Socialist Economic Bulletin

By Fiona Edwards

Jair Bolsonaro’s administration has wasted little time in advancing its project of systematically destroying the role of the state in Brazil’s economy. Bolsonaro’s radical neo-liberal offensive simultaneously encompasses drastic attacks on the economic and social rights of Brazil’s working class in addition to threatening the long term economic and social development of the country. Bolsonaro is effectively auctioning off Brazil’s future for the benefit of US capital and its allies.

The neo-liberal offensive is taking place on several fronts and includes a drastic attack on pensions, a huge programme of privatisation and the undermining of the technological development of Brazil’s economy.

Bolsonaro’s administration has embraced the era of ‘permanent austerity’ which was institutionalised by his predecessor Michael Temer who presided over Brazil from 2016-2018 following a coup that removed Workers Party (PT) President Dilma Rousseff.

Temer introduced a new ‘expenditure ceiling’ in December 2016 through a Constitutional Amendment which mandates a zero real growth rule for federal primary expenditures for the next 20 years. Temer’s harsh austerity programme made him extremely unpopular – his approval rating by the end of his Presidency was just 4% – and has left Brazil’s economy essentially stagnant, with growth of only 1% in 2017 and 1.1% in 2018 according to the World Bank.

Bolsonaro is attempting to deepen, accelerate and intensify the austerity offensive in Brazil. The project has been very bluntly described by Bolsonaro’s Minister of the Economy, Paulo Guedes, who said that he intends to “sell everything.”

Guedes has assembled a team which includes fellow University of Chicago trained economists and that is determined to systematically dismantle the state’s role in Brazil’s economy with a massive programme of privatisation and an almighty assault on the living standards of the overwhelming majority of the population.

A defining feature of Bolsonaro’s neo-liberal offensive includes the selling off of strategically important assets and industries that are crucial to Brazil’s future development to US corporations, in violation of Brazil’s national interests.

From the point of view of developing Brazil’s economy and raising the living standards of the population, Bolsonaro’s neo-liberal offensive is the exact opposite of what is required.

Bolsonaro’s drastic attack on pensions

The centrepiece of Bolsonaro’s neo-liberal offensive is a dramatic, vicious and politically unpopular attack on pensions.

Under Bolsonaro’s plan, which is currently under discussion in Brazil’s Congress, workers would lose $261 billion over the next 10 year as a result of their pension benefits being slashed and a drastic increase in the age of retirement. Under the current system men and women can claim pension benefits after 30-to-35 years of contributions respectively, which allows many to retire in their mid-50s. The proposal Bolsonaro has put to Congress would increase the minimum retirement age for both public and private sector workers to 65 for men and 62 for women.

Bolsonaro needs to persuade 308 out of 513 members of Brazil’s politically splintered lower house of Congress to vote for his Pensions Bill in order to get it passed. The unpopularity of the attack – a recent opinion poll from DataFolha showed that 51% of Brazilians are against the pensions ‘reform’ – and the resolute opposition from Brazil’s Workers Party (PT), other left wing political parties and the trade unions makes it difficult for Bolsonaro to win the necessary support in Congress to pass his proposals.

On Monday 15 April 2019, the Workers Party (PT) led the opposition political parties in the lower House in winning a majority to delay the pensions ‘reform’. Bolsonaro needs an additional 140 votes to push through his attack on pensions which would require him to build a coalition with the Brazilian Social Democracy Party and the Democratic Movement Party.

A recent article in the New York Times assesses the outlook of the Pensions Bill passing as “growing dimmer” and reports that “hearings on pension changes have devolved into shouting matches, frustrating proponents inside and outside the government, and leading even former allies to speak of Mr. Bolsonaro with open contempt.”

Bolsonaro’s team are proposing to launch a massive attack on healthcare and education should the attack on pensions fail to attract the support necessary to pass through Congress. The “Plan B” proposes to remove the constitutional guarantees which are currently in place for the funding for health and education and has been put forward alongside the Pensions Bill so that it can be used as a bargaining chip.

Radical privatisation agenda

Whilst Bolsonaro’s administration has disappointed US capital with its failure to launch a quick, successful, striking attack on pensions, it has succeeded in advancing an aggressive privatisation agenda.

In January, Bolsonaro’s Minister of Infrastructure Tarcisio Gomes de Freitas declared that the new government intended to privatise or liquidate about 100 state-owned companies during 2019, including the privatisation of key infrastructure such as railroads, ports and airports. The head of Brazil’s new Privatisation Secretariat, Salim Mattar, announced that Bolsonaro’s administration planned to raise $20 billion from the sale of state shares in public companies in 2019 alone.

Paulo Guedes reported on the progress of the Brazilian government’s privatisation programme at a recent conference in New York, stating that privatisation proceeds so far this year had reached £12 billion and expressed confidence that the goal of raising $20 billion from the sale of public assets this year will be exceeded by 40%. He also stated that the government intends to accelerate the pace of privatisation over Bolsonaro’s four year term.

In March 12 regional airports were sold off and now the Brazilian government are preparing to sell off a further 22 other airports later this year.

Crucially, Bolsonaro’s team plans to diminish Brazil’s biggest state company, the oil giant Petrobras. Salim Mattar, the leader of Brazil’s Privatisation Secretariat, announced that the Brazilian government wanted Petrobras to sell most of its 36 subsidiaries within four years in addition to privatising the Brazil state-owned power company Electrobras.

Guedes has appointed a fellow University of Chicago alumni, economist Roberto Castello Branco who is a fierce critic of state intervention in the economy and a consistent advocate of the complete privatisation of state-owned companies, to run Petrobras.

From the moment he was appointed Branco has made it clear he intends to push forward a “divestment plan” which will entail the sale of mature oil fields in addition to opening the refining sector, which Petrobras currently has a monopoly over, to the benefit of multinational corporations. Branco considers it “inconceivable” that one state-owned company has 98% of the country’s refining capacity and declared that monopolies are “absurd.” Jose Maria Rangel of the Single Federation of Petroleum Workers (FUP) has criticised Branco’s plans, stating “Petrobras is going to move to sell its refineries and fields, moving forward to reduce our company to serve international capital.”

In April 2019 the Brazilian government announced that Petrobras intends to start selling 50% of its refining capacity in June 2019, which is equivalent to 1.1 million barrels of oil per day. Such a move would severely diminish Petrobras.

The Bolsonaro administration is also undermining Brazil’s state banks in order to diminish the role of state investment in the economy. The main target is Brazil’s National Bank for Economic and Social Development (BNDES), the largest development lender in the Americas which under the Workers Party financed projects in many Latin American and African countries. Bolsonaro opposes BNDES’ practice of lending money at low interest rates to build “national champion” companies which was done under the left wing Workers Party governments from 2003 to 2016. BNDES is currently in the process of reducing its stake in the state-controlled oil company Petrobras.

Undermining the technological advancement of Brazil’s economy

Another feature of Bolsonaro’s neo-liberal agenda is to undermine Brazilian science and national technological development.

