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German Imperialism: Waking up to the US Threat

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In this survey of German imperialism, Martin Suchanek examines the contradictions and tensions shaping the policy of the world’s third-largest economy as the German bourgeoisie grapples with a familiar problem; how to achieve a dramatic increase in exploitation at home whilst expanding into a world economy already dominated by a more powerful rival.

“This is not the German way.” Gerhard Schroeder’s refusal to back the United States in its attack on Iraq gave the world notice of a major shift in relations between the imperialist powers. For the first time since the Second World War, a German Chancellor was charting an independent course in world politics. Just two years earlier, after September 11th, the same Schroeder had declared “unlimited support” for the USA in its “war against terrorism”. A decade earlier, German imperialism had supported the US-led invasion of Iraq to the tune of $13 billion but, now, there was not to be even verbal support, let alone financial.

Anybody who thought that Schroeder’s declaration was simply a shrewd, if cynical, tactic to strengthen his position in the forthcoming federal elections would have seriously underestimated the significance of the decision to form, with France and Russia, a “coalition of the unwilling”. On the contrary, it was an expression of trends and dynamics within German imperialism that had been gathering momentum for more than a decade. The initial optimism that accompanied German reunification and the removal of restrictions imposed by the Allies after 1945, has given way to a recognition that globalisation has transformed US superiority from the guarantor of stability into a long term threat to German imperialism’s interests.

From Cold War to Reunification

The emergence of a more forceful and confident German imperialism can clearly be traced back to the country’s reunification in 1990. For more than four decades prior to that, the German bourgeoisie had been obliged to accept a restricted role on the world stage and had concentrated on redeveloping and strengthening its economic role in alliance with France and within the developing framework of “European” institutions. In the world of the Cold War, any idea of Germany re-establishing a role as a major imperialist power in every sense of the word was restricted to the extreme right wing, diehard Nazis and the most blinkered and chauvinist of the petty bourgeoisie.

For the decisive sections of the German capital, compromise, caution and a pragmatic acceptance of the balance of forces had become the key elements of both foreign and domestic policy. Internationally, Willy Brandt’s “Ostpolitik” rejected polemic and confrontation with the Soviet bloc in favour of economic engagement and cooperation. At home, the policy of “co-determination”, the systematic compromise with the organised working class movement which traded industrial peace and high productivity for significant concessions in terms of job security, wages and social welfare, had underpinned the “economic miracle”.

Nonetheless, by the 1980s, some elements within the German bourgeoisie had concluded that the overhead costs of “co-determination” had become too high and they were casting envious glances at the ferocity with which Reagan and Thatcher were unleashing market forces, deregulating industry and subduing the trade unions. The small Liberal Party, at that time the junior partner in coalition with the Social Democrats, was the political mouthpiece of this current and it was the Liberal economics minister, Lambsdorff, who first drew up a neo-liberal policy for Germany.

The “Lambsdorff Paper”, as it became known, was met by stiff resistance both from the trade unions, which organised a widespread campaign of demonstrations, and from within the Social Democratic Party. Unable to force the policy onto the government, the Liberal Party changed its strategy, withdrew its support for the coalition, thereby bringing down the government, and then realigned itself with Helmut Kohl’s Christian Democratic Union in a new coalition.

The Kohl government, therefore, came into office ostensibly committed to forcing through a decisive shift in the balance of class forces in Germany. However, the subsequent history of the coalition, which lasted until the Social Democratic victory of 1998, made clear, time and again, that the German ruling class was deeply divided over domestic policy.

On the right wing of the coalition, the neo-liberal current around Lambsdorff and Stoltenberg wanted to dismantle the entire post-war framework of “co-determination” but the major partners to the coalition, the Christian Democrat Union and the Christian Social Union, its Bavarian sister party, were dominated by forces opposed to such an “adventurous” strategy. While supporting a degree of deregulation and cuts in welfare spending, the majority of Germany’s bourgeoisie remained convinced that their needs were best met through continued incorporation of the trade union bureaucracy.

This reluctance to envisage a wholesale offensive against the trade unions was neither a sentimental attachment to the past nor a cowardly avoidance of conflict. On the contrary, it was based on the twofold recognition that the trade union bureaucrats were more than prepared to negotiate major concessions but that, if they were denied a central role in conducting domestic policy, they could mobilise massive opposition that might threaten the very survival of the government.

In the mid 1980s, mass movements, such as those against NATO rearmament and against the use of nuclear power generation, added credibility to such a scenario. In 1984, IG Metall, the biggest union in Europe, successfully led strikes for the 35 hour week in the engineering industry, at the heart of the German economy. On the industrial front, steelworkers’ protests against the proposed closure of the Rheinhausen steel works in 1988 saw blockades of the motorways and the occupation of plant with a militancy which was immediately compared to that of the miners’ strike in Britain.

Moreover, co-determination still appeared capable of delivering important gains in terms of productivity and the introduction of modern technology. Meanwhile, Thatcher’s Britain was seeing widespread closures of major industrial plants and Reagan’s America showed no signs of rejuvenation but the economies of Japan and Germany, with their “corporatist” policies intact, seemed to be going from strength to strength.

Economics was neither the sole, nor even the decisive, factor in the bourgeoisie’s calculations. Integration of the Social Democratic Party and the trade unions, which extended to the shopfloor itself through the system of works councils, had long formed an important bulwark of “anti-Communism” in the Federal Republic. Although the division of the country was not a live political issue, in the sense that significant forces were actively pursuing policies to reverse it, the existence of “Eastern” Germany guaranteed that the ideological conflicts of the Cold War were a permanent factor in domestic politics.

