Nicola Sturgeon has announced that Scots would not get a vote on whether to join the EU in an independent state. We would join subject to negotiations between elites in Edinburgh and Brussels, with no say for the people. George Kerevan asks where the EU is headed, and whether Scots should want to be a part of it.
George Kerevan is a Scottish journalist, economist, and former member of Scotland’s parliament.
Cross-posted from Conter
Franco-German technocrat Robert Schuman – a sometime member of Petain’s collaborationist Vichy Government – is revered as one of the founding fathers of the European Union, along with the banker Jean Monnet. Schuman passed on to the great debating chamber in the sky in 1963, long enough ago for the more disreputable bits of his career to have been forgotten. Now Schuman is making an odd comeback: he is in line to be canonised a saint in the Roman Catholic Church.
Pope Francis will recognise Schuman’s “heroic virtues” as early as June, according to Archbishop Marcello Semeraro, prefect of the Congregation for the Causes of Saints. That would be a key step towards beatification, although the latter requires the attribution of a miracle. Perhaps the creation of the EU might count. But a second validated miracle will be needed before Schuman can become a true saint. Scottish membership of the EU, perhaps?
At the height of the Scottish election campaign, Nicola Sturgeon has announced that she has no intention of allowing Scots to vote on EU membership in an independent state. We will be entering into an entirely new and unknown relationship with the EU, without the consent of the Scottish people.
What is the current state of the post-Brexit EU that the SNP leadership proposes to join? The UK media prefers criticising the EU bureaucracy to understanding the economic forces at work across the Channel. Meanwhile the SNP leadership continues its sycophantic love affair with the EU without for an instant examining the dynamics of the German-dominated trading bloc. To deconstruct the economic and political pressures on the EU, we first need a little historical perspective.
The original Common Market (circa 1957-1973) was a political project designed to defuse inter-imperialist rivalry between France and Germany, so creating a bulwark against the spread of Communism, internally and externally. This was allied to subsidising the modernisation of agriculture, in order to divert cheap labour to the industrial northern cities from the backward, rural economies of southern Europe – simultaneously de-radicalising the peasant masses who traditionally voted left.
UK membership of the then EEC in 1973 was a belated attempt by Britain’s industrial capitalism to secure new markets for its over-priced, outdated products – the result of 50 years of under-investment. But this move came too late as the European economy was now dominated by internal sales of German machine tools and cars, balanced by return sales of high-value French and Italian consumer goods, wine and agricultural products.
To prosper inside this European trading system, UK manufacturing would have to displace Germany – a patent absurdity. Result: the death of British-owned manufacturing and the integration of British factories into Continental supply chains. Only the financial nexus of the City of London – originally bitterly opposed to EEC membership – eventually found a niche as Europe’s (and the world’s) main source of currency manipulation, inter-bank and derivatives trading, and investment management for wealthy, secretive clients.
With the fall of the Iron Curtain (more a Western push, actually) the EEC expanded to become the EU by absorbing the East European satellite states, the ex-fascist (but still authoritarian) Mediterranean fringe, and the pseudo-neutral Scandinavian bloc. But this over-ambitious bid to finally escape US tutelage proved an expansion too far after Berlin’s ham-fisted attempt to break up Yugoslavia turned the latter into an ethnic charnel house. It took US military intervention to stabilise the Balkans for the Bundesbank.
By the Millennium, however, the global economy had changed out of all recognition. The advent of neoliberalism in America and Thatcherite Britain, lowered wage costs and allowed massive investment in the new digital technologies. The global economic dominance of the German-dominated EU (with its class-collaborationist, social welfare model) was now in eclipse. But then Berlin sprang a surprise.
Struggling with foreign economic competition and the financial burden of reunification with the GDR, the Social Democrats under Gerhard Schröder launched “Agenda 2010”. This was Germany’s turn to neoliberalism, complete with spending and wage cuts. This resulted in Germany overtaking the US in global manufacturing exports. German machine tools and luxury cars soon came to dominate Chinese import markets, giving Berlin a permanent trade and budget surplus.
At the heart of this second German economic “miracle” was the launch of the euro as a common currency. Effectively, the euro was the old Deutschmark rebranded. The result was that the real exchange rates of EU member states were locked to the old Deutschmark at an artificially high level. This gave German exporters a crushing advantage inside the EU, removing France as an internal competitor once and for all and reducing UK manufacturing to a European owned branch plant economy. Simultaneously, German finance capital came to dominate internal European sovereign and industrial bond markets.
