What chances of a radical Scotland as an EU member?

emily-macintosh-photo“To take real and full control of Scotland’s future, we need to fully understand what we’re up against.”

As currency and Europe move to centre stage in the referendum campaign, we reproduce the text of the talk given by Emily MacIntosh at the RIC 2013 Europe workshop.

Emily is a freelance journalist and press officer for the European United Left/Nordic Green Left group in the European Parliament. Her talk was given in a personal capacity and the views expressed are her own.

I’m going to talk about some of the issues and questions we need to think about in terms of EU membership and the current neoliberal Europe-wide austerity drive. EU governments have been at the helm of the great ship austerity throughout the crisis, and on the radical Left in Scotland we should be just as critical of developments at the EU level that sideline social concerns as we are of those at the national level.

We need to think about what it means in practical terms for a nation state to join a political and economic union of countries, and widen the paradigm through which we talk about the EU. How do we critique EU policies from a radical Left perspective without sounding like a member of UKIP? We need to talk about the implications that membership of the EU or the Eurozone will have for Scotland’s monetary and fiscal policy, which we arguably need as much control of as possible if we are to fully achieve the aims of independence and realise the other Scotland we all want to see.

We have to think about the issues that surround the likely scenarios, whether this be Scotland as an EU member with its own currency or in a ‘Sterlingzone’, or Scotland in the Eurozone.

As a member of the EU, even if Scotland was to have full monetary and fiscal independence with a Scottish currency, we would not be free from having fiscal conditions imposed on us: all EU member states, in and out the Eurozone, are bound by the idea that to be ‘fiscally responsible’ governments must reduce public debt, and this is the basis for the EU Stability and Growth Pact which Scotland would be bound by as a member state. It enforces strict fiscal conditions and forces nation states to run a balanced budget at all times, a maximum deficit of 3% and a national debt limit of 60%.

To keep their budgets in line nation states rarely choose to raise taxes, they take the neo-liberal route and slash public spending and investment and implement austerity. But if we keep cutting public spending, unemployment rises and demand decreases, and recession drags on. EU leaders increasingly compare sovereign debt to household debt and we are told that we must ‘pay for the party’ and that ‘the books must be balanced’. But this is a false comparison. Sovereign states are not like households and they can default on debt – as Iceland has shown. There are other ways.

While the Yes campaign/SNP/Scottish government line is that we ‘wouldn’t be forced to join the Euro in an independent Scotland’. Controversially, I’d argue that on this one the Better Together campaign might have a slight point! It is not clear yet whether Scotland would be considered a breakaway state that might be able to keep the UK-opt out on Euro membership, or if Scotland would be a completely new state: under this scenario Scotland would have to meet EU enlargement criteria and for new member states the single currency is compulsory. Of course Sweden is often referenced as the exception to this rule: Sweden has got round joining the Euro by effectively deliberately not complying with the Eurozone membership criteria.

While the ‘Swedish model’ could be an option for Scotland to avoid the Euro, I think it ignores a crucial point, there is nothing to say that just because Scotland would not necessarily be forced to join the Euro that the current Scottish government, who will after all be largely responsible for negotiating the terms of independence, will not decide to join anyway, or that the first Scottish government in an independent Scotland we vote in in 2016 would not push to join the Euro.

So what is so bad about a currency union? Aside from the fact you are leaving monetary policy decision making to someone else – so in the Eurozone this is the European Central Bank setting interest rates and exchange rates and in a ‘Sterling zone’, the main option currently on the table for Scotland, this would be the Bank of England – the fundamental flaw of having different fiscal policies operating in one currency zone without a political union is that you lose the ‘exchange rate’ tool in your toolbox. So because governments can’t use currency devaluation as a tool to make themselves more competitive, they have to devalue ‘internally’ and they do this by lowering wages and reducing pension rights. This results in huge trade imbalances: in the Eurozone this was the case between the exporting countries in the North where workers’ wages were slashed like in Germany, and countries in the South like Greece where imports exceeded exports. These imbalances, coupled with the sky-rocketing sovereign debts caused by national governments bailing out banks, resulted in the Eurozone debt crisis which EU leaders have tried to solve through imposing austerity measures. The European Central Bank-International Monetary Fund-European Commission, or the Troika as they are known, are behind crisis solutions that involve giving countries bail-outs through mechanisms that come with macroeconomic conditionality, forcing them to implement austerity policies in the name of reducing public debt. The effects of these measures are hitting the most marginalised in Europe hardest meaning the poorest people in the periphery of Europe: in Portugal, Italy, Ireland, Greece, and Spain, are paying for a crisis they didn’t cause.

