The government is due to make an announcement on June 9, as to whether Britain has yet to meet their 'five economic tests' for entry. It is widely known that the five tests for economic convergence are really just a fig leaf for a political decision, with plenty of scope for fudging for them to come up with the 'right' result. At the time of writing all commentators are agreed that 'not ready yet' will be the word. But the issue won't go away. Big business is lobbying new Labour in favour of entry, saying that if Britain doesn't go in they will move production to the continent.
Socialist Appeal opposes Britain signing up to the Euro. There are, however, two groups of opponents of entry. The first is against adopting the single currency because the Queen's head will no longer appear on the coin. Eurosceptics argue that adopting the Euro will be another step on the road to abandoning 'British' sovereignty to a European superstate. But socialists know better. We understand that in a capitalist economy we, the working class, have no sovereignty. Whoever is in government, we don't get to decide whether we'll have a job next year or whether our standard of living will go up. The serious decisions are taken by the capitalist owners of the means of production, in response to market forces. Tory Eurosceptics have always been in favour of the rule of market forces - which actually make Parliamentary sovereignty a sham.
It's true that Eurosceptics go on about an unelected European Central Bank. When did you last cast a ballot for the ECB? But are they against it because it's unelected or because it's full of "foreigners"? Since 1997 interest rates have been set in Britain by the Monetary Policy Committee of the Bank of England, by a process very similar to that of the ECB. When did you last cast a ballot for the MPC? Gordon Brown gave up any pretence of democratic control of monetary policy as soon as he became Chancellor.
For the working class all bankers are 'foreigners' - they have the opposite interests and objectives from us. Of course the level of interest rates can make a difference to an economy, especially when they get it wrong. And it is a problem that the ECB sets a single rate for Germany, which is in recession, and Ireland, which still shows signs of overheating, in a 'one size fits all' policy. But there is no evidence that a discretionary monetary policy can halt the fundamental processes of boom and bust rooted in a capitalist economy.
The second group of opponents, rooted in the labour movement, believes that entry will involve the sacrifice of large swathes of the welfare state in forced austerity as the price of entry. This is the only serious reason for opposition. Here's Bill Morris, General Secretary of the Transport and General Workers' Union, quoting the European Central Bank's Monthly Bulletin. They believe "public health and long-term care systems should focus on providing core services for healthcare prevention while leaving individuals to provide for non-essential expenditure". In other words the ECB wants privatization of big chunks of our health service. Why should they have any say? The article is headlined 'Price of entry will be our NHS' (Observer May 11, 2003)
There is also the myth about a hard-faced Anglo-Saxon variant of capitalism, where they can only make money by grinding down the working class. Then there is supposed to be a nice European form of capitalism, 'social Europe', where they always consult the workers and protect them from the rigours of the market. Actually hard right neoliberal loonies have taken charge of the institutions of the European Union. The ECB is one example of this. Another is clearly seen by the Growth and Stability Pact, a kind of corset for Euro member states. If a government fails to balance its budget and gets into too much debt, it can be fined by the European Central Bank. First this is undemocratic - at least you get to vote for the national government every four or five years. It is also futile. The fines will of course make it more difficult for the government to make ends meet.
It flows from another mistaken neoliberal attitude, i.e. that if governments get into debt, that's their silly fault. There are supposedly two sorts of administration - thrifty Tory ones and spendthrift social democrats. In fact governments of all stripes have to borrow when they are in economic difficulties. The reason Germany is in breach of the Growth and Stability Pact is because unemployment there is over 10.7% - four and a quarter million workers claiming benefit rather than paying in to the tax pot as employees.
What is the case for entry into the Euro? The first argument is about 'transaction costs'. Apparently about half of one per cent of European national income was sucked away by moneychangers, who are of course parasites. Moving to a single currency would enable us to dispense with their services.
More significantly it should bring prices down to the lowest level to be found within the EU. For years economists have been puzzled as to how identical cars (to take just one example) can cost thousands of pounds more in Britain than on the continent when we live in a common market. The argument is that you can just go to where the cars are cheapest and buy them there. Some have concluded that the problem is that goods are denominated in different currencies. If everything is priced in Euros then they won't be able to get away with ripping us off. Well, it doesn't work. If you buy a Frankfurt edition of the Financial Times in Europe for instance, it is marked with different Euro prices for Portugal and Sweden. They continue to charge what the market will bear in different national markets. Monetary union just hasn't led to price convergence.
