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Catastrophe averted?

The leaders of the rich countries went to Washington to save the world from sliding into deep recess

Vincent Cable

Shadow chancellor, Liberal Democrats

By the low standards of economic summitry, the G20 meeting rated quite high. There was a predictable, no doubt pre-written, communiqué, full of the usual banalities. And the meeting suffered from the absence of the world's most important politician, who hasn't yet taken up office. But, these necessary caveats aside, there were important achievements.

The first is that the meeting took place at all. The ludicrous pretence of the G8 (or G7) that the old western powers should set the global economic agenda has been punctured for good. On a purchasing power parity basis, China has the second-biggest economy in the world and India the fourth. It has been clear for some time that China is lender of last resort to the global system (by, in effect, underwriting US government paper) and the main source of global incremental demand (and commodity price inflation). The Chinese self-parody as the pupil sitting meekly at the feet of a dominant, but erring, master defies belief. It is obviously right that China, India and the other main non-G7 countries should be at the top table.

The second achievement was the clear realisation that unless governments hang together they will hang separately. Enough has been learned from interwar history for us to understand the follies of beggar-my-neighbour economics. Perhaps a warning shock was being sent across the bows of the incoming Obama administration not to reinvent the protectionist tariffs of the 1930s in a new guise, directed at China or Mexico in particular, or aiming to salvage the US auto industry through public subsidy. But this new-found concern for open markets has not yet communicated itself to EU or Indian or Chinese trade negotiators, who show no enthusiasm for lifting the block on trade liberalisation under the Doha round.

While trade policy is on the back burner, macroeconomic policy co-ordination is not. With a few exceptions - Germany notably - there is recognition of the need for aggressive monetary and fiscal policy and for large-scale intervention to recapitalise banks. These interventions can be and are being undertaken nationally. But governments acting in isolation attract critical attention from capital markets and currency speculators, as Gordon Brown is discovering. Structures like the G20 are the best safeguard against chaotic, unilateral action.

Will Hutton

Economic commentator

It was remarkable to gather so much economic and political power in one room to address a common agenda. That was the good news - along with commitments to co-ordinate fiscal expansion, to expand the lending power of the IMF and World Bank (Japan's $100bn loan to the IMF will increase the Fund's lending capacity by 40 per cent), to boost cross-border supervision, to tackle credit rating agencies, to reassess mad accounting rules and require member countries to attack the bonus culture in the financial services industry. A year ago such an agreement would have been inconceivable.

The bad news is that much of this is shutting the stable door after the horse has bolted. Four things have to be recognised: that the world has profound imbalances between high-saving, high-surplus areas in Asia and the Gulf and low-saving, structural deficit countries in the transatlantic economy (Germany excepted); that a system of floating exchange rates and private banks can no longer take the weight of recycling those savings; that unless the system is de-risked and the burden of adjustment is placed on deficit and surplus countries alike, the global system faces breakdown; and finally, that the business model used by the banks to recycle surpluses - securitisation and hedging in the $360trn global derivatives market - is broken.

In plain English, China must accept that its currency must appreciate; Britain and America, that they cannot run their economies on foreign savings; and all players that there has to be a system of semi-fixed exchange rates between the yen, the euro and the dollar.

One tough reality is that, for all their new economic weight, China, Brazil, Russia and India do not have fully convertible currencies - nor do they want to accept the discipline involved in having convertible currencies.

Ann Pettifor

Fellow, New Economics Foundation

Over the past decade, the Group of Eight leaders turned their exclusive annual meetings into jamborees. Rock concerts, protesters and celebrities added populist glitz. However, the real purpose of the meetings - international co-operation and co-ordination - was ducked. At last year's G8 Summit in Heiligendamm, Germany, George W Bush and Gordon Brown vetoed Angela Merkel's agenda item for co-operation over tighter international regulation and financial oversight of capital markets. That task, they argued then, could safely be delegated to "the invisible hand". Now that the fantastic, self-regulating machinery of free markets has proved grossly malfunctional, it is good to hear talk of enhanced co-operation and regulation.

