EMUs in the class war

The developing New World Order, and the power of global finance capital, is accelerating the tendency of the European capitalist class to unite politically against the proletariat. The drawbacks of this strategy for the capitalist class, however, include the loss of their flexibility in fighting the proletariat at the national level.

Despite the riots, the town hall sieges and the above all the millions who defied the law through non-payment, it was not the poll tax revolt that finally put paid to Thatcher; it was the issue of Europe.

That the anti-poll tax movement was robbed of its ultimate coup de grace was perhaps indicative of the success of the Tories, even before the onset of the Gulf War, in making their tactical retreat from the poll tax, and perhaps demonstrates more than anything else the ultimate limitations of the anti-poll tax campaign.

Of course the spectacle of the 'palace coup' of November 1990, in which the pro-European wing of the Tory Party deposed Thatcher and swept aside her petty nationalism, was not a means to simply deny the class victory of the anti-poll tax movement - a victory that had come after so many defeats through out the 1980s and one which threatened to dispel myth of the futility of class struggle, although it did have this effect; but was the reflection of an important struggle within the British bourgeoisie. Indeed, it was only over Thatcher's dead body that British state could make its commitment to European union at Maastricht a year later.

Of course the whole issue of Europe for most people in Britain seems to be both irrelevant and incomprehensible; one big yawn, in fact. Who can make sense of the interminable list of E-words; ERM, ECU, EMU, EPU etc? Who can understand the 'historic implications' of this and that treaty couched as they are in Euro-speak? Even for revolutionaries the issue of Europe is often regarded as little more than a squabble amongst the ruling class. But the whole question of European unity raised by the Maastricht Treaty is part of the question of how the bourgeoisie is to organise itself against us in the New World Order which has arisen since the collapse of the state capitalism of the Soviet Union and the Eastern Bloc. Indeed, as we shall see, however indirectly, the potential class confrontation of the poll tax issue and the question Europe are linked as part of the same problem; the problem of class rule!

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The Breaking of the Dam

The fall of the Berlin Wall in 1988 signalled the end of the post-war era. All the old certainties of the previous forty years that had been cemented by the 'mutually assured destruction' of the confrontation between the old two super-powers have been swept away. Yet perhaps rather ironically, the very victory of the USA over its old rival has served to raise the very question of America's continued hegemony. In the old order, the threat of 'communism' had served as an overriding unifying force that consolidated the Western bloc under the leadership of the USA. Now that this threat has been vanquished, the centrifugal forces that have been building over the last 20 years as a consequence of the relative decline in the USA's economic hegemony are no longer held in check.

With the acceleration of the process of European unity and following the success of the North American Free Trade Agreement, even the most superficial of bourgeois commentators now recognises the rapidly accelerating process which is leading towards the break up of the world into three dominant and fiercely competitive economic blocs: the Pacific region led by Japan, the America's led by the USA, and Europe. It is this process towards a new tri-polarism, that has been unleashed by the collapse of the old bi-polar world, which is the basis for the development of the new world order of global capitalism. Yet the precise nature of this new tripolar world is far from certain. The relations of the various bourgeois factions both between and within these emerging blocs and their relative strengths with regard to each other and the proletariat are far from settled and indeed this is nowhere more so than in Europe.

Over the past forty years Europe, the very pivot of East-West confrontation, has been a bastion of stability in an uncertain and war ravaged world. Yet with the fall the Berlin Wall this has all changed. Both in Eastern and Western Europe we are seeing dramatic political and economic transformations as the European bourgeoisie realigns itself in the context of the emerging new world order.

We have all seen the dramatic collapse of the Eastern Bloc in Eastern Europe over the past four years, followed last year by the complete disintegration of the Soviet Union itself (and now even Russia is plagued by the threat of further disintegration into its constituent regions). We have seen the ruling classes of Eastern Europe, as they transform themselves from their old bureaucratic forms into fully fledged bourgeoisie, introduce drastic economic and political reforms in an attempt to sweep away the decrepit command structures of state capitalism. And we have seen them prostrate themselves before the envoys of international capitalism from the West and swallow whole the idiotic doctrines of the Western economic advisers as they seek to scramble aboard the New Europe. As the ruling classes of Eastern Europe no doubt know, either they open themselves up to the exploitation of Western capital and thereby hope to become a small centre of capital accumulation, or else they will be plunged into the nether regions of a newly emerging Third World of Europe.

