The Europe of big capital
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 for a common currency.
The European Commission pays very close attention to the policy proposals and demands which are regularly published by the European Round Table of Industrialists (ERT). This 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 influence directly, through lobbyists and 'corporate embassies' in Brussels.
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 criteria") imposed through the agreements that regulate the introduction of the common currency. The Treaty of Maastricht, and the Dublin Stability Pact (December 1996) imply generalised austerity policies across the EU. As Leon Brittan, External Trade Commissioner of the EU, recently admitted, "European Monetary Union is forcing European countries to adopt Thatcherite policies." ' 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.
5
edge of a cliff"; "running out of time"; "not aware of the rules of the game" 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 problem for the rich countries.
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 strategies;
• 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 affects only a limited part or the community economy. part of the Community economv. 6 International Viewpoint #290
REL FEDERAL RESERVE NOTEN
THE UNITED STATES OF AMERICA
THIS MOTE IS LEGAL TENDER
ROR ALL DEBES, RABLIC AND FENATE
G20118675A
WASHINGTON, D.C.
7
7
G 20118675A
T атака
7
ANGION humm
DOLLAR
The Commission also 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 transfer 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.