But, in places, the joint statement issued by the 20 world leaders borders on the delusional. The phrase "We must . . . ensure . . . that a global crisis, such as this one, does not happen again" implies that they are avoiding the next war when they are still losing this one.

Even more questionable is the call for continued "economic growth". In a world of finite resources on a planet with limited capacity to absorb toxic emissions, and with bushfires encircling Los Angeles, we would have hoped that world leaders had some awareness of the threat of climate change and of the limits to economic growth. But no. The gravest threat to global security - our rapacious attitude to the earth's resources - is once again whipped up with talk of "market principles, open trade and economic growth".

Jesse Norman

Senior fellow at Policy Exchange

One might have thought the G20 summit a good moment for some straight talk from the Prime Minister. Instead, the political wind machine was cranked up to full blast. The summit would be a second Bretton Woods. Gordon Brown would forge a new global consensus on co-ordinated intervention to stimulate growth (while, of course, leading reforms to prevent the banking crisis from ever recurring). Luckily virtually none of this was true, or the summit would have been a hopeless failure. With fiscal measures already widely adopted, the G20 hardly needed Brown's leadership. No surprise that he returned empty-handed.

Labour has moved from despondency to a manic desperation to remain in office. The result is that the ever-fragile concept of truth in politics has wholly been cast aside. Thus the humiliating bank nationalisation has been dressed up as an act of far-seeing economic statesmanship. And a sensible warning from the shadow chancellor that current economic policy puts sterling at risk has been condemned for breaching an irrelevant semi-convention dating from the time of fixed exchange rates.

Alex Brummer

City editor, Daily Mail

There is a golden rule of international financial meetings. The larger the "G" number, in other words the more countries involved, the less likely it is that any worthwhile or binding decisions will be taken. So while it was wholly encouraging that the G20 summit brought a number of emerging market leaders to the top table of finance, including China, Brazil and Russia, there was never any real prospect of the event becoming the new Bretton Woods.

Furthermore, the summit took place in the final days of the lame duck administration of George Bush. Once it became clear Barack Obama was going nowhere near the confab, the event became even more of an irrelevance.

European leaders may like to blame Wall Street and Anglo-Saxon capitalism for the credit crunch and the recession now spreading through the Group of Seven like wildfire, but there is no hope of concerted international action without the new White House and Federal Reserve on board.

Almost all that was agreed could have been decided before the leaders left home. The commitment to reviving the Doha trade round is pure motherhood and apple pie. The prairie populists on Capitol Hill are unlikely to be enthusiastic.

At the core of the proposals was the commitment to use fiscal measures, tax cuts and public spending to kick-start global economies. But despite Gordon Brown's enthusiastic embrace of a new Keynesian big-spending approach - as advocated by Nobel prize-winner Paul Krugman - he neatly forgot to mention that such big-spending ways were only for those countries with a "policy framework conducive to fiscal sustainability". The UK with its ballooning budget deficit, which could hit £100bn or more next year, is clearly in no such position.

It is hard to fathom in what way the G20 was "historic", as the Prime Minister claimed in the Commons. There is little original in a bunch of old ideas designed to remove risk from the financial system and control executive pay. That is what regulators should have done before the banks ploughed into the iceberg.

James Buchan

Author and financial commentator

What is the Financial Stability Forum? What is "mitigating against pro-cyclicality in regulatory policy"? What, if anything, has the G20 summit in Washington on the weekend of the 15 November achieved?

Nothing very much, is the answer to all three questions. In the twilight of a discredited US administration, and with President-elect Barack Obama absent, the meeting was never likely to achieve a great deal or generate excitement in the US. Yet the final declaration, drafted with suspicious ease by the delegations on Saturday night, has something for everybody but not enough of anything to scare the financial horses.

