla . Ou side he single cu ency, he UK go e nmen could s eng hen he economy’s compe i i eness by enhancing he p oduc ion po en ial o al eady s ong sec o s h ough a ge ed educ ions in co po a ion ax, esea ch and de elopmen , and g ea e spending upon educa ion. Wha abou globalisa ion? An a gumen ad anced by ad oca es o EMU is ha he deg ee o economic au onomy o he na ion s a e ad oca ed in his chap e is la gely illuso y due o globalisa ion and he in e na ional in eg a ion o inancial ma ke s. To he ex en ha na ional economies ail o insula e hemsel es om in e na ional inancial ma ke s h ough exchange con ols o ‘Tobin axes’, economies became p isone s o he neoclassical assump ions held by he majo i y o economis s.2 Fo example, an expansiona y iscal policy is seen by o hodoxy as a p elude o an inc ease in in la ion and a decline in in e na ional compe i i eness, a he han as a p ecu so o a highe le el o agg ega e demand, inc eased in es men in u u e capaci y and he e o e he c ea ion o a po en ially highe u u e a e o economic g ow h. Thus non-o hodox economic policy is penalised by he wi hd awal o inwa d in es - men , pe haps igge ing a cu ency c isis o a su icien magni ude o unde mine he en i e s a egy. An ex ension o his hesis a gues ha , due o inancial in eg a ion, na ion s a es can no longe ope a e a dis inc mone a y policy. In e es a es will be se in e na ionally, wi h a p emium equi alen o he deg ee o he pe cei ed isk o cu ency de alua ion, p oblems caused by poli ical ins abili y o h ea s o o eign in es men . The a gumen implies ha UK membe ship o he single cu ency, oge he wi h accep ance o a single Eu oland in e es a e, will be cos less since mone a y au onomy no longe exis s. Indeed, he g ea e an i-in la ion c edibili y o me ly associa ed wi h he Bundesbank, and assumed o pass o i s successo , he ECB, should ensu e a lowe long- e m eal in e es a e han would be possible o an independen na ion s a e. The e ec i eness o de alua ion as a means o es ablishing an in e na ional compe i i e ad an age is also dismissed, because he p eponde ance o subsidia ies o o eign ansna ional co po a ions (TNCs) ises as a p opo ion o he UK manu ac u ing sec o . Subsidia ies o a pa en company will no espond o de alua ion by allowing hei p ices o all, which would imply compe ing wi h hei own pa en company in o eign ma ke s a a lowe p ice. Thus hey a e mo e likely o main ain eal p ices and ake highe s e ling p o i s, he eby nulli ying he e ec i eness o he policy. In essence, he economic case o pa icipa ion in EMU es s upon he asse ion ha he economic e ec i eness o he na ion s a e is o e , so ha only as pa o Pos -Keynesian s a egy o he UK economy 101 egional economic blocs can go e nmen s easse he use o adi ional economic ools, such as mone a y and exchange a e policy. Indeed ce ain socialis heo is s a gue ha Eu opean economic in eg a ion can make possible a o m o eu o- Keynesianism, which can no longe wo k a na ional (Holland 1985). Howe e , he con es ed a i ica ion o he TEU sugges ha he e will be li le appe i e o enego ia ion, whils he EU Commission’s a acks upon ‘expansiona y’ B i ish and I ish budge a y policy unde he auspices p he GSP indica es ha a bias owa ds de la ion emains a he hea o EU economic policy decision making o EMU en y. The o e all implica ion o he a gumen is easy o dismiss, as he Uni ed Kingdom’s ecen expe ience o being ejec ed om he ERM demons a es. The esul an 20 pe cen de alua ion o s e ling coincided di ec ly wi h a esump ion o economic g ow h and a all in he a e o unemploymen , whils o he EU membe s a es ha main ained o e alued exchange a es and de la iona y Maas ich policies su e ed s agna ing ou pu and pe sis en ly high a es o unemploymen . Mo eo e , al hough inancial in eg a ion has, o a ce ain ex en , made an independen mone a y policy mo e di icul , he Uni ed Kingdom was able o i s loosen and subsequen ly igh en i s policy s ance du ing his pe iod – wi h p edic able esul s. I i s economy we e o be p o ec ed addi ionally by exchange con ols, he Uni ed Kingdom’s deg ee o au onomy would ise acco dingly. Ou a gumen s do no dismiss he eali y o a shi owa ds inc easingly globalised ade and inancial s uc u es, al hough i would be mo e accu a e o desc ibe he p ocess as ‘ iadisa ion’, as he wo ld economy becomes inc easingly domina ed by h ee dominan ading g oups – he No h Ame ican F ee T ade Ag eemen (NAFTA), he Eu opean Union and an Asian block buil a ound Japan. Many po s o he wo ld, o example almos he en i e A ican con inen , play li le o no pa in hese supposedly ‘global’ ma ke s. Ne e heless, i is ue ha an explosion in in e na ional mo emen s o inancial capi al, pa icula ly associa ed wi h specula ion a he han wi h ade in goods and se ices, has al e ed he en i onmen wi hin which na ional economic s a egy is de e mined. Ne e heless, he majo i y o coun ies in he wo ld con inue o ope a e con ols on he in e na ional mo emen o capi al, whils he inancial des abilisa ion in lic ed upon Mexico, Russia, he ERM and he ‘Asian ige ’ economies has se ed o wa n wo ld go e nmen s o he pe ils o un egula ed capi al mo emen s. The policy p esc ip ions should no come as a su p ise, as Keynes ou lined i decades ago when he pos -wa economy was based upon he igh egula ion o capi al o p e en in e na ional economic ins abili y. The e o e he choice is be ween membe ship o EMU, becoming inc easingly imme sed in o a neo-libe al, iadised sys em, o pu sing an independen , pos -Keynesian s a egy p o ec ed by a e- egula ion o inancial capi al. Conclusion B i ain enjoys an e ec i e long- un op ion conce ning i s u u e economic s a egy; i can emb ace an essen ially mone a is EU iden i y o , i i decides o op ou o he 102 Philip Whyman, B ian Bu ki and Ma k Baimb idge eu o, i can pu sue a pos -Keynesian policy. The widely held iew ha B i ain possesses ‘no al e na i e’ bu o pa icipa e in Eu opean in eg a ion is a odds wi h he ac s (Bu ki e al. 1996). I B i ain is decoupled om he EMU’s in eg a ionis momen um, he ou come will be enhanced economic p ospe i y and es o ed democ a ic choice o he B i ish elec o a e. Indeed, i pos -Keynesian insigh s in o he wo king o he economy in he eal wo ld a e e e o in luence go e nmen policy, hey a e mo e likely o be e ec i e ou side EMU han i he Uni ed Kingdom is a p isone o i s neoclassically designed ins i u ions. No es 1 The e is a la ge li e a u e on his issue, including: Amo oso and Jespe sen (1992); B uno and Sachs (1985), Came on (1984); Calm o s and D i ill (1988); Calm o s and Nymoen (1990); C ouch (1985); Henley and Tsakalo os (1995: 186–9); Ma shall (1995); McCallum (1983); Row ho n and Glyn (1990); and Sawye (1995). 2 ‘Tobin Taxes’ a e he name gi en o axes le ied upon he 90 pe cen o o eign exchange ansac ions un ela ed o ade. As some £200 billion daily is cu en ly aded on he London Fo ex ma ke , such a ax, e en a a low 0.5 pe cen a e, would yield conside able sums i specula o s’ beha iou emained unchanged. I could be a oided by mo ing ansac ions o o sho e ha ens, bu such a s a egy is de e ed by exemp ing all cu ency ansac ions no unde aken h ough a egis e ed exchange om legal s a us. Consequen ly unpaid, o sho e deb s would no be backed by he o ce o law. The emo al o he legal suppo and he low a e o axa ion would p e en mos specula o s om decamping elsewhe e. Pa II Employmen and social aspec s o EMU 10 The Eu opean social model My h o eali y? B ian Bu ki In oduc ion Cen e-le ad oca es o he UK’s en y in o he single cu ency a gue ha , despi e i s ob ious de iciencies (e.g. he ine iciency en ailed in submi ing o a uni o m, one-size- i s-all in e es a e, gi en cyclical and s uc u al di e gences be ween membe s a es’ economies), he eu o should be emb aced because i would enable he Uni ed Kingdom o enjoy he la ge coun e ailing bene i s o pa icipa ing in he ‘Eu opean Social Model’ (ESM). Much ecen wo k cas s doub as o whe he an ESM ac ually exis s – o ins ance, Kleinman (2002). Howe e , he case o emb acing i has