A crucial decision was made by the Brazilian government in February 2019 to approve the sale of the majority of Embraer’s commercial division to the US corporation Boeing. Embraer is a huge Brazilian aerospace company which is the third largest producer of civil aircraft after Boeing and Airbus. 80% of Embraer’s profitable commercial division is being sold-off to Boeing.

This decision means that Brazil is losing its only large, high-tech, profitable company, which will have a negative impact on the development of new strategic projects.

Manuela D’Avila, the left’s Vice President Candidate in the Brazilian elections of 2018, and member of the Communist Party of Brazil has outlined the significance of the sale of Embraer in undermining Brazil’s development:

“When Embraer was founded during the end of the 1960s, it overcame the disbelief that Brazil could make planes that could fly the entire world. This is now a reality. Today, Embraer is a private, open capital company that is strategic to Brazil in terms of innovation, economics and national defense.

“Due to the strategic nature of Embraer, the Brazilian government – which is a shareholder in the company – has a special type of stock, called a golden share, which gives it veto power and the final word over negotiations that are considered strategic, so that it can avoid allowing international transactions like this to damage our national interests.

“It is an initiative of national betrayal. The main impact of the possible sale of Embraer, is loss of intelligence and restrictions on the nation’s technological development.

“However, the debate over Embraer is opportune because it reminds us of what we want to be as a nation. Do we want to be a nation that produces knowledge and products of aggregated value or one that merely exports commodities?”

In addition to selling off the majority of Brazil’s most successful high-tech company, Bolsonaro’s government has also announced that it has frozen 42% of the budget for the country’s Science and Communications Ministry. This freeze will further undermine Brazil’s scientific and technological development. The Brazilian Science Academy and five other scientific societies have condemned the decision stating, “it will take many decades to rebuild the country’s science and innovation capacity” unless this decision is reversed.

Bolsonaro’s rising unpopularity

Bolsonaro already has the worst approval rating of any elected President by this point in their first term since democracy was restored in the 1980s. 30% of the population regard Bolsonaro as “bad or awful”, 33% have a neutral view and 32% believe he is “great or good.” On the day of his inauguration on 1 January Bolsonaro’s approval rating was 49%. However, there remains some illusions in optimism for Bolsonaro’s Presidency – with 59% believing that his government will be “great or good.”

New economic data shows that unemployment is rising in Bolsonaro’s Brazil – it increased from 11.6% in November 2018 to 12.4% in February 2019. Meanwhile the Central Bank has released data indicating that GDP fell by 0.73% in February of this year, compared to the previous month.

The clear priority of the Bolsonaro administration is to pursue an aggressive neo-liberal agenda to maximise profits for US capital and its allies in Brazil whatever the costs to Brazil’s overall development or the living standards of the population. Such an agenda, which is against the interests of the overwhelming majority of the Brazilian population, is unlikely to improve Bolsonaro’s approval ratings as it involves such a tremendous attack on Brazil’s population.

The exact opposite approach to Bolsonaro’s neo-liberal offensive is required to develop Brazil’s economy, improve living standards and advance social progress for the majority of Brazilians. Increasing state investment to build “national champion” companies, using state banks as a channel to promote public investment and building rather than selling off high technology companies is a path to Brazilian development and independence. Bolsonaro’s approach is a path to dependency and subordination to the US.

This article was originally published here on Eyes on Latin America

Why China maintained its strong economic growth

• The overwhelming cause of the slowing of China’s economy is a fall in capital/investment creation. This is shown in growth accounting by the fact that almost nine tenths of the decline in GDP growth is due to a fall in capital inputs. In national accounts data it is confirmed by the extraordinarily high correlation between net fixed investment and GDP growth of 0.81, of a correlation between gross saving and GDP growth of 0.87, and a correlation between net saving and GDP growth is 0.91 – all extraordinarily high figures.
• Demographic trends will reduce labour inputs, slowing the economy, but this effect only accounts for a small part of economic deceleration – macro-economic data shows that increased labour inputs created only a small part of China’s growth, while growth accounting shows a fall in labour inputs accounts for only about one tenth of the slowing of China’s economy.
• Growth accounting data shows that China’s TFP growth is high in terms of international comparisons – meaning it is very unlikely that China’s GDP growth can be accelerated by an increase in TFP, but that measures will have to be taken to ensure China’s TFP growth does not fall.

It is necessary to be aware of the full scale of this negative supply side shock in terms of capital creation. The decline in China’s net fixed capital investment is 9% of GDP on World Bank data. Even if the statistics on capital depreciation merit further evaluation, given their extremely high level by international standards, even measures of gross savings, which do not rely on calculation of depreciation, has fallen by 5.0% of GDP. Either figure is a severe negative supply side shock – confirming the growth accounting data which shows a sharp fall in capital inputs.

To return to the beginning of this article, the focus here is on medium/long term factors in China’s economic development. This is not contradictory to a shorter-term emphasis on demand management or supply side measures already taken to close excess capacity. However, to note again, measures affecting the demand side of the economy must necessarily operate through their impact on the supply side i.e. to produce changes in economic growth demand must create changes in labour inputs, capital inputs or TFP. Changes in demand which do not affect the supply side inputs may produce inflation or deflation, but do not produce changes in economic growth.

The consequences of this factual situation of the weight of factors in China’s economic development for economic policy are clear. As for reasons already stated TFP will be at best neutral, and demographic trends will be moderately negative, the only key input which can positively influence China’s growth rate is the level of capital inputs. This means that policies which affect capital inputs into China’s economy, that is investment, can have a powerful effect in lowering, sustaining or raising China’s economic growth rate.

This quantitative situation therefore also necessarily determines the practical efficacy of measures designed to limit China’s economic slowdown and/or to carry out any economic stimulus.

• Measures to maintain or increase market efficiency are important to try to sustain China’s rate of TFP growth but they not quantitatively able to prevent an economic slowdown – for the reasons given it is extremely improbable China could increase its level of TFP growth given its present high level. Furthermore, a strategy, which is sometimes proposed that China should allow its economy to slow but increase its TFP growth will not work for the quantitative reasons outlined – TFP growth is pro-cyclical and therefore a slowdown in economic growth will lead to a slowing of the TFP growth.
• Demand side measures to increase consumption will only be successful, for the reasons already outlined, if they produce changes on the supply side – that is, primarily if they affect capital inputs.
• Measures to cut company taxation are useful in maintaining employment and other goals but for the quantitative reasons analysed above they will only translate into faster economic growth if they lead to an increase in capital inputs – that is investment.
• In summary, given the quantitative situation analysed with demography/labour inputs and TFP, only measures which directly increase capital inputs, that is either state or private investment, will be significantly beneficial to the economic growth rate.

