[Militant International Review, No 57, May/June 1994, p. 15-21]
What has happened to the grandiose Maastricht plans for a capitalist Euro-state? Lynn Walsh writes.
For most people going to the polls on 9 June, the Euro elections will not be primarily about the European Union (EU) or its future. Throughout the Twelve, the vote will be a referendum on the policies of the national governments, In Britain especially the result is likely to be a massive vote of no confidence in the ruling party, an omen of defeat in a subsequent general election. Nevertheless, Euro-issues will also be put to the test – and there is hardly a government in Europe which does not fear a rising tide of anti-EU sentiment.
Throughout Europe there is an inchoate but strengthening mood that the EU is (at least partly) to blame for economic stagnation, rising unemployment, and government cutbacks in social spending. There is undoubtedly a narrow, nationalist strand in this mood – which is being ruthlessly exploited by ultra-right and racist parties striving to divert attention away from the capitalist roots of current problems. But there is also a widespread awareness that the EU is the Europe of big business and state bureaucracies, not the Europe of working people.
In an age of global economy and communications, national economies are outdated entities, But Europe – the Common Market, the EEC, the EC and now the EU – has not delivered the promised miracle of economic growth and prosperity. On the contrary, since the 1970s Europe had slower growth and suffered from higher unemployment than either the United States or Japan.
Unity, moreover, seems as elusive as ever. No sooner was the ink dry on the Maastricht Treaty than new quarrels broke out between national governments – over GATT, for instance, and the reform of the astronomically expensive and wasteful Common Agricultural Policy (which France fights to retain while Germany, Britain, and others demand reductions in farm subsidies).
The British Tory government, despite gaining an opt-out from the Social Chapter and Economic and Monetary Union (EMU), recently provoked a new row over the distribution of votes between states in an enlarged EU (after the accession of Norway, Sweden, Finland and Austria). Under pressure from the Tory Euro-sceptics, the British foreign secretary, Hurd, began to voice doubts about raising the ‘blocking minority’ from 23 to 27, which he had previously approved at the Lisbon summit. Then, after several days of wrangling at an emergency foreign ministers’ meeting in Brussels, Hurd accepted 27 after all – to the fury of the Euro-sceptics.
In immediate, practical terms, however, the elections to the European parliament, whatever the precise outcome, will make little difference. The European parliament is virtually powerless, Decisive power lies with the Council of Ministers This is an inter-governmental body on which, despite ‚qualified majority voting’ on issues relating to the ‘single market’, national governments retain the right veto on decisive issues. Despite the Euro-rhetoric of some capitalist leaders the EU is not a supranational, federal body. That would imply the subordination of member states to a central European authority, which is not the reality in the EU.
The Council of Ministers decides policy, and policy decisions are translated into legislative proposals and administrative measures by the European Commission, the Council’s standing bureaucracy. The European parliament is an advisory body. It has the right to be consulted and to amend legislation. The EU’s annual budget, it is true, has to be ratified by the parliament. But its power to amend or block the budget is, in practice, very limited as EU revenue depends on the willingness of the national governments to levy taxes and make financial contributions.
The Euro-parliament has no power at all concerning foreign and security policy, which is the prerogative of ministers representing national governments. In reality, it is the major powers, Germany, France and Britain, which have the decisive say in this area. The European parliament is the most expensive talking shop in the world.
Maastricht – boom-time illusions
This round of Euro elections was intended to provide democratic legitimacy to the Maastricht measures, and provide another stepping stone towards greater European unity. In the event, they will only help to highlight the illusory character of plans to surmount national differences and unite Europe on the basis of capitalist ownership of production and the anarchy of the market.
What happened to the grandiose plans which issued from the Maastricht summit in December 1991? According to the European vision of Jacques Delors, there would not only be a ‘single market’ by 1992 but also rapid progress towards an economic and monetary union (EMU), with a single Euro-currency and co-ordination of economic policies, Delors, in fact, championed the idea of a federal European superstate, with its own defence and security policy. Even some on the left began to accept the idea that there could be far-reaching, permanent integration of economies across national frontiers, giving rise in the future to a capitalist Euro-state.
Apart from the single market, however, this vision has now evaporated. EU ‘widening’, with the accession of Sweden, Norway, Finland and Austria, is unlikely to be accompanied by further ‘deepening’. More members will mean more differences.
