British Capitalism and European Unification, from Ottawa to the Brexit Referendum

in Historical Materialism

British capitalism has from the very beginning entertained an ambivalent relationship with the process of European unification. But that ambivalence has gone through different stages and since the outbreak of the financial crisis in 2008 a new, conflictual, stage in that relationship began. This is the essential backdrop against which the Brexit referendum should be understood and its consequences evaluated.

Abstract

British capitalism has from the very beginning entertained an ambivalent relationship with the process of European unification. But that ambivalence has gone through different stages and since the outbreak of the financial crisis in 2008 a new, conflictual, stage in that relationship began. This is the essential backdrop against which the Brexit referendum should be understood and its consequences evaluated.

I would like to thank John Palmer and Nigel Harris as well as six anonymous reviewers for comments on an earlier draft. The usual disclaimer applies.

Two interrelated questions have emerged as the key issues in European politics in the wake of the great financial and economic crisis of 2008–9 that shook the advanced capitalist world. The first, and more important one, is obviously the question of the Eurozone. The broader capitalist crisis combined with growing imbalances in Europe as well as the institutional deficiencies of the Eurozone to give rise to an acute speculative crisis on government bond markets in 2010–12. That crisis has in turn provided the political opportunity for European capitalists to implement a policy of wage depression and structural adjustment in the weaker member states of the Eurozone. But it has also triggered a process of institutional innovation to shore up the Eurozone’s architecture, crucially involving the centralisation of banking policy as well as initial steps towards a fiscal union with a Eurozone Treasury to partner the European Central Bank.1 And although this process is not unfolding seamlessly and a host of questions remains to be settled about the precise contours of such a fiscal union, the destination of travel is pretty obvious.

It is this latter process as well as the return of the Conservatives to power in 2010 that have reopened the long-standing ‘British question’. From the point of view of advocates of British membership of the European Union the June 2016 referendum and the renegotiation that preceded it were expected to settle the question by silencing British secessionists but also, crucially, by arriving at a new settlement regarding British capitalism’s and the British state’s position within the eu. In the event, this set of tactics badly backfired. The campaign led by Thatcherite Europhobes managed to assemble an electoral majority overlapping with the electoral support of radical and populist right-wing forces.2 Instead, therefore, of settling the question, the referendum result has kept it wide open as the new Tory government has to decide on what exactly leaving the eu means and then negotiate with the eu a new relationship while the majority of Westminster mps, let alone the Scottish, Northern Irish and Welsh devolved governments, are in favour of membership and potentially have the constitutional means of blocking secession.

Given the prominence of the populist right as the driver of the Leave campaign, analysis of the referendum campaign has largely focused on the rising pressure emanating from Europhobic Thatcherites both in ukip and within the Tories, a manifestation of the rise of the radical populist right in Europe since the early 1980s. What has largely been missing from such debates, especially on the socialist left, is the evolving relationship and interaction of British capitalism with the process of European unification. In no other member state is there such a record of ruling-class ambivalence, even hostility, towards the eu as in Britain. Even the Conservatives’ closest Eurosceptic allies in Eastern Europe have never entertained the notion of quitting the eu and some even count among the strongest supporters of the project of an eu army – which is anathema to almost every single Tory leader, let alone mps. And while it is the case that an overwhelming majority of big business leaders supported the Remain campaign, it is also the case that capital’s representatives lent, some more enthusiastically than others, support to Cameron’s tactics while wholeheartedly sharing his goal of remaining within a ‘reformed EU’ under a new settlement for British capitalism.3

In other words, the whole sequence of renegotiation and referendum is indicative of the tensions inherent in the process of building an integrated European capitalism and an increasingly centralised state order in Europe. This aspect speaks to the institutional dimensions of inter-capitalist competition. The particular institutional forms taken by the process of European unification are crystallisations of the competitive dynamic that structures the relations among the various groups of capitals driving the unification process. In arguing for a closer assessment of the evolving relationship of British capitalism with the process of European unification, I am following the call by Leo Panitch and Sam Gindin for historical materialism to pay careful attention to how institutions – in this case state institutions – reflect the core concepts of historical materialism.4 Doing so in the case of the European Union is probably a blind-spot of contemporary historical materialism. The few attempts that there have been focus on how eu institutions are crystallisations of the balance of class forces.5

The key in the case of British capitalism’s attitude to the eu is the term ‘reformed EU’. British capitalism has from the very beginning entertained an ambivalent relationship with the process of European unification. But that ambivalence has gone through different stages and since the outbreak of the financial crisis in 2008 a new, conflictual, stage in that relationship has begun – and that should be seen as the essential backdrop against which Cameron’s tactics and the referendum campaign and result have been shaped. In turn, that result has now thrown into open turmoil the relationship between British capitalism and the eu, and how exactly the British question will play out in the years to come is an open question.

I see four stages in the relationship such as it developed until the referendum result. The first is marked by Britain’s unwillingness to engage and readiness to stand back from the initial developments that were to give rise to the eu. That stage had its roots in the interwar period and lasted until a few years after the Treaty of Rome was signed in 1957. The second is marked by the reorientation that materialised through the membership application of 1961. During this second stage British capitalism came as close as it has ever done to a strategic convergence with French and German (‘Rhenish’) capitalism. That convergence, however, was overturned during the Thatcher years, which mark the beginning of the third stage. Finally, the balance that prevailed for some two decades after the Thatcher redefinition has been upset since the outbreak of the financial crisis and, especially, since it has become clear that the attempt to deal with the Eurozone crisis via the setting up of a fiscal and banking federal framework amounts to a strategic threat for the City of London.

The rest of the paper looks at each one of these stages. I also offer some analysis of how the evolution of British capitalism’s relationship with the eu has affected the position of the main social forces and their parties and thus what is driving the Thatcherite Europhobes. A concluding section looks at the implications of the vote and the potential scenarios following it.

From Ottawa to Rome – a Strategy Centred on the Commonwealth

In a nutshell, European unification is the key dimension of what can be called the ‘corporate reconstruction of European capitalism(s)’. The original impulse towards that reconstruction is located in the technological breakthroughs at the basis of what is usually referred to as the ‘second industrial revolution’ which gave rise to the core industries of twentieth-century advanced capitalism – chemicals, automobiles, metalworking, oil, food-packing, engineering and so on. The generalisation of production based on these breakthroughs entailed a qualitatively higher degree of concentration and centralisation of capital and thus the oligopolistic transformation of market and productive structures.6 Profitably exploiting the new technologies required vast capital investments (a qualitatively higher organic composition of capital) and very high production volumes within competitive markets of a continental scale so as to reap economies of scale and scope.

In the United States such conditions could be realised domestically, as the Yankee victory in the Civil War and the development of railroad and telegraph networks greatly increased the degree of integration of the American home market.7 But Europe faced the problem of fragmentation due to the multiplicity of nation states and, in particular, due to the Franco-German antagonism that structured Great Power politics on the Continent for three quarters of a century. Consequently, while the technological breakthroughs originated both in the United States and in Western Europe, in particular Germany and its satellite states (Switzerland, Sweden, the Benelux countries), the United States was better placed to take advantage of them and soon emerged as the leading industrial power in the world system, precisely because its national development strategy was not based on colonial markets. Indeed, as recently emphatically highlighted by Panitch and Gindin,8 the United States had an extremely low ratio of foreign trade to its domestic product until very late in the 1970s. Germany, as the industrial leader and rising power of Western Europe but also due to its lack of colonial possessions, made several attempts to expand its domestic market either through various Mitteleuropa schemes or through forcibly eliminating French opposition via war and forced federation. With the failure of this strategy, the only viable option was through Franco-German collaboration in building a European federation that could usher in the conditions congenial to the corporate reconstruction of European capitalism(s) – a unified market first and foremost. This process duly began after the United States decided in 1947, overruling British and French misgivings, not to dismember the German state but instead grant it sovereignty and revive the German economy. Once this choice empowered French and German supporters of Franco-German collaboration to take the lead, the process then followed its own endogenous dynamic and grew independent from American influence.9

British Foreign Economic Policy Adapts to the Transition to Corporate Capitalism

British strategy was different, indeed the opposite. Britain’s backwardness relative to the United States and Germany in exploiting the new technologies as well as the pull of Empire were the critical factors here – this is the overwhelming influence in initial British ambivalence towards European unification. British corporations were relatively slow to develop in capital-intensive sectors and fell behind their American and German competitors.10 The domestic market was too small for economies of scale to kick in and British firms in capital-intensive sectors could not compete in export markets with American and German competitors and increasingly faced competition in Britain itself as well as in imperial markets. Instead, British firms were leaders in consumer goods (textiles in particular) and retailing as well as shipping and commercial activities, commodities and associated services such as financial, legal and accounting services (all due to privileged access to Empire markets).

Despite their relative lack of international competitiveness, British firms in the new industrial sectors gradually came to exert more and more influence on the policy of the British state and on the ideological outlook of the Conservatives11 – which, after Labour had displaced the Liberals as the second major party in Westminster, became the main party of the British ruling class in the interwar period. In terms of foreign economic policy, the gradual rise of the capitalists in the new industrial sectors was reflected in the Tariff Reform movement which developed as of the late nineteenth century. The movement’s backbone was made up of firms in capital-intensive industries that sought preferential access to wider markets and found expression in the Chamberlain wing of the Conservatives. These firms also became the dominant influence inside the Federation of British Industries established in 1917. The tariff reformers campaigned for a reversal of the previous free-trade policy and for protections against imports into both the British domestic market and other British Empire markets while also supporting the organisation of tariff-free preferential access to imperial markets through an overall system of Imperial Preference (‘Empire Free Trade’), in effect turning the Empire and dominions into a preferential trading bloc. A corollary to that trade policy was the constitution of a sterling bloc, the abandonment of the gold standard and controls on capital movements that would help redirect available funds to domestic investment. Other capitalist interests, such as ‘banking, cotton, shipping, merchanting, commodity dealers . . . consistently opposed protection’ and defended the gold standard and the independent role of finance. The labour movement and the Liberals who were trying to appeal to workers also opposed protection because it ‘entailed tariffs on food imports from outside the Empire’.12

The political standoff between these forces – and inside the Conservatives – came to a head during the interwar period and was decisively settled in 1931 in favour of the tariff reformers.13 Although the ad hoc introduction of tariffs was extended during the 1920s, the return to the gold standard in 1925 was a setback for the reformers. It took the onset of Depression after 1929, the continuing decline of traditional sectors (textiles, shipbuilding and coal) and the tuc’s decision in 1930 to abandon its support for free trade before the Tory government could decide in 1931 to take sterling off the gold standard, institute exchange controls and introduce sweeping protection through the 1932 Import Duties Act. In 1932, it struck a deal with the Dominions at the Ottawa Imperial conference instituting a system of Imperial Preference14 (although not as far reaching as the tariff reformers wanted).