Practical application of policy will necessarily confirm the trends analysed. While measures such as increases in the retirement/pension age, and increases in training and education, may decrease the negative effect of demographic changes no significant body of opinion believes that a significant increase in China’s growth rate can take place due to an increase in labour inputs. There are those who argue that China’s growth could be increased due to an increase in TFP, but for the quantitative reasons given this will not be successful. For quantitative reasons the only method that will stabilise/increase growth will be an increase in capital inputs.

Postscript

This article was written to analyse in detail the slowing of China’s economy in the latter part of 2018. But its conclusion, that it is the level of investment which controls the rate of growth of China’s economy, applies equally to the good results for the first quarter of 2019. The fall in investment in 2018 led to economic slowing, the rise in investment in the first quarter of 2019 led to stabilisation in GDP growth and acceleration in other economic measures. Therefore, from both angles the data fully factually confirms that it is fixed investment which is the most powerful factor affecting China’s speed of economic development.

Appendix

This appendix is intended for economic specialists – non-specialists should know that it does not add to the main conclusions of the article. It merely indicates further substantiating evidence and explanations regarding the points in the article.

First regarding growth accounting, it is important to note the official improvements in the methods of measuring economic growth and its causes which have been formally adopted by the UN, OECD, and other statistical agencies – it is a serious problem in some literature in China that methods of measuring economic growth and its causes which are no longer accepted are used. The reasons for these changes in the official methods of calculating economic growth and its causes are analysed in detail in 为何联合国、经合组织与美国正式改变其经济增长成因测算方法？ (The Copernican Revolution in Analysis of Economic Growth is Very Significant for China). But the clearest fundamental error which had to be corrected compared to former methods of analysing the causes of economic growth was that these did not calculate changes in the quality of capital and labour inputs. This meant in the case of labour, for example, that one hour of work by a South Korean peasant in 1953, who may have been illiterate, was calculated as equivalent to 1 hour of work by a South Korean engineering PhD, and very rapidly depreciating assets such as ICT equipment were not treated differently from assets which depreciated over very long periods of time. These errors are corrected in the new internationally approved methods of calculating the causes of economic growth by:

1. Calculating separately labour quantity (the number of hours worked) from labour quality (the skill, educational etc qualification of labour);
2. Using the category of ‘capital services’ to measure the contribution of different types of capital investments (in the OECD methodology eight categories of capital assets are used ‘computer hardware, telecommunications equipment, transport equipment, other machinery and equipment and weapons systems, non-residential construction, computer software and databases, research and development and other intellectual property products.’

In this article data calculated according to these new and approved methods of calculation are used. Regarding the correlation of GDP growth and TFP growth the correlations for single years was shown in the article. However, it is useful and important to show that the same correlation exists over not merely the short but the medium term. Figure 18 therefore shows a three-year moving average for the correlation of TFP and GDP growth and Figure 19 shows a five-year moving average. The three-year correlation is 0.81 and the five-year correlation is also 0.81. Both correlations are extremely high. The caveat that correlation does not establish causation is irrelevant as this extremely high correlation shows that it is not possible to increase China’s TFP growth while reducing China’s rate of GDP growth – that is a strategy of ‘lower GDP growth and higher TFP growth’ will not work.

By Ken Livingstone

We are quickly running out of time to make the necessary steps required to prevent global warming exceeding the critical point of a 1.5 degree celsius rise. The International Panel on Climate Change has argued we have just over a decade to take the decisive action to reduce the amount of carbon in the atmosphere. We face a direct existential threat if we do not rapidly switch from fossil fuels by 2020, and a failure to do so will mean runaway climate change.

Already we are seeing record-breaking temperatures, extreme heatwaves, storms, floods, and wildfires leaving a trail of death and devastation. As the UN’s Antonio Guterres has said, scientists have warned about global warming for decades, but “far too many leaders have refused to listen [and] far too few have acted with the vision that science demands.”

When it comes to having both the vision and policies needed to address these severe dangers, it is only voices from the left that can put forward the radical changes to the economy needed, and it is the globally resurgent extremeright that is instead forming an international axis of climate change denial. Specifically, Donald Trump’s administration is continuing to undermine the Paris Climate Agreement and has made clear that the US will withdraw from it when the rules allow him to do so in 2020.

He is joined in this by the far-right president of Brazil Jair Bolsonaro, who has issued an executive order to facilitate the acceleration of deforestation in order to open up the Amazon rainforest for further exploitation by agribusiness, mining and construction companies. This move could destroy the ‘lungs of the planet’ by reducing the planet’s ability to absorb and store carbon.

While Bolsonaro and Trump claim these devastating policies are in the economic interests of their countries and populations, in reality they only advance short-term profits for a tiny elite. In the medium to long term they will have a devastating impact on the living standards of the overwhelming majority, especially the poorest, who are impacted by climate change the most.

This reactionary agenda faces stiff resistance from climate justice campaigners. Importantly we are also starting to see the seeds sown of an international political movement demanding a new, socially and environmentally sustainable model of political economy.

This movement understands that we need a fundamental transformation away from neo-liberalism, and that it is impossible to tackle climate change without simultaneously reducing inequality, and vice versa.

In the belly of the beast itself, the Green New Deal resolution put before the US Congress by Alexandria Ocasia-Cortez coherently melds action to tackle climate change with measures to counteract the obscene inequality and wage stagnation that has built up over decades of neo-liberalism.

The resolution starts with the Intergovernmental Panel on Climate Change’s conclusion that the only science-based target to tackle the climate crisis is to constrain a global average temperature rise below 1.5 degrees. But it also takes as its evidential starting point “hourly wages overall stagnating since the 1970s… the third worst level of socio-economic mobility in the developed world before the Great Recession…[and] the greatest income inequality since the 1920s”, including a specific focus on the racial and gender wealth divide.

To overcome this, it advocates the US government launches at least a trillion dollars in state investment to eliminate fossil fuels and switch to 100% renewable energy in the next decade, which would inevitably boost growth and create quality jobs.

Labour’s proposed green jobs revolution, creating hundreds of thousands of jobs and recently elaborated by Rebecca Long-Bailey, also shows that Jeremy Corbyn-led Labour is a central part of this international movement for change.

As Rebecca said, “We believe that together we can transform the UK through a green jobs revolution, tackling the environmental crisis in a way that brings hope and prosperity back to parts of the UK that have been held back for too long.”

After decades of neo-liberalism, our economy is structurally weak and deeply unequal. Whole communities have been de-industrialised, insecure and low paid work has soared, our infrastructure is underinvested and crumbling, and our society’s fabric is being pulled apart by austerity. In direct contrast to this failed approach, Labour’s green jobs revolution can improve the living standards of millions.

Jeremy Corbyn understands that only a total transformation of the failed neo-liberal model can change this, protecting both people and planet. This not only offers hope for a better life here, but is also part of a new international alternative to ensure humanity has a future.

» Follow Ken at www.twitter.com/ Ken4London and www.facebook.com/ KenLivingstoneOfficial

The above article was previously published here by Labour Briefing.