Nicolas Sarkozy, the French president whose idea the whole thing was, gained some support for more institutional government of trade and finance, but no super-gendarme international of the type that has been directing financial traffic in the French imagination since the 17th century. As Jean-Pierre Robin wrote in the Figaro: "Those with fantasies of supranational supervision will need to change therapist." The US, jealous of its commercial sovereignty even when it is going about without its shirt, put paid to those Gallic dreams and also gained some platitudes about free trade.

The new commercial powers, not only Brazil, Russia, India and mainland China but also rich oil producers such as Saudi Arabia, received diplomatic recognition of their deep pockets. "The world's geopolitical structure has a new dimension," the Brazilian president, Luiz Inácio Lula da Silva, said. "There is no logic to making any political and economic decisions without the G20 members - developing countries must be part of the solution to the global financial crisis."

I suspect the winner is Gordon Brown. The next meeting will be held under his presidency in London in April. The Washington ragbag of proposals to reform or tinker with the current system, such as reminding us about the Financial Stability Form and mitigating against that regrettable pro-cyclicality in regulatory policy, appeals to his technical vanity and plays to his technical strengths.

Paul Mason

Economics editor, Newsnight

There was a sense in Washington, despite the throbbing engines and bulletproof glass, of powerlessness. The communiqué was stronger on the causes of the crisis than on co-ordinated solutions. Policymakers are right to stay focused on the near-term dangers: these are country-level debt default, the rising cost of borrowing for non-financial companies, rapid job losses and - via feedback - further destabilisation of the banking system. We are moving into the phase of fiscal stimulus but there are powerful technical arguments that say without "quantitative easing" - that is, printing money to stimulate demand - it doesn't work. The same people who told me it would come to recapitalisation, that the TARP (troubled assets relief programme) would not work, are now saying: nationalise the banks and print money.

Despite the urgency of the focus on near-term dangers, what was obvious at G20 was the lack of vision as to the future growth model of capitalism. The problem was seen as a failure of regulation; the solution a pretty weak brew of re-regulation that will get diluted even more as the lobbyists begin to have influence. But the problem is more fundamental: the growth model based on high debt instead of high wages has failed and will be hard to revive.

Peter Mandelson

Secretary of State for Business

We have been caught in a global whirlwind of extraordinary force.

It has brought with it a fear that has gripped the world economy and taken hold here at home. We are seeing it every day, with fear among consumers that is depressing demand; fear among banks that is inhibiting them from lending; fear among small- and medium-sized businesses that banks are just about to cut off their credit lines. The choice facing us and governments around the world is this: do we act decisively to counter and overcome this fear, or do we become paralysed by it and fail to act?

The government has already shown its willingness to take the bolder course as the first mover in setting about stabilising the banks. What is needed now is action to stimulate the demand essential for recovery. The UK economy, like economies in the rest of the world, needs a shot of adrenalin.

The Bank of England has already made a significant cut to interest rates. This monetary stimulus now needs to be matched by a fiscal stimulus. And because this is a global crisis this is best done if the benefit of the measures taken nationally is maximised by the same measures being taken around the world. That was the message from the international conference in Washington, as governments recognised the need to take the action necessary to stimulate their economies.

People will say, "But you are resorting to borrowing in order to deliver the stimulus that's needed." My answer to that is, what is the alternative? We certainly haven't heard one from the Conservatives.

David Cameron and George Osborne, trapped by their desire to oppose everything the government does, refuse to accept the scale of the challenge the world's economies now face and the prescribed international action. Their stance appears to be, if the rest of the world disagrees with us, it is because the rest of the world is wrong. The result is incoherence and an Opposition at sixes and sevens. One minute this is "do all it takes" and the next it is - as we heard this week - leave the recession to "take its course".

Sitting on our hands watching houses repossessed and businesses go to the wall is certainly not the approach being urged on me by people I have been speaking to up and down the country. They want their government to act to stimulate demand in the economy here and now. With all due prudence, that is what we are going to do.

Diane Coyle

Author and economist

The G20 meeting confirmed a robust and rapid response (by past standards) to recession, even in the US operating under a rump free-market administration. Policymakers around the world have been shaken to see the financial system at the brink of collapse - on their watch.

