Socialist Appeal - British section of the International Marxist Tendency: the Marxist voice of labour and youth.

We publish here an edited version of an analysis originally written by Alan Woods in 1997, commenting on the contradictions within the European project in advance of the introduction of the Euro. In this document, Alan outlines the history and class character of the European Union and emphasises the need for Marxists to fight for a socialist alternative.

In advance of the referendum on Britain's membership of the European Union, we publish here an edited version of an analysis originally written by Alan Woods in 1997, commenting on the contradictions within the European project in advance of the introduction of the Euro. In this document, Alan outlines the history and class character of the EU and emphasises the need for Marxists to fight for a socialist alternative - the Socialist United States of Europe.

Despite being written almost exactly 19 years ago (on 4th June, 1997), this Marxist analysis and explanation is more relevant now than ever. Indeed, many of the predictions that Alan made in 1997 have since been realised in the form of the current crisis of European capitalism. Then, as now, our position remains the same: we are against both the EU of the bosses and bankers, and the delusion of an "independent" Tory Britain.

  • No to the bosses' EU!
  • No to Tory Austerity Britain!
  • For the Socialist United States of Europe!

A fundamental change is taking place on a world scale. We are witnessing an unprecedented onslaught on living standards in every continent. In the USA, Japan and Europe, the ruling class is attempting to put the clock back, cutting state expenditure, dismantling the welfare state, and destroying all the gains of the past fifty years. This is not an accident. Marxists have explained the reasons many times. In the past period the capitalist system has gone beyond its limits. Now it is compelled to retreat, relinquishing the old Keynesian policies of state intervention and managed capitalism. The same economists who previously saw the state as the source of their salvation now regard it as the source of all their ills.

In the past, the capitalist system played a relatively progressive role in developing the means of production in pursuit of profit. As the repositories of surplus value, the capitalists invested in new machinery, constantly revolutionising the productive forces. This was the main way in which they increased the productivity of labour. But now this has changed. They no longer invest in the productive forces to the same degree as they did in the past, preferring to dedicate themselves to the pursuit of easy profits through gambling on the stock exchange, derivatives and all kinds of speculation. The giant monopolies enrich themselves without the painful necessity of developing production and taking risks. They plunder the state through the swindle of privatisation where public utilities are snapped up at knock-down prices and turned into private monopolies.

Far from abolishing the slump, all these developments will merely give it a more severe and convulsive character. By cutting state expenditure and holding down wages, they simultaneously cut the domestic market, thus creating new contradictions. Each capitalist class seeks a way out by exporting. But this cannot provide a real solution, since all cannot export. Somebody must import! The struggle to conquer even the tiniest market space has assumed an obsessive and feverish character.

Despite all the talk about free trade and liberalisation, there is a fierce struggle for markets between all the main capitalist nations. There is a clear tendency for the world to break up into trading blocks, dominated respectively by the USA, Germany and Japan [and now China also]. Each one jealously tries to protect its own markets and spheres of influence, while demanding more access to those of its rivals.

In Europe, the situation is characterised by low rates of growth, high budget deficits and public indebtedness and unprecedentedly high rates of unemployment. All the governments are busy slashing state expenditure. But this will make it impossible either to achieve growth or reduce unemployment. On the contrary. These policies will only serve to cut the market and deepen the slump. At the same time, there has been an enormous increase in social contradictions, a widening of the gap between rich and poor, and a profound change in the consciousness of all classes.

We are thus in the midst of an entirely new period in history, a period far more similar to the period between the two world wars - a period of convulsions and crises. At the end of the day, similar conditions will produce similar results. The mass strikes and demonstrations in France [and Greece] in the recent period are a warning of things to come. Every one of the European countries is faced with a crisis in the economic, social and political plane. It is in this context that we must see the question of European unity and the debate over Maastricht and monetary union.

The decline of Europe

The Common Market was established as an attempt by the European bourgeois to overcome the narrow confines of the nation state, with its limited market. Historically the nation state played an essential role in developing capitalism, which served in the first instance to protect and develop the home market. However, with the development of communications, technique, science, multinational companies, and the world market, the productive forces came into conflict with the limitation of national state boundaries as well as private ownership of the means of production. Capitalism and the nation state from being a source of enormous progress became a colossal fetter and impediment to the harmonious development of production. This contradiction reflected itself in the world wars of 1914-18 and 1939-45 and the crisis of the inter-war period.

The development of world trade in the post war period allowed the capitalist system to overcome this contradiction, at any rate partially and for a temporary period. The separate national markets of Britain, France, Germany, and the others, were far too small for the giant monopolies. The Common Market was created in an attempt to overcome this limitation. The big monopolies looked forward to an unrestricted regional market of hundreds of millions, and beyond that to the world market. On the basis of the economic upswing, the European capitalists were largely successful in establishing this glorified customs union, where the abolition of tariffs between the countries of the Common Market and a common tariff with the rest of the world served to develop and stimulate world trade.

In the Communist Manifesto, written in 1847, Marx and Engels showed that capitalism, which first arises in the form of the nation state, inevitably creates a world market. The crushing domination of the world market is, in fact, the most decisive feature of the epoch in which we live. No country, no matter how big and powerful, can escape from the pull of the world market. The total failure of "socialism in one country" in Russia and China is sufficient proof of this assertion. So is the fact that both the major wars of the 20th century were fought out on a world scale and were wars for world domination.