The second argument is for investment stability. If a Japanese capitalist wants to invest in Britain, then they are taking enough risks already without worrying about how many pounds they'll get to the yen in twenty years when it's time to repatriate their money. Maybe they just won't bother. So the answer's an internationally recognised single currency. It is true that inward investment into Britain as a proportion of European investment has collapsed since the launch of the Euro. There is no complete explanation for this. The Tories boasted that this country attracted so much investment from abroad because of their iron heel on the workers' necks. When asked, the investors said it was because English was the only European language they understood.
A case in point is the Nissan plant in Tony Blair's constituency of Sedgefield. Management are threatening to relocate to the Eurozone, leaving 5,000 jobs behind, if we don't sign up. An anonymous commentator explains their angle (Observer May 11, 2003). "I know it sounds cynical, but it does Nissan no harm to talk about the virtues of the single currency, while trying to drum up grant aid as compensation if Britain fails to enter." Let's face it. Nissan management are playing mind games with us. As the article goes on to point out, 80% of the cost of producing a car in Sunderland is parts, which can be produced in the Eurozone anyway. The answer is surely for us to control the movement of capital by taking over the means of production, not relying on the goodwill of our enemy, the capitalist class.
"Cry for help"
The third argument for British entry is in the nature of a cry for help. Sterling has been massively overvalued for years. With British goods so expensive abroad, British industry has been in recession almost constantly for the past four years. Hundreds of thousands of jobs in sectors from textiles to steel have haemorrhaged from manufacturing over this period. Gordon Brown has met this disaster with stony silence, helped by the stupidity of the Tory opposition. Quite simply, the overvaluation of sterling has not been an issue between the political parties. But for some in the trade union movement it is the only issue and they have argued the case for entry as a means of devaluation and a basic protection for jobs.
That case has been undermined by the collapse of sterling this year. Last year sterling got you 3 Deutsch Marks, now translated into 1.59 Euros. But now it's down to DM 2.72 (or 1.39 Euros). To see how far it has fallen, back in 1992 the pound got you DM2.95. And it's due to fall further, not good news for those of us who like to holiday in Euroland. Plus, of course, manufacturers get less pounds for every Euro they earn by selling abroad, so devaluation is not all bonus points.
Decline in industry
This devaluation ought to have got British manufacturing out of the hole it's in. It hasn't. British industry has been in relative decline against its main rivals for at least fifty years. CBI economist Doug Godden points to other recent factors. "The pound/euro exchange rate has had a fairly dramatic effect, but in the past 18 months the most important factor has been the slowdown in world demand."
The major indicator of the poor performance of British capitalists is the 'productivity gap' between us and our major rivals. The Treasury Budget Report (the 'Red Book') for 2002 comments, "By international standards the UK's productivity performance has historically been poor… the productivity gap between the UK and its main competitors is substantial… in terms of output per hour, the gap against the US narrows slightly - to 25% - while the gap against France and Germany widens to 27% and 25%." So an American, German or French worker can bang out five widgets in the time it takes us to make four. Is that our fault?
Patricia Hewitt, Minister at the Department of Trade and Industry, blurted out in exasperation, "When you look at the gap in productivity between Britain and the rest of the world, too often it is poor management of the production processes and poor management of people that accounts for that gap." (Financial Times October 15, 2002, 'Hewitt turns spotlight on UK's mediocre managers'). So management are thick as planks, except when it comes to sitting round a table with themselves and negotiating bonuses.
Back to the Red Book. "By international standards, levels of innovation in the UK have historically been low…levels of UK private sector investment in research and development (R & D), a key indicator of successful innovation, are significantly below those achieved in many other advanced industrial countries." And, whatever the investment climate, year after year British capitalists have invested more abroad than they have at home. So the reasons for British lack of competitiveness are complex - but the problem can't be sorted by a quick fix of the currency.
British capitalism is a failure internationally. Its problems are deep rooted and structural. Entry into to single currency will not provide a solution to relative decline. We have to understand that it is time to make the 'captains of industry' walk the plank.