The Labour right is now focusing on the European Union to attack Corbyn – Chris Nineham shows why this is a dangerous moment

With the backing of wider forces, the right in the Labour Party is trying to push Corbyn into agreeing to stay in the European single market and the customs union. This would water down Brexit to the point where it was barely a Brexit at all. The single market and the customs union come with a host of conditions guaranteeing, amongst other things, corporate ‘market access’ to industries and services, which would effectively neuter Corbyn and McDonnell’s plans for renationalisation and rule out all kinds of state intervention in the economy. 

Meanwhile, it would alienate many of the millions who voted for Brexit, the majority of whom, as polling reveals, voted to leave because they felt they had lost control over society. As Wolfgang Streeck amongst other economists has shown, the EU has indeed played an important role in imposing the free market regime which eroded the public sector and undermined democracy over the last few decades. Only the right in both its Tory and its more extreme forms can benefit from a scenario in which Labour both effectively ignores the referendum vote and takes Britain back under neoliberal regulations. 

Those who cannot remember the past…

History matters, and on this subject a good deal of the left have short memories. EU membership has been used a number of times to undermine left governments, but much of the current discussion ignores even the recent and traumatic history of the Greek people’s encounter with EU institutions. To jog memories, it was only three years ago, in January 2015, that the radical Syriza party won a spectacular general election victory. Its surge was a product of popular protests against the austerity imposed by the European Commission, the European Central Bank and the International Monetary Fund. As the traditional parties collapsed, Syriza came to office committed to a sharp break from the EU-imposed neoliberal programme. 

Prime Minister Alexis Tsipras and his team went into talks with the ‘European Troika’ convinced that, given Syriza’s popular mandate, a compromise would be on offer. To the surprise of Tsipras and his finance minister Varoufakis, nothing of the sort happened. The Troika didn’t give an inch and demanded complete surrender to a harsh austerity programme. Faced with this intransigence, the Syriza leadership eventually called the July 5 referendum on the austerity plans in the hope that it would pile more pressure on the European bankers.

After one of the biggest popular mobilisations in Greek history in which, according to one participant, people were ‘asking for a battle’, Greeks voted by 61% for defiance. But there was no battle. Despite the vote, Tsipras and most of the Syriza deputies decided to surrender. The result has been a disaster for the vast majority of the Greek people. To add to the agony already caused by a 25% slump in the economy, the ever obedient Tsipras has imposed round after round of austerity at the EU’s behest. The most recent was launched in January this year and included cuts to already meagre child benefits. It was accompanied by laws clamping down on union activity. As if the immediate level of human suffering was not bad enough, many commentators are worried that the left’s failure opens up opportunities for Greece’s far right. 

The French dream deferred

The EU - then the European Economic Community (EEC) - played a less dramatic but still decisive part in the calamitous story of the Socialist Party government in France in 1981 - 1986. Socialist Party leader Francois Mitterrand’s election as President was greeted with dancing in the streets across France. The Socialist Party won the presidential and the assembly elections on a left wing platform and Mitterrand set about implementing it with energy. His government nationalised twelve major industrial conglomerates, thirty six banks and two financial corporations. By the end of 1981, it controlled nearly the whole of the financial sector. Meanwhile it raised wages and welfare spending drastically. Union rights were improved and tens of thousands of jobs were created in the public sector. To pay for these programmes, the government hiked taxes for rich and corporations.

Within months the government ran into problems. One of them was that French capitalists started taking their capital out of the country. Mitterrand promised he would balance the books and committed to a mixed economy but the capital flight continued through the first two years of office. His government was constrained by France’s membership of the EEC’s European Monetary System (EMS), which tied the Franc to the German Mark and restricted his ability to use monetary policy to create room for manoeuvre. 

Within a year of taking office, right wingers in the Socialist Party were publicly calling for an end to reflationary state-led economic policy. They were backed up by the bulk of Mitterrand’s economic advisors, and the Finance Ministry in particular was a centre of opposition to state direction of the economy. The Left, led by Industry Minister Jean Pierre Chevenement, pushed for exit from the EMS and stronger capital controls. Such policies would have allowed the government to tighten its control over the economy and continue its policies of redistribution. The right argued that continued membership of the EEC and the EMS was crucial to France’s position in the European and global economy. This meant an about turn. As French economists De Boisseau and Pisani-Ferry explained, the right won the argument on the basis that ‘maintaining France’s status within the EEC and within the so-called French-German couple’ was essential.