been deployed mos eloquen ly and mos o ce ully by Edmonds (2000), o me Gene al Sec e a y o he Gene al Municipal and Boile make s’ Union (GMB). This chap e que ies he e y exis ence o an ‘ESM’ and es ablishes ha , i i does exis , Edmonds’ easons o pa icipa ing wi hin i a e ou da ed. Wha e e hei alidi y du ing he Tha che i e 1980s, any cen e-le case o joining he eu o has become comple ely edundan in he wen y- i s cen u y. The ESM p oposal o close EU in eg a ion Edmonds asks: How impo an is i o B i ish ade unionis s ha he Eu opean p ojec succeeds, and how impo an is i o be close o i s cen e o powe ? He answe s ha i is c ucial, because ade unionis s iden i y wi h he Eu opean model o indus ial socie y, combining high le els o p oduc i i y wi h high le els o social p o ec ion. The ESM is pe cei ed o b ing a li le secu i y in o people’s li es by making i a he di icul o sack wo ke s. When edundancy occu s, he ESM se s he sa e y ne su icien ly high o p e en po e y. Jacques Delo s ou lined his p og amme in his speech o he 1988 T ades Union Cong ess. His message was: pu up wi h he compe i i e p essu es o a single ma ke , whils he social dimension p o ec s om he wo s excesses o ma ke capi alism. The ESM, acco ding o Edmonds, deli e s bene i s o wo king people. I s eng hened mo es owa ds equal pay, o e ed some p o ec ion o wo ke s in co po a e akeo e s, imp o ed heal h and sa e y p o ec ion, and has gi en labou a small bu inc easing in luence o e he s a egies o mul ina ional companies. Mo e impo an ly, he ESM p o ides ade unions wi h a di ec in ol emen in he 106 B ian Bu ki design o social legisla ion. The p ocess o collec i e dialogue means ha he Eu o- pean T ade Union Con ede a ion can nego ia e ag eemen s wi h he employe ’s o ganisa ion (UNICE) ha a e gi en binding e ec h ough he Eu opean Union. Edmonds claims ha he ad an age o joining he single cu ency in o de o bind B i ain mo e igh ly in o he ESM is compelling. Howe e , he also makes clea ha le -o -cen e suppo o en e ing he eu o should be ully condi ional on he Eu opean Union’s commi men o he ESM. Does an ESM exis ? Unde pinning he a gumen s o Edmonds, and hose o le -o -cen e eu ophiles, is he assump ion ha a dis inc , inde inable ESM cu en ly exis s. Howe e , he weigh o e idence om ecen social policy esea ch is ha such an assump ion is p oblema ic. Mos commen a o s accep ha each EU membe coun y possesses a wel a e s a e ha g ew in size o e he wen ie h cen u y, bu hey belie e ha hese wel a e s a es di e signi ican ly om each o he and ha hey can be classi ied in o sepa a e ‘clus e s’. In he seminal social policy wo ks o he las gene a ion, Esping-Ande son (1996) dis inguished di e en ypes o wel a e s a e, based on he concep o ‘decommodi ica ion’. Whe e ma ke s become uni e sal and hegemonic, wo ke s’ ma e ial li ing s anda ds become en i ely dependen on he sale o hei labou . The de elopmen o a wel a e s a e in ol es a loosening o his commodi y s a us, he eby diminishing inancial and psychological insecu i y. Decommodi ica ion occu s when a good o se ice is p o ided as a ma e o igh , so ha a pe son can main ain a li elihood wi hou eliance on he ma ke . Esping-Ande sen’s wo k gene a ed conside able deba e, documen ed by A s and Gelissen (2002). I has become accep ed ha all wel a e s a es decommodi y labou bu o di e en deg ees. On his basis, ou di e en kinds o wel a e s a e ha e been iden i ied wi hin he Eu opean Union; he social democ a ic (occu ing in Scandina ia – ‘ he no he n model’), he conse a i e-co po a is (loca ed in F ance, Ge many and he Benelux coun ies – ‘ he cen al model’), he Medi e - anean ( ound in G eece, possibly I aly, Po ugal and Spain – ‘ he sou he n model’) and he uniquely hyb id UK sys em (‘ he o sho e island model’). To which o hese models, does he ESM, so ex olled by suppo e s o B i ish en y in o he eu o, ela e? I migh be hough ha he social democ a ic e sion o Denma k and Sweden, wi h i s explici ly edis ibu i e objec i es, would appeal mos o democ a ic socialis s. Howe e , he Scandina ian coun ies we e la e en an s in o he Eu opean Union and ha e exe ed li le in luence upon i s cen al policy goals. The e o e, he ESM model, o which cen e-le ad oca es o he eu o aspi e, is he conse a i e-co po a is a ian , implemen ed by he six o iginal signa o ies o he T ea y o Rome (wi h he possible excep ion o I aly). These coun ies a e now a mino i y wi hin he Eu opean Union, bu hei long-s anding and ounde s a us gi es hem an in luence a g ea e han hei numbe s would sugges . The Eu opean social model: my h o eali y? 107 The ESM o he o iginal six The ESM de eloped in i e o he o iginal membe s con ained many disc e e na ional cha ac e is ics, bu essen ially possessed wo dimensions: 1 social insu ance; 2 labou ma ke egula ion. Con ibu o y social insu ance is a he hea o his sys em. Bene i s a e mos ly inanced by con ibu ions om employe s and employees, so ha social occupa- ional and income di e ences a e ep oduced in he pa e n o wel a e paymen s. Consequen ly, unlike in Scandina ia, he e is li le emphasis on edis ibu ion as an objec i e o social policy. Se ice o ganisa ion and deli e y end o be plu alis ic, i.e. non-s a e o pa a- s a e o ganisa ions p edomina e in he adminis a ion and dis ibu ion o insu - ance unds, and in p o iding se ices. They e lec he in luence o Ca holic social eaching, pa icula ly he p inciple o ‘subsidia i y’, which claims ha wel a e a angemen should be p o ided by he na ion s a e in he absence o adequa e measu es a some lowe le el, be i he amily, he local communi y, he chu ch, occupa ional g oups, businesses o ade unions. The e exis s a hie a chy o solida i ies, he lowes being he mos impo an . The e o e he ESM e lec s and suppo s an o ganic, hie a chical and in eg a ionis iew o socie y, whe eby amily, chu ch and occupa ional o ms o wel a e a e supplemen ed by he s a e, bu no eplaced by i . Ge many is gene ally aken o be he pa adigma ic case o he ESM, whe e wel a e measu es a e unde pinned by he social ma ke economy. The s a e’s gene al commi men o p o iding income and employmen is complemen ed by an emphasis upon he obliga ions o employe s, ade unions, amilies and indi iduals o suppo hemsel es. Redis ibu ion h ough he ESM is la gely ho izon al, wi hin occupa ional and s a us g oups, a he han e ical, om ich o poo . Pensions and wel a e bene i s e lec income di e en ials. The sho - e m unemployed wi h a ull con ibu ion eco d ecei e 68 pe cen o p e ious ake- home pay. Those no eligible o his comp ehensi e insu ance apply o social assis ance, which is means- es ed; i he means es is passed, applican s ob ain 58 pe cen o ne pay. A hi d g oup, ha ing ailed he means es , a e dependen on much smalle le els o la - a e bene i , whils 15 o 25 pe cen o he egis e ed unemployed a e cu en ly no in eceip o any bene i . Al hough co e social insu ance is ela i ely gene ous by in e na ional s anda ds, social assis ance is no only hea ily means- es ed bu also ca ies conside able s igma. Such aspec s o he ESM became inc easingly impo an in he 1990s and 2000s, wi h he ise in unemploymen and he g owing numbe s o hose who, due o a lack o a achmen o he labou o ce, did no possess con ibu ion eco ds. These de elopmen s led o a apid inc ease in social exclusion unde he ESM, wi h he c ea ion o a ‘2/3 socie y’, om which app oxima ely one- hi d o ci izens a e excluded. 