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Maastricht and beyond: a capitalist United States of Europe?

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1992 came and went. But did European unity go with it? Keith Harvey examines the prospects.

Can Europe become a single state?

Will armies go to war for the ECU? Will soldiers die for Europe? These were some of the many questions posed by the media as the European Community (EC) passed through the barrier of 1 January 1993, the date when all the provisions of the Single European Act were due to come into force and a new phase of European integration inaugurated.

1992 was the year of Euro-sceptism. The difficulties encountered in ratifying Maastricht in France, Denmark and Britain have added weight to the arguments of those who insist that the vision of European union is in fact a mirage. The scars of the Danish “No” and the fracturing of the ERM are still fresh. The idea that Europe can become a political entity greater than the sum of its parts seems far-fetched.

But Marxists should not tail the propagandists of the bourgeoisie through their moods of depressive pessimism any more than through their phases of exaggerated optimism. Massive mood swings have been evident over the twenty five years since the Treaty of Rome gave birth to the EEC.

During the last ten years profound changes have taken place in the European and world economy that have created the objective basis for a much higher level of pan-European integration, politically as well as economically than at one time seemed possible. What is the nature of these developments, what new contradictions do they give rise to, and what challenges do they present to Marxist theory?

The present European Community (EC) sees itself as a phoenix born from the ashes of the world war which particularly devastated the continent. Bourgeois strategists believed that the only way to prevent either inter-imperialist war in Europe or the extension of “communism” westwards was to tie the former antagonists to one another with limited bonds of mutual dependence and co-operation. The USA supported and promoted this idea. France and Germany took the initiative for realising its initial forms.

The first tangible result was the 1951 plan for the European Coal and Steel Community (ECSC). It was empowered to levy taxes, shape investment and intervene in the market. This involved the six countries (France, Germany, Benelux and Italy) which went on in 1957 to sign the Treaty of Rome and thus inaugurate the European Economic Community (EEC).

The EEC had three goals: create a tariff-free internal trading zone, erect a common external tariff and establish a Common Agricultural Policy (CAP). The latter was necessary to modernise and cushion the under-capitalised sectors of farming against the full impact of the world market. The supra-national authority—the Commission—had little legal weight outside agriculture and the EEC was a partial free trade area and little more.

Development since these beginnings has been far from smooth, and uninterrupted; it has been characterised by abrupt reverses and sudden forward lurches that necessitated periodic reformulations of the very purpose and goals of European co-operation. For most of the post-war years member states have in fact pursued their own national interests with little or no regard to the effect on further European integration.

In the 1960s France under General de Gaulle played the decisive role in obstructing both EEC enlargement (vetoing Britain’s membership application in 1962) and the emergence of a supra-national interest (through the 1966 Luxembourg Compromise which allowed for national governments to exercise a veto against any proposal which they considered damaged their national interest). In the 1970s and 80s Britain took over the major role in this retarding process.

During the post-war boom years the limited character of co-operation and the prominence of national vetos all reflected the character of capital accumulation in these decades. To varying degrees all EEC members were locked into Keynesian, expansionist, consumerist strategies in which the national governments were important directing agencies in the economy.

Each government had to have complete control over the various macro-economic instruments (e.g. money supply, level of interest rates, exchange rates) if it was to manipulate the aggregate level of demand for goods and services and trade off the level of unemployment against inflation.

This arrangement served the EEC countries well throughout the post-war boom. EEC internal trade grew from 40% of total member states’ trade in 1960 to nearly 60% in 1970. Economic growth was boosted accordingly. Each nation state had as much of Europe as it wanted. But during the 1970s and early 1980s the EEC hit troubles which seemed set to break it up as the post-war boom gave way to a long period of faltering growth punctuated by severe global recessions.

Using the economic instruments and goals inherited from the post-war boom national governments resorted to crisis management strategies. As European competitiveness declined each nation’s classes demanded that “their” governments use each and every weapon to gain advantage against their European rivals.

Non-tariff barriers increased within the EEC and the economic performance of each capitalism grew more and more divergent. The growth of intra-EC trade actually halted and GDP growth fell to half its 1960s levels. On the other hand the growth of CAP subsidies was seemingly uncontrolable, eating up three-quarters of the EEC budget.

Yet its manifest capitalist irrationality only helped to highlight that the EEC existed to serve very narrowly defined national interests (“support our farmers”) and these battles deepened the divisions within the Community. The EEC became a crisis management forum.1

Yet shortly after the end of the 1979-82 recession the crisis of the EEC abated and gave way to a renewed momentum towards a capitalist united states of Europe. Why? In the first place it was made possible by the post-1983 global economic recovery itself. In the years 1984-90 EC GDP expanded by no less than 2.4% per annum and this lessened the antagonisms and conflicts between the European capitalist states.2

But this alone would have been insufficient. Longer and deeper periods of economic growth had not resulted in anything more than an enlarged tariff-free zone. Nor was renewed interest in integration the result of a Pauline conversion to the loftier Social and Christian Democratic ideals of the EC’s founding fathers.