Yet it is difficult to predict how severe the recession will be. Bank lending to businesses and individuals is virtually frozen. In many (but not all) areas of the economy, activity has come to a halt. The last financial boom and bust, ending in 2001, had surprisingly little impact on jobs and growth, as the financial bubble had become increasingly untethered from anything real. Today's vicious circle of evaporating liquidity is much more serious, but lower interest rates and bigger government deficits will help. The underlying trends are easier to outline. Some challenges are clearly unaltered, such as climate change and our ageing society.

The technological opportunities are still there, too, in communications, the internet and biotechnology. Globalisation will be less driven by finance in future, but it will not be unwound. It would take a generation to turn back the clock on economic linkages, and the cultural impacts are permanent. In fact, the crisis has underlined our interdependence across national borders.

What has changed is the political economy of globalisation. In the triad of efficiency, fairness and freedom which dominates political choice in democracies, fairness will take priority in the years ahead, and the drive for ever greater productivity gains will retreat. The semi-nationalisation of the banks has started to shift the boundary between public and private domains; we will have to think more carefully about how to govern private choices that have big social spillovers. The G20 did not touch on this profound question of governance.

Iain Macwhirter

Political commentator

The G20 was largely a throat-clearing session and was never going to put in place the foundations of a new international financial system. Progress on the stalled Doha trade talks is encouraging but provides no guarantee that protectionism will not raise its head in the coming economic slump.

It is inevitable that countries faced with financial collapse will try to defend their economies by any means possible. Britain is already far down the road of "beggar my neighbour" economics by the "managed" devaluation of the pound, a crude attempt to boost UK industry by lowering the prices of British exports and creating a de facto tariff wall around imports from abroad. It won't work because Britain does not make much of anything any more except debt, and the world has plenty of that already.

But the collapse of the pound will seriously damage what is left of UK financial services. No one in their right minds would put money into the UK economy now, with the property market collapsing, UK banks insolvent and government borrowing likely to reach £100bn in the next 18 months.

Gordon Brown seems to believe that sterling is like the dollar, and that people will buy our dud pounds whatever the likely losses. However, as we are discovering, sterling is not a reserve currency and unlike the US we cannot force other countries to pay our debts. The future for our battered island is likely to be hyperinflation punctuated by appeals to the International Monetary Fund for emergency aid. Forget about spending our way out of recession - the UK government simply lacks the resources to fund the huge borrowing that would be required. Something will have to give. Brown will have cause to regret being so beastly to the Icelanders.

Richard Reeves

Director of Demos

James Carville, the hardened political aide to Bill Clinton, said that if he was reincarnated he'd want to come back as the bond market: "You can intimidate anybody." Right now it seems odd to think of any financial markets threatening anybody. But it is one of the ironies of the current economic situation that the capital markets still have some serious muscle.

Western governments, faced with recession, need to throw a lot of money at their ailing financial institutions - money that can be raised only by selling Treasury debt, mostly to the capital-rich investors of the Far East. For Gordon Brown, this is likely to become a more difficult sell, as Prudence is given the push and the pound takes a nosedive. Even national exchequers invite sceptical scrutiny in this new, nervous world.

The financial crisis is at heart a loss of faith. The word credit derives from the Latin credo - "I believe". When the Titanic of the financial world - in the shape of Lehman Brothers - was allowed to sink, the bonds of trust stretching around the world were snapped. In an instant, everyone stopped believing in each other.

A number of sensible measures should be on the agenda when the G20 reconvenes next year, including legislation to ensure bonuses in financial services are paid on the basis of five-year performance; new "pro-cyclical" provisioning rules requiring finance houses to increase their store of capital in economic upturns; and tougher, independent regulation of the rating agencies whose doe-eyed assessments of banks built on a mountain of paper helped get us in this mess.

There is, however, no quick technical fix for such a dramatic loss of confidence. Trust can be lost in the blink of a market-trader's eye - but it will take years to rebuild.

