Tribune leader, 6 November 1992

The second most important elections for Britain took place this week. Bill Clinton won the American Presidency and, understandably, much of the British Labour Party is very pleased. His success proves that incompetent right-wing gov­ernments elected on free-enterprise, fam­ily-values tickets can be beaten.
But euphoria is not in order. Mr Clin­ton’s programme for the United States is better than George Bush’s but by no means an adequate answer to the serious­ness of his country’s economic and social crisis. He is likely to be as bad as his pre­decessors for the people who are most di­rectly affected by American foreign poli­cy. He is radically pro-Israeli and shows no sign of deviation from establishment wisdom on Latin America or the poor countries of the Pacific basin. Apart from boosting the morale of European social democrats, his effects this side of the At­lantic will be minimal unless he starts a trade war or brings the boys back home.
Put bluntly, the US does not matter as much to Europe as it once did. If Ameri­ca’s are the second most important elec­tions for Britain, the most important are Germany’s – and the last ones, two years ago, were lost by the Social Democrats. After that, Helmut Kohl’s ill-conceived programme for German unification plunged the whole continent into reces­sion. Mr Clinton has the power to make matters worse but is most likely to have no impact on Europe’s economic predica­ment.
What will make a difference is the re­sponse of European Community govern­ments to the current mess. An immediate co-ordinated reflation of the EC economy is urgently needed, followed by rapid de­velopment of the democratically account­able EC institutions required to pursue employment-oriented macro-economic policies.
It is this message that Labour must press home at its European conference this weekend. After this week’s (neces­sary) attempt to give John Major a bloody nose in the Maastricht “paving debate” in the House of Commons, which was still going on as Tribune went to press, the party must reassert its pro-European credentials and make clear its commitment to the process of European economic and political union laid out in the Maastricht treaty. Maastricht may not be perfect but the alternative, no progress at all towards European union, is even worse.
For too long, Labour has fudged its way through European policy, carefully avoid­ing mention of “federalism” and assuring us all that it believes Westminster to be where the most important decisions about Britain’s future should be made. The party must show how it wants Eu­rope to evolve after Maastricht, in partic­ular how it would like to see the EC’s “democratic deficit” addressed.
“Giving the principle of subsidiarity real force”, “strengthening the appropri­ate powers of the European Parliament”, “making the Commission more account­able” and “ensuring that the Council of Ministers is more open”, the main propos­als in the policy document passed at last month’s Labour conference, are not enough. Labour should embrace the idea of an EC in which an executive drawn from and answerable to the European Parliament takes control of macro-eco­nomic policy and sets a “level playing field” for social and environmental stan­dards. If that is “federalism”, so be it.
Hitting the poor is no way out of recession
Westminster is buzzing with rumours that the government’s brave new economic policy will have three key elements: increases in several of the supposedly index-linked welfare benefits well below the rate of inflation; a public-sector wage-freeze or something very close to it; and increases in public works programmes. In other words, spending on infrastructure will be paid for by some of the poorest in our society.
If this is indeed the government’s plan, it is not only immoral: it also flies in the face of economic rationality. Keeping in­creases in benefits and public sector wages below the rate of inflation will cut the living standards of those who can least afford it: most public-sector workers are extremely low-paid. Worse, inflation is set to rise from now until this time next year because of the devaluation of the pound.
There is a morally preferable way which also makes economic sense: increasing taxes for those who can afford to pay rather than cutting real wages and benefits for those who cannot.
Poor people tend to spend rather than save their money and to buy goods pro­duced domestically rather than imports. Taxing the better off will have a less harmful effect on the level of demand in the economy than reducing the spending power of the poor. The Tories are clearly less concerned with growth than with not hurting their friends.
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