You’re wrong, Matthew Parris: sovereignty is worth more than a sneer.

In his usually witty manner, Matthew Parris, in The Times of February 24,  trashes “Hologram May” for leading “a hopeless mission”. “As obstacles appear on the route to Plateau Sovereignty, perhaps this illusory leader’s role is to make sure it’s never reached.”

As an MP, Parris was one of the star orators in the House of Commons, quick on his feet, fast out of a cul-de-sac. The Tory party he joined in the 1970s was almost uniformly pro-Europe, and no-one who wanted to go anywhere in politics took it upon themselves to bang on about a legal category called sovereignty.

Ideas on sovereignty.

Nonetheless, the MPs of the period, on all sides of the House, -not least Matthew Parris who grew up in Africa- would have been aware that sovereignty, abstract though it is as a concept, is more than a fiction. Canada, Australia and New Zealand used it to protect their home markets; India and Pakistan achieved it thirty short years after the end of the first world war; Harold MacMillan delivered his “winds of change” speech in Pretoria, arguing in favour of the black man’s vote; Rhodesia was mired in civil war over it, and people were dying in northern Ireland in pursuit of it.

Sovereignty is not unattainable, as Parris implies. People die for it, and they do so because, even by a minimalist definition, its possession  involves the power to say no. No, we do not want India or Pakistan to be ruled from London; no, we do not want the tampon tax; no, we do not want our legislature to be emasculated, and laws to be made for us by unelected officials in Brussels.

The key question, not answered by Remainers, is: would it have been possible to say No and to stay in the EU. I believe it would have been, and so via Tory party channels, I submitted a simple proposal to that effect, and well before the vote of June 23, 2016. The proposal was to rewrite Article 2.1. of 1972 ECA (the European Communities Act), along the lines of the German Constitutional Court (GCC) judgement on the Lisbon Treaty.

The GCC judgement is a lengthy document, but translated into English and available to any QC inquisitive enough to read the official position of the EU’s prime power on the subject of sovereignty and the EU. It holds two key statements: one is that the EU is no more than an alliance of sovereign states. The other is that the German people have an inalienable right , grounded in the Basic Law of 1949, to sanction their lawmakers. The GCC adds that if any further requests for a transfer of powers to EU institutions were to be made, Germany would have to call a constitutional assembly with the task of drawing up a new Basic Law for Germany. https://germanlawarchive.iuscomp.org/?p=1179

Sovereignty and Westminister.

This proposal was passed on, I believe, to Dominique Grieve, the former Attorney General.  Grieve  opined that if such a change were to be made, veteran sovereigntists, William Cash and friends, would crawl all over the 80% or so of laws that come down from the EU for rubber-stamping by parliament.

There is no doubt that if offered half the chance William Cash and friends would have crawled all over legislation passing through parliament. That after all is what they are elected for.  We elect our MPs to propose, amend or repeal legislation. Without parliament’s say-so, bills die. That is the theory.

In reality, laws run through the Brussels institutions, get voted on the nod in the European parliament, and then transposed straight into UK law. Eurosceptics have for long argued that this process makes the UK parliament an exhalted town council. By 2016, the total of EU measures implemented in the UK summed  to 40,000 legal acts, 15,000 court verdicts and 62,000 international standards.

In parallel, criticism of parliament has become more pronounced. As Hansard reports in 2017, the British voting public is more engaged but less satisfied with parliament. Over 71% say that parliament is vital to UK democracy, but under one third consider it is doing a good job.

This pattern of dissatisfaction/engagement is also traced in turnout during elections.  Between 1922 and 1997, turn out in UK general elections hovered between  70% to over 80%; fell to 59.4% in 2001;  in 2005 it was 61.4%; in 2010 it was 65.1%; in 2015 it was 66.1%; in 2017, turnout stood at over 68%.

Given these trends, it is not unreasonable to think that if there were a powerful Westminster voice to naysay legislation coming down from Brussels, voter interest would be back to pre-1997 levels, and more importantly that attitudes in the UK would be that more favourable to Brussels.

As it is, according to Pew opinion polls across the EU prior to the June 23, 2016 vote, UK attitudes towards the EU were very comparable to German, and Spanish, with 48-49% in each one of the countries recording dissatisfaction with the EU. In France, the figure was 61%, and in Greece, 71%. As President Macron has recently admitted on the Andrew Marr show, if a referendum were to be held in France now, the Leave EU camp would stand a very good chance of winning.

The June 23, 2016 vote was won by a narrow 52-48% vote in favour of Leave. Another way of presenting this well-known fact would be to say that a different outcome could have been achieved by small but significant changes. For such small changes to have impact, they would have to be easy to do and they would have to have addressed the electorate’s concerns. The electorate’s concerns were and are that parliament could and should do a better job, and that the EU is far too meddling.

Reinforcing parliament relative to Brussels should therefore have been a priority for Remainers. Cameron clearly thought, along with Prime Minister Rutte of The Netherlands, that there was a possibility to reinforce national parliaments in the EU policy process. That was one of the key components of his January 2013 speech at Bloomberg’s in London. But the EU was hell bent on the supranational formula, which Heath had signed the UK up to, and his idea of reinforcing national parliaments in the EU was waved aside.