Rather, it corresponded to the deeply rooted and diverse national interests of the members of the EC at a new stage in their development. Specifically, it corresponded to the vital immediate interests of European multinational capital feeling the knife of Japanese and US competition at its throat.

The EC is the biggest trading bloc in the world market. In association with the seven EFTA countries it conducts 40% of global business. It accounts for the largest share of world imports and exports.

But beneath that impressive bulk lies the fact that the EC is structurally the weakest of the three regional economic blocs that have emerged. Its growth rates were less than the global average throughout the 1980s.3 Its share of world trade in manufactured goods fell from 45% to 36% between 1973 and 1985.4

The USA and Japan were growing increasingly competitive at Europe’s expense during the later 1970s and continued to do so throughout the 1980s. The Reagan years saw massive deregulation and lowering of the costs of inter-state trade inside the USA.

Meanwhile, for whole sectors of industry in the EEC—power generation, railways, telecommunications, defence—there was little or no intra-EC trade and competition. This gave rise to a proliferation of firms but none of them were allowed or enabled to grow to a scale that would allow them to be competitive in a global market against US and Japanese multinational corporations (MNCs).

In order to amortise the ever larger outlays on fixed capital and spiralling research and innovation costs each national capital desperately needed a larger and larger market. Yet the existence of non-tariff barriers to trade between EC members meant that each national firm would have to produce differing products for each market well below optimal rates of output, thus raising average costs and rendering them less and less competitive in global competition.

There was a growing recognition in multinational capital that it would be in their interests to promote a removal of all national barriers to intra-EC trade, to promote competition and the concentration and centralisation of capital in the relatively protected environment behind EC barriers. But in the early 1980s the national non-tariff barriers such as differential taxation and differing technical specifications for products were a profound obstruction to this process of concentration and centralisation.

The most important and most costly of these barriers are protected procurement contracts and the administration costs of border controls. After the removal of all tariff barriers in 1968 the existence of the non-tariff barriers was proving more and more costly as national capital grew in scale.

Between 1983 and 1987 a group of key MNCs lobbied the EC Commission under the banner of the “Round Table of European Industrialists”. They included Philips, Olivetti, Siemens, GEC, Plessey and Thompson, companies involved in high technology products such as information systems and consumer electronics.

They had internalised the fact that on their own and in competition with one other they were falling further and further behind their US and Japanese rivals.5 They pushed for and got Commission backing for a programme of joint research.6 They lobbied to minimise the restrictions of EC competition policy (i.e. anti-monopoly regulations) on the creation of “European champions” through mergers and acquisitions. These MNCs were the prime movers in the push for the Single Market Act.

Each of the main four imperialist powers in the EC—Germany, France, Italy and Britain—(which account for 75% of its GNP) possess key sectors of multinational capital that stood to benefit from the single market.

In Britain it was the chemical and pharmaceutical industries but above all its financial services sector; in Germany, the machine tools, automotive and households appliances sectors; in Italy, the office equipment sector, in France, the aerospace and defence sectors. During the 1980s the European bourgeoisies finally recognised that they would have to hang together if they did not want to hang separately. Thus their respective national governments one by one fell in behind the proposals for a “borderless market”.

The first to give political expression to this need for change once again proved to be French and German imperialism. These two powers were most closely bound by economic and political ties. They stood to lose most by stagnation and to gain most by a new push for a higher level of economic and political union. It was Giscard and Schmidt who in 1979 pushed through the ERM and it was Mitterrand and Kohl who forced the pace of change in the mid-1980s.7

With Franco-German backing the EC Commission proposed the Single European Act of 1986 to resolve the accumulated problems. It set out about 300 measures of mutual standards recognition, selected harmonisation of standards and the elimination of border controls, to be fully implemented by 1 January 1993.

Various studies in the mid-1980s calculated that supply side benefits of the Single European Act would lead to short term gains of around $250 billion to EC firms. Medium term benefits to capitalism were estimated to boost EC GDP by about 4.5% and deflate prices by 6% through lower costs.

The consensus achieved within the European bourgeoisie for these measures revived the power of the Commission as a supra-national executive body, innovating and mediating between the national interests.

It quickly won the argument that the ambitious project and timetable of the single market demanded an end to the Luxembourg Compromise (national veto) and the acceptance of qualified majority decision-making for most measures. The national capitalist classes were thus willing to cede sovereignty to an unelected European bureaucracy—a voluntary, if limited, political expropriation.

At the same time the Commission also won for the EC institutions a whole new series of powers to operate in areas previously denied it: regional policy, research and development, foreign policy and the environment.