By Fiona Edwards

“Many people ask what a Green New Deal entails. We are calling for a wartime-level, just, economic mobilisation plan to get to 100% renewable energy ASAP.”
AOC tweet, 2 January 2019

Alexandria Ocasio-Cortez (AOC) is proposing that the United States become a global leader in the battle to stop climate change by undertaking a rapid and thoroughgoing economic transformation to drastically reduce US greenhouse gas emissions in the next 10 years. The plan being put forward by AOC calls for the US to launch a massive programme of state investment to bring about a ‘Green New Deal’ and the necessary transformation of the economy away from a reliance on fossil fuels to 100% renewables. It is an approach that directly challenges US President Donald Trump who is currently leading the US in precisely the opposite direction. Under his Presidency the exploitation of unconventional fossil fuels has massively expanded which is causing US carbon emissions to rise at a time when they should be rapidly falling.

As AOC’s resolution to Congress points out, the US has “historically been responsible for a disproportionate amount of greenhouse gas emissions” and continues to contribute enormously to the problem of climate change. The US has a moral responsibility to play a leadership role in resolving the international climate crisis, a crisis that poses an existential threat to human civilisation and which the US has played a major role in creating. In addition to being a responsibility, leading a global effort to decarbonise the world economy does also present the US with a “historic opportunity” to break out of “a 4-decade trend of economic stagnation, deindustrialisation and anti-labour policies” to create millions of good, high wage jobs and “provide unprecedented levels of prosperity and economic security for all people of the United States.”

The scale of the planetary emergency the world is facing was underlined by the International Panel on Climate Change (IPCC) ‘Special Report’ of October 2018 which outlined the disastrous impact a 2 degrees Celsius rise in global temperatures would cause: widespread increase in famines, cities and entire countries submerged in water, deadly heatwaves, forest fires, floods and hurricanes. Global temperatures have already risen by approximately 1 degree Celsius since pre-industrial levels and on the current trends the world is on track for 3.3 degrees Celsius of warming by the end of the 21st century. Humanity is currently losing the battle to stop catastrophic climate change. Urgent and massive action is needed to limit global warming to a ‘safer’ 1.5 degrees Celsius rise and major strides forward are needed within the next decade.

In light of this reality AOC’s assertion that the ‘Green New Deal’ is “going to be the Great Society, the moonshot, the civil rights movement of our generation” is not over-blown rhetoric but entirely, as she has put herself, “the scale of the ambition that this movement is going to require.”

In the FAQs section of her draft ‘Green New Deal’ published at the end of 2018 AOC made clear the scale of the investment required to bring about a massive transformation to decarbonise the US economy, citing that “at least $1 trillion” would be needed. She is also made clear about the fact that the state will need to play a “big role” in driving and making such investments.

On how to raise the funds required, her draft proposal stated:

“Many will say, “Massive government investment! How in the world can we pay for this?” The answer is: in the same ways that we paid for the 2008 bank bailout and extended quantitative easing programs, the same ways we paid for World War 2 and many other wars. The Federal Reserve can extend credit to power these projects and investments, new public banks can be created (as in WW2) to extend credit and a combination of various taxation tools (including taxes on carbon and other emissions and progressive wealth taxes) can be employed. In addition to traditional debt tools, there is also a space for the government to take an equity role in projects, as several government-affiliated institutions already do.”

AOC’s widely publicised proposal to increase tax on the super-rich to help fund the ‘Green New Deal’, by raising the top marginal tax rate to 70% for those that make above $10million, has been very well received by the US public.

Some have dismissed AOC’s ‘Green New Deal’ as unrealistic. On the contrary, the ambition of the ‘Green New Deal’ – to make a rapid transition to 100% renewable energy and abandon fossil fuels – is entirely consistent with the what the IPCC says is necessary. The world’s carbon emissions must collectively start decreasing now and half from current levels by 2030 and this can only be achieved through the rapid phasing out of fossil fuels which must be replaced by an enormous expansion of renewable energy. And as Dean Baker points out, China is delivering its own Green New Deal right now through enormous, on-going state investment in renewables and electric cars.

It is Donald Trump’s approach that is completely unrealistic and out of step with what the international scientific consensus states is required. The US is now the number one producer of oil and gas in the world as a result of the “fracking revolution” which has seen production of unconventional fossil fuels soar. It’s a trend that the International Energy Agency is anticipating will deepen, with expectations that the US will be responsible for 75% of global oil growth and 40% of global gas growth over the next 6 years. The result of Trump’s policies on climate change has been to increase US carbon emissions, which rose by 3.4% in 2018.

Trump and the fossil fuel industry argue that aggressive exploitation of fossil fuels is necessary for economic development and that green policies are damaging to prosperity.

In reality massive state investment for a ‘Green New Deal’ could get the US economy out of its stagnation and provides a route to improving living standards as well as tackling climate change. As AOC put it in a public event on the climate change in December 2018:

“The idea that we are going to somehow lose economic activity… As a matter of fact it’s not just possible that we will create jobs and economic activity by transitioning to renewable energy but it’s inevitable that we are going to create jobs. It is inevitable that we are going to create industry and it’s inevitable that we can use the transition to 100% renewable energy as the vehicle to truly deliver and establish economic, social and racial justice in the US. That is our proposal.”

AOC’s ‘Green New Deal’ proposal is exactly the ambitious approach needed to save the planet and achieve a decent standard of living for all and it is the type of approach that Jeremy Corbyn and the Labour Party front bench are also pursuing in Britain.

By Tom O’Leary

The importance of Britain being in a Customs Union with the EU is highlighted by the recent exchange of letters between Jeremy Corbyn and Theresa May. Jeremy Corbyn has focused on blocking a ‘No Deal’ outcome, which would be extremely negative for jobs and living standards. He has also set out his support for being in a customs union with the EU. Theresa May continues to threaten No Deal and rejects being in a permanent customs union, it being one of her key red lines.

Although there is much else in the exchange of letters which is also important to note, the principal issue examined here will be the one that Jeremy Corbyn raises, which is the vital necessity of being in a Customs Union with the EU.

Corbyn’s letter demands significant changes to the Political Declaration (which offers an outline of the future relationship with the EU) and insists that these changes need to include, “A permanent and comprehensive UK-wide customs union. This would include alignment with the union customs code, a common external tariff and an agreement on commercial policy that includes a UK say on future EU trade deals. We believe that a customs union is necessary to deliver the frictionless trade that our businesses, workers and consumers need, and is the only viable way to ensure there is no hard border on the island of Ireland. As you are aware, a customs union is supported by most businesses and trade unions.”

The full text of Corbyn’s letter is here. May’s letter rejects this, and falsely claims that the Political Declaration continues the same benefits as the customs union. This is blatantly untrue, as the Political Declaration says only that those same benefits are desired, without any mechanism to achieve that. May’s letter is here.

