Is the Pound worth saving?

Some said it would never happen, yet on 1 January of this year the Single European Currency became a reality. Five months on, we have seen the fall of Oskar Lafontaine, the German Finance Minister, the resignation of the entire European Commission and the Euro steadily fall in value.

Despite all of this, New Labour has started to come off the fence and demonstrate that they are preparing to recommend Britain’s entry to the project, subject to a referendum of course. This policy shift (especially after publishing the National Changeover Plan), has only intensified debate across the country, spawning a plethora of ad hoc organisations, dedicated to both sides of the argument.

Without equivocation, we in the Socialist Party say that the introduction is a capitalist question which has nothing whatsoever to do with the interests of the working class. Our class interests can only be furthered by the abolition of the capitalist wages system and all money no matter which name our masters wish to give it.

The “pro” and “anti” positions span the political spectrum from right to left. Some of the Eurosceptics to be found on the extremes of the Conservative and Labour parties are actually in favour of EU withdrawal, whilst the majority are just hostile to the Single European Currency. In the case of the Europhiles, they can be found anywhere from the Tory left, the Liberal Democrats through to New Labour. It is interesting to note that the vast bulk of the pseudo-revolutionary Trotskyite sects are defending their own variation of the Eurosceptic position.

Ever-increasing concentration
The Euro project is just the latest (but by no means the last) phase of European capitalism’s attempts to compete as an effective unit on the world stage (especially against the US and Japan). This is not just a political project, as the capitalist media likes to make out, but is rooted in the ever-increasing concentration, centralisation and integration of European capital. Indeed, the prelude to the launch of the Euro was littered with take-over activity. This process itself is part of capitalism’s attempt to restructure itself to the needs of the modern globalised economy.

Perhaps, not surprisingly, we find that the most powerful section of the capitalist class (big manufacturing and finance) are generally the ones pushing for Britain’s entry into the Euro. There are the capitalists who have a big stake in Europe either via importing/exporting or providing finance for take-overs.

It does not follow that businesses with extensive European interests who have supported the development of Europe vis-à-vis the EEC and single market EU, necessarily believe the Euro is a good idea in itself. The CBI, which represents big manufacturing capital, is actually quite divided on this issue despite its leadership being in favour. For many members, it’s not the principle of the Euro which is the problem—it is the economics of it. However, some pro-European capitalists take the view that although the single currency is not perfect, they cannot be left out of it. In fact some argue that early membership would have allowed the British government to influence the shape of the Euro project in their favour.

Bearing in mind that the majority of the British public are not Euro enthusiasts, we should expect to see a big propaganda drive over the next year or two from the powerful pro-Euro lobby (which is likely to involve the government). The most popular argument trotted out by the Europhiles is that an integrated Europe will reduce the risk of another European war because Germany will be kept in check. This is a feeble argument which totally misunderstands the causes of war. The fact that superficially Europe’s capitalists are coming together does not alter the fact that they remain competitors and this is only a marriage of convenience. If, due to capitalist logic, the arrangement should break down, no amount of political organisation at a supra-national level will prevent a war. The example of the United Nations demonstrates this.

Following on from this, we are told that from this position of political stability there will be increased economic growth via increased trade and low interest rates and inflation. The logical corollary of this would be a Europe reasserting itself on the world stage, whilst captable of dealing with its own internal balance-of-power. As pro-Euro economist Christopher Johnson argues in his book In With The Euro, Out With The Pound:

“The Euro, with the UK inside it will become a world currency alongside the dollar and the yen. Britain can thus retain, or even regain, some of its status as a world economic and financial power without giving up its national identity.”


“Britain can avoid German domination of Europe only by joining France, Germany and other European countries as partners in an integrated Europe” (p.197).

Quite where Johnson find the facts to support such optimistic economic reasoning is anybody’s guess. It’s certainly not supported by the first five months of the Euro, which has highlighted many of its contradictions. Firstly, there has been the constant bickering between the politicians and the bankers of the European Central Bank (see January Socialist Standard) which resulted in the resignation of “Red” Oskar Lafontaine, the German Finance Minister, and of course the corruption scandal at the heart of the EU Commission which demonstrates the lack of even basic democratic accountability. And as for the Euro becoming a world reserve currency to threaten the dollar—well it hasn’t happened yet. 

