A homemade crisis
ECONOMIC analyses are up for sale, commented the West German economic paper Die Wirtschaftswoche on October 30, 1992. The authors point out that all the well-known economic research institutes are dependent on the state drip-feed. Thus, for example, Munich's Ifo-Institut
International Viewpoint #244 April 1993 only in a very watered down form. The bourgeois category of "industrial production" reflects the Marxist notion of the productive sector to a far larger extent.?
If we take as our starting point figures for "Output in the producing industries" as
Since the turn of 1990/91 such institutes have been in the grip of a sectoral crisis — the cyclical crisis of economic research institutes - partly owing to the tight rein on public spending; as a result at the end of 1991 the Ifo-Institute had to beg a "liquidity aid grant" of 2.2 million marks from the Federal and Bavarian authorities in order to avoid bankruptcy.
In these circumstances the tendency to come up with advice which the payers want to hear has become increasingly pronounced.
WINFRIED WOLF — Cologne, March 4, 1993
O
NE and the same institute can give two different and contradictory accounts of the same thing at the same time. Thus in discussing the merits of state economic aid to industry in its Finance Needs 1992, the Ifo advised the economics minister Möllemann against such intervention while Riesenhüber's science ministry got precisely the opposite advice from the same source.
Since both ministers have since moved on, there is an opportunity for a repeat performance — perhaps with the roles reversed.!
And the various predictions of economic trends from the institutes and their experts in 1992 have now been revealed as the merest flattery. As late as October last year, the autumn bulletin of the Ifo-Institut predicted renewed growth for 1993. On
December 14, 1992, however, the institute did an about turn and foresaw a recession for this year.
Commented the Süddeutschen
Zeitung: "Thus, the Ifo-Institut is the first competent body to predict a negative growth rate for the coming year... 1993 will thus witness the first recession for a decade" (December 15, 1992). The precise figures mentioned were a decline in production of between a half and one percent.
Two months later, the Ifo-Institut was painting the future in still more gloomy colours. The Handelsblatt of March 1 published the Ifo-Institut's latest forecasts
— a fall in industrial production of 4% and commented: "the Ifo's experts, taking into consideration the trends in the last months of 1992, think it quite conceivable
16 that the downturn will be even stronger".
This is remarkable in two ways. Such a sharp revision of views has not been seen in recent years. In the space of five months, predictions of slight growth have given way to predictions of a fall of four percent or more. And, secondly, if the latter forecast is realized this will mean the deepest crisis that the West German economy has ever seen. Added onto the decline in industrial production in 1992, the fall predicted for 1993 would make a drop of
Looked at through another optic, the situation is even more dramatic. Some 15 months ago I wrote in the revolutionary socialist weekly Sozialistische Zeitung (December 15, 1992): "The least that can be said is that Germany is in the midst of an economic crisis. Back in December 1991 we wrote, 'the boom in Germany ended in summer 1991... and the German economy is slipping back. Almost everyone agrees that, unlike in 1986/87 when the decline was short-lived, this time we are seeing the onset of crisis"
Since then the diagnosis has been confirmed. German Gross Domestic Product (GDP) has been stagnating since the middle of 1991 and falling slightly since mid-1992. If we take the figures for industrial production as our guide the trend is even clearer. Other indicators - such as Gross National Product (GNP) or GDP -include various non-productive sources of income which only express redistribution and which strongly distort the development of the productive sector and express the development of the industrial cycle they appear in the last available number of the Monatsberichte der Deutschen Bundesbank (February/1993), we get the following picture of the situation over the year: production in West Germany has been falling since mid-1991. By the last quarter of 1992 it was 4.4% down on the previous year.
Compared to the second quarter of 1991 — the high point of the boom - the drop was 6.3%. For the "consuming industries" (that is, industrial production except for mining, construction, electricity and gas production) which more accurately reflect the economic cycle, the level in the fourth quarter of 1992 was down 7.6% from the high point. Comparing monthly rather than quarterly figures it appears that West Germany's industrial production at the start of 1993 was back at its level of autumn 1989. The drop between December 1991 and December 1992 was about
1. Sozialistische Zeitung (SoZ), no. 26, 1991.
2. It should be stressed that the figures for the development of industrial production are only an indicator of what is happening to production.