Then came the global Bank Crash of 2008. Berlin forced a crushing austerity on EU debtor states in order to protect its bank loans, while enjoying a massive export boom to China – the one part of the globe relatively unaffected by the financial crisis. This was to be the economic apogee of post-war German imperialism. It was not to last.
Current EU Impasse
Two things have gone wrong. First, complacent (because highly profitable) German manufacturers failed to grasp the technological and market revolutions being pioneered by the big US high tech monopolies such as Amazon, Google, Tesla and Apple. For example, German car manufacturers clung too long to diesel vehicles. Witness Volkwagen’s fraudulent manipulation of exhaust emissions to maintain super profits, rather than invest in new electric cars. Result: Germany’s premier industrial products now face sudden market oblivion from US and Chinese high tech.
The second problem is that a decade and more of Berlin-induced austerity has boomeranged by crushing consumer demand inside the EU’s own protected domestic market. As a result, EU and German growth rates have slowed dramatically. Then came the black swan of the Covid pandemic. Germany’s public finances have plunged seriously into the red for the first time since Reunification. The latest economic data shows worse-than-expected industrial production figures across the Eurozone, as a third lockdown has been implemented. Germany’s industrial production unexpectedly slumped in March, down 1.5% compared to the previous month. French industrial output has contracted by a catastrophic 4.7%.
What riposte can Berlin make? German imperialism (and its partners in the two semi-detached lenders of Holland and Denmark) are contemplating a way to outflank their US and Chinese competitors through investing heavily in a new, hydrogen-based industrial base. The idea is to crack hydrogen from North Sea gas, delivered using the existing oil and gas pipeline system. This would provide the cheap and (ostensibly) “clean” fuel to underpin a fresh generation of industrial manufacturing.
This plan has something of an air of desperation, given that Germany is actually lagging behind many other European states in raising the role of renewables in energy production. Germany and the EU bet heavily on reducing emissions by switching from coal to imported natural gas. In fact, Europe is still planning to build circa €87 billion worth of fossil gas infrastructure. The EU either throws that away (unlikely) or pumps dirty hydrogen through the pipeline network, which has a lifespan of another 50 years.
The downside is that hydrogen is manufactured by splitting methane. That process produces CO2 which will have to be sequestered underground in the North Sea. No-one has done this at scale and the possibility of leaks is real. And it will cost a bloody fortune. (Note: this means that Scotland’s hope of selling the EU wind energy after re-admission is completely bonkers.)
Inside the centrist CDU-SPD grand coalition, there is a lot of posturing regarding exactly how much production capacity should be allotted to hydrogen. The SDP wants to commit to 10MW a decade earlier than Chancellor Angela Merkel’s conservatives. Merkel herself is quitting as Chancellor in September, after 16 years in office. Her CDU appears rudderless without her, which makes deciding on a new energy and economic strategy that more difficult.
Even then, what markets are open to German goods in the future? This is the real issue, not any particular energy strategy – though hydrogen investments would soak up Germany’s excess capital. Germany’s export markets are under threat. Xi’s China is bent on self-sufficiency while post-Trump America is still flirting with protectionism. Clearly, the simplest option is for the EU to crank up domestic demand. But Germany’s conservative bankers remain reluctant to turn on the monetary tap across Europe.
In previous epochs, Berlin has looked to Russia for both raw materials and markets. But will Putin’s current adventurism (born of domestic instability) allow Berlin the opportunity to make Moscow an economic partner? It is doubtful if President Biden or France’s Macron would sit idly by if Berlin cosied up to the Kremlin. A case in point is the Nord Stream II gas pipeline project being built between Germany and Russia. This is 95% completed with only [parts in Danish and German waters still to be finished. Nevertheless, the new Biden administration is weighing introducing additional sanctions against the pipeline, to put pressure on the Kremlin (which is currently massing troops on the Ukraine border).
The Future of EU Politics
What is the political outcome of the EU’s economic impasse? Franco-German relations are rocky, with Macron floundering about as usual, while facing another dangerous challenge from the populist, far right Marine Le Pen in next year’s French presidential election. France and Germany are daggers drawn over defence. Germany is still reluctant to spend more than 1.5% of GDP on defence, whatever its public pronouncements. Macron is trying to save France’s declining global technological position by persuading Berlin to fund a new, 6th generation French combat jet (with accompanying drones). If a Green-SDP coalition emerges in Germany after September, then kiss goodbye to that. Beneath the froth, it could be that the Franco-German axis created by Robert Schuman and Jean Monnet all those decades ago is fractured beyond repair.