The anticipation of success in realising the aims of the Single European Act spurred a wave of investment in the EC economies. In preparation for the borderless market after 1992 many MNCs invested to increase their geographical spread, enlarge their market share and enhance their product diversification.

One effect of these investments has been to boost the concentration and centralisation of capital across existing national borders. Two types of accumulation are discernible here. The first is the creation of a pan-European market and MNCs that dominate it where before there were only national markets dominated by national monopolies. The food processing industry (the largest single industrial sector in the EC) is a clear example of this trend.8

In other industrial sectors (e.g. defence, pharmaceuticals and airlines) investment has been directed at reducing over-capacity, sharing research and development costs but creating fewer and stronger European MNCs that can compete in world markets with US and Japanese MNCs.

The merger between Metal Box (UK) and Carnaud (France) in 1989 which created the EC’s largest and the world’s third largest packaging MNC is a good example of this trend. In the second half of the 1980s there was a rapid increase in the number of cross border mergers, acquisitions and joint ventures and this trend is continuing into the 1990s.

In the 1960s most merger activity took place within nation states and led to the creation of “national champions”. In the 1980s of the largest 1,000 manufacturing firms in the EC only 117 mergers were reported in 1982, but 383 in 1984 and 492 in 1988. In 1982 only 18% of these mergers were cross border ones, but this had risen to 40% in 1988.9

The tendency, therefore, where this merger activity involves EC MNCs is towards the creation of “European champions” capable not only of dominating the EC market but of competing effectively with the Japanese and US MNCs in their own domestic and regional markets.

The problem has been, however, that the process of creating a pan-European capital has been too slow and has not prevented Europe from falling further behind. Much of the feverish activity in capital concentration and centralisation in the last five to seven years has been a belated attempt to “catch up” with the USA and Japan in many industrial sectors: cars, computers, aviation, defence.

Meanwhile, Japanese and US MNCs have been consolidating themselves within Europe and forging ahead in new generation technology products and processes. Creating distinctly Euro-MNCs is proving painfully slow, impeded from below by the continuing clash of national interests and from above by still weak EC quasi-governmental institutions.

As the Danish and French referenda were later to demonstrate it was proving difficult to create a popular “Europeanism”, anything approaching a European national consciousness. The EC central institutions are widely seen as a “monstrous bureaucracy” despite the fact that this bureaucracy is actually much smaller than any of the member states’ bureaucracies. This is the legacy of each national government’s struggles against Brussels over one or another question especially during the budget haggling.

Whilst intermittently complaining about the unelected character of the bureaucrats who took decisions, most states made sure that no pan-EC politics developed to rival the national parties and national parliaments. The European Parliament remained a bloodless and toothless creature.

The single market was a decisive step with important consequences, a catalyst in creating a distinctly European capital. But economic and political logic demanded a series of further measures without which the gains implicit in the Single European Act would unravel.

Europeanisation had been hampered by the lack of a synchronised economic cycle between all the twelve of the EC’s member states. The Commission proposed that the next stage of European integration—economic and monetary union—would create this synchronisation. The pattern of trade and investment between the Benelux countries and Germany had long merged the economic cycles of these countries. The operation of ERM since 1979 brought about a further synchronisation of macro-economic money policy between its participants. Inflation had been brought down from an average level of 11% in 1980 to 3% in 1988 for those countries within the ERM. Once France abandoned its reflationary policies in 1983 (precisely because they were incompatible with ERM membership in the medium term) the cycles of Germany and France too became closer and closer.10

Plans for further economic and monetary union were incorporated in the Delors Report of 1989 and formed the basis of the Maastricht Treaty discussions in 1991. The Maastricht Treaty, finally signed on 7 February 1992, set a timetable for the creation of a single currency for the single market. The European bosses set themselves a common series of economic criteria—so called “convergence” criteria—which would lay a stable basis for the single currency (EMU).

Without this the single market would become a sloping playing field, operating to the advantage of more efficient German imperialism. The major imperialist powers committed themselves to a medium term strategy (to 1996) of low inflation, low borrowing and low public spending in order to facilitate “convergence” with the standards set by German imperialism.

Without bringing together the economic performance levels of the EC countries a single currency is impossible. But such a currency is essential since the present system of managed exchange rates (ERM) isopen to speculation and manipulation.

Thus ERM is a transitional regime that is unstable and vulnerable to any serious divergence between the economic cycles of member states. With the onset of global recession in 1989 and its subsequent deepening and broadening, the basis was laid for a grinding of the gears of the economic cycles.

Britain fell into deep recession influenced by the USA with whose economy it is still deeply enmeshed. German unification after 1990 added to the problem of divergence. The German bourgeoisie decided, for mainly political reasons, to exchange the deutschmark with the ostmark at 1:1.8 and to move to equalisation of wage rates.