114 Ma hew McG ego employmen .13 I may be an unwan ed by-p oduc o Pe e Mandelson, bu i ha dly seems like a good eason o Labou o e s o change hei mind on he eu o. The eu o would also a ack he ounda ion upon which he social model is based – secu i y a wo k. The lexibili y ha economies need has, in Eu ope a leas , been based on egional and na ional planning accompanied by iscal and mone a y policy o ensu e s ong g ow h. In he eu o, hese le e s a e aken away and go e nmen s a e unable o eac quickly and e ec i ely o economic shocks. The only eac ion o a sha p down u n o demand in he economy is h ough lexibili y in he labou ma ke – and wo ke s ha e lea n he ha d way ha ‘ lexibili y’ doesn’ usually mean pay ises o mo e job secu i y. One o he a chi ec s o he eu o has a gued as much. O ma Issing, he Chie Economis o he Eu opean Cen al Bank has made his case plainly: ‘The mos ob ious [dange o he eu o] is he lack o lexibili y in he labou ma ke . . . his poses an almos le hal h ea o mone a y union.’14 The e is a case o sugges ha economies will be mo e success ul i labou ma ke s a e mo e lexible, wi h wages able o all mo e easily and companies able o sack s a mo e quickly. Howe e , i is no a le -wing case, and i is no a case ha appeals o wo king-class people. Du ing i s pe iod in go e nmen since 1997 he Labou Pa y has buil i s elec o al appeal a ound inc easing spending on public se ices, pa icula ly on educa ion and heal h. Bu joining he eu o would mean ha in es men could be pu a isk. The ules o he eu o, including he S abili y and G ow h Pac (SGP), we e c ea ed in a way ha imposes a s ai jacke on coun ies du ing imes o economic down u n. The SGP limi s membe s o he eu o o unning a budge de ici o 3 pe cen o less yea on yea . The p oblem is ha when a coun y aces economic p oblems and i s budge de ici ises, he only ecou se is highe axes o lowe public spending. In he sho ime since he in oduc ion o he eu o Po ugal, F ance, I eland, G eece, Ge many and I aly ha e announced o implemen ed plans o cu public spending in esponse o he SGP. Po ugal was i s in 2002, when he newly elec ed go e nmen o José Manuel Ba oso, now he EU Commission P esiden , pu in place a se e e aus e i y package in esponse o he coun y’s b each o he SGP. The package included public spending cu s and VAT ax ises, and he opposi ion socialis s esponded o he package saying: ‘We canno a o d o sac i ice ou u u e o he sake o blind adhe ence o a se o quan i a i e c i e ia.’15 In Ge many, he coun y’s budge de ici emains s ub- bo nly abo e he limi allowed and measu es o b ing i down ha e included cu s o wel a e and public se ices. Along wi h a p oposal o sc ap one o Ge many’s bank holidays, Ge man Finance Minis e Hans Eichel un eiled a plan o impose a €1billion cu on all minis ies and eeze public sec o pay inc eases.16 I isn’ jus coun ies in he eu ozone ha ha e had public se ices h ea ened. In 2002 he Eu opean Commission sugges ed ha he Uni ed Kingdom’s spending plans could need o be eined-in as i we we e membe s o he eu o. The P ime Minis e ’s spokespe son was quick o eac , saying: ‘The UK has no in en ion o educing public spending by £10billion as he Commission seems o imply. . . . As we a e ou side he single cu ency we a e no subjec o i s sanc ions.’17 Ad oca es Vo ing no – he eu o and Labou o e s 115 o ea ly en y o eu o membe ship ha e poin ed o he ac ha many Eu opean coun ies ha e be e public se ices han he Uni ed Kingdom. I is undoub edly ue ha coun ies like F ance and he Ne he lands ha e good public se ices. Bu i hasn’ escaped o e s’ no ice ha hei public se ices we e buil up o e decades wi h la ge-scale in es men , he so o le els o in es men ha may no be possible in imes o economic down u n. Gi en ha public se ice in es men has o med he backbone o Labou Pa y campaigning o e he las ew yea s, i is ha dly su p ising ha opponen s o ea ly UK membe ship o he eu o ha e highligh ed he issue in deba es. Ian Da idson o he Labou Agains he Eu o g oup o MPs said a i s launch ha : ‘We a e nei he c i icising no con adic ing go e nmen policy. We a e simply saying ha M Blai ’s p io i y should be public se ices.’18 Si Bill Mo is, he hen Gene al Sec e a y o he T anspo and Gene al Wo ke s’ Union explained he Union’s decision o campaign o a ‘no’ in he e en o an ea ly e e endum on he eu o by saying: “En y a his pa icula poin would be a majo di e sion om he policy o he go e nmen o inc ease public expendi u e and e o m public se ices.’19 I is jobs, public se ices and wel a e ha Labou o es a e in e es ed in, and i is he jobs, public se ices and wel a e policy sphe es ha o e he mos con incing case o s aying ou o he eu o in i s cu en o m. And i isn’ jus he Uni ed Kingdom whe e his case holds – he e idence om he eu o e e endum in Sweden in Sep embe 2003 is ema kably simila . Exi polls (o VALU )20 om he e e endum show ha he la ges g oup o ‘no’ o e s we e social democ a s,21 and b oken down on class, he la ges g oup o ‘no’ o e s was blue-colla s a .22 Fi e ou o he se en op easons o o e ‘no’ (i.e. hose easons ci ed as being o ‘ e y g ea impo ance’) we e economic easons, pa icula ly public se ices and wel a e. The e idence om Sweden is all he s onge gi en ha he o e whelming majo i y o he Social Democ a ic Pa y leade ship campaigned ha d o he ‘yes’ campaign. One senio Swedish ‘no’ campaign s a e has desc ibed he si ua ion by saying: ‘The Pa y leade ship we e ocused on he poli ical capi al o be won in B ussels, and hey o go ha ou o e s ca e mos abou e e yday issues.’23 As in Sweden, he e idence in he Uni ed Kingdom poin s o a signi ican ejec ion o he pa y line by o e s who no mally suppo Labou . Bu despi e he ac ha so many Labou o e s seem willing o buck hei no mal pa y p e e ences and o e ‘no’ in a e e endum on he eu o, he usual media epo ing o he deba e is one o le e sus igh . Jou nalis s a e genuinely in e es ed in s o ies abou le -wing opposi ion o he eu o because i is ou side he no m and he e o e deemed o be in e es ing. The e is, o some ex en , a simple misunde s anding abou he na u e o e e enda in his epo ing. Vo e s a e sophis ica ed enough o unde s and ha o ing ‘no’ in a e e endum doesn’ mean ha he go e nmen will change, bu epo ing o he eu o deba e s ill ocuses on he iews o pa ies and pa y poli ical igu es. Equally, he e is some bias in he media, no leas om an unnamed BBC epo e who in amously old a campaign s a e ha hey a ou ed joining he eu o because, ‘we like cappuccinos and we don’ like acis s’.24 Howe e , he main cause o he ailu e o no ice and unde s and he opposi ion om Labou o e s has been he na u e o ha opposi ion. To mos people who 116 Ma hew McG ego a ou joining he eu o, he economics comes second. As Labou o e s end o oppose eu o en y on economic, no poli ical, g ounds, hey don’ show up on he media ada . In he e e endum on he no h-eas assembly in au umn 2004, he ‘yes’ campaign ied o u n he poll in o a Labou e sus To y con es . The ‘no’ campaign won wi h 78 pe cen o he o e. The e a e many people in he poli ical wo ld who ha e no g asped he di e en na u e o e e endum poli ics. When Labou o e s cas hei ballo in elec ions, hey usually look down he pape in on o hem o ind he Labou candida e. In a e e endum on he eu o, hey will be looking a a pape ha o e s hem he choice o o ing ‘yes’ o ‘no’. I is a simple ac , bu one ha has i al implica ions o he campaign. The pa y loyal ies ha o e s o en eel in elec ions, because o hugely complex and o e lapping ac o s, a e downg aded, i no e adica ed, in e e enda. Gi en ha in he e en o a e e endum on joining he single cu ency, he e would be campaigne s om he labou mo emen on bo h sides o he deba e, o e s will no ace he conce ed pa y e o o b ing hem o one pa icula conclusion. Tha b ings o e s o a simple choice: o e ‘yes’ o join a club whe e unemploymen is high, g ow h is low, and whe e he ide is u ning agains he le ; o e ‘no’ o p o ec he ad ances he Labou go e nmen has won, and keep ou abili y o con inue building ou co ne o social Eu ope secu e. I ’s no wonde Labou o e s a e agains he eu o. Labou o e s a e agains joining he eu o because i is no in he economic in e es s o people in his coun y. They ha e no changed hei mind on his since 1997, and hey a e no likely o do so in he nea u u e. Despi e he popula imp ession o he eu o deba e being one which pi s le e sus igh , he di e en na u e o e e endum poli ics mean ha Labou o e s will buck he Pa y line i a o e is called. No wonde Tony Blai has gone om a posi ion o seeing he eu o as a ‘des iny’25 o he Uni ed Kingdom, o saying: ‘The a gumen abou he single cu ency – he posi ion has ne e changed he e; he e has go o be a clea case o joining i , and a he momen he e isn’ .’26 No es 1 I would like o acknowledge he help o G aham Copp in he w i ing o his chap e . 