The Insoluble Contradiction between British Imperial Strategy and the European Customs Union

The British government came into conflict with the United States in the 1930s and during the War as the American government was eager to dismantle barriers to the international expansion of American firms,15 including the Ottawa system.16 When in 1947 the American government began actively promoting a European customs union17 British policy clashed with American biddings again. Both the Federation of British Industries and the economic ministries ‘were implacably opposed to British involvement . . . because it would herald the end of Imperial Preference’18 due to the common external tariff of such a union. British capitalists and state bureaucrats were also put off by the prospect of German competition within such a common market whereas Labour feared the effect on living standards of British participation in the common agricultural policy which would force British workers to consume dearer farm products from the Continent instead of cheaper imports from the dominions. The Labour party also considered the Continent to be dominated by anti-socialist Christian Democrats and feared that participating in a European customs union would endanger the welfare reforms introduced under Attlee.

The British government’s attitude, therefore, was to refuse to take the initiative in Europe as the American government expected it to and to stand back and hope that the French and German governments would not be able to reach an agreement. This policy was a continuation of British governments’ traditional European policy of preventing the rise of a single power centre on the Continent. It was tested initially during the negotiations for the European Coal and Steel Community in 1950–1 when Britain only had observer status and was further pursued when the Belgian and Dutch governments jointly proposed a customs union in 1953. Famously, the British government only sent a mid-ranking Board of Trade civil servant to act as an observer at the 1955 ministerial Messina conference19 which worked out the compromise that would become the Treaty of Rome in 1957 and continued to hope that French fears of German competition would prevent a deal from being reached.

The problem was that the main assumption underpinning this policy – that a Franco-German axis was impossible – proved mistaken. This was by no means an obvious conclusion to come to in the 1950s as it really constituted a momentous departure from the pattern of inter-state relations that had prevailed in Europe since German unification in 1871. But being unable to thwart progress towards such a union on the Continent put British firms in an impossible situation as they stood to lose out either way. Even if Britain did not join, ‘tariff barriers would limit access to fast-growing continental markets while the economies of scale gained by continental manufacturers would enhance their relative advantage in British and other third markets’.20 Moreover, preferential trade liberalisation within the customs union would create trade diversion in favour of those same continental manufacturers and to the detriment of those left outside. This is the earliest instance of a familiar pattern in British capitalism’s relation to European unification. Full engagement was problematic, but doing nothing was equally not an option – Britain was therefore doomed to tail developments and trying to shape them as much as possible to local capitalists’ preferences.

Once it became obvious that the customs-union project stood serious chances of being implemented, the British government made an attempt to torpedo the Treaty of Rome through a proposal in 1956 for a Free Trade Area to include all oeec member states (this became known as the ‘Big Europe’ project as opposed to the ‘Little Europe’ of the Treaty of Rome). These proposals reconciled Imperial Preference with the need to participate in the expanding markets of Western Europe as they did not involve a common external tariff, although they did not offer protection from German competition. The attempt was based on the hope of luring the Benelux countries as well as the Erhard and protestant wings of German Christian Democracy away from privileging relations with France. When it failed, Britain set up in 1960 a European Free Trade Association with Switzerland, Sweden, Austria, Norway and other countries.

However, the pulling power of the eu21 was such that even before efta was set up a reorientation in favour of entry was underway. In fact, both the economic ministries and the fbi were aware early on that should Britain fail to prevent the setting up of a customs union, applying for membership would be the less costly solution.22

Britain Joins the Race to Build National and European Champions

Already before the setting-up of the eu in 1958, the revival of the German economy was generating a profound reconfiguration of economic relations on the Continent.23 Trade flows among the future eu member states soared and this contributed to the economic growth of the two postwar decades. At the same time, the Commonwealth-centred strategy was much less successful than expected initially. To begin with, the Imperial preference bloc was not as compact as British capitalists had wanted it to be. Moreover, during the 1930s and the War the dominions embarked on import-substitution industrialisation strategies and so restricted access to their markets to British manufacturing exports. efta lacked the dynamism of the eu, being much smaller and more fragmented with transport infrastructure a major liability. The pulling power of the eu was such that in order not to be left behind British capitalists began campaigning for equal access to continental markets.

At the same time, the pattern of British foreign trade and investment flows gradually shifted away from the Commonwealth and towards the eu. By the second half of the 1960s, British exports to Western Europe overtook exports to Imperial Preference markets and a trend for faster growth in investment flows to the eu than to the Commonwealth was evident in the 1960s.24 The Confederation of British Industry (which replaced the fbi in 1965) justified this latter move by the need to Europeanise productive operations. ‘The argument for entry into Europe . . . is that we must have a larger industrial base than the home economy can provide. Overseas investment is an important means of extending the range and scale of industrial operations’, it noted in 1967.25 The charge into Europe was led by the largest and most modern of the manufacturing corporations, epitomised by ici. These corporations were also the main proponents within the cbi of British eu membership and soon came to the conclusion that complying with the cap was a price worth paying for access to the eu market. Smaller firms were divided but only the farmers’ federation opposed entry.26

ici was the model for British industry at this particular juncture. Like in France, British firms in many of the key industrial sectors were still laggards in terms of scale and needed to attain a much greater degree of concentration and rationalisation. As a result, British governments embarked in the 1960s on a strategy of building ‘national champions’ through indicative planning and state-induced mergers and rationalisation,27 which France largely exemplified at the time. The strategy had prewar origins, with the British state instigating the creation of ici in 1926 through the merger of four smaller firms. eu membership and state-induced rationalisation and mergers thus came to be seen as two sides of the same coin. National champions like icl in electronics and computers, gec in engineering, British Leyland in automobiles and British Steel were all set up in the 1960s. Concentration levels soared, largely due to a merger wave from the late 1950s to 1973 that consummated the corporate transformation of the British economy.28

This conscious attempt at speeding up the corporate reconstruction of British capitalism was accompanied in the latter half of the 1960s by an intense fear of American domination of high-tech industries. This fear both reinforced the attraction of eu membership and generated interest in Europeanising the strategy of building national champions through active state intervention. The seminal statement of European fears about American domination and clarion call for an active supranational policy of promoting industrial champions was French journalist Jean-Jacques Servan-Schreiber’s 1967 book Le défi américain. The book highlighted the extent to which American corporations were dominating high-tech industries (electronics, computers, aerospace, etc.) and outspending their European competitors in high-tech R&D, the fragmentation and scattering of European efforts and the advance of American firms in Europeanising their production networks and reaping the full benefits of the European customs union.29 France and the European Commission were at the vanguard of the push for an active European industrial policy and this also led to a change of French attitudes on British membership with top civil servants and the cnpf (the French employers’ peak organisation) pushing for reversing de Gaulle’s opposition to British entry.30 French revisionism on this score finally removed the last obstacle to British membership, and when Georges Pompidou – the French politician most closely associated with the strategy of building national champions – became president in 1969 British entry became only a matter of timing.

British capitalists were equally keen on a strategy of building European champions and this became an increasingly prominent reason for pursuing eu membership. Firms in the high-tech sectors became the most vocal proponents of membership and the cbi increasingly stressed the importance of technological collaboration and an active pan-European industrial policy.31 British firms embarked on pan-European high-tech ventures. icl joined the short-lived Unidata consortium in 1972 and was part, along with gec and Plessey, of the group of 12 electronics firms set up in 1980 to campaign for technology programmes run by the Commission.32 gec set up joint ventures with the French cge (a conglomerate combining electrical engineering and telecommunications equipment businesses) and the German Siemens. The British aerospace industry was intermittently associated with the Airbus consortium and when BAe was formed in 1978 it insisted on re-joining the venture rather than linking up with Boeing as it feared becoming a mere sub-contractor in such an arrangement.33 The British government has also participated from its beginnings in 1973 in the Ariane project of satellite launchers and in the European Space Agency. Thus, the years between the reorientation away from the Commonwealth and the Thatcher governments were the high-point of British convergence with French and German capital, which was premised on a common ‘mercantilist’ preoccupation with the international position of European industry.

Political Attitudes towards European Unification during the Second Stage

This configuration of interests also largely defined political attitudes toward the eu. The Conservatives, still under the dominant influence of British-controlled industry, were overwhelmingly pro-European during this stage, with only 39 Powellite mps out of 330 voting against membership in the 1971 Commons vote.34 These mps were ‘Imperialists’ in the sense that they retained an attachment to the Commonwealth which they believed could not be reconciled with eu membership. Even Margaret Thatcher, who would later become the symbol of British Euroscepticism, was pro-European in the 1970s.

But Labour and the wider labour movement were much more sceptical. Activists and leaders – overwhelmingly on the left side of the spectrum – continued associating the eu with higher food prices and job losses due to rationalisation. The most prominent opponent of British membership during the 1975 referendum campaign, Tony Benn, encapsulated this mood, famously claiming, ‘Half a million jobs lost in Britain and a huge increase in food prices as a direct result of our entry into the Common Market’.35 A Labour party conference voted 2 to 1 for withdrawal in April 1975 with only seven out of 46 trade unions supporting membership, and more Labour mps opposed entry than supported it.36 When Labour returned to opposition it maintained until the mid-1980s its pledge for withdrawal. Support for eu membership was confined to the right wing of the party and its modernising social-democratic leaders such as Roy Jenkins, who would go on to become Commission president in 1977 and contribute to the formulation of a supranational industrial policy as well as the setting-up of the European Monetary System which would eventually lead to monetary union.

The Thatcher Sell-off and the City’s Rise as Europe’s Premier Financial Centre

The interest configuration and economic strategy at the basis of the second stage and of the convergence with continental capital collapsed during Thatcher’s premiership. The Thatcher governments made a series of choices amounting to a strategic reorientation for British capitalism. Two trends led to this and contributed to fashioning a new, more hostile, attitude towards the eu.

The first trend was British industry’s continuing decline relative to its main competitors. Despite the national champions strategy and the intensive rationalisation and rising concentration of capital that this entailed in the 1960s and 1970s, British industry performed much less well than its European competitors. In 1960–73, average annual manufacturing productivity growth in Britain was 4.1%, in France 6.6% and in Germany 5.7%. British relative decline then accelerated. In 1973–9, the respective figures were 1%, 4.4% and 4.2%.37 With a few exceptions (pharmaceuticals and aerospace) this decline concerned all industrial sectors, from automobiles to engineering through electronics and computers. During the 1970s, then, the British government became a hospital for ‘lame duck’ firms unable to keep up with European, American and increasingly Japanese competition.