The subsequent cost of unification transference funds thus amounted to over 7% of Germany’s national product and has been financed largely through borrowing rather than by raising taxes. The Bundesbank was alarmed by Kohl’s largesse in 1990-91 but by 1992 it restored its grip on the German state’s macro-economic policy. Containing the costs demanded a tight monetary policy, exercised through high interest rates.

This forced countries like Britain to sustain their interest rates at levels pegged to the German ones. But these proved unsustainably high for a capitalism in the trough of recession. Eventually in September 1992 a ferocious speculative assault on sterling brought about the partial break up of the ERM. The lira was also forced out of the ERM and others devalued against the deutschmark whilst staying within it.

But the events of September 1992 were a serious warning not an irreversible blow to EMU. They served to highlight what failure to take the transitional system forward would cost. Its collapse could bring down with it the scarcely launched single market and mightily deepen the crisis of European capitalism. Germany and France have heeded this lesson and are putting all their efforts into to pushing forward the EMU measures of Maastricht.

Even Britain has been strong-armed into pressing ahead with ratifying Maastricht. It has however been forced into a lengthy tactical retreat before rejoining ERM. It would take prolonged stagnation or a further collapse into general slump to force the EC states to each take unilateral rescue measures incompatible with the objectives set out in the Maastricht Treaty.11

Even if the economic and monetary provisions in the Single European Act and Maastricht Treaty were fully realised the barriers remaining in place would leave the EC far short of a United States of Europe.

In the first place the remaining conflicts between different sectors of national capital are not inconsiderable. In the banking and financial sectors, capital remains profoundly national and few cross-border developments have taken place. Given their role in raising capital for industry this is a major national barrier to European integration.

Moreover, attempts at significant harmonisation of taxes on capital have failed and are not even envisaged in this decade. Sectors of medium and small capital, which exert a major influence on bourgeois parties, also remain far more dependent on national markets and have much to lose by ever greater integration and competition (e.g. the transport industry in Germany), or harmonisation of market standards (e.g the German brewing industry, which account for 70% of all EC brewers and was hitherto protected).

But the greatest set of contradictions in the path of European integration arise from the presence of non-European capital within the single market. At one level the acceleration of US and Japanese investment into Europe (especially after 1985 in the case of Japan)12 to take advantage of the single market creates further material pressures to press ahead with the tearing down of national barriers to the free movement of capital and commodities within Europe.

However, this trend is cut across by an altogether different one; namely, the tendency for US and Japanese MNCs to invest inside the single market and take over a larger and larger market share of national capital. In Spain, for example, some 60% of manufacturing output today is owned by non-national capital. In the UK the trend is the same.

Much of this investment is from the USA or Japan. This cuts across the trend for a pan-European capital to emerge. Here we have a situation where the pan-European political (and diplomatic/military) machinery of a proto-state have to be deployed not simply in defence of a European capital but of US and Japanese capital.

Moreover, even EC multinationals are interested first and foremost in strategies that can ensure survival and growth in the world market. There is nothing per se that indicates that commercial survival dictates alliances with other EC multi-nationals. Cartels, mergers and corporate alliances can and do take place between EC and non-EC MNCs, the better to compete globally. When Smithkline, the giant US pharmaceutical company, merged with the UK MNC Beecham the creation of a distinctly pan-European pharmaceutical capital was thereby obstructed.

It is the fear and dread that the European MNCs may not be the biggest beneficiaries of the European single market that leads the weaker sectors to demand action against US and Japanese MNCs both in terms of discrimination within the EC and protection from outside competition.

Fiat President, Umberto Agnelli, has argued: “The single market must first offer an advantage to European countries. This is a message we must insist upon without hesitation.”

It is no accident that he heads a car maker MNC. They losing out hand over fist to the Japanese and will lose out even more after 1992. Probably Rover and/or Peugeot will not survive Japan’s competitive advance. Japanese micro-processors and the IBM-Macintosh alliance spells doom for some parts of the EC computer industry too.

Already protectionism is on the rise. Car imports and even the market share of Japanese firms inside the EC is restricted and likely to be more so. France is in the vanguard of anti-Japanese sentiment. The short lived premier Edith Cresson was fond of Japan baiting. She once insisted: “Japan is an adversary that doesn’t play by the rules and has an absolute desire to conquer the world. You have to be blind or naive not to recognise that.”13

This stance brings France into direct conflict not only with Japan but also with Britain, which is the destination for over 50% of Japanese direct investment in the EC. This discord further impedes European unity. But it is not the only source of protectionism between the imperialist triad.

If different rules apply inside the three different regional blocs then this will be a source of discrimination against foreign capital within them. Since US banks cannot buy the shares of US companies (and hence neither can EC banks) then US banks cannot be allowed to buy company shares inside the EC either.