2 Unnamed Downing S ee sou ce, quo ed in he Mi o , 6 Feb ua y 1999. 3 The e a e dozens o examples o his. See, e.g., ‘P o-eu o g oup “a on o labou ”’, Robe Sh imsley, Daily Teleg aph, 9 No embe 1999. 4 MORI poll su ey commissioned by he Eu opean Mo emen , Augus 1996. 12 pe cen o Labou o e s suppo ed joining he eu o in p inciple wi h 27 pe cen agains . Labou o e s agains in p inciple and ‘gene ally opposed’ e sus Labou o e s in a ou in p inciple o ‘gene ally in a ou ’ spli mo e e enly – 44–5 agains mem- be ship. 5 Regula ‘eu o acke poll’ by ICM o he Gua dian, h p://www.icm esea ch.co.uk/ e iews/polls-a chi e.asp. The ques ion ICM used was: ‘I he e we e o be a e e en- dum, would you o e o join he Eu opean Single Cu ency, he eu o, o would you o e no o join?’ Vo ing no – he eu o and Labou o e s 117 6 I would like o hank Ba clays Capi al o p o iding wi h me hei polling s a is ics going back se e al mon hs. Ba clays Capi al’s polling is conduc ed by MORI. 7 A majo i y o Labou o e s eplied ha hey would ejec he eu o despi e a ecommenda ion om he go e nmen in Oc obe 2003, Augus 2004 and Sep embe 2004. The igu es we e ied in June 2004, and he esul s we e wi hin he poll’s ma gin o e o in h ee o he mon hs. 8 ICM poll o he ‘no’ campaign, 27 Sep embe 2002. Responden s we e asked: ‘Which wo o h ee o he ollowing do you hink a e p io i ies o he go e nmen o add ess in his pa liamen ?’ The op ions we e (in o de o popula i y): he NHS, c ime, educa ion, e o ism, public anspo , he economy, en i onmen , social secu i y, income ax, de ence, uel ax, con olling in la ion, ge ing id o ed ape, he eu o. 9 Opinion polls ha e consis en ly showed s onge opposi ion o he eu o om wo king- class o e s. Fo example, an ICM poll om Sep embe 2002 had opposi ion o he eu o om social classes A and B a 45 pe cen , and opposi ion om social classes D and E a 67 pe cen . www.icm esea ch.co.uk 10 h p://eu opa.eu.in /comm/employmen _social/publica ions/2004/ke5703265 _en.h ml 11 I am g a e ul o he no-eu o campaign, and he Vo e No g oup o access o eco ds o hei ocus g oup esea ch. 12 P epa a ions o EMU, UBS Wa bu g, Oc obe 2002 13 Pe e Mandelson, speech o CBI con e ence, 8 No embe 2004. Fo he ull ex , see h p://www.cbi.o g.uk/ndbs/p ess.ns /0363c1 07c6ca12a8025671c00381cc7/ 577ab ebe84c762880256 4600325c6a?OpenDocumen 14 P o esso O ma Issingwas speaking a he ‘Fo um Dialogue’ o ganised by he Banque cen al du Luxembou g on 8 Feb ua y 2000. 15 Luis Naze e, a membe o he Socialis Pa y’s na ional leade ship, quo ed in ‘Aus e i y measu es aim o close he EU gap’, Financial Times, 7 Oc obe 2003. 16 ‘Ge man package aims o pu budge back in o line wi h EU iscal ules’, Financial Times, 5 No embe 2004. 17 P ime Minis e ’s o icial spokespe son, 31 Janua y 2002. 18 Quo ed in ‘Pu se ices be o e eu o, say MPs’, Daily Teleg aph, 22 Janua y 2002. 19 ‘T&G will wo k o eu o no o e’, Gua dian, 5 Feb ua y 2003. 20 Exi polls conduc ed by SVT, he s a e-owned Swedish b oadcas e . 21 This igu e is o all o e s and does no ep esen p opo ions. As Social Democ a s ep esen he la ges g oup o o e s, he numbe o Social Democ a s o ing ‘no’ was g ea e han he numbe o any o he pa y suppo e g oup o ing ‘no’. 22 Blue-colla wo ke s o ed ‘no’ by 69–29, compa ed o a me s (65–35). Whi e-colla wo ke s and he sel -employed na owly o ed ‘yes’. 23 Pe e Gus a sson (Di ec o o O ganisa ion o Socialdemok a e Mo EMU – he Social Democ a ‘no’ campaign) speaking a semina in Uppsala, Janua y 2004. 24 Quo ed in Sunday Business, 7 No embe 2004. 25 In his speech o he Labou Pa y con e ence in Sep embe 2002 Tony Blai said: ‘Tha ’s why he eu o is no jus abou ou economy bu ou des iny.’ 26 Tony Blai , speaking in a media b ie ing a Downing S ee , 29 No embe 2004: h p:// www.numbe 10.go .uk/ou pu /Page6679.asp 12 Wha u u e in he Eu opean Union? Joe Ma ino In oduc ion Many my hs ha e been sp ead abou he ade union app oach o he Eu opean Union. To ead he messages coming om Cong ess House and epo ed in he media, one could be o gi en o belie ing ha he ade union mo emen was a wholehea ed chee leade o he Eu opean Union. This is pa and pa cel o he old misconcep ion ha sees he ade union mo emen as a monoli hic whole. No hing could be u he om he u h. The issue o he Eu opean Union di ides ade unions and hei membe s as much as i di ides all poli ical pa ies and B i ish socie y as a whole. The e is no hing new, no is he e any hing w ong wi h ha . Is i no called democ a ic deba e? Does his no make us s onge han hose who would p each unanimi y a any p ice no ma e wha he cos ? No is his di ision new o ne e changing. Some indi iduals change ‘sides’ as hei s ances mo e wi h wha hey would call ‘e en s’. One has only o look a he wo main pa ies o see ha . Ini ially he Conse a i es we e he main champions o EEC membe ship, pushing i o all i was wo h. The labou mo emen s ini ial s ance was one o heal hy scep icism, wi h many in he labou mo emen campaigning o a ‘No’ o e in he e e endum o EEC en y. T ue, some o hose opponen s a e now chee leade s o he Eu opean Union, o example Neil Kinnock, an EU Commissione . And he To ies a e a mainly eu oscep ic pa y (wi hou , o cou se, da ing o ask he $64,000 ques ion on con inued membe ship). How imes change. Indi iduals and pa ies can, o cou se, change hei iews. No hing w ong wi h ha , no need such changes be a ma e o c i icism. Howe e , I would a gue ha he ques ions ha hung o e he o iginal membe ship o he EEC a e w i la ge o e he cu en deba e on B i ain’s u u e in he Eu opean Union. The e is no doub ha a sea change came o e he iews o many ade unions in ela ion o he Eu opean Union du ing he pe iod o he Conse a i e go e n- men s o 1979–97. Those go e nmen s we e so an i- ade union and wo king class ha any hing was seen as be e . Howe e , e en in hose halcyon days some o us we e wa ning abou g eene g ass in he nex ield. A union con e ence a e union con e ence I emembe wa ning – bo h in e nally and ex e nally – ha membe - ship o he Eu opean Union only looked good because he To y go e nmen was so Wha u u e in he Eu opean Union? 119 bad. Wha ma e ed was ou own con ol o e ou own democ acy – and ha mean ade union and labou mo emen democ acy no na ionalis ic clap ap. The coun e -a gumen was always on he ‘bene i ’ o Eu opean Union legis- la ion ha was a ou able o wo ke s se agains he an i- ade union app oach o he hen Conse a i e go e nmen s. Tha , we we e old, was wha made membe - ship o he Eu opean Union a ac i e. I ne e belie ed ha was a sus ainable a gumen . The b ie his o y o New Labou shows ha i is un enable. Wi h Tony Blai b agging abou he Uni ed Kingdom ha ing he mos es ic i e labou laws in he de eloped wo ld, and he New Labou go e nmen seeking op -ou s and he wa e ing down o any EU issues ha bene i wo king people and ade unionis s – a e all we mus no upse he CBI mus we? – one has o se iously ques ion he u u e o wha has been desc ibed as ‘social Eu ope’. Indeed, New Labou is leading he cha ge o sweep away o , a wo s o hem, wa e down any social gains he Eu opean Union boas ed o in he pas . Se e al poin s ha e now become clea ega ding he posi ion o ou union in he deba e o e he u u e o he Eu opean Union: Club ules I B i ain is o be pa o he Eu opean Union i is clea ha , soone o la e an EU cons i u ion is necessa y. In he sho e m, he issue is no he p oduc ion o a cons i u ion bu wha is in i . The e is also he longe - e m iew in ela ion o con ol o e changes in he cons i u ion. T ade unions know only oo well ha ag eemen s s uck on amalgama ion o ans e o engagemen s a e empo a y a ai s ha , in he ullness o ime – o en much speedie han ha – a e o e aken by eali y. The e is a lo in he p oposed ‘cons i u ion’ ha makes sense o a club. The eplacemen o he o a ing p esidency by a chai o he council; he educ ion o commissione s o one pe s a e, and hen es ic ing ha numbe o wo- hi ds o membe s a es on a o