The nature of the EU

There is no useful purpose, either for serious analysis or promoting the interests of the working class, to suggest that the European Union is anything other than a capitalist club. It is not, as Will Hutton and other propagandists claim a repository of Enlightenment values. First these so called ‘Enlightenment values’ were used to create the greatest colonial Empires the world has ever seen. In the famous words of Gandhi when asked what he thought of Western civilization he replied ‘it would be a good idea’. Today it remains a sickeningly bad joke in light of the EU’s treatment of refugees fleeing across the Mediterranean, its treatment of Greece, the imposition of austerity across the Eurozone and much more besides. The false claims as to the EU Enlightenment project also acts increasingly as a cover for an intensification of vile Islamophobia, antisemitism and other forms of racism within Europe.

The purpose of the EU is to enhance and develop the interests of capital, most powerfully German capital, across the continent of Europe. But this development is multi-faceted in the way that the development of capitalism is in general. So, a new factory will usually entail increased labour exploitation and environmental degradation. Yet socialists do not stand against the construction of the new factory and do welcome the jobs, but instead argue for the best possible pay and conditions for all the workers in it, for environmental protections, other safeguards, and so on. Where and when it is possible, socialists are in favour of the factory passing into the hands of the workers.

The nature of a customs union

All goods and services operate in a market, irrespective of whether the producers or consumers understand that as such. For the most advanced manufactured goods in particular that market is increasingly internationalised, even globalised.

The internationalisation occurs at three different levels.
· First, there is the production of inputs for final production, which is everything from basic raw materials to the most sophisticated machinery, equipment or software.
· Secondly, there is the production of finished goods themselves which can take place at a number of different locations internationally.
· Thirdly, there is the market for the goods themselves, where the size of the market is decisive for the efficiency of the production and the Investment that is required.

The production of many services is less easily internationalised for many reasons, including language barriers and lack of labour mobility, although some services such as finance, travel etc are highly internationalised and increasingly legal and accounting services are also heading in the same direction. Many others, such as entertainment services, some aspects of design and publishing are developing in the same way.

The alternative to the customs union

Because the British economy already participates in the Customs Union with the EU and the Single Market, refusal to have any Customs Union with the EU amounts to a protectionist measure, a reduction in this economy’s openness to international trade. The Brexiteer fantasy that barriers to trade with the EU economy can be compensated by trade deals with other countries is mathematically unlikely as the EU constitutes approximately half all trade in goods. But it also ignores that fact that over 60 trade deals with third countries will in fact be ripped up by no longer being a Member of the EU. Trade deals with those countries, most especially the US, but also Japan, South Korea and other countries will have to be renegotiated from a relatively weaker position.

The increasingly internationalised production of manufactured goods has also become a hot topic in the United States because of Trump’s trade wars and protectionism. But Trump’s protectionism in favour of the autos sector has foundered precisely because so much of the content of US-marque cars that are finished in the US is from Canada, Mexico and other countries.

However, these ‘American-made’ cars are actually globally-produced. The 2017 Ford Focus, for example, is built in the United States, but only gets 40% of its parts from the U.S. and Canada, according to Federal data. At the other extreme, only 5% of the parts for 2017 BMW 7 Series Sedan were made in the US. The rest was made in Germany. For some time, the leading automakers in the ‘motor city’ of Detroit have been Japanese, outstripping the production of US marques.

At most, Trump’s protectionist measures (which have been underpinned by huge tax breaks for companies and the rich) have only deferred the further internationalisation of production. Yet the IMF has noted that they could knock $430 billion off global output.

Trump once tweeted that trade wars are easy to win for a country which runs sizeable trade deficits:

Of course, if there was one big set of factories in the US producing cars and another set in Canada and Mexico, then his protectionism might possibly have the impact he desires. Instead, his policy simply interrupts the efficient socialisation of production, in favour of a failed attempt to re-organise it on a national basis. By far the most important effect of his policy is to raise the cost of production in the US, which raises prices to US consumers more and therefore increases the competitive threat to US jobs in cars and associated industries.

A key impediment to the development of these fundamental trends is the existence of tariff and non-tariff barriers (which include product standards, local content rules, and other factors which are all subject to inspection regimes). A customs union operates to remove the tariff barriers between two different economies.

Unfortunately, there are romantic notions in left circles in Britain and Europe that would wish away the concrete issues raised by the existence of multinational or even global supply chains. It is unrealistic to believe workers’ control or ‘Lucas plan’ ideas in relation to current, complex manufacturing supply chains that dominate aerospace, cars, pharmaceuticals and other sectors can ignore these realities. As described in a previous article, aerospace and other advanced producers rely on a vast flow of inputs as part of the production process. It would require a vast, entirely unfeasible level of investment to recreate those on national territory, and for a national market that is simply too small to support even the current level of output.

Outside a Customs Union

It is clear that simply to attempt to retain key producers after Brexit, a large increase in public expenditure on subsidies would be required – as this government has already done with Nissan. Even though Ministers attempted to keep the deal with Nissan secret, it was later revealed that is was a subsidy of £80 million. Crucially, with the threat of No Deal still not removed, that subsidy was not enough to get Nissan to meet its commitment to producing new models at its Sunderland plant. As Jeremy Corbyn put it replying to Theresa May in Parliament on 12 February: ‘The Prime Minister has just told members of this House to hold their nerve. Tell that to Nissan workers in Sunderland and the thousands more worried about their job security”.

In the event of No Deal, which means having no Customs Union with the EU, the scale of the compensation needed to offset new tariffs on cars is equivalent to the carmakers’ wage bill. This is untenable over the medium-term as it would be cheaper for government to pay the workers directly. Outside a Custom’s Union with the EU similar these problems would be multiplied in numerous industries.

In general, without the reactionary political interventions from the likes of Trump and the Hard Brexiteers, the underlying economic trends are for greater trans-continental and even global production. A leading Italian transport services provider last year announced the first ever regular roll-on, roll-off route between North America and the Mediterranean. It will be used primarily to connect Turkish to European car production, and then connect the latter to Canada, the US and Mexico. These are the fundamental economic trends the protectionists like Trump and the Hard Brexiteers are attempting to fight.

Marxist theory

Marxism explains these fundamental economic trends. Despite being frequently asserted, it is not the case that Marx begins his analysis of capitalism with analysing only capitalist production. This is for the very good reason that production is not unique to capitalism. It exists in all more primitive societies, feudalism and slavery, and will of course exist under socialism. Production is a given in every form of society.

Marx actually begins ‘Capital’ with what is unique to capitalism, the transformation of commodities into their universal equivalent of money, thus enabling ‘generalised commodity production’. This is decisive in this context if it is recalled that Marx demonstrated that commodities first appear through trade, through exchange.

