The European Crisis: Regression and Resistance

David Black

The financial meltdown of 2008, the first effect of which was a decline in the “real” economy, has now plunged several European states into sovereign debt crises, amid fears of further collapses of the banks, decline in “social cohesion,” the end of globalisation, and the deepening of  international conflicts. As unemployment in the European Union reaches 17 million, its national governments, bitterly divided amongst themselves, are effectively waging war on the livelihoods of their people.  But can the Left, Labour and  Occupy activists move popular resistance towards an adequate critique of capitalism that raises the prospect of a radical overturning of capitalist relations of production?

The financial meltdown of 2008, the first effect of which was a decline in the “real” economy, has now plunged several European states into sovereign debt crises, amid fears of further collapses of the banks, decline in “social cohesion,” the end of globalisation, and the deepening of  international conflicts. As unemployment in the European Union reaches 17 million, its national governments, bitterly divided amongst themselves, are effectively waging war on the livelihoods of their people.

In Western Europe the protests by organized labour and political activists continue to ebb and flow. On 22 March, Portugal’s unions held a 24-hour general strike against the austerity measures brought in as part of a £65 billion bailout package agreed with the Troika (European Union, European Central Bank and International Monetary Fund). The strike paralyzed the  transport system, but had mixed success in  other sectors. As the economy  is expected to shrink by 3.4% this year, and there are no indicators of recovery in 2013, Portugal is expected to follow Greece in requesting a second bailout.

In Spain, the unions held a well-supported 24-hour general strike on 29 March to protest the government’s austerity program and reforms which make it easier for companies to sack older workers.  Much of Spain was brought to a standstill by the transport unions, and in several cities demonstrators disrupted bus routes and lorry deliveries to supermarkets. Over a million people took part in marches and demonstrations in Barcelona and Madrid.  The day after the strike the Spanish government announced  further budget cuts of 27 billion euros and a 7% hike in electricity prices. On the same day, in Brussels, Eurozone ministers agreed to expand Europe’s bailout reserves to 800 billion euros, but this may not be enough to bailout Spain or Italy, should the need arise. Spain’s Debt to GDP  stands at 64%, but its private sector debt is 227% of GDP, and the Spanish banking system is hugely leveraged at 19 to 1. Spain’s conservative premier Mariano Rajoy has been under pressure from the EU to reduce the current deficit of 8.5% to 4.4 %, if necessary by means of a bailout from the Troika. Rajoy, still hoping to avoid a bailout, eventually got the EU to accept a current deficit target of 5.3%, but in return he had to announce an extra 10 billion euros of budget cuts on top of the 27 billion. Rajoy’s aim is to prevent borrowing costs reaching unsustainable levels, but opponents argue that further austerity will send the economy into a spiral of decline. Unemployment is Spain has already risen to 24%, and GDP is forecast to drop by 1.7% during 2012.

The OECD expects zero growth this year in the three largest economies of  the Eurozone (Germany, France and Italy). During the last year, the governments of Italy,  Greece and Ireland have, with no electoral mandate, given up their fiscal sovereignty in return for further loans and debt restructuring. This means that the Troika technocrats are empowered to dictate these nations’ management of deficit spending through severe austerity programs. In Greece, where within living memory Left and Right fought a civil war, many fear the country is slipping through the EU social safety net into the Third World. Because of the ferocity of the resistance to the austerity measures, the Troika was unable to impose Papademos’s unelected techocratic government on the Greek people for another 18 months by getting the Greek parliament to postpone elections. In the elections, which will be held as planned in May, the Left parties are expecting to get about 43% of the vote, although there is little chance of them coming together to present an “alternative.”  The fascist Right also stands to gain, mainly from anti-immigrant sentiment. On the streets the protests show no sign of stopping. On 6 April, striking dockworkers fought with police in a protest outside Athens’ central bank.

In Ireland the Fine Gael/Labour government plans increases in taxes and year-on-year cuts in wages, health, education and welfare. The EU Fiscal Treaty, which is subject to an upcoming referendum in Ireland, requires EU member states to reduce their debt to GDP ratio to 60%. But as Ireland’s debt to GDP ratio is nearly 100% and projected to reach 120% within a few years, the government’s meagre “recovery plan” is unsustainable. With further recession virtually guaranteed by job-killing cutbacks, tax revenues will decline  and the fiscal deficit target will not be met. With the failure of “fiscal sustainability,” Ireland too may face a Greek-style default. Ireland has not however, so far seen the levels of protest seen in other EU states.

In France, according to a GlobalScan opinion poll, only a third of the people  believe “the free market system is the best”.  The Economist complains,

“For years France has offered its people a Swedish-style social model of services, benefits and protection, but has failed to create enough wealth to pay for it… The French live with this national contradiction—enjoying the wealth and jobs that global companies have brought, while denouncing the system that created them—because the governing elite and the media convince them that they are victims of global markets. Trade unionists get far more air-time than businessmen… Mr Sarkozy has called for capitalism to become ‘moral’ so as to curb such abuse. Mr Hollande has declared that his ‘main opponent is the world of finance’.”

[‘The French election: An inconvenient truth’, Economist, 31 March 2012]

For the neoliberals, France, even under Sarkozy, has an unacceptable level of public spending and progressive taxation that must be cut to “Anglo-Saxon” levels. The contradiction of citoyen and bourgeois identified in nascent French capitalism by Hegel 200 years ago persists.