Helmut Kohl himself balanced between the neo-liberal and Christian Social wings, using the right wing as a pressure group but recognising the need to stay within the class collaborationist framework. The predominance of the more conservative tendencies was sealed by the revelations of a financial scandal in which Lambsdorff was centrally implicated.

Nonetheless, the deep-seated, structural features of German capitalism, which the neo-liberal policies had been designed to remove, had not gone away. The most important of these, the so-called “nonwage costs” in industry which supported the expanded provision of pensions, welfare and social services and the statutory limitations on the freedom of movement of capital had, if anything, become more entrenched. By the end of the decade, it appeared to the more radical right that Kohl would go down as a Chancellor of limited vision, a provincial petty bourgeois who had promised much and delivered little.

The collapse of the Soviet bloc, symbolised for the entire world by the breaching of the Berlin Wall, transformed the German political and economic landscape. As the pressure of mass demonstrations rose in September and October 1989, decisive elements in the West German bourgeoisie and state apparatus recognised that what was at stake was far more than a democratic reform within the “German Democratic Republic”.

When Gorbachev made it clear that Soviet power would not be used to maintain the status quo, they grasped the opportunity to reunite “their territory”. Overnight, Kohl became a political colossus, able to dictate terms not only to the pygmies of East Berlin but to the Kremlin, Downing Street and even the White House. Momentarily, provincial chauvinist prejudice coincided with the immediate strategic aims of the big bourgeoisie. Overriding the narrow, monetarist objections of the Bundesbank, Kohl proposed immediate reunification.

This decisive political leadership contrasted sharply with the uncertainty, incoherence and lack of a long term political programme of the anti-bureaucratic movement in the East. Forty years of stalinist dictatorship ensured that there was no experienced independent working class leadership or organisation at either local or national level.

Consequently, although not originally opposed to the maintenance of state property or economic planning, the movement had no means of bringing production and distribution under its own control while driving out the bureaucracy. Ably assisted by the labour bureaucracy in the West and the hurriedly renamed “Party of Democratic Socialism” in the East, and backed by the huge material resources of West Germany, Kohl steamrollered through the creation of a restorationist government committed to reunification on a capitalist basis within a matter of months.

Germany after reunification

The formal completion of reunification in November 1990 enormously enhanced the prestige not only of the Chancellor but of Germany itself. The scene was now set for Germany to play a more independent role on the world stage. The “Four plus Two Treaty” between the USA, Great Britain, France and the Soviet Union, on the one side, and the Federal Republic of Germany and the German Democratic Republic, on the other, not only sanctioned unification but also lifted most of the restrictions placed on the political and military power of the German state in the postwar settlement. Berlin’s “special status” was removed, Allied troops withdrew from Germany and, apart from continued prohibition on the possession of nuclear weapons, full sovereignty was restored.

Flushed with success, the German bourgeoisie pressed home its advantage as it took control of East German industry, cherry-picking those assets it wanted but more generally closing, dismantling and demolishing across the country. Within three years, some two thirds of all industrial jobs were lost. What had begun as a popular movement to overthrow Stalinism ended in the degradation of the East German working class and the aggrandisement of the German bourgeoisie. Once again, the law that every half successful revolution is followed by a completely successful counterrevolution was validated.

The implications of Germany’s new status were not lost on the ideologues and strategic planners either. Suddenly, the possibility of Germany one-day challenging the United States of America as a serious rival was being discussed in mainstream think tanks and research institutes. A permanent seat on the United Nations Security Council was assumed, for a while, to be a foregone conclusion.

Not surprisingly, the military authorities were among the first to give systematic consideration to the significance of Germany’s new position. As early as the takeover of the National People’s Army, on 3 October, 1990, the generals made it clear in which tradition they expected the “United” Army to stand. The Major General of the time, Werner von Scheven, went on the record in “Information to the Troops” in September 1990, saying that, “they would maintain the standards of the Wehrmacht” (as Germany’s armed forces were known up to 1945.

Since then, a key role has been played by Klaus Naumann who, in 1991, became the General Inspector of the Federal Army and later rose to being NATO’s Commander in Chief (the highest rank that a non American has held within NATO).

In 1991 and 1992, he began a political campaign, against the then foreign minister Genscher, to change the defence doctrine. It was already clear to him that, irrespective of the “still to be taken political clarification” (that is, changing the constitution!) the Federal Army should be prepared for “collective interventions outside the territory of the Federal Republic, in so far as German interests demanded it”.

Naumann himself was and is a member of the “Clausewitz Society”, a club for key representatives of the military, political and economic elites. Since the beginning of the 1990s, there has scarcely been a strategically important military-political decision that was not prepared or demanded by it. It plays a role in a small network of institutions and societies (such as, for example, the Quandt Institute) which prepares the strategic line of German imperialism.