In a brilliant article written in 1924, Leon Trotsky predicted the decline of Europe. He said that the centre of gravity of world history would pass to the Pacific, and that the Mediterranean Sea (which in Latin signifies the "centre of the earth") would be relegated to an unimportant lake. In reality, this has already occurred. The decline of Europe, which began one hundred years ago, was enormously accelerated in the two world wars, but particularly in the period after 1945. Europe's decline was accompanied by the irresistible rise of the United States. Europe, and particularly Britain, was the real loser in both world wars, and the USA was the real victor. This merely reflected the real balance of forces. The United States began to flex its muscles as a world power in 1898 with the war with Spain which effectively gave it possession of Cuba. But the most decisive turning points were in the first and second world wars, when US imperialism, having remained on the sidelines long enough to weaken its European rivals, Britain and France, finally threw its weight into the struggle against Germany and emerged as the supreme arbiter of the destinies of Europe.

This is not the first time in history that formerly powerful states were compelled to bow the knee to more powerful neighbours. The Greek city states of Athens and Sparta once played a dominant role, but exhausted themselves through wars, and were finally forced to accept the domination of Macedonia and then Rome. They were too small to continue to play an independent role. After 1945, Europe lay in ashes, weak, divided and bled white by the conflict. By contrast, American industry was intact, and two-thirds of all the world's gold reserves were in Fort Knox. Britain, also severely battered, was still sufficiently strong to occupy for a time the role of second fiddle to the transatlantic giant, with the pound sterling as a reserve currency to the dollar. But in practice, the Lilliputian powers of Europe could not maintain themselves against the might of US imperialism on the one hand and Stalinist Russia on the other. In contrast to the situation after world war one, the threat of revolution and the need to halt the advance of the USSR, forced America to underwrite European capitalism with large amounts of aid and investment under the Marshall Plan. In effect, with the Marshall Plan, Europe was placed on American rations.

This relative weakness was the main factor that led to the setting up of the European Common Market. While the myopic British ruling class clung to its dreams of imperial power, the French and German ruling classes were forced to come to terms with the new situation. Germany, in particular, emerged from the war severely weakened, with the loss of a big part of its territory and the massive destruction of its industries. Another reason for the creation of this European bloc was as a political, diplomatic and economic counterweight against the USA and Japan. On their own, the separate European powers were not able to compete effectively with the economic domination of America and Japan. So here we had a contradictory development - on the one hand, a massive development of world trade and the lowering of tariff barriers, and on the other the emergence of huge trading blocs that act as new barriers to world trade.

The French ruling class, having suffered defeat at the hands of Germany in three wars in the space of less than a hundred years (1870-71, 1914-18 and 1939-45), was obsessed with the idea of avoiding a new war with Germany by tying its neighbour to itself, first with the European Coal and Steel Agreement, then in the EEC. Given the weakness of Germany, they imagined they could become the real leaders of Europe, although things did not turn out as they had planned. Even when Germany rebuilt a powerful industrial base, the French ruling class still imagined it could dominate Europe, arriving at a kind of condominium, in which Germany would have economic supremacy, but France would have the political and military leadership. This is one of the main reasons why France insisted on keeping control of its own nuclear weapons. In practice, however, the Paris-Bonn axis is a fig-leaf that barely conceals the crushing domination of Germany.

The defeats of French imperialism in Indo-China and Algeria forced Paris to accept the loss of its status as an imperial power and dedicate its energies to reinforcing its role in Europe, while developing industry. This was possible on the basis of the post-war economic upswing. The result was the transformation of France from a formerly mainly agricultural and rentier economy into an industrial power, and in the process enormously strengthening the working class. The same process of the whittling away of the peasantry and the growth of the proletariat took place in Italy, Spain and the other European states.

Although the broad analysis made by the Marxists has been proved to be correct, the growth of the Common Market from six countries to fifteen, and the integration of their economies has gone far further than we originally thought. They were able to do this because of the development of world trade, and the general upswing in world capitalism in the period 1948-74, from which they all benefited. While there was economic expansion, they were able temporarily to develop the economy. With an abundance of markets, full employment and a growth rate of 5-6 percent a year, the different capitalist powers of Europe could afford to reach a gentleman's agreement dividing up a growing market among each other with a minimum of fuss. True, De Gaulle vetoed Britain's first application to join the EEC, partly because he was suspicious that Britain would be a Trojan Horse for American interests in Europe, but mainly because France did not want any rival to her pretended position as co-ruler of Europe together with Germany. The short-sighted British ruling class, which had refused to join with Germany and France in the beginning, preferring to aim at an imaginary world role, paid for its stupidity by seeing its power dwindle rapidly to next to nothing while France, Germany and even formerly backward Italy overtook her.

All this was predicated on a high rate of economic growth. This gave rise to a significant development of the productive forces for a time. In this context, the closer integration of the economies of the main European powers was in the interests of all of them. Finally, Britain scraped in, followed by most of the other former members of EFTA (the European Free Trade Agreement) the trading bloc of the weaker European states, put together by Britain as an unsuccessful attempt to counter the EEC. The illusion was created of an irresistible movement in the direction of a united Europe. Nevertheless, the internal contradictions remain and will inevitably emerge [and now have emerged] in a period of economic downswing. As we have already seen over the past period, the vested national interests of the different European powers have come to the fore. The crisis of the EMS in 1992 indicated the fragile basis of this "unity". They are now at loggerheads over which countries should participate in the single currency, the terms and timetable, and which new countries should be allowed to join the EU in the future.