The trend in this direction is already clear. As the Financial Times noted in April 1991: “. . . the EC has put in place a ‘complex hierarchy’ of preferential trading arrangements and built up a network of bi-lateral agreements with other countries, which introduce strong elements of discrimination into multinational trading systems.”14

Thus regionalisation creates huge contradictory pressures. Regionalisation and the inter-regional conflict that arises on this basis, is the pre-dominant tendency today. But the road towards a capitalist united states of Europe is littered with obstacles that threaten to trip up all those marching along it; namely, the multiple bourgeoisies of Europe and the non-European rivals who exacerbate these intra-European differences.

One thing is certain. The European working class will reap only defeat and demoralisation if it allows its reformist leaders to tie it to the chariot wheels of either the project of a European imperialist super-state or of a retreat into national isolation. It needs to leap over both the nationalism and the pseudo internationalism of the bourgeoisie and unite as a class across the continent and beyond.

A period of stormy struggles is approaching, caused by the deep changes taking place in world capitalism and by the opening of a new period of redivision of the worlds resources, markets and exploitable labour power.

The bourgeoisie’s hired ideologists, such as Francis Fukayama, have rushed into print in order to celebrate the end of communism, socialism, the class struggles, the working class and even History itself. They are in for a rude awakening.

The EC and its member states

The degree of enthusiasm with each of the twelve EC states greeted the process of European integration, which gathered pace from 1985 onwards, varied according to how it would affect their own national interests.

Each nation’s ruling class differs over the tempo of integration, how much political power should be surrendered to EC institutions and what lies at the end of the road—merely a single economic space, political confederation and single currency, or a federal super-state.

Each state possesses quite different political and governmental structures. These make it more or less difficult for each bourgeoisie to take decisive steps to meet the obligations undertaken in relation to Maastricht. They have, through these structures, to reconcile the interests of distinct sectors of capital and to navigate the treacherous currents of regionalist, ecologist, trade union and other popular pressures.

This problem is particularly acute in the case of the defeated Axis powers—Italy and Germany. These states were given constitutions by the Allies that introduced checks and balances to prevent the emergence of strong centralised rivals.

The results of these relatively democratic constitutions are constant coalition governments and continual trade-offs between fractions of the bourgeoisie that make a hard confrontationist policy difficult.

It has also fostered clientelism, nepotism and even corruption These modes of political life now stand in the way of decisive actions to achieve economic and political union.

Britain, on the other hand, has had 13 years of Tory government with an uninterrupted mandate to deregulate, privatise and cripple the working class’ trade union rights. In contrast to this Italy’s 45 post-war governments have been coalitions of compromise, weakness and concessions.

The need to buy the support of a multiplicity of parties led to a ballooning budget deficit, a bloated and inefficient state bureaucracy, a high level of state ownership of industry and high labour costs. Further steps to convergence underline the need for major political and constitutional reforms within each nation state.

In addition, as a result of the uneven and combined development of European capitalism throughout the 1980s several countries now find it increasingly difficult to articulate one “national interest” in relation to European integration. Just as certain sectors of industry and commerce have benefited by the process of the single market so too certain regions within each nation have benefited and developed whilst others have fallen even further behind.

In Italy the northern region has enjoyed the highest rates of growth in the whole EC in the last seven years and enjoys the next highest per capita GDP in the Community.

Meanwhile, the Mezzogiorno is, after north Portugal, the most backward region in the EC. The Northern Leagues (Lega Lombarda etc) now openly call into question the unity of the Italian state in their eagerness to ensure at least their region’s convergence with the Franco-German core of the EC.

In Spain a similar process of uneven and combined development has taken place since 1986 leading to growing cleavages between Catalonia in the north east and regions such as Extre-madura and Murcia. Politically, this has promoted the rise of regionalist or nationalist (e.g. Catalan) parties which want to cast off the obligation to provide funds for the developments of the backward regions of their own states and seek to integrate themselves into the prosperous core of the Community.

This development clearly threatens to break up the existing bourgeois nation states and provides a developing popular force for European integration.

Each state has historically different economic and political objectives in the world beyond the EC. This is a crucial factor for the former colonial powers. France and Italy retain important interests in their ex-colonies or protectorates in North Africa and the Middle East; Britain retains distinct privileges in many Commonwealth states.

Even Germany, a power defeated and despoiled of its colonies and conquests in two world wars, retains or is regaining old spheres of interest in Eastern Europe, the Balkans, Turkey and Latin America.

However, the collapse of Stalinism in Eastern Europe and the USSR after 1989 posed the urgent necessity of a co-ordinated response to capitalist restoration and the eventual integration of these states into the “wider Europe”.

Consequently, the Maastricht Treaty outlined a procedure and institutions that could co-ordinate a common foreign and security policy for member states.