a ion sys em; inc eased powe s o MEPs (al hough hese go nowhe e nea a enough o democ a ic esponsibili y); a single EU Fo eign Minis y e c. All hese s eps ecognise he basic ac ha a club mus ha e one se o ules. Ye a he same ime we a e asked o belie e ha o he a eas o he wo kings o he Eu opean Union will no be pa o he cons i u ion; ha he so-called ed lines ha e no and will no be b eached. Such a claim begga s belie . The e can be no gua an ee ha hese a eas will emain ‘ ee’ om he cons i u ion, and i is nai e o hink so and dishones o claim so. Pu simply, he Eu opean Union canno wo k in he long e m wi h di e ing ules o di e en membe s a es. Once he economy is cen alised all else mus and will ollow. In such a case he p esen democ a ic de iciency will mul iply and B i ain will, like o he s, be le a he ma gins o a Union i canno in luence. He e he cen al issue is economic managemen , and he ac is ha he isola ion o he Eu opean Cen al Bank om eali y – no o men ion any kind o democ a ic con ol and accoun abili y – is cen al. The e is no space he e o a gue his case in 120 Joe Ma ino de ail; o he s will do ha . Ye i is a ac ha e en p o-Eu opean Union economis s despai abou he ole and lack o accoun abili y – no o men ion he policies – o he ECB. The e can be no g een ligh o he Eu opean Union cons i u ion un il he ECB is b ough unde ha democ a ic con ol. E en he ‘independen ’ Bank o England aces he inal poli ical con ol – i s e y independence can be e e sed by a poli ical decision o he House o Commons. No such sanc ion is he e o he ECB and he e is a undamen al law in he s uc u e o he Eu opean Union. O cou se, i can be a gued ha powe ul go e nmen s can jus igno e he ECB – as Ge many and F ance ha e done ecen ly. Tha , o cou se, begs he ques ion o how long he e y s uc u e o he ECB, he single cu ency and he Union i sel can su i e unila e alis , indi idual s a e decisions. By hemsel es he ac ions o he Ge man and F ench go e nmen s show he sham o uni y. Single cu ency The same is ue o he single cu ency. We belie e ha membe ship o he single cu ency would be a disas e o B i ain and ha he issue o he le el o joining – a wha exac exchange a e – is a ed he ing. We would be bound by he ules o he eu o and ou economic independence would be gone o good. All ha would be le is inke ing a he edges. No is i enable o sugges ha once we join we could hen in luence e en s – ha boa has al eady le he ha bou . Democ a isa ion o he eu o and he ECB is essen ial – bu much ha de o achie e once le go. And no one can se iously doub he democ a ic de iciency he e. O equal impo ance a e he so-called budge ules. The Commission p esiden may well hail he ecen Eu opean Cou o Jus ice uling ha EU go e nmen s had ac ed illegally in igno ing a call o punish F ance and Ge many o iola ing budge ules, bu he ac is hey did. And in doing so hey highligh ed a majo ailing in hose ules. O equal impo ance a e he in lexibili y o he eu o ules and he ole o he ECB. E en he mos a den suppo e s o he single cu ency do no disag ee ha Go don B own’s in es men plans o he NHS and educa ion would all oul o hese ules. In such ine i able ci cums ances B i ain would ha e o ace he same ‘dilemma’ aced by Ge many and F ance. Do we heed he eu o ules o mee he demands o he B i ish people o in es men in heal h and educa ion? I know my choice – bu I doub ha o some B i ish poli ical pa ies. One has only o look a he mess he Sch oede and Chi ac go e nmen s a e in o e he eu o/s a e unding/s abili y pac issues o see he w i ing on he wall. Bo h Ge man and F ench go e nmen s a e aking he axe o social p o isions, especially pensions, in o de o minimise hei bus ing o he eu o ules – and, despi e hose sa age cu s, s ill ailing. I seems he only ‘posi i e’ in he eu o is no ha ing o pay commission on holiday exchange a es – I can li e wi h ha i i means making ou own decisions on in es men in B i ish public se ices. The cons an blea ing ha being ou side he single cu ency – indeed ou side he Eu opean Union – equals job losses is so a o he ma k one ge s su p ised ha i is s ill being made. To quo e he ‘Labou Eu o-Sa egua ds Campaign Bulle in’ o No embe 2003: Wha u u e in he Eu opean Union? 121 We cons an ly ha e a ade de ici wi h he o he EU coun ies, cu en ly unning a well o e £10bn pe annum. No is B i ain dependen on he EU o jobs. The claim ha 3m jobs would be los i we we e no in he EU is nonsensical. In ac , B i ain’s economic pe o mance has been conside ably be e ecen ly han mos o he EU Membe S a es, la gely because we a e no in he eu o and hus no bound by he S abili y and G ow h Pac and he de la iona y dic a es o he Eu opean Cen al Bank. I is no a long- e m enable posi ion o suppo membe ship o he Eu opean Union bu oppose he single cu ency. The issue he e is no jus iming and he le el a which B i ain joins he single cu ency i i s ays in he Union. The e is also he issue o democ a ic accoun abili y in ela ion o he Eu opean Cen al Bank and he need o lexibili y in economic managemen o ake accoun o di e ing needs in di e en pa s o he single cu ency a ea. These issues a e a om se led and un il hey a e ou iew emains one o opposi ion o single cu ency membe ship. As se ou abo e, he weakness shown by he p esen EU ins i u ions does no bode well o he success o he cons i u ion. I economic sec ions o EU policy can be igno ed, hen why no o he s? And i is no jus he Ge man and F ench go e n- men s who claim his igh o di e en ea men . I ha e a gued ha membe ship o he Eu opean Union only looked good o B i ish ade unionis s because o he an i-union s ance o he Tha che and Majo go e nmen s. I emembe wa ning a he ime ha , should a Labou go e nmen wish o pou money in o he social ab ic o B i ain – in pa icula he NHS and schools – hen i could well all oul o EU ules. Su e enough, as Go don B own bela edly began he ebuilding o ou neglec ed public se ices, he ECB issued i s wa nings agains his spending plans o b eaching EU ules. O cou se, being ou side he single cu ency he T easu y qui e igh ly igno ed hose ‘sugges ions’. I would, o cou se, be a di e en ma e i we we e s angled by he single cu ency ules – as F ance and Ge many ound. Ye o b ush hese p oblems aside by ei he ollowing he F ench and Ge man example – unsus ainable in e en he medium e m i he single cu ency is o su i e – o by saying we ne e will join he single cu ency unless i is on ou own e ms is disingenuous. The single cu ency is he li eblood o he Eu opean Union and, soone a he han la e , all membe s a es will ha e o join i hey wan o s ay in he club – he e can be no dispu e abou ha . The only poin o disag eemen o p o-Eu opeans seems o be he le el a which we join. Impo an as ha is, i is dishones o gi e any o he signal. Membe ship o he Eu opean Union mus mean a some s age membe ship o he single cu ency. Le ’s a leas be hones abou ha . The e o e he a gumen abou he democ a ic de iciency in economic ma e s is i al bu is a oided by hose who wish o sho e us in o he Eu opean Union by he back doo . As wi h o he aspec s o he Eu opean Cons i u ion, a he end o he day i is all o no hing. 122 Joe Ma ino Dilu ed membe ship The issue o de ail is also one ha d i es ou cu en iew on he cons i u ion and on con inued membe ship o he Eu opean Union. I a cons i u ion is o be ag eed, i mus be he same o all membe s a es. Tha is a om he posi ion o he B i ish go e nmen which con inues o seek op -ou s o ha EU legisla ion a ou able o wo king people in he Uni ed Kingdom. How he go e nmen can hope o win a e e endum on he cons i u ion whils i akes such an an i-wo ke s ance begga s belie . And why should we suppo such a s ance ha is clea ly agains he bes in e es s o ou membe s? I he pe cei ed gains o ‘social Eu ope’ a e o be denied us, wha a e we in i o ? Indeed ou con e ence was clea on one hing: he go e nmen need no seek ou membe s’ assis ance in ge ing a ‘Yes’ o e whils i akes his s ance. Che y-picking a he cons i u ion is no an op ion. I ha is o be allowed hen he cons i u ion i sel will be a a ce and would no dese e suppo . Thus he claim is made by some ha ade unions mus suppo he cons i u ion because i emb aces he Eu opean Cha e o Fundamen al Righ s. This goes igh o he hea o he deba e o us – because he claim is spu ious. How can we campaign o such a laudable aim i , a he same ime, he New Labou go e n- men is op ing ou o ha same Cha e all o e he place. This is he p oblem wi h he gua an ees gi en o he CBI and o he employe o ganisa ions. In e ec , B i ish wo ke s a e being old: he e is wha he es o he Eu opean Union wo k o ce is ge ing bu we a e ensu ing hey don’ apply he e in B i ain. Vo e o a cons i u ion ha makes you he poo ela ions o he Union. Wha a a ce – and one we, a leas , a e no p epa ed o ake pa in. Resis ance o ull in o ma ion and consul a ion o B i ish wo ke s; opposi ion o ull implemen a ion o he wo king- ime di ec i e; e usal o g an B i ish wo ke s he same igh s o de end hemsel es h ough he igh o ake indus ial ac ion; he ailu e o gua an ee employmen p o ec ion igh s om day one o employmen ; he ease wi h which B i ish wo ke s – one o he leas p o ec ed wo k o ces in he ad anced economic wo ld – can be dismissed . . . The lis is endless. Whils pe haps we should no be su p ised by New Labou ’s an i-wo ke s and in hese a eas, i is su ely simplis ic o hem o expec ou suppo o a cons i u ion ha lea es B i ish wo ke s as he poo ela ions o he Eu opean Union in any e e endum. The ques ion is ‘wha ’s in i o us?’ And he answe is ‘ e y li le’. I may well be claimed ha membe ship o he Eu opean Union c ea es jobs in he Uni ed Kingdom. I don’ accep ha – a he e y leas he ju y is s ill ou on ha ques ion. Bu wha is he use o job c ea ion i , due o he weakes labou p o ec ion laws in he ad anced economies, hose same jobs can be aken away a a me e whim wi h no comeback o p o ec ion? Conclusion Ou cu en iew was one o opposi ion o membe ship o a club ha s acks he ules agains ou membe s and hei amilies. Howe e , we do belie e ha Wha u u e in he Eu opean Union? 123 membe ship o he Eu opean Union mus mean accep ance o a cons ic ion o some so ; and ha any a emp by he UK go e nmen o op ou o wo ke - iendly clauses o he cons i u ion o o he EU laws and di ec i es would lead us o campaign o a ‘No’ o e in any e e endum. I would simply no be wo h he candle. Membe ship o he eu o and suppo o he Eu opean cons i u ion a e inex icably linked. The Conse a i es and hei suppo e s on he igh , such as he UKIP, wish o see he Eu opean Union as a ee ma ke o big business wi h li le o no p o ec ion o wo ke s o consume s. Hence, o example, hei oppo- si ion o s eng hening labelling laws o he s ic con ol on GM oods. The To ies’ p oblem is ha hey canno ake hei opposi ion o cu en ends in he Eu opean Union o i s logical conclusion – ha o lea ing he Union. The UKIP is agains any hing ha smacks o Johnny Fo eigne and wan s o see B i ain e u n o p e- Elizabe han days when he wo ld was much smalle and we we e bliss ully igno an o anywhe e pas hese sho es. Ou opposi ion o he eu o mus be and is based on mo e han li le-Englande p ejudice. This idea ha economic supe -blocs a e he answe is iddled wi h con adic ions ha will ine i ably bu s hem apa . Who, ou side Washing on ha is, se iously belie es ha NAFTA is any hing bu an economic ex ension o he pax Ame icana and a ehicle o he expo o US capi alism? F om whe e we s and he cu en s a e o he Eu opean Union is one ine i ably linked o and suppo ing capi al agains labou . Tha becomes mo e and mo e appa en as wo ke p o ec ion and social ad ancemen a e abandoned in a ou o lexible ma ke s. We wan no pa o ha . 226 Bibliog aphy Ma shall, M.G. 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Index Page e e ences o ables and igu es a e shown in bold, e.g. ba e ca d 162 accession coun ies 65–8 Accession, T ea y o (1972) 21 accoun abili y 119–20, 121; o B i ish go e nmen s 170 acquisi ions and me ge s 150–2 ad anced echnology s uc u es 100 AES (Al e na i e Economic S a egy) 23, 25 agg ega e demand 97, 99 Al e na i e Economic S a egy (AES) 23, 25 Ame icanisa ion 89 Ams e dam T ea y (1997) 31, 171, 197, 212 Annual Con e ences (Labou Pa y): deba es on EU (1947–1987) 27–8; deba es on EU (1988–2000) 29 Anzilo i, Judge D. 171 A es is, Philip 5–6, 58 A gen ina 161, 164; ba e ca d 162 A hu D. Li le (consul ancy i m) 160 A s, W.A. and Gelissen, J. 106 Asia: li ing s anda ds 72; ading block 101; US powe in 164 asymme ic shocks 212 A kinson, D. 35 Baimb idge, M. 6, 93–4, 204 balance o paymen de ici s 46–7 Balanyá, B. 35 Bank o England, independence o 31, 41, 180 banks, and co po a e go e nance 151; see also cen al banks; Eu opean Cen al Bank Ba a B own, M. 35 ba ie s, o ade 72, 150 Ba oso, José Manuel 114 ba e ca d 162 ba e clubs 161–2 BBC, Re e endum S ee (TV p og amme) 182–3 bene i s see cos s and bene i s Benn, Tony 11, 35, 186–8; e e endum campaign 21, 30, 31, 157, 187, 188, 195 Be in, E nes 16 Blai , Tony: opposes EU bonds 31; p o-EU agenda 31, 85, 138, 143; p o-eu o agenda 111, 112, 116, 199; p o- ede alism o 196, 197 Bolks ein, F i s 128 bo de s, c oss-bo de in es men 150 Boyle, D. 161 B i ain see Uni ed Kingdom B i ain in Eu ope campaign 112 B own, Geo ge 18 B own, Go don 86–7, 88, 121, 134; EMU and so e eign y 168, 169, 171; eu o en y and so e eign y 181, 182; p o- ede alism o 196 budge , ede al 67, 68–9 budge ules 120 Bundesbank 212 Bu ki , B ian 7–8, 10, 34, 35, 63 Bush, Jane 6 business o ganisa ions 211; see also i ms; in e na ional ma ke s; mul ina ional co po a ions; ade Callaghan, James 21, 22, 23 campaigns see B i ain in Eu ope campaign; e e enda CAP (Common Ag icul u al Policy) 89, 212 capi al accumula ion 134 capi al spending, educ ion o 87, 88 ca bon dioxide emissions 163 Ca ey, A. 36 Ca o, Sco 10 Ceccini epo 69 cen al banks: independence o 78, 80–3; see also Bank o England; Eu opean Cen al Bank Cen e o a Social Eu ope 110, 133 Ce ny, P.G. 143 CFP (Common Fishe ies Policy) 89, 212 Cha e o Righ s (Commonweal h o Eu ope Bill) 194–5 Chu chill, Wins on 40 Ciampi, Ca lo 199 Index 231 Cla ke, Kenne h 68 Common Ag icul u al Policy (CAP) 89, 212 common cu ency 160–2 Common Fishe ies Policy (CFP) 89, 212 Common Fo eign and Secu i y Policy (CPSP) 212 Commonweal h o Eu ope Bill (1992) 11, 30, 188–95 con e ences see Annual Con e ences Conse a i e Pa y: an i-Eu opean s ance 178, 180, 197; Labou ’s opposi ion o Conse a i e en y e ms (1971) 20–1; opposi ion o single cu ency 60; p o- Eu opean s ance 1–2, 118–19; p oposals on FTAs 17 Cons i u ion: and B i ish so e eign y 176; see also Eu opean Cons i u ion; so e eign y co po a e go e nance, and EMU 149–52 co po a ions see mul ina ional co po a ions cos o li ing: e ec s o en y on 19, 20; see also li ing s anda ds cos s and bene i s, o EU membe ship 34–5, 71–6, 119–20, 122, 124–31, 200 CPSP (Common Fo eign and Secu i y Policy) 212 c edibili y, o mone a y policy 79 C ow, Bob 110 cumula i e causa ion 96–7 cu encies: common and al e na i e 160–2; he dolla 163–4; eu o as al e na i e o dolla 164; pound s e ling 168, 178, 181, 183, 207; see also eu o; exchange a e cyclical con e gence 212 Da idson, Ian 115 de Gaulle, Cha les 18, 19 Deakin, S. 42 deb , ex e nal 164,165 de la ion 94, 178, 212–13; and cumula i e causa ion 96; see also Maas ich Con e gence C i e ia deg ees o independence 80 Dehaene, Jean Luc 198–9 Delo s, Jacques 25, 48, 105, 138 demand, and supply 98 democ acy: and he ECB 54; in a ede al Eu ope 36; loss o 130–1, 175, 176; and new EU membe ships 73; pa liamen a y 169–70 Denma k 73 de alua ion 100, 173, 181–2, 213 de eloping coun ies 162; ex e nal deb o 165 di e en ial shocks 55 di e en ials, in ea nings 162 di ec elec ions 213 dolla : as in e na ional cu ency 163–4; alue o , agains he pound 207 Dou hwai e, Richa d 163–4 Duisenbe g, Wim 166, 199, 200 Dyson, K. 147 ea nings see wages eas e n Eu ope, mone a ism in 65–8 Ea well, John 25 EBRD (Eu opean Bank o Recons uc ion and De elopmen ) 66 EC (Eu opean Commission) 69–70, 134 ECB (Eu opean Cen al Bank) 41, 77–89, 213; accoun abili y o 119–20; and EMU 2, 