European integration as a political issue.
De Gaulle was weakened by the 1968 events in France, and there is some evidence his strategic thinking started changing at that point. French military strategy shifted from the anti American “Tous Azimuths” – all targets – doctrine, according to which the French nuclear bombs could be targeted in any direction , including the USA, to a more traditional, western approach, in which they were only aimed eastward – towards the Soviet Union. Hostility towards the most faithful ally of the USA in Europe, Britain, receded. De Gaulle resigned in 1969, after losing a referendum on decentralization, and was succeeded by George Pompidou. Germany and Italy exerted pressure on the French government, which agreed to reopen negotiations in spring 1971.
As was the case 10 years earlier, differences were small, and were solved by experts. The most difficult issues were those of sugar and of British debts, the “sterling balances”. The issue of sugar was complex, because it combined interests and ethics. Britain produced a large amount of sugar from sugar cane, imported from the Commonwealth, but costly and less competitive than sugar produced in Northern Europe from beet root. The British sugar industry therefore needed and obtained protection, since it could not withstand competition. About 70 MPs were part of the sugar lobby at Westminster. Besides, sugar cane production was also essential for those third world countries who were involved, and who depended on it. This combination of interests and ethics became a familiar one in negotiations where Britain was involved.
The issue of the Sterling balances , the foreign debts of Britain in Pounds, was thought to be difficult, and had plagued the debates in the 1960’s, since British debts were very high. In practice, Britain pledged itself to pay its debts, but inflation was so high in the 1970’s, reaching at some point 24% a year, that the real burden of the debt fell rapidly. This was one of the unexpected indirect benefits of high inflation.
An agreement was reached in January 1972, and entry was set for January 1st 1973, if the British Parliament accepted the terms. It was agreed:
to grant Britain a 4 year transitional period, after which the European external tariff would apply to British industrial imports from the rest of the world
that Britain would accept the Common Agricultural Policy, and see its contribution rise by 2,5 % a year for 6 years
that Britain would start contributing to the EEC budget in 1978, and that the amount would start at £300 million.
That individual negotiations would be opened with members of the Commonwealth.
The terms were reasonable, and the impact of integration would only be felt in the late 1970’s – which is precisely the time when Mrs Thatcher came to power, and the crisis between Britain and the EEC started.
-European integration as a political issue.
From 1970 to 1974, Britain was governed by the Conservatives, under Edward Heath. This was a very difficult period, in which the economic crisis combined with a serious social crisis. The time for joining Europe was not particularly well chosen. The economic crisis had a number of internal and external causes, which included:
the collapse of the fordist system. Productivity did not increase anymore, or only marginally, because full use had already been made of new technologies such as electricity, and the degree of rationalisation of industrial work processes was already so high that it seemed impossible to go any further. This was an international phenomenon, which hit Britain particularly hard because it was more highly industrialized than other countries, such as France. This problem lasted until the 1980’s, when a new technology, computers, enabled developed countries to improve again their productivity dramatically, and to create a new type of society. The 1970’s correspond to the gap between full electrification and the generalization of “information technologies”. Expectations of wage increases, based on fordism, were still very high, especially since the inflation rate was rising.
Britain suffered from a specific combination of inflation and economic stagnation, whereas the two never came together before. This was called “stagflation” (stagnation + inflation), and puzzled economists.
The USA, faced with a huge public deficit which resulted from their costly involvement in the Vietnam war, realized that the confidence of international financial markets in the US $ was vanishing. They feared a situation in which the gold standard (i.e. the idea the $ was guaranteed in gold) would come under strain, and the gold reserves of the Federal Reserve Bank would be depleted. They therefore decided to abolish unilaterally the gold standard, and to let the value of the US $ slip. This brought about the end of the Bretton Woods system, and all currencies started fluctuating , some of them, such as the Pound, violently. The world financial system became very unstable.
The Kippur war between Israel and its neighbours led oil producing countries to increase the price of crude oil, in September 1973, so as to exert pressure on the western world. The price of oil was multiplied four fold.
The Heath government, like all western governments, was at a loss. Economics is not an exact science, and experts were left without a common theory or doctrine. Keynes’s ideas, which had dominated the thinking of experts and governments since the I930’s, were questioned by many, and were eventually rejected, in the mid 1970’s. Heath hesitated between several courses, and tried to keep wages under control, so as to reduce inflation and restore profitability. This led to large strikes, in particular in the winter of 1973. The miners decided to operate an overtime ban – i.e. to stop working overtime-, which reduced the supply of coal … just at the time oil prices were rising. The country ground to a halt, industry could only work 3 days per week so as to save electricity, television was cut at 10 PM etc. Elections were called, and the Conservatives lost, to be replaced by the Labour Party, under Prime Minister Harold Wilson.
In this context, the population became extremely anxious about the future of the country. Europe, which used to leave public opinion largely indifferent, became a new cause for angst. The percentage of people wanting to leave the Common market rose from 15% to 29% between January 1973 and July 1973 .
In Parliament, Heath avoided turning Europe into a party political issue. He made sure the vote on joining did not require party discipline, but treated it as an ethical issue , worthy the individual judgement of Members of Parliament. This was called a “Free vote”. On February 17th 1972, the decisive vote confirming entry approved the government’s policy by a narrow majority of 8.