Commenting on a first draft of this article, Wolfgang Wolf from East Berlin pointed out that the category of "industrial production" itself includes a series of areas of double bookkeeping which distort the real situation. Thus for example value components that Marx would have registered under the notion of "c" (constant capital) appear both as half-finished products and then renewed as industrial finished products. Wolfgang Wolf also comments that in Volume 2 of Capital Karl Marx insists on the productive character of transportation costs since these are needed for the value of
Transport costs, however, do not show up in the figures for industrial production while they
I accept the point about double book-keeping. However, a creative development of Marx's ideas presented in Volume 2 of Capital is needed to deal with transport costs. In my view, more than 80% of transport costs under highly developed capitalism are unproductive. A study by Stefanie Böge of the Wuppertal Institut für Klima Umwelt und Energie has revealed that a pot of strawberry yoghurt requires some 7695 kms of transportation - the fruit from Poland, the top from Nordrheinwestfalen, the yoghurt culture from north Germany, the final production in south Germany etc.
All this movement is not needed to realize the value embodied in the product. It is the result of an absurd division of labour which enormously increases the social costs of production and leads to an artificially inflated GNP. The subsidizing of all transport costs means that, at the level of the individual enterprise, producing yoghurt in this way is always preferable to production on an exclusively regional level.
3. Calculated on the basis of net production figures from which inflation and seasonal factors have already been removed. The base year is 1985 (=100).
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International Viewpoint #244 April 1993
Turning to the figures for different sectors we find that until the start of 1992 the chemical and car industries were resisting recession. In the third quarter of 1992, the chemical industry was still at the level of the same quarter of 1991 and tram and bus production even registered a slight rise. A fall here was recorded only in comparison with the first quarter of 1992. This means that two branches with great importance for the West German economy acted as a brake on recession until the last quarter of 1992.
On the other side were the steel, textile and mechanical engineering sectors, which exerted a recessionary pull. They were the first to go into recession. The figures for mechanical engineering are eloquent: here the high point was mid-1990 — some 24.7% up on 1985. Ensuing stagnation still left these industries more or less at that high level. However, in the last three months of 1991 a massive decline set in — to a mere 4.5% above the 1985 level by the end of 1992 and a 15.4% drop compared to the high point. Calculated on a monthly basis the fall is even more dramatic. In December 1992 mechanical engineering was at 95.3% of its 1985 level.
If we take "recession" to mean a situation of low growth rates, and "crisis" as one of an absolute decline in production then it is clear that there is a new economic crisis in Germany. This is the third such crisis in postwar German history, the others being in 1974-75 and 1980-82. The last downturn should be considered a recession, as should that of 1966-67.
OUL
As we will show, this is a homemade crisis - one in which the immanent rules of the capitalist mode of production find expression. The 1980-82 crisis was followed by an international upturn. In 1986-87 this seemed at an end, corresponding to the pattern of five or six year cycles seen since the start of the 1970s. A fall in production in North America, Japan, West Germany and other EEC states, and the stock market crash of 1987 seemed eloquent testimony to this.
However, in fact a short downturn was followed by a resumption of the rather good conjuncture. A worldwide explosion of public debt contributed to this, along with the one-off boom in West Germany occasioned by unification with the East. In hindsight it is of a certain theoretical interest to consider whether the 1982-90 period was a long period marked by good conditions or whether it should be viewed as two shorter cycles (1982-86/87 and 19871990) separated by a brief recession. In any case, 1990 saw the start of a new international crisis which reached Germany, where special factors were at work, in
For no other country is the homemade character of the crisis so unequivocally obvious as in Germany. One almost has the impression that the crisis has been staged to explain to the 16 million inhabitants of the former East German state what a proper capitalist crisis of over-production is all about. For this crisis has nothing to do with "abroad" and has occurred despite the positive role that the East German economy has played for West Germany. All the excuses based on special factors such as the "export crisis" or the "crisis in East Germany" are completely wide of the mark as explanations of the West German crisis.
In fact, falling exports have not played any significant role in the new crisis. Even in 1992 German exports remained at a high level. A glance at where exports are going shows that the decline in exports to the USA after that country went into crisis in 1990-91 was compensated by rising exports to the OPEC countries (1991 — the Gulf Crisis!) and, until mid-1992, to some EEC countries. At the same time Germany's strong position on the world market means that it continues to export more than it imports and has a positive trade balance; in 1992 for example this added DM191bn
The search for an external scapegoat is thus mistaken. The same is true for intraGerman relations between the economies of West and East Germany. Until well into 1992 the West German economy was supported by the consumer boom in the East. The German Bundesbank's monthly report for February 1993 sums it up: "Positive impulses were provided by continuing high demand in East Germany. To be sure in the meantime the scramble for western consumer goods had largely died away. But investments in East Germany were surely of great benefit to West German produ-
This needs some additional comment: this East German demand was directed above all towards West German consumer and capital goods and helped Western industrial sectors that had been destroyed in the East. At the start of 1993, industrial output in the former East Germany was a third of its 1989 level — a figure which includes new factories and plants started up by West German firms in the region, such as the Opel/General Motors car factory in Eisenach or VW's in Mosel and Zwickau.
