July 03, 2016

On Brexit, What Does It Imply?

Subin Dennis

THE people of the United Kingdom have voted in a historic referendum in favour of the country quitting the European Union (EU). Most of the mainstream media have been telling us that the campaign for Britain to leave the EU was entirely that of a far right lunatic fringe. This is far from the truth. While there were undoubtedly reactionary far right forces in the campaign such as the UK Independence Party (UKIP) which fomented xenophobia and racism, it should be obvious that most of the 17 million people who voted in favour of ‘Leave’ were not racists. Most of them voted to leave the EU in protest against the establishment parties whose policies have created the livelihood crises that the working class is facing today. The people refused to be intimidated by the Remain campaign – lavishly funded by big business led by the financial oligarchy – and whose leaders have contemptuously dismissed the concerns of the working class.

The fact of the matter is that there was a significant section of the Left which supported the Leave campaign. This included ‘Lexit – the Left Leave Campaign’ and the ‘Labour Leave’ campaign. Ignored by the mainstream media, the Left campaigners who supported Leave vehemently rejected the xenophobic, racist arguments put forward by the likes of UKIP, as well as the neo-liberal abomination that is the EU.

Large sections of the Left in Europe – mostly social democratic parties – have for long held that any delinking from capitalist globalisation will only help reactionary forces. Yet the reality remains that in the absence of a global working class movement, resistance and struggles against neo-liberalism are nationally based. Hence if forces leading such resistance come to power, alternative policies will have to be implemented at the level of the nation first by delinking from globalisation. But the European Union is an institution that structurally and legally makes it impossible for any member state to make a meaningful break with neo-liberalism.Let us see why.




(i) Neo-liberalism is the law in the European Union, enshrined in the EU treaties. Restrictions on the free flow of capital between member states and between member states and third countries are prohibited. The EU is also a customs union, with no restrictions on the movement of goods and services within its borders, and with common tariffs with respect to other countries. There are severe restrictions on fiscal policy for EU member states – as per EU treaties, their government deficit cannot be more than 3 percent of GDP, and the government debt shall not exceed 60 percent of the GDP – which limits their ability to increase government spending, to tide over economic difficulties, for instance. Things are worse for  countries with Euro as their currency, as they cannot have an independent monetary policy either – they cannot print their own currency to spend, nor can they set interest rates. Eurozone countries do not have the option of devaluing their currencies to make their exports cheaper in situations where their imports far exceed exports, hurting domestic industries badly. All these mean that the inequalities between countries of the European Union continue to increase, pushing the economically weaker countries into crises.

(ii) The EU has been ruthless in imposing savage austerity, especially on countries in crisis such as Greece. Recalling its handling of the Greek crisis alone is enough for us to grasp the monstrosity of the institution. The deal accepted by the Syriza government last year included barbaric spending cuts (which would be quasi-automatic if the government fails to meet fiscal targets of generating a surplus), pension cuts and massive privatisation. The deal said that the government had to get the approval of the Troika (European Commission, European Central Bank and the IMF) on all draft legislation in relevant areas before submitting it for public consultation or to parliament. It even had to put in place a programme under the European Commission “for capacity-building and de-politicising the Greek administration”! In other words, the democratic mandate and will of the Greek people would not matter any longer, and Greece was reduced to being a colony under occupation by the Germany-led EU.

(iii) Keen observers of the situation in Britain have noted that EU laws make it nearly impossible to implement even the kind of policies that are advocated by Jeremy Corbyn, the leader of the Labour Party, such as the renationalisation of railways. The EU treaties and the verdicts of the European Court of Justice make the nationalisation of such key sectors on a nationwide-scale illegal.

(iv) The so-called free movement of people is applicable to the people within the EU. This is not a problem for capital, as capital sees it is a convenient method to keep wage rates low. There is, of course, no free movement into EU for those outside it. The flow of refugees from Syria and elsewhere (which is the direct result of the devastation inflicted on Iraq and Syria by the US and its allies, including European countries) is being curtailed by the EU through various means. Hence the term “Fortress Europe” used by the Left to denote the immigration policies of the EU. At the same time, the downward pressure on wages in a situation where there is austerity is taken advantage of by the far-right which foments anti-immigrant sentiments. It is worth noting here that Slovakia is set to take the presidency of the council of the EU, and its prime minister is somebody who has stated that Islam has no place in his country!

(v) EU is ferociously anti-democratic. Its attitude towards Greece has already been mentioned. When the ‘European Constitution’ was rejected by the French and Dutch people in referendums in 2005, the very provisions rejected by the people were incorporated into the Treaty of Lisbon in 2009. This treaty was not taken to a referendum in France or Netherlands. There was a referendum only in Ireland, which rejected it. Then the EU said, “Wrong result. Vote again!”. The Irish were bullied into ratifying the treaty in a second referendum.

All of the above means that even if a government committed to ending austerity comes to power, it cannot implement such policies.





Any Left-led government would want to end austerity. But for the EU rules preventing the implementation of such policies to be bent in any meaningful manner by a country, either EU as a whole has to change, or the country has to come out of the EU.