This was all the more clever as the ranks of the Labour Party and the Trade Unions were much more divided on the issue than the Conservatives. The Conservative opponents of European membership were mostly backward-looking nostalgic nationalists. The dynamic wing of the party, supported by British industry, by the conservative press and economic experts saw European membership as the only way of halting Britain’s decline, exposing it to the bracing winds of competition, and offering it the prospect of a large market. Their motivation was clearly economic, which is understandable, given the crisis the country was facing. The idea that European unity could one day constitute an alternative to American domination over Europe, and that the specific social model of the social market economy, half way between capitalism and socialism, deserved support, was not shared by anyone in the UK, with the exception of a few intellectuals. There was no idealism, and no lyricism in Britain’s decision to join the EEC.
The Labour party leadership shared the views of Edward Heath and of experts in general on the economic benefits of joining. However, a significant section of the labour movement (which includes the Unions) and of the Party itself opposed membership. Large unions such as the Transport and General Workers Union (TGWU), or the Amalgamated Union of Engineering Workers (AUEW), which constituted the left of the movement, opposed entry. Pro European Labour MP’s lobbied very actively within the movement, and the party proved much more hostile to entry in the opposition than when it returned to government in 1974.
When Labour returned to power, the economic crisis was still extremely serious. Besides, most European countries had undergone a social and political crisis in the late I960’s: the May I968 crisis in France, the Autumn I969 events in Italy, numerous students movements in Germany had rocked the boat, and encouraged the left, all over Europe, to adopt ambitious programmes of social reform, and, in some cases, radical policies. Wilson’s Labour party and government were influenced by this historical trend, and included a left wing which was encouraged in its activism by the success of the miners ‘ strike, which had brought down the government. Wilson and his successor James Callaghan used the European issue in order to isolate the left, and eliminate it from its government. The Labour left, under the leadership of Tony Benn (then minister for industry), opposed European membership for two reasons:
a political one. Only British sovereignty would enable the Labour government to pursue radical policies.
An economic one. Only British sovereignty and protectionism (called “import controls” ) would enable the government to reflate the British economy without increasing the trade deficit. Capital outflows from Britain could be prevented, and prohibited. A policy geared towards the third world would enable Britain to maintain its outward looking stance. This policy was therefore in keeping with Keynesian theory.
The campaign mounted, but was somewhat weakened by the successful outcome of the renegotiation of British terms of entry which took place in March 1975, at the Dublin European summit. This took into account the state of the British economy, and stated that the British contribution to the EEC budget would reflect ”the evolution of the British GDP”. Europeans had therefore agreed that Britain was a special case, which paved the way for the crisis of the 1980’s. Members states ‘ contribution to the EEC budget was supposed to be calculated in a mathematical, objective fashion: it was supposed to take into account the amount of goods imported from outside the EEC, and taxed according to the common external tariff, on the one hand, and, on the other hand, domestic consumption. Britain had obtained the principle of a partial exemption from the Common Tariff, even before it started contributing.
Britain also obtained that all agricultural produce imported from the Commonwealth be exempted from the Common External Tariff. Former British colonies were treated exactly like the former French ones, which obtained the same preferential treatment as a result of the Lomé Agreement with ACP countries (Africa, Caribbean, Pacific).
Prime Minister Harold Wilson, intent on keeping Britain within the EEC, remaining in power, and isolating the left of his own party and government , decided to call a referendum on the subject of Europe. This was the first referendum in British history, and, as such, its organization was very controversial, and had to be approved by Parliament. Contrary to the USA, which operate a presidential regime, and to France, whose constitution is a hybrid including presidential and parliamentary elements, Britain is the mother of parliamentary democracies. It is the one of the oldest and the purest parliamentary regimes in the world, which explains why referenda are in absolute contradiction with its constitutional culture. In a parliamentary democracy, vital decisions are taken by parliament, in which popular sovereignty resides. Members of parliament are trusted, their legitimacy is undisputed. Indeed, in the past, their debates were not even public, so as to preserve the independence of members. No authority can compete with that of Parliament. Organizing a referendum amounts to reducing the field of competence of Parliament . It is natural in “elected monarchies” – as presidential regimes are sometimes called- whenever a president feels he should put a question directly to the people, or he doubts his own judgement.
This explains why the organization of a referendum, which would be commonplace under a constitution such as the current French one, was hotly debated in the UK. The campaign was fiercely disputed, and, although both sides received government subsidies, the supporters of membership mobilized much greater resources than the opponents ( £ 1 million vs £130 000) . Supporters included the Confederation of British Industry, the National Farmers’ Union, most newspapers on the left and right of the spectrum . Opponents included prominent left wingers, one daily paper (Daily Express) but also embarrassing allies, such as the Irish Republican Army, protestant paramilitaries in Northern Ireland, the extreme right National Front, and the Communist Party. Opponents campaigned on practical issues, such as the price of food, and on the issue of sovereignty.
The turn out was low, (64.5 %, whereas it reaches 75 % for General Elections), and most abstentions were to be found in Labour controlled areas: The left had doubts, but refrained from embarrassing Harold Wilson. The supporters of entry obtained a large majority, 67.2% .
British membership was therefore approved both by the House of Commons and by referendum.
The influence of the left was much reduced in government, and Labour remained in power until May I979, when a new breed of conservatives, under Margaret Thatcher, won the general elections.