Implications of the Euro To date, critical analysis of the Economic and Monetary Union project has largely been advanced from the centre-right spectrum of British politics. Comparable questioning from the centre-left, whilst once a powerful phenomenon, has more recently failed to find a coherent voice. Yet the European fault-line cannot be characterised as a neat left–right issue. There are noticeable divisions in opinion across British business, the trade union movement and within the Labour Party. Implications of the Euro offers a unique insight into this key debate from the ‘centre- left’, eurosceptic viewpoint. This book provides a rigorous analysis of the salient economic and political issues of concern, such as: the economics of a single currency, employment and social implications, in addition to issues of sovereignty and political determination. The arguments presented in this volume highlight the emergence of a coherent alternative to deepening economic integration as a platform to build a just and equitable society. Contributions are drawn from leading academics, trade union leaders and prominent politicians, both from the Labour Party and the wider progressive left in British politics. This informative and thought provoking book will be indispensable reading for students and practitioners in economics, politics and international relations, as well as those interested in this highly contentious topic. Philip Whyman is Reader in Economics at the University of Central Lancashire. Mark Baimbridge and Brian Burkitt are Senior Lecturers in Economics at the University of Bradford. Also by Philip Whyman The Impact of the Euro Debating Britain’s future (co-editor) Economic and Monetary Union in Europe Theory, evidence and practice (co-editor) Fiscal Federalism and European Economic Integration (co-editor) Sweden and the ‘Third Way’ A macroeconomic evaluation An Analysis of the Economic Democracy Reforms in Sweden Britain and the European Union Alternative futures (co-author) Also by Mark Baimbridge The Impact of the Euro Debating Britain’s future (co-editor) Fiscal Federalism and European Economic Integration (co-editor) Economic and Monetary Union in Europe Theory, evidence and practice (co-editor) Current Economic Issues in EU Integration (co-author) Britain and the European Union Alternative futures (co-author) Also by Brian Burkitt Trade Unions and Wages Implications for economic theory Trade Unions and the Economy (co-author) Radical Political Economy The Political Economy of Social Credit and Guild Socialism (co-author) The Impact of the Euro Debating Britain’s future (co-editor) Britain and the European Union Alternative futures (co-author) Implications of the Euro A critical perspective from the left Edited by Philip Whyman, Mark Baimbridge and Brian Burkitt I~ ~~o~;~;n~~~up LONDON AND NEW YORK First published 2006 by Routledge Published 2017 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Routledge is an imprint of the Taylor & Francis Group, an informa business Copyright © 2006 Philip Whyman, Mark Baimbridge and Brian Burkitt for editorial matter and selection; the contributors for individual chapters Typeset in Baskerville by Book Now Ltd The Open Access version of this book, available at www.tandfebooks. com,has beenmade available under a Creative Commons Attribution -Non Commercial- No Derivatives 4.0 license. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN13: 9–78–0–415–34952–9 (hbk) ISBN13: 9–78–0–415–38071–3 (pbk) This book is dedicated by the editors to the memory of the Rt Hon Lord Shore of Stepney PC (1924–2001). Throughout British politics, whether his views were accepted or not, he commanded respect as a man of principle. Contents List of illustrations x Notes on contributors xii Foreword by David Owen xix Preface by Bryan Gould xxv Acknowledgements xxviii 1 The left and the euro 1 PHILIP WHYMAN, MARK BAIMBRIDGE AND BRIAN BURKITT 2 The great debate: the Labour Party and European integration 12 ANDY MULLEN PART I The economics of a single currency 37 3 Economic consequences of EMU for Britain 39 JONATHAN MICHIE 4 What type of European monetary union? 52 MALCOLM SAWYER AND PHILIP ARESTIS 5 Economic performance and the euro 60 JANET BUSH 6 The euro: an outsider’s perspective 71 PAUL ORMEROD 7 The ECB in theory and practice 77 MARK BAIMBRIDGE viii Contents 8 The left must wake up – Europe isn’t working 85 LARRY ELLIOTT 9 A post-Keynesian strategy for the UK economy 91 PHILIP WHYMAN, BRIAN BURKITT AND MARK BAIMBRIDGE PART II Employment and social aspects of EMU 103 10 The European social model: myth or reality? 105 BRIAN BURKITT 11 Voting no – the euro and Labour voters 111 MATTHEW MCGREGOR 12 What future in the European Union? 118 JOE MARINO 13 Hooked to the falling stars 124 DOUG NICHOLLS 14 A safe European home? 132 BILLY HAYES 15 British trade unions and EMU: natural supporters or conflicting interests? 