Official German economic statistics are still not in a position to provide detailed allGerman figures and such figures are thus only available for West Germany. This means, to be precise, that the crisis is Made in West Germany. The tendencies to crisis in West Germany would have been all the more dramatic without the Wild East. Indeed, the disaster there has been an antirecessionary factor for the West. And this process is still at work. Although there has been much talk this year about green shoots of recovery in the East the sober truth is as stated by the Wirtschaftswoche at the end of 1992: "The gap between industry in the old and new federal regions is still gro-
There is plenty of evidence that we are 17
International Viewpoint #244 April 1993 only at the start of the crisis. Meanwhile we can listen to the faith-healers whistling in the wind. The Federal Bank's February report holds that: "Despite the sharp fall in economic activity in the last quarter there are no grounds for exaggerated pessimism. To all appearances, the conjunctural potential for downturn has reached its limits in West Germany. Germany is not affected to the same extent as many other Western industrialized countries by the after-effects of speculative overheating that were widespread from the end of the
What the aims of such purposeful optimism might be will not be dealt with here. In any case, such optimism is not justified in the given national and international conditions. Three different levels should be distinguished here.
• First, the deep roots of the "natio-
Germany is not only going through a cyclical crisis. On top of this there is also a structural crisis. At the moment investment activity is not only dropping off, but is falling in absolute terms.4
This goes together with a huge crisis of particular branches of industry. The figures for the fall in production in mechanical engineering industries have already been cited - and this is the international 18 cutting edge of German capital. The much-trumpeted German skill in enginee ring along with inventiveness and "handiness" can no longer compensate for basic deficiencies such as a largely middle class structure and relatively small series production. To regain its former position on the world market, German mechanical engineering needs massive concentration and widespread bankruptcies.
The same is true for the country's second most important branch, motor vehicles. Thus VW has just recorded its biggest ever quarterly loss — a billion marks, the sum set as the expected limit for the whole of 1993. At the start of 1993, Mercedes-Benz introduced short time working and its motor vehicle operation will be in the red in 1993. The same is true for Opel/General Motors and Ford Porsche meanwhile is facing an existential crisis and may not see out 1993 as an independent producer.
Productivity in West German motor vehicle factories is said to be below that of Spanish factories or the Japanese-owned Nissan plant in Sunderland in Britain. This key European industrial branch as a whole is at the start of a conjunctural and structural crisis. There are already ten Japanese "transplants" in Europe — mainly in Britain and Spain. Between 1993 and 1995 their output is set to treble from 260,000 to 800,000 units. Increased output at a time of crisis and falling demand means a massive competitive struggle, a price war and bankruptcies of major firms.
In the German auto industry "panic management is the rule. Some 50,000 jobs are to go in the industry in 1993 and by the end of the decade almost 200,000 less white and blue collar workers will be employed" 6
Steel and coal round out the picture. Here a new wave of mergers started in 1991 with a successful hostile takeover of Hoesch by Krupp. At the end of 1992 the Klöckner-Werke, the country's fifth biggest steel firm, was on the verge of collapse putting 50,000 jobs in jeopardy.? Since February 1993, all the German steel firms and the coal mining industry (since the 1960s united in one company, Ruhrkohle AG) have been in crisis threatening more than 100,000 job losses. These are traditionally the most militant sectors of the working class, with 90% or more union mem-
In all enterprises in these sectors, co-management, the typical West German model of institutionalized class peace has been in force. The crisis of the sector also means the end of this model and a desire for confrontation with the IG-Metall union by the management.
• Second, Germany's financial room for undertaking active counter-cyclical policies is nil (at least in the view of
The stated goal of the conservative coalition government between Christian Democrats and the liberals of the FDP formed in West Germany in 1982 was the reduction of the public debt. In fact this doubled between 1982-89 despite the economic boom. According to budget plans it is set to double once more in the 1989-94 period making a fourfold rise since 1982 The total West German public debt accrued between 1949 and 1989 was about DM1000bm but by the end of 1994 this will probably have doubled to
4. Investments in equipment developed thus (quarterly, in 1985 prices): 1 / 91: +6%; I| / 91: 00%; III / 91: - 1.5%; IV / 91: -2.5%; 1 / 92: +6%; I| / 92: -4.5%; III / 92: -3%; IV / 92: -9%. (From the Bundesbank's monthly report for February 1993). A further absolute fall is predicted for 1993.