TEN THINGS THEY ACHIEVED

  • 1 Created a road map aimed at stabilising the world economy and overhauling the banking system with targets for the end of March 2009
  • 2 Advocated Keynesian big-spending
    “fiscal stimulus”
  • 3 Expanded from a small club making world decisions to recognise the importance of the economies of Brazil, Russia, India and China
  • 4 Agreed to reform international finance institutions, including better transparency and supervision of credit ratings agencies
  • 5 Agreed that the Financial Stability Forum should include emerging economies
  • 6 Banks and hedge funds to hold increased levels of capital and cash
  • 7 Recommended “supervisory colleges” for all major cross-border financial institutions
  • 8 Return to the Doha round – trade ministers to meet in Geneva next month
  • 9 Instructed G20 finance ministers to draw up plans and timeline
  • 10 Agreed to meet again, in London next April

. . . AND FIVE THEY DIDN’T

  • 1 Agree a future growth model for capitalism. Instead they reconfirmed their “shared belief in market principles”
  • 2 Agree detailed plans for regulatory reforms of banking
  • 3 Establish a plan of action for achieving the already endangered Millennium Development Goals
  • 4 Set up an international supervisory body with sufficient power to control global markets
  • 5 Halt the run on sterling, which fell sharply against the euro and dollar

Alyssa McDonald

This article first appeared in the 24 November 2008 issue of the New Statesman, How to get us out of this mess

ANDRÉ CARRILHO
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The Great Huckster: Boris Johnson’s reckless distortions of history

As a scholar of Churchill, Boris Johnson could have articulated a constructive vision for Britain and Europe. Instead, he wilfully manipulates and distorts the historical record.

This month, 76 years ago, the defeated British Expeditionary Force was making for the Channel ports. Thanks to the ferocious resistance put up by the garrison at Calais, and Hitler’s hesitation, the bulk of the men were safely taken off the beaches at Dunkirk to fight another day. Whatever their private feelings during those terrible hours may have been, most of them knew even then that they would return to Europe to finish the job.

Their forefathers had been intervening in Europe for as long as anyone could remember. From Shakespeare’s Henry V through to Elizabeth’s support for the Dutch revolt, the Second Hundred Years War against Louis XIV, the French Revolution and Napoleon, and the First World War, London had always been profoundly invested in the continent. Defending the “liberties of Europe” and thus British freedoms was what Englishmen and Britons did. It was part of what they were.

In early June 1944 – on D-Day – the British, Americans and Canadians hurled themselves into northern France as their ancestors had done since the late Middle Ages. At least one British officer tried to inspire his men that morning as the landing craft approached the strongly defended beaches by reading out Henry V’s speech before Harfleur, in which Shakespeare has him exhort the men, “once more unto the breach”. The film version of the play was released that same year, dedicated to the “commando and airborne troops of Great Britain”. In the popular mind, these Englishmen and their North American descendants were part of the continuity of a European story that went back to the medieval English empire in France.

Some of those liberating Europe thought that they could not simply return to “business as usual” after the war. One of them was the later Conservative prime minister Ted Heath, the man who took Britain into the European Economic Community in 1973. He first defended Liverpool as an anti-aircraft gunner and then took the fight to Hitler as an artillery man during the campaign in north-west Europe. Over the course of the next 11 months, Heath and his comrades fought their way across the traditional battlefields of northern France and the Low Countries, including the Walcheren swamps in which their ancestors had been mired in Napoleonic times; and through western Germany into the centre of the Reich. They were to stay there, at the heart of Europe, for some 60 years. They created a stable European order, based on Nato and what was to become the European Union, which remains with us to this day.

