Europe is haunted by austerity. Public sectors across the EU are cut back and working class gains from
the post-war period seriously undermined (see also Reflections
on the Eurozone crisis). In this blog post, I will
assess the causes of the crisis, its implications for workers and discuss the
politics of labour in response to the Eurozone crisis.
The underlying dynamics of the Eurozone crisis
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| Photo by Gwydion M. Williams |
Nevertheless, this analysis ultimately only
scratches the surface of the causes of the crisis. The fundamental dynamics
underlying the crisis have to be related to the uneven nature of the European
political economy. On the one hand, Germany has experienced an export
boom in recent years, with almost 60 per cent of its exports going to other
European countries (Trading
Economics, 10 May 2013). Germany’s trade
surplus is even more heavily focused on Europe.
60 per cent are with other Euro countries and about 85 per cent are with all EU
members together (de
Nardis, 2 December 2010). However, such a growth strategy cannot be adopted by everybody. Some
countries also have to absorb these exports, and this is what many of the
peripheral countries now in trouble, such as Greece,
Portugal, Spain and Ireland, have done. They, in turn,
cannot compete in the free trade Internal Market of the EU due to lower
productivity rates. Germany’s
export boom results in super profits, which then require new opportunities for
profitable investment. State bonds of peripheral countries as well as
construction markets in Ireland
and Spain
seemed to provide safe investment opportunities. In turn, these investments led
to yet more exports from Germany
to these countries and yet further super profits in search for investment
opportunities.
Who is being rescued?
It is often argued in the media that citizens
of richer countries would now have to pay for citizens of indebted countries. Cultural
arguments of apparently ‘lazy Greek’ workers as the cause of the crisis are put
forward. Nevertheless, this is clearly not the case. Greek workers are amongst
those, who work the most hours in Europe (BBC, 26 February 2012). In any
case, it is not the Greek, Portuguese, Irish or Cypriot citizens and their
health and education systems, which are being rescued. It is banks, who
organised the lending of super profits to peripheral countries, which are
exposed to private and national debt in these countries. For example, German
and French banks are heavily exposed to Greek debt, British banks to Irish debt
(The
Guardian, 17 June 2011).
What is the purpose of
the bailout programmes?
Is the purpose of the bailout programmes to
ensure the maintenance of essential public services in Europe’s
periphery? Clearly not. On the contrary, the Troika consisting of Commission,
European Central Bank and IMF demands cuts in public finances precisely for
services such as education and health care. Is the purpose to assist peripheral
countries in re-gaining competitiveness? Again, this too is clearly not the
objective. The bailout programmes do not include any industrial policy
projects.
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| Photo by HatM |
The true nature of the bailout programmes is visible in their conditionality, making support dependent on austerity policies including: (1) cuts in funding of essential public services; (2) cuts in public sector employment; (3) push towards privatisation of state assets; and (4) undermining of industrial relations and trade union rights through enforced cuts in minimum wages and a further liberalisation of labour markets. Hence, the real purpose of the bailout programmes is to restructure political economies and to open up the public sector as new investment opportunities for private finance. The balance of power is shifted further from labour to capital in this process. Employers, ultimately, use the crisis in order to strengthen their position vis-à-vis workers, facilitating exploitation.
Are German workers the
winners due to the export boom?
In contrast to general assumptions, German
workers have not benefitted from the current situation. German productivity
increases have to a significant extent resulted from drastic downward pressure
on wages and working related conditions. ‘Germany has been unrelenting in
squeezing its own workers throughout this period. During the last two decades,
the most powerful economy of the eurozone has produced the lowest increases in
nominal labour costs, while its workers have systematically lost share of
output. EMU has been an ordeal for German workers’ (Lapavitsas et
al, 2012: 4). The Agenda 2010 and here especially the so-called Hartz IV
reform, implemented in the early 2000s, constitutes the largest cut in, and
restructuring of, the German welfare system since the end of World War II. In
other words, Germany
was more successful than other Eurozone countries in cutting back labour costs.
‘The euro is a “beggar-thy-neighbour” policy for Germany, on condition that it
beggars its own workers first’ (Lapavitsas
et al, 2012: 30).
Hence, while the mainstream media regularly
portray the crisis as a conflict between Germany and peripheral countries, the
real conflict here is between capital and labour. And this conflict is taking
place across the EU as the economic crisis is used across Europe
to justify cuts. In the UK, although not in the position of countries such as
Greece, Portugal or Ireland, people too are faced with constant further cuts
and restructuring including privatisations in the health and education sectors
as well as attacks on employment rights. In short, across the EU, employers
abuse the crisis to cut back workers’ post-war gains. The crisis provides capital
with the rationale to justify cuts, they would otherwise be unable to
implement.
What possibilities for
labour to resist restructuring?
Considering that austerity is a European-wide
phenomenon, pushed by Brussels
but equally individual national governments, it will remain important that
trade unions combine resistance to neo-liberal restructuring at the European
level with resistance at the national level. To declare solidarity with Greek
workers is a good initiative by German and British unions, for example.
Nevertheless, the more concrete support is resisting restructuring at home. Any
defeat of austerity in one of the EU member states will assist similar
struggles elsewhere.
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| Photo by informatique |
A victorious outcome in the struggle against
austerity ultimately depends on a change in the balance of power in society.
The establishment of welfare states and fairer societies were based on the
capacity of labour to balance the class power of capital (Wahl
2011). Overcoming austerity will, therefore, require a strengthening of
labour vis-à-vis capital. As Lapavitsas notes, ‘a radical left strategy should
offer a resolution of the crisis that alters the balance of social forces in
favour of labour and pushes Europe in a socialist direction’ (Lapavitsas 2011: 294). Hence,
in the medium-term, it will be essential to intervene more directly in the
financial sector. As part of bailouts, many private banks have been
nationalised, as for example the Royal Bank of Scotland
in the UK.
However, they have been allowed to continue operating as if they were private
banks. Little state direction has been imposed. It will be important to move
beyond nationalisation towards the socialisation of banks to ensure that banks
actually operate according to the needs of society. Such a step would
contribute directly to changing the balance of power in society in favour of
labour.
In the long run, however, even the change in
power balance between capital and labour will not be enough. Capitalist exploitation
is rooted in the way the social relations of production are set up around wage
labour and the private ownership of the means of production. Exploitation,
therefore, can only be overcome, if the way of how production is organised is
being changed itself.
This post was first published in Norwegian on radikalportal.no
and in English by the Global
Labour Column as well as by the Social
Europe Journal.
29 July 2013
Prof. Andreas Bieler
Professor of Political Economy
University of Nottingham/UK
Personal website: http://andreasbieler.net
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