France and Germany

merkelIn the first instance, the drawing together of Germany and France and the other countries of the EEC was an attempt to defend themselves against the USA and Russia. In the epoch of the world economy, the European national economies were too small to compete on their own. It was necessary to pool resources and arrive at an agreement to share a common market, first in steel and coal, then in other products. This was a tacit recognition of the fact that under modern conditions, the nation state has turned into a reactionary fetter on the development of the productive forces. It is too narrow to contain the colossal productive potential of modern industry. From any rational point of view the case for European unity is unanswerable. But on a capitalist basis, genuine unity is impossible. As Lenin explained long ago, a capitalist united states of Europe is a reactionary utopia - that is to say, it cannot be achieved, and if it could be achieved, it would not be in the interests of the working people.

As a matter of fact, the only time a united capitalist Europe was achieved was under Hitler. The Nazis succeeded temporarily in "uniting" continental Europe under German domination. The reactionary nature of such a "union" requires no further comment. But it must be understood that under capitalism, the antagonism between the different ruling classes is such that any union must necessarily mean the domination of one power over the others. We see the elements of this at the present time. Over a period of decades, Germany succeeded in achieving by economic means what it failed to achieve in two world wars - uniting Europe under the domination of German imperialism. This is the essential thing to grasp about the so-called European Union. Behind the façade of unity, all the old contradictions between the national states continue to exist and in fact are intensifying.

The EU is in fact a nominal customs union for the defence of European capitalism against the USA and Japan. Internally it is a partially free market which works within certain limits, as long as the vital interests of the member states (particularly the key players) are not affected, but in which each one of the ruling classes strives for its own advantage. Under conditions of upswing, they were able to hold together and even achieve greater integration. But under conditions of sluggish growth, stagnant demand and high unemployment as at the moment - and still more in a serious recession - all the national contradictions will be exacerbated, beginning with France and Germany.

The decisive turning-point was the unification of Germany. At a stroke, a new and powerful state of 80 million inhabitants was created, situated in the heart of Europe, with a mighty industrial base and a formidable military potential. Here it is necessary to cut through the fog of official propaganda and diplomatic lies, and lay bare the real relationships. Though German unification was greeted in Paris and London with polite applause and handshakes, it undoubtedly filled the British and French ruling circles with apprehension. Even before this, Germany was clearly the dominant power in Europe, but now the immense potential of a united Germany threatened to overwhelm the others entirely.

It is surprising to what extent the foreign policy of a given state remains constant. This peculiarity arises from the fact that through all the changes of government, the state apparatus with its caste of conservative Mandarins remains intact. The permanent bureaucracy tends to preserve an inertia built up over a long period, generations, maybe centuries. Thus, the main strategic objectives of German foreign policy in Central and Eastern Europe known as the Drang nach Osten (the "thrust to the East") has remained basically the same for a hundred years. Not satisfied with its economic domination of Western Europe, German imperialism wants to recover its traditional spheres of influence in Eastern Europe and the Balkans. This is an alarming prospect for the other European capitalists.

"Fortress Europe"

Far from being a step in the direction of free trade, the EU is a regional trading block directed, on the one hand, against the USA and Japan, on the other hand it is an alliance of imperialist powers dedicated to the collective exploitation of the Third World. This neo-colonialist mode of exploitation is no less predatory than the overt plunder of the colonies realised in the past on the basis of direct military rule. In general, the same old colonies in Africa, Asia and the Caribbean are being sucked dry by the same old bloodsuckers. The only difference is that this robbery is effected "legally" through the mechanism of world trade by which the advanced capitalist countries of Europe exercise a joint domination of the ex-colonies, and are thereby spared the cost of direct rule, while continuing to extract huge surplus profits by exchanging more labour for less.

Europe indeed represents a formidable trading block, despite its relative decline. In fact, with an internal market worth approximately $8.4 trillion, it is actually 20 percent bigger than that of the USA. The main aim of the European capitalists is precisely to club together to try to protect this market against the competition of American and Japanese products. This engenders the wrath of the American capitalists who long ago dubbed the EU "Fortress Europe", a description that is not far from the mark.

In one famous aside, Henry Kissinger was quoted as saying: "When I want to speak to Europe, whom do I call?" The formation of the EU makes it possible for the ruling classes of Europe to "speak with one voice" up to a point (at least in theory). That said, the contradictions between the European states make it impossible for them even to agree on a common foreign policy.

In the last half century, the idea of war has receded in the consciousness of the masses in Europe. Yet a hundred years ago the anarchist Kropotkin pointed out that "war is the natural condition of Europe." And historically that was true. Only the peculiar balance of forces that arose from the second world war meant that war - at least war between the major powers - was off the agenda. Nevertheless, we are now entering into a new and troubled period in history. The tensions that now exist between the United States, Japan and Europe in another period would have already led to war. But with the existence of nuclear weapons, and also the horrific array of other barbarous means of destruction - chemical and bacteriological arms - all-out war between the major powers would signify mutual annihilation, or at least a price so terrible as to make war an unattractive proposition, except to ignorant and unbalanced generals. Under present-day conditions, not war between the European states, but class war in every country of Europe is the prospect that now opens up.

eu schengen visa border wide

The scourge of unemployment

"The patrimony of a poor man lies in the strength and dexterity of his hands; and to hinder him from exploiting this.....is a plain violation of this most sacred property." (Adam Smith)

In Greek mythology, there was a character called Procrustes who invited his guests to sleep in a bed which had the peculiarity that it would only admit people who fitted exactly into it, and, in order to ensure that they would, its owner had the unpleasant habit of lopping off arms, legs and heads to achieve the required dimensions. The capitalist system in the present epoch is just like the bed of Procrustes. The amazing development of the productive forces made possible by the advances of industry, science and technology since the second world war has built up a colossal productive capacity. This cannot be absorbed by the existing markets. Everywhere there is too much capacity - too much steel, too many cars, too many microchips, too much food even. So why invest in creating new capacity? On the contrary. It is necessary to cut back, to close down, to cease production, even to pay people not to produce. Factories are closed down as if they were matchboxes; millions are put out of work; whole communities are laid waste. Just like the bed of Procrustes.