52; mone a y policy and in la ion con ol 54–5, 58–9, 63–4; p ice s abili y and unemploymen 94; p i a isa ion agenda 61; and he single cu ency 77–84 economic g ow h see g ow h a es Economic and Mone a y Union see EMU economic shocks 148, 212 ‘The Economis ’ (jou nal) 64, 150, 151 economy/economic policy: al e na i es o EMU 203–7; al e na i es o neo-libe al policies 135–6; al e na i es o single cu ency 202–3; au onomy o , and globalisa ion 100–1, 207; economic consequences o single cu ency 39–51, 120–1; economic cos s o EU membe ship 35, 119–20, 178; economic lexibili y 114, 121, 160, 165; and EU Cons i u ion 126–7; impac o EMU 140–1; non-economic ac o s and mone a y policy 80; p oblems associa ed wi h ESM 108–9; so e eign y as economic issue 177–8; see also iscal policy; mone a y policy; ade ECS (Eu opean Company S a us) 213 Edmonds, J. 105, 106, 139 EDP (Excessi e De ici P ocedu e) 214 EEC, B i ish en y in o 177–8 EFTA (Eu opean F ee T ade Associa ion) 17 EIB (Eu opean In es men Bank) 58 Eichel, Hans 114, 198 Eicheng een, B. 58 Elec ions: as democ a ic igh 170; di ec elec ions 213; and ep esen a i e poli ics 172; esul s o , and he economy 181 Elec o a e: labou no o e on eu o 111–16; igh s and p o ec ion o 170; so e eign y and he eu o 175, 176–7, 178, 179, 182–3 Ellio , L. 6–7, 35, 165–6 El is, W.A. 99 EMI (Eu opean Mone a y Ins i u e) 214 employmen : Keynesian and pos -Keynesian policies o 97, 98; secu i y o 114; see also labou ma ke ; unemploymen ; wo ke s EMS (Eu opean Mone a y Sys em) 23 EMU (Economic and Mone a y Union) 52–9, 213; a gumen s o and agains 2, 207–9; and B i ish so e eign y 168–74; and B i ish ade unions 137–44; es ablishmen o 94; mac oeconomic impac o 145, 146–9; mic oeconomic impac o 145–6, 149–52; neo-libe alis policies 62–5; op -ou and al e na i es policies 11, 203–7, 209–10; and a pos -Keynesian s a egy 95, 98–100, 232 Index 100–1; social and poli ical cos s o 148–9; sus ainabili y o 51 ene gy supplies 129–30 en y ( o EU/eu o)a gumen s agains 196–201; suppo o 17–20, 184; e ms o 177–8; e ms enego ia ed 21–2, 187; see also ede alism; so e eign y en i onmen al cos s 160 en i onmen al policies 130, 173 E ha d, Ludwig 108 ERM (Exchange Ra e Mechanism) 23, 39–41, 92–3, 214; TUC suppo o 138 ERT (Eu opean Round able o Indus ialis s) 158 ESCB (Eu opean Sys em o Cen al Banks) 214 ESM (Eu opean Social Model) 7–8, 105–10, 145–53; as al e na i e o US capi alism model 35, 138; and dena ionalisa ion 126; ade unions suppo 138–9, 143 Esping-Ande sen, G. 106 ETUC (Eu opean T ades Union Cong ess) 138, 139 EU bonds 30–1 EU (Eu opean Union) 214; B i ain’s u u e in 118–23; EU e o m (1976-1979) 22–3; ailu e o 85–90, 180; independen o eign policies o 136; Labou Con e ence deba es on 26–9; limi s pa liamen a y democ acy 170–3; membe ship cos s and bene i s 34–5, 71–6, 119–20, 122, 124–31, 200; opposi ion o en y 17, 20–1, 124–31, 186–8; policies on unemploymen 48–50; and he US 132–3 he eu o: as al e na i e o dolla 164; bene i s o , o po en ial membe s 71–6; and B i ish so e eign y 176–7, 179–80, 181, 182–5; and EU membe ship 123, 152; Eu opean adop ion o 197; impac o minimum wage on 143; and in e na ional issues 157–67; New Labou policies on 32, 111–16; and he poo wo ld 162–5; e e enda on 115, 116, 182–3, 184, 200–1; alue o 94–5; and wel a e s a e 165–6; see also single cu ency Eu o-A ica plan 16 Eu o-X Commi ee 214 Eu opean Bank o Recons uc ion and De elopmen (EBRD) 66 Eu opean Cen al Bank see ECB Eu opean Commission (EC) 69–70, 134 Eu opean Company S a us (ECS) 213 Eu opean Cons i u ion 213; Cons i u ional T ea y 65; deba e on 119–20, 122, 135; New Labou policy on 32–3; ade unions’ iews on 124, 127, 129–31 Eu opean Con en ion on Human Righ s 18 Eu opean Council 187–8, 213 Eu opean Economic Communi y 177–8 Eu opean F ee T ade Associa ion (EFTA) 17 Eu opean In es men Bank (EIB) 58 Eu opean Mone a y Ins i u e (EMI) 214 Eu opean Mone a y Sys em (EMS) 23 Eu opean Pa liamen 159; B i ish o es in 175 Eu opean policy, o Labou Pa y and Fo eign O ice (1945–2004) 13–16 Eu opean Round able o Indus ialis s 158 Eu opean Social Model see ESM Eu opean Sys em o Cen al Banks (ESCB) 214 Eu opean Technology Communi y 186–7 Eu opean Union see EU Eu opean Wo ks Councils (EWCs) 141–2, 214 eu oscep icism, p og essi e 2, 3 EWCs (Eu opean Wo ks Councils) 141–2, 214 Excessi e De ici P ocedu e (EDP) 214 exchange con ols: abolishmen o 44–5; es ablishmen o 92; and globalisa ion 100 exchange a e 40, 55, 182, 183; lexible exchange a e egime 148–9; and UK economic policy 206–7, 210 Exchange Ra e Mechanism see ERM ex e nal shocks 212 Fa Eas 163–4 Fa as, A. 56 ede al budge 67, 68–9 ede alism 17, 169, 172, 196–201; iscal ede alism 67–8, 68–9, 214 Figa o (newspape ) 166 inal sala y pension 127–8, 129 i ms: ESM and co po a e con ol 149–52; in UK, and he eu o 158, 159 iscal ede alism 67–8, 68–9, 214 iscal policy 214; and abolishmen o exchange con ol 44–5; al e na i es o EMU 204–5; and ailu e o Eu ope 85–90; ha moniza ion wi h mone a y policy 67–8; and in la ion con ol 54; lack o Eu opean 53, 68–9; non- economic ac o s in 80; and edis ibu ion 55–7; ade unionis s’ an i-EU posi ion 124–31 iscal ans e s 45–6, 56, 68–9 Fische , Joschka 198 Fische , S anley 147 i e economic es s 32, 182, 183, 197 lexibili y, economic 114, 121, 160, 165 lexible exchange a e egime 148–9 Flynn, Pad aig 48 Foo , Michael 24 Fo eign O ice, and Eu opean policy (1945– 2004) 13–16 o eign policy, o EU 136 F ance: Mi e and go e nmen 49; social p o ision cu s 120; unemploymen a es 63 ee ma ke economy: as aspec o in eg a ion 50; and EMU 60, 109; p og essi e eu oscep ic iews on 3 FTA (F ee T ade A ea) 17 G7 172, 214 Gai skell, Hugh 18 Gaspa , V. 82 Index 233 GATT (Gene al Ag eemen on Ta i s and T ade) 208 GDP (G oss Domes ic P oduc ) 68, 215; and ex e nal deb 164; GDP g ow h and in la ion 75; pe capi a GDP ela i e o EU co e 71; ecessiona y limi s on 94, 140; spending on EU membe ship 130 Gene al Ag eemen on Ta i s and T ade (GATT) 208 Geo ge, Susan 164 Ge many: al e na i e cu encies in 161; ESM in 107–8; g ow h and expendi u e in 64; in la ion and cen al bank independence 79; euni ica ion o 141; Social Ma ke Model 139; spending cu s in 114, 120; unemploymen in 62, 66, 166; wage ba gaining in 141 gil s 214 global emissions 163 globalisa ion 72–3; and economic g ow h 176; and EU policies 143; and he eu o 158, 159, 167; and g een economics 162–4; and mul ina ional capi al 43, 50–1; poli ical consequences o 172–3; social consequences o 147 GNP (G oss Na ional P oduc ) 215 Godley, Wynne 44–5 gold s anda d 39, 40, 83, 214–15 Gonzalez, Felipe 198 Gould, B yan 4, 25, 30, 40–1 go e nance: co po a e, and EMU 149–52; and EU Cons i u ion 126–7, 129–31 G ahl, J. and Teague, P. 146 G eece 71 g een economics 157, 161, 162–4 G een Pa y 10, 157 G os, Daniel and Thygesen, Niels 149 G oss Domes ic P oduc see GDP G oss Na ional P oduc see GNP g ow h a es: o B i ish economy 85–6, 87, 130–1, 176; o EU economy 127; and eu o en y 178, 181; and inc easing e u ns 96–7; and in la ion 73–4, 74–5, 79; na ional 64; neo-libe al con ol o 61–5 Ha din, R. 96 Ha monised Index o Consume P ices (HICP) 81 Hayes, Billy 9 HICP (Ha monised Index o Consume P ices) 81 Hines, C. 35 Holland, S ua 19, 24, 30, 35, 140 Honohan, P. 58 Hood, A. 35 hos ile akeo e s 150–1 Howe, Si Geo ey 86 Hund , Die e 166 Hunga y 66 Hu on, Will 159 IMF (In e na ional Mone a y Fund) 215; and B i ish economy 85–6; on EU economic g ow h 65 impe ial hi d o ce policy 16 inc easing e u ns 96–7 independence (concep o )and ECB 78–81; o UK om EU 130–1 indus ial policies 205 indus ial ela ions 141–2 indus ies, manu ac u ing 129–30, 178, 182, 205 in la ion: al e na i e policies on 204–5; and g ow h a es 73–4, 74–5, 79; and mone a y policy 53, 54–5, 57–8, 63–4, 67; and policy c edibili y 79; and p ice s abili y 81–2; and eal GDP g ow h 75; and he single cu ency 39, 42; and unemploymen 173 in as uc u e 87, 89 Ins i u e o Communi y Cu encies 161 insu ance, social 107–8 