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LAST week Goldman Sachs chief executive Lloyd Blankfein tweeted that it may be necessary for Britain to hold a second referendum on the EU. Too many CEOs, he claimed, “are not happy” with the result.
What is Goldman Sachs? It is the United States’ biggest investment bank. It is also the EU’s.
Last year Goldman Sachs handled 33 per cent of all EU mergers and acquisitions. Together with JP Morgan and Morgan Stanley, these three US banks handled 80 per cent of all company mergers and acquisitions in the EU. They also dominate most other financial services. They do so from London.
These banks are now worried about their continued ability to control EU markets from their still partly deregulated base in the City. They want to continue in London. But they want Britain to remain within the EU single market. Hence the pressure being placed on all political parties to modify their position in favour of single market membership.
And it’s not just from within the (US-dominated) City of London. The pressure also comes from within the EU.
Although the US banks compete with French and German banks, they hold a pivotal position within EU financial markets and hence in the bloc’s policy making.
Among other key figures, European Central Bank president Mario Draghi was managing director of Goldman Sachs International from 2002 to 2005.
The current intransigence of EU negotiators in part reflects these pressures — as does the parliamentary debate on the Withdrawal Bill with amendments from the Liberal Democrats, right-wing Labour and the SNP all in favour of single market membership.
Why should this be a matter of concern to the left? Surely the single market gives us the best of both worlds. We’d be out of the EU but still get full access to the EU market.
Unfortunately it is not as simple as that. The EU single market requires full compliance with virtually all aspects of EU treaty law and EU directives. The only things excluded are taxation policy, full budgetary supervision and agriculture and fisheries.
The EU single market requires compliance with EU rules on competition, on procurement and on state aid to industry.
These rules ban any form of public ownership that distorts competition — ruling out the comprehensive renationalisation of rails, posts or energy.
It also requires free movement of goods, services, persons and capital, including the “right of establishment” — effectively the right of business to operate without undue hindrance from national legislation.
And EU Court of Justice case law is mandatory, including anti-trade union rulings such as Viking, Laval and Ruffert.
Last year trade unionists in the single market member states, Norway, Iceland and Liechtenstein, learnt this to their cost.
Norway’s dock labour scheme was ruled illegal by the European Free Trade Association court, which polices the single market, because it stopped employers bringing in labour from elsewhere.
This is why the issue of the single market is so important for the trade union and labour movement. It would nullify key elements of the 2017 Labour manifesto, above all its industrial strategy.
And this matters. Jobs depend on it.
Since 1981, the year Margaret Thatcher deregulated financial services to bring over the US banks, almost three million manufacturing jobs have been lost. Some 600,000 have gone in the 10 years since 2006 leaving us with a weaker, smaller industrial base than any other any advanced economy.
Export figures demonstrate this. In 2016 Britain’s deficit on its trade in goods was at an all-time high, equivalent to 6.9 per cent of GDP (and the biggest part trade with the EU).
But there was a positive balance equivalent to 4.7 per cent of GDP for services, mainly financial services through the US banks in the City of London.
Where does the bankers’ money go? Certainly not into productive investment. Quite the reverse. Thirty years ago only 15 per cent of company profits went to dividends: the rest to investment. Now over 70 per cent goes to shareholders.
This is because the dominant blocks of shares are now themselves controlled by investment banks and these banks need to maximise their own immediate profits if they are to retain their wealthy clients. Our whole economy has been financialised.
This is why Labour’s activist industrial policy is so important. It is the only way of breaking the cycle of decline. Only public-sector intervention can now do it: a state investment bank, government aid for struggling firms, public ownership where necessary and the active use of public procurement to require local purchasing and the redevelopment of regional economies.
Yet none of this is possible within the terms of the EU single market. The prohibitions go back to the deal which Thatcher’s ministers struck with Germany in 1986 over the Single European Act, the basis for the neoliberal EU that exists today.
Britain got financial services; Germany manufacturing industry.
In one big single market, with barriers removed and governments prevented from intervening, Germany could maximise on its existing strengths in manufacturing, while the US banks in London could exploit their dominant size.
We live with the consequences. This is why it is correct for the Labour Party to stick to its policy of negotiating maximum access to the EU single market but to oppose membership of it.
Membership would simply lock in the existing disparities. Good for Goldman Sachs — but not for workers in the real economy.
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