When the Conservatives returned to power in 1979, the stage was set for a radical break with the national champions strategy. The strategic decision was taken to cease the policy of active state involvement in industry in favour of that of a ‘spectator state’38 engaged in opening up all sectors of the economy to the forces of international competition. What replaced the strategy of promoting indigenous and European corporations was a strategy of attracting as much foreign investment – greenfield or not – as possible. Crucially, this involved the sell-off of most British industrial champions to whoever was willing to buy them. The strategy was implemented wholeheartedly. By 1990, the ratio of the stock of foreign investment to gdp was 21.2% in Britain as against 8.1% on average in developed economies and 8.9% in Germany. The number of foreign-controlled firms among the 100 largest operating in Britain rose from 18 in 1986 to 35 in 1993. The automobile, electronics and computers and, by 2005, engineering British national champions all came under foreign control.39 The automobile industry in particular exemplified this strategy. British Leyland was gradually sold piece by piece to Ford and bmw, and the three big Japanese car-makers (Toyota, Nissan and Honda) chose Britain as the basis of their European operations. The only exceptions have been the aerospace industry (BAe, Rolls Royce) on national security grounds, and pharmaceuticals (GlaxoSmithKline and Anglo-Swedish AstraZeneca) on account of the competitiveness of the firms under British control.40

The Thatcher government’s assault on the trade unions was instrumental here, as one of its objectives was to pacify industrial relations and offer foreign investors labour markets where the power of capital to set conditions and wages would be entrenched. A docile but nonetheless relatively highly-skilled industrial labour force became a key dimension in the strategy of attracting foreign investment, as illustrated by the ‘Japanisation of British industry’ with the introduction of just-in-time processes and lean management.41 It also exemplified the broader attitude towards industrial policy that emerged during the Thatcher years. Instead of the state making strategic decisions itself, the new orientation was based on ‘horizontal’ policies designed to improve the business environment.

The strategy of becoming a prime destination for inward foreign investment has also entailed a generalised attempt to lower regulatory costs for capital (such as environmental and consumer protections), leading to a minimal regulatory standards agenda, and corporation and income tax rates. By 1995, for example, the top income tax bracket in Britain was 40% as against an eu average of between 47% and 49%. Corporation tax was 33% (down from 52% in 1981) as opposed to 56.7% in Germany.42

The second trend was the continued revival of the City of London as an international financial centre. International capital flows accelerated markedly from the mid-1970s onwards, partly reflecting the attempt by national champion firms in the eu to become pan-European organisations. In particular, this spurred the growing centralisation of wholesale capital markets as corporations from the Continent gradually shed their dependence on domestic bank finance and became keener to tap securities markets where international savings were pooled. The Thatcher government’s strategic decision was to swing fully behind the City’s attempt to become Europe’s premier financial and international business services centre and thus to have the British economy specialise in high value added financial and associated business (accountancy, law, consultancy and so on) services, in which the City had a long-standing comparative advantage as the former hub of imperial finance. A series of financial market reforms culminating in the 1986 ‘Big Bang’ liberalisation of securities markets were ushered in.

In fact, these reforms represented a deepening of the minimal regulatory standards agenda pursued by City financiers since the early 1960s, which had enabled the domiciling of the Eurodollar market in London. In 1962, the Conservative government had liberalised all foreign currency-denominated transactions under pressure from City financiers keen to resume their position as a hub for international finance. The move paid off largely due to the regulatory arbitrage that it enabled American banks and then industrial corporations to operate to the detriment of Wall Street. On top of various restrictions such as interest rate ceilings on deposits, American governments began using capital controls – in particular a 1963 tax on purchases of foreign securities – from 1960 on to stem the capital outflows that would finally break the Bretton Woods monetary system and did not liberalise financial services until the mid-1970s.43 The City rebuilt its position as an international financial centre by providing American corporations with a way to circumvent these restrictions and by abandoning sterling as an international currency in favour of the dollar. City financiers thus came to see their position as hinging on undercutting the regulatory standards of foreign competitors44 as well as on becoming an offshore financial centre dealing in foreign currencies and foreign currency-denominated instruments.

During the years between Thatcher’s election and the financial crisis, the rise of the City was reflected in the inflated share of the British economy revolving around it. Although all advanced capitalist economies saw declining manufacturing shares, that decline was steepest in Britain according to a 2014 report by the Office of National Statistics. Financial services alone accounted in 2009 for 10% of British gdp, by far the highest share among G7 countries (Canada was second with 6.7%), and became the most important British export.45 One other calculation based on ons data indicates that exports of ‘international business services’ grew much faster (12.7% per year on average) than either total exports (6.7%) or gdp (5.3%) in the 1991–2008 period.46 In 2014, financial and associated business services generated a trade surplus of 72 billion pounds, more than all other net exporting industries combined.47 In the aftermath of the financial crisis, a consensus had formed that the British economy had become over-reliant on the City and a chorus of voices (including the Financial Times) began talking about ‘rebalancing’ the British economy away from the City and supporting the renaissance of manufacturing industry.

The Post-Thatcher Capitalist Strategic Consensus and the Entrenchment of British Euroscepticism

The combination of these two strategic choices has meant that most sections of capital could unite around a common strategy based on minimal regulatory standards for capital, labour, goods and services markets and on the most wide-ranging opening up of these markets to the forces of international competition. British governments thus ditched all attachment to protectionism and preferential treatment that was a key part of British capitalism’s strategy from Ottawa onwards and which had pitted manufacturing and capital-intensive industrial firms against the set of interests coalescing around the City of London and representing money and commercial capital.

This redefinition has transformed British capitalism’s relation to the process of European unification as it has undone the convergence of the second stage and underpinned the rise of the City as the most politically powerful section of capital in Britain. British governments have become the main proponents of the minimal regulatory standards agenda (together with East European governments) and of all the initiatives to deepen the eu’s single market through liberalising initiatives, from the Single European Act in 1986 to the current digital union initiative, the attempt to liberalise the utilities sectors in the 1990s and the 2003 Bolkestein directive on services, as well as of free-trade policies for the eu as a whole in relation to the outside world. British governments also championed enlargement to Eastern Europe as the widening of the eu’s labour pool could further undermine the power of well-organised trade union movements in Western Europe. Characteristically, the British government chose not to apply the seven-year transition period for the free movement of labour from Eastern European member states when these joined the eu in 2004, whereas both the French and German governments did.

The Thatcher redefinition has not, however, overturned the dominant preference for eu membership. The latter has been instrumental to the new strategy inasmuch as it serves both the goal of attracting foreign investment by becoming the main entry point for extra-eu investors into the world’s single biggest market and in entrenching the City’s status as an international financial centre by transforming it into the eu’s financial capital. In this respect, the City is to the eu what Wall Street is to the United States.48

At times, the Thatcher redefinition has created a convergence with other sections of European capital, as happened for example with the Single European Act designed to remove non-tariff barriers in goods markets and overseen by a British Conservative commissioner, Arthur Cockfield. The redefinition also spurred a general dynamic of ‘competitive deregulation’ in financial services49 as Paris and Frankfurt entertained hopes of rivalling London for the position of the eu’s premier financial centre50 and as European big banks began Europeanising from the late 1980s on and enjoyed support from their national regulators in the shape of laxer standards and supervision in doing so.51

But it has also pulled Britain out of the Rhenish coalition favouring the development of pan-European corporations to rival American and Japanese and, increasingly, Chinese competitors in high-tech industrial sectors. British governments have thus been opposed to an interventionist supranational industrial policy. Crucially, the Thatcher redefinition has created a powerful British vested interest in minimal regulatory standards, especially in financial services, which sits awkwardly with any attempt at political and regulatory centralisation and harmonisation within the eu, as regulatory decentralisation has fuelled the process of relaxing regulatory standards (much as fiscal decentralisation has spurred a race to the bottom in income and corporation tax rates). The traditional British reluctance towards political centralisation – due to lingering attachment to the imperial past and the Atlantic alliance52 as well as the traditional suspicion of anything that smacks of the centralisation of state power on the Continent – has thus been boosted by an economic strategy best served via political and regulatory decentralisation but also by the political rise of the City. The City has historically been the hub of globalist and Atlanticist leanings in Britain53 due to its role as former imperial financial centre. This outlook has been shared by the Treasury, the bulwark of Euroscepticism within the British state apparatus,54 and boosted by recent efforts to attract Russian, Chinese, Gulf and other investors to London. This complex mixture of imperial nostalgia, the rise of the City, Euroscepticism and support for political and regulatory decentralisation is well illustrated by a comment by Crispin Odey, a hedge-fund owner who was among the main financial backers of the Leave campaign: ‘Europe turns us into a colony and we are used to an empire. We are not used to obeying rules we haven’t set’.55 This is the key point when it comes to the post-financial crisis and post-referendum stage of relations.

The Reversal of Political Attitudes towards European Unification Following the Thatcher Redefinition

The convergence of most sections of British capitalism towards a strategy centring on a minimal regulatory standards and minimal fiscal burden agenda is also the key factor in the shifting attitudes of the key social forces and their respective parties. The trade-union movement and Labour came to see the eu as a bulwark against the Thatcherite onslaught. This shift happened during Jacques Delors’s tenure as Commission president from 1985 to 1995. Delors had a social-democratic agenda for the eu particularly loathed by Thatcherites.56 He promoted pan-European corporatist structures and fiscal transfers for backward regions but also pushed for new pan-European standards in a series of fields such as industrial relations legislation, health and safety regulations and environmental and consumer protection. He was also instrumental in introducing the Social Charter in the Maastricht Treaty, which enshrined a series of workers’ rights in eu law. His agenda received support from both the French and, in particular, the German government as uniform and relatively stringent standards were seen as a way of reducing the comparative advantage of firms based in Southern and Eastern Europe.57 Delors thus became instrumental in winning over the bulk of the trade-union movement. ‘The turning point was [his] appearance at the TUC in September 1988. . . . His call for increased structural funds appealed to regions ravaged by Thatcherite deindustrialisation. His advocacy of a “Social Charter” enthused trade unions demoralised by industrial and political defeat. His support for “every worker’s right to be covered by a collective agreement” so excited Ron Todd, the then tgwu general secretary, that in a dramatic response to Delors he threw over three decades of hostility to Europe: “in the short term we have not a cat in hell’s chance in Westminster. The only card game in town at the moment is in a town called Brussels”.’58 By 1998, polls showed that only 3 per cent of Labour mps supported British withdrawal from the eu, which had been official policy until the party’s 1989 Policy Review.59 The shift was never reversed thereafter. At the June 2016 referendum, 218 Labour mps supported Remain and only 10 Leave60 and the bulk of trade unions campaigned for Remain.