An indication of the much greater role now played by the military in determining the course of German policy is provided by the “Furstenfeldbrucker Symposium for Leadership Forces in the Federal Army and the Economy” jointly organised by the Confederation of German Employers and the leadership of the Federal Army in September 1991. In his contribution to the symposium, Rupert Schultz, often described as the grey eminence of military politics, summarised their priorities in the following theses:

1. Germany must once again become “normal” and, as the strongest power in Europe, must play a leading role, “partnership in leadership”;

2. It must support and take part in military actions by the United Nations;

3. The NATO treaty must be changed so that interventions can also be legally undertaken outside of the “mandate territory”; the same will be true of the Western European Union;

4. No amendment to the constitution is necessary for this;

5. A Security Council for Europe instead of the world Security Council, the political union must be “deepened” both militarily and with regard to security policy;

6. The building of well-armed special forces for intervention in crisis regions;

7. For interventions by NATO, the Western European Union, and United Nations even against the will of the states involved;

8. Scenarios which qualify as security-political “dangers” should include: threats to Western values, strategic raw materials, mass refugee movements;

9. Restructuring of the Federal Army through “professionalisation” (reduction in size, the creation of smaller, more flexible units and reduction in maintenance costs);

10. State planning for weapons requirements, research and development in this sector;

11. Develop an acceptance of armaments and interventions amongst the taxpayers, strengthen “weapon readiness” amongst the citizens.

12. Introduction of general military and civilian service for men and women.

Many of these plans have already become reality today, others, in particular all those which cost money, are still at the planning stage.

The “ Guidelines on Defence Policy”, prepared by Naumann and the “Clausewitz Society”, were adopted by the Federal Cabinet on 26 November, 1992.

For the first time since the Second World War, “the national interest”, rather than acceptance of NATO duties and subordination to the USA, was given a pivotal role in Germany’s military doctrine. The central objectives of the Federal Army were now defined as: “prevention, containment and resolution of crises and conflicts which could have an impact on Germany’s well-being and stability” and “maintenance of free world trade and unhindered access to markets and raw materials across the world in the context of a fair economic order”.

Of course, German imperialism pursued its own interests even before 1992. However, the “Guidelines on Defence Policy” are not just a matter of a more bluntly stated presentation of their objectives. An “ Intervention Command” which embraces all the individual forces, was established in the 1990s with its headquarters in Potsdam, a newly created, de facto General Staff which the Potsdam Treaty actually forbids Germany from having.

The “clarification of the constitution”, which empowers the military authorities to launch a war with a simple government majority in Parliament, was also carried through, not by Parliament, which has never even debated the defence guidelines, but by the Federal Constitutional Court

However, important as these developments are for an understanding of the impact of unification, they should not be taken to mean that a rampant German militarism is once again on the march. Similar definitions of the purpose of their armed forces would scarcely raise an eyebrow in Paris or London.

In reality, German strategy remained in every respect firmly tied to the European perspective. This had been confirmed, prior to reunification, in Madrid and was now concretised in unambiguous terms at Maastricht. Indeed, the agreements on a much higher degree of political integration of Europe and the introduction of the euro rank second only to the achievement of reunification itself in the record of the Kohl government. Against a background of a sudden, albeit short lived, economic boom in Germany, the other member states agreed to financial institutions, such as the European Central Bank, that bore more than a passing resemblance to their German counterparts.

The assumption behind this strategy was that, given integration, a single market and the single currency, German economic superiority would grow organically into a German-led Europe destined, in time, to embrace the countries of the former Soviet bloc and big enough to look the United States in the eye.

Within Germany, Kohl’s prestige, particularly when compared to the ideological disarray of the opposition Social Democratic Party and the unions, which had supported reunification but gained little from it, ensured that significant gains were made by the capitalist class. The huge costs of reunification were, to a large extent, shifted onto the shoulders of the (Western) German working class in the form of the “solidarity premium” of increased taxation. At the same time, despite continued increases in productivity, real wages remained virtually stagnant for much of the decade.

Naturally, this was not enough to satisfy the employers. Particularly after the temporary character of the boom became apparent, they returned to the agenda set out in Lambsdorff’s paper a decade earlier, demanding deregulation, privatisation, reductions in social and welfare payments and an end to what they saw as the excessive influence of the unions over wages and the location of investment.

Individual employers and their federations were not entirely unsuccessful in their campaigns. However, where gains were made, for example, over temporary workers, new technology and “flexibilisation”, the very fact that these had to be negotiated with the unions served to underline the labour movement’s continued strength. Increasingly, they demanded that the Kohl government, their government, take the initiative to instigate a wholesale offensive on the accumulated statutory rights and protections of the workers and their unions.

Kohl tested the water by changing the law affecting sick pay and sick leave, opening the way for employers to tear up existing arrangements. The response was immediate and massive. Within one week, the car industry was brought to a virtual halt by strikes which union leaders found themselves forced to support. The united front of the government and the employers and, indeed, between employers was shattered.

Kohl’s social cuts met a similar response as the unions mobilised 300,000 to demonstrate in Bonn. Proposals for redundancies among steel workers and miners led to mass demonstrations across the Ruhr and, in Bonn, miners broke through the police lines and occupied the headquarters of the Liberal party. Only intervention by “left” leaders of the Social Democratic Party, such as Lafontaine, could persuade them to leave the building. Significantly, Lafontaine’s advice was to ensure as big a turnout as possible at the forthcoming elections.

In effect, although the unions once again negotiated significant concessions to the employers, the hoped-for offensive had been defeated. The mobilisations had, predictably, breathed new life into the Social Democratic Party which had, in turn, moved to the left, at least in its rhetoric. The emergence of the likes of Lafontaine as part of the leadership team further encouraged the belief that the working class could expect significant gains through its return to government with, if necessary, the support of the Greens rather than the Liberals.

