SANE Views

Vol.5 No.12, 05 June 2005

Why did the French and the Dutch Reject EU?

Margaret Legum

The real significance of the French and the Dutch rejection of the EU Constitution has been missed. That is because it contradicts a basic tenet of current economic thinking. In terms of that thinking, the ‘No’ votes have been described in the mainstream media as both incomprehensible and totally negative - a blow to progress, a step back from steady advance or simply xenophobic.

The truth is that there has-been no serious interrogation of that rejection. Why should people who are being well served by a particular dispensation suddenly reject it? Why was an overwhelming ‘No’ vote not anticipated? Why was it such a surprise until the almost eleventh hour? Because the real reason is unthinkable within accepted theory - that the larger the market, the better for everyone’s standard of living, because it encourages trade and growth.

So the real reason does not occur to established opinion leaders. It is that the majority in those countries have seen their standards of living eroded instead of enhanced by the size of the market in which they had to compete and the standardisation of their financial institution, so that one size was forced to fit all.

They had noticed that the longer the EU lasted and the more countries were let in, the poorer middle and lower income people were getting, and the more rapidly incomes were floating to the top. That inexorable growth in inequality was and is the same fact of life as it is in all countries. While that inequality is accepted by the mainstream – the facts are incontrovertible – there has been complacency about two things.

First, that somehow inequality would be mitigated over time and with growth; and second that the victims of that inequality would not connect it with the enlarged market, and so would continue to believe it was about their own failure to be more competitive.

The opposite has happened: growth has increased inequality as the size of the market increased. That is historically true. It is because the larger the market the more scope there is for investors to insist upon, and gain agreement for, lowering wage and salary levels and increasing hours of work. As well as pragmatic evidence, that stands to reason. Since the point of investment is profit, the investor must seek the lowest costs. And if labour costs are less, and unemployment larger, in one place rather than another, investment will be inclined to flow there.

Similarly the fiercer the competition in that larger market the more essential it becomes to shed labour in favour of capital; thus creating unemployment, and with it the willingness to work for even less. .

None of this can be controversial. Take the most recent example in our faces. Before our clothing industry was forced into the world market, local enterprises competed efficiently against each other in terms of cost and quality. We did not produce the cheapest clothing in the world – nor the most expensive – but we did employ hundreds of thousands of people. Now that we must compete globally, we must sack people because they are not prepared to work seven days a week, fifty-two weeks of the year to ‘become more competitive’ like the Chinese.

The same process has been going on in Europe, especially in the founding countries, whose living standards started off higher and relatively equal. There are now ghost towns from Scotland to the tip of Italy. Small farmers have gone out of business. Chain retailers and supermarkets, lauded as job creators, in fact cause deserts of unemployment around them as they source their products world-wide. Cities must cope with enlarging ‘under classes’ of demoralised, alienated, yobified, violent, unemployable and often delinquent people. These cost each nation huge sums in terms of policing, community and social workers, psychiatric services and welfare payments.

These symptoms have been variously misdiagnosed – from the permissive society, to national characteristics to generalised ‘that’s life’. In the same way the ‘No’ votes have been ascribed to some familiar stereotypes. Thus, the French are notoriously insular, short-sighted, a nation of essentially chauvinistic small peasants. And the Dutch? Scarcely! And when the other nations’ referenda produce the same result?

The rejection has also been ascribed to racism and xenophobia, because Turkish EU membership seemed to spark the rebellion. That membership was indeed a factor – because Turkey’s relative poverty realistically threatens wage standards that have been fought for over decades.

What are the lessons for South Africa? First, those who benefit by global markets – shareholders of mobile investment, who have achieved ‘passive’ income – cannot take for granted forever the compliance of those who lose. They are not stupid. They know it is about having to compete with workers in other countries over which they have no influence. Those who lose will in one way or another force a revision of the global market theory.

Second, if we had ever put our faith in Western policies to free trade in our direction, we can surely now forget about it. No politician will gain popular support by proposing laying their economy even more open to competition. The people who will suffer from that freeing of trade are not the captains of industry or their shareholders but those who already feel victimised by the world market. Why should they worry about us?