Saturday, 1 April 2017

Brexiters Learn The Lessons Of The Opium Wars

The proponents of Brexit have frequently argued that the EU would have to give Britain a good deal, even a better deal than being inside the EU, because the EU has a trade surplus with Britain. They will not want to limit their exports to Britain by tariffs, the argument goes. Of course, that's back to front, because it will be the EU imposing tariffs on imports from Britain, alongside other non-tariff barriers, not vice versa. With only a couple of days having passed after the triggering of Article 50, the Brexiters are having some truths brought home to them. They should learn from the experience of Britain's relations with China resulting in the Opium Wars.

By the early 1840's, Britain had become in an industrial power, with its industry being powered by steam engines that enabled production to expand on a qualitatively different basis, even from what it had been during the initial period of the Industrial Revolution, after 1750. As Marx describes in Capital III, and more specifically in Chapter 17 of Theories of Surplus Value, bourgeois economists such as Smith, James Mill, and Ricardo could not grasp the idea of overproduction, because they were writing at a time prior to this massive expansion of output due to machine industry. The first actual crisis of overproduction did not occur, Marx says, until 1825.

Until then, capitalist crises had been financial crises resulting from private banks printing notes way in excess of their capital, and from other speculative bubbles such as The South Sea Bubble. James Mill developed the theory that has come to be known as Say's Law, that there can be no overproduction because, supply creates its own demand, i.e. every sale is at the same time a purchase. But, Marx shows, this is only true in a system of barter. In a money economy, the transaction C – M – C, illustrates that the commodity owned by A is sold, and A then obtains an amount of money, which they then give up to buy a commodity of the same value from B. What under barter, is an exchange of the first commodity for the second, is in a money economy mediated by money.

But, Marx says, this means that have sold their commodity, A having obtained an amount of money is under no obligation to then spend this money to buy a commodity of the same value from B. They can simply hold on to the money, and in that case, B will not be able to sell their commodity. It will have been overproduced. And, this can exist generally. All that is required Marx says, in Chapter 17, is that the demand for the general commodity – money – exceeds the demand for all other commodities.

So, when an actual crisis of overproduction arose in the 1840's, when China and other overseas markets failed to buy all of the exports that Britain wanted to sell them, the economists could only explain this crisis as a crisis of under-consumption. It was not that Britain was overproducing, they argued, but China that was under producing, and thereby not creating the revenues required to buy up all the commodities that Britain wanted to export to them. Moreover, one commodity that Britain was keen to sell to China was Opium, that Britain was shipping out of India and Afghanistan. The Chinese Emperor was insistent that he did not want the Chinese people poisoned by opium.

But, a militarily powerful Britain was having no such resistance, and sent in the gun boats to ensure that they could control the Chinese markets, and sell their Opium and other commodities.

Britain is already receiving a similar lesson in the Brexit negotiations with the EU. The Brexiters sowed the delusion that by separating from the EU, Britain would “take back control”, and assert its sovereignty. And, of course, at a very superficial level that is true, but in reality, nothing could be further from the truth. As I argued last year, and as Michael Heseltine has also stated recently, Brexit actually represents the greatest abandonment of sovereignty that Britain could have undertaken.

The Brexiters may retain fantasies about Britain's colonial past, when it could send the gun boats into China, but the world today is very different. Britain is now a second rate power, that only had influence as part of the EU. As I suggested last year, an indication of that would come the next time some dispute arose over Gibraltar. The EU is a proto-state comprising 500 million people, as opposed to the 60 million people of Britain; it is the world's largest economy with a GDP of around $18 trillion as opposed to Britain's $2 trillion. When it comes to power relations the EU now stands in relation to Britain in the same way that Britain stood in relation to China at the time of the Opium Wars.

The Brexiters do not seem able to help themselves when they continually talk in terms such as “Brussels must do this” or Madrid must do the other”, as though it was Britain that was able to tell others around the globe what they must or must not do! But, in fact, as the EU has now demonstrated, in relation to its insistence that Spain has a veto over any future decisions on the future of Gibraltar, it is they who will tell Britain what it must or must not do. Britain may have sovereignty, in theory, but in practice it will now have to do what it is told by these larger power such as the EU, US, China and so on. And unlike previously, when Britain had a large say in how the EU determined these policies, and in turn how the EU was able to negotiate with the US, China etc., Britain is now out in the cold, with no say whatsoever in that decision making.

As the coming months will show, the EU holds all the cards. It is the EU that will tell Britain what terms it can trade on, and will also have a major role in determining even what happens with the future of Britain, the independence of Scotland, Northern Ireland, and the borders between these nations and the rest of Britain. Theresa May has threatened the EU like a bad poker player, who everyone knows has a useless hand, and whose bluff is therefore, easily called.

May threatened that if the EU did not give Britain what it wanted they would turn Britain into a modern version of Batista's Cuba. The EU shrugged its shoulders, and said go ahead. May has threatened the EU with withdrawal of co-operation on defence and security, but the reality is that Britain's defence industries, and subsidiary industries in steel, technology and so on, depends upon the EU defence industry, and procurement. Moreover, Britain has been a serious drag on the EU developing a European Defence Force, as Britain acted as the agent of the US within the EU.

With Trump indicating that he is ready to drop NATO, he has given the green light for the EU, to start to develop its own defence and security arrangements prior to separating from NATO. The EU really only needs to concentrate on a defence of western Europe, and the security of its near abroad, rather than financing NATO's global policing role. The Tories pulling out of current arrangements in Europe, will simply facilitate the core countries of Germany, France and Italy in developing a European Defence Force, supplied by EU Defence industries, and supplied by European steel producers, technology companies and so on.

And, whilst the Brexiters fantasise about the EU's dependecne on selling things to Britain, the EU can simply threaten to withdraw the existing investments in production in Britain, and to relocate them in the EU. Even if Britain buys a smaller quantity of those commodities, they will then be commodities produced in the EU not, Britain, employing EU workers not British workers, and paying taxes into EU coffers not British coffers.

What the Brexiters have done is to delude themselves into thinking that they have obtained sovereignty, whilst in reality they have simply given it away.

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