Labour’s conversion allowed Blair, Roy Jenkins’s intellectual heir, to emerge as the most consistently pro-eu British mainstream politician ever. Blair and his supporters effectively adopted the point of view of the Foreign Office, according to which the new political reality is that power on the Continent is gradually being centralised in Brussels and that if London wants to remain politically relevant (including as the United States’ main ally in Europe) it must engage as closely as it can with the process of unification and seek to play a central role in Brussels while also trying to channel eu policy as much as possible in a pro-British direction. This entails both building alliances with and earning the goodwill of other member states and the Commission, and therefore making compromises and not being obstructionist is seen as valuable in winning the British government such goodwill.

Conversely, the strong pro-eu consensus within the Conservatives, based on the strategy of building national and European industrial champions and on British industry’s dominant influence within the party, collapsed under Thatcher. The vast majority of Conservatives came to see the eu as a barrier to the Thatcherite agenda.61 A few weeks after Delors’s appearance at the tuc conference, Thatcher shot back with a speech at Bruges that has come to encapsulate her thinking on the eu, warning that ‘[The EU must not] be ossified by endless regulation. . . . We have not successfully rolled back the frontiers of the state in Britain, only to see them re-imposed at a European level with a European super-state exercising a new dominance from Brussels. . . . Our aim should not be more and more detailed regulation from the centre: it should be to deregulate and to remove the constraints on trade’.62 Accordingly, Tory Eurosceptics see political decentralisation within Europe as the key institutional principle for the organisation of European capitalism. ‘The guiding principle . . . is that . . . the EU needs to move away from the expensive harmonisation of labour laws, social rights or financial regulations. Instead, Conservative MPs believe that the EU should embrace beneficial competition between different members’.63

But although most Conservatives share this orientation, they have polarised into two main wings. The wing with the strongest links to big business and the dominant players in the City are centrist, moderate Eurosceptics who, despite being suspicious of initiatives emanating from Brussels, realise that eu membership is integral to British capitalism’s strategy and that therefore a policy which reconciles the membership imperative with that strategy is the desirable one. For example, Cameron told the Commons in October 2011 that ‘a lot of companies come and invest in Britain not just because of . . . our flexible labour markets . . . but because of access to the world’s biggest single market, which is important for investment into Britain by American, Japanese and other firms’.64 Their preferred set of tactics has therefore been close to that advocated by the Foreign Office, although these Tories are happy to see the eu develop along a two-track path with an inner core around the Eurozone which keeps centralising more and more policies and an outer layer of member states content with the single-market dimension of the eu.

A radically conservative, rabidly reactionary Europhobic wing has, conversely, argued for a policy of obstruction and isolation from the policy initiatives decided in Brussels. As the eu keeps integrating further, its members have increasingly inclined towards Britain leaving the eu, while their red line has been to reverse the tide of integrationist measures introduced from the Treaty of Maastricht onwards. They have explicitly linked the issue of economic strategy to that of the eu’s deepening political centralisation and have thus objected to every extension of qualified majority voting in the Council of Ministers, to the legal doctrines of the supremacy of eu law and judicial review by the ecj, the rise of the European Parliament and the setting up of the European Central Bank.65 Its proponents believe Britain can be a bigger ‘Switzerland with nukes’,66 with the City increasingly becoming a financial hub for fast-growing emerging economies such as China, Russia and the Gulf states as well as Britain doing free-trade deals with former colonies and dominions, thus reconnecting with her imperial past. Their ideological outlook is a radical libertarian one, advocating a small state through integral privatisation (including of the nhs) and low-tax, low-welfare and low-spending fiscal policies. For example, the chief executive of Vote Leave, the main pro-Brexit group during the referendum campaign, Matthew Elliot, is a self-described ‘free-market libertarian’ who had previously been the chief executive of the Taxpayers’ Alliance group, which aggressively campaigns for both spending and tax cuts and largely shaped the Conservative party’s manifesto for the 2010 general election.67 David Davis, the new minister for Brexit, is also a self-styled libertarian. These Tories tend to be younger and more in line with the dominant mood among the party membership and, to a lesser extent, the party’s voters.68 They see the eu as a major obstacle to their ‘offshore Britain’69 or ‘hyperglobalist’70 strategy but also as being increasingly irrelevant to the City’s strategy because of its alleged rigidities and low growth and because of the rise of the emerging market economies. Finally, the Eurozone crisis was greeted enthusiastically by these Tories who saw in it not only the failure of the euro which they had predicted twenty years earlier but also a chance to blackmail the rest of the eu by setting conditions for accepting not to block the measures needed to shore up the euro (a deluded notion as I show below).

The first instance at which this split openly and dramatically manifested itself was Thatcher’s downfall in October 1990. Thatcher had gradually emerged as the leader of the Europhobes but her unrelenting and increasingly vocal opposition to the prospect of a single currency led to a revolt in October 1990 by pro-European and moderate Eurosceptic Tory mps. Their alliance was based on rejecting Thatcher’s obstructionist tactics, although they did not agree on the single currency. She was thus replaced by John Major who stood on the middle ground on the Europe question and who accordingly negotiated a British opt-out from emu without threatening to block the Maastricht Treaty or excluding the possibility that Britain might eventually join. But this was not enough for the split to disappear. The Conservatives descended into civil war in the mid-1990s as Europhobic mps staged guerrilla warfare against the Major government over the treaty’s ratification. The infighting was seen as deeply damaging by party managers, all the more so as opinion surveys consistently showed that the general public did not think the eu was an important political issue.

From the Financial Crisis to the June 2016 Referendum

Although there were clearly tensions in British capitalism’s relationship with the eu during the third stage, these were contained by the fact that regulatory decentralisation in financial services and taxation remained relatively unproblematic. In financial services in particular, regulatory competition provided a technique for promoting the integration of European capital markets and the Europeanisation of financial corporations. The eu agreed in the early 1990s on the principle of the ‘single passport’ where a licence granted a bank by any national regulator in the eu was enough for that bank to develop activities anywhere in the eu. Banks would also remain under the supervision of home-state authorities. The decentralised structure of rulemaking and supervision was supported by financial corporations and member states as the links between banks and their home states were still strong and national control of financial policy was seen as a means for each member state to promote its own big banks in the jockeying for position in the emerging pan-European financial services market.71 The ensuing regulatory competition, as already argued, fitted well with the City’s general strategy of ‘light-touch’ regulation as it spurred a race to the bottom.

The Sharpening Contradiction between City-centred British Capitalism and an Increasingly Politically-centralised European Union

City financiers had always been alert to the possibility that eu membership might become an obstacle to that strategy and have always maintained an ambivalent attitude towards the eu, even during the second stage described above. Tom Nairn highlighted ‘the City’s caution’ during the final stages of Britain’s campaign for eu membership in the 1960s and early 1970s as well as the minority of City financiers opposed to membership altogether. The reasons for that caution are very instructive. A merchant banker cited by Nairn argued for example that ‘The prosperity of the City’s international business depends on the willingness of . . . the British authorities to treat the City as an “off-shore island” outside the controls imposed on domestic institutions . . . The City thus has a strong interest in seeing that whatever arrangements . . . are developed within the Common Market, it preserves the independent, “off-shore” position vis-à-vis those arrangements that it currently enjoys vis-à-vis the domestic monetary arrangements in Britain’.72 In other words, City financiers fretted even before British entry that, once part of a federal structure like the eu, political decision-making over the financial sector could escape the control of the British state and potentially undermine the City’s ‘off-shore position’.

This is precisely what has been happening in the wake of the 2008 financial crisis. Two different trends combined to trigger alarm bells in the City, the Treasury and the Bank of England. One is the general trend in public opinion in favour of stricter regulation of the financial services sector which has put pressure on politicians to tighten the screws. This trend is particularly strong on the Continent where financial systems are bank-based and where suspicion of international securities markets and ‘financialisation’ has always been strong. In France, moreover, such feelings are exploited by the local big banks and insurance firms which have for a long time seen the tightening of the regulatory screws at the eu-level as a way of diminishing the City’s competitive advantage.73 The French government, for example, proposed in 2001 the setting up of a European Securities and Exchanges Commission and a few years later rules to curb the over-the-counter derivatives market, one of the City’s major strengths. Both moves were fiercely and successfully resisted by London.

A second, and much more important, trend is that the tide of regulatory (and to a lesser extent fiscal) competition based on political decentralisation has turned in the eu. Two developments account for this. Firstly, the Lisbon Treaty that came into effect in 2009 provides for qualified majority voting in financial services – an extension which did not escape the attention of Eurosceptic City financiers.74 Crucially, as of 1 November 2014, the new voting rules mean that Eurozone finance ministers have enough votes to adopt financial policy legislation. Secondly, the Eurozone crisis has triggered a process of centralisation involving banking policy and plans for a fiscal union with a common Treasury. The centralisation of banking policy is the immediate problem for the City, as it has created an in-built majority of Eurozone banking supervisors that can overrule non-Eurozone ones such as the Bank of England.

These developments have provided an opening for the Commission to push for a greater degree of centralisation of financial services policy as well as more stringent standards. This effort was concentrated in the second Barroso Commission (2009–14) and was led by a French commissioner, Michel Barnier, a centrist Gaullist embodying everything the City loathes about Continental ruling classes. One of his first initiatives was to appoint in 2009 a group headed by former imf chief and Banque de France governor Jacques de Larosière to come up with proposals for establishing a European System of Financial Supervisors. The group’s report led to the setting up of four such bodies in 2011, most importantly for the purposes of this paper the European Banking Authority and the European Securities and Markets Authority. The British government has resisted every attempt to extend the scope of their powers, arguing that they should simply be forums for coordination among regulators, whereas Barnier and the French government see their role as contributing to developing a ‘single rulebook’ for financial services in the eu. For example, the Commission decided that esma would have the authority to ban short-selling in certain circumstances. Barnier also tabled a wave of new legislation whose overall thrust is to constrain financial market operators. Measures particularly loathed by City financiers include new capital and leverage rules for investment and hedge funds, requirements for derivatives to be traded on regulated and transparent platforms, and a cap on banker bonuses.75 Barnier also placed limits on the Bank of England’s autonomy in deciding capital-adequacy rules for banks domiciled in Britain.

