To Stay or not to Stay, continued....

by Glenn N. Holliman

The responses to Terry Field's opening paragraphs have been robust but very polite  (unlike many USA controversies, i.e. the current presidential primary contests).  Terry now continues Part 2 of his 'Why the U.K. should remain in the E.U.'  He is laying the base of his argument, and there is more to come after this.  His tour of the last forty years in history is insightful and gives one much on which to ponder.

As he says, pull up a chair, get another cup of coffee and have a read, allowing time for reflection (and a photograph of Steph's olive tree in Adelaide). -GNH

To Stay in the E.U. continued, Part 2.... 
by Terry Field

All this sets the scene for British accession to the then 'Common Market'. (1970s)

The final accession, much manipulated by the two major parties so as to maximally promote and minimally discuss the idea of accession, was done in the context of a country that was entirely convinced that it could not succeed in any other way.

Britain was 'the sick man of Europe; described by Dean Acheson as having 'lost an empire and not yet found a role'.

The Europe that Britain joined was one utterly dominated by the French. Germany was paying in all respects for its actions, and said nothing. It financed all, contributed all, agreed to all, was invisible.

Its pain and discomfort was reflected by its political impotence. The 'EEC' that developed from the 'common market' was composed of western European nations; Germany was split in two and occupied in the east. The Soviet Union was the alternative power to the United States, and attracted the emotional loyalty of much of the European and British left. Much of government policy in all European states, and Britain, reflected this, and accommodated socialist values.

The economies of France and Britain were highly distorted by 'directed' government action. The 'market' was super-controlled, regulated, suppressed. Social equality, massive infrastructure projects,  and politicised engineering decisions were the order of the day.  Plans, ' five year plans', 'town-planning' etc, all accounted for the majority of activity. 

In Britain most manufacture was either nationalised or controlled as to investment and activity, by the state. This was, at an emotional level, both expected and accepted by a population conditioned by the environment of total war from 1914-18 and 1939-45 with economic depression in between.

This was a benign  environment for the European Economic Community to operate within. Common income levels across the market nations ( more or less), acceptance of directing government and an autocratic power in the East to concentrate minds.

This was a period of recovery from violent autocracy and war, with an American superpower to show the pleasures of high levels of personal consumption that all Europeans hungered for.

There were certainties.

Life was less personal, and more 'group' based. There was the protecting hand of the state, the sense of safe passage from birth to death, and the comfortable assurance that the Welfare State would guarantee the life and the rights of the citizen. To be a consumer in a market economy was all but meaningless for British and French people.

Then the Soviet Union collapsed.

Completely unanticipated, the alternative reality in the East was no longer there. In its place, the United States offered safe, unchallenged super-prosperity. The life of the American, experiencing what we were told was the 'American Dream' could be ours. How? By accepting the replacement of the 'directed' economy with the 'market' economy. Free trade. work, personal responsibility, guaranteed success- the True Liberty of Choice.

How far did this new liberty ( at least new for British and Europeans) go?

All the way. On a visit to New York during a particularly unpleasant winter, during the late 1980s, I listened as Americans discussed the liberty of tramps to fail economically and die on the streets of exposure.

Liberty without restrictions. No top; no bottom.

This rewriting of the place of the citizen in the mind of American society was as novel and disconnected from its past as it was in Britain. Or was it? No, not really. 

The 'kid-in-a-candystore' experience of the American as he or she ripped the abundant resources from a capacious continent was bound to produce a more cavalier attitude to group  behaviour.

How did the European societies react to this radically changed landscape?

The British enthusiastically accepted the 'freedoms' the market offered. The restraints that controlled aspiration and governed social relationships between people were cast aside. Old state-controlled industries, now hollowed-out shells, empty of capital were allowed to fail. Petro-currency prosperity both accelerated de-industrialisation and facilitated importation of goods from the East for trivial payments. Winners won big; losers skulked away, said nothing, disappeared.

The sun was out, the beach went on for ever. Joy unconfined.

The late 1980s became a time of consumer pleasure burying the idea of the value of the citizen in Britain. It now mattered much more to be well employed in a major - or profitable minor - corporation - than it did to be a 'citizen'.

The de-industrialisation was so extreme in Britain that the German head of BMW at the time, Herr Bernd Pischetsrieder, commented ' we are observing your deindustrialisation in Britain; you will permit us not to join you?'

This was mirrored in the United States, with similar euphoric results.

The American Dream could now be achieved with no real work requirement at all. Selling was what mattered. Making was for dummies.

Nobody cared that the power of manufacture resided elsewhere; nobody remembered that Chemical Bank got rich from the deposits of the chemical industry. That industry made wealth, made banks, made the future.

Those of us properly trained in economics well understood the future that was unavoidable - the transfer of wealth arising from manufacture in China and elsewhere to western banks to be re-invested in the west at almost no cost by a sophisticated banking system that was used to doing exactly that with the revenues of foreign petroleum-producing states.

What we had not reckoned with was President Clinton - or Gordon Brown.

The 'liberation' of the banking system, at a stroke, allowed the banks to merge high street banking with risk lending, but more importantly massively increase - by a factor of x 40 -  the size of the depositor and lender base, relative to the capital invested.

Thus the banks generated gigantic paper profits, buoyed the economy by free lending against illiquid as well as liquid assets, and filled the treasuries of the Anglo Saxon nations with gigantic receipts that fuelled a consumption binge and the construction of unproductive real estate. 

The banks balance sheets become as large or larger than the economies where they were registered; the guarantors of their liabilities - never really their assets - were the nation states that now played Russian roulette with paper money.

