By Steve Dobbs

The British financial system is still reeling from a huge devaluation of the Pound in response to perceived risks and uncertainty from Brexit. This has plunged Sterling to an effective exchange rate lower than anything on record (from the last 168 years).

Finance capitalists (‘investors’) fear a so-called ‘hard Brexit’, where Britain would no longer be part of the European single market and thus would face additional tariffs and regulations when trading with EU countries. Perhaps more importantly for British capitalism, the same also applies to the banking sector and the potential loss of the financial ‘passport’ that allows British banks to sell their services freely across the rest of the EU and European firms the same in return.

The strength of the Pound prior to Brexit demonstrates the political dimension to currency valuation. Whilst ultimately the law of value determines the exchange-value of all commodities, including money, the price is still influenced by supply and demand at the surface level. Traditionally investors have favoured the Sterling (along with the US Dollar) based on its perception as a stable and reliable currency. Until now, that is.

The lower purchasing power of the Pounds means that importing goods from overseas, priced in other currencies, will be more expensive. No one wants higher food and consumer goods prices, although consumer prices have actually been falling for the past several years until very recently, largely thanks to falling oil prices. Between April 2014 to 2015, the price of common food items fell by double digit percentages.


However, in more general historic terms, the cost of food and consumer goods has been kept relatively low thanks to ‘globalisation’, the wave of imperialism that occurred following the generalised economic crises of the 1970s in the advanced capitalist countries. The capitalists’ answer to falling rates of profit and higher wage demands in Britain was to outsource manufacturing and farming abroad where wages were lower, and import those goods back. This allowed capitalists to simultaneously maintain high profit rates and keep the retail price of goods relatively low for consumers in Britain. As Engels noted, ‘Participation in the domination of the world market was and is the basis of the political nullity of the English workers’. Lower consumer good prices meant that wage growth could be moderated, whilst still providing relative material prosperity for most workers, keeping radical politics and class demands at bay. In some respects, the outsourcing of production also outsourced class struggle.

The collapse of the Soviet Union and the eventual capitalist ‘integration’ of Eastern Europe in the late 90s/early 2000s and entry into the EU allowed British capitalism to benefit from cheap labour through the free movement of people. But whether outsourcing production or importing migrant workers, the intention was the same: reduce wage costs to maintain profit rates.

Globalisation (i.e. imperialism) has meant a race to the bottom for workers around the world, and it is this imperialism that has allowed workers in the advanced capitalist countries to partly live at the expense of workers in the exploited or semi-exploited nations. Lower consumer prices for us are largely a result of lower labour-costs in other nations. This can be and has been compounded by the strength of the Pound against other currencies. With a weaker pound, however, exchange is now less unequal. British investment overseas will now be less profitable and hence less attractive. It is even possible that some manufacturing will return to Britain following Brexit. British imperialism and its domination of the world market will be curtailed.

If consumer prices start to increase, workers will and must fight for higher pay rises. Workers will demand more radical policies such as price controls and greater state intervention. In many ways, we could see a repeat of the struggles in the 1970s, but this time without the capitalists’ safety valve of another round of globalisation. Without the distraction of the EU and less reliance on imperialism, the class antagonisms of capitalist society will come to the foreground. The question will be posed: Do we accept that capitalists must maintain their profits at our expense, or do we get rid of the capitalists and their profits system?

Brexit Disaster?

Those on the Left condemning the vote to leave the European Union are seriously misguided. The class struggle is returning home and the contradictions are sharpening, but apparently they would much rather have cheap goods based on the super-exploited labour abroad or imported migrant labour. In effect, the Remain Left are the cheer-leaders of globalisation and the race to the bottom. Exploitation and imperialism are bad, they say, unless we benefit from it. The subjective pessimism of the Remain Left stands in complete contrast to the objective situation.

The Remain Left share their analysis of the world economy with Kautsky and his theory of ‘ultra-imperialism’. They believe that globalisation/imperialism will break down all national boundaries and average out all inequalities across the world, creating a united international working class who can take power peacefully from the few remaining capitalists. (A similar tendency can be seen amongst the supporters of ‘postcapitalism’ who believe that increasing automation under capitalism will gradually yield a socialistic future.) Yet as Lenin argued, imperialism widens the divisions between workers of all nations; it sharpens conflicts, creates wars and even threatens a third world war. There is no gradual, teleological process that will transition capitalism to socialism. There must, at some point, be a violent rupture.

Of course, socialism must be international. But relations between workers of different countries are being blown apart by the European Union, not fostered through it. All the Remain Left can resort to is a Stalinist caricature of Trotsky’s Permanent Revolution: To achieve socialism, we must have socialists come to power simultaneously in all European nations via the European Parliament!

Workers’ Power

The building of a new workers’ international will not be mediated by bourgeois institutions such as the European Union. Let’s remember that it was not until after the Bolsheviks took power and overthrew the Tsarist state in Russia that they founded the Communist International in 1919, uniting newly formed revolutionary parties in dozens of countries. A revolution thus may take place in a few countries or even a single country initially. If this happened in Britain, the task would then be to spread the revolution to Europe and further afield. In such a situation, the slogan of a workers’ socialist federation of Europe would be essential – the complete opposite of an enforced capitalist European Union controlled by technocrats and corporations.


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