Unsurprisingly, Barnier’s policies were perceived as directed against the standing of the City as an international financial centre. The Financial Times published a long article on the clash in November 2011 citing British politicians and financiers claiming that the City was under attack from Brussels and explaining that ‘underlying the alarm in London is a more visceral fear: that Mr Barnier’s backers on the mainland are using this regulatory marathon to sap London’s strength as Europe’s pre-eminent financial centre’.76

The Commission’s initiatives have been just one dimension of the assault on the City. Equally worrying have been attempts by the ecb to get a firmer grip on the euro-denominated trading taking place in London,77 a belated consequence of the creation of the euro. The ecb has attempted to force clearing houses handling a substantial volume of euro-denominated transactions to relocate from London to the Eurozone. The rationale for that move was provided by Banque de France governor Christian Noyer, who told the Financial Times that the bulk of euro-denominated trading had to be under the ecb’s control as this was a matter of the Eurozone’s financial stability and that there was no rationale for the City to be the Eurozone’s financial capital if Britain decided to retain the pound.78 The statement triggered a public Franco-British fight. London’s mayor and future leader of the official Leave campaign Boris Johnson accused Noyer of ‘a naked attempt to steal London’s financial crown’.79 More broadly, the fear in London was that with the centralisation of banking supervision in the Eurozone under the ecb, the latter institution will have a natural majority to set banking regulation within the eba, thus weakening the capacity of the Bank of England to adopt regulations congenial to the City’s strategy. The British government has expressed many times the fear that the Eurozone might ‘caucus’ together to impose financial regulation and other protectionist measures that harm the City.80

The last set of initiatives that are perceived as an attack on the City and more broadly on British capitalism’s general strategy are tax-related. Although unanimity applies in taxation matters, a set of Eurozone member-states have decided to push ahead with a financial transactions tax. The plan, should it go through, would apply extraterritorially to all Eurozone-based financial institutions, thus levying contributions in London and distributing the proceeds in the Eurozone. ‘Proposals for a Europe-only financial transactions tax are a bullet aimed at the heart of London’ was the reaction of the then Chancellor of the Exchequer George Osborne in December 2011.81 Britain has also opposed attempts by the Commission, strongly backed by France, Germany and Italy, to establish a common consolidated corporate tax base, a first step towards tax harmonisation across the eu. The move is clearly linked to the prospect of a Eurozone Treasury with powers to levy taxes, as it has been suggested that one potential source of tax revenue would be a Eurozone-wide corporation tax.82 It is not a long stretch to imagine a situation where a Eurozone Treasury would pick up a fight with its British counterpart over fiscal competition, with the former accusing the latter of fiscal dumping through lower corporation tax rates compared to the Eurozone. Finally, the new competition commissioner in the Juncker Commission, Margrethe Vestager, has been leading an effort to use state-aid rules to rein in tax havens such as Ireland that offer advantageous fiscal terms to multinational corporations in order to attract them to their jurisdiction.83 This is a typical instance of the integration creep denounced by Tory Eurosceptics: the Commission is using powers in one policy domain (competition) to venture into another (tax) where it has no formal powers.

The British Reaction to the Drive towards Greater Political Centralisation and the June 2016 Referendum

The British reaction to these moves has been to seek to reverse the loss of decision-making power over financial services or at least obtain guarantees that the interests of the City will be preserved. Initially, this took the shape of litigation at the ecj against the most obnoxious of the measures. The Treasury brought cases against the Commission and the ecb (on the financial transactions tax, the ecb’s clearing houses policy, esma’s authority to ban short-selling and the bonus cap) to the ecj, which it has lost (apart from the clearing houses case), thus demonstrating the accuracy of the Eurosceptics’ claim that the ecj’s rulings tend to come down on the side of further increasing the eu’s powers to the detriment of the member states.

But court cases were never going to settle the matter on their own. The Cameron government understood very early on that the Eurozone crisis had set in train a new stage in the unification process in which the British government was not willing to take part. Osborne famously remarked that the Eurozone crisis was forcing the ‘remorseless logic’ of monetary union towards greater fiscal union.84 He further admitted that the British government’s support for such a move broke with the traditional British policy of preventing the formation of a core group of eu member states and insisted that non-Eurozone member states should not be marginalised.

Cameron therefore sought to kill two birds with one stone. On the one hand, granting a referendum to the Europhobes gradually became unavoidable if he was to prevent the Tory backbenches from wrecking his premiership. He had already pledged in 2007 to hold a referendum on the Lisbon Treaty and his entourage has claimed that by the end of 2011 Cameron knew that offering a referendum after the 2015 general election was the only way to keep the party united. One party official said that ‘There was only one thing the party would agree on over Europe and that was to have a referendum . . . It avoided civil war on Europe during the election’.85 On the other, it was imperative to come to a permanent understanding with the Eurozone and the Commission that would provide Britain and the City with guarantees in the new eu emerging out of the Lisbon Treaty and the Eurozone crisis.

That attempt began as early as December 2011, when Cameron conditioned his acquiescence to the Fiscal Compact on the introduction of an amendment reintroducing unanimity (effectively a British veto) on financial services legislation. The Eurozone crisis led many Conservatives to believe that they now had more leverage over continental governments and the Commission as they could veto the reforms necessary to make the Eurozone sustainable. Cameron’s attempt was premised on the same misguided assumption as the ill-fated fta proposal almost sixty years earlier: that Britain could split the Franco-German axis and isolate France, who has been the most consistent anti-City force within the eu.86 The attempt failed and the Treasury had to revise its ambitions downwards, from a veto to ‘safeguards’ that its concerns would be taken into account when regulation is made in Brussels and that discrimination as in the case of the ecb’s clearing houses policy will not be allowed.87 The renegotiation for ‘a new settlement’ for Britain that was supposed to provide the Cameron government with the chance to campaign for membership of a ‘reformed EU’ was thus not just a token gesture. Calling for a referendum after a renegotiation in this context was a way of applying further pressure on the rest of the eu by bringing the Eurosceptic mood among British voters to bear on the stand-off, on the assumption that the eu is keen for Britain to remain a member and would thus pay the necessary price. And according to Osborne, protection for the City would lie at the heart of the renegotiation.88

The problem with this set of tactics, however, was that it did not substantially increase the British government’s leverage. This is because the case for British membership under whatever terms is so overwhelming that the threat to secede was never credible. As argued above, eu membership is instrumental to British capitalism’s strategy such as it was redefined under Thatcher. The prospect of an ‘off-shore Britain’ cut loose from the eu, free to pursue its own free-trade agenda and lure to London investors from around the world is also a pipe-dream. This was brutally highlighted by none other than the United States’ Trade Representative who warned that the us would see no point in negotiating a trade deal with Britain alone. Instead, he pointed out the obvious fact that Britain’s leverage in trade negotiations is maximised by being part of a larger economic entity such as the eu.89 This argument also applies to relations between a post-Brexit Britain and the eu itself. All existing scenarios for a deal granting British firms access to the eu’s single market entail Britain accepting eu regulations, free movement of labour and even continued British contributions to the eu budget without any of the influence and voting power that comes with membership.90

The majority of British capitalists were keenly aware of this and thus backed the campaign for Britain to remain in the eu despite the misgivings they have about it. The overwhelming majority of big business executives opposed Brexit in January 201691 and the cbi began actively campaigning for Remain months before the result of the renegotiation had become known.92 Even a slim plurality of small businesses backed membership.93 Nor is opinion among City financiers significantly more anti-eu than among manufacturers. An April 2015 survey showed that 75% of respondents among London-based executives of financial services firms would vote to stay in the eu, despite 42% of them feeling that the Commission was ‘hostile to City interests’.94 The big banks from Barclays to hsbc95 backed membership, and Goldman Sachs and other American banks made donations to the pro-membership campaign group Britain Stronger in Europe.96 Only among hedge funds and asset-management firms was support for Leave substantial with much of the funding for the Leave campaign coming from maverick millionaires in the business.97 The Bank of England also joined the campaign against Brexit as early as October 2015.98

The strategy of asking for safeguards on the basis of non-discrimination for non-Eurozone member states also had a major limitation since it does not solve the fundamental issue in the medium term, as the Eurozone is set to keep expanding at the same time as it is integrating further. Apart from Britain and Denmark, all other member states are legally bound to join the euro, and despite some like Sweden not considering joining any time soon, most are keen to join. Hence, the French and German governments insisted during the renegotiation that decision-making by qualified majority voting would remain the rule. This tough negotiating stance was clearly expressed by a ‘source close to’ the French President, who told the New Labour think-tank Policy Network that ‘if the City wants to be the financial centre of Europe, it has to be part of the regulatory framework. If London convinces that they are tough on the regulation of financial services, the spirit of consensus will come back.’99

Accordingly, what the British government got in practice was a ‘gentlemen’s agreement’ that the City’s interests would be taken into account when drafting financial regulation.100 The rest of the eu had already showed goodwill by giving the Conservative commissioner the financial services portfolio in the Juncker Commission. But crucially for what followed, Cameron failed to obtain a mechanism for stemming the flow of eu migrants into Britain. The Leave campaign would go on to win the referendum by increasingly focusing on the issue of immigration and whipping up the racism of many sections of the British electorate, including sections of the working class.

The Potential Consequences of the Referendum Result

How exactly the referendum result will reconfigure the relationship between British capitalism and the eu is an open question. Given how prominent the issue of halting immigration into Britain from the eu was during the campaign, the new government is in an impossible situation where it has to satisfy the main demand of the Leave campaign while at the same time it is under strong pressure from big business, both under domestic and foreign control, to preserve the core of the existing economic relationship between Britain and the eu by remaining in the single market. Unfortunately, the labour movement seems to be irrelevant for the moment to how the relationship will be shaped.

As argued above and as made clear by eu leaders, any deal that ensures Britain remains in the single market – either through membership of the European Economic Area (the ‘Norwegian’ solution) or through a comprehensive bilateral trade agreement (the ‘Swiss’ solution) – entails not only to a large extent importing eu economic legislation and making contributions to the eu budget but also accepting freedom of movement for eu nationals. Effectively, Britain would still be an eu member state (albeit with more opt-outs including from the common foreign-trade policy, thus at least partly satisfying the demand of the Europhobes for more decentralisation) but would renounce her right to take part in the decision-making. A whole set of scenarios is being discussed, ranging from a reversal of the mandate for secession to a ‘hard Brexit’ where Britain would no longer be linked to the eu in any preferential way and would find herself excluded from the single market, even facing tariffs for exports of goods to the eu (this is usually referred to as the ‘WTO option’).

The long-term economic consequences of the referendum result largely depend on how this contradiction will be solved. But there are already signs of what those consequences might be if a ‘hard Brexit’ materialises. These would reverse two of the key planks of British capitalism’s post-Thatcher strategy, namely attracting inward foreign investment due to its role as the gateway to the single market and for the City to be the eu’s financial capital, as well as an accentuation of the ‘offshore Britain’ dimension of British capitalism’s strategy.