in eg a ion: and co po a e go e nance 149–52; e ec o mone a is policies on 66–7; ESM p oposal o 105–6; ee ma ke aspec o 50, 146–9; Labou posi ion on 4–5, 12, 17, 34–6, 186, 199–201; poli ical consequences o 172–3, 208; social consequences o 147 in e es a es: con ol o and he eu o 113, 180, 184; and exchange a e policy 206; and in la ion con ol 54–5, 173; low in e es a e s a egy 203–4 in e go e nmen al Eu opean Co-ope a ion 17 in e go e nmen alism 215 in e na ional o ces 130–1 in e na ional ma ke s: and Eu opean in e nal ade 57; and he poo wo ld 162–4; and powe o mul ina ional capi al 43, 50–1 In e na ional Mone a y Fund see IMF in es men , socialisa ion o 97–8 I aq 133 I eland 71, 141 Issing, O ma 82, 114, 143 I aly, g ow h and expendi u e 64 Jay, D. 35 jobs see labou ma ke ; unemploymen Kaldo , N. 46 Ka z, P. 35 Kenne , J. 148 Keynes, J.M. 40, 91–2, 97–8 Keynesian s a egy 3, 204–5; see also pos - Keynesian s a egy Kinnock, Neil 24–5, 118 Kleinman, M. 105 Kohl, Helmu 31, 197, 198 Labou Eu o-Sa egua ds Campaign Bulle in 120–1 labou ma ke : limi ed wo k o ce composi ion 142; need o lexibili y in 67; policies o UK 234 Index 205; p o ec ion o and EU membe ship 122–3; egula ion o and ESM 107–9; egula ion o and social policy 142–3; see also employmen ; unemploymen Labou Pa y: condi ional suppo o en y (1962–1970) 17–20; EU e o m (1976-1979) 22–3; Eu opean in eg a ion issue 4–5, 12, 34–6, 186, 199–201; Eu opean in eg a ion schemes (1946-60) 16–17; Eu opean policy (1945-2004) 12–13, 13–16; opposi ion o en y on Conse a i e e ms (1971) 20–1; opposi ion o en y wi hou sa egua ds (1961) 17; policy changes on EU 33–4, 137–8; p o- membe ship policy (1988–) 24–33, 197–8, 199–200; e ms enego ia ed (1972-1974) 21–2; wi hd awal policy (1980-1987) 24; wi hd awal scheme (1975) 22; see also New Labou policies La on aine, Oska 198 Lamon , No man 82–3 La in Ame ica 162 Lawson, Nigel 82–3 legisla ion 169–70; powe s o 171–2 Lisbon Agenda 215 li ing s anda ds: in Asia 72; see also cos o li ing Lucas, C. 35 Maas ich , T ea y o Maas ich (Re e endum) Bill 31, 195 Maas ich Con e gence C i e ia see MCC Maas ich T ea y 5, 30, 31, 41–3; al e na i es o 43–7; and B i ish so e eign y 173; on EIB 58; hos ili y o de la iona y p o isions o 199; neo-libe al agenda o 52–3 MacDougall Repo 43, 56 McG ego , Ma hew 8 mac oeconomic impac o EMU 145, 146–9 mac oeconomic policy 62, 66; ou side single cu ency 99, 203–10 Majo , John 31 majo i y o ing 171 Malcolm, N. 171 Mandelson, Pe e 32, 33, 113–14, 125 Mannesmann 150 manu ac u ing indus ies 129–30, 178, 182, 205 Ma ino, Joe 8 Ma jolin, Robe 18 ma ke ideology: and EMU 146–9; see also ee ma ke economy; labou ma ke ; single ma ke MCC (Maas ich Con e gence C i e ia) 93, 108, 215 media: bias in 115, 183; Labou a ack on 199; opinions on eu o 176, 182–3 Medium Te m Economic Policy (MTEP) 18–19 me ge s and acquisi ions 150–2 Michie, Jona han 5, 40 mic oeconomic impac o EMU 145 Middle on, Si Pe e 82–3 mili a y powe 163–4 Milne, I. 35 Minimum Funding Requi emen (MFR) 129 Mi chell, Aus in 11, 31 Mi e and, F ançois 48 Monbio , Geo ge 164 mone a ism 62, 86–7; in eas e n Eu ope 65–8; and ESM 108; ‘new mone a ism’ 53; he TEU 92–5 mone a y policy 5–6, 215; al e na i es o EMU 203–7; au onomy o , and globalisa ion 100–1, 207; and cen al bank independence 82–3; c edibili y o 79; ha moniza ion wi h iscal policy 67–8; non-economic ac o s in 80; and philosophy 81–2 mone a y union 52–9; and in e nal ma ke 147–53; and op imal cu ency heo y 67–8; and poli ical union 47, 198–9, 200–1; and egional policies 42, 53, 125; alue o 69–70 Mo is, Si Bill 115 MTEP (Medium e m Economic Policy) 18–19 Mullen, Andy 4–5, 32, 34 mul ina ional capi al 43, 50–1 mul ina ional co po a ions 158, 159 Mundell, Robe 67, 68 Mu doch, Rupe 33 NAIRU (non-accele a ing in la ion a e o unemploymen ) 53, 216 he na ion s a e 3, 184–5; see also sel - de e mina ion Na ional Changeo e Plan 199 Na ional In es men Bank (NIB) 98 na ional a es: o g ow h and expendi u e 64; o unemploymen 62–3 na ional social models, de ence o 146 neo-libe alism 52–3, 60–5, 133–4; al e na i es o 9, 135–6 Ne he lands 64, 68, 141 New Economics Founda ion 163 New Labou policies: and cen al bank independence 82–3; on EU membe ship 11, 119; on he eu o 33, 111–16; on p i a isa ion 61; see also Labou Pa y ‘new mone a ism’ 53 NIB (Na ional In es men Bank) 98 Nice T ea y 31, 215 Nicholls, Doug 8–9 No Campaign 157, 187 nominal wage igidi y 216 non-accele a ing in la ion a e o unemploymen (NAIRU) 216 OCA heo y 96, 216 Occupa ional Pension Funds Di ec i e 128 OECD 216 opinion polls see elec o a e; public opinion op imal cu ency heo y 67–8 Op imum Cu ency A ea heo y 93, 216 Index 235 O ganisa ion o Economic Co-ope a ion and De elopmen 216 O me od, Paul 6 Ou o C isis P ojec 25 o e alua ion 181, 183–4, 213 Owen, Da id 4 pa liamen a y democ acy 169–70 pensions 127–9 people see elec o a e; wo ke s philosophy, and mone a y policy 81–2 Podmo e, W. 35 Poland 65–6 poli ical business cycle 79 poli ical cos s: o EU membe ship 35, 125, 168–72, 179–80, 183–5; ou comes o in eg a ion 172–3, 208 poli ical union, and mone a y union 47, 198–9, 200–1 pooling 10, 147 he poo wo ld, and eu o 162–5 Po ugal 71, 114 pos -Keynesian s a egy 7, 91–5; al e na i es o 95–8; and EMU 95 pound s e ling 168, 178, 181, 183, 207 po e y gap 161, 162; see also poo wo ld Powell, Enoch 168 powe : o mul ina ional capi al 43, 50–1; and so e eign y 171, 195, 200; o UK ou side EU membe ship 208–9; US mili a y powe 163–4 p ice s abili y 42, 77, 81–2; and unemploymen 94, 158 p ice s uc u es 100 p i a e sec o 149–52 p i a isa ion: and he Single Ma ke 35; o wel a e se ices 61 P odi, Romano 66, 68 p og essi e eu oscep icism 2, 3 public expendi u e: cu s in 87, 88; high le el o 182; inc eases in 114–15, 121; and ax 55–6, 64–5 public opinion 176, 178, 179, 198 public se ices see wel a e s a e quali ied accep ance 216 QVM (Quali ied Vo ing Majo i y) 216 Ramsay, R. 34 a e capping 42–3 Rawnsley, A. 32 eal wage igidi y 216 ecession: and ERM membe ship 39, 40; and unemploymen 56, 166 e e enda: 1975 Re e endum 23, 85, 188; Benn’s campaign 21, 30, 31, 157, 187, 188, 195; on eu o 115, 116, 182–3, 184, 200–1 Re e endum S ee (BBC p og amme) 182–3 e la ion 212–13 egional ans e s 56 egions: dispa i ies in 57; policies and mone a y union 42, 53, 125 emi ed/ emi ing 216 ep esen a i e poli ics 172 esou ces: compe i ion o 124–5; supply o 129–31 e alua ion 213 igh s: democ a ic 169–70; igh o s ike 135 Robe son, J. 161 Robinson, Geo ey 180 Robinson, Joan 39 Rogo , Kenne h 61 Rome, T ea y o 54 sa egua ds, o en y 17 Sawye , Malcolm 5–6 scep icism 7, 88–9; p og essi e eu oscep icism 2, 3 Schioppa, Tommaso Padoa 65 Sch oede , Ge ha d 198 Schuman Plan 216 Sco , Regan 25 sel -de e mina ion 3, 125–7, 169, 173–4, 184–5, 202–3, 210–11 SEM (Single Eu opean Ma ke ) 216–17 se ices: o ganisa ion o and ESM 107; see also wel a e s a e SGP see S abili y and G ow h Pac shocks, economic 148, 212 Sho e, Pe e 11 SIM (Single In e nal Ma ke ) 2, 216–17 single cu ency: ad an ages and disad an ages o 158–60, 207–9; a gumen s o 106; and a common cu ency 160–2; he ECB 77–84; economic consequences o 39–51, 120–1; economic pe o mance and he eu o 60–70; es ablishmen o 92, 93; ailu e o Eu opean sys em 85–90; ea u es o mone a y union 52–9; pe spec i es on he eu o 71–6; and UK economic s a egy 81–102, 197, 202–3; and unemploymen 39, 41, 89, 113, 166 Single Eu opean Ac (1986) 133, 171, 178, 188 Single Eu opean Ma ke (SEM) 216–17 Single In e nal Ma ke (SIM) 2, 216–17 single ma ke : ESM and o ms o co po a e go e nance 150; and p i a isa ion 35; Tha che ’s suppo o 24 The Six 217 Smi h, Go don 134 Smi h, John 25 Social Cha e /Social Chap e 30, 31, 217 Social Dialogue 217 social insu ance 107–8 social models see Eu opean social model; na ional social models social policy, and labou egula ion 142–3 socialisa ion o in es men 97–8 socialis hi d o ce policy 17 so e eign y 175–85; concep o 171–2; and he EMU 10–11, 168–74