Now the Brexit stalwart Boris Johnson, my fellow historian, claims that it was all in vain. “The European Union,” he says, “is an attempt to do what Hitler wanted by different methods.” Worse still, the EU is a German plot, whose currency, the euro, was “intended by the Germans” to “destroy” Italian manufacturing and generally grind the faces of its unfortunate members. Johnson has also invoked the spirit of Churchill in support of his arguments. He has since doubled down on his remarks and has received support from other members of the Brexit camp, such as Iain Duncan Smith, though not apparently from more informed figures such as Michael Gove. Unfortunately, Johnson’s claims are as historically wrong as it is possible to be, comparable in their crassness only to his predecessor as London mayor Ken Livingstone’s suggestion that Hitler supported Zionism.

Far from supporting European political unity, Hitler was violently and explicitly opposed to the idea. This was partly because it was proposed by his opponents on the “left” of the Nazi Party, such as the Strasser brothers. They belonged to the “anti-imperialist” wing of the Nazi Party, which wanted a pan-European front against the Jews and the British empire. Hitler’s hostility to the European project was also in part due to a racial antipathy to the half-Japanese Richard, Count Coudenhove-Kalergi, the author of the widely discussed book Pan-Europa (1923). One way or the other, Hitler condemned the Pan-Europa movement as “a fantastical, historically impossible childishness”, which would be no more than a “Jewish protectorate”.

Nor did he hold back with his alternative view of what the continent should look like. “The solution,” he wrote, “cannot be Pan-Europa, but rather a Europe of free and independent national states, whose spheres of interest are separate and clearly delineated.” Comparisons involving Hitler are usually odious but if one is going to draw parallels, his view of European integration then was much closer to that of the Brexiters today than that of the advocates of the European Union.

Moreover, the European project did not originate in the Nazis’ attempt to mobilise the continent on their behalf but rather in the resistance movement against Hitler. Take Sicco Mansholt, who hid Dutch resisters on his farm during the war, at great personal risk. He subsequently became the Dutch minister for agriculture and one of the fathers of the Common Agricultural Policy (CAP). Take Altiero Spinelli, the Italian anti-fascist who spent ten years in Mussolini’s prisons. It was there, in June 1941, at the height of Hitler’s power, that he secretly wrote his draft manifesto For a Free and United Europe.

Take Paul-Henri Spaak, later prime minister of Belgium, first president of the Common Assembly of the European Coal and Steel Community – the forerunner of the EU – and secretary-general of Nato. He was forced to make a daring escape from wartime Europe in the false bottom of a lorry in order to carry on the struggle against Hitler in exile. Indeed, across Europe there were thousands of men and women who fought, died, were imprisoned or tortured because they believed in a free and united Europe. To suggest that they were trying to achieve the same thing as Hitler by different methods is an outrageous slur on their memory. If Johnson ever makes it to the top of the Conservative Party, and thence to No 10, he will have a lot of explaining and apologising to do in Europe.

***

As if all this were not bad enough, Boris Johnson’s invocation of Churchill flies in the face of everything we know of the great man’s attitude to the European project. To be sure, he began as a Eurosceptic. When army reforms were proposed in 1901 to support the creation of a substantial land force on the continent, the young Winston Churchill was one of the few MPs to oppose them on the grounds that the navy, rather than the army, was of crucial importance to British security. Writing in the Morning Post, Churchill argued that “history” and “geography” showed that the British empire was “essentially commercial and marine”, and had been defended by armies of foreigners.

As the German threat loomed large, however, he changed his mind. Churchill, then first lord of the admiralty, told the Australians and New Zealanders in April 1913 that Europe was “where the weather came from”. It was the terrible storm of the First World War that caused Churchill not only to believe in the centrality of Europe but in the need for European – or at least continental European – unity.

In May 1930, the president of the Pan-Europa Union, the former French prime minister Aristide Briand, made a formal proposal for a “European federal union” based on a “European conference” with an executive to co-ordinate economic and military co-operation. The British government of the time rejected the surrender of sovereignty involved but many were sympathetic to the idea of continental European union under liberal auspices. The arch-imperialist Leo Amery, secretary of state for the colonies and later a powerful critic of appeasement, was a strong admirer of Coudenhove and his projects, which he regarded as the extension of Anglo-Saxon principles to the continent.