So can the EU be reformed from the inside or should Scotland avoid it at all costs?

The next European elections are on 22 May next year, and today the European Parliament does have increased decision-making powers. And while Scotland only has 6 seats up for grabs, if these seats were filled by progressive MEPs, could they help fight the neoliberal legislation being pushed by the Commission? And they would hopefully not be alone: the radical left could double in size in the European Parliament, a realistic estimate according to current polls, with significant increases expected in countries like Greece and Spain where left parties have successfully mobilised people affected by austerity.

A common misconception of the EU is that it is some abstract body that is separate from national governments, but in fact the most powerful institution is the Council, which is made up of national government ministers. How would an independent Scottish government act in the Council? Could we affect change at the top table? But can we really expect any of the mainstream parties to push an anti-neoliberal agenda?

Perhaps it is naive to think that the EU can be reformed from the inside, even if Scotland returned radical MEPs and a progressive government in Council, the neoliberal legislation that has been adopted of late won’t be undone easily. Even if Scotland managed to negotiate opt-outs to some of this legislation, like the UK has done, and had significant control of its monetary and fiscal policies, across all policy areas EU membership might not be the shining beacon of progress it his often held up to be: for example, in Regional policy, we are now seeing a huge push for grants to the most underdeveloped European regions to be tied to macroeconomic conditions, and the militarisation of the EU is being driven forward through increasing funds to the EU military industry. We are also witnessing asylum seekers die at Europe’s borders because of our repressive migration policy.

A nation state could therefore have a better chance of breaking away from this increasingly right-wing and neoliberal model by going it alone and not pursuing EU membership. But much of the problem at the end of the day remains the power of capital and corporations and it is perhaps wrong to transpose this problem onto the European project. There is no quick gateway to a progressive Europe.

It is important to separate the EU as a project and a construct from the policies it pursues at any given time. And we could argue that just because the neoliberal legislation adopted of late won’t be undone easily doesn’t mean it can’t be undone at all. The EU has been a force for social progress in the past in many countries, so can it be again? Can we dare to imagine 15, 20 years down the line an EU made up of radical governments and a Left-dominated European Parliament, with new Treaties to reflect this ideology shift? Could we see a radical Scotland as part of an EU with a budget and a structure that focuses on economic and social cohesion?

Understanding what we are up against key to fighting austerity

The reality is that to make a more equal and socially just Scotland, the supranational political system we are in thrall to and the make-up of our fiscal and monetary policy is important as it forms the backbone of all our independence objectives. And while I’m not advocating for one particular blue print in terms of Scotland’s future, what I am saying is that we need to keep a close eye on exactly what kind of independence we end up with. The type of independent Scotland we will have will depend on who we vote for in 2016 as well as on those doing the negotiating post-referendum. That is why I think a crucial part of the Radical independence movement should be about thinking ahead past the referendum and working to get radical change on the agenda.

For those fighting neoliberalism and austerity on the Left across the UK and across Europe, Scottish independence is interesting because it will weaken the UK. After all, successive Westminster governments’ policies, both Tory and New Labour, have been a lot further to the right than the dominant ideology in the European institutions, blocking progressive change and promoting finance and business interests.

But in Europe on the radical Left, while we are united against austerity we are not united in approach: there are those who believe the European project is an inherently neoliberal one and cannot be changed and there are those who think it can be reformed from the inside. ‘Revolution or reform’ we could say. In many ways I think it is this very ‘disagreement’ that poses the greatest obstacle to uniting Europe against austerity.