The original European common market was for coal and steel. The coal industry has been decimated in one country after another. Now it is the turn of steel. In 1984 there were 450,000 jobs in the European steel industry. Now there are only 250,000, and this will have to be reduced still further. There is said to be over-capacity in steel. Yet steel still remains essential for building and a whole series of productive activities. From the point of view of the needs of society, there can be no question of an excess of steel. We definitely need more of it. But from the narrow standpoint of capitalist production for profit, there is definitely too much steel, and too much of many other things. This is the logic of the madhouse, but it is precisely the logic upon which the capitalist EU works, and for that very reason, it can never work in the interests of the working class.

Permanent mass unemployment now affects all the countries of the EU. It is like a terrible epidemic, and like all epidemics, it strikes at virtually all layers of society. Even white collar, skilled and professional strata that in the past thought themselves immune, have been struck down. 

By what means do the European capitalists propose to reduce unemployment? By slashing social benefits and unemployment pay to force the jobless to accept low-paid employment; by removing all restrictions on sacking workers ("greater labour flexibility"); by promoting part-time jobs with no protection and low wages, at the expense of real jobs.

The tough Maastricht economic criteria was a recognition that Europe cannot continue with its present ever-growing deficits and public debt. Given the slow growth rates, these debts are continuing to build up. Huge cuts are on the order of the day as each European power grapples with its budget. In reality they are trapped. If they cut state expenditure and the living standards of the working class then they cut the market, which in turn reduces growth and prepares the way for another devastating slump. They are facing an insoluble dilemma.

That is the meaning of the capitalist crisis, which the left reformists are unable to understand. They hanker after Keynesianism, of boosting public expenditure, which the capitalist system can't afford. The only option for the capitalists is to carry through cuts in living standards and the welfare state. In the downswing, the EU powers find themselves enmeshed in hopeless contradictions, each one attempting to find a solution at the expense of the other. The EU is paralysed by crisis.

Why austerity?

latuff greek memorandum wideIn the pages of Capital, Marx already explained that through credit capitalism goes beyond its natural limits, expanding the market in the short term, only at the cost of undermining it at a later date. In the last boom in the period 1982-90, they used credit and public spending to avoid a recession. From a capitalist point of view, this was really irresponsible. The classical policy of Keynes was to use "pump-priming" to get out of a recession. To use such measures during a boom was quite unprecedented and showed just how afraid they were of the political and social consequences of a recession. In the event, they merely succeeded in postponing the recession for two years, while making it deeper and more prolonged. Now they cannot have recourse to those methods. On the contrary. The resulting levels of indebtedness - public, private and corporate - are still causing them problems at the present time. That is why they have cat aside the mask of liberalism to reveal the real cold, rapacious mask of capitalism, under the banner of "sound finance" and "balanced budgets", which is the battle cry of those advocating austerity.

In their desperation to find a way out of the crisis, the bourgeois economists swing all over the place, supporting first one policy, then another. They understand nothing and foresee nothing. In the late 1980s, they thought that the boom would go on indefinitely. They did not predict the recession in 1990, or the subsequent recovery. Having embraced Keynesianism in the period of the upswing, they became fervent advocates of monetarism in the 1980s. But in practice, monetarism has already shown itself to be bankrupt. They are cutting the market so severely that they can end up in a deep slump, without having experienced a proper boom.

The real reason for austerity is the burning need to reduce the very high public debt which is absorbing a disproportionate amount of the wealth of society and has become a monstrous ulcer gnawing at the bowels of the system. These figures have no precedent in peacetime. They cannot be sustained. The interest repayments on these debts swallow up a great part of the national budget. Without these repayments, many of these countries would have a budget surplus. This fact alone shows the enormous increase in waste and parasitism which are inseparable from modern capitalism.

These figures explain the policy of ruthlessly cutting down on state expenditure being pursued by all governments. It is not the product of malice or caprice, as some people imagine, but flows from the contradictions of the capitalist system itself. The capitalists find themselves trapped between the devil and the deep blue sea. On the one hand, the dictatorship of bankers and finance demand austerity. On the other hand, the policy of cutting state expenditure is cutting the market and deepening the crisis. Despite this, they have decided to gamble everything on a policy of cuts. The capitalist system has gone beyond its limits and is now compelled to cut back, on pain of extinction.

The problem is that the European capitalists are attempting to move towards union at a time when the general economic conditions are pointing in the opposite direction. What lies behind the pleas for "flexibility" is the defence of the national interests of each state. If they agree on a common currency, they will disagree on everything that flows from it. Quite apart from this, there are a thousand and one other points of conflict - cross-border travel, passports, immigration, and so on.

All this means that a Federal European state on a capitalist basis is ruled out. Especially in conditions of world economic crisis, all the contradictions are coming to the fore. The movement towards European union is foundering in a sea of national conflicts and bickering. Such a situation is very unstable and pregnant with all kinds of explosions.

This is what the bourgeois economists do not take into account. To them this is just like a mathematical problem or a game of chess. They are removed from the realities of life, and especially the class struggle. Already there have been strikes and general strikes in one country after another. This marks the beginning of the reawakening of the European working class. That is the most important thing to see.