Instead, in February 2016, Cameron tried to sell the EU’s formula that if 16 national    parliaments objected to a draft EU legislative act, the other member states in the Council could consider the matter. Furthermore, President of the European Parliament, Martin Schulz, declared that even if the UK voted Remain, there was no guarantee that MEPs would not amend the deal.

Cameron realised that there was not a snowball chance in hell to sell this EU potage, and so grabbed for Project Fear, painting outsize pictures of gloom and doom if the UK voted Leave. He called in the Great and the Good from around the world, including President Obama, to encourage a Remain vote. Voters were not sufficiently impressed.

The UK doesn’t look at options, but plays according to its version of the rules.

There were alternative ways of fixing Cameron’s conundrum of heading a Eurosceptic public opinion, while remaining in an EU heading to “ever closer union”. For instance, he could have postponed the vote, put it off to another day, and used the time-worn EU method of using the future to locate present disagreements, on the prospect that the next round of meetings could be organised in some pleasant watering hole in Europe’s green and pleasant lands. But Cameron wanted to settle matters once and for all. He thereby infringed one of President Mitterrands’s cardinal rules: politicians should avoid at all costs to run out of options.

The options that were there waiting to be used were not even considered. One was to use the EU institutions to promote UK national interests. For instance, immigration to the UK was at an official 250,000 per annum, even though the issue of new National Insurance numbers floated around an annual figure for the previous decade of 650,000-a huge flow of migrants, both in and out of the UK labour market. What this implied for the UK in terms of economics is that the supply curve for labour -in catering, farm work, construction- was flat, so that as demand for labour kept rising, wages remained constant or fell. Northern English working people took the hit.

The reason for this was and is mass unemployment in southern Europe, a low wage level in central-eastern Europe, and a flexible labour market in the UK. Together, they ensured that the UK was helping to hoover up EU under- and unemployment, while Euroland states were stuck in a rut of near zero growth. No-one in the government seems to have considered that seven years of a policy- driven recession in Euroland was contrary to the commitment in the Lisbon Treaty  for the EU to achieve high levels of employment.

Here was an excellent opportunity for the UK to slam controls on immigration while taking the Euroland member states to court in the ECJ for infringing the terms of the Treaty.  Even if the UK had lost its case in the ECJ, to have taken Euroland member states to court would have been to visibly defend worker rights in the UK. It would have been an assertion of national sovereignty. It would have been registered in continental capitals.

Another option would have been to beef up Westminster’s powers relative to the EU. That would have meant changing the terms of Section 2.1. 1972 ECA. It would have meant being more German, more protective of disparate national interests in the EU policy process. Such a measure would have made it clear to other member states’ representatives they would face serious obstacles in the Commons were they to propose laws prejudicial to British voters and their interests. Yes, such a measure would have made an EU-wide consensus more difficult to achieve; other member states would have no doubt followed suit, if they were not already behaving in that way; but UK consent to the new law, once locked in, would be as good as gold. It would have passed a very tough test in Westminster.

Yet a further option was for Cameron to stay on after he lost. He promised he would. He could have gone back to the EU27 and said: now negotiate seriously with us. You can see how the British public thinks. Look at the evidence how your own publics think. Remember that when you passed legislation on the Lisbon treaty you instituted all sorts of sovereign backstops. What I need is something much closer to my January 2013 Bloomberg speech, notably power to national parliaments. What I am proposing in effect is a European alliance of constitutional and sovereign states. That is how the GCC defines the EU. Let’s drop this open-ended commitment to “ever closer union”, which the Benelux mafia read as an excuse to centralise at any opportunity.

Maybe, he would have been listened to. The alternative was that the EU actually lose its second largest economy, and a major diplomatic/military power in European terms. It would lose an economy, the combined size of 20 of its member states.

But the option was not chosen.

Divergent German and UK views on constitutional democracy.

Why was it that the UK government did not take these, or similar options to delay, fudge, bang the EU table , strengthen Westminster relative to the EU, or challenge the EU27 to get serious? No doubt many different reasons may be adduced. But the one that was relayed back to me, in response to my proposal, was that Dominique Grieve said that such a step would be contrary to our international obligations. Such a statement is reported as having informed the key meeting between David Cameron and Boris Johnson in 10 Downing Street, when Cameron made clear that he would campaign for Remain. This was reportedly the issue on which Johnson decided to head the Leave campaign.

The assertion that strengthening Westminster relative to the EU is contrary to the UK’s international obligations, implies that there is an objective standard binding all member states to the same interpretation of their respective constraints, duties and rights. A different view, the one represented here,  is that the UK and Germany hold very different interpretations of the international obligations flowing from their membership of the EU. There is plenty of evidence to suggest that this is the case.

Why would the UK and Germany hold divergent views about what the EU is, and should be? A brief answer is history.

The German judges are only too aware that 1933 led immediately to the Ermächtingungsgesetz which gave all powers to Hitler. Guarding against such an event was a prime consideration for the founders of Germany’s Basic Law. All sorts of impediments had to be erected to prevent such a blatant power grab, even by a political party which won a considerable number of votes, but not a majority, as was the case of the National Socialists in the general elections of 1932. One vital component of those impediments is the inalienable right of German voters to sanction their legislators. Another is to that the President of the Republic is indirectly, not directly elected. Referenda are not permitted under the Basic Law.

