Monday, 31 December 2012

Britain and Europe

I talk at several points in the book, and especially Chapter Five, about the EU and the Eurozone crisis, but say nothing about the complex debate within the UK about its membership of the EU. This looks set to become a matter of interest beyond the UK in the coming year and it has emerged today that other EU countries are beginning to float the idea of creating a new, Associate Member status for the UK and, possibly, Turkey. The details are sketchy at the moment but what seems to be envisaged is a situation in which Associate Members would be part of the single market but not part of the political structures of the EU-proper, for example not having any MEPs or Commissioners. The way this idea plays out will have important consequences for organizations across Europe so in this post I will try to situate it within the politics of the UK’s attitude to the EU. For those unfamiliar with them, these politics are convoluted and filled with ironies.

Although now primarily associated with the political Right, it’s worth recalling that back in the 1970s British Euroscepticism was mainly the preserve of the ‘Bennite Left’ because they saw Europe as a vehicle for capitalist globalization via the promotion of free markets. Although rarely heard in the UK now, where the political centre gravity has moved very markedly to the Right since the 70s, this remains a standard critique of the EU in countries such as France. Indeed, it largely explains the French ‘no’ vote in the 2005 EU Constitution referendum.  But, whilst being a free-market project, the EU was also, for its architects both in continental Europe and the UK, and certainly for Ted Heath the Prime Minister who championed British membership, a response to the horrors of the Second World War. So already, at this early stage, there was an irony: nationalists of the traditional Right saw Europe as a way of healing international divisions, whilst internationalists of the Left opposed it as a free-market project. 

That latter analysis received confirmation when Margaret Thatcher, for all that she is now remembered for her anti-European handbaggings, presided over the crucial transition from the EEC trade bloc to the single market  with the passing of the Single European Act in 1986. It is the consequences of that decision that created the terms of the current debate about Britain and Europe. A single market requires a single framework of regulation and law. Contracts, competition, free movement of goods and people, health and safety, employment law and even weights and measures need to be unified if a single market is to be a reality. And the unification of regulation and law imply the unification of politics, since what is a political jurisdiction separate from control of such things? Moreover, the aim of British foreign policy in Europe for at least two decades was primarily the expansion of the EU eastwards, and as this was achieved the growth and increasing complexity of EU regulation and law was inevitable.

Out of this basic reality two things followed in the UK which have coloured the debate since then. Firstly, for the political Right all this seemed to come as a surprise. They had seen opposition to Europe as anti-business socialism, and they had not understood the key distinction between a free trade zone and a single market. Free trade merely removes tariff barriers to trade; a single market unifies a whole swathe of standards and removes non-tariff barriers to trade as well. The ultimate cause of this failure by the right to understand the consequences of the free market they championed is the assumption at the core of neo-liberal ideology of the market as something existing ‘naturally’ and independent of regulation.  So they understood the inevitable growth of regulatory and political unification in Europe as Leftist and anti-market. Thus, ironically, Tory free-market ideologues, from the Maastricht Treaty of 1992 onwards, have opposed an EU which actually promoted and extended the ideology they believe in.

What is now emerging in the UK is a significant split in the political right. There is growing support for the UK Independence Party (UKIP) which seeks UK withdrawal from the EU (although seems to be happy with the idea of EFTA membership – see below) which is beginning to create a crisis for the Conservative Party. Many Conservatives also favour withdrawal, but they are also beholden to business interests, for example as represented by the CBI, which do not, precisely because they understand its value to them as a free market. Thus the British Prime Minister talks about ‘re-negotiating’ the UK’s relationship with the EU but with little sense of who this negotiation would be with and what its terms would be, in that a negotiation implies both sides making concessions.

The Maastricht Treaty and its aftermath also shifted the British Left’s view of Europe, and for two reasons.  On the one hand, it soon coincided with the emergent New Labour commitment to globalization and free markets, and in that way the main parties became indistinguishable. On the other hand, the development of, in particular, employment and human rights protections within the EU led many on the Left (and disaffected with New Labour) to think that the best hope for social democracy for a UK in the grip of the neo-liberal consensus  was to integrate more closely to Europe. Moreover, the way that the loudest anti-EU voices in the UK have been those of the most reactionary, nationalistic, sections of the Right made Euro-enthusiasm an attractive option, if only on the principle that my enemy’s enemies are my friends. But in supporting the EU the Left became entirely blind to the way that European integration had virtually no democratic institutions or mandate, and ironically supported a EU which actually promoted and extended a free-market ideology they do not believe in.