I believe that Europe-wide resistance to austerity must be combined with a resurgence of economics education on the left. Mainstream media report the fluctuations of the markets just before or after the weather so we think of both things as natural phenomenon we can do nothing about. But there is nothing ‘natural’ about an economic system. The economic future of any nation state is political so we must stop treating it as a hard science. We need to get talking about the tricky stuff, the boring stuff; and the uncomfortable stuff. We need to educate ourselves and others. Understanding how societies and economies work shouldn’t be complicated or full of abstract concepts and jargon as that is what alienates people from taking an interest in how the power structures around them impact on their well-being, and ultimately oppress them.

To take real and full control of Scotland’s future, we need to fully understand what we’re up against. We need to keep our eyes open. And while Scottish independence will not overturn our neo-liberal profit-led global market-economy overnight, it is the best opportunity we have to start bringing about change and move towards that other future. Let’s not waste it by forgetting to read the small print.

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2 Responses to What chances of a radical Scotland as an EU member?

  1. alister7 says:

    Though she is quite nuanced at various points in her speech, Emily is clearly opposed to EU membership. I would like to respond to some of the issues she raises. Her starting point is “the current neoliberal Europe-wide austerity drive.” She correctly points out that as a member of the EU Scotland would be bound by, “strict fiscal conditions” which cover the deficit and the national debt. She then notes that, “To keep their budgets in line nation states rarely choose to raise taxes, they take the neoliberal route and slash public spending and investment and implement austerity.” However the key word here is choose, and Emily just glides over this. Governments are not forced to follow a neoliberal agenda – they willingly choose to do so. The current neoliberal consensus is one created by the member states – it has not come from above. We should instead be asking why voters all over Europe continue to elect right wing governments and stop blaming the EU. The current economic mess is the result of the failure of the left, both the mainstream and the radical left. It is the voters who have rejected whatever alternatives have been presented, not Brussels.

    Her second issue is the euro and currency unions. She claims that, “for new member states the single currency is compulsory.” But this is simply untrue. There is no mechanism by which a member state can be forced to join the euro. A new member state may sign a bit of paper committing it to, sometime in an unspecified future, join, but nobody can force them to join. The first step of many to joining the euro is to join ERM2, and this step is purely voluntary. This claim is just scaremongering and I am very surprised that she repeats it here. She does eventually concede that Scotland would not necessarily be forced to join the euro, but then states that, “there is nothing to say that the first Scottish government in an independent Scotland we vote in in 2016 would not push to join the Euro.” Now, where did that come from? Is there anyone currently advocating joining the euro? In any event I thought the whole point of independence was that we get the government we vote for. If the voters of Scotland vote for parties that are in favour of joining the euro, what exactly is she proposing that we do? If it did happen, then it would represent another failure of the left. Not at all sure what her point is here.

    Perhaps it is because her real opposition is to currency unions and she desperately needs to assert that Scotland is likely to join the euro so that she can deploy her arguments against the euro. According to Emily the fundamental flaw of a currency union is that, “you lose the ‘exchange rate’ tool in your toolbox.” This means that, “governments can’t use currency devaluation as a tool to make themselves more competitive.” Now while devaluation has proved useful for some developing countries, it has rarely proved to be as useful as its advocates claim. The UK for example has seen a large devaluation of sterling over the past few years, and not much good it seems to have done us. Once again I would contend that devaluation is a sign of failure, and something to be avoided. As Emily herself notes, devaluation is used as an attempt to become more competitive. But it rarely works as a tool on its own. If a country has become uncompetitive then it needs to tackle the root causes. Devaluation can only offer a temporary respite in which to introduce these necessary reforms. Otherwise there will be no lasting change in competitiveness and further devaluations will become necessary a few years down the line. The other danger is that devaluation is used as a politically acceptable way to avoid reforms. I am not sure why the right to devalue has become such an important issue for the radical left. Since Scotland is not going to join the euro in the foreseeable future, this whole issue is a bit academic. Competitiveness is not an issue in a sterling union as the two economies are closely aligned. Which presumably is why Emily makes so much of the non-existent threat of joining the euro.