In 1925,  Field Marshall Hindenburg was elected by direct vote to the  Presidency of the Weimar Republic. In the eyes of millions of voters, he was a war hero, a direct link back to the Prussia of Bismarck,  before Kaiser Wilhelm took the helm, and a conservative who could be counted on to make life difficult for the German communist party, then a mighty force in the nation’s politics.

But the major failing of Hindenburg, in the eyes of the lawmakers of 1948-49, is that he signed the decree that gave the Führer unrestricted power. The delegates of 1948-49 strained every sinew to ensure that such a chain of events as Hitler’s Machtergreifung would never happen again. In other words, they took constitutional democracy very seriously indeed.

I consider that the British government which took the UK into the then EEC did not. Nowadays, this may sound a fringe opinion. At the time, the heart of the opposition’s position to joining the EEC was precisely that it would weaken Westminster. After all, the UK prides itself as the Mother of Parliaments-perhaps with some exaggeration, as the Danish Folketing is older by a few centuries, and as the late Dr Jim Lydon, from Trinity College, Dublin has shown, the Irish parliament pre-dates Simon de Montfort’s by decades.

But the fact of the matter is that the two world wars, universal suffrage, the welfare state, Keynesian economic policy and the exigencies of operating in a highly interdependent world political economy, had greatly expanded the reach of Whitehall at the expense of Westminster: Westminster was at the time treated by Whitehall as a legislative sausage machine. As Philip Norton,  the analyst of comparative parliamentary systems,  writes of Westminster in his edited volume,  Parliaments and Governments in Western Europe, published in 1998: “The British Parliament has a limited capacity to affect the outcome of public policy….Parliament may make some difference, but if a government with a parliamentary majority is intent on getting its way then there is little to stop it achieving its goals”.

Thomas Saalfeld, in the same volume edited by Philip Norton, makes the following assessment of the Bundestag: “..the political environment in which the Bundestag operates will continue to favour consensual decision making in flexible intergovernmental bodies, which include leadings parliamentarians, but the negotiations will remain largely removed from the public eye”.

As Paul Lever, former British ambassador to Germany writes, in his book  Europe and the Germany Way: Berlin Rules, the German governing system fits neatly into the EU’s, whereas the British parliamentary tradition of government and opposition does not. In Germany, the channels of influence across the layers of federal and Land governments and parliaments gives plenty of access points for varied interests to bring their views to bear on policy.

In the UK, parliament is salient, but weak. The central government has extensive areas of discretion to fashion policy according to its own preferences. Joining the EEC/EU considerably enlarged Whitehall’s discretionary powers in that key decisions regarding legislation are made in the EU’s Council of Ministers, and in the COREPERs, the committees of permanent representatives, or ambassadors, to the EU. The Commission has the sole right of proposal. The Council of Ministers and COREPER’s deliberations are way out of reach of the UK’s elected representatives. The Commission is not out of reach, it is beyond reach.

To summarise, the EU’s politics is an updating of its older interstate diplomacy; democracy in the EU is domestic. In the UK, it is deficient. During the period of Cameron’s “renegotiations” from 2013 to 2016, this domestic deficiency was compounded by the UK’s diplomatic deficiencies. The deficiencies derived from the fact that Cameron could not credibly want the UK to Remain in Brussels, and continue to give voice to Euroscepticism at home. As voting on the 2012 Fiscal Pact showed-the Fiscal Pact committed Euroland member states to balanced budgets and to no bail out-the EU 27 were prepared to plough ahead on ever closer union, without the UK. The fact that ploughing ahead without the UK might tilt the UK to vote Leave does not seem to have phased the supporters of “ever closer union”. Indeed, President Hollande made quite clear, and in the presence of Chancellor Merkel, that if the UK did not want to go for closer union, it should leave.  In short, Paris, Berlin and Brussels were contemplating a British negative vote before June 23, 2016.

 

Westminster and Heath’s grand strategy for a post-imperial UK.

The June 23, 2016 drove a coach and horses through Edward Heath’s grand strategy for a post-imperial UK. That strategy had three components: constitutional, economic ; diplomatic/military .

The constitutional component is the more familiar. Ensuring Westminster’s powers relative to the executive was not a priority. Rather, Westminster featured high in Prime Minister Heath’s tactical calculations to get the necessary legislation on  joining the EEC through the two houses of parliament. The main idea was to sit at the top table of European and Atlantic policy, and to revitalize an economy deemed to be lagging behind faster growing countries in western Europe. Sitting at the top table is what mattered, ensuring that British mandarins continued to wield “influence”. The wager was that voters would get used to the results.

The European Communities Act 1972 became law on January 1st, 1973, when the UK joined the then EEC. Under its terms, Prime Minister Heath signed the UK up to the full supranational agenda, far in excess of the far more equivocal commitment of the other two large member states, France and Germany.

Section 2 of the 1972 European Communities Act (ECA), asserts that EU laws override national laws where they conflict,  and that Whitehall has the powers to give effect in national law to EU law via secondary measures.

