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Analysis #15

Is No Deal the Only Socialist Option?

Danny Nicol

24 October 2018

Although the EU places enormous limits on democratic control over the economy, so do various alternatives to full EU membership. Indeed, a “no deal” Brexit may be the only option to enable socialist policies in future.

Translated into German here.

A pervasive theme of mainstream neoliberalism is the compulsion to insulate certain policies against the vagaries of democracy. The intellectual grandfather of neoliberalism, Friedrich von Hayek, argued for supranational federalism to rule out undesirable policy options. He explicitly and unashamedly campaigned for a limited democracy. Markets and free trade had to be taken out of the realm of democratic contestation and elevated to the status of incontestable supranational law.


This design was reflected in the EU treaties, as shown in the four freedoms, the limits placed on governmental use of state aid, and the outlawing of public monopoly in various economic sectors. These limits on democracy have been explored previously on The Full Brexit, with many contributors highlighting how EU law creates serious impediments to a bold industrial policy and to the extension of public ownership (see Analysis #5 – Why Brexit is Essential for Economic Renewal; Proposal #2 - Quit the Single Market: How the EU Throttles State Aid and Industrial Policy; Proposal #8 - Extend Public Ownership; Proposal #9 – Fix the Broken British Growth Model).


Reflecting this, the Labour Left was traditionally anti-EEC/EU (see Analysis #7 - Why Does the British Left Love the EU?). Figures such as Jeremy Corbyn, John McDonnell and Diane Abbott constantly opposed parliamentary approval of the various revisions of the Treaties over the years. However, Euroscepticism ceased when Corbyn became Party leader. Not only did the Party back Remain in the referendum but the Party’s left wing has also staged a collective capitulation on the EU issue.


Yet there was never a worse time to switch to a pro-EU stance. Back in 1975, when the Labour Left’s opposition to the EEC was absolutely solid, the Community’s restrictions on state aid were rudimentary. Furthermore, EEC law hardly touched on the balance between public and private ownership in the Member States. Decades later, the EU has developed its law on state aid into an effective weapon against interventionist governments, and its war against public monopolies is well established. Yet this is the moment when the Labour Left chooses to abandon its long opposition to the EU!


Against this backdrop, it makes good sense to examine the various alternatives now being put forward for a new relationship with the EU for their stances on public ownership and state aid.


The Norway Option: The European Economic Area (EEA) involves accepting the single market. The popularity of single market membership appears to have waned: it is too much like EU membership but without a seat at the table. Nonetheless, this has not stopped Labour’s Blairites from promoting it. Blairite fondness for the single market is hardly surprising given that the EEA involves the entire gamut of laws against socialism which are present in the EU Treaties. It includes not only state aid laws, but also crucially the liberalisation directives which forbid public monopoly in essential public services. 1945-style nationalisation of economic sectors would continue to be beyond the reach of the UK Parliament.


The Chequers Plan: the invention of a Conservative Prime Minister who supported Remain, this plan explicitly commits Britain to “maintain a common rulebook on state aids” with the EU. In other words, there would be an international agreement that the UK Parliament could not change its state aid regime unilaterally. As for public ownership, the plan states that there should be “deep Market Access commitments”, eliminating restrictions on service-providers in one country operating in another. This can only mean an obligation to retain the privatised market systems for public utilities as laid down in the EU liberalisation directives. The plan’s commitment to maintain a robust approach with the EU to enforcing competition law has to be interpreted in the same light.

Canada Plus: this option is perforce even woollier than the Chequers plan since the “plus” (or indeed “plus plus plus”) element remains vague. Yet even without unspecified “pluses”, even the Canada-EU free trade agreement (CETA) contains anti-socialist elements. It limits the contracting states’ freedom over nationalisation, subjecting the extension of public ownership to judicial review with particular emphasis on compensation. This must be “prompt, adequate and effective” (CETA, Article 8.12). From the perspective of socialist strategy this is highly significant. Compensation for the post-1945 nationalisations involved issuing non-redeemable bonds. Governments subsequently had to pay out interest on those bonds, but on the other hand they gained the income from the nationalised industries. An obligation to pay cash as compensation, fully and promptly, would have meant no nationalisation at all. The same would apply today. The CETA model also unduly compromises national sovereignty on state aid. Under the innocuous-sounding heading “Consultations on subsidies”, it stipulates that, after such consultations, the responding party must “endeavour to eliminate or minimise any adverse effect of the subsidy” (Article 7.3.3).

Is “No Deal” the only way out? The EU Treaties, EEA, Chequers and “Canada plus” all have in common the outlawing of socialist economic policy. This is hardly surprising. After all, they are all the product, in a period of neoliberal hegemony, of neoliberal leaders working hand-in-glove with transnational corporations. But why isn’t the Labour Party, and in particular the Labour Left, clamouring about this? The Party has adopted six tests by which to assess a Brexit deal. Yet appallingly none of these tests bear on the freedom of governments to nationalise and to provide state aid to industry – freedoms which ought to be Labour’s absolutely pivotal red lines. Labour’s tests do include an insistence that any deal provides the “exact same benefits” as membership of the single market. Is compulsory privatisation a “benefit”? Is the restriction of state aid? Jeremy Corbyn talks in terms of fashioning “a” customs union with the EU, as opposed to “the” customs union. But it is difficult to envisage the EU accepting any customs union which would not import the anti-socialism provisions of both the single market and international agreements like the CETA as part of the common commercial policy of that customs union. Under Corbyn’s leadership, Labour continuously berates a no-deal Brexit, yet this remains the only option so far under which the Party can implement a dynamic, distinctive and socialist economic policy.


About the author

Danny Nicol is Professor of Public Law at the University of Westminster and author of The Constitutional Protection of Capitalism (Oxford: Hart, 2010).



This work represents the views of the authors only. It is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

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