Now the first possibility can occur only if a number of countries come to be ruled by parties which are committed to such change. But even assuming that such prospects exist, the election schedules of various countries are such that it cannot happen in the very near future. Therefore some Left party might end up coming to power in some country first, and could become the trailblazer or “test dose”. But then the very prospect of ending austerity being anathema to finance capital, the coming into power of an anti-austerity party itself causes capital flight out of that country. If the country is not part of the Eurozone, the capital flight would destabilise its currency and economy, and the government would be brought to its knees. If the country is part of the Eurozone, its borrowing costs would sharply increase, private investment and economic growth would plummet and the government would be brought to its knees. In the case of countries like Greece which have high debt-to-GDP ratios, this would cause the ratio to rise, worsening the debt problem. The government, being unable to indefinitely violate EU treaties which forbid ending austerity, would be unable to increase government spending.

Therefore, the first thing that any Left government which manages to come to power today in a country in the EU, especially in a country which faces economic crisis, would be to impose controls over capital inflows and outflows (which might necessitate the nationalisation of banks as well) if it intends to save the economy from further worsening of the crisis. Once this is done, exit from the eurozone and EU logically follows as restrictions on free cross-border movement of capital is prohibited as per EU treaties.

Flow of capital is the most important disciplinary weapon used by international finance capital today to perpetuate its rule over the world, and neo-liberal economic policies cannot end without drastically curtailing the mobility of capital. In other words, the end of neo-liberalism cannot be negotiated with finance capital. It has to be won through a massive struggle, the toughest in the contemporary world.





Brexit will not mean Britain shall become socialist from tomorrow, or even that austerity will end in the country. As mentioned earlier, unfortunately the leading champions of the Leave campaign belonged to the far right. The Labour Party leadership had supported the Remain campaign, which makes its position and the position of Jeremy Corbyn weaker (note that Labour had been opposed to the European economic integration project until 1983). If the Left within the Labour Party and the Left in the UK overall weakens, things will be worse off for the working class of Britain, with continuing austerity, and with initiatives like the Transatlantic Trade and Investment Partnership (TTIP) expected to gather pace. On the other hand, if the Left sections within the Labour Party step up to lead the efforts to chart out an alternative agenda to end neo-liberalism, the recent developments could strengthen their hands.

However, it is important to view the developments in Britain in their larger context.




The worldwide economic crisis that began in 2008 and which is still continuing is the single biggest driver of social and political change in the world today.

Periods of economic crises under capitalism are times of mass unemployment, and given the popular anger that such a situation produces, give rise to mass movements which polarise people into both the Left and the Far Right. As people seek answers to the deep livelihood issues they face, the far right tells them that their problems are due to some “other”, such as immigrants or minority groups. The Left tells them that their problems are due to the systemic problems associated with capitalism, and that they need to unite. The political “centre” – such as Pasok in Greece – goes bust (unless they reinvent themselves) because they don’t have answers to the questions posed by the people.

It is easier for many people to understand the explanation peddled by the far right – it requires no application of the mind, after all. Therefore it is no wonder that the far right increases its influence in periods of crises.

But wherever the Left makes a determined, organised effort, they tend to make advances. This is what is happening in various parts of Europe, with the Left expanding its influence in Greece, Spain, Portugal, Czech Republic etc, while Austria, Armenia, Serbia, Finland and Hungary have seen the rise of the far right. The far right is also growing stronger in the US, France and the UK. The Jeremy Corbyn-led Labour Party in the UK seems to be making an effort to turn towards the Left, while the rise of Bernie Sanders has sparked hopes for a new movement in the US.

Thus it can be seen that the latest developments are very much part of the continuing consequences of the worldwide economic crisis. The crisis gave rise to movements such as Occupy Wall Street, stimulated Europe-wide mass protests following widespread austerity and the eurozone crisis, and became one of the catalysts of the uprisings in the Arab countries. It led to the slowdown in China which led to the collapse of commodity prices, which in turn led to the flare-up of popular anger against many governments in Latin America in the recent months. The rise of the Modi-led BJP in India is also directly related to the diminishing living standards which the common people faced as a result of high inflation, slowing growth and lack of job opportunities.





There could be more referendums in countries such as Denmark, Netherlands, Italy and even France. There would be serious debates everywhere, including within the European establishment led by Germany, regarding the future of the EU. There are calls for another referendum in Scotland on independence from the UK, and for a referendum for a United Ireland.

The weakening of the EU could be a shot in the arm for any Left-led government which manages to come to power in a member state in the years to come, and even for the Syriza government in Greece which had meekly surrendered to the dictats of the Troika last year.




As mentioned earlier, the xenophobic, racist far right has been rearing its ugly head in many parts of Europe. While xenophobia has an autonomous existence just as any other ideology, the material conditions for it to gain prominence and influence in contemporary Europe are being provided by the economic difficulties caused by austerity policies. In the larger context of the worldwide economic crisis with its attendant mass unemployment and stagnant demand, immigration exerts a downward pressure on wages and puts strain on resources. This is exacerbated by austerity policies which hit public education, public health and social housing. The situation would have been entirely different if the economy was a planned one, or at least one in which the government was committed to, and is capable of, implementing an expansionary fiscal policy. Immigration would be far lesser a problem under such conditions - in fact a country with a planned economy can take in far more number of people than others.

But the EU does not allow its member states to end austerity, and if austerity is not ended, no amount of campaigning will make xenophobia go away. The EU would prevent the implementation of a progressive economic agenda even if a Left-led government comes into power in a member state. The resultant demoralisation and continuation of austerity will contribute to the strengthening of the xenophobic right.The abandoning of the progressive agenda of countries quitting the EU will only result in the far right championing the quit EU cause and the working class gravitating towards them.

The fight against austerity and against the EU as it exists today, therefore, is an essential part – along with the crucial battle in the political and ideological sphere – of the fight against xenophobia and racism as well.