137 PHILIP WHYMAN 16 The European social model: between a rock and a hard place? 145 MATTHEW WATSON PART III Sovereignty and political determination 155 17 How the euro threatens the well-being of the planet and its people 157 MOLLY SCOTT CATO 18 EMU and British sovereignty 168 BRIAN BURKITT Contents ix 19 Euro versus the people 175 AUSTIN MITCHELL MP 20 The establishment of a Commonwealth of Europe 186 THE RT HON TONY BENN 21 Fighting against federalism 196 RT HON THE LORD SHORE OF STEPNEY PC 22 Rediscovering progressive economic policy outside EMU 202 PHILIP WHYMAN, BRIAN BURKITT AND MARK BAIMBRIDGE Glossary 212 Bibliography 218 Index 230 Illustrations Figures 5.1 German unemployment, January 2001–October 2002 62 5.2 French unemployment, January 2001–October 2002 63 5.3 UK unemployment, January 2001–October 2002 63 5.4 Growth rates in the United Kingdom, Germany, France and Italy, 1982–2002 (HM Treasury) 64 5.5 UK and eurozone members’ inflation, harmonised index of consumer prices (HM Treasury) 67 6.1 Inflation and real GDP growth in the EU15 75 17.1 Example of token from an Argentinian barter club 162 17.2 Relationship between increase in world trade and global carbon dioxide emission 163 17.3 External debt of developing countries (1971–97) 165 Tables 2.1 The European policy of the Labour Party and the Foreign Office (1945–2004) 13–16 2.2 Number of resolutions and amendments on the EU submitted by affiliates to the Labour Party Annual Conference (1947–97) 26 2.3 Number of speakers and their stance on the EU during Labour’s Annual Conference debates (1947–2000) 26 2.4 Pro-EU arguments during Labour’s Annual Conference debates (1947–87) 27 2.5 Anti-EU arguments during Labour’s Annual Conference debates (1947–87) 27–8 2.6 Pro-EU arguments during Labour’s Annual Conference debates (1988–2000) 29 2.7 Anti-EU arguments during Labour’s Annual Conference debates (1988–2000) 29 6.1 Per capita GDP relative to the EU core 71 Illustrations xi 7.1 Comparison of central bank independence of EU member states and the ECB 78 9.1 A comparison between features of post-Keynesianism and EMU 95 17.1 ERT sets the agenda for the EU 158 17.2 Comparison of size of external debt and size of GDP for a range of countries 164 Contributors Philip Arestis is Professor of Economics at the University of Cambridge where he is Director of Research at the Cambridge Centre for Economic and Public Policy. He is also University Director of Research and Institute Professor (Levy Economics Institute, New York); Visiting Professor, University of Leeds and School of Oriental and African Studies (SOAS), University of London; Vice- Chair of the Macroeconomics, Money and Finance (MMF) Research Group. Most recently his work has concentrated on various aspects of the European Union related to monetary union, such as the historical and institutional frame- work of the EMU, the shaping of new institutions such as a European central bank, deflationary consequences of the EMU and the type of institutional framework necessary to generate higher levels of employment. He has pub- lished numerous books including Introducing Macroeconomic Modelling (Macmillan, 1982), An Alternative Analysis of Economic Theory and Policy (Edward Elgar, 1992), Money, Pricing Distribution and Economic Integration (Macmillan, 1997), The Euro: Evolution and Prospects (Edward Elgar, 2001), Economic of the Third Way (Edward Elgar, 2001), What Global Crisis? (Palgrave, 2001), Re-Examining Monetary and Fiscal Policies in the Twenty First Century (Edward Elgar, 2004) and The Post-Bubble US Economy (Palgrave, 2004). Mark Baimbridge is a Senior Lecturer in Economics at the University of Bradford. He is also the author/editor of The Impact of the Euro (Macmillan, 2000), Economic and Monetary Union in Europe (Edward Elgar, 2003 and 2005) and Fiscal Federalism and European Economic Integration (Routledge, 2004), Current Economic Issues in EU Integration (Palgrave, 2004), together with a number of forthcoming texts: Britain, the Euro and Beyond (Ashgate), A Modern Guide to European Integration (Edward Elgar) and a three-volume series analysing The EU at 50 (Palgrave). In addition to the economics of European integration (EMU, central bank independence, enlargement, UK–EU relations), his research interests include elections/referendums, trade unions, higher education and the economics of professional sports. Tony Benn is the son, grandson and father of MPs. The longest serving Labour MP in the history of the party, which he joined in 1942, he retired from the House of Commons in May 2001, after 50 years in Parliament, to ‘devote more Contributors xiii time to politics’. From 1964 to 1979 he was a Cabinet minister in both the Wilson and Callaghan governments, as Minister of Technology, Secretary of State for both Industry and Energy, and President of the Council of European Energy Ministers in 1977.