The consequences of the Right’s inability to see that promoting an expanding single market entailed the diminution of national sovereignty and the Left’s unwillingness to face up to the democratic deficit that accompanied EU-enshrined rights is now becoming clear because of the Euro crisis. For the Left, the role of the EU in enforcing austerity and the erosion of welfare and pension rights without democratic mandate is becoming daily more evident. For the Right, the very lack of the political ‘super state’ they so long opposed and feared means that the kinds of fiscal discipline they would actually like to see are impossible. In short, the Eurozone crisis has brutally exposed the weakness of attempting economic harmonization before rather than after substantive political harmonization, a situation connived at both by the unwillingness of pro-Europeans to be honest about political harmonization and the refusal of Eurosceptics to countenance it.

So what now? In the UK, any and every discussion of the EU leads to calls for a referendum on membership.  The Right want one, believing it a racing certainty that the outcome would be withdrawal. This is by no means certain – current opinion polls are likely to be highly misleading, not least because pro-EU arguments are almost never heard in the UK, as they would be in a Referendum campaign - but even if it were to happen it would immediately expose the longstanding irony of the Right’s position. For what they envisage is a ‘Norway option’ and if this happened it would simply mean accepting EU rules without any involvement in their making and probably higher contributions than the UK presently makes.  So despite being notionally democratic it would actually reduce democracy since at least at the present time the UK’s democratically elected government has some input into EU decision-making.  But suppose the outcome were to stay in. That might silence the Eurosceptic Right (or possibly not, especially if the vote were close), but it would do nothing to make the EU more democratic since it would leave EU institutions unreformed

Within this context, today’s news of the idea of Associate Membership is an interesting one. At first sight, it seems to give UK Eurosceptics what they want, and has already been welcomed by some of their leading figures. In time, and perhaps precisely because it is being proposed by those who want to defend the EU federalization project, I suspect that a different view will emerge (it’s interesting to see the somewhat perplexed responses to this news in the reader’s comments sections of the Daily Mail, a right-wing British tabloid). For in being offered what they claim to desire, it may finally dawn upon Eurosceptics how foolish that desire is: a demand to be subject to a free-market polity without representation or influence. In short, an arrangement unsatisfactory to both the Left and Right in Britain, but one created by their mutual stupidities, cowardices and dishonesties.

Monday, 3 December 2012

Tax Avoidance

The tax avoidance strategies of large international firms like Starbucks, Google and Amazon have become a big political story in the UK recently. But of course it isn’t only a UK story – it’s a global issue precisely because these are global companies. In my book, I give a little explanatory one-liner (p.128, note 5) that tax evasion means illegal tax-dodging, whilst tax avoidance means legal ways of reducing tax liability. That’s true so far as it goes, and it is the defence wheeled out by these companies. But it hides a more complex reality: what constitutes legal tax avoidance is a matter of interpretation and of negotiation between companies and tax authorities. And beyond that it constitutes a matter not of legal technicality but ethics and political philosophy.

What lies behind this is the way that economics has run ahead of politics. Globalization was to a large extent produced by national political decisions to open up world markets but, having done that, the capacity of national polities to regulate global companies has disappeared, as s I mention in the book (p.107). The genie can’t be put back into the bottle. It may be possible for national governments and national public opinion to ‘shame’ global companies into paying more tax, but that is only going to be limited in effect, and possibly contradictory. For example, Starbucks has just said that it will pay more UK tax, but it is also cutting back on the rights and benefits of its employees. This is also, by the way, an indication of why issues of economics and politics are inseparable from those of studying organizations, something I am so keen to argue in the book.

If there is an answer to these issues it can surely only come from inter-governmental action, and an internationally agreed tax regime, but at the present time the institutions to take such action are pitifully weak. One thing which is worth saying is that concern about the conduct of these companies is not, inherently, anti-capitalist. Some of the biggest losers in all this are the local coffee shops and book shops which have no choice other than to pay their taxes and, as a result, are severely disadvantaged. And hence their employees, the local high street, and our sense of community. To make organizations work we have to re-connect ownership, employment and place. That may also mean that we all – me included, as someone who, for example, buys and sells books through Amazon – need to pay a bit more. More importantly, we have to be prepared to vote for political parties that tell us that uncomfortable truth.

Because the bottom line is that for all that we may bemoan its consequences, for 30 years or so significant numbers of us have deemed ‘unelectable’ any political party which questions the orthodoxy of economic globalization, or the doctrine of self-interest that makes it both inevitable and justifiable that companies will minimise their tax liabilities if they can get away with it.