The collapse was inevitable; I say this with the confidence of one who sold every asset just prior to the 2007 crash (yes 2007, NOT 2008, that was merely the market reaction). 

Europe crowed it was an Anglo Saxon problem; they had, after all, had to listen at their dismal 'summits' to the humourless Brown grandstanding that the financialised economy was the way to go, the British success that they should have the courage to copy.

The puffed up leaders of Europe sniffed and sneered. They would be fine; all was controlled there, was it not?

NO. It was not. Their banking system had done precisely what all others had done; the economic illiterates in the chancelleries of Europe just did not know that it had all been done quietly.

The recapitalisation of the Banks in Britain and the United States, and the model of de-corporatisation of 'non-performing loans' by transferring them to national 'balance sheets' propelled debt levels to percentages of GDP not seen since the end of general war, and in some cases, particularly the United States, ever.

The European states did not recapitalise their banks; they operate out of government guarantee of balance sheets, and issued equity has withered on the vine more severely than in either Britain or the USA.

The results of this approach, (in my view a Bernanke-inspired over-reaction to the history of the Great Depression, and a gigantic failure of both analysis and appropriate decision-making) - now means the West will grow at a snail's pace for quite some decades; that interest rates must remain at very low levels for national budgets to be able to be written at all; and the technology driven and market-generated extreme social inequality that this economic management has generated since Clinton is now apparently intractable.

MY SUMMARY OF BRITAIN'S RECENT PAST THAT INFORMS THE PRESENT DEBATE IS NOW COMPLETED. 

You can all breathe now, get a cup of coffee and a biscuit ( or indeed two, preferably chocolate digestives) and relax.

Now, with the 'table set', Terry in his next post writes about why he reluctantly supports the U.K. remaining in the E.U.  Stay tuned.  

Thanks for your comments (articles!) to date.  

From Australia and her Olive Tree....

Dear Glenn

Aaaagh, I’ve now swayed back on to the other side, to David of Normandy. He knows it won’t be easy to break away and go it alone, but to have again control of one’s own borders and the accountability of one’s own politicians, are two key points. He puts it beautifully when he says: We shall not solve everything by leaving the EU for the safety, security and prosperity of our people. By leaving, our debts will remain, but security will be a little easier when we can control our bordersproperly. Prosperity will be up to us taking advantage of new found freedoms to trade and why should we fear reprisals as it is not in the interests of exporters on the continent to cut off their noses to spite their faces. 

The one huge advantage that we shall gain is that our politicians will be fully exposed and their decisions theirs and theirs alone. No longer will they be able to hide behind the unaccountable bureaucrats in Brussels.

I also didn’t know that David Cameron had not received the full concessions the UK needed so desperately if it were to stay in the EU. This is a VITAL point.

From Steph who uncharacteristically teeters on the fence over this ants nest.

From David in the Midlands of England responding to President Obama's pro E.U. Statements....

But it's not interference - it's good advice given by one friend to another!

I would hope that, were New York State to contemplate seceding from the USA, most New Yorkers would be happy to have almost anyone tell them -

"Don't  do it - such a course of action would be madness" - and

"You'd never be able to negotiate a trade-deal with the EU: well, you might, but you'd have to wait at the back of a long queue, because the EU is far more concerned with arranging such deals with big trading blocs like the USA."

From a noted Barrister in the Commonwealth of Pennsylvania....

Glenn, some thoughts ---

Dean Acheson got it right.....Britain lost an empire and is still searching for a role.....of course, the English Channel will do that do an island nation. 

Acheson, of course, was referring to the role of Britain in world affairs in the late 1940's after World War II and after India became independent.  That search for a role continued for Britain into the 1950's as Britain withdrew "east of Suez" after the catastrophe with the Franco-British-Israeli invasion of Egypt in 1956 and into the 1960's as the "winds of change"  blew across Britain's colonies in Africa. Having spent a semester in London in the fall of 1964, I remember well the arguments leading up to the election in October 1964 concerning the role of Britain in the world, especially the role inside or outside of Europe.  Taking the long view, I think the role of England in western Europe (especially in France and the Low Countries) has been of concern of kings and policy makers in London for over 600 years.  

Might the same analysis be made of France?....the losses at Dien Bien Phu and in Algeria in the 1950's still reverberate across French society.  Having been to Montreal twice, I can testify to the sentiments of many French Canadians (who feel that they lost the ability to have an empire in North America) as they reflect on the outcome of the Battle on the Plains of Abraham in 1759

Might the same analysis be made of Russia?....it lost an empire in 1991 and is still searching for a role.  Certainly the Crimea, the Ukraine and maybe the Baltic states come to mind.

Might a somewhat similar analysis be made of the United States?   Although American did not have a geo-political empire to lose, it has after the disastrous invasion of Iraq (with all its repercussions) lost its willingness to project military and political power in various parts of the world unless its vital national interests are at stake. 

Is Afghanistan or Libya or the Crimea or the Ukraine or Yemen or Somalia or the South China Sea an area involving vital American national interests?  Are any of those areas worth the loss of life and treasure that would be involved if American projected its military power in those areas?  Maybe yes, maybe no.  

I hope that gradually the American public is coming to realize that John Quincy Adams, a great Secretary of State, got it right---American should "not go abroad in search of monsters to destroy." 

Having been since 1991 the world's only super power and having slowly recognized since 2003 the limits of its military power and its ability to project its military power, American is still searching for its role in the world. 

NUF SED on a beautiful Sunday in April