In the general election of 1998, Kohl’s coalition suffered a humiliating defeat as votes for the two bourgeois workers’ parties came within a whisker of an absolute majority. The combined vote of the Social Democrats and the Party of Democratic Socialism reached its highest level ever, even in comparison to the combined votes of the Social Democrats and the Communist Party during the Weimar Republic. Although Schroeder formed a coalition with the support of the Greens, rather than the PDS, the defeat of their preferred electoral choice forced Germany’s bosses to take stock of their position.

Their sense of urgency was increased by the international situation. Far from the 1990s witnessing further stagnation and decline in the USA, the decade of globalisation, dealt with in detail elsewhere in this journal, was coming to an end with the USA further ahead of her rivals than ever. Politically, too, US pre-eminence had been dramatically underlined by her military intervention in the Balkans, making clear that even in their own backyard neither the European Union nor Germany could take a leading role for granted.

Their first priority had to be the domestic political situation. Before Germany’s bosses could hope to bend the new government to their will, they had first to prevent it making any fundamental concessions to its working class supporters. The route to this lay through exacerbating internal divisions within the new coalition and, with unerring class instinct, the bourgeoisie and its media recognised that the most significant divisions were not between Schroeder and the supposedly radical Greens but within the SPD itself. Within a year, the left wing, represented by the Finance Minister, Oskar Lafontaine, had been forced out of office and Schroeder had accepted that, “to retain credibility” he had to oversee substantial cuts in public spending and privatisation of state assets.

Predictably, as the government’s policies became clearer, working class electoral support began to ebb away. Having unceremoniously ditched Kohl in a welter of suddenly discovered allegations of corruption during his long term in office, the CDU/CSU began to recoup its position under the right winger, Edmund Stoiber. His programme of steep cuts, deregulation of industry and stripping away of the statutory rights of the unions in the supervision of companies was counterposed to Schroeder’s policy which accepted the need to reduce non-wage costs and public spending but sought to achieve them through collaboration with the union chiefs in the “Alliance for Jobs”.

Stoiber’s advance, however, was slowed from a most unexpected quarter. After September 11th, Schroeder moved quickly to the right, promising unlimited support for the “War against Terrorism” and following this up with the provision of troops in Afghanistan, the first use of German soldiers outside Europe since the Second World War. However, as Bush turned his sights towards Iraq and began to threaten an unending war in the Middle East and central and eastern Asia, Schroeder rightly recognised the looming threat to the German bourgeoisie’s long-term interests. As popular opinion hardened against US policy, Schroeder moved to put himself at the head of the “European” coalition of the unwilling with France and Russia.

Taking advantage not only of growing opposition to war but also of the entirely fortuitous state of emergency created by the worst floods in living memory, Schroeder stressed the central role played by the public sector and state in coordinating aid to the stricken regions, counterposing the wave of public solidarity with the flood victims to the selfishness and inefficiency of the market forces championed by Stoiber. Albeit by the skin of his teeth, Schroeder was re-elected.

Despite the defeat of Stoiber, however, the German bourgeoisie is in a stronger position now than five years ago. It is more unified and clearer in its aims and the narrowness of his victory leaves Schroeder greatly weakened. Although Bush’s unilateralism played a role in this, it was the onset of recession, and the different responses to it in the USA and Germany, which highlighted the structural disadvantages faced by German capital and, therefore, the bourgeoisie’s objectives.

However one reads the often revised economic indices for 2003, it is clear that the German economy is barely growing at all and that the US recovery is fragile and dependent largely on massive military spending and huge tax breaks. Even the sustained US boom in the 1990s, could not be generalised to the other imperialist economies. Japan, the second-biggest economy, was unable to achieve a sustained period of growth throughout the decade. This inability of the US economy to pull the rest of the world into an upswing was largely a result of the fact that the US boom itself was dependent on the inflow of capital from those other centres. For the foreseeable future, therefore, there is no prospect that the US economy will achieve such a sustained period of growth that it will drag the other economies into recovery by itself.

The US’s strategic response to this is quite clear. Under the banner of the “War on Terrorism”, it is seeking to ensure control of the global economy by projecting its economic and military power into the key strategic areas, most obviously the Middle East and central Asia. Although certainly aimed at setting limits to the future growth and power of Russia and China, this is also a conscious strategy to ensure continued US hegemony over its imperialist rivals.

For the German bourgeoisie, there can be no question of openly challenging the US even within the next decade. Rather, their task is to rid themselves of accumulated limitations on their freedom of movement and to overcome the important obstacles and problems that stand in the way of competing with the USA as an equal:

• Economic inferiority and a relatively small domestic market
• A weak and less flexible financial sector
• The lack of a colonial or semicolonial sphere of interest
• Inability to project military force internationally
• Domestic opposition to military interventions that go beyond “police missions”
•Continued strength of a constitutionally protected and well organised labour movement

Modern finance capital

A comparison between the structure and organisational form of German capital as compared to US capital, will clarify the problems and, therefore, the objectives, of the German bourgeoisie. Although the companies which dominate both economies long ago became “multinational corporations” in the sense that they are active across the globe while remaining rooted in their countries of origin, there are crucially important differences in the structure of capital in the two countries.

Because Lenin used it to illustrate the creation of “finance capital” by the fusion of banking and industrial capital, the “German model” is often taken to be the classic form for the organisation of capital in the imperialist epoch. However, history has shown that its close organisational interdependence between banks and industrial corporations can become a limitation on finance capital, a restriction on its ability to seek out the highest possible rates of return on investment.