Whereas the tectonic shifts of the New World Order are tearing Eastern Europe apart, in Western Europe they have hastened an obverse process of unification. Few but the most Euro-fanatics in 1988 would have believed that in less than four years time the Governments of the EEC would have committed themselves to abandoning their 'economic sovereignty' by accepting a single currency and a European Bank by the end of the century, with all the implications such a decision has for eventual political union in some form of United States of Europe. Yet it was such a momentous commitment that was made at Maastricht last December.

Whether such a commitment will be realised is still an open question - particularly in the wake of Denmark's rejection of the original Maastricht Treaty in its recent referendum. But to fully understand the importance of this commitment and the implications it has for the class struggle we must first look at the how it arose out of the decline and fall of the Old World Order of the post-war era and its effects on the political contours of Western Europe.

The Rise and Fall of the Old World Order

The Rise

It is perhaps no surprise that Europe should be at the centre of the geo-political changes brought about by the decline of the post-war era since it was through the stabilisation and division of Europe at the end of the Second World War that the world order of the past forty years was constructed. But to understand this pivotal position in the old world order and its position in the new we must recall Europe's special position in the history of capitalism.

It must be remembered that it was in Europe that capitalism first emerged and matured and it was in Europe that the industrial proletariat first emerged and became organised as an antagonistic force opposed to the domination of capital. It was the confrontation between the growing power of the organised working class and capital's ceaseless efforts to fully dominate and subsume the labour process that led to both the emergence of monopoly capitalism and the strife that tore Europe apart in the first half of this century. War, aborted revolutions, mass unemployment, fascism and yet more war plagued Europe for more than thirty long years. It was as a result of this tumultuous period that social democracy finally triumphed, establishing a truce in the class war that was to assure relative social peace in Europe for several decades and laid the basis for the post-war boom - in Western Europe at least.

The post-war settlements were made possible in Europe, as elsewhere in the industrial world of the Western Bloc, by a radical change in the mode of capital accumulation; from that of monopoly capitalism, that had been predominant since the late nineteenth century, to that of Fordism, which had first emerged in the USA during the 1920's and 30's and which became implanted in Europe following the Second World War. What then was the nature of this change in the mode of accumulation?

In the face of the growing power of organised labour in the late nineteenth century, the tendencies towards the centralisation of capital had become greatly accelerated. In order to accommodate concessions made to the more organised sections of the working class the huge monopolies sought to exploit their monopoly positions by restricting production thereby raising prices and shifting the burden of higher wages onto the non-monopoly sectors of the economy.

However, high monopoly prices could only be maintained by restricting foreign competition, and the necessary restrictions on the level of production served to restrict the outlets for the further domestic accumulation of capital in the monopolised industries. As a consequence the state had to be mobilised on behalf of monopoly capital, firstly to restrict foreign competition on the domestic markets, and secondly to defend by force if necessary the opportunities for the export of capital to foreign markets. Thus monopoly capitalism could only lead towards state capitalism and intense imperialist rivalry and ultimately war, a process ably described and analysed by Bukharin and Lenin at the time.

The fundamental problem of state monopoly capitalism was that it was unable to fully realise the real subsumption of the labour process under capital since it was unable to eliminate the power of various skilled craft workers from the process of production that had developed in the key heavy industries following the industrial revolution (eg coal, steel, engineering and the railways). With Fordism, pioneered by the new consumer industries (cars, washing machines etc) and made possible by the bitter struggles of the early twentieth century, a new deal was possible. The way was opened for the real subsumption of labour to capital allowing the rapid and 'scientific' transformation of the production process in the pursuit of the production of relative surplus-value.

Capital's real domination of the labour process enabled a continual rise in the productivity of labour. In return for conceding its power over the labour-process, the working class could be virtually guaranteed of rising real wages within the limits of the growth in the productivity of labour. These higher wages then served to provide the demand for the ever increasing production of commodities by Fordist industry. So, whereas the old mode of accumulation had been based on restricting the supply of commodities in order to obtain monopoly prices with which to accommodate the demands of skilled and organised sections of the working class, Fordism was based on expanding production and paying for higher wages out of increased productivity. It was a mode of accumulation of mass production and mass consumption.

As has been well documented elsewhere, Fordism gave rise to a major recomposition of the working class and to the emergence of the mass worker. The skilled craft workers of the old industries now gave way to the semi-skilled workers of the assembly line. For these mass workers, who had surrendered control over the production process as part of the 'Fordist deal', there was little or no attachment to a particular trade. Work was merely a means to a wage and no more, while the wage was the means of the imposition of an indifferent labour. As such the mass worker could be seen as the historical realisation of the tendency towards abstract labour.