In March 1983 Mitterand gave in and announced a complete U turn. He had, according to De Boisseau and Pisani-Ferry, ‘made the choice of giving priority to France’s European commitments over his own initial economic programme’. Taxes on the rich and state expenditures were slashed and consumers and workers were forced to pay 40 billion francs more. Meanwhile wages were delinked to profits and state subsidies of industry were drastically reduced. The impact on French workers was immediate and stark. Wages fell by 2.5 per cent in 1984  and unemployment rose from 7.4% in 1982 to over 10 per cent in 1985 and kept on rising. Commitment to the European project had helped to bury the dream of French socialism for a generation.

Breaking Benn

The question of EU membership was crucial to the (mis)fortunes of Britain’s last left wing Labour government too. The Wilson Labour government came to office on a wave of working class militancy in 1974. In particular two militant miners’ strikes had shaken the Tory government. Labour narrowly won the election on a radical manifesto that committed to the takeover of 25 key firms and planning of the operation of 100 more. High profile left wingers were in key positions. Tony Benn was given the job of Secretary of State for Industry. He chose Liverpool socialist MP Eric Heffer as his deputy. Michael Foot, the one survivor of the post war Attlee government, was made Minister for Employment. 

Despite being a minority government, Wilson’s administration moved quite decisively on taking office. In its first six months, it settled with the miners, scrapped a Tory Housing Act, raised welfare payments and increased taxes on the rich. It also scrapped the Tories’ Industrial Relations Act and brought in much more progressive trade union legislation. The left’s forward momentum was sustained through a second election in which Labour won a small overall majority.

Establishment resistance started early though. The City of London and big business circles regarded Benn’s industrial strategy as an existential threat to its powers and privileges. They pressured Wilson and the Labour right to act. Tony Benn recalls in his diaries that one of the directors of leading engineering firm GKN privately threatened an investment strike if his company was not taken off the target list of top 20 companies. MI5 organised a series of covert ops to smear and discredit leading government figures.

But the left’s momentum was only checked in the summer of 1975. A referendum on EEC membership provided both the establishment and Labour’s right with their chance to discipline the left and change the direction of the government. Tony Benn, six other cabinet members, the bulk of the left and the whole of the trade union movement opposed the deal on the basis that continued membership of the EEC weakened democracy and would make it harder to push through a radical economic programme. In particular Benn argued that competition clauses in the Treaty of Rome threatened the whole democratic basis of his Industry Act. 

The pro-EEC campaign brought together Wilson, Roy Jenkins and the Labour right with Margaret Thatcher and the Tories, the City of London and the bulk of British big business. 

The pro Europe campaign won the referendum by more than two to one and business rejoiced. Wilson seized the chance to sack Benn and Heffer, shifting the balance of power in the cabinet from left to right. As economists Mitchell and Fazi put it recently in their book Reclaiming the State, the referendum ‘all but killed the impetus for radical reform’.

Following this defeat for the left, sabotage and subversion started in earnest. Investors and currency speculators used growing levels of inflation as an excuse to pull out of the British economy. There was a massive run on the pound. Instead of responding by deepening government control over the economy and introducing currency controls the government ended up imposing wage restraint and going to the IMF for loans that were tied to cuts in public spending on hospitals schools and on government Investment in industry. 

Overall the record of the 1974 – 79 government turned out to be a drastic one for working people. In 1977 an economist wrote in the Observer, ‘The past twelve months have certainly seen the sharpest fall in the real living standards of Britain’s working population in any year for at least a century, including the wars. Indeed, to find a comparable fall, it will be necessary to go back to the eighteenth and early nineteenth centuries’.

Look who is on the list

This history should give pause for thought to those who see remaining in the single market or the customs union as in any sense left policies. Pro-business and anti-left groups in social democracy have always lined up with the EU because it promotes free market policies. Today is no exception. The list of 64 Labour MPs who rebelled and voted in December to try and keep Britain in the customs union is a list of those who are amongst the most hostile to Jeremy Corbyn’s progressive economic agenda. Once again the issue of the EU is the frontline of an attack on the left, this time against Corbyn and Corbynism.