Britain's position

In the past Britain was the workshop of the world, leading the way in industrialisation. But history plays strange tricks. Now, in the period of capitalist decay, Britain leads the way in pursuing the most retrograde policies in all spheres. Under Thatcher, a quarter of Britain's manufacturing industries were destroyed and replaced by the most parasitic sector of services, banking and insurance. Britain has partially become transformed into a parasitic rentier state, an unimportant island off the coast of Europe and a satellite of US imperialism, a humiliating dependence which they attempt to disguise with foolish talk of a non-existent "special relationship." In reality, Washington attaches much more importance to its links with Bonn than with London, although it occasionally uses Britain as its catspaw to defend its interests in Europe when necessary.

Like the bullfrog in Aesop's fable, the British capitalists are puffing themselves up, bragging about their alleged successes on the economic front. This is a blatant lie. Under the Conservative government, Britain's industrial base was partially destroyed. It has been turned into a low wage, low skilled, backward economy, although all history shows that an economy based upon low wages can never prevail against an economy based on high wages, high productivity and modern machinery. The utterly reactionary British ruling class is attempting to turn the British workers into the "coolies" of Europe. They have systematically dismantled the welfare state and pushed down the living standards especially of the poorest sections of society. In some respects, they are fast going back to Dickensian conditions of wages, hours and conditions and the brutal treatment of the unemployed, sick and homeless. This is seen as an attractive model by many of the European bosses, who, however, are fearful of the social consequences of such a policy. For their part, the new breed of upstart middle-class Tory leaders, ignorant and rapacious, are blind to the consequences of their actions which are piling contradiction upon contradiction, preparing a social explosion in the next period.

The real balance of forces, however, was starkly revealed when the Bundesbank unceremoniously ejected the pound sterling and the lira from the ERM and forced Britain and Italy to devalue in 1992. By this means the Bundesbank showed who was boss! However, a section of the most reactionary and obtuse elements of the British ruling class resents the idea of bowing to the might of German capitalism in Europe. They suffer from delusions of grandeur about Britain's role in Europe and the world. This section, represented by the so-called Eurosceptic wing of the Conservative Party cannot reconcile itself to the loss of Britain's former power and influence. They long for a return to past imperial glories, and are blind to the fact that this power was based on Britain's monopoly of industrial muscle, which is now non-existent. The wish to become "independent" of Europe merely disguises the reality of Britain's dependence on the United States.

However, the fact remains that , having lost both its industrial base and its colonies, Britain is now completely dependent on the European market. The idea of withdrawal is completely utopian. It would be an even bigger disaster for British capitalism. This is understood by the decisive sector of the big monopolies which still dominates the Tory Party leadership and is resisting the pressures of the Eurosceptic wing.

This split in the Tory Party is the most serious split for 150 years. The industrial wing of the British capitalist class (and part of finance capital with connections in Europe) understands that there is no future for Britain outside Europe at the present time. The old markets in the former colonies have largely disappeared, taken over by the Americans and Japanese. Such is the collapse of Britain's manufacturing base, that a large part of industry is now in foreign hands. The Tories are proud of this fact, which in reality flows from two things - "coolie" wages and Britain's access to the European market.

It is true that, given the frightful decline of its industrial base, the future for British capitalism inside the EU is bleak. But neither is there a future outside it. To pull out now would be a disaster, causing a severe economic recession, aggravating all the social contradictions and even putting into question the unity of the UK itself as a result of the effects in Scotland, Wales and Northern Ireland.

EU Referendum

The future of the Euro

There is a vast gulf separating theory and practice. In theory, the single currency all looks very nice and logical. The problem is that the capitalist system is anything but logical. In the abstract, the idea of a common European currency is a good one. It saves a lot of money, streamlines trade, facilitates long-term economic planning and investment decisions and eliminates a whole series of unnecessary and wasteful operations. But in practice, on a capitalist basis, it is a disaster. Every country is locked into a rigid system and cannot get out of a crisis by resorting to devaluation.

Denied access to devaluation, each government instead has to seek a solution at home - which means a policy of savage deflation and unemployment, especially for the weaker economies. It also means an enormous increase in tensions between the different states and between the classes within each state. Such an inflexible monetary system is clearly unviable. In practice, each national state tries to get an advantage over the others. This creates all kinds of conflicts, and will lead to eventual breakdown. Neither will the attempt to impose a regime of permanent austerity work.

The central problem may be simply stated: the idea that economies of such different characters, all pulling in different directions, can be successfully harnessed to a unified central currency, backed up by common funds and binding legislation, is clearly false. The capitalist system is anarchic by its very nature. The attempt to tie these economies into a rigid common exchange rate gives rise to a whole series of distortions and unbearable contradictions. When the economic conditions of one state demand an increase in interest rates, those of another demand a reduction. Who decides? As the chief economic power in Europe, Germany imposes its criteria through the European Central Bank, which effectively controls the central banks.

There were no less than five monetary unions in Europe in the nineteenth century, but the only successful ones were those that led to the establishment of a unitary state. Thus, the monetary union set up by Germany in the 1830s laid the basis for the unification of Germany later on. The same was true of Italy which carried out a process of monetary union as part of the movement towards national unification in the 1870s. This was in the period when capitalism was in the ascendant and playing a relatively progressive role in developing the productive forces. The formation of the national states was a necessary corollary of the development of the national market. But stable monetary union went hand in hand with a common state apparatus, taxation, customs barriers, army and police force, as well as a national bank. Where this was not the case, all attempts at monetary union invariably failed.