The imposition of Fordism then served to underpin the social democratic class compromise at the political level. The increased production of relative surplus-value allowed the emergence of a relatively generous welfare state and the consequent rapid and unprecedented expansion of public expenditure into areas of health, housing, education and social security that provided a substantial and growing 'social wage' in the post-war era. At the same time, in most countries, various degrees of tripartite consultation (government, trade unions and employers) were instituted and developed at varying levels of society for the planning of the economy and for the co-ordination of social policy thereby giving labour-power representation within state-capital.

So while the new Fordist mode of accumulation underpinned the post-war settlement and provided the material and economic basis for limited class conciliation, the post-war settlement was consolidated at the level of the nation state. To this extent the post-war era of Fordism built upon the tendency towards state capitalism that had begun in the previous era of monopoly capitalism.

Yet the state not only policed, maintained and organised the new class compromise between the working class and the bourgeoisie, it also imposed and maintained and organised the new relations within the bourgeoisie itself.

Firstly, the old bastions of the age of monopoly capitalism were nationalised or else heavily regulated not only to diffuse the traditional class antagonisms that typified these industries, but also so that their inherent propensity towards restrictive monopoly pricing would not hold back the necessary expansionism of the newly emergent Fordist industries. This gave rise to the so called 'mixed economy' of the post-war era in which an extensive public sector of state capital operated side by side with a more or less equally extensive private sector of capital. Secondly, the state sought to integrate and subordinate the money-circuits of capital to the accumulation of national productive capital through extensive regulations on financial institutions and the active application of Keynesian monetary and fiscal policy.

Capital accumulation in the post-war era therefore became consolidated around a number of distinct national economies each with its own semi-autonomous cycles of accumulation and each enjoying a limited autonomy with regard to its integration of its own working class. Fordism gave rise to the mass worker - the historical realisation of the tendency towards abstract labour - but the various post-war settlements fractured the mass worker as abstract labour on national lines. Concessions to the working class were made not to the working class as such but to the British, French, Italian or German working class - and thereby excluded those regarded as aliens such as immigrants. (This national fracturing of abstract labour of course reflected the national fracturing of capital that meant that, despite multi-nationals and global markets, we still can talk in terms of the interests of 'British', 'German' and 'American' capital etc.)

These distinct national economies were then inserted within the overall accumulation of capital in the Western Bloc through the Bretton Woods system of fixed exchange rates in which each national currency was committed to a maintain a fixed parity to the dollar. Through this system of fixed exchange rates and its attendant supra-national organisations such as the IMF and World Bank each national economy was strictly subordinated to the hegemony of the USA.

The empires of the old imperialist powers of Western Europe, which had been so central to the previous era of monopoly capitalism, were rapidly broken up through the post-war process of decolonialisation as the national economies of Western Europe became integrated as the secondary pole in the Atlantic axis of accumulation. It was this Atlantic axis of Pax Americana which then provided the central dynamic for capital accumulation in the Western Bloc throughout the first two decades of the post-war era. While the progressive development of free trade allowed an unprecedented growth in the trade of manufactures within the Atlantic axis the ex-colonies of the Third World were increasingly left to stagnate on the peripheries.

The Fall

The post-war settlement and Pax Americana laid the basis for the long post-war boom of the '50s and '60s and the economic stability and prosperity that Western Europe still to a large degree enjoys. However, already by the mid-'60s its very success had begun to sow the seeds of its own demise.

Firstly, the unprecedented period of sustained economic growth of the Atlantic axis had brought with it an even faster growth in world trade, particularly that of manufactured commodities. This growth in world trade brought with it a rapid expansion in the circuits of international money-capital and the development of global capital markets. With the development of offshore banking and the Euro-dollar markets, which had emerged as means to escape state regulation, these swelling international money-circuits increasingly began to breach the constraints that had bound the movement of such money-capital to the national accumulation of productive capital and which had underpinned the efficacy of Keynesian demand management.

At the same time, the successful export of Fordism and the generous aid provided by the USA to both Europe and the far East in order to 'preserve the free world from 'Communism'' had laid the foundations for the economic miracles of both West Germany, which pulled the rest of Western Europe in its train, and of Japan. As a consequence, both West Germany and Japan had by the late '60s become serious economic rivals to the USA. The growing autonomy of international money-capital combined with the relative decline of American economic hegemony increasingly put strains on the Bretton Woods systems of fixed exchange rates which finally collapsed in 1973.