So, in concluding Chapter One of Volume 1 of Capital Marx writes,
‘As a general rule, articles of utility become commodities, only because they are products of the labour of private individuals or groups of individuals who carry on their work independently of each other. The sum total of the labour of all these private individuals forms the aggregate labour of society. Since the producers do not come into social contact with each other until they exchange their products, the specific social character of each producer’s labour does not show itself except in the act of exchange. In other words, the labour of the individual asserts itself as a part of the labour of society, only by means of the relations which the act of exchange establishes directly between the products, and indirectly, through them, between the producers. To the latter, therefore, the relations connecting the labour of one individual with that of the rest appear, not as direct social relations between individuals at work, but as what they really are, material relations between persons and social relations between things. It is only by being exchanged that the products of labour acquire, as values, one uniform social status, distinct from their varied forms of existence as objects of utility’.

Exchange, of which international trade is one large scale form, is central to the production of commodities. Goods only become commodities through that exchange. Not only is it impossible in the modern era to maintain efficient production on a national basis in an economy of Britain’s scale, it is also impossible to produce efficiently without international exchange. Incidentally, it will be even less possible in an advanced socialist society.

Socialists, and a government pursuing progressive socialist policies, have no interest in the political structures of the EU – which are designed to be as little democratic as possible. But they, and the working class of this country, do have an interest in ensuring access to the markets of the EU. That can be gained either through remaining in the EU, for purely economic and not political reasons, or via a custom’s union and ‘close alignment with the single market’.

As Jeremy Corbyn put it in Parliament on 12 February: ‘In order to stop the UK falling into the backstop you need a permanent customs union and a strong single market deal. That is key to maintaining an open border on the island of Ireland. That is key to protecting jobs, industry and living standards in this country.
‘The Prime Minister says there is no need to negotiate a customs union as her deal provides for the benefits of being in one. I’m afraid… that is simply not the case.
‘The deal the Prime Minister negotiated means there will be barriers to trade in goods and there will not be frictionless trade. Putting manufacturers across the country at a huge disadvantage.’

This is why May’s threat of No Deal and refusing a customs union is a deeply damaging policy, and why Jeremy Corbyn is entirely right to insist on a customs union with the EU.

By Tom O’Leary

Labour, led by Jeremy Corbyn, has thrown itself full scale into the struggle to block a No Deal Brexit. The latest step in this was the correct decision not only to put forward Labour’s own proposals but to whip Labour MPs in favour of Yvette Cooper’s Parliamentary amendment – which would have lifted the 29 March deadline to give a period of time for Parliament to change the law to block a No Deal Brexit. Even although this was defeated, because a small number of Labour MPs opposed Corbyn and instead supported the government, it was entirely correct for Jeremy Corbyn and Labour to have continued the fight against No Deal – and this will have been overwhelmingly supported by Labour voters, Labour members, and supporters of Jeremy Corbyn. For reasons analysed in this article the willingness of the Tories to consider a No Deal Brexit is an attempt to carry out a policy which will constitute an extremely severe attack on the working class and ordinary population.

This fight against a No Deal Brexit is a key part of the current struggle to prevent a severe and enduring attack on living standards. It involves much more serious and damaging issues than short term disruption from No Deal. To understand a No Deal outcome would clearly be a terrible option, involving major loss of jobs and attacks on living standards, it is worth examining it in detail and from a fundamental aspect. This shows why the struggle to block a No Deal Brexit is not merely tactically correct but flows from fundamental features of Marxism.

No Deal fundamentals 

The small minority of economists who advocate a Hard Brexit or No Deal have recently begun to address the question from a fundamental viewpoint. This is largely in response to the risks that some major international manufacturers may be forced to leave Britain if No Deal is enacted. Other companies have already begun to halt, close, or relocate operations. These include among others, Jaguar Land Rover, Honda, AirBus and of course Dyson, despite its founder being a prominent supporter of Brexit.

Unfortunately, the response of the Brexit-supporting economists to the clash between their plans and the reality of fundamental economics is to seek to abolish the latter. So, prominent Brexiteer economist Roger Bootle was reported as saying he was: “Fed up with businesses talking about their supply chains as if preserving their businesses were the most important thing in the Brexit negotiations.”

Similarly, Julian Jessop Brexiteer and formerly chief economist for the right-wing Institute for Economic Affairs tweeted, “Perhaps we should sometimes question whether it makes sense to prioritise the preservation of complex business models that rely (in the case of Honda’s Swindon plant) on 350 lorries delivering 2m components every single day, with just one hour’s worth of parts kept on site…?”

But this model exists independently of Brexit and even of this country. Neither is it a ‘capitalist plot’ – in the sense of an arbitrary subjective decision by capitalists. It simply reflects the current development of modern complex production along lines analysed and foreseen by Marx long ago – the increasing division/socialisation of labour which has necessarily now assumed a globalised form. The Brexiteers cannot abolish the model, any more than the law of gravity can be repealed, their plans can only achieve Britain’s removal from it – with serious damage to production and therefore jobs and living standards.

This model, of highly complex, integrated supply chains where components arrive just-in-time and where value is added at a series of specialist locations, is simply the modern expression of the most fundamental economic forces analysed in ideas which were first set out with the founding of economics as a science and which were further and most fundamentally developed by Marx.

Division/socialisation of labour

In the opening chapter of The Wealth of Nations, Adam Smith begins, “The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is anywhere directed, or applied, seem to have been the effects of the division of labour.”

The division of labour encapsulates the process by which an entire complex chain of goods is created through a series of tasks performed separately and distinctly before they become the final finished product. The material expression of those tasks are the inputs of intermediate goods – Honda’s two million parts a day and the supply chains that so antagonise the Brexit-supporting economists.

In Adam Smith’s famous example, no single individual could or can possibly produce even the simplest product of his day, a pin, without the inputs of a huge number of other industries. The production process, from raw materials, to intermediate goods is just too complex.

Furthermore, this division of labour long ago passed over national boundaries. Smith himself pointed out that it was as easy then to transport coal from Newcastle to Amsterdam as it was to London (both were done by sea, which was then a far more efficient mode of transport than road).

In the course of economic development, which has of course been overwhelmingly capitalist development, the division of labour, or what Marx calls more scientifically the ‘socialisation of production’, becomes ever more international, rendering purely national large scale production increasingly obsolete and impractical.

So, in the Communist Manifesto Marx and Engels write, “The bourgeoisie has through its exploitation of the world market given a cosmopolitan character to production and consumption in every country. To the great chagrin of Reactionists, it has drawn from under the feet of industry the national ground on which it stood. All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. And as in material, so also in intellectual production. The intellectual creations of individual nations become common property. National one-sidedness and narrowmindedness become more and more impossible, and from the numerous national and local literatures, there arises a world literature.”

The prime example used by Marx and Engels of this development at the time when the Communist Manifesto was written was England. Part of the genius of Marx and Engels was to foresee trends almost uniquely apparent in England at that time, and understand how they expressed the development of the world economy. This was at a time when England’s openness to trade was equivalent to just 13% to 15% of GDP, when currently the most advanced economies have an openness to trade far in excess of that. According to the World Bank world trade as a proportion of world GDP was 56.2% in 2016. The world economy is gripped by the ‘cosmopolitan character to production and consumption in every country’ foreseen by Marx and Engels 170 years ago.