What went wrong for the capitalist Europhiles? Their moment has passed! The ambitious federalist plans were the product of a particular combination of factors which emerged in the late 1980s, between the 1985 Cockfield proposals for the single market and the 1991 Maastricht summit. The new conjuncture followed a decade of economic stagnation dominated by the slumps of 1974-75 and 1979-81. The ‘widening’ of that period, with the accession of Britain, Denmark, and Ireland in 1973, was accompanied by paralysis within the EC, with annual quarrels about the Common Agricultural Policy (CAP) budget and frequent use of the veto by one or other government to block new initiatives.
A review of the factors which emerged in the late 1980s reveals their temporary nature:
(1) There was a brief spurt of accelerated growth (averaging about 3% per annum, 1985-90), with a temporary fall in unemployment. This was stimulated by low world oil prices after 1986, the speculative Tory boom in Britain 1985-88 (raising demand for imports by 30%) and the ‘unification’ boom in Germany 1988-90 (increasing import demand by 20%). There is always more room for co-operation between competing national capitalist states in periods of economic growth. This, however, has given way to deep recession, first in Britain and now in Germany and France.
(2) Following the trends set by US capitalism under Reagan, there was a worldwide acceleration of ‘free market’ liberalisation and deregulation. The growing share of services in the advanced capitalist economies and increased cross-border trade in services, especially finance, insurance, etc. (facilitated by advanced communications technology), increased the pressure to reduce state regulation, harmonise tax regimes, and allow international access to domestic markets. The big European multinational companies were eager to broaden their ‘home base’, to achieve greater economies scale in order to compete with US and Japanese corporations. For big business, the ‘single market’? was long overdue – in theory, it should have been achieved under the Treaty of Rome during the 1960s and 1970s.
(3) The ‘globalisation’ of finance capital and the massive fluctuations in the dollar/yen exchange rate reinforced the resolve of Germany, France, and the Benelux countries, to strengthen the European Exchange Rate mechanism (ERM) as a haven of stability in a volatile sea of floating rates. Following the ERM realignment of January 1987, there were five years of relative stability for the EMS. At the beginning of stage one of EMU in July 1990, there was a widespread belief that the stable ‘parity grid’ of EU currencies had become a permanent fixture – an illusion which was shattered by the European monetary crisis which followed the Danes’ rejection of Maastricht in June 1992.
(4) After Mitterrand’s Socialist Party government abandoned its reformist programme in 1983 and turned towards ‘free market’ policies, there was a strengthening of the Franco-German alliance. A firm Franco-German axis was the precondition of any strengthening of the EC. The representatives of French capitalism believed that through enhanced EC structures France could exert decisive political influence in Europe, in spite of the greater economic strength of Germany, whose political influence was limited under the post-second world war settlement. With the collapse of the Stalinist regimes in Eastern Europe, however, the attention of German capitalism has shifted from ‘deepening’ within the EU to ‚widening’, especially to draw in Germany’s Eastern neighbours. This and other developments have produced tensions in the Franco-German alliance.
(5) The favourable conjuncture gave the EC Commission exceptional room for manoeuvre, which president Delors skilfully exploited. Linked to the ’single market’ proposals, qualified majority voting was introduced in the Council of Ministers, breaking the log-jam previously caused by national vetoes. Intermixed with the 1992 proposals, which were rapidly implemented, the Commission introduced ‘federalist’ proposals, for monetary union and steps towards political union. The increased economic interpenetration of the EC economies appears to have induced a romantic, utopian strain n the thinking of some capitalist politicians, who for a while naively believed that EC structures could permanently transcend the national interests sf rival capitalist economies. Even Thatcher, who welcomed Euro-liberalisation but opposed federalism, appears to have underestimated the scope of the Commission’s plans – at least until the Danish referendum, which triggered the beginning of the disintegration of the Maastricht project.
Diagnosing the economy: ‘Euro-sclerosis’
While the short-lived economic expansion of the late 1980s allowed increased co-operation between the EC states, the re-emergence of crisis since 1990 has sharpened the tensions between national states. It has also released centrifugal forces within the nation states – nationalism, regionalism, linguistic particularism – as well as stimulating xenophobic and racist currents diametrically opposed to the idea of “European unity’.