However, more importantly, the post-war world order came under threat from the resurgence of class conflict. By the 1960s a new generation of the working class had grown up who had known nothing of the traumas of the early twentieth Century. A new generation fully formed within the Fordist mode of accumulation and the post-war settlement that brought with it new demands and aspirations - a new revolt of the mass worker. At their most radical these aspirations did not concern the question of who controlled the work process but constituted a revolt against work and the commodity form itself!

Against this, capital's immediate reaction was to recuperate such revolutionary demands and aspirations by making material and economic concessions that preserved the wage-relation and the commodity-form. Images of the revolution were sold back to the would-be revolutionary rebels in the form of rock music to t-shirts, the wildcat strikers were granted wage rises and more free time, while more was spent on public services and various restrictive social legislation was liberalised.

Yet while making concessions to the working class succeeded in diffusing the immediate threat to capital's very existence, it could not be a long term solution. Selling the revolution back to the would-be revolutionaries could only be a short term palliative which threatened to stimulate demands for the real thing once its inauthenticity had become apparent, while liberal reforms threatened to undermine the long term social discipline needed to ensure a productive working class. At the same time, conceding wage increases above the growth in the productivity of labour and allowing the 'social wage' to balloon out of control could only result in a serious profit squeeze.

Amongst all the diffuse complaints of the bourgeoisie concerning declining moral standards, disrespect to authority, the threat to the right to manage, it was the threat to profit, as always, that galvanised and organised their response to the resurgence of the proletariat. Indeed, the squeeze on profits caused by rising wages, combined with the rising organic composition of capital resulting from two decades of sustained capital accumulation, began to undermine the general rate of profit thus producing a serious crisis in the accumulation of capital in the Western Bloc. Capital had to take radical action.

In order to both circumvent and undermine the bastions of working class power that had become entrenched within the development of Fordism in the industrialised West, capital took up a threefold strategy of restructuring. In the old established industries it sought to completely re-organise and, wherever possible, to automate the existing labour process. A strategy exemplified by the automation of the Fiat production process in response to the militancy of the Italian car workers. Secondly, capital shifted into new industries, such as information technology, electronics and the so-called service sector, where fresh labour relations could be established. Thirdly, capital took flight to the more developed regions of the now long-neglected third world.

Whereas the first two forms of restructuring for the most part involved a long term commitment, capital flight offered a much more immediate response that became increasingly attractive as the crisis in Atlantic axis gathered pace. Indeed, throughout the 1970s, galvanising the emergent autonomy of international money capital, capital flooded into certain selected parts of the Third World giving rise to what became known as the newly industrialising countries (NICs). A process that was greatly accelerated following the dramatic oil price hike of 1974 which served to liquidate and then divert huge sums of capital away from industrial capital, which was committed to various national economies within the Atlantic axis, into the hands of the banks and the international circuits of money capital that owed little or no allegiance to any state.

However, this massive capital flight of the 1970s undermined the very conditions of its own realisation. Accumulation in NICs still depended on sustained accumulation in the main poles of global accumulation in the West. Yet the very flight of capital to the NICs undermined this very sustained accumulation in the West upon which its realisation depended. By the end of the decade the flight of capital, which had amounted to a virtual 'investment strike' in countries such as Britain, had precipitated a recession in all of the Western economies which necessarily brought with it a distinct downturn in world trade.

Those Third World economies that had borrowed heavily from the major banks and finance houses to finance rapid accumulation and development now found that the expected growth in exports necessary to pay for interest on such loans failed to materialise. This together with rising interest triggered the Third World debt crisis that came to dominate international finance throughout the 1980s.

Through strenuous efforts on the part of the IMF and the World Bank, backed by inter-government co-ordination amongst the industrial powers, the complete collapse of the international banking system was narrowly averted. Yet, at least for the time being, the attempt to out-flank the working class in the industrial countries through global capital flight had run up against its own inherent barriers.

But while the strategy of capital flight had run into its own insurmountable barriers it did serve to impose the new economic reality of the dominance of global finance capital and in doing so laid the ground for the further development of capital restructuring against the working class in industrialised economies. With the economic crisis of the early 1980s it became clear that economic policy had to be tailored to the demands of global money-capital.