France, Belgium, Italy and Switzerland formed a currency zone linked to silver in the 1860s, but it broke down as a result of large Italian budget deficits and the debasement of the currency. A further factor was the movement in the direction of the international gold standard, which gathered strength in the 1870s as a result of the development of world trade. Austro-Hungary briefly participated in a common currency with Prussia. That attempt ended badly, with the war between Austria and Prussia in 1866. In both these cases, one power was, in effect, seeking to establish its domination over the others - in the first case, Louis Bonaparte's France, in the second, Bismarck's Prussia. The countries of Scandinavia also attempted monetary union in the 1870s, but this likewise broke down among political squabbling between the different states.

euro crisisThe conclusion is clear. On a capitalist basis, a stable monetary union cannot be achieved without a unified state. Moreover, the crushing domination of the world market means that, to be viable, any regional currency must fit in with the global exchange rate system. In the past, this was achieved by the introduction of the gold standard, from the 1870s onward. All the national currencies had to be linked with gold, which provides an objective standard of measuring value. After the second war, the overwhelming superiority of US imperialism allowed it to impose the dollar as the international currency (with the pound sterling as a secondary currency). At that time, in addition to the strength of its industry, which was intact while Europe and Japan were in ruins, the USA held two thirds of the world's gold reserves. Thus, the dollar was "as good as gold." But since the collapse of the Bretton Woods fixed rate system, no satisfactory alternative has been found. The result has been an increasingly unstable situation in the currency markets internationally, with vast amounts of money being used for speculative purposes, providing the basis for periodic crises and forced devaluations which bring nation states to their knees in a question of hours.

Contrary to the demagogy of the Eurosceptics, the EU is not a federal state, and there is no prospect of it becoming one. It therefore cannot function in the same way as, say, the USA, which, in the event of a crisis, can channel funds from the centre to any state which finds itself in difficulties. In Canada, which is also a federal state, the federal government underwrites the debts of the poorest provinces. On the contrary, as we shall see, the Maastricht treaty rules out such aid. All the burden of a recession must be borne by each member state unaided. The intention is to compel each government to maintain "sound finance" through the good old method of raising taxes, cutting public spending and selling off state assets. This stratagem leaves out of account the fact that before the first world war the trade unions and the workers' political parties were relatively weak, and the working class itself was actually a minority in most of the countries of Europe (Britain was the exception, because it had entered the phase of capitalist development far earlier than the others). Since the second world war the class balance of forces in Europe has been transformed. The social reserves of reaction, in particular the peasantry, have been whittled away by industrial development. The working class has become the dominant force in society, and will resist any attempt to take away the gains it has made since 1945.

Is the EU progressive?

Part of the reason for the EU's existence is for the purpose of the continued exploitation of the former European colonies in Africa, the Caribbean, etc. The only difference is that this is joint exploitation, as opposed to the old one to one relationship of a colony to its imperial masters, and the plunder is carried out through the mechanism of trade, as opposed to the direct robbery perpetrated under military rule. The ex-colonies are used as a source of cheap raw materials and also cheap labour, although with mass unemployment, this role is less necessary than in the past. In the period of upswing, the capitalists of Europe encouraged the immigration of a large number of workers from the former colonies in Africa, Asia and the Caribbean who were used as cheap labour. Now, in the downswing, they can no longer be used. Instead they have become the scapegoats for mass unemployment and the target for the demagogy of right-wing politicians like Le Pen in France. Racism is the inseparable companion of imperialism and the domination of one people by another.

Lenin pointed out that one of the features of imperialism is the domination of finance capital. The Maastricht treaty is a good example of this. Under the new system, all the main levers of financial power  are in the hands of a European Central Bank, under a board consisting of six internal executives (including the president) and the governors of the member central banks. The whole scheme has been cooked up by the Bundesbank which is supposed to be "independent" of the German government. In fact, the European Central Bank is supposed to be even more independent, since it is not answerable to any elected national government. The toothless European "parliament" is, even more than the national parliaments, a mere talking shop which can settle nothing except for the most marginal questions. The bank is only required to "testify" before the European parliament from time to time - an idea funny enough to make even a banker laugh.

In reality what we have here is a blatant expression of the striving of finance capital for untrammelled domination, to free itself from all constraints and rule supreme. Lenin explained long ago that the essence of imperialism is the domination of the banks and big monopolies. The present situation represents the clearest confirmation of this analysis. On a capitalist basis, the crude reality of "European unity" is the complete domination of finance and monopoly capitalism, to the detriment of the interests of the mass of the people - the workers, peasants, unemployed, pensioners and small business people. These bankers and their allies in the boardrooms of the big monopolies can be relied upon to pursue a relentless policy of squeezing the last ounce of profit out of the people in the name of Capital, irrespective of the social consequences.

This is precisely what we mean when we say that the idea of European unity on a capitalist basis is a reactionary utopia. It is utopian because it cannot be carried through to the end. The existence of deep conflicts of interest between the capitalists of the different national states, like the fault lines in geology, inevitably cause these attempts to break down at a certain stage. Paradoxically, the very attempt to install a common currency lends an even more convulsive and bitter character to these tensions. But to the degree that they succeed in achieving greater integration, this merely signifies a greater degree of domination of the banks and monopolies over the lives of the peoples. It is therefore not only an utopia, but a reactionary utopia. There is absolutely nothing progressive about it.