By contrast, in the USA, there are far fewer such restrictions on the movement of finance capital, allowing it to approach much more closely the essential characteristics of Lenin’s model. This superiority is not a conjunctural matter but, as we shall see, flows from the pattern of ownership of capital. In the USA, a much greater role in mobilising and directing capital investment is played by the “institutional investors” and there is a far wider distribution of share ownership among the working class and middle layers of society. The difference between this model and the German can be clearly seen by comparison of ownership structures shown in Table 1.

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Sources: for USA, Japan and Germany A:Doremus, The Myth of Global Corporation, p.52; For Germany B, Deutsche Bundesbank, Monatliche Berichte 7/1997, quoted in W.Wolf, Fusionsfieber, p. 192

In particular, this reveals the much greater importance of pension funds in the USA and the relatively limited role that they play in Germany. Their importance stems not only from their scale but their commitment to “shareholder value” which ensures their willingness to buy and sell shares in response to market indicators, the very opposite to the German banks’ commitment to long-term investment in “their” industries.

A second major handicap for German capital is its smaller scale and, in many sectors, lesser degree of centralisation, as compared to the USA. Ultimately, the only solution to these related problems lies in developments on a European scale. This, however, is fraught with difficulties because of the fragmentation of the continent into nation states. As we will see, the formation of the European Union has yet to provide a means of overcoming this problem.

The third factor in insuring the superiority of US capital is its continuing ability to take advantage of the defeats inflicted on the working class in the 1980s. These have ensured the highly prized “flexibility” of the labour market, that is to say, the ease with which capital can hire and fire workers which allows a generally greater mobility of capital not only in the sphere of investments and speculation but also between the various economic sectors. For example, in the last recession, the electrical company Lucent was able to lay off over 50% of its employees and close whole factories within a matter of weeks, rapidly shifting the cost of its crisis on to the backs of its workers. Such an option would simply not exist in Germany.

The European Union orientation

Taken on its own, the German economy is too small to compete with US imperialism. Consequently, the building of a capitalist European Union within which German imperialism would play a dominant role has long been the chosen strategy of the German bourgeoisie. Of course, Germany would retain world power ambitions even if the European Union were to fragment or the euro collapse but that would require a completely new orientation and, in all probability, a far more aggressive policy by German imperialism.

For the moment, the German bourgeoisie is entirely committed to the European Union. Nonetheless, the EU has not yet overcome its inherited disadvantages. Whereas within North America and the NAFTA area, the USA is an unrivalled hegemon, the EU is an alliance of states and an economic area which embraces a number of imperialist powers. While Germany is clearly the first economic power, she is just as clearly behind both France and Britain militarily and, to some extent, politically.

The German bourgeoisie has for long worked on the assumption that its economic superiority would, in time, guarantee its pre-eminence within Europe. However, there are fundamental obstacles in the way of German capital simply evolving into European capital through the normal operation of economic forces. For that to happen would entail German capital taking over, or forcing out of business, companies and industries which are the economic base of other ruling classes. That would require overwhelming political and social force but there is no political institution that could play the role on a European scale that Kohl’s government played in the forced reunification of Germany.

The institutions of the European Union are, at most, a quasi state which reflects the balance of forces amongst the ruling classes of the member states. Unlike a real state, the European Commission does not express and enforce the interests of a ruling class rooted in its own national society. This reflects the fact that, as yet, there is no genuinely European capital. Although it is based on the recognition by other imperialist bourgeoisies, especially the French, that they cannot hope to achieve equal status with the USA alone, the enforced alliance of the European imperialists is very far from being free from frictions.

While it is true that, apart from Britain, the dominant fractions of capital in all the important EU countries are solidly pro-EU, this is for well understood, self interested reasons. A capitalist Europe, led by Germany in some kind of partnership with France and, perhaps, Britain, is simply the lesser evil than having to face the USA or Japan alone on the world market. Recognising that any “deepening” of the EU has to mean ceding more of their sovereignty, many national governments see the enlargement of the EU as their last chance to grab as much as possible for their own capitalists and even sections of their petty bourgeoisie.

This is the context in which the main imperialist powers and the European Commission have been trying to create a unified European finance capital which will be able to compete with the US multinationals in every sphere. Although they have passed several important milestones – the Single Europe Act, the Maastricht treaty and now the introduction of the Euro – European financial markets remain essentially fragmented and no match for their US counterparts.

Centralisation of capital in Europe

The fact that European, in particular German, capital is pressing ahead with direct investment in the other triad blocks, adding to the struggle for markets, does not in any way contradict the necessity of further EU integration. On the contrary, it adds to it. Nonetheless, so far, there are very few signs of the formation of a real pan-European monopoly capital. Basically, most capital continues to grow on a nation state basis and looks likely to continue in this way for the foreseeable future.

A glance at the statistics is enough to prove this. There are scarcely any “European” firms. The few exceptions, such as Royal Dutch Shell, were not, characteristically, founded recently but in a very much earlier phase of capitalist development. Whilst it is true that there has been an enormous increase in the concentration of capital in the EU in the last 10 to 15 years, this has mainly been the result of fusions and takeovers within countries or the takeover of foreign concerns in which control remained quite clearly in one imperialist country, for example, DaimlerChrysler or Deutsche Bank-Bankers Trust.

