The Europe of big capital which introduced a greater degree of turbulence into monetary and financial markets. The shift to the European Union
A major shift took place between 1989 and 1992. The adoption of the Single European Act (1986) introduces 3,000 practical measures, designed to implement the general objectives specified in the Treaty of Rome. It specified a target date. 1 January 1993. The French social democrat Jacques Delors, President of the European Commission, convinced western Europe's dominant classes of the political importance of the project, and transformed it into a series of plausible policies. The neo-liberal wave of the Thatcher-Reagan years, and the major shift in the world situation represented by the fall of the Berlin Wall, the defeat of the working class in the East, and the political triumph of capitalism, cleared the path for the introduc-
Then came the Maastricht Treaty, adopted in December 1991, signed in March 1992, and coming into force in November 1993. Just as the European Monetary System explodes. Despite this, the Maastricht Treaty succeeds in giving the bosses' and governments' offensive sufficient coherence and
The de-regulation imposed by the Single Europe Act was not counter-balanced by restrictions and obligations in the social field. This places the working classes of the various member states in generalised competition with each other. The Maastricht Treaty's monetarist convergence criteria begin systematically undermining the
The latest treaty is the Dublin Stability Pact, which aims to prevent future deviation from or challenge to this strategy. The situation today
Monetary union implies the creation of real supra-national mechanisms, with a transfer of national sovereignty to an independent European bank. Monetary union is due to begin in 1998. Meanwhile, the adhesion of several central and east European countries to the European Union implies extending the area covered by the single market.
These two processes give rise to a crucial question. How to maintain the political cohesion of a Union which is facing contradictions within the core group over monetary union and its consequences, and which must at the same time deal with an immense geopolitical region stretching from the Atlantic ocean to the frontiers of Russia, and from the North Pole to the Mediterranean?
The Inter-Governmental Conference has not answered this question. The challenge is huge. Barely 100 years after they established independent, imperialist states, will the German, French and British bourgeoisies now be able to take an unprecedented leap, abandoning part of their power, and creating a stable, supra-national state authority? * 1. Prepared in 1950, and signed in 1951 2. An acronym for BElgium, NEtherlands, LUXemburg. 3. Introduction to the Treaty.
Concrete demands from big capital have always been one of the main driving forces behind European integration. Capital was behind the 1986 European Single Act, which created the single market, and the 1991 Treaty of Maastricht, which began preparations
The European Commission pays very close attention to the policy proposals and demands which are regularly published by the European Round Table of influential group brings together the presidents of the main European multinationals. More generally speaking, most major companies, and associations representing most branches of industry, organise their intluence directly, through lobbyists and 'corporate embassies"
The single market has been a very profitable development for big capital. The EU is the biggest single market in the world. Closer harmonisation and standardisation offers the major capitalist enterprises immense opportunities for increasing sales and cutting production costs.
The imposition across Europe of "free market" policies of deregulation and privatisation is leading to increased competition. This is causing an increasing number of mergers and take-overs, and a significant concentration of capital.
For industrialists and traders, the main direct advantage of the single currency is that it will reduce the cost of buying and selling *abroad'. Most also expect that the single currency will create a more stable business climate, by making it impossible for any one country to devalue its currency, making its exports cheaper, while discouraging its own population from buying imported goods.
Any currency union would have the above effects. But the Euro project is accompanied by a monetarist straight jacket (the "convergence critera) imposed through the agreements that regulate the introduction of the common currency. The Treaty of Maasand the Dublin Stability Pact (December 1916) imply generalised austerity policies across the EU. As Leon Brittan. External Trade Commissioner of the EU, recently admitted, "European Monetary
That info pincestopean countries to adopt
The edge of the cliff
Every day, it seems, we are told that European companies are involved in a life or death struggle with competitors in the rest of the world, especially in the USA and Japan. Every week there is a new study, warning about the loss of competitiveness of our companies. They all contain roughly the same analysis, and exactly the same policy proposals.
In one, "83 business leaders... from all over Europe" told Eurostudy, and Fortune magazine, that Europe is "standing on the The world's top
1,000 companies
Companies Sales Profits
Country in $000 m. in $000 m
Austria 1 -- 0.1
Belgium 11 46.1 4.6
Britain 97 783.9 74.3
Denmark 7 11.1 1.9
Finland 2 19.4 2.0
France 43 511.7 7.4
Germany 35 651.3 13.0
Ireland 3 3.0 1.0
Italy 17 177.7 9.5
NL 18 268.9 12.0
Spain 12 51.5 6.6
Sweden 19 139.9 11.6
Total EU 265 2,664.4 151.9
Japan 227 2,930.1 234.0
USA 422 3,494.7 276.4
Calculated by market value. Data from 1995. Source:
Business Week, 8 July 1996.
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THE UNITED STATES OF AMERICA edge of a cliff"; "running out of time"; "not aware of the rules of the games and "about to lose its leading position in the world economy". "The language is apocalyptic" ", said the Financial Times. In fact, the study proposed little that has not already been endorsed by the European Commission and many individual governments, like moves to increase labour market flexibility and increase cross-border competition.?