5. Porsche's output in February 1993 was 350 sports cars which would give a maximum annual output of 5,000 units. At least 15,000 units need to be sold this year for the company to survive. Just five years ago production was twelve times higher than now.
6. Wirtschaftswoche, February 26, 1993.
7. 1992 was already a record year for bankruptcies in Germany. The number of bankruptcies and liquidations rose 16.4% in West Germany while in East Germany it tripled. A special factor in the latter development was that the rush of new firms seen in 1990 and 1991 had turned into a rush of bankruptcies, providing another important lesson in the workings of the capitalist market economy.
International Viewpoint #244 April 1993
DM2000bn. This is about 10% of GNP -a level comparable to the present Italian debt. As a result 1993 will see policies that exacerbate the downturn (or be "pro-cyclical") with huge rises in taxes and contributions and falls in real wages.
The Bonn government's medium term policy on debt and their short-term procyclical policies are either the product of blindness on the "after us the deluge" principle; or we are seeing a conscious accumulation of ammunition that in the nottoo-distant future will be used in a wide-ranging class struggle onslaught from above.
• Third, the international and European context:
It hardly needs to be underlined that hopes for an international boom are likely to be dashed. Thus no relief for the German crisis is to be expected from this quarter. In any case, the first economic measures of the Clinton administration in the USA reveal an orientation towards increased protectionism, which will obviously not help German exports - for example, of steel or of the Airbus aircraft. The same goes for the interminable GATT talks.
The Banana War which has erupted this year with the imposition of import duties on bananas from the "dollar-banana-region" is only one symptom — with a symbolic significance in Germany where bananas were supposed to be a fruit that the free market would at last allow East
ITE Germans to enjoy. They have just doubled
Meanwhile in the EEC, the conjunctural crisis has been coupled with an exchange crisis. The European Monetary System (EMS) has been cut back to little more than its core alliance between the German mark and French franc. This is a political alliance which the French bourgeoisie may discover to have been a mistake since it is the German Bundesbank (Federal Bank) - that is, the heads of German banks and industry — which calls the tune.
Apart from the franc, which has been defended by the Germans, all the major European currencies have either left the EMS' Exchange Rate Mechanism or been devalued within it.
Hilmar Kopper, the head of Germany's biggest private bank, the Deutsche Bank, has stated "the volume of money traded on the currency markets has been estimated at about DM1000bn each day. This sum is more than the total currency reserves of all the world's issuing banks". He was thereby underlining the relative helplessness of state financial policy in the face of the flows of international money trading in private hands.
It is nonetheless interesting that, despite this, the fixed exchange rate for the mark and franc has thus far been successfully defended. This is essentially the result of a political decision. The German bourgeoisie does not (yet) want to undertake its march to the summits of the European and world markets, with all the related political and military decisions, alone. They want a close alliance, which they find in the new Bonn-Paris axis.
We must wake up to the fact that the German bourgeoisie is adopting a new political orientation. It will in the short term mean increased internal and external aggressiveness. This new line is in the first place the result of unification; it will be favoured and accelerated by the economic crisis.
Externally, the German bourgeoisie is effectively putting the European Community project at risk. The decisions of Maastricht have increasingly been shown up as lip service. Some significant capitalist papers such as the Wirtschaftswoche and the Frankfurter Allgemeine Zeitung and institutions such as the Bundesbank scarcely bother to hide their drift away from the aim of a politically and economically united EEC. Instead they favour a "twospeed Europe in which Germany and France set the pace in the fast lane.
This vision of Europe is of course not solely the result of German intentions. There are other weighty factors such as the crisis of the Italian state, the Danish no to Maastricht in the referendum last spring, rejection of membership of the European Economic Space by Switzerland, the threat of a disintegration of the Belgian state and protectionism between European states — for example against motor vehicle exports from the Japanese factories
However, no effort by Bonn to counteract the centrifugal forces can be detected. In addition there is the eastwards expansion of German capital, which is outside the framework of the EEC and its institutions. For example Siemens and VW have invested far more in the Czech and Slovak Republics than in East Germany. The break-up of the Czechoslovak Federation was partly financed by influential German bourgeois circles.8
The penetration of Austrian entrepreneurs and banks into Hungary, Slovenia and the Czech Republic cannot be separated from the growing interests of German entrepreneurs and banks in Austria and the
8. The election campaign of the Slovak president,
Vladimir Meciar, was financed by a foundation controlled by the Bavarian Christian Social Union (CSU). The declared aim was to weaken the Czechoslovak Federation to the point where German rights in areas from which Germans were expelled after the Second World War (the
Sudetenland) could be successfully pursued.
