Labour should prepare to fight neoliberalism within the EU – Lexit is not an option

The cancellation of Brexit and the election of Jeremy Corbyn would transform the mood in Europe. 

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In the Brexit crisis, the next steps for Labour are difficult and disputed. They will stand back and let civil war break out inside the Conservative Party. They will vote against Theresa May’s deal (assuming she survives as Tory leader), tweaks or no tweaks. They will, at a point where it looks realistic, propose no confidence – either in May’s government or the administration cobbled together to replace it. But after that?

I want either a second referendum or an election. In both situations Labour should fight on the slogan: remain and reform. But that means seriously addressing something that Labour’s frontbench hasn’t had to since 2016: what exactly does reforming Europe mean?

Since the Brexit vote, a series of crises and policy dilemmas have changed the dynamics of the European Union itself. There is gridlock on the post-2011 project of a banking union. There is a zombie coalition in Berlin, which is still willing and able to impose austerity, inequality and low growth on the rest of Europe.

There is a crisis-wracked administration in France, where Emmanuel Macron has had to bust the budget legally allowed under the Maastricht treaty in order to assuage the gilet jaunes protesters. There is a right-wing government in Italy, itself ready to bust the Maastricht rules. And there are three left-wing governments: Portugal, Greece and Spain.

On top of that there is Jean-Claude Juncker’s dead duck. In March 2017, the EU Commission president outlined five options for the future of Europe, moving quickly to declare that the only real option was “European sovereignty” – fast-forward to a defence union and single migration policy, while avoiding tough decisions about integrating the tax and banking systems.

In the surreal world of the Commission, the plan – even now – is to draw up a blueprint for an even more neoliberal and expanded Europe, only now with its own army, and agree this at a summit in Romania in March before the next European parliament election in May 2019. The role of the elections would then be to return the centre-right European People’s Party with a majority to implement Juncker’s plan.

Unfortunately for Juncker, the political realities of Europe will kill his plan stone dead. The realities are half of eastern Europe under the sway of right-wing populism, rising opposition to austerity, paralysis in Berlin and the streets of Paris on fire.

What happens if, into this unstable mix, the Brits suddenly return? One by-product of the European Court of Justice ruling on Article 50 is that, if we decide to stay, the elections in May will have to be run with British MEPs and parties. Another is that the the UK government would return to the European Council and Commission as a full participant.

That makes the question “what should Labour fight for in Europe?” non-academic. If we’re facing the possibility now of a remain-reform campaign in a second referendum there are things Labour can promise domestically, and things they need to take to Brussels.

Domestically, we should propose new rules on the application of freedom of movement. There should be a time limit after which the government can require EU migrants to return home if they don’t find a job. There should be a massive migration impact fund, throwing money in real time at areas where public services come under strain from a rapid influx of EU citizens.

Britain should pass the strictest possible version of the new Posted Workers Directive, effectively banning the use of imported workforces to undercut local wages and conditions, and create a tough new labour law enforcement unit, to attack abuses of the minimum wage.

The aim should be to encourage migration into high value jobs and public services where there are shortages, and deter the creation of business models that can only survive by using exploited labour from eastern Europe.

At a Europe-wide level, if the UK remains, Labour should announce that, in government, it would form an alliance of left governments inside the EU pushing for the complete reform of the Lisbon Treaty. The aim would be a new treaty, removing competition rules which promote privatisation and outsourcing, and modifying the state aid rules to allow both a national and a Europe-wide industrial strategy to support high-tech jobs, innovation and growth.

As a non-Euro member, there is little a left government could do directly to counter the way Germany games the Eurozone to promote jobs and growth at home, while maintaining austerity and poverty in the periphery. But it could promote, at Commission level, the policy of fiscal stimulus designed specifically to counteract the misdesign of the single currency.

Here, the recent manifesto published by Thomas Piketty is worth a look. It proposes tax rises of €400bn, mainly on corporations and the assets of the rich, and spending the revenue on innovation, democratisation and the integration of migrants.

The upside is that it would create, at a pan-European level, both money and democratic control for fiscal stimulus and a redistributive programme. The downside is that it is explicitly designed to avoid a “transfer union” – whereby rich countries pay for public services in poor ones. But unless it becomes a transfer union, the Eurozone is simply a union for transferring wealth and growth from the periphery to the north European centre.

At the very least, a left-led Labour government could constructively join the discussion around Piketty’s manifesto. Events are moving so fast, and uncertainty is so high, that people have barely registered what a remarkable change for Europe the withdrawal of Article 50 would be.

The biggest of the left governments – Spain – is shaky: it needs a domestic election to be able to move forward, and might lose it. Greece, though Syriza has stuck determinedly to its plan to impose most of the austerity on the middle class, via taxes, has to appease Germany. Portugal has breathing space but is small.

A left-wing Labour government, with a mandate to cancel Brexit and reform the EU, would radically transform Europe. Because, whatever happens to Piketty’s plan, it would come to power on a programme of fiscal expansion and redistribution, intending to overcome any Brussels-mandated obstacles to nationalisation and industrial policy. It would change the atmosphere. It would empower the parties of the left at national level, and could immediately engage Labour-controlled cities with the innovative left administrations of Barcelona, Berlin and Amsterdam.

There are many obstacles to cross: May has to go, her deal has to be defeated, the Tory party has to fall apart and – either in an election or in a second referendum – the xenophobic backlash has to be defeated.

But the British left has to stop dreaming about Lexit. One of the things we have genuinely learned from the process of trying to leave the EU is the extensive nature of its status as a regulatory superpower. Even a Britain ruled by the Socialist Workers Party and the Morning Star would find itself forced to comply with Commission directives. Paradoxically, a left exit from Europe is only possible if Europe itself goes left.

For two and a half years Labour has dutifully and painfully tried to make Brexit work. But parliament has been sidelined, time has run out, and the space for a Labour-designed version of Brexit has disappeared. If anybody has betrayed Brexit it is Theresa May. Once her deal is thrown out, the moral authority of the 2016 referendum evaporates. It’s then either no deal or no Brexit.

And if it’s no Brexit, watch the blood drain from the faces of European neoliberalism: I’ve been with Jeremy Corbyn as he’s hit both Brussels and the Hague with messages of uncompromising clarity: neoliberalism is over, austerity is a catastrophe. But to the stunned audience of centrist social democrats, Corbyn’s words always seemed like a message from afar. If we play this right, we can take it into the heart of Europe.

Paul Mason is a New Statesman contributing writer, author and film-maker. As economics editor at Newsnight, then Channel 4 News, he covered the global financial crisis, the Arab Spring, the Occupy movement and the Gaza war. His latest book is Clear Bright Future: A radical defence of the human being.