Should I Stay or Should I Go? Brexit, Extortion, and the Path to Reform

'On the one hand, in the U.K., the movement to leave is led by the right -- with a generous sprinkling of racist elements -- and a Brexit victory would likely strengthen their hand. On the other hand, the EU has increasingly become a neoliberal project and -- partly because neoliberalism generally requires it -- an anti-democratic one.' (Photo: D Smith/flickr/cc)

Should I Stay or Should I Go? Brexit, Extortion, and the Path to Reform

There is a Mafia-like quality to the threats emanating from EU officials, who are acknowledged to be contemplating how much punishment they can mete out to the U.K. if the people should dare to vote the wrong way. "Vote remain, and nobody gets hurt," so to speak. Or, as The New York Times headline yesterday put it, "E.U. Countries Warn Britain on 'Brexit': You'll Pay if You Leave Us."

It is reminiscent of the European authorities' threats, and ultimately the European Central Bank's shutdown of the Greek banking system, in the attempt to force Greeks to vote "yes" in a referendum last July 5 on further austerity. The defiant Greeks voted "no" with a 62 percent majority, but their government was subsequently beaten into submission.

So EU officials are demonstrating once again not only their contempt for democracy, but their shamelessness as extortionists. "This is how democracies die," writes Ambrose Evans Pritchard in an eloquent explanation of his choice to vote for Brexit. The Guardian's economics editor Larry Elliott notes, "The eurozone is economically moribund, persists with policies that have demonstrably failed, is indifferent to democracy, is run by and for a small, self-perpetuating elite."

However, as these and other thoughtful observers acknowledge, the question is not an easy one. On the one hand, in the U.K., the movement to leave is led by the right -- with a generous sprinkling of racist elements -- and a Brexit victory would likely strengthen their hand. On the other hand, the EU has increasingly become a neoliberal project and -- partly because neoliberalism generally requires it -- an anti-democratic one.

The creation of the euro has clearly been a terrible mistake, and has inflicted mass unemployment and unnecessary suffering for what is about to become a lost decade, along with "structural reforms" that have hacked away at European economic and social rights. The U.K., of course is not part of the eurozone, but the whole EU project has been deeply influenced by the eurozone and the neoliberal ideology that is baked into it. The misnamed European Stability and Growth Pact, for example, applies to the whole EU, not just the eurozone. It builds on the mistakes of the Maastricht Treaty, and is likely to result in more fiscal austerity when the region really needs fiscal expansion to recover; and this at a time when public borrowing is free and the Central Bank can create money without fear of inflation.

There is also a paper trail of thousands of pages of Article IV consultations between the EU governments and the International Monetary Fund (IMF). These show an elite consensus by the EU finance ministries -- not just the eurozone governments who have been vulnerable or right-wing enough, or both -- to implement these policies. This consensus includes cutting pensions, healthcare and other social spending, as well government employment, and spending generally; as well as reducing employment protections and instituting labor market "reforms" to reduce the bargaining power of workers, as is currently being resisted in France.

So, this is a much longer discussion, but to simplify, it seems the question from a pro-human point of view is whether Europe can steer away from its continuing, long-term neoliberal failure more quickly by trying to democratize the eurozone and the EU, and thereby change their policy agenda -- as former Greek Finance Minister Yanis Varoufakis is now campaigning to do; or by trying to change the agenda at the national level first, where possible.

There are many big unknowns: How much are EU officials willing to cut off their nose to spite their face, as they did when they plunged the eurozone into an extra two years of recession in 2011, in order to enforce their will on the more vulnerable European countries? How much is the German government willing to put the euro and the EU at risk, given that the German economy is by far the biggest beneficiary of the eurozone?

It is unfortunate that it is mainly the right has taken up the cause of national sovereignty, not only in the U.K., but in other European countries. This is what happens when the center-left embraces an internationalist economic agenda that promises, and in many cases delivers, lower living standards for the bottom half of the income distribution.

But the eurozone countries' loss of sovereignty over their most important economic policies -- monetary, exchange rate and, when they got into trouble, fiscal policies as well -- is at the heart of Europe's problems. It is a major underlying cause of the migration issue also, since it has created permanent mass unemployment. (The other main cause of Europe's migration problem is a joint U.S./European foreign policy, which has made a mess out of Syria, the Middle East and North Africa -- but that is another topic.)

Democracy that is one step removed from a national electorate is inherently weak -- that has been the problem at the IMF for decades. At the national level, a majority or even a plurality that favors positive change (i.e., reforms that most people benefit from, like increased employment and economic security) can often win, as most politicians want to be reelected. Even Republicans in the U.S. have been forced, at times, to vote for things like minimum wage increases or a stimulus package during the Great Recession. Positive reforms at the supranational level are another story, especially in an era when neoliberalism is so deeply entrenched ideologically and institutionally.

If the Podemos party were in power in Spain, if British Labour Party leader Jeremy Corbyn were the prime minister of the U.K., and if there were left-wing governments in Germany and Italy, it would be easier to imagine the beginning of the end of the failed neoliberal experiment in Europe. But until that happens, the European authorities are likely to continue hacking away at Europe's social and economic achievements, and to try to make mass unemployment the new normal. And this will feed the growth of right-wing nationalism, to the extent that the left is unable or unwilling to take up economic sovereignty as its own cause (as Syriza did in Greece until after the July referendum). If that is what the future is looking like, Brexit might just be the wake-up call Europe needs.

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