Theoretically independent, the European Central Bank is the only one in the world to be governed by a treaty signed by dozens of countries. In practice, it carries out a policy in the interests of the most powerful states, that is to say, in the first place, Germany. The idea of a supra-national central bank, free from national pressures, is a self-evident piece of nonsense. In the same way, the big multinational companies cannot be separated from their national base, although their operations are world-wide. Does anyone seriously believe that General Motors is anything but an American company? Or that Mitsubishi is anything but Japanese? In the same way, in the last analysis the European Central Bank is run by the Bundesbank, which certainly reflects the national interests of German capitalism. By pursuing a conservative financial policy, allegedly of its own free will and volition, the central bank provides the Berlin government, and all the others, with the convenient excuse that the cuts and unemployment which result from it is nothing to do with them, but the inevitable result of the sacred principle of free market forces and financial "independence". And who can argue with that? In reality, there are plenty of arguments, and very ferocious ones, at that.

It is by no means certain that the intentions of the central bankers can be carried into practice. The attempt to carry out a policy that amounts to permanent austerity cannot be maintained. It is leading to one social explosion after another, with strikes, general strikes, mass demonstrations, and even insurrectionary movements. We have entered into an entirely new period, characterised by sudden and sharp turns in the situation. The ruling classes of Europe have sown the winds and will reap whirlwinds. The situation will be much more similar to the 1920s and 30s than the period of the last fifty years.

Even now, the policies of monetarist "neo-liberalism" have shown themselves to be bankrupt. The idea of privatisation now stinks in the nostrils of even middle class people. They are preparing a massive backlash against it, and a big swing to the left. It is ironical that the reformist leaders have embraced the "market" just at the point in which it is beginning to break down. The attempt to impose permanent austerity will break down, and with it all the attempts at a common European currency. This could be the signal for a new outbreak of competitive devaluations, with the Americans allowing the dollar to fall in order to restore competitiveness to their exports. It was precisely this kind of competitive devaluations that undermined world trade before the second world war, and turned the slump into a world Depression. The return of such conditions is quite possible in the next period.

An amusing sideline of this is the idea put in circulation by the nationalists, for example in Scotland, that the EU somehow represents a progressive development which will aid the cause of small nations. They seek to prettify the reality of the Europe of big Capital by talking about a "Europe of the Peoples". What foolishness! Since when did the rule of the big banks and monopolies act in the interest of small nations? This is typical of the prejudices of the petit-bourgeois nationalist leaders who reject the class analysis of society and therefore inevitably fall under the influence of the ideas of the ruling class. Far from benefiting the Scots, a capitalist Europe will trample their interests underfoot, destroy their industries and impoverish their populations. The fact is that a capitalist Europe represents a trap for all the peoples.

Marx on "Free Trade"

Over a hundred years ago, Karl Marx explained that, in the struggle between the Tories and Liberals over Free Trade versus Protectionism, the working class had to maintain an independent position. We were in favour neither of one thing or the other. This was merely a struggle between different wings of the ruling class (landowners and manufacturers) in which the workers had no interest.

The present debate on the European Union bears a striking resemblance to the controversy on free trade in the last century. Then as now, there was a sharp difference of opinion between various wings of the ruling class in Britain. The landed aristocracy, for its own purposes, defended protectionism, while the rising industrial bourgeoisie, defending its own interests, advocated free trade. (Needless to say, at that time, the weaker bourgeoisies of France and Germany were all in favour of protectionism). In the course of this struggle, which became extremely heated, the rival wings of the ruling class both sought to enlist the support of the working class. What was the position of Marx and Engels? They adopted a firm position of class independence, and resolutely advised the workers to refuse support to either one of the two sides. This was despite the fact that, in the abstract, one could argue that free trade was more progressive than protectionism. However, questions of this kind can never be settled "in the abstract". It is necessary to pose the question concretely, that is to say, from a class point of view. And it is clear that the interests of the working class was not served by either of these policies. Only a socialist policy can serve the interests of the working people. That remains as true today as 170 years ago, when Marx delivered his speech on free trade. The issues are somewhat different, but the principles are identical.

Our position on the EU is similar to the position Marx took in the controversy about free trade or protectionism that time. He explained that the interests of the working class are neither for free trade nor protectionism, but international socialism. That the debate on free trade reflected the interests of different sections of the ruling class. It was a trap to take sides in this dispute, and the workers' movement had to take an independent political stance. Similarly with us. We are neither for nor against withdrawal from the EU on the basis of capitalism. The interests of the working class is not represented in either case.

From the standpoint of the working class, there is nothing to choose between Remain and Leave. It is head and tail of the same coin - the choice between death by beheading or roasting over a fire. We want neither one thing or the other, but only the right to live and work in decent conditions. But that right is now incompatible with the rule of Rent, Interest and Profit.

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For a working class alternative to the European Union

Does this mean that we are indifferent to the question of the European Union? Not at all. But we insist that this issue, like all others, must be approached from a class point of view, and no other. Already workers across Europe who are faced with redundancies and closures are questioning the class character of the European Union. Tens of thousands have taken to the streets to protest about job losses in Germany, France, Belgium and Spain. As a Belgium metal worker demonstrating against unemployment put it recently: "Europe is for Capital, it is a Europe which does nothing for workers." This feeling will become generalised and is preparing fertile conditions for an all-European struggle against the dictatorship of the bankers and capitalists that oppress all the peoples of our continent. In order to be successful, however, it is vital that the labour movement does not become entangled in so-called alliances with reactionary sections of the capitalist class posing hypocritically as the defenders of an imaginary "national unity".

