Just what is David Cameron playing at?

Why has the British Prime Minister excluded Britain from vital negotiations on the future of the EU?

This has been a week when friends from around the world have been asking me to explain what exactly David Cameron was up to by refusing to sit down with the other 26 countries of the European Union to formulate a plan to try and get out of the economic pickle which the whole of the west, and not just the 17 members of the Euro, finds itself in. To many it appears strange that the cause of the economic crisis, namely deregulation of the financial sector, is still being touted as a solution by the British when the general, and increasingly popular, mood appears to call for more regulation, not less.

Let me begin first with the domestic political reasons for Cameron's no vote. His Conservative party has been divided for many years on the subject of Europe. The previous Conservative government, in power for 17 years and led during most of that time by the firebrand Margaret Thatcher, presided over a period of cooling relations with the continent. It was her that famously won the British Rebate from the EC (forerunner to the EU), a refund from Europe today worth around £5 billion to the British economy, and one which must be defended at all costs. However, she also joined the forerunner to the Euro, the Exchange Rate Mechanism, a venture which failed spectacularly 2 years later when the British Pound's high valuation compared to other European currencies made the union unstable, forcing Britain to withdraw and devalue the currency, a move which cost 3 1/2 billion pounds to the UK economy, but also explains how the UK avoided becoming a member of the Euro.

After Tony Blair swept to power in 1997 the Conservatives spent a miserable 13 years out of power, during which time the vaguely pro-Europe Labour Party succeeded in little more than keeping the UK out of the single currency. Not a difficult move considering the lack of domestic support for the change. The dead-in-the-water Labour government of Gordon Brown finally fell apart at the 2010 general election, although the Conservatives didn't fully capitalise on the unpopularity of the incumbent party, failing to secure a majority in the House of Commons and being forced to form a coalition - the first in Britain since the national governments of the 1930s - with the left-of-centre Liberal Democrats. Despite being in government with a nominally pro-European party, the Euro-sceptic wing of the Conservatives grew more and more vocal. By the end of October this year, a group of Conservative 'back-benchers' engineered a vote in the House of Commons to take the matter of Britain's membership of the European Union to a national referendum - one which would most likely conclude with the majority voting against Britain's continued membership, and favouring a Norwegian or Swiss-style relationship with the block. The vote was defeated, but 111 MPs, out of a total of 594 and including 79 Conservatives, voted in favour of the motion. This was the biggest rebellion against the coalition government so far during its period in power, and goes a long way to explain what was going through Cameron's head as he took his seat at a Brussels table last week to discuss the future of Europe. He had to be strong in Europe, just like Thatcher

So he used Britain's veto against the idea of a 'treaty within a treaty'. Despite failing to garner any support amongst other nation states - Hungary's far-right government agreed for a while, but in the end the British position was too radical even for them and the matter will instead be taken to their parliament to decide upon - Cameron went ahead and said no to a deal which appears to be, at the most, still loosely formulated. What was finally decided were some quite dull restrictions on fiscal policy, which are not terribly different to those already set-out as founding pillars of the Euro. Common-sense things like restricting government spending to a certain limit and encouraging balanced budgetting by all nation states, as well as the usual pie-in-the-sky desire to align countries' economies - a wish that is fundamentally unchanged from the principle dream of the Euro when it came into being 7 years ago. Imagining that Greece's economy will eventually look like Germany's is what got us into such a mess in the first place - the Greeks and other were given money at much lower interest rates on this crazy supposition - so to say this is the answer to Europe's problems is optimistic at best.

That said, it was not for this reason that Cameron vetoed the proposal. He said no in order to ensure "safeguards for British interests" in the European single market. By this, he is mainly referring to financial interests in the City of London, that money machine at the heart of the British Capital which must be defended at all costs. Yet just what is it that he's defending? It is a widely-held belief in the UK that the financial sector is the driving force of the economy, yet in 2009 it actually generated less than 10% of UK Gross Added Value income - a sum less even than that of government, according to the latest UK National Accounts (the Blue Book). The UK financial sector pays less than 2% of this income as tax, and takes more than 50% as profit. This compares to Non-Financial companies, which produce more than 6 times as much Gross Added Value, pay proportionally more taxation and take just 33% of this income as profit. So, the contribution of the city of London to the UK economy is not as great as we might be led to believe. Indeed, taking into account the subsidies received, net contribution would be even less. While the government is planning £80 billion in cuts over the next few years, in October of this year £75 billion was ploughed into the banks as part of QE3 (the third round of Quantitative Easing) - showing the crisis to be an act of wealth redistribution from bottom to top and an excuse for more of the same neo-liberal economic strategy (I hesitate to use the word planning here) rather than simply a tightening of belts.

And what of these evil regulations imposed by Brussels against the national interest? Here's a story that doesn't make the mainstream press but is a strong indication of the UK position. Last year the London Metal Exchange, the primary global price-setting market for non-ferrous metals (i.e. the place where all the world looks to garner the true market price of copper, aluminium, zinc, lead and a number of other metals) saw individual financial trading institutions buy up more than 50% of the available stocks of certain metals over 600 times! That's 600 occasions when banks or hedge funds controlled the market in these vital commodities, where the market price is important to the whole world, including British manufacturing. In October 2010, JP Morgan was allowed to buy up to 90% of all the copper stocks on the market, and guess what, the price of copper on that day reached a new high - a price which kept growing into January of this year as the US bank gradually sold off the stocks at greater and greater profit, while the rest of the world was forced to pay ever more for a mineral vital to electronics and many other things. One of the EU's proposals for regulation would see position limits set up in such markets, so that no single company could own more than 25% of a given commodity. This follows a law passed in the United States last year, the Dodd-Frank law, which regulates for the same position limits, and much more. In opposing this, Cameron is exempting Britain from regulation that the whole world agrees on (not including the Republicans in the US of course, but they think God created American so that the banks could become very rich).

Disbelief in this matter can only be explained away by an understanding of the role which The City plays in British public life. The Corporation of the City of London is a body elected mostly by the financial companies based in the square mile to represent their interests at the very highest level. To quote former Prime Minister Clement Atlee, taken from an excellent article by George Monbiot, "over and over again we have seen that there is in this country another power than that which has its seat at Westminster." This understanding puts Cameron's position in some context, and explains away his seeming madness, although his posturing may have endagered not just Britain's position in the world, but also the very coalition government on which his continued power depends. The next developments will not be dull!

Adam Mathews, Utrecht, 11 December 2011

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