The distinct national economies were now disintegrating as the circuits of international money-capital became increasingly autonomous from state regulation. As a consequence, government after government throughout the industrialised West began to abandon Keynesian economic policies in favour of monetarism as each tried to attract footloose international money-capital with escalating interest rates and disinflationary economic policies. As a result each government was obliged - whether socialist or conservative - to organise a concerted counter-offensive against the gains of the working class of the previous decade. Under the threat of mass unemployment, each sought to hold wages down and slash public spending on the social wage.

However, it must be said that this concerted counter-offensive against the working class in the industrialised economies has paled into insignificance compared with the onslaught on the working class in many Third World countries brought about by the solution imposed by international money-capital to the Third World debt crisis. Escalating interest payments have meant that throughout the 1980s huge amounts of surpus-value have been transferred to the industrial economies from the Third World. Even now, after much of the Third World debt has been written off it has been calculated that the net transfer is more than $50 billion per year.

But this is only the tip of the iceberg. In order to service their debts Third World economies have been obliged to maximise their exports at all costs. As a consequence, the price of primary commodities, which make up a substantial proportion of the Third World's export earnings, have plummeted as the world market has becomes flooded by Third World economies competing with other to export. Thus even non-NICs that did not build up such massive debts during the 70s have been badly hit.

The collapse in prices for primary commodities, together with debt servicing, has involved a massive attack on working class living standards. While much of Africa is on the verge of mass starvation, the working class in countries such as Brazil and Mexico have seen their wages cut by between a third and half in real terms over the last decade.

The massive increase in the rate of exploitation in the Third World, together with the counter-offensive in the industrial economies that has resulted in a renegotiation of the post-war settlement, laid the basis for the renewed acceleration of capital accumulation in the 1980s. But as the present stagnation of the world economy shows the crisis of capital accumulation is far from being solved.

The New Economic Reality of Global Finance Capital

So, the decline of US hegemony and capital's attempt to outflank and force back the resurgent proletariat within the old Atlantic axis has led, in the past twenty years, to the emergence of the new economic reality of global finance capital and the disintegration of the distinct national economies that underpinned the Old World Order. With the disintegration of the national economies has come the decline in the efficacy of state action to regulate capital accumulation. As billions of dollars swish around the globe at the touch of button in search of ever greater profits and interest, all 'Chinese walls' are raised to the ground. All is reduced to the common standard of abstract profit. This movement of capital at its most abstract demands that all should be subordinated to the most productive of profit.

Yet the movement of abstract money-capital, for all its instantaneous freedom to roam the world, ultimately depends on the extraction of surplus-value in concrete labour-processes carried out in the context of social and political constraints. With the decline in state regulation the threat of serious dislocation, of devastating financial crashes becomes ever more probable.

In response to such dislocations we have seen the emergence of ad hoc interstate co-ordination on a global level - such as the G7 summits which bring together the major western industrial powers - so as to guide global markets back to positions coherent with economic 'fundamentals'. At the same time, we have also seen the development of the three regional blocs that have emerged in an effort to consolidate capital accumulation at a supra-national level.

However, the emergence of this new economic reality of global finance capital is still at an early stage. Its development has been held in check by two distinct factors. Firstly, the old confrontation between the USA and the USSR has meant that, despite the relative decline in USA's economic hegemony, the USA was still able and willing to play a leading role within the Western Bloc.

>From the very inception of the post-war era, the 'threat of Communism' has served to mobilise the diverse fractions of the American bourgeoisie to pursue a common policy of enlightened self-interest and take an active role in regulating the conditions for the world accumulation of capital. It was this very 'threat of Communism' which mobilised the enormous Marshall Aid programme of the immediate post-war years that served to rebuild Europe. And it was this self same 'threat' that up until recently meant that the USA was prepared to exclude agriculture from its insistence on free trade, and thereby tolerate the huge subsides given to the farmers of Western Europe and Japan at the expense of the export potential of its own farmers. Such subsidies being seen as necessary to support a substantial number of conservative small farmers as a bulwark against the electoral success of the various 'Communist' and Socialist Parties in Japan and Europe.

With the collapse of the Eastern Bloc there is little except the threat of Islamic Fundamentalism to mobilise the American bourgeoisie for anything more than their most immediately apparent common self-interest. As America's negative response to the recent World Environmental Conference in Brazil and its dismal response to the crisis in the erstwhile Soviet Union clearly demonstrates, the US government is increasingly unwilling to take a leadership role in the world. The American bourgeoisie is now increasingly restricted to its own immediate self-interests, subordinating all its efforts to its growing economic competition with Japan in accordance with the dictates of the new economic reality.