In order to evaluate the economic strength of German capital inside the EU it is instructive to analyse the distribution of the biggest firms within Europe and the extent to which this has changed in recent years. Table 2 reveals a clear trend. Of the 100 biggest firms in Europe only seven are not within the EU, five in Switzerland and two in Norway. A comparison of the development of the balances of all these firms in the last decade makes clear the centralisation of capital. From Dm 3219 billion it has grown to Dm 5312 billion, an increase of some 65% at a rate approximately twice as fast as the increase in West European GNP.

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Three bi-national concerns, such as Royal Dutch Shell, were counted twice and, therefore, appear under both Britain and Holland in that example. Source W.Wolf, Fusionsfieber

Of particular interest to us is the distribution of the big firms. In 1990, 29 were based in Germany and together they had a turnover of Dm 958 billion accounting for some 29.8% of the total turnover of the biggest 100 firms. By 1999, the number had not changed substantially, an increase of just one. Total turnover, however, was Dm 1870 billion or 35.2% of the top 100. The share of German capital had increased by more than 5%.

Alongside German capital, French capital also strengthened its position. From 23 firms, the number grew to 26 and the share of total turnover grew from 20.3% to 22.9%. More than half of all the biggest EU firms have their headquarters in one of these two countries (56 from 100), they control 58.1% of total turnover, and the trend is rising.

The countries which have lost out in this centralisation process are, above all, Britain and Italy. Even though each lost only one from the top 100 firms, both suffered a clear drop in their share of total turnover. Britain’s firms’ share declined by 3.4% (from 20 to 16.6%) and Italy lost 4% (from 11% to 7%).

If we then compare the centralisation and concentration process of the capital in the industrial and service sectors between the two winners, Germany and France, there is only one conclusion that can be drawn: the centralisation process is moving forward much faster in Germany.

In 1990, the 12 biggest German industrial firms had a total turnover of Dm 545 bn, the 12 biggest French firms had a turnover of Dm 383 bn. By 1999 total turnover of the 12 biggest German firms had reached €530 bn and that of the French €267 bn. If we take the turnover of the French firms as an index of 100, then the total turnover of the German firms in 1990 was 142. By 1999, however, it was 199. A similar, although not so dramatic, picture emerges if we take into account the service sector.

By comparison with its European competitors then, German capital has undoubtedly strengthened itself. In addition, however, there are two further significant points that have to be taken into account in any assessment of the future prospects of German capital and its EU competitors.

The first of these is that, although the EU has not been successful in creating European capital, it has created a European market which is the main sales area for the EU states. Within this, Germany is not only the biggest exporter into other EU countries (intra-EU trade) but also, and by a much bigger margin, the biggest exporter out of the EU. The principle reason for this is that a huge proportion of the exports go to Central and Eastern Europe (the Czech Republic, Slovakia, Poland and Hungary). Here, German capital left its EU rivals behind long ago and has either displaced other, originally better placed countries, such as Austria, or has bought out their firms.

Secondly, the international expansion of German multinational corporations into other imperialist centres or into the semi-colonies has meant an increase in trade within these firms. Thus, the greater part of the trade with countries such as South Africa and Brazil is accounted for by trade within these companies. The positive balance of trade for Germany with these countries is accounted for not least by the repatriation of these firms’ profits.

In the last 10 years, German capital has been able to carry out important takeovers in the other triad blocks, although this should not be taken to be a one-way process. In general, the takeovers highlight, first of all, sharper competition at the global level and, secondly, the strengthened position of German capital on the world market.

The export of capital, of which takeovers and investments in other countries are undoubtedly an important form, has certainly increased in recent years. According to the Federal Bank, the 29,000 foreign firms “under German influence”, in other words, the subsidiaries of German multinationals, brought in an annual turnover of €1,708 billion. (Source: Bundesbank Monatsberichte, April 2001, p.68). That is approximately twice the scale of German exports.

This increase is in keeping with the international trend. Globally, foreign direct investment grew by 600% between 1990 and 2000, while global GNP grew by precisely 25% and world trade by 85%. The front runner in this is the USA but German direct investment also increased fourfold in the decade.

This underlines the fact that German capital has a global reach which, within Europe, can only really be matched by Britain. It is fighting for influence and a significant, if not dominant, role in the markets of all three of the triad blocks. Its reach grew after the Asian crisis as German firms took advantage of Japan’s weakness and that of the Tiger states to buy up firms (in which they always came up against US competitors) and is also shown by the expansion of trade with China and by strategic investments in, for example, Iran (together with France, and against the USA).

The currently low growth rates in the German economy, therefore, do not in any way imply a lowered importance for German capital competition on the world market and certainly not within the EU. The introduction of the euro and the further economic integration of Europe provide the basis for a further strengthening of German capital.

The euro is already a competitive currency to the dollar such as no other currency has come near to being since the Second World War. However, the dollar remains the international reserve currency, in 1998; 69% of all currency reserves were held in dollars, only 24% in euros.

Nonetheless, as a currency for trade and investment, the balance has already altered. In 1997, 48% of world trade was in dollars and 34% in euros and 40% of all investment was in dollars with 34% in euros (Source: Wirtschaftswoche, 30.4.98). Since it became the single currency for the euro zone, the euro has appreciated by some 15% against the dollar. Although the strengthening currency is a hindrance to exports out of the EU, it naturally has no impact on intra-EU trade and can be expected, in time, to attract inward investment away from the USA.