A very clear indication of how extra-eu investors would react to a ‘hard Brexit’ was provided during the G20 summit in September 2016. In a very unlikely move breaking with the traditional secrecy of diplomatic practice, the Japanese government made public a document which it had delivered to its British counterpart outlining what Japanese multinationals would like to be the result of the Brexit negotiations.101 The document is quite explicit that as much of the current relationship as possible should be preserved, including the customs union, common regulations and standards and free movement of labour but also British participation in the eu’s R&D policies. But the document is even more revealing, because after reminding the British government that almost ‘half of Japanese direct investment intended for the EU in 2015 flowed to the UK’ and that ‘a number of Japanese businesses, invited by the Government in some cases, have invested actively to the UK, which was seen to be a gateway to Europe, and have established value chains across Europe’, it explicitly formulates the threat that Japanese firms based in Britain might move to continental Europe ‘if EU laws cease to be applicable’ after secession. In other words, extra-eu industrial multinationals that want to access the single market will no longer see Britain as the gateway into that market and will significantly scale back their investment in Britain in favour of the rest of the eu. An additional reason for them to do so – also pointed out in the Japanese letter – would be that they could not benefit from the free-trade deals signed by the eu with the rest of the world.

The reference in the Japanese letter to ‘value-chains across Europe’ points to something else as well. As briefly mentioned above, from the 1970s onwards European corporations have restructured their operations in such a way as to operate regionally-integrated production chains, effectively treating the single market as their domestic market and establishing a continental division of labour. This also applies to extra-eu corporations that have invested in the eu. Leaving the single market would cut the British jurisdiction off from this continental division of labour. Accordingly, multinational corporations of all ‘nationalities’ – including British – would no longer base operations in Britain that are aimed at serving the single market. Major firms such as Siemens or AstraZeneca for example would only keep in Britain those production units intended to serve the British market and would also shift any R&D operations to the Continent. Those corporations that oversee their European operations from Britain would move their headquarters to the Continent. This would most likely not trigger a wholesale decamping of production from Britain to the rest of the eu, but it would involve some immediate scaling-down of operations and a long-term drying-up of industrial investment in Britain in favour of the Continent.

The Japanese letter also deals with an aspect that directly relates to the City’s status as the eu’s financial capital. It explicitly calls for the preservation of the single passport system for financial services, which allows banks and other financial firms to offer their services across the eu from London. Again, the document threatens that Japanese banks might have to ‘relocate their operations from the UK to . . . the EU’. Financial firms that have large operations in wholesale capital markets conduct their European business from London. This also applies to continental firms such as Deutsche Bank and bnp Paribas. Without the single passport, this will no longer be possible and at least some operations will be moved to the rest of the eu. In fact, given the prevailing uncertainty, some banks began to take action to move operations soon after the referendum result102 and other eu member states and city authorities (France and Paris, Germany and Frankfurt, Ireland and Dublin, Poland and Warsaw) began actively trying to lure London’s bankers.103 In other words, the centralisation of European wholesale capital market activity in London that was the product of the last thirty years of unification would be called into question, and together with it so would the City’s status as the eu’s financial capital.

But even if the single-passport system or an equivalent is preserved, the City’s status as the eu’s financial capital will be under threat for another reason. There is nothing that could stop the eu from forcing a repatriation of euro clearing from London to the Eurozone. This highlights the extent to which the City’s success as a global financial centre has hinged on the support it received from the eu. French president François Hollande lost no time in making this clear. Shortly after the referendum result, he told the press that ‘The City, which thanks to the EU, was able to handle clearing operations for the Eurozone, will not be able to do them . . . It can serve as an example for those who seek the end of Europe . . . It can serve as a lesson’.104 The City would not lose all euro-denominated business just as it continues to handle significant volumes of dollar-denominated trades. But it will no longer enjoy the support or even the forbearance of the eu and clearing will have to move to the Eurozone, dragging in its wake many of the investment banks’ operations in euro-denominated assets.

The most likely scenario in that case would be an accentuation of the ‘offshore Britain’ orientation. This would probably entail a further erosion of manufacturing activity in Britain, especially if, as suggested by pro-Brexit economists,105 Britain unilaterally drops all tariffs (just like Hong-Kong and Singapore), and a further specialisation in services. The City would become even more important for the British economy and would turn even more to extra-eu investors from China, Russia, the Gulf States and other emerging economies. The rationale of this shift would also entail scrapping many regulations and standards and further reducing the tax burden on capital as clearly suggested by Davis and other high-profile Brexiters.106 Indeed, one of the very first economic consequences of the referendum result was the announcement that corporation tax would be further cut from 20% to 15% as a way of enhancing the attractiveness of the British jurisdiction to foreign investors.

Such a scenario would heighten the tension running between London and Brussels. This would become the ultimate test of the Europhobes’ isolationist and confrontational tactics. The eu would have every incentive to thwart such an ‘offshore Britain’. The conflict between a British capitalism revolving around the City and having a vested interest in a politically decentralised Europe and an eu that becomes ever more centralised would therefore move into a new stage of sharpened confrontation.

Conclusion

In attempting to analyse the ambivalent relationship between Britain and the eu, I have focused on how the evolution of British capitalism has determined the attitude of British capitalists and the British state to the process of building a centralised state order in Europe, such as it is embodied in the eu. In doing so, I started with the assumption that the various forms taken by the capitalist state – unitary, federal, confederal and all the real-life variations along this continuum – reflect intra-capitalist class relations and tensions among the capitalist classes engaged in state-building.

British capitalism’s relative backwardness in those sectors that provided the impetus for European unification together with the pull of Empire created a completely new situation for the British capitalist class and the state under its control in the second half of the twentieth century. For the first time, political developments on the Continent did not depend on British policy and it therefore proved impossible to prevent the emergence of a continental power centre that would drain power away from London. This fundamental fact alone means that British Euroscepticism is a symptom of Britain’s decline as a global capitalist power and the difficulty of the British ruling class in crafting a new positive strategy for the promotion of its interests on the world stage.

The only time when the British state seemed to fully and eagerly participate in the effort to build a European federation was during the second stage, when an attempt, modelled on that successfully carried out by the French state, to promote a set of internationally competitive industrial corporations under the control of domestic capitalists and operating in the technologically advanced sectors of the day was made. That ‘mercantilist’ stage corresponded to the continued pre-eminence of technologically advanced productive capital within Britain and the ‘normalisation’ of its international projection through the shift away from the less-developed markets of the Commonwealth and towards the advanced capitalist economies of Europe. That stage stood in continuity with the mercantilist orientation which during the interwar period had seen the end of free-trade and the gold standard in favour of protectionism and a preferential imperial bloc, albeit this time the bloc in question was the eu.

The failure of that attempt and the revival of the global capital market upended both the convergence of British with Rhenish capitalism as well as the intra-capitalist balance of forces within Britain herself. The Thatcher revolution involved much more than a vicious attack on the working class: it involved the abandonment of former British national champions in a good number of the sectors that had pushed for an alignment with the Rhenish mercantilists and the renewed pre-eminence of the set of interests coalescing around the City of London representing money and commercial capital. The British government abandoned any support for a supranational mercantilist policy and reverted to a free-trade inspired policy of full openness to international competition. Although this did not involve a reversal of the preference for membership, it did entail a vested interest in a politically decentralised eu that would promote regulatory and fiscal competition among its component jurisdictions. The memories of Empire were summoned again and put to the service of a globalist policy which envisaged the European federalism of continental ruling classes as a barrier. This led to a rift with the rest of the eu which has kept growing deeper as the process of unification has unfolded. Already, the rift manifested itself at Maastricht through the British opt-out from the Eurozone and gave rise to a two-track eu with a core around the latter and a periphery outside it. The referendum result means the rift will, at least initially, grow larger still.

But it is unlikely that the Thatcherite Europhobes and their strategy of isolation and confrontation with Brussels – which only enjoys the support of some of the most rapacious of the capitalists operating in the City as well as capitalists orientated solely towards the domestic market such as the Murdoch press – will succeed. That most big business executives – in the City or otherwise – as well as the most important departments of state including the Eurosceptic Treasury (let alone the Foreign Office, despite its diminished standing) are opposed to it not only indicates that a simple referendum result would be insufficient for the strategy to be implemented but also that the British ruling class is aware of its limitations. British capitalism has come to depend on membership of the eu and the latter is not going to go away.

As for the British labour movement, its shifting attitude to the eu – from outright opposition to support ranging from enthusiastic to critical – has been dictated by the presumed impact that membership would have on living standards and working conditions. This is understandable but insufficient. The political organisation of Europe is neither an immaterial matter nor a tactical question, to be determined according to how it immediately affects the prospects of the class struggle. Determining a socialist attitude towards the actually existing process of European unification should begin with answering the question of whether European unification is a historical necessity and therefore a strategic objective, just like the socialisation of the means of production and investment is a precondition for ending capitalist rule and crisis. But that’s a matter for another paper.

1 Some readers might entertain doubts regarding the point about fiscal union. There is no space in this article for even a cursory demonstration of the point. I refer readers to a recent article (Georgiou 2016) in which I deal with this issue.

2 The data compiled by Tory Peer Lord Ashcroft (<http://lordashcroftpolls.com/2016/06/how-the-united-kingdom-voted-and-why/>) confirm the analysis in pre-referendum surveys of voting intentions (e.g. Goodwin and Milazzo 2015) as well as the intuitive analysis of many activists and commentators.

3 See for example Groom and Smith 2013; Kuchler 2013.

4 Panitch and Gindin 2012, p. 3; Panitch and Gindin 2015.

5 E.g. Keucheyan and Durand 2015 in this journal. Carchedi 2001 uses the concepts and tools of Marxist economics to analyse the European Union’s main policies and show their class nature.

6 The classic business history treatment is Chandler 1990. The classical theories of imperialism were based on a flawed understanding of this trend – with Bukharin’s (1915) statement coming closest to fully grasping the process. Trotsky alone, however, developed a basic understanding of the link between this trend and European unification (e.g. Trotsky 1915).

7 Egan 2015.

8 Panitch and Gindin 2012.

9 Defraigne 2004, from p. 167 on.

10 Chandler 1990, pp. 235–93; Jones 1997, pp. 103–12.

11 Harris 1972 is a major study of how the Conservative party evolved during the first half of the twentieth century in order to accommodate the transition from entrepreneurial to corporate capitalism.

12 Harris 1972, p. 29.

13 Harris 1972, pp. 48–61.

14 Chase 2005, pp. 69–88.

15 Chase 2005, pp. 105–42.

16 Dür 2010, pp. 50–82.

17 Lundestad 1997, pp. 29–57.

18 Rollings 2007, p. 80.

19 Young 1999, pp. 71–98.

20 Rollings 2007, p. 101.

21 I use the acronym eu throughout the article for simplicity.

22 Moravscik 1998, p. 123.

23 Milward 1992.

24 Rollings 2007, p. 20 (trade) and pp. 49–70 (investment).

25 Cited in Rollings 2007, p. 65.

26 Rollings 2007, pp. 134 and 151 (large firms main proponents), p. 153 (farmers opposed, industry accepts cap).

27 Owen 1999 has an extensive industry-by-industry treatment that covers the Thatcher years as well. For summaries, see Owen 2012, pp. 5–12, and Smith 1974.