The second check on the emergence of the new economic reality has been the overhang of Third World debt. The huge debts of the Third World have meant that global finance capital has been largely restricted to the industrialised West. As a consequence, the huge profit potential of countries such as Brazil have so far been left untapped. But this huge overhang of debt is being progressively wound down. This check on the movement of international finance capital, that has gone a long way in mitigating the effects on the working class in Western Europe, is beginning to be removed. A prospect that points towards an intensification of global competition, particularly between the three poles of accumulation.

With the prospect of increased global competition within the New World Order it would seem that Japan and its Pacific hinterland has a clear head start. With real investment twice as high per worker as that of both Europe and the USA, and its dynamic links with the rapidly expanding NICs of the Pacific such as Taiwan, South Korea and Singapore, the Japanese Pacific Bloc seems to be streets ahead.

But the USA and the North American Bloc is in hot pursuit. The important defeat of the American working class during the Reagan years has meant that wages over the last ten years have been cut in real terms to levels not seen since the 1950s.

Europe on the other hand has been lagging behind. Although the European bourgeoisie has been able claw back many of the gains of the working class of the previous decade and in many cases has been able to hold wages constant in real terms for most of the 1980s, it has so far failed to successfully impose Japanese style flexible labour relations nor has it been able to cut real wages to the extent that has been seen in the USA. It is in this context of the European bourgeoisie's response to the emerging new economic reality and the new world order that we must examine the question of European unity.

The Question of Europe

In the face of the growing competition from Japan and America the emerging European Bloc faces its own distinct and peculiar problems. First and foremost, Europe faces an entrenched working class that has grown accustomed to particularly generous post-war settlements. While most Western European governments have succeeded in holding down wages and introducing monetarist policies they have failed to impose large scale wage cuts like those imposed in the USA, nor have Western European managements succeeded in obtaining 'flexible labour practices' that would be on par with those obtained in Japan. Instead the Western European bourgeoisie has been obliged to tread very warily lest it awaken the wrath of its proletarian masses. A danger that has been repeatedly underlined in various instances through the 1980s: from the miners strike and the riots of 1981 and 85 in the UK, the often violent strikes by Spanish Dockers and French steel workers, the general strikes of public sector workers in Belgium and Denmark, the emergence of militant rank and file COBAS in Italy in the mid-80's, and so on.

Secondly, Europe is made up of a number of small nations, none of which has an overwhelming economic dominance. Of course the major economic power in Europe has been West Germany, but faced with the formidable economic power of France, Italy and even the UK, Germany has been unable to dominate the European pole of accumulation as the USA can that of North America or Japan that of the Pacific. In the absence of an overwhelmingly dominant state the emerging European Bloc has tended to coalesce around the supra-national organisation of the EEC. Yet this itself has caused important problems in the process of consolidating Europe as a distinct pole of accumulation. Without a single dominant state which can unify a programme and impose it on subordinated states as is the case elsewhere, the emergent European bourgeoisie has been riven by competing nationally defined interests that have repeatedly thwarted its development as a cohesive bloc in competition with those of the USA and Japan.

Thirdly, up until the collapse of the Eastern Bloc, Europe lacked an extensive economic periphery. While the USA had central America on its borders as a source of cheap and compliant labour and Japan had the enormous populations of South East Asia, Europe was confined to relatively underpopulated and politically unstable regions of North Africa and Asia Minor.


The fall of the Eastern Bloc has, however, opened up new possibilities for Western Europe as a distinct pole of global capital accumulation and particularly for Germany's leading role within it. Ever since its unification in the 1870s Germany has been a central European power, with German capital flowing equally eastwards as it did westwards. Yet the division of both Germany and Europe following the Second World War forced West German capital into the arms of its western neighbours as West Germany became integrated into the Atlantic axis.

However, even as early as the 1970s, exploiting the detente between the USA and USSR, West Germany had begun to make its rapprochement with East Germany and Eastern Europe through the policy of Ostpolitik which led to substantial credits being made by West German banks to the governments of Eastern Europe. With the collapse of Eastern Europe, West Germany did not hesitate at the opportunity of reunification. Indeed a united Germany offered the Western German bourgeoisie a golden opportunity to break out of its impasse.

The economic reunification of Germany hinged on the exchange rate that was to be established between the West German Deutschmark (DM) and the East German Ostmark (OM). The rate eventually set was 1 DM for 2 OM, with a limited 1-to-1 exchange for private individuals. This exchange rate substantially overvalued the Ostmark - a more realistic exchange rate being somewhere between DM 1 : 4 OM to as low as 1DM to 10 OM - as the Bundesbank and other financial commentators pointed out at the time. Butthis was no mistake.