Likewise, Churchill, then chancellor of the Exchequer, told parliament in June 1925 that he hoped that one could “weave Gaul and Teuton so closely together economically, socially and morally as to prevent the occasion of new quarrels and make old antagonisms die in the realisation of mutual prosperity and interdependence”. Then, he continued, “Europe could rise again”. Churchill did not believe, however, that Britain should be part of any continental political union. “We are with Europe, but not of it,” he wrote in 1930. “We are linked but not compromised. We are interested and associated but not absorbed.”

In mid-June 1940, however, as western Europe buckled under the Nazi onslaught, Churchill went a step further. He made an unsuccessful offer of union with France – involving joint citizenship and a common government – designed to lock the French into the war effort against Germany or, failing that, to secure their fleet. The Nazi threat was so existential, in other words, that it justified the surrender, or at least the pooling, of British sovereignty.

When the threat of invasion passed, Churchill returned to the theme of continental European integration. In October 1942, he “look[ed] forward to a United States of Europe in which barriers between the nations will be greatly minimised. He “hope[d] to see the economy of Europe studied as a whole”, and the establishment of a council of “ten units, including the former Great Powers [and thus presumably Britain], with several confederations – Scandinavian, Danubian, Balkan, etc, which would possess an international police and be charged with keeping Prussia disarmed”.

Churchill returned to the subject immediately after the war, as the Soviet threat menaced Europe. In a speech at Zurich University in September 1946, he urged the continent to “unite”, with Britain supporting the project from the outside. Once again, including the Germans was central to his conception. Churchill urged no less than the full political union of the continent in a “kind of United States of Europe” under the “principles embodied in the Atlantic Charter”. He again praised the work of Hitler’s bugbear, Count Coudenhove-Kalergi’s “Pan-European Union”.

Churchill demanded an “act of faith”, beginning with “a partnership between France and Germany”, assembling around them the states of Europe “who will and . . . can” join such a union. Its purpose was clear, namely “to make the material strength of a single state less important. Small nations will count as much as large ones and gain their honour by their contribution to the common cause.”

Moreover, Churchill argued, “The ancient states and principalities of Germany, freely joined together for mutual convenience in a federal system, might each take their individual place among the United States of Europe.” In short, the new polity was designed to solve not merely the European question but the German problem, the two being one and the same. Once again, Churchill conceived of this United States of Europe alongside but not including the United Kingdom and the British “Commonwealth of Nations”, that is, the empire. Instead, he believed that Britain should be one of the “sponsors of the new Europe”.

Churchill’s attitude to continental European union was, unlike Hitler’s, highly positive. For Johnson to suggest, therefore, that he is donning the mantle of Churchill to prevent the current European Union from achieving Hitler’s aims through other means is a complete travesty of the historical truth.

Far from being intended to promote German power, the European Union was designed to contain it, or at least to channel it in the right direction. Contrary to what Johnson suggests, the euro was not planned by Germany to subjugate Italian industry or any other European economy. It was insisted on by the French to decommission the deutschmark, which they described as Germany’s “nuclear weapon”. Likewise, the Germans are not incarcerating the Greeks in their European prison: Greeks are desperate not to be released back into the “freedom” of the drachma and the corrupt national politics that they joined “Europe” to escape. If there is one thing worse than being dominated by Germany in the European Union, evidently, it is not being in the EU at all.

Boris Johnson may not have known the details of Hitler’s attitude to European integration, or the European sympathies of many resisters, but he is very well informed about Churchill and Europe. His ignorance is thus not just a matter of making mistakes; we all make those as historians. Nor is it simply a matter of these mistakes being, like bank errors, in favour of one’s own argument. To say that Johnson knows better is not a figure of speech: he has shown in print that he does. His recent book, The Churchill Factor, contains a very balanced account of Churchill’s position on Europe, including most of the statements listed above.

In making his arguments, Johnson is not appealing to the baser instincts of the electorate; it is far worse than that. The deeply ingrained British instinct to fight European tyranny is not base but fine. What Johnson and those who defend his rhetoric have done is to take something virtuous and pervert it. The European Union is not, as we have seen, the continuation of Hitlerism by other means and to suggest so is blatant manipulation.