This corroborated the interpretation of the Rome Treaty by the judges of the European Court of Justice(ECJ) , in the course of the 1960s, that EEC law took direct effect over national law and even had supremacy over the constitutions of the member states. By contrast, Germany’s Constitutional Court only came round to conditional acceptance of the ECJ’s position in 1986. The French  Conseil d’Etat accepted the  doctrine in 1990, also conditional on other provisions of the French constitution.

In 2008, the constitution of the Fifth Republic was further modified to bring the text in line with the provisions of the Lisbon Treaty: for instance, both houses, the National Assembly and the Senate could each appeal to the ECJ in opposition to a European legislative act  for “violation of the act of subsidiarity”( modification of  Title XVn of February 4, 2008. “The appeal will be conveyed  to the ECJ by the government”.

The full implications of EU membership for the UK  became clear when the ECJ struck down an Act of Parliament, the 1988 Merchant Shipping Act, as incompatible with EEC/EU law. As Lord Denning, a former senior judge, stated:  “No longer is European law an incoming tide flowing up the estuaries of England. It is a tidal wave.” Subsequent developments validated Denning’s assessment.

 

The second component of Heath’s strategy for a post-imperial UK was economic. At the time of the UK ‘s entry to the EEC, manufacturing exports were the country’s prime foreign exchange earner. French and German markets were difficult of access, in France because of the state’s extensive presence in the national economy; in Germany because of the dense network of cross-share holdings  between insurers, banks and corporations, compounded by similar arrangements at Land level between local politics, financial institutions, corporations and smaller businesses.

German and French attitudes on trade, intra-and extra-European, remained resolutely mercantilist. Germany has run a trade surplus, presently over 10% of gdp, since the early 1950s, and it has done so on purpose in counterpoint to the experience of the Weimar Republic, when the Reichsmark was under permanent speculative pressure due to external deficits and war reparations. German exports began to boom on the back of US demand during the Korean war; German war debts were hugely written down in the London agreements of 1953.

French economic policy places a high priority on achieving balance in external trade, and doing so through a hard currency that ensures against devaluations of the currency. The deal on market opening between France and Germany was that France would open its capital goods and machine tool sectors to German competition, in return for German support for a protectionist farm policy that would keep small Rhineland farms in business and Paris basin agro-businesses in pocket.

By contrast, British policy saw EEC/EU entry as a market opening device; Germany and France saw the EU as a mechanism to negotiate reciprocal deals between recognisably mercantilist states. To put it more bluntly, French and German policy was nationalist; the UK saw national economy policy as a two way liberalisation, at home first and abroad also, and maybe. The cold winds of competition would make British industry more efficient, and thereby restrain union militancy. This economic policy came to fruition in the 1980s, with the Thatcher government’s subordination of the great part of finance and all of labour to statutory law; the sale of nationalised industries; the acceptance of unemployment as a tool of economic policy; and strong British support for the EEC/EU’s market opening policies.

The UK public became very pro-EU in the late 1980s, as growth picked up at home, unemployment plummeted, and the EU’s internal market policy opened the prospect of a more free trade Europe.

The third component of Heath’s grand strategy was diplomatic/military. The idea was to ally with Paris to keep Bonn anchored in the western alliance, while the US was still distracted by the war in Vietnam, and powerful currents were running in Germany to declare neutrality in the cold war. At the Paris October 1972 summit of the EEC 9, Heath, along with President Pompidou and Chancellor Brandt pledged the EEC to full union by 1980: monetary, market, political, and with foreign policy co-ordination to ensure a strong pro-western European caucus in the Atlantic alliance. Hardly had the commitment to the 1980 deadline dried on the paper, than the project was blown out of the water by turmoil on foreign exchanges, divergent inflation rates and economic policies, turbulence on global energy markets, and the beginning of the end of détente in East-West relations, as western Europe under the US strategic umbrella sought to export human rights into the domestic arena of the eastern European party-states, and the Soviet bloc simultaneously exported Marxist-Leninism into the domestic arenas of western Europe.

There is no need to recount here the intricate diplomacy of intra-and extra European relations in the early 1980s, except to recall that the decade was overshadowed by the prospect of German unification as the Soviet Union sank into senescence.

The years 1987 to 1992 opened with the withdrawal of intermediary nuclear weapons from eastern and western Europe, leaving Germany, East and West, in what Franz-Josef Strauss, the powerful Bavarian leader, termed “semi-colonial status”, unarmed and undefended. As the pressures to German unity accelerated, so French diplomacy changed from giving priority to national security to pushing fast for full European integration.  Here was the supranational Europe that Heath had envisaged, and the UK Great and the Good wanted. The UK had to be in on the act. So they browbeat the government into hitching sterling to the DM, thereby importing both inflation and very high interest rates. Boom turned to bust and public support for the EU never recovered.

 

The UK as the EU’s supranationalist No Uno ends on the sidelines.

In hindsight, it is possible to say that the years 1987 to 1992 proved a disaster for Heath’s grand strategy. Arguably, the EU was the prime protagonist of the EU’s mid-1980s strategy of market-opening. But Commission President Jacques Delors had other priorities in mind. With Germany heading to unification, and the Bundesbank dictating economic policy to France, he was determined to push for a single currency as a step on the way to  United States of Europe (USE). The UK establishment realized that this was the crucial moment, when the EU’s path would be set from heading to a lose confederation to travelling along a road to a fully fledged union. But they lost the battle: they failed to win the argument that the EU was an optimal currency area, and more importantly, they failed to win over the great British public. The next major defeat for the UK establishment would have to wait until June 23, 2016.