And, indeed, after the break up of the Federation into the
Czech and Slovak Republics, Meciar has offered the
German and Bavarian governments a renegotiation of the
German-Czechoslovak Treaty and in particular asked them to present a reformulated version of the rights of "Sudeten"
and "Carpathian" Germans.
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International Viewpoint #244 April 1993 grip of German media on firms on Austrian newspapers. And when in 1992 the former president of the Federal Monopolies Office, Kartte, opened an office in Moscow as an "economic advisor" he was pursuing German and not EEC aims.
Internally, the German bourgeoisie has called an end to class peace. In February 1993, the official unemployment figure for West and East Germany was 3.7 million. Another million were on short time. The amount of unemployment hidden by the state is bigger in Germany than in France or Britain because of more comprehensive social programmes. Thus we find a further million plus concealed in a variety of Work Creation Schemes, and Retraining and Further Education Courses. The Wirtschaftswoche (January 29, 1993) reckons that "more than five million German citizens" are unemployed and actively seeking jobs.
The rise of poverty can be gauged from the tripling of the number of those receiving welfare benefits, which had risen to over three million in 1992 and the one million recognized as homeless. This winter already there have been 29 recorded cases of homeless people freezing to death as against twelve in the winter of 1991/92.
We are now seeing the first shots in the class struggle from above. At the end of February 1993, the East German engineering employers terminated the wage settlement in force, which envisaged a rise
20 in wages in the East to around two thirds of those in the West. This is an exceptional event in a state based on the rule of law — the agreement is valid and the IG-Metall union has so far refused to enter into new negotiations.
However, its threat of strike action in the East is idle owing to the mass unemployment and deep demoralization, at least so long as the union is not prepared to engage in a political strike involving the West as well. The employers' shows their historical class consciousness. The last time they broke a valid wage agreement in this way was in 1928. At that time they used this measure for a global onslaught on the core of the organized working class movement.
The Federal government and the social democrats (SP) are underpinning the stream of attacks by employers on the unions and the weaker sections of society with the so-called "solidarity pact". A package of measures has been agreed between the government and the SPD that throws the burden of the crisis onto the shoulders of the socially weak. Among these mea-
• a cut in the budget of the Federal Labour Office and a sharper rise in official unemployment figures through a similar reduction in the money available for unemployment benefits
• rises in taxes and contributions for social and health insurance
• reductions in social assistance benefits
• reductions in aid for students from poorer backgrounds.
For the employed worker these measures, taken together with 4% inflation and the 3% ceiling for the new round of wage settlements, mean a cut in real income of 4 to 5%. A small fall in real incomes took
The current crisis in Germany has many ingredients that could turn it into a depression. The leading bourgeois circles are doing nothing to prevent the crisis reaching depths last touched in 1930-32; indeed they are acting to deepen the downturn. The signs that this crisis will be the occasion for an attempt to change the economic balance of forces are unmistakable - much clearer than in 1980-82 for example. At that time unemployment at the start of the crisis was under a million, this time it is twice as high in West Germany.
At that time also there was not the additional element of the upsurge of neoNazism and racism, while now Germany is number one in Europe for such phenomena. This time too there are the demoralizing effects of German unification and the East/West division of society which is as deep as that between north and south Italy. Then, too, the possibilities for union resistance were much higher than today. The German unions had taken the political offensive — for example over the reduction in the working week - which they are far from doing today. For the first time, unions have started to lose members and this in significant numbers.
But above all, at that time the German bourgeoisie was not able to operate so aggressively both internally and externally. As VW's president Daniel Goeudevert, one of the most lucid representatives of the German employers commented in the light of the collapse of the GDR and the new crisis: "The success of capitalism flows from the fact that it is the most efficient form of economy, not the most just".
All this does not mean that resignation is obligatory and there is no possibility of resistance in Germany. The public sector strike of spring 1992 is only a year past and shows the possibilities. A realistic appraisal of the changes in the economic balance of forces is, nonetheless, a precondition for our struggle, which, naturally, continues... *
9. In 1992, thirty people were killed in racist and fascist attacks in Germany. The Anti-Racist Alliance in Britain gives a figure of eight such murders for that country. While the media are no longer paying the attention to racist attacks that they were, such attacks have not declined despite the impressive anti-racist mobilizations.