The shame of it is that there is a perfectly plausible Eurosceptic argument on its own merits. It was well stated by Michael Gove at the start of the campaign. It insists on the historical distinctiveness of the United Kingdom, whose history does indeed set it apart from the rest of the continent. It makes the case for a reform of the EU. It rejects the scaremongering of “Project Fear”, on the cogent grounds that the United Kingdom has the political, economic and military weight to prevail even without the stabilisers of the EU. It scorns President Obama’s impertinent warning that Britain would have to “get to the back of the queue” for a trade deal after Brexit, with a reminder that Britain and her empire defied Nazi Germany for two years before the Americans joined the fray, when Hitler declared war on them (not vice versa). One does not have to accept every detail of this discourse to feel its force. Uniquely among the democratic European powers, the United Kingdom can “stand alone” if it must or wants to.

The Achilles heel of the Brexit campaign, however, is that it has no viable vision for continental Europe. Even Gove falls down here, as his idea of a British departure unleashing a “democratic liberation” of the continent is pure fantasy. It seems odd to have to explain this to Brexiters but Britain really is special. Casting off the bonds of Brussels will not emancipate mainland Europe but let loose the nationalist and xenophobic demons tamed by the integration project. This is clear when we look at the rise of radical anti-European parties in France, Hungary, Austria, Germany and many other parts of Europe as the European project fragments. These developments should not surprise anyone who knows the history of mainland Europe before the mid-20th century and to a considerable sense beyond.

***

 

Most of continental Europe had failed before 1945 and even now the European Union is only failing better. Unlike virtually every other European state, which has at some point or other been occupied and dismembered, often repeatedly, England and the United Kingdom have largely – with very brief exceptions – been subjects of European politics, never merely objects. In this sense, too, she is exceptional. Yet this should not be an occasion for British triumphalism. Whatever the outcome of the referendum on 23 June, the European Union is not an enemy of the United Kingdom. It should best be understood as a modern version of the old Holy Roman Empire; hapless and officious, perhaps, but not malign. It needs help. The failure of the European project and the collapse of the current continental order would be not only a catastrophic blow to the populations on the far side of the Channel but also to the United Kingdom, which would be
directly exposed to the resulting disorder, as it always has been.

In short, the Brexit camp in general and Boris Johnson in particular are missing a great opportunity in Europe. A student and partisan of Winston Churchill, the former mayor of London was qualified to articulate a constructive vision for Britain and the continent. He has failed to understand that the only safe way that Britain can exit from the European Union is not through Brexit – whose consequences for mainland Europe would be dire – but through Euroexit; that is, a Churchillian political union of the continent in close co-operation with the UK.

Instead, in addition to their distortion of the historical record, Johnson and the Brexit camp are committing the cardinal sin of making a decision before they need to. The European Union is not, sadly, a United States of Europe, even though it needs to become one to survive, and is becoming less like one every day. If and when it musters the strength for full political union, there will be plenty of time to leave. Meanwhile, the EU needs all the support that Britain can give it from within.

In 1940, the British forces had been defeated and retreat was the only option. The situation could not be more different today. This is no time to head for the beaches in what will be a legislative Dunkirk of epic proportions, with incalculable consequences not so much for Britain as for the rest of the continent. Unlike in 1940, the United Kingdom is not being forced out of Europe. It has hardly begun to fight there, unless shooting oneself in the foot through Brexit counts as combat. The battle in Britain today is a distraction from the great struggle on the mainland. There is much work to be done in Europe. It is time the British stop tearing themselves apart and return unto the breach once more.

Brendan Simms is a NS contributing writer. His latest book is “Britain’s Europe: a Thousand Years of Conflict and Co-operation” (Allen Lane). He is president of the Project for Democratic Union

This article first appeared in the 19 May 2016 issue of the New Statesman, The Great Huckster