Why did the UK establishment lose in 1992 and again in 2016? First, successive prime ministers never succeeded in winning over the public opinion to Heath’s  Europe. In his autobiography, Kind of Blue, Ken Clarke recounts Heath’s angry assertion that the days of nation states were numbered. As Clarke observed, Heath never undertook the Herculean task to try to bring the British public round to his conviction. The most that could be hoped for, said Clarke, is to present the EU as European alliance of constitutional states. But the veteran Conservative political bruiser could not explain that either to the British public; in fact, all he did over the intervening years was to assert his pro-EU, pro-federal credentials. He, too, had no idea how to reconcile a British public opinion favourable to a Europe of co-operating states, and a Europe on the path to some sort of federation, as a necessary supplement to monetary union.

Heath’s fudge on sovereignty could not survive the heat of UK politics. EU membership, he asserted, did not entail “an erosion of essential national sovereignty”. This was true, but not in the sense that the British public understood his words. It was true that the British parliament’s sovereign powers sanctioned EU supremacy, but the result was to distort the fundamental constitutional settlement that underpinned the country’s unwritten constitution, which had been carefully negotiated in the years 1689 to 1707, (the year of the union between Scotland and England).

The Heath formula for EU membership-subordination to EU laws, no questions asked please- reinforced an already over-mighty Whitehall, at the expense of Westminster. The Commission proposed. Whitehall mandarins then joined the EU legislature in the Council of Ministers, and in the work of the COREPER, where member state ambassadors worked out the legislative compromises to be presented to the assembled ministers. The result in the longer run has been the further neutering of Westminster, as more and more powers seep away to Brussels.

The Heath grand strategy produced a rumbling constitutional crisis in the UK. Our constitution, rooted in the Glorious Revolution of  1689, is predicated on the idea of an executive power accountable to the electorate, and constrained by common law, trial by jury, and by habeas corpus. Many of these conventions run directly contrary to the notion of laws and directives imposed from outside the UK, over-riding UK courts and Parliament on a daily basis. The most important of these conventions is that voters can sanction their legislators. UK voters cannot sanction the EU Council of Ministers.

 

Second, the two decades and more between 1992, and the launch of the monetary union, and the vote of June 23, 2016, obliged UK mandarins to do the impossible: accelerate the pace of market opening in compliance to the Heath strategy;  give the wink to further construction of the EU’s supranational edifice, to demonstrate sympathy for the project; try to pretend they were putting a break on things ,in order to impress a Eurosceptical public, the opposite of the French policy to become more ardently Europeanist despite an accelerating growth in Euroscepticism;  and sell the project via the politicians to the great British public. Politicians, both of the left and the right, tried to square the circle by plain lying-no, the EU is not centralizing really-the fact that it has  an ECB, an ECJ, a Commission, an EIB, an anthem, a quasi-constitution, disguised a Treaty, is just bye the bye. All to keep a seat at the top table. It was not an ideal formula to sell to the great British public.

There were three episodes that illustrated the difficulties.

  • The one related to Prime Minister Blair, probably the one Prime Minister who could truly have been said to be the heir of Heath. He favoured the market liberalization policy, both for the domestic market and for the EU’s internal market. But he never succeeded to galvanise the major continental economies into liberalizing: the Lisbon programme of 2001 was billed to make the EU the most dynamic and innovative region of the world, for which it has all the attributes. But Germany and France were not interested.

Blair was for the UK joining the monetary union; but he faced opposition from his Chancellor, Gordon Brown, as well as a more Eurosceptic press and Tory party. He advocated close military co-operation in the EU, but fell out with Germany and France over the 2002-2003 Iraq war. As I have written elsewhere on this blog, those were the years when Germany began to stop pretending that it was following a Europe-first policy. That trend, Germany first, became more pronounced in the following years, and I consider that the trend is still powerfully in that direction. Germany is not pursuing a go-it-alone policy; it just seeks to  make the EU in its own likeness.

  • The second episode was when President Chirac ditched the Bolkestein directive, that could have opened EU national markets on the continent to UK financial service firms. Chirac did so in an attempt to curry favour with French voters, the great majority of whom considered that the internal market was far too Anglo-Saxon as it was, let alone opening it up to “ultraliberal” City firms. The French voters nonetheless gave the thumbs down to the Constitutional Treaty, but found themselves ending up with a look-alike Lisbon Treaty. Since then Berlin and Paris have fallen out over whether to give preference to no bail outs(Berlin’s preference) or a Transferunion (France’s preference), precipitating Euroland into a seven year recession from which it may presently be merging. Meanwhile, the UK had in effect transmogrified from being a national economy as it was in the 1970s, to being a service led and cosmopolitan economy by the time of the June 23, 2016 vote.

