Have-your-cake-and-eat-it, Lexit style: Paul Mason gives a master class in the transitional demand

Paul Mason, writing in the New Statesman last week,  gave a nice rendition of Jeremy Corbyn’s rule-maker-not-rule-taker position on Europe. Mason, like Corbyn, focuses on the EU’s regulations on state aid, which both men claim conflicts with Labour’s plans.

Mason makes a kind of have-your-cake-and-eat-it argument. But unlike the sunny Tory-Brexit vision of the benefits of being in and being out both arriving effortlessly, Mason demands having the cake and eating it. He’s ready for battle, though the battle is all for show – he knows his demands won’t be met; indeed, he makes the demands because he knows they won’t be met.

European law places substantial restrictions on subsidising and aiding individual companies, though there is considerable disagreement as to whether the measures in Labour’s platform would fall foul of this: for a view contrary to Mason’s see Biondi and Tarrant. What is clear to all is that the rules on state aid are evolving through the EU’s internal processes, and that leaving the EU would mean leaving losing influence over the evolution of the rules. It is also clear that the closer the UK remains to the EU – is in particular, the closer its integration with the Single Market – the more closely it will need to align with EU regulations, not least those on state aid. That’s the quandary. Now see what Mason does with it.

Mason says he wants the UK to be in the Single Market but with an agreement which allows the state to “subsidise, aid, restructure and, where necessary, nationalise companies”. He acknowledges that it is not clear whether, as things now stand, EU state aid regulations would actually conflict with Labour’s programme, but he raises two spectres: one is that Brussels even now is planning to exact vengeance on the UK because it’s leaving, and that Brussels’ wrath would be redoubled with the advent of the long-awaited left-wing Labour government; the other is that Brussels will fall under the sway of a “right/far-right coalition” (though the far right of course is also hostile to the EU’s state aid restrictions…).

So what does Mason want, in return for his precious support for remaining under single market rules?  “I want an advance, legal and binding agreement that European rules will not now, and cannot in the future, sabotage a Labour government’s programme.” (the underlining is Mason’s)

Sure, and I want a unicorn for Christmas.

Consider first that we’re talking about an international treaty. Treaties don’t work like commercial contracts – governments withdraw from them as they choose, and there’s really no way to hold them to account for it. And, as Mason correctly notes, the EU’s own treatment of the state aid problem keeps evolving. He frames the problem as one in which the UK, having renounced its right to help write the rules, should make its participation contingent on rules being frozen in place for the UK, even as they evolve for other Single Market members. That simply won’t happen: “legal and binding” is a unicorn.

Second, even if HM Government could find and capture such a unicorn, Mason is writing as a partisan of a Labour party that does not have the privilege of negotiating the details. Whatever concessions this government does negotiate, they will certainly not be specially geared to facilitate the implementation of the Labour election manifesto. For the same reason, we can’t credit the Times’ report linked by Mason, of an anonymous “senior Brussels source” (how vague is that attribution) claiming that the “real battle” in the negotiations with Britain is over state aid rules due to Brussels’ fear of Labour: does the Times want us to think the reason for lack of progress in Brexit negotiations is that the Tories are not allowing Brussels to construct an agreement that will protect Margaret Thatcher’s legacy from a future Jeremy Corbyn government? (I know that the previous sentence is strange, but that does seem to be what the Times, and Mason, are claiming.) The best explanation for the Times story is that it is an attempt to plant a meme helpful to the Tory soft Brexit camp, in their battle with the hard Brexit camp: the Times is telling fellow Tories that Brussels is just offering them tough love, protecting them from the spectre of corbynism. Only a fool would believe this, but Mason seems to put his readers in that category.

Third: even if there were to be a pre-Brexit general election which resulted in a Labour majority, and that election were to occur soon enough that Labour could negotiate the final deal with the EU, and Brussels were not as determined as Mason claims it is to sabotage Labour… even if all of those things, why on earth would the EU agree to allow any Single Market member to provide whatever state aid it wanted? We need to keep in mind why restrictions on state aid are so important to the functioning of the single market.

The fundamental reason for state aid restrictions in the Single Market is to prevent races to the bottom: mutually destructive subsidy wars. Countries can shield themselves from subsidy wars with trade barriers, but the Single Market abolishes those – that’s why the EU’s internal restrictions on state aid are so much more exacting than those of the WTO.

To accede to Mason’s demand of an unfettered right to “subsidise, aid…” etc. UK companies, public or private, would be to let the UK act like a state or city in the USA. That means giving massive tax subsidies to particular companies in exchange for building (or not closing) a plant or an office. For a taste of what that means read about the long-drawn-out beauty contest of American cities offering free everything to Amazon in return for the privilege of hosting its “second headquarters” (its home city of Seattle having become too small for the company), and bear in mind that this is just one current example of something that happens every day, all over the USA. It starves local public services in the USA of revenue, and undercuts small businesses that don’t have the bargaining power that big corporations do. Of course the EU would, and should, refuse to allow this within the Single Market. It’s not about whether nationalization can happen within the EU (it can): it’s about whether individual corporations can hold up the Exchequer for bespoke tax rebates. The EU has no reason whatsoever to let the UK use this tool for “industrial policy” as it steps (halfway) out the door.

Mason is a clever and well-informed person, who cannot possibly believe that his demand has any chance of being met. I believe that, technically, he is making what in the Trotskyist political tradition is called a transitional demand. That’s a demand that you know cannot be met. Often, of course, people make demands that won’t be met, as a bargaining position, expecting or hoping for compromise. The transitional demand is different: it is made to be rejected, to demonstrate that the end you seek cannot be achieved within the current system.

Mason’s demand on state aid is a perfect example of this. It is meant to achieve two things: first, for Mason to be able to claim to support Single Market membership while not in fact doing so in any meaningful way; second, to show –  when the Tory-EU negotiators fail t accede to Mason’s demand – that the UK has no place in the European single market. This would be comical if it were not so close to the position of the Labour leadership.

 

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Skills and the response to crisis

My paper with Andrea Filippetti is now available from Birkbeck’s Centre for Innovation Management Research. Bottom line: European countries with a combination of good short-term unemployment insurance and vocational training participation were less likely to see reductions in private sector investment in innovation in the first year of the financial crisis: having just one of these was no help, and job security, the bête noire of neo-liberalism, made no difference. Another way of putting it is that, in this particular case (investment in innovation, during the financial crisis), it is the security part of the flexicurity model that provides the benefit. This is consistent with the logic of Estevez-Abe, Iversen & Soskice’s chapter in Hall & Soskice’s Varieties of Capitalism.