Already bi-lateral co-operation over military matters exists with the EC especially between France and Germany. The Western European Union (WEU) has been taken out of cold storage to act first as a supplement to and maybe an eventual replacement for NATO.

Its aim is to forge a distinctly European military alliance. The cold war bond that united US and European imperialist interests is dissolving. The “new world order” will give rise to further revolts and conflicts in which Europe and America’s interests will not coincide.

The steps so far taken towards a federal Europe are very limited and prone to being halted or reversed under the pressure of “national” differences and crises. The very different responses to the break up of Yugoslavia illustrate this; Britain and France were initially supportive of a Serbian-dominated Yugoslav federation whilst Germany and Italy were openly sympathetic to Slovene and Croatian secession and provided covert aid to these states, which they aim to integrate into their spheres of investment and influence. In addition, countries such as Ireland and Denmark are likely to opt out of military integration altogether.

Britain is eager to retain US involvement in European security via NATO, and is a major brake upon a independent European imperialist foreign and defence policy. The main driving force in military matters as in economic is the Franco-German alliance. But the Germans still retain serious restrictions on their military capabilities and the French have a history of refusing to subordinate French forces to foreign command.

A United States of Europe with its own armed forces is certainly not just around the corner. It will take serious intra-imperialist conflicts and internal political battles to open the road to a European super-state.

The EC and the “wider Europe”

The Achilles’ heel of European imperialism is its relatively high labour costs in comparison with those of its main rivals. Germany’s are the highest in the world. These are only partly offset by high productivity. Indeed, with productivity declining—especially in Germany—the danger of losing further competitive edge increases.

High unit labour costs are bound to remain a structural problem as long as the proportion of GDP set aside for research and product innovation remains lower than that of the USA and Japan. Japanese MNC’s, are able to super-exploit extremely low paid but reasonably skilled labour in their “free trade zones” in South East Asia and the US multinationals can do likewise in Mexico and further afield in Latin America.

They can do this to a far greater extent than is possible for their European competitors—so far.

The process of European integration imposes severe limits on the ability of MNCs to increase the rate of exploitation of labour in any of its member states (such as Ireland or Spain) or the labour of any of its immigrant communities within the nation states. Integration requires to some extend the ironing out of the unevenness between them (i.e. convergence and regional aid from EC) rather than profiting by it.

In conditions of free movement of both trade and labour the complete impoverishment of a whole country by another within the EC would be dysfunctional. In contrast Mexico can be used as a vast reservoir of exploitable labour by US MNCs safe in the knowledge that the realisation of the surplus value thus generated will take place outside Mexico where higher wage and non-wage incomes exist.

European MNCs can seek to reproduce this relationship with the prospective semi-colonial states of Eastern Europe and the CIS or with the peripheral countries such as Turkey and North Africa. The break up of the degenerate workers’ states also presents European capital with an opportunity to resolve some of the other barriers to its further development.

In particular the integration of Poland, Czechoslovakia and Hungary as peripheral semi-colonies could help Germany address the problem of high labour costs and increase its competitively against the USA and Japan. Some $4 billion has been invested in East Europe since 1989 and over half of this went into Hungary, the country with the most developed market infrastructure at the time of the collapse of Stalinism. Hungary has a small domestic market but a skilled and cheap labour force.

Already US and Japanese motor car MNCs and Electrolux have set up plants there for export into the EC. Smaller investments from the EC and Austria have also escalated. Daimler-Benz in Germany has taken steps in this direction, shifting production sites to Poland and Czechoslovakia where skilled, educated workforces exist but wage costs are much lower than in Germany.

In the future Poland may see more investment tied to taking advantage of its sizable domestic market. Places like Slovakia’s border areas with Austria could become the maquiladora’s of the future for EC capital, profiting from cheap labour and proximity to huge markets while being denied full EC membership.

These developments present the EC bourgeoisie with an external “reserve army of labour” with which to undermine their own workers’ wage levels, social gains and trade union organisation. They will not do so without battles that will rock Europe to its capitalist foundations.

Marxism, the EC and the nation state

At the heart of the new Europe after 1986 was the search for a new form of handling one fundamental contradiction of our epoch; that between the internationalisation of capital and the basic political form of bourgeois rule, the nation state.

At the beginning of the twentieth century an unstable equilibrium existed on the basis of a relatively low level of internationalisation of capital between the major powers, as opposed to investment in colonial and semi-colonial territories and the great multiplicity of nation states inherited from the epoch of nineteenth century nation-state building.

In this period there was a relatively restricted international division of labour in production, nationally restricted banking and financial markets and limited trade between branches of the same multi-national company (MNC).

It thus appeared that a fusion between the nation state and a national monopoly capital dominating the domestic market would be the general course of development.