The idea that a socialist economy would not aim to make the maximum possible use of the international division/socialisation of Labour therefore has nothing to do with Marx’s analysis but was introduced from Stalin onwards in the USSR. The consequent cutting off of the USSR from participation in the international division of labour was one of the primary reasons for the problems of the Soviet Union’s economy and the final collapse of the USSR. In contrast China’s ‘reform and opening up’ policies, which oriented China to attempt to use to the maximum participation in the international division of labour, were a return to Marx’s analysis, and produced the most rapid growth of a major economy in human history. It is crucial for defence of working-class living standards that the left follows the analysis of Marx and not that of the former USSR.

The effects of No Deal 

This cosmopolitanism in production and consumption, which today is sometimes called globalisation, takes different precise forms in each country. As much as it irritates Brexiteers, the truth is approximately half of all trade in goods to and from Britain is with the EU. The international division of labour that Britain’s economy participates in is primarily with the EU. The US is only a distant second, approximately one-sixth the size in relative importance in trade in goods to the EU.

With a No Deal Brexit there would be two hammer blows that would severely damage that participation, which is expressed as ‘supply chains’, which are another name for the complex process of creating inputs. The first is the imposition of tariff barriers, which would necessarily occur to any production outside the EU’s customs union. The second are non-tariff barriers, which are largely a function of being outside the Single Market, which has a single, unified regulatory regime including for input goods.

It is conceivable the effect of increased costs from tariffs could be off-set by lowering costs elsewhere. Some might argue that subsidies to industry in the form of state aid might be worthwhile, even though the World Trade Organisation also has prohibitions on certain types of state aid, as the EU does. If state subsidies of 10% per cent were required to off-set EU tariffs, the resulting cost of £27.5 billion would be in excess of the planned budget for increased public investment for an incoming Labour government.

Otherwise, the more likely off-setting factor for new tariffs would be a sharp attack on wages. In short state subsidies to offset a no deal Brexit would cost the entire amount by which Labour intends to increase public investment.

A comparison to Turkey 

But it is the non-tariff barriers which could prove even more damaging. Here the practical example of a country at a less developed stage of economic development, and therefore less integrated into modern division of labour, is useful in illustrating the fundamental issues involved – Turkey. Turkey is in a customs union with the EU since the beginning of 1996. The Turkish economy has developed strongly since that time.

The effect of Customs Union membership has been to give greater access of Turkish goods to the EU Single Market (except agricultural goods), and vice versa because tariff barriers are removed. Over time, it has helped to develop the growth of an important car production sector, including for export to the EU. This is the by-product of the Customs Union.

But it is not a member of the Single Market. So, non-tariff barriers remain. It is therefore extremely difficult for Turkish car production to become properly integrated into the continent-wide car production of the EU. Instead, production is mostly focused on stand-alone models, niche production or ultra-cheap models.

Under a No Deal settlement the entire car industry in Britain would be outside both the Single Market and the Customs Union. Under WTO rules, which would apply in case of a No Deal Brexit, a 10% tariff on car exports would apply – making production in Britain uncompetitive in the EU market. A similar process would apply to all production which is highly integrated with European output. It is no accident that that it is AirBus, car makers, advanced manufacturers and pharmaceuticals companies who are most vocal in their opposition to a No Deal outcome.

It is sometimes argued that the EU would block a fully socialist economic policy. This is true. Britain would be forced out of the EU if it attempted to replace capitalism with socialism. The gains from the introduction of socialism in Britain would be so great that they would more than offset the disadvantages of being forced out of the customs/single market of the EU.

But while Jeremy Corbyn’s policies are highly progressive, and would significantly take working people and the mass of the population forward, they do not propose to replace capitalism with socialism. Nor should they – neither the objective nor the subjective conditions to bring capitalism to an end and introduce socialism in Britain exist. What Jeremy Corbyn proposes are a series of highly progressive reforms which are in the interests of the population both in Britain and internationally – and that is exactly what should be proposed at present.

Attempting to implement such progressive changes by a Jeremy Corbyn led government might be blocked by the EU – but this is not at all certain and will be determined by the relation of forces at the time. But if implementing such progressive changes is blocked by the EU then the population will understand why Britain may be forced out of the EU. The same would apply to any country or countries who moved ahead of this country and were themselves replacing capitalism with socialism.

But what is wrong, is against the interests of the working class, and therefore will not be supported by the population, is voluntarily to give up the advantages that flow from participation in the EU’s division of labour – therefore cutting off Britain from the most advantageous participation in EU markets and supply chains.

No benefit from No Deal

The Brexiteers, including the pro-Brexit economists, provide no concrete analysis that can withstand any scrutiny. Instead, they fall back on general expressions of optimism, or complete red herrings.

Crucially, there is the assertion that No Deal or something close to it ‘will allow us to trade with the rest of the world’. On the contrary, this economy already trades with the rest of the world. No Deal will put major barriers in the way of the current trade with the EU, with nothing realistic that could compensate for that – other countries are naturally much more interested in trade with the far larger economy of the EU than with the comparatively small economy of Britain.

Once again, this is because of fundamental economics. There are three decisive factors that No Deal puts at risk:

· The most competitive access to the current inputs for production of goods and services
· The integration of British production into EU-wide production
· Access to markets

The weight of each of these can be illustrated with reference to one of the most integrated industrial sectors, Britain’s participation in Airbus. Other advanced sectors of production show the same characteristics. Some months ago, when Airbus executives previously highlighted the risks to their business from No Deal, one Tory MEP raged that, “we can build our own Airbus”.

This foolish bluster highlights the level of ignorance about the economy fostered by the Tories. Whether the ignorance is wilful is difficult to say.

For this country to create ‘its own Airbus’, would be an enormous, potentially crippling, and in reality a totally unrealistic undertaking. The market capitalisation of Airbus has fluctuated between €75 billion and €100 billion in recent months. Its great rival, Boeing is currently valued at over $200 billion, having recently been as high as $360 billion.

But this is only an indicator of the type of initial outlays required to create a new Airbus-type company in this country. As shown above, an industrial giant like Airbus requires an enormously complex supply chain. The chart below is from Airbus and highlights this point in relation to just one of its models, the A350.

According to the company, the components made in various countries themselves rely on a supply chain which includes operations all across Europe and beyond, with 4,000 companies and over 100,000 jobs in this country. To overcome the imposition of both tariff and non-tariff barriers arising from No Deal, an entire supply chain would need to be replicated in this country.

This position is not at all unique to Airbus. In the course of the public debates about the effects of No Deal it was revealed that Jaguar Land Rover uses 25 million components a day in producing 3,000 cars, and that 40% per cent of these come from the EU. Investment in the motor industry already feel by 50% last year, due to the situation created by the threat of Brexit, which will translate into thousands of lost jobs over the medium/long term.