By then, manufacturing was down to 10% of gdp; the UK sent 47% of output to EU markets, down from 60% in 2000, and was running an enormous trade deficit, particularly with Germany. London ranked as the world’s prime financial market location; the UK had a thriving entrepreneurial culture; it ranked among the world’s top ten most business friendly territories. Given the EU’s continued reluctance to liberalise financial services, only one third of the City’s earnings came from the EU. The main source of income was global. The UK, too, hosted about 1.24 trillion Euros of inward direct investment, about half from other members of the EU.

  • The third episode was Foreign Secretary Haig’s promotion of the 2011 Act whereby any further seepage of powers from London to Brussels would have to be sanctioned in a referendum. David Cameron had won the leadership of the Tory party by promising his “cast iron guarantee” to submit the Constitutional treaty, and its successor, the Lisbon treaty, to referendum. But he dropped the guarantee as soon as he could. As he was told at the time, the next time there is a referendum, it will be on an In/Out vote, not on a specific EU treaty. That was the ticket which sent the United Kingdom Independence Party aloft on the opinion polls, leading Cameron to propose his referendum.  When the campaign was launched in February 2016, Cameron had nearly the whole establishment onside.

There was one more factor which condemned the Heath strategy. After 43 years in the UK, the UK was running a massive deficit with the EU, particularly with Germany. The so-called “cold winds of competition” has helped wind down much of UK industry, while the City of London had prospered on the back of world markets. Per capita income in the South-East is 160-180 per cent of the EU average; rest UK has a per capita income below the average. Not surprisingly, northern England voted massively against remaining; London voted massively for. Both the Scottish and northern Irish votes for, may be construed not just as votes for the EU, so much as also votes against Whitehall.

What are the prime conclusions from this discussion.

The first  idea that deserves knocking over the head is that the the UK voted Leave out of nostalgia for the empire. Heath’s grand strategy was designed for a post-imperial UK, but it was designed by civil servants with imperial reflexes. Those imperial reflexes, one may say, considered that it may have been right to divest empire by giving the natives parliaments, but that was not fit for the British locals, who could be made to live with a Potemkin-style Wesminster, while the real decisions were made either in Whitehall, or by Whitehall in co-operation with other member state mandarins. As President of the Commission Juncker is quoted as saying, we are building an empire. He is right. The British natives have rebelled, and the danger is that they have rebelled against their homegrown compradores.

Second, there is no going back. The Leave vote propelled Cameron into political outer space, and with him, the Heath strategy for a post-imperial UK. This does not mean at all that Leave has won, and Remain has lost. The conclusion that I take from the above, and offer as advise to either band, is that there is no going back to the Heath formula of a Potemkin Westminster. If Remain wishes to remain, they must at least incorporate part of what I recommend into their overall policy: that entails writing a Section 2.1. of a renewed 1972 ECA along the lines of the GCC’s judgement on the Lisbon Treaty. But it would also entail drawing up a constitution, or a renewed Bill of Rights, against which the new Supreme Court can assess cases taken to it by plaintiffs who want to challenge what comes down from Brussels, or indeed from Whitehall.

Alternatively, Leave has received the gift of the Supreme and High Court reminders that the UK does indeed have a form of written constitution in the 1688 Bill of Rights. That set in place the developments that led to the constitutional monarchy, the rule of law not fiat, trial by jury, habeas corpus. The Bill of Rights is the inalienable DNA of the United Kingdom. The whole purpose of Leave was to bring law-making back home, to “bring back control” of UK laws, of policy, of migration, and everything else to Westminster. The vote of June 23, 2016 was not a vote for a Potemkin Westminster but for a greatly strengthened Westminster. Leave also has the opportunity of revising the House of Lords, packed with placemen from both parties more interested in its attributes as a fine town club, than as a powerful and legitimate branch of the legislature, capable of making the Whitehall Sir Humphrey’s tremble in their boots. Were it not for “Hologram May”, as Parris with some justification calls her, this prospect would be seized as a demonstration that a modernising conservative party can also be radical.

Third, the Heath strategy has not failed in terms of its economic components. The UK ranks high in the ranking of places to do business. Singapore is No 1. That is the benchmark, along with other leaders ahead of the UK, against which economic policy could be judged. Susan Strange long ago pointed out that the acquisition of territory was no longer a measure of status. Much more important was to ensure that the domestic market was treated as a platform capable of permanent improvement, and promoted not by a laissez faire policy, but by a business friendly set of government policies that make the location attractive for local and foreign business to do business in.

But the Heath strategy can only record partial success in opening markets in the EU. The internal market exists for farm and manufacturing goods, reflecting French and German domination of the organisation.  Britain, as a production platform, sells a record amount of manufactured products into the EU, but-as mentioned-runs a massive deficit with the EU. Much of this is due to the propensity of British governments to grasp for Keynesian texts of deficit pump-priming in the event of downturns, boosting consumption at the expense of savings, that in turn is interpreted into an excess of imports over exports. Germany has presently forced restEU into the opposite trend: when in recession, double down on consumption, boost savings and raise exports over imports. Currently, the EU is running a large surplus with the UK, and a $150 billion surplus with the US. President Trump has spotted the policy, and is quite capable, if the dollar soars and the deficit widens, to slap on tariffs or quotas. The motto is: if mercantilist countries play first to their domestic audience, liberal market countries can do so too. By its internal inertia, Germany is creating problems not just in the EU, but worldwide.