These problems reflect the limited, one-sided character of the 1980s boom in Europe. Over the whole 1979-89 period GDP growth averaged only 2.2% per annum for Western Europe as a whole, A major factor behind this slow growth has been the policies of German capitalism. Germany is the dominant EU economy and was, until recently, the most prosperous. Yet haunted by the fear of renewed inflation, the German capitalists doggedly adopted highly restrictive monetary and budgetary policies. Through its dominant economic position, and especially through the ERM, German capitalism imposed its slow-growth policies on its European neighbours. The ERM acted as a straightjacket for EC members.
Despite the recovery of big business profits, which have returned almost to 1960s levels, there as been a steep, ten-year decline in investment, with only a modest recovery after 1985. This failure to expand capacity, combined with the effects of labour-saving technology, has produced a long-term growth of structural unemployment. Unemployment in the EC states has been higher than in the non-EU West European states. In the EU the percentage of the labour force unemployed rose from 2.8% in 1954-73 to 4.8% in 1974-79 and 9.6% in 1980-89, The comparable figures for the non-EU states (Austria, Finland, Norway, Sweden and Switzerland) were 1.6%, 1.8%, and 2.7%. The unemployment figures for the EU were partly pushed up by high levels of unemployment in the poorer, south-European states: Spain, Portugal, and Greece. Nevertheless, the slow-growth policies imposed by German capitalism undoubtedly resulted in higher levels of unemployment in Germany, France, and other ‘core’ countries.
During the 1980s growth-spurt, investment was concentrated in the most prosperous areas, while the older, heavy industrial regions and the predominantly agricultural regions continued to decline. The ten poorest regions (out of 180) have per capita GDP less than a quarter of the richest regions, like Hamburg, London and Lombardy. Moreover, even in the richer countries there is high unemployment amongst young people in the urban areas. Since the beginning of the slump in Germany and France after 1993, unemployment in both those countries has soared to over four million – pushing the EU rate to over 11%.
A large proportion of this unemployment is structural, that is permanent rather than cyclical, i.e. not merely temporary unemployment caused by the current recession. However, deep recession and very slow recovery aggravates the problems of mass unemployment and regional decline. The growth rate in Western Europe for 1989-95 is projected to be only 1.2% – that is, below the 1.5% per annum growth of 1929-38, the period of ‘Great Depression’.
The limits of the national state
There are contradictory forces at work within the EU: some pushing towards greater economic interconnection, others tending to accentuate national differences and other forces of disintegration.
The interpenetration of trade, especially in manufactures but increasingly in services, has continued to rise. Over 70% of the major EU countries’ trade is now within Europe. Through their subsidiaries and partners, most of the big multinationals now operate on an all-EU (or all EU-EFTA) basis. Finance capital flows freely across the EU’s internal borders.
This process of increased economic interpenetration will continue, irrespective of political and institutional arrangements, inevitably putting pressure on national governments to continue their efforts to harmonise their markets. This trend arises from the inner logic of contemporary capitalism – and is irreversible, short of a massive slump and a turn by the major capitalist powers to beggar-thy-neighbour policies, which will develop at a later stage. This would provoke a catastrophic economic collapse and social crisis.
A section of British capitalism, for instance, represented by the Tory ‘Euro-sceptics’, fear that competition within the EU will accelerate the decline of the feeble British economy, a fear which is amply justified. The saner representatives of British capital realise that for Britain to withdraw now, when the Nordic and East European states are pushing to enter the EU, would result in an even more rapid decline of British capitalism.
Countering the ‘unifying trends’, however, are powerful disintegrating tendencies, Underlying all of them is the historic reality that capitalism is organised on the basis of national states, which remain the fundamental unit of the capitalist system. The fact that EU states no longer publish figures for their trade with their EU partners does not mean that economies cannot fall behind in terms of capacity and productivity, or that they can no longer have trade or capital deficits with their EU neighbours.
While the capitalists generally feel that they are gaining from EU participation, they will continue to support further integration and co-operation. But when their interests begin to be seriously undermined by competition from more powerful EU rivals, the attitude of sections of big business will change. This is reflected in the opposition to the Maastricht Treaty of a number of capitalist parties in France, Germany, and Britain’s Tory Euro-sceptics.
Given the overwhelming dominance of the world market and the extreme division of labour internationally, there can be no possibility of ‘capitalism in one country’. But while capitalism can partially surmount its national limits through international investment and trade, ultimately the capitalist class cannot transcend the limits imposed by their national roots. The territorial basis of private property, the long historical evolution of bourgeois classes with their own national culture and language, and capitalism’s organic links with national state machines rule out planning on an international scale, which is now a prerequisite for progress in the development of science, technology, and production. In short, the national state remains a fetter on social progress.