In sum, German capital has successfully consolidated itself after the unprecedented reunification of the country and strengthened its position within the EU and globally. As a result, it is well positioned to benefit from the strengthening of the euro and next year’s expansion of the European Union to 25 members. Against this, however, it has not succeeded in restructuring its own financial sector and in Europe as a whole there is nothing to equal the scale and centralisation of US capital. The last decade has shown that reliance on “organic growth” of German capital is not fast enough to close the gap with the USA. Germany has no choice but to force the pace within the EU in partnership with France. The proposed new constitution of the EU is intended to be a major step in this direction in that its new procedures give greater weight to the bigger powers and the Franco German alliance is best placed to take advantage of this.

Foreign Policy and the EU

The danger in this policy is that increased pressure from Germany and France may antagonise those countries which are destined to lose out, encouraging them either to form an alliance to block economic “rationalisation” or to side with the United States, thereby threatening disunity within the EU. Poland’s vocal support for the invasion of Iraq and subsequent decision to commit troops to the occupation forces is an early, but unmistakable, signal that Warsaw will play the US and, for that matter, UK, card for all it is worth.

Of even greater importance, strategically, is the question of Russia. Germany has pursued a consistent policy of seeking cooperation with Russia under both Kohl and Schroeder no doubt with a view to reducing her to the role of a semi-colony, albeit an extraordinarily powerful one, militarily. Although this remains the policy, in the aftermath of September 11th, Putin was quick to exploit the opportunity to improve relations with the White House, thereby underlining Russia’s continued ability to manoeuvre between the two imperialist blocs.

At the same time, US foreign policy has become ever more clearly focused on establishing its power in the key strategic areas of the world and not least in the Balkans and Eastern Europe which Germany and the EU would like to regard as their own backyard.

While Bush’s policy of aggressive unilateralism led almost immediately to a clash with the foreign policy of Germany and, indeed, France, for example, with regard to Iran, it also revealed the almost complete lack of any agreed EU foreign policy, let alone any military means for enforcing it.

The difficulties that the European Union has had in formulating a coherent foreign policy and developing a credible military capacity echo those in the economic and political spheres. The aspiration to become a unified force in world politics was spelt out in the Tindeman Report to the European Parliament in 1996. This proposed that “the European Union, the leading trading power in the world, (...) Could no longer be satisfied with the second rank responsibility in international questions (...). At the same time, the advice was given that the European Union could not pursue an effective foreign policy at the diplomatic level or in the application of military pressure without a common security and defence policy.” (Source: Uli Cremer, Neue NATO, Neue Kriege?, Hamburg, 1998, p.61)

Despite that, and despite the German and French military authorities’ support for developing the Western European Union into the “military arm” of the European Union, the military forces of the EU today remain little more than a skeleton whose military potential is inadequate even though its military strategists are striving to learn the lessons of the Balkan wars. Recognition of this lay behind the decision, taken by Chirac and Schroeder at the 73rd Franco German summit in 1999, to increase the size of the Euro Corps to an intervention force of 50,000 men.

The Amsterdam Treaty came into force in the same year, providing the basis for a “common foreign and security policy” of the EU. Through this, Javier Solana became in a certain sense the “foreign minister” of the EU. Similarly, the foundation stone of the European military union was laid at the EU summit in Cologne, also in 1999. Finally, it was agreed to establish the “European Weapons Agency” in order not to lose any more ground to the USA in this area.

Nonetheless, the USA remains in the lead. Even before September 11th, a massive new armaments programme had been put in place. As early as 1999, the decision had been taken for an increase in the budget for military forces and armaments of $112 bn, spread over six years. This American policy has undermined NATO far more quickly and permanently than anything done by the “European partners”, whose EU military project has yet to get off the drawing board. More recently, the White House and Pentagon have accelerated the process of centralisation in the armaments sector and this has put EU companies under massive pressure.

A comparison of the armaments budgets for the year 1999, that is, before the 2002–3 armaments round began, between the USA, France, Germany and Great Britain makes the scale of the problem very clear.

At that time, the USA was committing $252.4 bn per year, representing 3.1% of GDP. France, Germany and Great Britain together were spending only $85.2 bn (France: $28.4 bn or 2.7% of GDP, Britain $33.3 bn or 2.6% and Germany, $23.8 bn or 1.4%). In total, the armaments budgets of all the European NATO states accounted for approximately two thirds of the American budget in that year.

The gulf is even more apparent with regard to the development of new weapon systems. In 1999, the USA spent $37 billion on this and the EU countries precisely $8 billion. When interpreting these figures, it is also important to take into account that all the US spending flows into one military machine while, at the moment, there are no comparable European armed forces.

The same problem of dispersal and fragmentation in Europe also applies to weapons manufacturers themselves. Since 1993, the 21 biggest US armaments manufacturers have been rationalised into five powerful weapons trusts. The centralisation was brought about by the conscious pressure and strategy of the US government. By comparison, the biggest European concerns remain nationally rooted in the most important military powers: British Aerospace-Marconi (Britain) Aerospatiale-Matra (France) and Dasa (Germany).

Even the European armaments firm, EADS, established in the meantime and easily the most far-reaching attempt to create a supranational undertaking, is still stamped with the divergent interests of the different nation states. Its ownership is essentially divided between Germany, France and Spain. Even a glance at the owners makes the problem clear. On the German side, there is, in effect, only one main owner (and it is the biggest overall) DaimlerChrysler. On the Spanish side, there is a similar picture, the Spanish state is the principal owner. Finally, on the French side, there is a combination of state and private ownership (the armaments firm, Lagadere).

