Larry Elliott writes: In the age of globalisation, the idea was that a more integrated Europe would collectively serve as the bulwark that nation states could no longer provide. Britain, France, Germany or Italy could not individually resist the power of trans-national capital, but the EU potentially could. The way forward was clear. Move on from a single market to a single currency, a single banking system, a single budget and eventually a single political entity.

That dream is now over. As Charles Grant, the director of the Centre for European Reform thinktank put it: “Brexit is a momentous event in the history of Europe and from now on the narrative will be one of disintegration not integration.”

The reason is obvious. Europe has failed to fulfil the historic role allocated to it. Jobs, living standards and welfare states were all better protected in the heyday of nation states in the 1950s and 1960s than they have been in the age of globalisation. Unemployment across the eurozone is more than 10%. Italy’s economy is barely any bigger now than it was when the euro was created. Greece’s economy has shrunk by almost a third. Austerity has eroded welfare provision. Labour market protections have been stripped away.

Inevitably, there has been a backlash, manifested in the rise of populist parties on the left and right. An increasing number of voters believe there is not much on offer from the current system. They think globalisation has benefited a small privileged elite, but not them. They think it is unfair that they should pay the price for bankers’ failings. They hanker after a return to the security that the nation state provided, even if that means curbs on the core freedoms that underpin globalisation, including the free movement of people.

This has caused great difficulties for Europe’s mainstream parties, but especially those of the centre left. They have been perfectly happy to countenance the idea of curbs on capital movements such as a financial transaction tax, and have no problems with imposing tariffs to prevent the dumping of Chinese steel. They feel uncomfortable, however, with the idea that there should be limits on the free movement of people.

The risk is that if the mainstream parties don’t respond to the demands of their traditional supporters, they will be replaced by populist parties who will. The French Socialist party has effectively lost most of its old blue-collar working class base to the hard left and the hard right, and in the UK there is a danger that the same thing will happen to the Labour party, where Jeremy Corbyn’s laissez-faire approach to immigration is at odds with the views of many voters in the north that supported Ed Miliband in the 2015 general election, but who plumped for Brexit last week.

There are those who argue that globalisation is now like the weather, something we can moan about but not alter. This is a false comparison. The global market economy was created by a set of political decisions in the past and it can be shaped by political decisions taken in the future. [Continue reading…]