Capitalist governments have to attempt to balance the national books in the broader sense. If large sections of the population suffer a decline in living standards – accentuated by competition within the EU – capitalist leaders will face growing social instability and political upheaval. The beginning of such a movement was reflected in the Danish referendum. Rejecting the policies of all the major parties in Denmark, a majority rejected proposals which they identified with growing unemployment, cuts in public expenditure, and other measures designed to achieve the ‘convergence conditions’ for participation in the EMU.
The Danish vote forced the modification of the Treaty, the beginning of the unwinding of the grandiose plans for economic and political union. Since then, opposition to the EU has grown even in Germany and France, where capitalist politicians previously assumed massive support for the idea of European integration.
Uneven development within the national states, with declining regions blighted by unemployment and poverty, has stimulated a tendency towards national decomposition. In Britain, this has aroused national sentiment in Scotland and Wales and underlies the conflict in Northern Ireland. Ironically, the idea of a federal Europe, despite regional hostility to central authority, has only fuelled the fire. Why should not Scotland, Lombardy and Catalonia, stand on a par with Denmark, Ireland and Portugal?
Denouncing the folly of a federal Europe, as advocated by some politicians, William Rees-Mogg (The Times, 11 April 1994) says: “In such a Europe there could easily be as many as 60 states … The nations put together in the 19th century, particularly Belgium, Germany and Italy, would disintegrate into their separate regions. The work of Bismarck and Cavour would be undone … Spain without Barcelona and Catalan industry would be bankrupt”.
Rees-Mogg consoles himself with the thought that, “as with everything about Maastricht, one can see that this is something which cannot happen”. Certainly, capitalist states which cannot be sure of maintaining their own national unity on the basis of harmony and prosperity do not have the capacity to secure the unity of Europe. But on the other side, defence of national sovereignty against EU encroachment will not prevent a tendency towards internal disintegration.
The end of the ‘social’ market
What degree of integration has actually been achieved by the European capitalists? What are the prospects for the EU?
The EU is not a single, unified project. There are different elements, reflecting different trends within capitalism and the disparate aims of national capitals and even fractions within the national capitalist classes.
Within the 1992 Maastricht package, there are two major projects, which are intertwined but are ultimately contradictory:
(1) There is the neo-liberal, laissez-faire project for the realisation of a ‘single market’ through liberalisation and deregulation with the EU acting as ‘ringmaster’;
(2) And there is the federalist project for a ’social’? Europe, in which a supra-national EU government, on the basis of the single market, would promote economic and social welfare throughout the EU.
1. The neo-liberal internal market
Prior to ‘1992’, tariffs had been reduced to negligible levels. The ‘internal market’ measures were aimed at removing non-tariff obstacles to free trade: abolishing ‘technical barriers’ (quality standards etc.), harmonising tax and insurance laws, and opening up public-sector purchasing to non-national suppliers.
Many of these measures are now being implemented. But some governments are dragging their feet. Only about half of the 230 single market measures have been implemented throughout all 12 states, and in some they are not being rigorously enforced. Tax harmonisation is still a long way off although big concessions have been made to the multinationals.
Plans for EMU are also linked to the neo-liberal project. Big business, the argument goes, will not be truly free to invest, produce, and trade across frontiers less they are assured of exchange-rate and interest-rate ability. But such stability requires ‘convergence’ of money, budgetary, and other economic policies. And the logic of such coordination is the establishment of single currency regulated by a European central bank – the EMU. Even if all these steps could be taken, however, the project would still face a fundamental contradiction. Intensive profit-driven competition between the big multinational corporations in a free market would inevitably accelerate the polarisation of wealth.
Investment and growth is inevitably concentrated in the more prosperous areas, aggravating e decline of the poorer areas. Poverty and unemployment inevitably fuel protests from regions and national minorities against the destructive social effects of the centralised European market. In the face of mass protest, national governments sooner or later attempt to soften the effects of the unfettered market – by resorting once more to protectionist measures.
The collapse of the ERM in the currency crisis 1992-93 was itself the result of the growing divergence between the economies, which widened with the onset of recession. The pegging of the pound at the unsustainable rate of DM2.95 forced the Tory government to maintain high interest rates in the midst of a deep slump, increasing unemployment and postponing an upturn. The Danish referendum raised doubts over the whole EMU project, and the massive flow of speculative ‘hot money’ against the ‘overvalued’ pound and Italian lira brought down the whole ERM edifice.