By overvaluing the Ostmark the German government no doubt gained temporary popularity in the east as East Germans found their savings could buy ample quantities of long coveted western consumer goods, a popularity reflected in Chancellor Kohl's triumph in the first post-unification elections. But more importantly to the German bourgeoisie an overvalued Ostmark first of all created the basis for an East German petit-bourgoisie which was necessary for the extension of a 'market economy' to the east. Those East Germans that had large savings of Ostmarks could cash them in and find they had a substantial amount of Deutschmarks that could then serve as a starting capital for a small business or to buy shares in newly privatised industries.

What is more, East Germany, even more than the rest of Eastern Europe, had a plentiful supply of cheap but educated and skilled labour. However, the working class in East Germany, as in the rest of the old Eastern Bloc, tended to be adverse to hard work: the BR ethos of 'we pretend to work and they pretend to pay us' pervaded much of its industry. By imposing an overvalued Ostmark, East German industry was made hopelessly uncompetitive. Unable to compete, East German firms would have no option but to throw millions out of work and sell out to West German capital. This short sharp shock of mass unemployment would then serve to discipline the East German working class to accept Western style work discipline.

A disciplined and cheap East German labour force would then serve as a powerful competitor to the West German working class. The entrenched power of the West German working class, indeed that of the working class of Western Europe as whole, could thereby be undercut, opening the way for substantial cuts in both the private and the social wage to match the competitive edge of both Japan and the USA.

Indeed such a strategy would have established the newly unified Germany as the economic power in Europe and would have gone a long way in overcoming the problems of the consolidation of the European pole of global capital accumulation. However, the strategy has gone awry. The attempt to impose the short sharp shock on the East German working class was met by a wave of strikes and demonstrations. Faced with mass social unrest, the German government was forced to back down and concede commitments to raise East German wage levels to West German levels within less than three years and has repeatedly been obliged to extend employment support schemes. Although the German government has been able to sweep away various food and rent subsidies to the East German working class the 'cost of unification' imposed by working class resistance have been 'far higher than expected'.

The German government has sought to shift these costs onto the West German working class by restricting wage increases, but again, in the face of mass public and private sector strikes this spring, they have been obliged to back down. The promise of German unification is rapidly turning into a nightmare for the German bourgeoisie.

France, Italy and the rest of the EEC.

The threat of the emergence of a Greater Germany following the fall of the Berlin Wall and the subsequent process of German unification, greatly alarmed the other continental powers in Western Europe and the EEC. Fearing that the new Germany would break free of the EEC in order to establish itself as the central European power economically dominating the whole of Europe, both East and West, the other continental states of the EEC hastened to commit Germany to the process of economic and eventual political unification of Western Europe.

Although accelerating the process of unification meant that the rest of the EEC had to make important concessions to Germany as to the structure of the EEC and the exemplary role of the Bundesbank in monetary policy, it was clearly better to become subordinated to the dictates of Germany through the structure of the EEC where various governments would retain a say, rather than be subordinated de facto by Germany's growing economic might. This was particularly true for the more peripheral economies such as those of Portugal, Ireland, Spain and Greece.

The emergence of a unified market and eventually a single European currency could only unleash a process of concentration and centralisation of capital that would lead to an economic polarisation between the rich and poor regions of Europe; but if such a process was instituted politically through the EEC then it would necessarily involve compensatory financial transfers to the poorer nations. If, on the other hand, the Deutschmark eventually was allowed to became the de facto single currency then there would be no such compensation. The weaker EEC states would be left to their own fate on the verge of a newly emergent Third World of Europe.

So, faced with the prospect of being overwhelmed by the growing competition from Japan and America and faced with the new realities of both the dominance of international money-capital and the post-Cold War world the Western European governments had little choice but to accept the imperative for economic unification. What is more, the fear on the part of most of those governments within the EEC of the implications of a unified Germany impressed upon them the importance of EEC as the political vehicle for such economic unification. Hence the acceleration of the process of European unification through the EEC that we have seen in the last few years culminating with the Maastricht Treaty last year.