The illusion of the Tory MEP is that all of this would be a massive boost to manufacturing jobs in this country and the wider economy. The fantasy is that Britain, maybe with even bigger cuts to wages and much reduced protections for workers, could compete by replicating these enormous industries on a national scale. Unfortunately, he is not alone in this illusion.

Production is the first factor. But this is integrated, complex production, not just the finished goods but also all the inputs required for those finished products. There is the cost of establishing an AirBus-type company based in this country, say the equivalent of €100 billion. There would also need to be the creation of a supply in support of that. As Airbus estimates the workforce in the current supply chain for AirBus components in this country is about 7 times greater than the direct workforce employed here, that may indicate the scope of the additional investment needed. And all of these would need a workforce trained in highly specialist manufacturing skills, and an infrastructure, of roads, rail, energy and water services to supply them.

But production is not the only factor. As Marx and Engels wrote, the development of international production was accompanied by the growth of, “….industries whose products are consumed, not only at home, but in every quarter of the globe”. A ‘British Airbus’ would require a market.

As the production from all investment is limited by the scope of the market, and the demand for aircraft is a global market, no country of Britain’s size could hope to establish a new large-scale aircraft sector solely or even primarily on a national terrain. British Airbus would therefore have to compete directly with the two dominant global producers, Boeing and Airbus.

British Airbus would in effect need to make huge investments simply to establish itself as a third competitor to two global rivals who are already engaged in an existential struggle with each other. It would need to be more competitive and efficient than either of these two to win customers, requiring much higher rates of investment. And it would have to attempt prise open new markets in the face of fierce resistance from the US and EU authorities, who already have one of the most bitter and long-running disputes lodged at the World Trade Organisation. The whole project would be a fool’s errand.

The reality is that the advanced manufacturing that does take place in this country is integrated with the world economy, and primarily the EU economy. What is actually required is for large-scale investment to fortify and develop those sectors, one part of which is their deepening integration into the world economy, primarily the EU economy. This is a policy that Labour’s economic policy encourages, and which the Tories resolutely oppose.

By blocking effective participation in the most advanced sectors of production thousands and thousands of jobs would be lost directly, the entire economy would be held back and therefore living standards would rise more slowly than possible – at best. Due to this economic setback the pound would almost certainly devalue significantly, creating inflation and a reduction in living standards. In order to attempt to make British capitalism competitive in the new unfavourable circumstances employers would launch an all out attack on workers living standards and rights – the ‘hard Brexiters’ have already made clear their ideal is a low social protection economy of the US type.

It is important to note that there is a set of circumstances under which the above economic factors take second place. If an incoming radical or socialist government were taking measures that were so contrary to the other European governments, they might well take steps to cut off that government from both EU institutions and the European market. But that is the traditional punishment that anti-socialist governments and institutions mete out, the US increasingly so. But it is a punishment. It should not be a policy aim.

Under those circumstances, the long-term political, social and economic benefits that a socialist government could deliver would far outweigh these serious economic difficulties. But that is not the situation currently, and is not likely to be in the foreseeable future.

Crashing out with No Deal in this period in reality means the only viable alternative is a trade agreement with Trump and his successors. No-one who thinks about it seriously can actually believe that that outcome would be more favourable to the socialist project. Whether for the reason of defence of the immediate living standards of the population and working class, or for reasons of fundamental Marxist theory, or both, there should be 100% opposition to a No Deal Brexit – and Jeremy Corbyn correctly led total opposition to it.

Conclusion

Finally, if a No Deal Brexit is totally against the interests of the working class, for the reasons outlined by Marxism, what positions are in line with those interests? These have nothing whatever to do with nonsense claims by people from the Labour right, such as Will Hutton. that the EU is progressive representing ‘Enlightenment values’. In fact the ‘Enlightenment values’ were accompanied by the creation of the greatest colonial empires the world has ever seen, oppressing the majority of humanity, dividing the world between them, and culminating in the historic catastrophe of World War I. The EU is a cabal of European imperialists who, compelled to construct a unified European economic structure because modern production has outgrown the European state, set out about creating it in the most undemocratic form possible – with as little power as possible to the European parliament and transnational power concentrated in the non-elected European Commission. The best historical analogy is Bismarck’s Germany – the Germany capitalists, forced economically to create a unified German state, deliberately also created it in the most undemocratic form possible.

There is nothing progressive politically about the EU and therefore socialists should be completely indifferent to whether Britain is part of the political structures of the EU. What is in the interests of the working class in the present situation however, for reasons outlined in this article, is to be able to participate in the economic space of the EU if possible. This could be secured by two mechanisms:

· Labour’s goal in its ‘six tests on Brexit of securing: ‘the “exact same benefits” as we currently have as members of the Single Market and Customs Union’.
· Membership of the EU.

Therefore, the bloc of Remainers and supporters of a ‘soft Brexit’, which is the position of the huge majority of Labour voters, Labour Party members, and Jeremy Corbyn’s supporters, have a position which fully corresponds to the interests of the working class and the population – which is exactly why it is the majority position among them. It is also a position precisely in line with Marxism.

Transform: Issue #5 | November 2018 | A Journal of the Radical Left
– includes articles by regular SEB contributors John Ross and Tom O’Leary + many more

Ten years on from the near-collapse of the global financial system in 2008, there is little sign of capitalist recovery and renewal. The consequences of the austerity policies pursued by so many governments are now playing out: from the destruction of the social and economic gains made by working people over many decades, to the rise of the far right, the crisis of social democracy and the ‘weaponisation’ of racism and Islamophobia.

Right-wing forces, given succour by an increasingly belligerent Trump White House, have often emerged stronger from the crisis, but left and progressive forces have also challenged for power, posing political and economic alternatives. Unfolding political developments and new mobilisations in Britain and elsewhere demonstrate that the right is being fought and can be defeated.

Transform #5 looks at the continuing economic crisis, with articles on the Lehman crash of 2008 and how we can tackle the power of big finance; Corbyn’s economic policy in the context of the attacks that lie ahead; economic lessons from the left governments in Latin America; and how we can learn from the struggles against neo-liberal globalisation. We also take a look at the big global strategic issues: the implications of Trump’s trashing of the Iran nuclear deal, how the differing approaches of Trump and Xi Jinping are playing out, and an assessment of NATO at 70. The political impact of film propaganda is considered through a case study of Nazi cinema, the latest issue of Socialist Register is reviewed, and we pay tribute to the late, great Samir Amin.

IMF data shows the exact opposite of Trump’s claims that US growth will accelerate under his presidency

The latest IMF analysis of the world economy

Summary of US long term growth

The long slowdown of the US economy

Projections for US per capita GDP growth

US medium term growth

As two years of the Trump presidency are already passed it is also useful to consider the IMF’s projections for the next five years – Figure 5 shows this, together with historic data on average US annual average GDP growth over a five year period.

Trump and business cycle

The US business cycle

Conclusions for US tactics in its trade aggression

Conclusions for China