Britain and Italy remain outside the ERM, while the participating currencies have settled for the wider 15% fluctuation band. Not one EU state currently fulfils all four EMU criteria. The German public-sector debt in 1995 will exceed the EMU convergence target of 60% of GDP because of subsidies to the former East Germany. While Greece is considered a ‘basket case’, with a national debt of 114% of GDP, this is exceeded by Italy (116%) and Belgium (138%).
Throughout Europe, there are now capitalist parties denouncing the EMU plan as a grave threat to national sovereignty. This now includes Germany and France, where the capitalist leaders were previously overwhelmingly advocates of monetary union.
2. The ‘social’ Europe
The other project, championed by the French social democrat, Jacques Delors, embraced the ‘single market’ and EMU, but linked them to plans for a federal Euro-government, which would implement the ‘Social Chapter’ and administer regional subsidies to compensate for uneven growth.
Under the Social Chapter, there would be ‘harmonisation upwards’, spreading the most favourable employment conditions and welfare benefits from the richer economies (Germany, France, Belgium, etc.) to the poorer economies (Britain, Spain, etc.). When the Maastricht plans were being formulated, big business in Germany, France, etc., favoured equalisation. They did not see why they should be obliged to compete with bosses in other countries who got away with much lower employment costs and social contributions. But in Britain Major and his Euro-sceptic opponents were united in their virulent hostility to the Social Chapter, and Major secured an opt-out so British bosses could pay poverty-level wages and abandon protective legislation.
With the economic downturn in Germany and France, however, the attitude of big business has changed. The bosses are now blaming the crisis on ‘labour rigidities’ and demanding ‘flexibility’: the scrapping of national agreements in favour of plant bargaining; job flexibility, flexible hours, cuts in bonuses, holidays and pensions; and the curbing of health and safety and other protective legislation.
The Euro bosses, in other words, are abandoning the ‘social market’ or ‘welfare state’ which developed under pressure from the labour movement during the postwar upswing and are now taking the Reagan-Thatcher road: low pay, part-time and casual working, minimum worker protection, minimum employment and welfare benefits. The capitalists in Germany, France, Belgium, and also in the prospective member-states once famous for their welfare provision (Sweden, Norway, etc.) are now turning to the same crisis-policies adopted by the US and British capitalists during the 1980s. Regardless of the promises embodied in the Maastricht Treaty, Delors’ social democratic vision of a united Europe is now being abandoned. In addition to high unemployment (now over 11% of the labour force), the workers of Europe will be offered low pay, insecurity, and poverty.
Subsidies to the poorer regions, through the ‘structural funds’, will also be increasingly squeezed. At the 1992 Edinburgh summit, it was agreed to raise these regional funds by 35% in real terms by the year 2000. Even if achieved, this would still be less than 0.5% of total EU output of goods and services. German capitalism, moreover, is no longer prepared to provide additional funds for an ambitious regional policy. The polarisation between the rich and poor regions will continue, in parallel with the growing polarisation between the classes in all the EU states.
For a Socialist United States of Europe
The Maastricht Treaty is now “less a monument to European unity than an embarrassing white elephant”, writes a commentator in The Times (Janet Bush, 5 January 1994). This is not to say that the EU is about to break up. A Europe of autarchic capitalist states would not be viable. Driven by the logic of the market, the European economies will no doubt take further steps towards an integrated single market. But there will also be frequent resort to national protection.
The Maastricht plans are in tatters, and no doubt they will be shredded by the time of the EU summit in 1996. Again, this is not to say that there will be no further attempts to refurbish the EMS or to strengthen political co-operation, But capitalism, which can no longer assure growth, prosperity, or democratic rights within the national states, will not be able to achieve the harmonious integration of Europe’s economy or lasting co-operation on federal lines. Given a further 20 or 30 years of economic upswing, European integration could go further. But in a period of economic depression and growing social crisis, the prospect is for fissure and conflict between the European states – which will eventually erupt in crisis.
The unification of Europe is beyond the historic capabilities of the capitalist class. The task must be taken up by the working class, which, in opposition to the Europe of big business and their oppressive state machines, must raise the banner of the Socialist United States of Europe. This will be accomplished on the basis of a socialist planned economy and workers’ democracy, which will enable society to travel far beyond the cramped allotments of capitalism.
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