Eastwards, the ex-Soviet satellites such as Poland, Hungary, Romania, Bulgaria and Slovenia are mired in various degrees of authoritarianism and corruption. Eastern Europe was integrated into the EU before those states were properly de-Stalinised or made into respectable capitalist economies for Germany to exploit. The rush had everything to do with intimidating post-Soviet Russia into being a safe Western puppet (and look how that turned out); creating a captive internal market replete with cheap labour; and aggrandizing the EU as a counterweight to Washington. But in that rush, the Eastern states were left in the hands of crony networks, mad libertarians, populists of the hard right and comedic left, and serious mafia criminal gangs. It was only a matter of time before this detritus surfaced to take control of the government. Brussels and Berlin have largely chosen to look the other way. But it leaves the EU’s eastern flank an accident waiting to happen.
One result of this cronyism and corruption is that the Eastern and Central European economies are actually becoming less competitive. Germany can draw on the influx of huge numbers of recent immigrants, include a million or so from Syria (many of whom are well educated). But Eastern and Central Europe eschewed this immigrant wave, often violently. One result is that the Western European states now imports less from their EU partners in the East of the bloc. These imports are being replaced by cheaper and better goods from China. Worse, the less than spectacular economic performance of Central and Eastern EU countries is undermining the efficiency of supply chains across the bloc, as compared to China. This suggests dangerous repercussions for the EU into the future. We might expect a major push by both Berlin and Brussels to impose harsher exploitation rates on the bloc’s workforce – something the SNP has failed to take into account in its desperate drive for EU membership.
To the EU south, matters are just as bad. The debt-ridden, neo-Francoist Spanish state is struggling to contain a Catalonian break-away. Italy teeters forever on the verge of a banking and financial crisis held at bay by endless (and equally weak) technocratic governments. Greece is suffering from EU sanctions against Moscow: Greek-Russian trade has halved since they began. Which explains a lot about the corrupt interplay between the two countries. Ditto Cyprus and Malta, two economies based on tourism and money laundering. Malta is actually a franchise of the Sicilian mafia and the Iranian Revolutionary Guards. All of these states are looking forward to using EU Covid cash support as the basis for another round of corruption.
In March 2021, the EU finally got round to signing off on The Conference on the Future of Europe – the brainchild of France’s President Macron. This is a year-long series of internet conferences and debates on what the EU will look like 10 or 20 years hence. My hunch it will turn out to be a useless talking shop. EU expansion is on hold and certainly no longer includes Erdogan’s authoritarian Turkey. The EU’s entire North African and Middle Eastern frontier is in chaos – expect Germany’s economic and diplomatic push into Morocco to make matters worse. America and Britain are focussed on containing China. The EU will stagger out of the pandemic lacking an economic plan and very likely with a new set of untried leaders.
Options for Scotland
None of the above suggests that an independent Scotland would find re-joining the EU a comfortable experience. For a de-industrialised Scotland, successful reabsorption into the EU-German trading bloc would come at the price of becoming a tartan holiday Brigadoon and an underground CO2 storage depot. Wage rates would be crushed in order to remain competitive. Yet all the economic intervention levers needed for investment and development would be commandeered again by Brussels and Berlin. The only alternative would be to contest with Luxembourg to be a financial haven for laundered money. This clearly does not make economic or political sense for an independent Scotland, though it might appeal to the bankers in Charlotte Square.
Scots voted to stay in the EU less out of an understanding regarding the crisis overtaking the bloc and more as a sign they were opposed to the racist, libertarian, free-market project being pursued by Boris Johnson, Nigel Farage and the City Hedge Funds. But Brexit means Brexit, as they say. Starting from the position of being outside the EU, it makes less sense for a newly independent Scotland to surrender its room for economic manoeuvre by putting itself under the tutelage of Berlin, the Bundesbank and the EU’s bureaucracy. Even if Robert Schuman is looking on from Heaven.
The idea that we should enter such a faltering institution without even consulting the Scottish people, and on who knows what terms, makes less sense still.