28 Hannah 1976, pp. 164–77.

29 Servan-Schreiber 1967. The last point was not exaggeration on the part of a Euro-federalist. Subsequent studies (Wilkins 1996) have confirmed that American multinationals were quicker to set up pan-European operations than European corporations.

30 Warlouzet 2011, pp. 440–4.

31 Rollings 2007, pp. 157–9, has an industry-by-industry assessment of attitudes towards entry; pp. 163–78 (technological collaboration).

32 The first such programme was launched in 1983 and inaugurated the eu’s supranational industrial policy, whose budget has kept increasing over the years. See Van Laer 2008 for the early years.

33 Owen 2012, p. 11. In fact, the earliest occurrence of this Franco-British convergence was the 1962 agreement to launch the Concorde supersonic aircraft which eventually was a spectacular commercial failure. The Concorde was seen as Europe’s response to American dominance of the subsonic aircraft market.

34 Baker, Gamble, Randall and Seawright 2008, p. 97.

35 The vast majority of the Left also couched their opposition to membership in the language of defence of national sovereignty. A forceful contemporary critique, which retains much of its relevance today, is Nairn 1972.

36 Nairn 1972, p. 95.

37 Owen 1999, p. 4. These figures are for the economy as a whole but during these years they are good proxies for the performance of firms under British, French and German control respectively, as European corporations were yet to become the ‘regional multinationals’ (Rugman 2005) with Europeanised operations they gradually morphed into starting in the early 1970s (Franko 1976). These firms were also still largely under the control of domestic capitalists. ‘British industry’, therefore, means in this case British-controlled firms.

38 Grant 1995.

39 Jones 1997, p. 116; Owen 2012, p. 28 (engineering).

40 In this respect, the contrast with France is striking. Still in 2013, the French state controlled 10 out of the 32 French corporations (including Airbus) featuring in the Fortune Global 500 ranking. These were all industrial and utilities corporations that had been central to the national champions strategy. Georgiou 2014, p. 339. Moreover, the French state has from the early 2000s onwards pursued a policy of equity-market protectionism in order to preserve the control of key industrial firms under the control of domestic capitalists.

41 Oliver and Wilkinson 1993.

42 Eurostat 2014, p. 32 (income tax) and p. 36 (corporation tax). Fiscal competition within the eu due to fiscal decentralisation has meant that corporation tax rates continued falling throughout the eu in subsequent years. Britain, together with other tax havens such as Ireland, Luxemburg and Cyprus, has consistently opposed the eu-wide harmonisation of tax rates (apart from vat) advocated by France and Germany. Tony Blair blocked the extension of qualified majority voting to taxation in the Lisbon Treaty, thus retaining a British veto – essential for continued fiscal competition among member states.

43 Helleiner 1994, pp. 83–4 (City early 1960s) and pp. 84–8 (United States capital controls).

44 For example, the ‘regulatory environment’ was listed as the second most important factor (slightly behind the availability of skilled personnel) in explaining the City’s international competitiveness in a 2005 study based on interviews with City financiers. Z/Yen 2005, p. 7.

45 The share of financial services exports to total exports stood at 29% in 2009, by far the highest share among G7 economies (the us was second with 15% and Japan last with barely 3%). Monaghan 2014.

46 Congdon 2014, p. 15. Data in current prices.

47 Source: TheCityUK.

48 A recent study for TheCityUK, the main lobby group for the City, estimates that more than three-quarters of investment-banking and capital-markets revenue in Europe is transacted in the uk (Jenkins and Jones 2014).

49 Underhill 1997.

50 Cassis 2006, pp. 263–80.

51 Epstein 2014.

52 Grob-Fitzgibbon 2016.

53 Van der Pijl 2012.

54 Young 1999. The Foreign Office, on the contrary, has been the most consistently pro-eu department of the British state.

55 Jenkins and Agnew 2016.

56 Gillingham 2003, pp. 259–93.

57 Moravcsik 1998, pp. 320 and 328–30.

58 Liddle 2014, p. 37. The Major government opted out of the Social Charter in 1992. The Blair government opted in in 1997 to the delight of the trade unions and the dismay of the cbi. The Charter includes such provisions as the maximum working-time directive despised by Thatcherites but also minimal standards on maternity leave, paid holidays and so on.

59 Baker, Gamble, Randall and Seawright 2008, p. 115.

61 The shrinking minority of Conservative Europhiles maintained some attachment to an industrialist strategy and the prospect of British membership of the euro. Michael Heseltine, for example, engineered a modest revival of active industrial policy when he was given the Department of Trade and Industry portfolio in the Major government (Owen 2012, p. 26) and, together with Kenneth Clarke, led the cross-party campaign ‘Britain in Europe’ set up in 1999 to campaign for British euro membership. Other such figures include Geoffrey Howe and Chris Patten. By the time of the Cameron government, however, their numbers had dwindled to such an extent that they were entirely irrelevant to how the debate played out within the party.

63 Rennie 2012, p. 35.

64 Cited in Rennie 2012, p. 17. This echoes countless statements to the same effect from the cbi. For example, its chairman Roger Carr argued in the Observer in 2013 that ‘The UK is often the preferred bridge into Europe . . . EU membership encourages large company capital investment within the UK’.

65 For want of space, I cannot deal in detail with the issue of the euro. Suffice it to say that after initially being sceptical, the cbi supported euro membership in 1997–2003, although that was not a unanimous position. The City, on the other hand, was sceptical but inclined towards membership as it feared that retaining the pound would be damaging to its status as the eu’s financial capital (Howarth 2004, pp. 12–13). When that did not happen – indeed the euro even entrenched its position – concerns subsided. The Treasury emerged under Blair as the key opponent to euro membership.

66 A Tory mp cited in Rennie 2012, pp. 47–8.

67 Booth 2009.

68 According to Lord Ashcroft’s data, 58% of the party’s voters in the 2015 general election backed Leave in the June 2016 referendum. 185 Tory mps supported Remain at the referendum and 138 Leave (<http://www.bbc.com/news/uk-politics-eu-referendum-35616946>).

69 This is the term used in Liddle 2014 and Rennie 2012.

70 This is the term used in Baker, Gamble and Seawright 2002. The strategy used to be referred to as the ‘Hong Kong solution’ in the 1990s.

71 Epstein 2014.

72 Nairn 1972, p. 19.

73 Georgiou 2014, pp. 284–7; 300–6.

74 E.g. Congdon 2014.

75 A full list of the measures is available at <http://ec.europa.eu/internal_market/publications/docs/financial-reform-for-growth_en.pdf>. Policy Network 2013, pp. 4–14, has details on the most contentious of the measures.

76 Barker 2011.

77 London is home to the largest share of euro-denominated foreign exchange transactions, with 44% of the global total. Source: TheCityUK.

78 Noble and Barker 2012.

79 Pickford and Carnegy 2012.

80 Rennie 2012, p. 3.

81 Rennie 2012, p. 46.

82 E.g. Macron and Gabriel 2015.

83 The latest and most significant Commission ruling orders Apple to pay back to the Irish Treasury 13 billion euros. As the Financial Times has commented, the ‘Apple ruling puts being an eager member of the [EU] and a low-tax location for multinationals in conflict’ (Boland 2016).

84 Giles and Parker 2011.

85 Parker and Barker 2016.

86 A good account of the backstage dealings related to the December 2011 incident is Barker and Parker 2011.

87 Barker and Masters 2012. This was also the City’s preference. Many financiers disagreed with Cameron and the Treasury’s tactics in December 2011.

88 Watt 2014.

89 Donnan 2015.

90 Piris 2016. This is because in any such negotiation, the same asymmetries of bargaining power would apply, as 45% of British exports go to the eu but only 10% of eu exports go to Britain.

91 Ipsos-MORI 2016. This was a survey of ‘more than 100 of the most senior figures in top UK companies’, 87% of which backed membership. Tellingly, 67% cited eu regulation as the greatest drawback of membership.

92 cbi 2015.

93 fsb 2015. 47% backed membership as against 41% who backed secession.

94 csfi 2015, pp. 7–8 (membership) and p. 16 (Commission). The same study also found that 75% of respondents considered that the most important issue in the renegotiation was reforming the qualified majority voting system on financial services.

95 Arnold 2016.

96 Parker and Noonan 2016.

97 Marriage 2015.

98 Turner 2015.

99 Policy Network 2013, p. 22.

100 The final deal only provided for the possibility of ‘escalating’ disputes among finance ministers by referring them to the heads of state and government for discussion.

102 Arnold and Noonan 2016.

103 ft reporters 2016.

104 Cited in Brunsden and Chassany 2016.

106 E.g. Lawson 2016. Davis 2016.

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  • 4

    Panitch and Gindin 2012p. 3; Panitch and Gindin 2015.

  • 7

    Egan 2015.

  • 8

    Panitch and Gindin 2012.

  • 9

    Defraigne 2004from p. 167 on.

  • 10

    Chandler 1990pp. 235–93; Jones 1997 pp. 103–12.

  • 12

    Harris 1972p. 29.

  • 13

    Harris 1972pp. 48–61.

  • 14

    Chase 2005pp. 69–88.

  • 15

    Chase 2005pp. 105–42.

  • 16

    Dür 2010pp. 50–82.

  • 17

    Lundestad 1997pp. 29–57.

  • 18

    Rollings 2007p. 80.

  • 19

    Young 1999pp. 71–98.

  • 20

    Rollings 2007p. 101.

  • 22

    Moravscik 1998p. 123.

  • 23

    Milward 1992.

  • 24

    Rollings 2007p. 20 (trade) and pp. 49–70 (investment).

  • 25

    Cited in Rollings 2007p. 65.

  • 26

    Rollings 2007pp. 134 and 151 (large firms main proponents) p. 153 (farmers opposed industry accepts cap).

  • 28

    Hannah 1976pp. 164–77.

  • 29

    Servan-Schreiber 1967. The last point was not exaggeration on the part of a Euro-federalist. Subsequent studies (Wilkins 1996) have confirmed that American multinationals were quicker to set up pan-European operations than European corporations.

  • 30

    Warlouzet 2011pp. 440–4.

  • 31

    Rollings 2007pp. 157–9 has an industry-by-industry assessment of attitudes towards entry; pp. 163–78 (technological collaboration).

