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As all that is solid melts to air and everything holy is profaned...

Tuesday, September 23, 2014

Raw Power

Another bad day for the Stock Market

So it’s a mess. It would have been a mess either way the vote went. If it had been a Yes I was expecting an economic / sterling crisis. The No vote has postponed that crisis, but now we have a constitutional crisis which has the potential to tear the Union apart anyway.  You can‘t have a Union Parliament and ‘English votes for English laws’.

If there had been a Yes vote I would have been writing about a Scottish constitution and the problem of how to embed social and economic justice in it. The problem I was going to focus on was how to establish democratic power over economic power. Instead of that, here are some thoughts on  economic power and the British constitution .

The British constitution goes back to 1100 when king Henry I of England needed to legitimise his rule in the face of opposition from the barons, the Church and the recently conquered  (Anglo-Saxon) English .he did this by offering concessions to all three groups in a ‘Charter of Liberties’. In 1215, king John 1 of England had to make  similar concessions in order to legitimise his rule- the famous Magna Carta. One of the signatories was Alan, lord of Galloway and constable of Scotland. The aim of these charters was to resolve disputes between the centre represented by the king and peripheries represented by regionally powerful barons. The power of the barons was determined by  their military strength, which was influenced by  their wealth which was influenced by the agricultural/ economic  prosperity of the lands they owned.

Four hundred years on from Magna Carta, the English economy had developed and with it the English constitution. Now rent from land rather than military strength indicated the barons’ power. This power was exercised through the House of Lords. The beginnings of  ‘middle class’ also existed in the House of Commons, occupied by wealthier farmers and merchants. Taxation was the source of the constitutional conflict which led to a civil war across England, Scotland, Wales and Ireland. The turmoil lasted  from  1638  to 1746-  from Charles I’s  first war against the Scots to the defeat of the Stuart cause at Culloden.

The end result, which included  the Union of Parliaments as a side effect, was an increase in the power of the English Parliament and a dramatic reduction in the power of British queens and kings.  However, the power of the new British Parliament was then challenged by the American colonies over a constitutional problem- taxation without representation. The new American state then adopted a written constitution.

The French had supported the American’s against the British but to meet the cost of this support the French needed to raise money through taxation.  To do this, an assembly called the Estates General which had not met since 1614 was summoned in 1787 by Louis XVI. This was done to bypass the Paris Parliament which was refusing to help the king. But, similar to the problems experienced by Charles I in England, the Estates General made demands on the king in exchange for agreeing to new taxes.

When these demands were refused a constitutional crisis broke out which led to a revolution and Louis XVI’s execution.  Like the revolutionaries in America, the French revolutionaries drafted a written constitution in 1793. This was ratified by a referendum but then replaced by a fresh constitution in 1795.

In Britain, the idea of a written constitution became associated with fears of revolution and democracy. The situation was further complicated by the industrial revolution which shifted economic power towards the midlands and north of England, to south Wales and to Scotland. The industrial revolution also led to the rapid growth of new industrial towns and cities although few of their inhabitants had the right to vote.

Gradually and grudgingly the constitutional system was reformed until representation in the House of Commons, but not the House of Lords, roughly matched the new economic and demographic reality. This created a rough balance of power between the financial interests of the City of London and the manufacturing regions. But as  the UK’s role as ‘workshop of the world’ declined, so economic power and hence political power shifted  to London as a centre of global finance. This process has speeded up over the past 35 years.

The central problem with this concentration of economic power in London is that because it is based on banking and financial services it relies on the confidence of global markets that London will remain a good place to do business. If that confidence wavers, London’s wealth will vanish in an instant. At the same time, given the problems of a global economy which is still struggling to  recover from  the collapse of confidence which occurred in 2008, London’s failure could well trigger another global crisis of capital.

"The British pound (also called the pound sterling) is one of the most economically and financially important currencies in the world. The pound is the fourth-most traded currency in terms of turnover and it is the third-most widely held reserve currencies among the countries of the world."

Any threat to the value of the British pound is therefore of international as well as local importance. The loss of export earnings from oil would have impacted on the British pound’s international status. That fear has now receded, but the constitutional crisis triggered by the No vote may also have an economic impact.

The problem here is that to maintain London as a centre of global finance requires huge investments in London’s infrastructure, including transport. But, as the Scottish independence campaign showed, this is at the expense not just of Scotland, but of other English regions, Wales and Northern Ireland. The ‘devolution all round’ demands from other parts of the UK which have emerged  in response to  the ‘vows’ of more power to Scotland conflict with the need to maintain investment in London. The political demands to rebalance the UK economy, to shift power away from London, are impossible demands.

It is very difficult to see how the UK’s  Londoncentric status quo can be maintained  in the face of  a UK wide constitutional crisis. If Scotland is not given more powers, then  pressure for independence will increase. But if Scotland is given more powers, then pressure for a shift of resources away from London will also increase. This risks checking London’s growth and disrupting economic policies designed to maintain London as a global financial centre.

A further constitutional conundrum is the idea of  ‘English Votes for English Laws’ as a solution to the West Lothian question.  Labour are against it because it would mean that even if  elected,  Scottish and Welsh Labour MPs  could not be used as lobby-fodder to push through reforming legislation affecting England. If more powers are transferred to Scotland, the scope of  EVEL would be increased.  The danger  for Labour in Scotland would be having a group of second class MPs with  no effective power.

The answer would be for Labour to win a majority  in England so they don’t have to rely on their Scottish and Welsh MPs. However to win in England Labour have to break out of their traditional heartlands and gain LibDem and Tory seats. That will be very difficult if Labour are seen as being ‘soft on the Scots’ - which they need to be to win seats in Scotland. Even in their traditional heartlands, Labour could suffer if they are seen as neglecting deprived areas of England by failing to promise them equivalent devolved powers.

To conclude.

Constitutional history is rooted in civil wars and revolutions. Constitutional change is driven by crises of legitimacy, by an old order trying to hang on to power or a new order seeking to establish itself. Changes in constitutions reflect changes in the structures of power and the balance between economic and political power.

In the nineteenth century, the present ‘unwritten’ UK constitution was forced to adapt itself to economic and demographic changes which  followed the industrial revolution  The UK is no longer a significant industrial power but it is, via the City of London, a key part of the global financial system. Economic power dictates that the rest of the UK is drained of resources in order to maintain  this status.

The fearful desperation which drove the No campaign to hold onto Scotland at all costs was driven by the nightmare scenario of a loss of global confidence in UK plc and the British pound. That moment of fear has passed, but the slowly unfolding constitutional crisis which victory has wrought will be no less damaging.
Stop the City flyer from 1983


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