At the end of the twentieth century the much greater internationalisation of all forms of capital is well known. This is giving rise to new contradictions with the state forms inherited from earlier periods of the imperialist epoch.

One tendency is for MNCs that originate in one nation state to take over another nation states’ capital. In some countries this is compensated by their own MNCs taking over a larger share of a rival country’s industrial base. The nation state, its laws and bodies of armed men thus have to act in the service of “foreign”, “international” capital.

This potential dislocation of the state from the nation is very dangerous for the bourgeoisie. It threatens to undermine the efficacy of the nation state’s role in deceiving the exploited and subaltern classes into believing that when they make sacrifices to aid “our” industry they benefit the nation not simply capital.

These developments are also a stunning refutation of the theory of state capitalism which sees developments as moving inexorably to a fused state-capital.

Today the contradiction between the national character of the political state and the international nature of the economy is being shifted to a higher level. While the contradictions within and between the nation states are not removed, increasing co-operation and federation within the regions or continents produces antagonism and conflict between the rival blocs.

In 1915 the superiority of Lenin’s dialectical view of imperialism was that he recognised the theoretical possibility of capitalism bursting through the existing national state form of its development: at the same time he recognised that such a development was impossible without revolutionary convulsions which would threaten the very life of capitalism:

“There is no doubt that the development is going in the direction of a single world trust that will swallow up all enterprises and all states without exception. But the development in this direction is proceeding under such stress, with such convulsions—not only economic but also political, national etc—that before a single world trust will be reached, before the respective national finance capitalists will have formed a world union of ‘ultra-imperialism’, imperialism will inevitably explode, capitalism will turn into its opposite.”

Without falling into Kautsky’s theory of a harmonious ultra-imperialist phase for capitalism we can now confirm Lenin’s general view that in principle there is nothing to exclude the formation of larger states defending larger capitals.

Applying Lenin’s dialectical method to the EC what can we conclude?

The tendency towards the development of a “world trust” is manifest in the strong trend towards the formation of regional trusts: Pacific/Japanese, North American, European. Each in turn is comprised of major and minor imperialisms and also of semi-colonies under the domination of the former.

This trend towards regional trusts is nevertheless a profoundly dialectical development. It emerges both as a point of conjunctural equilibrium reflecting the countervailing pressures of competition within a global marketplace and at the same time as a formidable obstruction to the further development of national capital on the other.

In Europe the looming reality of each nation’s economic decline and remorseless falling behind its US and Japanese rivals gave rise to the impulse to cede a certain level of political state sovereignty to a European bureaucratic quasi-state structure.

Only such a structure could promote the amalgamation, restructuring and rationalisation which would enable them to transcend their competitive difficulties. Above all this required the full power of the hegemonic imperialisms (Germany and France) to drive Europe in this direction.

Up to the adoption of the Single European Act and even Maastricht the existing members of the EC could subordinate their contradiction to the goal of wider European union.

But in the coming post-Maastricht years it may not be possible for France and Germany to to pursue their own pan-European ambitions and drag all the member states along with them.

In this case the Franco-German content that lies within the pan-European form of development will be revealed all the more openly. France and Germany will proceed in this direction and there is a li22mit to the compromises it can afford to make with Britain and those who wish to retard the process of European unity to assist their own and Japanese/US interests.

The logical destination of this road is a European state that can enforce these measures against the will of specific national capitals and to the general advantage of Germany’s global ambitions.

The EC supervises (via competition policy etc) the emergence of stronger nationally based MNCs on the so-called level playing field, the better to take on the US and Japan.

The exact size and composition of a confederation of European states cannot be determined at this stage, although it would most likely include Germany, France and Benelux and even those like Austria who are not part of the present EC.

What we are witnessing then is an attempt to enlarge the boundaries of the nation state rather than the internationalisation of the capitalist class. Moreover, this enlarged proto-nation state of Europe exists alongside, and in conflict and co-operation with, the already established nation states of Europe and beyond.

As Lenin states, “the development in this direction is proceeding under such stress, with such convulsions”. Each member state in the EC still pursues its own national interest in many areas. In addition the growing presence of US and Japanese capital within the gates of any Fortress Europe obstructs the development of single European trust.

The next stage of the contradiction is developing in the following manner: European MNCs are emerging to compete in the global market. They are protected and regulated by an under-developed European “state”. But remaining “national” interests and the presence of US and Japanese MNCs inside the EC obstruct the European State’s development lest it discriminate against them.

It is clear that the weak form of a “capitalist confederated states of Europe” that could emerge from a full application of Maastricht does not abolish the nation states of Europe, still less the separate nations.

Rather, a degree of the executive, legislative and military functions of the existing nation states will be derogated to pan-European institutions. Even under Maastricht the decisive levers of control over taxation and the armed forces would remain within the control of each national government.