    It is interesting that the remainder of her speech is much more nuanced. She makes some pertinent points about how limited the influence an independent Scotland would have within the EU. On the other hand she points out that, “the EU has been a force for social progress in the past in many countries.” So, by implication it can be so in the future. She also usefully points out that the current neoliberal agenda of the EU is just that – current. It is not a given. As she notes, “It is important to separate the EU as a project and a construct from the policies it pursues at any given time.” She also very helpfully reminds us that the real enemy of radical progressive change is not really the EU, when she states, “ But much of the problem at the end of the day remains the power of capital and corporations and it is perhaps wrong to transpose this problem onto the European project. There is no quick gateway to a progressive Europe.” In the EU, power remains with the national governments of the member states. Across Europe we need to win power back from the neoliberal right. I fail to see how leaving the EU makes this any easier.

  2. radicalindy says:

    —-The following is a response from Emily to Alister’s comments. Please join in the discussion————————————-

    Thanks for your interesting comments and sorry for not responding sooner. Always nice to have extensive feedback on your thoughts 🙂

    Just a few points on your comments.

    My aim was to put across the different scenarios and not to advocate for one particular option. I don’t know what the right answer is to whether Scotland should remain a member of the EU or not, I think that largely depends on the post-referendum negotiation period and what type of membership we would have.

    My point is that the ‘EU issue’ should not be considered a secondary consideration that can be left to ‘experts’ to decide over. We on the radical left need to, as I said, ‘understand what we are up against’ and I while I agree that the neoliberal agenda comes from the member states’ choices, they are still able to implement this agenda using the EU structures. So regardless of the ‘origin’ of the ideology, the reality is that these structures and mechanisms exist and are in operation.

    Which brings us back to the ‘reformable or not’ question.

    On the Euro my point was simply that whether in the Eurozone (which is, yes, arguably unlikely in the near future and ‘academic’, but not impossible) or in a Sterling zone, an independent Scotland would have limited fiscal and monetary control.

    I cite devaluation as one ‘tool’, I didn’t mean to make it sound like devaluation was the holy grail. Perhaps it would be better to simply say that if a nation state has limits on its monetary and fiscal policy then it is forced to make economic adjustments elsewhere, and this proves to be in the labour market.

    I’m trying to read up at the moment about devaluation in more detail to get my head around it better.

    I agree that the Sterling zone would be different from the Eurozone as an independent Scotland’s economy would be very closely aligned with the rest of UK economy, but this does not avoid other facts such as a Scotland without its own central bank would not have the ‘lender of last resort’ capacity, i.e Scotland would not have any say in whether we bailed out banks or not in a future crisis. The point is that monetary and fiscal policy is political; another example would be when it comes to financial regulation.

    I also agree that independence is about Scotland getting the government it votes for. But just because a majority of people voted in a party advocating the euro would not mean that others in Scotland shouldn’t continue to oppose it.

    Admittedly my last two points are not directly linked to the question but I’d argue that they are crucial.

    How can we even have this debate without being better informed about what we are talking about? (Case in point: understanding devaluation). What I’m saying is that you don’t have to be equipped with a Masters in economics (I’m certainly not) before you can have an opinion, (after all we all have opinions on climate change without being climate scientists) but at the moment there exists a barrier to discussing economics because it seems complicated (which it is!) and non-political.

    The independence debate can be greatly enriched by going deeper into the detail. And that is why I think these types of discussions are very useful.

    Lastly, I think we need to make a distinction between being pro-EU and pro-European.
    For a while I found it hard to place the idea that being anti-EU or EU-critical could be a ‘lefty position’ as in my head anti-EU sentiment meant inward-looking Tories and ‘Rule Britannia’, so of course I felt uncomfortable with the idea of the UK has an ‘awkward partner’ and I associated being pro-EU as a sort of progressive internationalist standpoint.

    But while of course anti-EU sentiment incorporates the above-mentioned feelings, there is nothing cooperative and internationalist about supporting the EU at all costs, and we need to condemn what is happening across Europe, most notably in Greece.

    How this all fits into the debate on Scottish independence is not easy, but I hope we can, if nothing else, get people talking and thinking and questioning.

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