The political economy of Brixit

At the end of this week, David Cameron will deliver “the speech”: his much talked-about and endlessly-put-off speech on the place of the United Kingdom in the European Union. Choosing to give the speech abroad, in the Netherlands, Cameron is hoping to gain the gravitas of earlier famous speeches on Europe, like Thatcher’s in Bruges in 1988. After so much feverish speculation, the speech will probably disappoint. But it does raise the question of what exactly is going on with the UK and its relations with the EU. Is “Brixit” really likely? Does anyone actually want it to happen? Or is the debate only really about a more cosmetic recalibration of the UK’s membership of the EU?

The Current Moment has previously argued that were “Brixit” to occur, it would be rather in the manner of the “accidental divorce” of Slovakia and the Czech Republic: a curious historical event, where neither side was virulently separatist but a split occurred nonetheless. But how likely is “Brixit”? The Current Moment also suggested that it was unlikely given how implicated the UK is in the EU. The country is far more of a member state than its political leaders admit and finds itself active in the policymaking process even in areas where it has formally opted out.

Even if the UK doesn’t leave, current events still need to be explained. Why this particularly awkward relationship to the EU? Why the prominence of Eurosceptic movements like UKIP and the political classes’ fixation – above all on the Tory side – with reclaiming power back from the EU? Some of the explanation is historical: the UK joined later than many other members after having been rebuffed twice by Charles de Gaulle and made itself unpopular by trying to renegotiate its membership immediately upon entering. Thatcher’s long-standing battles against the European Commission no doubt left scars on both sides. But these explanations are too dated to have much purchase on events in recent years and they don’t explain the climate within the UK and the virulent anti-Europeanism of some its political class that is pushing a rather neutral David Cameron in the direction of “Brixit”.

One powerful argument is that the British establishment, and its political class in particular, does not need Europe in the same was as others do in the rest of Europe. There are various economic ties between the UK and Europe that make the case for EU membership rather strong, as Lord Heseltine and others have argued recently. But the political economy of UK membership in the EU is somewhat distinctive from other member states. In short, the UK has managed its transition away from postwar social democracy on its own, without too much reliance on the EU. Compare Thatcher and Mitterrand. At exactly the same time as the British police were – on Thatcher’s orders – fighting pitched battles against the trade unions, Mitterrand was undertaking his own retreat from Keynesianism via the European backdoor. Rather than take on the militant elements of the French working class directly, Mitterrand preferred to rely on European agreements as a way of slowly and partially dismantling the mixed economy model of postwar capitalism. Thatcher attacked the public sector directly, Mitterrand – and Kohl – did so indirectly via European directives. The same holds true for other countries – like the Netherlands, Belgium and Denmark – where old corporatist models of national capitalism were slowly reformed and wound down via a reliance on European agreements. From the Maastricht Treaty to the Lisbon Agenda to the present day Fiscal Pact, the management of socio-economic change across European societies has been conducted collectively at the European level. In the more extreme cases, like Italy, the vast swathe of the political class believes that macro-economic stability can only be achieved if the country is bound up tightly within a set of European rules. The Euro – with its Stability and Growth Pact and now with the new rules being introduced – was the apotheosis of this particular approach to governing national societies.

In contrast to all of this, Britain has generally managed the transition alone. Its own way of dismantling the postwar social contract was to isolate decision-making power from the authority of the national legislature. Politicians gave up powers to independent bodies, from the multiple national regulatory agencies to the Central Bank and the Office of Budgetary Responsibility. Decision-making was located outside of politics, but not outside of the UK as such.

For this reason, the British political class needs the EU and Brussels much less in the governing of British society. The EU is less tied up with the transformations of British capitalism than it is the transformations of national capitalisms on the continent. That leaves the door open to all the parochialism and xenophobia that animates the British political debate on the EU. This also makes it possible, though still unlikely, that the UK would leave the EU.

On the unlikelihood of « Brixit »

There has been quite a bit of talk recently about a British exit from the EU. Playing on the reference to a Greek exit, “Grexit”, the Economist’s Bagehot column took up the theme. In the UK, Eurosceptic Conservatives have jumped on the recent Eurozone crisis deals to suggest that unless the UK leaves the EU, it will find itself tied down by all sorts of new measures and rules. This debate has become particularly acute given that banking supervision, and financial market supervision more generally, has become a key part of the reform agenda for Eurozone member states. The position of British Prime Minister, David Cameron, is that a referendum on membership is not ruled out but the government’s preferred option is to renegotiate the UK’s relationship to the EU.

In his column, Bagehot makes the interesting point that if the UK does leave the EU, it will be more in the manner of the way the Czech Republic and Slovakia split in the early 1990s. This was, as the late Tony Judt put it, in the manner of an accidental divorce. It had been neither the explicit goal of Klaus nor of Meciar to push for a split but in the end it happened nonetheless. As Judt put it: “not many people were overjoyed at the result, but nor was there lasting regret” (Judt, 2005, p659). There is always the possibility that something similar happens for the UK and if so, it will be a reflection more of impassivity over Europe than of strong sentiments in any particular direction.

It is much more likely that “Britxit” never comes to pass. The UK’s close place at the heart of the EU is often underestimated given the Eurosceptic froth of much of the UK press. Looking at how the EU works and the direction integration has taken over recent decades, the British contribution is difficult to ignore. A wider EU, that took in former Soviet block states, and one organized more loosely along the lines of continuous cooperation between national officials and national representatives, has become increasingly the norm. This reflects British preference more than it does the preference of other powerful states. In some areas, like cooperation in policing, the British have a formal opt-out yet are massively involved behind the scenes. And though the UK maintains its distance with the EU in terms of financial market integration, it is thoroughly integrated in other areas. Few aspects of policymaking in Whitehall today do not have as an inescapable part of day-to-day operations involvement in EU level policymaking.

When Tony Blair decided to abandon his promise for a referendum on membership of the Euro, he did so largely because he assumed he’s lose. That he would have lost is by no means certain and it is possible that the British population is far less Eurosceptic than its own political elite believes. Perhaps a referendum would be the best way to confound the prejudices of its elite as they are what fuels talk of “Brixit” more than anything else.