However, the capitalist class is multi-faceted and some sections are openly hostile to Britain joining the Euro. These capitalists (generally small and medium size concerns) grouped around organisations such as the Institute of Directors and the Federation of Small Businesses see joining the Euro as a costly adventure. The EU “social market” model is derided as an economic anachronism which will not be able to compete against the low cost, dynamic “free market” US and that Britain’s entry into the single currency will effectively spell the end of the Thatcherite revolution.

There is a certain amount of truth in this position. It is clear that if Britain did join the Euro there would be moves to harmonise taxes and costs since British capital would have an unfair advantage over its European rivals. However, it is also true to say that European capitalists have been trying to restructure their own economies for sometime now with attacks on welfare provision and working conditions. The results of this have been violent protests and demonstrations by French and German workers. In reality, Euro capital will try to restructure at home whilst demanding concessions from a British entry.

The Eurosceptics often claim that a single currency with a “one-size-fits-all” monetary policy would inevitably require a single fiscal policy. John Redwood, the Tory arch Eurosceptic, articulated this view in his 1997 book Our Currency, Our Country:

“You cannot have a single currency without a single interest rate, a single banking policy, a single budget and a single finance minister or central bank governor. You are inevitably led to a single taxation policy and a single economic policy. You are close to creating a single government” (Preface).

Although Redwood’s arguments may be more cogent and honest than Christopher Johnson’s, his views are ultimately based upon populist nationalism. Britain would cease to be an independent nation and parliament would resemble little more than a glorified county council under the jackboot of French and German bankers.

This may or may not be true. The question is what difference would this make to the working class? When people like John Redwood start talking about democracy it’s difficult not to laugh.

The main strengths of the “Eurosceptic” position rests on their critique of single currency economics. Firstly, they argue that Europe is not an “optimal currency area” which is a prerequisite for the Euro to be a long-term success. Britain’s trade cycle is synchronised more closely with that of the US and this could cause problems with a common interest rate policy (i.e. German growth may be slowing and Britain’s picking up). This could mean that the currency area was more susceptible to “asymmetric shocks” that could threaten the stability of the entire continent.

Left-wing Eurosceptics with their desire to reform British capitalism have also used “loss of control” arguments. The Campaign for an Independent Britain write in a recent pamphlet:

” . . . opting for economic self governance, rapid growth and full employment means opting out of a single currency” (Burkitt, Bainbridge and Whyman—There is An Alternative, p.65).

It is a supreme irony that left-reformists such as the aforementioned authors and Tony Benn can be on the same side as the Thatcherites, whilst denouncing the Maastricht “Convergence Criteria” and Amsterdam “Stability Pact” for being “monetarist” and “deflationary”. For these people are still labouring under the delusion that capitalist governments can control and influence the economy by using monetary and fiscal policies. They have learned nothing from history.

Clearly, the Tory Eurosceptics (currently under the leadership of William Hague) nominally support the notion of an independent Britain, but in reality represent the pro-US section of the British capitalist class. It is precisely this division between the pro-European and pro-US sections of the capitalist class that will fuel the single currency debate in the coming months.

Indeed, the EU and US seem to be in a perpetual trade war at the moment and such tensions are likely to increase rather than diminish. This makes Britain’s future role even more interesting. If Tony Blair does take Britain further into Europe, how will this affect Anglo-US relations? Perhaps Blair’s strategy will be to play one bloc off against the other?

We have seen the poverty of all the capitalist arguments for and against the Euro and located this debate in its true context. From the petty nationalists to the more “sophisticated” pro-Europeans this is not a debate for the working class. To be “pro-European” or “anti-European” is to fall for capitalist trickery. We should create our own agenda rather than just responding to our masters’ in-fighting. Is the Pound worth saving? A better question would be: Is capitalism worth saving?


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