Looked at from the point of view of the German capitalists and ideologues, the underlying root of the military difficulties of the European Union is basically the same as in the economy: dominance within Europe has to be cemented. On the economic front, the German imperialists are striving to resolve this problem in cooperation with the French but relying in the first instance on their own overwhelming business strength.

In the political, and especially the military, spheres, this is even more difficult because there is no obvious German superiority. At the present time, the formation of an EU army would not, in itself, serve German interests. Firstly, it would mean a significant degree of dependence on the other imperialists and this would undermine Germany’s leading role. Secondly, although the EU project is certainly central, it is by no means irreversible. This means that the priority for Germany will be to strengthen its own military capability through a massive armaments programme and the creation of what has been called a “crisis intervention force” of many tens of thousands of men.

The German Army’s calculations are based on the belief that a doubling of the German defence budget, alongside reform of the Armed Forces (reduction in the number of soldiers, above all conscripts, the introduction of a more flexible command system) and similar steps by the European partners, is necessary within the next decade. The objective would be, if not to catch up with the USA technologically, at least to begin to close the gap. Scharping has already taken on some of the preliminary work, for example, fot the Airbus 400, but that is far too little to match the needs of German imperialism.

Repeated calls for more “implementation ability” to “close the yawning gap”, however, are no alternative in the short term to the development of a diplomatic and foreign policy aimed at safeguarding German and European interests in conflict with their US “partner”. Given the unilateralism of the “War on Terror”, the United Nations no longer offers a framework within which to do that. Indeed, the German imperialists will shed few tears over this because, lacking a permanent seat in the Security Council, they were permanently disadvantaged against not only the USA but also France, Britain, China and Russia within the UN framework.

Today, US unilateralism is itself the biggest problem facing the other imperialists. Rather than the cumbersome apparatus of the United Nations, they would prefer to create a forum exclusively for the great powers, an institution such as the G7 within which to attempt to limit the power of the USA. During Bush’s visit to Germany in May 2002, some commentators even spoke of the formation of a G-2, the EU and the USA.

Prospects

Of all the problems confronting the German imperialists, only one can be resolved without the need to make significant concessions to imperialist rivals: redressing the balance of class forces in Germany itself. Although their preferred option, a victory for Stoiber in last year’s elections, was not to be; the bosses used the election campaign to establish their immediate objectives for any government. Among the key demands were:

• “Moderate” wage agreements in the range from 0.9 to 1.8%
• Flexibilisation of the labour market including the creation of a low-wage sector, increased pressure on the unemployed to accept any job, extended use of temporary workers and the repeal of job security legislation
• Dismantling of the health insurance scheme and further privatisation.

Electoral defeat did not diminish the pressure for a moment as the bosses, recognising the weakness of Schroeder’s position, immediately went on the offensive. Just as quickly, Schroeder made clear his willingness to be pressurised. The Ministry for “Employment and Social Services”, which was traditionally led by a former leading trade unionist, was abolished and “incorporated” into the Ministry for Economic Affairs which is headed by the most right wing of the SPD leaders, and darling of the bosses, Clement.

The scale of the concessions the SPD government is prepared to make to the employers can be seen from the key measures proposed for the government’s programme, the so-called “Agenda 2010”; flexibilisation of the labour market, weakening and eventual repeal of employment protection and nationally agreed wage contracts, amalgamation of unemployment benefit, social security and pension payments at 67. At the same time, major reductions in corporation tax have been introduced.

Successful implementation of the government’s agenda would undoubtedly represent a major cut in working class jobs, wages, rights and living standards but, for all that, it would not satisfy Germany’s bosses. Because of the SPD’s links to the trade unions and social roots within the working class itself, the government’s preference will be to force through its programme with the support of the so-called New Centre leaders in the trade unions. These can be expected to play the same destructive role as the New Realists in Britain, arguing for acceptance of major attacks by the SPD because the “only alternative” would be even worse measures from a Christian Democrat government. This, however, would still leave the unions with some role to play in policy implementation.

The capitalists’ strategy, for the time being, is to maintain pressure on the government and the unions, raising their demands every time a concession is made. From their point of view, however, involvement of the union leaders, even to negotiate defeats, is always likely to make the SPD-Green coalition an unreliable government for achievement of their long-term aims. Equally, a strategy focused on the end of the decade is a strategy that does not meet the urgency of their situation.

A CDU-led government with the Liberals or the Greens as junior partners or, possibly, a “grand coalition” of the CDU and SPD would be a more reliable vehicle for a decisive attack. Certainly, inside the CDU, new neo-liberal imperialist politicians such as Merz and Koch, who appear committed to a full scale battle with the organised working class, now emerging.

Ever since reunification, the German bourgeoisie has been grappling, rather ineffectively, with this need to forge a political leadership capable of taking full advantage of its new potential by a decisive shift in the balance of class forces internally. In the 1990s, a modest tempo reflected the absence of any serious rival on the European stage. Confident in their new found status, the German imperialists expected to achieve leadership of Europe principally through buying out their lesser rivals and negotiating from a position of strength with the bigger players. Since Bush’s unilateral declaration of war, however, the real scale of their task has become clear. From now on, the stakes are higher and there is a new urgency in their manoeuvrings. What is being fought for within Germany will not only determine the political shape of Europe but the balance of power internationally as the imperialist powers shape up for the inevitable battle with the USA.