What is necessary is a clear class alternative to the capitalist EU. In dealing with questions of this character, we need to proceed from fundamental considerations. Socialists must take an independent class viewpoint, and not be pushed into positions that defend the interests of one or another section of the capitalist class. The business of the labour movement is not to line up behind different groups of capitalists, but to fight for the socialist transformation of society, nationally and internationally, as the only solution to our problems. Forget this, and you will inevitably end in a mess.

We are accustomed to see the right wing of Labour echoing the views of big business - after all, that is their role. Unfortunately, however, the left reformists, even the best and most honest of them always approach these questions on the basis of capitalism instead of approaching them from a class point of view. They find themselves in the company of all kinds of right-wing chauvinist elements and the declared enemies of the working class. This is inevitable if we do not remain firm on basic class principles and a socialist perspective.

Opposition to the Europe of the monopolies does not mean that we must support the kind of "national independence" advocated by the Eurosceptics. The policy of national self-sufficiency ("autarchy") has failed everywhere where it was tried, and must inevitably fail in the modern epoch when everything is decided by the world economy. The attempt to build "socialism in one country" led to a disaster in Russia and China, although they were both mighty economies based on the resources of sub-continents. What future could there be for small states like Britain, France, or even Germany in isolation? The idea of combining the economic resources of Europe - and the whole world - is a progressive aim which shows the only serious way forward out of the present crisis of humanity. The two main obstacles which are preventing the further development of industry, agriculture, science and technique on a world scale are private ownership of the means of production and the nation state. Only by eliminating these obstacles can society break the shackles that fetter its development. Thus, the real alternative to the capitalist EU is not "national independence" but the Socialist United States of Europe.

The idea of a capitalist united Europe, as Lenin long ago explained, is a reactionary utopia. On the one hand, it is impossible to achieve a genuinely united Europe on a capitalist basis. The separate national interests of each capitalist class rules this out. In reality, what is proposed by the EU is very far from this.

Marxists and the EU

The European Union is nothing more than a capitalist club, a glorified customs union, established to promote the interests of European big business. It has nothing in common with the interests of the working class. That is our starting point. Our opposition to the EU is exactly the same as our opposition to capitalism generally. We take a clear independent class position. The only alternative to the capitalist EU is the Socialist United States of Europe.

Even where the EU pretends to stand for workers' interests (the Social Chapter), there is no real protection against capitalist exploitation. The only real defence is the unity, organisation and class consciousness of the workers, and their willingness to fight. That this exists and is growing is clear from the struggles of workers in France [and Spain, Greece, Italy, etc.] and other countries over the last few years. There workers have had no protection from the Social Chapter against cuts, closures or redundancies.

Even where workers succeed in fighting against the cuts (and we must actively support all such struggles), the victory proves to be only temporary. The bosses and their governments soon return to the attack, taking back with the right hand what they gave with the left. The reason for this lies, not with the caprice of this or that minister, but with the impasse of the capitalist system.

Only a Marxist policy based on workers' internationalism and the programme of the socialist transformation of society can arm the labour movement for a serious struggle against the Europe of the bosses. It is necessary to fight for the expropriation of the banks, finance houses and monopolies and a socialist planned economy under the democratic management and control of the working people. We must have an internationalist perspective, based on the need to combine the huge productive potential of the whole of Europe in a harmonious fashion, abolishing the frontiers - those remnants of barbarism - and creating the conditions for the free movement and fraternisation of the peoples. A democratic socialist plan of production, drawing upon the vast economic, material and human resources of Europe would enable us to end the nightmare of unemployment. The immediate introduction of the 32 hour working week is the prior condition for putting 18 million Europeans back to work. Freed from the artificial restraints of production for profit and the narrow confines of the nation state, production would soar to unseen heights. This is the way to "set the economy free" and not the madness of capitalist anarchy!

Such a target - very modest for a planned economy backed by the united resources of Europe - would mean that in the space of just two five-year plans, the wealth of Europe would be doubled. There would be no more talk of austerity, cuts, hospital and school closures. On the contrary. It would be possible to launch upon the most ambitious programme of public works ever seen in history. Instead of cuts in living standards and longer hours of work, we would be in a position to increase wages and pensions every year and progressively reduce the working day, as increasing production generated greater wealth. In a very short space of time, we could abolish poverty and deprivation, even in the most backward regions of Europe.

This, in turn, would make the national problem a thing of the past. Within the framework of a flourishing and democratic socialist commonwealth, every people would be guaranteed full equality and autonomy to control its own affairs, speak its own language and develop its own culture. Far from oppressing and strangling small nations, a socialist Europe would give them full freedom to develop and prosper. But in place of the old reactionary, claustrophobic nationalism, with its inevitable companion of narrowness xenophobia, a new spirit will arise, in line with the demands of the modern age - a spirit of fraternity and co-operation between the peoples in realising the full potential of Europe. This would be a beacon to the peoples of Africa, Asia and the rest of the world, laying the basis for the establishment of a socialist world federation.

This is no utopia, but is an entirely realistic - even modest - vision of what would be possible on the basis of the present productive capacity of European industry, agriculture, science and technology. But this potential cannot be realised as long as Europe remains divided and under the domination of a handful of banks and big monopolies. To break this reactionary stranglehold and set about the radical transformation of society: that is the only goal really worthy of workers and youth in the 21st century - the struggle for the emancipation of humanity from capitalist barbarism and the creation of a world fit for people to live in.

  • No to austerity! No more cuts!
  • No to the Europe of the bankers and capitalists!
  • Nationalise the banks and monopolies under workers' management!
  • For the Socialist United States of Europe!