  • 33

    Owen 2012p. 11. In fact the earliest occurrence of this Franco-British convergence was the 1962 agreement to launch the Concorde supersonic aircraft which eventually was a spectacular commercial failure. The Concorde was seen as Europe’s response to American dominance of the subsonic aircraft market.

  • 34

    Baker Gamble Randall and Seawright 2008p. 97.

  • 36

    Nairn 1972p. 95.

  • 37

    Owen 1999p. 4. These figures are for the economy as a whole but during these years they are good proxies for the performance of firms under British French and German control respectively as European corporations were yet to become the ‘regional multinationals’ (Rugman 2005) with Europeanised operations they gradually morphed into starting in the early 1970s (Franko 1976). These firms were also still largely under the control of domestic capitalists. ‘British industry’ therefore means in this case British-controlled firms.

  • 38

    Grant 1995.

  • 39

    Jones 1997p. 116; Owen 2012 p. 28 (engineering).

  • 41

    Oliver and Wilkinson 1993.

  • 42

    Eurostat 2014p. 32 (income tax) and p. 36 (corporation tax). Fiscal competition within the eu due to fiscal decentralisation has meant that corporation tax rates continued falling throughout the eu in subsequent years. Britain together with other tax havens such as Ireland Luxemburg and Cyprus has consistently opposed the eu-wide harmonisation of tax rates (apart from vat) advocated by France and Germany. Tony Blair blocked the extension of qualified majority voting to taxation in the Lisbon Treaty thus retaining a British veto – essential for continued fiscal competition among member states.

  • 43

    Helleiner 1994pp. 83–4 (City early 1960s) and pp. 84–8 (United States capital controls).

  • 46

    Congdon 2014p. 15. Data in current prices.

  • 49

    Underhill 1997.

  • 50

    Cassis 2006pp. 263–80.

  • 51

    Epstein 2014.

  • 52

    Grob-Fitzgibbon 2016.

  • 53

    Van der Pijl 2012.

  • 54

    Young 1999. The Foreign Office on the contrary has been the most consistently pro-eu department of the British state.

  • 55

    Jenkins and Agnew 2016.

  • 56

    Gillingham 2003pp. 259–93.

  • 57

    Moravcsik 1998pp. 320 and 328–30.

  • 58

    Liddle 2014p. 37. The Major government opted out of the Social Charter in 1992. The Blair government opted in in 1997 to the delight of the trade unions and the dismay of the cbi. The Charter includes such provisions as the maximum working-time directive despised by Thatcherites but also minimal standards on maternity leave paid holidays and so on.

  • 59

    Baker Gamble Randall and Seawright 2008p. 115.

  • 63

    Rennie 2012p. 35.

  • 64

    Cited in Rennie 2012p. 17. This echoes countless statements to the same effect from the cbi. For example its chairman Roger Carr argued in the Observer in 2013 that ‘The UK is often the preferred bridge into Europe . . . EU membership encourages large company capital investment within the UK’.

  • 67

    Booth 2009.

  • 71

    Epstein 2014.

  • 72

    Nairn 1972p. 19.

  • 73

    Georgiou 2014pp. 284–7; 300–6.

  • 74

    E.g. Congdon 2014.

  • 76

    Barker 2011.

  • 78

    Noble and Barker 2012.

  • 79

    Pickford and Carnegy 2012.

  • 80

    Rennie 2012p. 3.

  • 81

    Rennie 2012p. 46.

  • 82

    E.g. Macron and Gabriel 2015.

  • 84

    Giles and Parker 2011.

  • 85

    Parker and Barker 2016.

  • 87

    Barker and Masters 2012. This was also the City’s preference. Many financiers disagreed with Cameron and the Treasury’s tactics in December 2011.

  • 88

    Watt 2014.

  • 89

    Donnan 2015.

  • 90

    Piris 2016. This is because in any such negotiation the same asymmetries of bargaining power would apply as 45% of British exports go to the eu but only 10% of eu exports go to Britain.

  • 91

    Ipsos-MORI 2016. This was a survey of ‘more than 100 of the most senior figures in top UK companies’ 87% of which backed membership. Tellingly 67% cited eu regulation as the greatest drawback of membership.

  • 95

    Arnold 2016.

  • 96

    Parker and Noonan 2016.

  • 97

    Marriage 2015.

  • 98

    Turner 2015.

  • 99

    Policy Network 2013p. 22.

  • 102

    Arnold and Noonan 2016.

  • 104

    Cited in Brunsden and Chassany 2016.

  • 106

    E.g. Lawson 2016. Davis 2016.

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British Capitalism and European Unification, from Ottawa to the Brexit Referendum

in Historical Materialism

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References

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  • 4

    Panitch and Gindin 2012p. 3; Panitch and Gindin 2015.

  • 7

    Egan 2015.

  • 8

    Panitch and Gindin 2012.

  • 9

    Defraigne 2004from p. 167 on.

  • 10

    Chandler 1990pp. 235–93; Jones 1997 pp. 103–12.

  • 12

    Harris 1972p. 29.

  • 13

    Harris 1972pp. 48–61.

  • 14

    Chase 2005pp. 69–88.

  • 15

    Chase 2005pp. 105–42.

  • 16

    Dür 2010pp. 50–82.

  • 17

    Lundestad 1997pp. 29–57.

  • 18

    Rollings 2007p. 80.

  • 19

    Young 1999pp. 71–98.

  • 20

    Rollings 2007p. 101.

  • 22

    Moravscik 1998p. 123.

  • 23

    Milward 1992.

  • 24

    Rollings 2007p. 20 (trade) and pp. 49–70 (investment).

  • 25

    Cited in Rollings 2007p. 65.

  • 26

    Rollings 2007pp. 134 and 151 (large firms main proponents) p. 153 (farmers opposed industry accepts cap).

  • 28

    Hannah 1976pp. 164–77.

  • 29

    Servan-Schreiber 1967. The last point was not exaggeration on the part of a Euro-federalist. Subsequent studies (Wilkins 1996) have confirmed that American multinationals were quicker to set up pan-European operations than European corporations.

  • 30

    Warlouzet 2011pp. 440–4.

  • 31

    Rollings 2007pp. 157–9 has an industry-by-industry assessment of attitudes towards entry; pp. 163–78 (technological collaboration).

  • 33

    Owen 2012p. 11. In fact the earliest occurrence of this Franco-British convergence was the 1962 agreement to launch the Concorde supersonic aircraft which eventually was a spectacular commercial failure. The Concorde was seen as Europe’s response to American dominance of the subsonic aircraft market.

  • 34

    Baker Gamble Randall and Seawright 2008p. 97.

  • 36

    Nairn 1972p. 95.

  • 37

    Owen 1999p. 4. These figures are for the economy as a whole but during these years they are good proxies for the performance of firms under British French and German control respectively as European corporations were yet to become the ‘regional multinationals’ (Rugman 2005) with Europeanised operations they gradually morphed into starting in the early 1970s (Franko 1976). These firms were also still largely under the control of domestic capitalists. ‘British industry’ therefore means in this case British-controlled firms.

  • 38

    Grant 1995.

  • 39

    Jones 1997p. 116; Owen 2012 p. 28 (engineering).

  • 41

    Oliver and Wilkinson 1993.

  • 42

    Eurostat 2014p. 32 (income tax) and p. 36 (corporation tax). Fiscal competition within the eu due to fiscal decentralisation has meant that corporation tax rates continued falling throughout the eu in subsequent years. Britain together with other tax havens such as Ireland Luxemburg and Cyprus has consistently opposed the eu-wide harmonisation of tax rates (apart from vat) advocated by France and Germany. Tony Blair blocked the extension of qualified majority voting to taxation in the Lisbon Treaty thus retaining a British veto – essential for continued fiscal competition among member states.

  • 43

    Helleiner 1994pp. 83–4 (City early 1960s) and pp. 84–8 (United States capital controls).

  • 46

    Congdon 2014p. 15. Data in current prices.

  • 49

    Underhill 1997.

  • 50

    Cassis 2006pp. 263–80.

  • 51

    Epstein 2014.

  • 52

    Grob-Fitzgibbon 2016.

  • 53

    Van der Pijl 2012.

  • 54

    Young 1999. The Foreign Office on the contrary has been the most consistently pro-eu department of the British state.

  • 55

    Jenkins and Agnew 2016.

  • 56

    Gillingham 2003pp. 259–93.

  • 57

    Moravcsik 1998pp. 320 and 328–30.

  • 58

    Liddle 2014p. 37. The Major government opted out of the Social Charter in 1992. The Blair government opted in in 1997 to the delight of the trade unions and the dismay of the cbi. The Charter includes such provisions as the maximum working-time directive despised by Thatcherites but also minimal standards on maternity leave paid holidays and so on.

  • 59

    Baker Gamble Randall and Seawright 2008p. 115.

  • 63

    Rennie 2012p. 35.

  • 64

    Cited in Rennie 2012p. 17. This echoes countless statements to the same effect from the cbi. For example its chairman Roger Carr argued in the Observer in 2013 that ‘The UK is often the preferred bridge into Europe . . . EU membership encourages large company capital investment within the UK’.

  • 67

    Booth 2009.

  • 71

    Epstein 2014.

  • 72

    Nairn 1972p. 19.

  • 73

    Georgiou 2014pp. 284–7; 300–6.

  • 74

    E.g. Congdon 2014.

  • 76

    Barker 2011.

  • 78

    Noble and Barker 2012.

  • 79

    Pickford and Carnegy 2012.

  • 80

    Rennie 2012p. 3.

  • 81

    Rennie 2012p. 46.

  • 82

    E.g. Macron and Gabriel 2015.

  • 84

    Giles and Parker 2011.

  • 85

    Parker and Barker 2016.

  • 87

    Barker and Masters 2012. This was also the City’s preference. Many financiers disagreed with Cameron and the Treasury’s tactics in December 2011.

  • 88

    Watt 2014.

  • 89

    Donnan 2015.

  • 90

    Piris 2016. This is because in any such negotiation the same asymmetries of bargaining power would apply as 45% of British exports go to the eu but only 10% of eu exports go to Britain.

  • 91

    Ipsos-MORI 2016. This was a survey of ‘more than 100 of the most senior figures in top UK companies’ 87% of which backed membership. Tellingly 67% cited eu regulation as the greatest drawback of membership.

  • 95

    Arnold 2016.

  • 96

    Parker and Noonan 2016.

  • 97

    Marriage 2015.

  • 98

    Turner 2015.

  • 99

    Policy Network 2013p. 22.

  • 102

    Arnold and Noonan 2016.

  • 104

    Cited in Brunsden and Chassany 2016.

  • 106

    E.g. Lawson 2016. Davis 2016.

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