The International Monetary Fund (IMF) sings the same song. Its most recent World Economic Outlook states that the rigid and insufficiently flexible functioning of labour markets has become clearly the most urgent
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The same argument is present in the European Commission's recently formulated "10 Commandments for economic virtue." Labour market flexibility, more flexible work time arrangements and wage flexibility are among the Commission's concrete proposals to the Amsterdam Summit.*
Of course, all these horror stores about the loss of competitivity and threat of disappearing market shares for European companies have a clear ideological function. Capital wants bigger profits and therefore more austerity, lower social expenses and lower wages. It is not at all interested in fighting unemployment, poverty and increasing social polarisation. Globalisation?
By blaming globalisation and competitors in the rest of the world for the social tragedy in the EU, employers and politicians are trying to evade responsibility for the consequences of their own macro- and microeconomic choices
A look at the facts makes clear that those stories do not hold water. As the table on the previous page shows, the European Union has more multinationals among the 200 biggest in the world than Japan or the USA. And 265 of the biggest 1,000 companies in the world can be found in the EU.
The debate on globalisation is scattered with myths and exaggerations.
• companies have very different, sometimes contradictory internationalisation
• very few multinationals are really globalised (most are regionalised);
• in fact, wage costs are often not the first or even second important factor determining where investments are made.
Even the European Commission relativises many of the more wild caricatures about globalisation. Its' latest Annual Economic Growth Report demonstrates that exports and imports between the EU and the rest of the world are stable or even declining. These figures are sumarised in the table to the right.
"The degree of openness of the Community to the world economy is relatively small and broadly similar to that of the United States and Japan, " ° the report continues. "This implies that the globalisation of trade directly attects only a limited part of the Community economy." 6 International Viewpoint #290 notes that trade with lowwage countries is small part of total EU trade. "Extra-EC imports from low-wage countries amount to less than 3% of Community GDP at present and the Community's trade with these economies is broadly in balance."
While trade with the rest of the world is stable or declining, there is a sharp increase in Foreign Direct Investments (FDI) among EU member states: "The Single Market Programme has also provoked unprecedented amounts of Foreign Direct Investments between EC member countries. As a proportion of total EC FDI outflows, intraEC FDI flows soared from 20% in 1983 to 59% in 1994."
The EU has "done fairly well in international competition for direct investment as witnessed by both the strong growth in inflows and its moderate surplus in net FDI flows." The Commission even questions the never-ending demands by employers for wage restraints to avoid delocalisations to low-wage countries.
The Annual Economic Report asserts that "there are no signs that the foreign transter of production is predominantly determined on wage-cost grounds, even if this might be the case for some labour-
EU external trade
1976 1982 1995 as % of nominal GDP
Exports
OECD 4.6 5.0 4.9
Non-OECD 6.2 6.4 4.9
Total 10.9 11.5 9.8
Imports
OECD 4.9 5.7 5.1
Non-OECD 7.2 7.2 4.5
Total 12.1 12.9 9.6
Trade balance
OECD -0.3 -0.7 -0.2
Non-OECD -1.0 -0.7 0.5
Total -1.3 -1.4 0.3
Extra-community trade in goods. Source: European
Commission, 1997 Annual Economic Report:
Growth, Employment and Convergence on the Road to EMU (02/97)
intensive sectors such as clothing, footwear and toys." So much for the decline of 'European competitiveness' that we are permanently brainwashed with! The Commission report reveals that the EU has had higher labour productivity growth than the United States and, in recent years, Japan, while maintaining external equilibrium.
Also very revealing is the calculation that part of the deterioration of the EU's share of export markets has been "a consequence of the substantial appreciation of its real effective exchange rate"; in other words: a consequence of the absolute priority given to strong currencies and low inflation in the Maastricht Treaty. Change of priorities
From Aachen to Athens, the supposed consequences of globalisation and the threat of competition from low-wage countries are used to force trade unions to make even more concessions. But the European Commission's own statistics show that the European Union is a virtually closed economy. An economy in which reflationary policies could stimulate the public sector, and a general reduction of the workweek without loss of pay could be implemented relatively easily.
With 20 million unemployed and 50 million poor people in the European Union (from a total population of 360 million) the need for such a radical change of priorities is obvious. It will not happen as long as Europe is dominated by big capital. Only when the left, trade unions and other social movements join hands to mobilise for a different social and economic agenda, and take initiatives to Europeanise struggles and campaigns will such a policy shift become possible. * Notes 1. The Economist, 15 March 1997 2. The Financial Times, 7 April 1997 3. World Economic Outlook, April 1997 4. Financial Times, 24 April 1997 5. 1997 Annual Economic Report: Growth, Employment and Convergence on the Road to EMU 6. In 1995, the degree of openness of the EU (average of exports and imports of goods and services as percentage of nominal Gross Domestic Product) was about 10%, as compared to 12% for the USA and 9% for Japan.