Not least, the Heath strategy for a post imperial UK was backed by powerful City interests.  Perusal of the newspapers of 1973 reveals clearly how much the strategy was led by the City; given the inefficiencies and  overmanning of strike-prone and nationalised British industry, there was much less enthusiasm for market opening in the manufacturing Midlands of the UK. The efficiencies were hugely increased as a result of the Thatcher revolution; de-industrialisation had to await the advent of the Blair-Brown government, when Brown bet the firm on finance, gave the Bank of England “independence”, and clamped on a supervisory framework which folded as soon as the 2008 financial crash came round. Furthermore, neither Germany nor France want  London in on their financial services, though they do need London for their wholesale business. One unintended consequence of the Heath strategy has been to make the UK a major, for the moment, the major global financial centre. A Leave strategy would make it possible for the UK to devise rules for its own benefit, rather than have rules imposed on it by a Berlin, Paris and Brussels who frankly are not happy with “cosmopolitan “finance.

Fourth, the Heath strategy is also because it sought to make Europe into what it is not. Until 1989, I argue that the UK was the lead supra-nationalist. It would have been possible to keep that position if the EU had opted for some form of flexible currency cooperation, capable-as Bernard Connally wrote in his book, The Rotten heart of Europe-of absorbing via flexible currencies the tensions of high growth playing out in a multi-state environment. But Connally was booted out of his senior post  in the Commission; British ideas for flexible currency formulas were sidelined, and France, with Italian support, rammed through a single currency policy, against the German public’s preference, and with a view to ending DM hegemony. The result is painful to watch: France’s own post imperial strategy, to create a Napoleonic Europe in its own image, now confronts a Germany determined to make Europe in its own image. Phrased in that way, the UK is well out.

As I have argued elsewhere on this blog, Europe is a mosaic of peoples and states, interdependent among each other, with distinct languages, neighbours, memories and tax systems. Its peoples do not appreciate being herded into one supranational entity, which is also a democracy free zone wide open to well healed lobbyists. The Heath strategy greatly contributed to get the supranational policy on a roll, and so contributed to creating the current pathetic situation of a rich Europe, unable either to act as one, and/or whose member states’ powers have been so hollowed out that they can barely act either. My recommendation to Remain and Leave supporters is that in or out the UK, with a greatly strengthened Westminster-backed by a Supreme Court referring in the event to a modernised Bill of Rights-can take the fight to the continentals in favour of a European alliance of constitutional states, where legitimacy is rooted in national parliaments. This does not discount specific supranational instances, but such a reformulation of the EU’s institutions would ensure that those institutions did not continue to enjoy the open ended brief for further centralisation, adumbrated in the phrase “ever closer union”. This battle for an European alliance of constitutional states can also by waged from outside the EU: there is plenty of support for that in a Europe, whose peoples are increasingly alienated from the EU project as it is.

Fifth, Prime Minister May has chosen about the most complex way to implement Brexit that can be possibly imagined. As I have argued elsewhere on this blog, the EU27 is not negotiating. One of its prime tenets is that progress to “ever closer union” is not reversible. Yet Brexit is the Mother of all reversals. It sets an evident precedent for other reversals, the most important of which would be France, as President Macron has indicated as quite possible, and even more Germany, where the centre right/left parties are now visibly shrinking as German Euroscepticism continues to bubble, the desire to return to the DM is high,opposition to immigration is widespread, and many people in Germany feel uncomfortable at an EU policy which places Berlin in the position of schoolmaster for delinquent European children.

So the EU27, especially the Commission and the Benelux mafia, have an evident vested interest in reversing the June 23 verdict: we would be back to an EU 28; the EU’s second largest fiscal benefactor would be back on board; hanging tough on Brexit would prove as profitable for the project as crushing Greece proved to be in taking the wind out of “populists” in Latin Europe. The fact that this could take the UK one whole step closer to civil strife is not considered: in other words, the EU does not think European, it thinks a sum of interests. That is what a swathe of British people see: were there to be a second referendum that perception would likely find expression in the way votes are cast. They would likely be cast against. If that train of circumstances occurred, we would not be together contributing to European security and prosperity.

There is a rule of thumb in business. The project must be simple and comprehensible at launch: because when it ventures out into the real world, the real world has a habit of multiplying complexities, for ever and ever, as Händel’s Messiah sings, and ever, and ever. May does not think like this. The way she thinks is the following: what are the constraints, she asks. Her advisers tell her. She then trundles down the pre-established path designed by the constraints, and sooner or later, gets herself trapped in a labyrinth, where every hedge she goes around ends in another cul de sac. She is indeed Parris’ Hologram May.

My advise is keep it simple. The vote was 52/48, Scotland, London and northern Ireland voting Remain, the restUK voting leave. One way is the WTO: it has its pros and cons. One con is that 48% of people would not be happy. The Norway EEA solution is another: it keeps some ECJ; it keeps the single market; it keeps the four freedoms; it squares Ireland, which WTO doesn’t. Some 52% might not be entirely satisfied, but they would get the benefit of free trade; the ECJ would become a marginal bother; corporations would know where they are. The disadvantage is the four freedoms, from the perspective of Remain voters in northern England. There are solutions to this: bang the EU table, tell the EU to get its house in order and massively bring down unemployment, then we will consider opening labour markets wide again. Another solution is make benefits much less accessible.