In Britain, where capitalism is more popular (but becoming less so), two years into the coalition government’s austerity program the economy is currently in recession. Although Britain is independent of the Eurozone, the issues of economic justice and democracy are no less sharply posed. As the Tory-Liberal theory of coalition  “democracy” means you don’t need a mandate for whatever  policies you agree on with your partners,  as long as they accommodate neoliberal ideology, the Coalition’s program of austerity, privatizations and attacks on civil liberties is well under way with much worse to come. The Cameron government’s neoliberal ideology masks howver, the reality of 21st century state-capitalism. In British public services the cuts and privatisations are designed to draw private capital into partnership with the state through the awarding of profitable tax-funded contracts, combined with attacks on  subsistence wages, employees rights, health services and safety regulation, etc. Beginning with the massive revolts by students against rises in fees and cuts in grants in 2010, there has been no shortage in Britain of protests by trade unionists, Occupy activists and others (the 2011 Summer Riots in Britain were seen by many of the youth participating as protest against racist harassment by the police). But the protests have so far failed to stop the cuts and National Health Service “reforms.”

Paul Mason, in his book, Why It’s Kicking off Everywhere: The New Global Revolutions, highlights the  intensifying predicament of a global humanity facing a future of ecological destruction, civil disintegration and war. Mason argues that without a global strategy for social equity through Keynesian state intervention – which he doesn’t see happening — the alternative could be a regressive “nationalism and protectionism” of “competing economic blocs” and an end to “rising personal freedom”. On of the most disturbing developments in Europe has been the policies of the ruling Conservative-Fascist coalition in Hungary, which is combining state-capitalist economic  interventionism with  ultra-nationalist authoritarianism. According to Jan-Werner Mueller in The Guardian (22 Oct 2011), what has been going on in Budapest, “the dismantling of the rule of law, the systematic weakening of oppositional media, the creation of a new nationalist and in many ways authoritarian constitution” has “arguably put European integration much more in doubt than any problems with the euro.” In a Red Pepper interview to promote Why It’s Kicking off Everywhere (Feb 2012), Mason warns that “this generation of protesters could easily suffer the fate of social-democracy in 1914, [which] had to choose between being a recruitment sergeant for mass slaughter, or becoming an underground movement.” Given the ever-presence, and increasing frequency of localised wars – both civil and interventionist – in recent years, we must also consider,  given the Israeli threat to attack Iran, the danger of War on a global scale. The prospect of military catastrophe brings into focus Rosa Luxemburg’s binary formulation of capitalist development as ultimately a choice between Socialism or Barbarism. We can hardly forget that destruction of capital – and millions of humans – rather than Keynesian economic policy was the “transition” factor between the 1930s Global Depression and the Post-War Boom.

Internationally, the protests of  Occupy and other mobilizations internationally have seen activists denouncing the “fat cats,” “banksters” and “predator” financiers, and arguing that these “greedy” elements, rather than the workers and pensioners, should be made to pay for the crisis. But can such “anti-capitalist politics” avoid falling in with some dubious popular-frontism for the purpose of turning the “People” against one fraction of the capitalist class  deemed to be “unproductive,” “predatorial,” or even “parasitical,” in support of a “progressive” fraction seen as “productive,” “entrepreneurial” and “anti-monopolist”? The likelihood of the European austerity strategies causing a spiralling downturn does not in itself validate Keynesian and leftist underconsumptionism. Rather, the failure lies in the insufficiency of value available to start another boom in the “real” economy. But what is the real economy? Peter Hudis, in ‘The Dialectics of Economic Turbulence‘ [ November 2010] argues that capitalist development primarily occurs through productive consumption — by capital  becoming “big with value” as it consumes an ever greater-share of the social wealth i.e. the greater quantities of value that capital needs to get the economy moving on an ever-expanding scale. The only source new value can come from is  living labor. Workers are thus expected to work more and consume less in order to pay off IMF and EU loans. As Hudis puts it, “The growing debt levels are being used as a pretext to reduce the relative amount of value that goes to the workers in order to allow the speculative appetites of unregulated global capital to again have free reign.”

Contrary to the beliefs of left populists, social wealth is not reducible to the revenue paid out to workers on the one hand and to fractions of capital on the other; the bulk of the value produced in capitalism is “consumed” neither by workers nor by capitalists but by capital itself. The development of late capitalism has consistently seen a preponderance of investment demand – for software, machinery and buildings –  over consumer demand – food, clothing, housing, etc. – which is based on historically determined levels of subsistence (i.e. determined by previous class struggles). The actual declines in consumer demand forced by the “credit crunch” have their origins in the long term decline of sufficient investment demand for sustained growth.

That the current system is long past its sell-by date is becoming obvious to millions of people. But to  develop an alternative to value production will not be easy. And for the uprooting of capitalism that is precisely what is required.


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1 Comment

  1. Lydia

    How to get our heads around the concept of most value being consumed by capital. Its like the whole is an exploiting monster hoovering up worker vitality which is then frozen & guarded until it can be thrown into another factory extraction process with an ever sliding scale of worker consumption the only aim of the whole horror show to keep an arrogant unwise elite of slavers in unproductive luxury. They are the thieves who have stolen our private property in means of production as space & time free of continuous harassment, in terms of a place to work in free of disruptive snoopers, in terms of the constitutional conditions for development as humans in wisdom & joy of all.