But the paradox of European history is this: that the survival of some nation states in Europe (e.g. Italy) may well depend upon their integration into at least a confederal Europe.

Anything less may see the break up of these nation states under the impact of the unevenness of capitalist development as the more developed regions refuse to take sole responsibility for the subsidising the backward regions.

Only a new and protracted period of economic recovery in the global and European economies plus an accelerated concentration of distinctly European corporations able to compete effectively in the world market will produce a new qualitative push towards the capitalist United States of Europe.

Even this would require settling accounts with the “enemy within”—the US and Japanese MNCs and their European agents, first and foremost Britain. It would certainly mean EC nation states accepting subjection to the bonapartist decisions of pan-European political structures.

It would require their ruling classes being able to resist the inevitable backlash under nationalist banners. The European bourgeoisies face enormous difficulties and convulsions along this road.

They will seek to unload the costs of this process on their working classes and on their semi-colonial spheres of interest, provoking resistance.

But there is no alternative to pursuing this course except economic defeat and subordination to their Asian and North American rivals.

The sort of convulsions that Lenin envisaged are almost inevitable in the decade ahead. Europe is likely to be the most crisis wracked of the three blocks in these years.

Only a further slump in world trade during this cycle that massively weakened Japan and hit the USA hard could alter this scenario .

Given the historically higher level of working class organisation there compared to its rivals, mighty class battles are looming on the old continent. The European, and more specifically the German bourgeoisie, must put its proletariat on Japanese rations.

Combined with this is the deepening crisis of the restoration process in Eastern Europe and the USSR. Thus in the years ahead Europe is likely to prove the key to the international situation.

1 During this decade of crisis the development of European monetary co-operation in 1972 (the “snake”) and then the ERM in 1979 were pure survival measures forced upon the EEC in the wake of the collapse of Bretton Woods in 1971.
2 It was no accident therefore that it was in these years that in addition to the single market proposal the long standing wrangle over the “British rebate” was resolved, currency realignments within the ERM ceased and Maastricht was conceived.
3 Between 1979-89 industrial growth rates in the EC averaged 2% per annum. This compared unfavourably with Japan (4.6%) and the USA (2.6%).
4 This trend continued in the second half of the 1980s and early 1990s. The EC’s share of world exports for manufactured goods declined a further 6.3% in the recession of 1990-92 and the EC’s trade deficit with the rest of the world shot up from $11 billion in 1988 to $71 billion in 1991.
5 In 1986 the EC had 19% of the share in the world market for telecommunications equipment compared to 38% for the USA. But both the USA and Japan’s market share was growing at twice the annual rate of EC firms. The EC share of world market in high technology goods shrank from 27% in 1979 to 23% in 1989.
6 After 1985 the EC Commission has been successful, with MNCs, in promoting a qualitatively higher level of pre-competitive pooled research and development (e.g. electronics, high definition TV), to share the benefits and compete globally. ESPRIT and EUREKA are two such projects
7 That such leadership could find general political support in the EEC in the mid 1980s was due to the sea-change in bourgeois politics. Neo-liberal parties or policies triumphed on the back of discredited Keynesian crisis management. This led in turn to a series of defeats inflicted upon the working class whose earlier strength had acted as a pressure for national forms of state action to deliver reforms.
8 See “Will there be a European Food Processing Industry?”, J Mc Gee and S Segal-Horn, in, Europe and the Multi-Nationals, (ed S Young & J Hamill) (Aldershot) 1992
9 In 1989-90 3,410 cross-border mergers took place, at a value of £63 billion. In addition to full-scale mergers or take-overs, corporate partnerships between competing firms accelerated (i.e. cross-shareholdings and joint ventures). In Q4 1989 alone 669 such partnerships were registered (e.g. GEC-Siemens, Volvo-Renault).
10 The weakest link in the chain of synchronising the economic cycles of the EC members was Britain. This was for two reasons. First, its large investments in and trade with the USA made the UK more sensitive and locked into the economic cycle of the USA than any other EC country. Secondly, sterling is a major international reserve currency and unlike the Franc or Dmark much of these reserves are held outside the EC and hence outside the control of the those states that control the ERM. Britain’s membership of ERM in September 1990 was thus treated with some concern by the German Bundesbank.
11 The events of September 1992 and the warning shots delivered to EC states will lead to a renewed determination to attack the working class in each country so that convergence criteria can be met more fully and more quickly.
12 The absolute stock of Japanese investment in the EC remains small compared to the USA, amounting to $45 billion at the end of 1989. But the rate of increase in the 1980s under the impact of the Single European Act was eye-catching. In two years (1986-88) Japan’s investments accounted for half its post-1951 total.
13 Quoted in “Head to Head”, L Thurow (New York 1992) p81
14 Financial Times 17.4.91

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