Whichever way is taken, there will be hurdles. These can be anticipated. May seems to have zero ability to foresee hurdles until she has to cross them. Nearly invariably, she creates a pile up. But she is right in one thing: people have voted. They have voted to Leave. Leave can mean many things. But one thing it does mean is that the UK is taking back control, In our Out.

Matthew Parris is wrong. Plateau Sovereignty is attainable, if it means at the very least the power to say no. Sovereignty deserves much more than a sneer.

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About Jonathan Story, Professor Emeritus, INSEAD

Jonathan Story is Emeritus Professor of International Political Economy at INSEAD. Prior to joining INSEAD in 1974, he worked in Brussels and Washington, where he obtained his PhD from Johns Hopkins School of Advanced International Studies. He has held the Marusi Chair of Global Business at Rensselaer Polytechnic Institute, and is currently Distinguished Visiting Professor at the Graduate Schoold of Business, Fordham University, New York. He is preparing a monograph on China’s impact on the world political economy, and another on a proposal for a contextual approach to business studies. He has a chapter forthcoming on the Euro crisis. His latest book is China UnCovered: What you need to know to do business in China, (FT/ Pearson’s, 2010) (www.chinauncovered.net) His previous books include “China: The Race to Market” (FT/Pearsons, 2003), The Frontiers of Fortune, (Pitman’s, 1999); and The Political Economy of Financial Integration in Europe : The Battle of the Systems,(MIT Press, 1998) on monetary union and financial markets in the EU, and co-authored with Ingo Walter of NYU. His books have been translated into French, Italian, German, Spanish, Chinese, Korean and Arabic. He is also a co-author in the Oxford Handbook on Business and Government(2010), and has contributed numerous chapters in books and articles in professional journals. He is a regular contributor to newspapers, and has been four times winner of the European Case Clearing House “Best Case of the Year” award. His latest cases detail hotel investments in Egypt and Argentina, as well as a women’s garment manufacturer in Sri Lanka and a Chinese auto parts producer. He teaches courses on international business and the global political economy. At the INSEAD campus, in Fontainebleau and Singapore, he has taught European and world politics, markets, and business in the MBA, and PhD programs. He has taught on INSEAD’s flagship Advanced Management Programme for the last three decades, as well as on other Executive Development and Company Specific courses. Jonathan Story works with governments, international organisations and multinational corporations. He is married with four children, and, now, thirteen grandchildren. Besides English, he is fluent in French, German, Spanish, Italian, reads Portuguese and is learning Russian. He has a bass voice, and gives concerts, including Afro-American spirituals, Russian folk, classical opera and oratorio.
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4 Responses to You’re wrong, Matthew Parris: sovereignty is worth more than a sneer.

  1. Mark Allan Munson says:

    So, German Basic Law acts like the U.S. Constitution; it constrains legislative action. Whereas in the UK, all there is is common law piled up from precedant, and there is no exogenous legal constraint. Is that a fair asessement? I am also curious about how other European national governmental structures are compatable or not with the EU.

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    • Many thanks for the comment, Mark. The main constitutional document for the history of the USA, and then for Canada, Australia, New Zealand, and to a lesser extent India and South Africa, is the 1688 Bill of Rights. I would add successive Acts relating to voting rights, especially the extension to universal suffrage, male and female. In response to your position, I would say that the 1972 ECA, using the autocratic Henry VIII clause, arguably, was contrary to Acts extending the suffrage. It was never put to trial. At the time, the judges were subordinate in effect to the political arm. Now, if there were to be an attempt to Remain, it would be a reasonable position to take, in my view, that a return to ECA 1972 would infringe the powers of parliament as delegated for five years from the electorate. Remainers seem blind to this. But in effect , in the period 1972 to 2016, Whitehall operated “as if there were no exogenous constraint”. As for common law, cases are measured in relation to other cases. I am not a lawyer, but I think that that method gives judges far too great discretion: which cases? The judge decides. Given the cost of a case, taking the case to a higher instance, is costly, and that acts as a deterrence. Yes. One of the takeaways from the vote of June 23,2016, is that we need a “constitution”: my suggestion is a modernisation of the Bill of Rights;
      Yes, German Basic law definitely acts like the US Constitution, and constrain legislative and executive action. The thing to look at, and there is now a growing literature on the subject, is the positions of EU member states supreme courts in relation to the EU. There remains a lot of ambiguity. Germany is the most powerful member state, and the ambiguity is patent. What exactly are the powers of the ECJ, the GCC judgement implicitly asks. In the UK, the supranational answer was: supreme, and, importantly, no challenge. In my view, given the realities of the UK’s legal set up, Heath in effect locked the UK into a Star Chamber relation to the EU. Remainers clearly hark back to that. I would argue that they wanted the restEU to follow that principle.

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  2. Julian Bassett says:

    “Sovereignty deserves much more than a sneer….” Yes, shout that from the rooftops.

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  3. Thanks, Julian. The power to say No is an elementary anti-imperial power. The Irish will help explain.

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