However, the breakneck speed with which the EEC is now heading towards economic unification has served to raise serious questions amongst many within the European bourgeoisie who are now having to face up to its implications. The 'convergence conditions' of the Maastricht Treaty has committed the bourgeoisie of the EEC to take a hard and resolute line in the face of European proletariat. If they are not to be left behind in the process of European unification, the signatories of the Maastricht Treaty are committed to meet strict and onerous monetary targets. These targets demand that public spending should not exceed 3% of each economies GDP, that the total National Debt should not exceed 60% of GDP and that inflation should be brought with a couple of percentage points of the lowest in the EEC. All of which imply for most economies of the EEC severe cuts in the social wage and strenuous efforts in holding down wage levels. Hence, in the absence of a world-wide economic boom, the resolute commitment to these 'convergence conditions' can only lead to an outright confrontation with the working class throughout most of the EEC.

Yet, at the same time, such a commitment to these convergence conditions, and indeed eventual monetary union, both removes the economic flexibility each individual government has in diffusing class confrontation, and serves to undermine nationalist sentiment that has proved such an important element in maintaining social cohesion in Europe for more than hundred years. Let us briefly consider these two important implications in turn.

Under the old Keynesian policy regime, governments could always defuse particular class confrontations by relaxing monetary and fiscal policies and maintain international competitiveness through a subsequent devaluation of the currency. In this way the bourgeoisie was always able to make a tactical retreat if the going got too tough in the hope that any concession could be clawed back at a later date. (Of course this always held the danger that a series of 'tactical retreats' would turn into a full scale rout, as it threatened to do frequently in the '70s.)

In establishing the Exchange Rate Mechanism (ERM) in the late seventies, most EEC governments committed themselves to taking a tough and unified stance by tying the exchange rate of their currencies to the Deutschmark and allowing only occasional realignments within the ERM. Following the Maastricht Treaty, not only is devaluation increasingly ruled out even in the most exceptional circumstances - eventually becoming impossible with the introduction of the single currency at the end of the century - but fiscal and monetary policy are to be increasingly circumscribed by the need to meet its various 'convergence conditions'. Hence, with the Maastricht Treaty, the governments of the EEC are now committed to progressively surrendering their flexibility and room for manoeuvre - their 'political sovereignty' - in their confrontations with the working class.

But many in the European bourgeoisie not only fear that the commitment to a hard and unified stance against the proletariat will restrict their room for manoeuvre and prove not only a hard but brittle unity, but that the Maastricht Treaty will ultimately rob them of the most effective weapon - nationalism. As Nicholas Ridley revealed most clearly in his outburst against the Germans, what many of the bourgeoisie fear is that while the working class may accept austerity measures imposed by their 'own' ruling class 'for the sake of the nation' that has been long and painfully constructed over more than a hundred years, they are less likely to go along with austerity measures that originate from Brussels or the Bundesbank.

This fear is shared by both the Left and Right of the bourgeois political spectrum and has led to increasing opposition to the Maastricht Treaty and the present course of European unification. In the face of accelerated European unification and its threat to 'national sovereignty and identity' the Right has mobilised nationalist sentiment. A mobilisation that has become most apparent with the rise of the far Right parties in Germany and France, and which has no doubt drawn strength from the fears of many working class people with the undermining of the nationally defined post-war settlements.

While the Right is opposed to the Maastricht Treaty because it sees European unity as undermining the working class identity with its 'own' bourgeoisie through the nation, the Left oppose the Maastricht Treaty on the grounds that it merely lays the basis for a bankers Europe run by bankers. For them, what is needed is the construction of a new European identity, perhaps buttressed by various sub-national identities (eg of the Scotland in Europe ilk), that can appeal to working class loyalties, built on filling the 'democratic deficit' (greater powers to the European parliament) and a European social settlement (eg through the strengthening of the social chapter). In other words, what they demand is a bankers Europe run by a new European intelligensia.


These divisions in the west European bourgeoisie are reflected in British ruling class circles, as is evident in the deep divisions within both the Tory and Labour Parties over the issue of Europe. But these divisions are further complicated by the peculiarity of Britain's position.

The British bourgeoisie have always maintained an aloof and detached attitude towards the rest of Europe. The legacy of being the first industrial capitalist power, which gave Britain hegemony over the world market throughout much of the last century, has left the British bourgeoisie with a distinctly global outlook and interests. Yet to understand the present divisions within the British bourgeoisie over Europe we must briefly reconsider the last 40 years with respect to Britain.

Unlike much of mainland Europe, Britain did not experience the devastating dislocations brought about by invasion and modern warfare on its soil. As a consequence it was far more difficult to sweep away many of the old pre-war social relations and institutional structures to make way for the post-war reconstruction around Fordism and social democracy. This had important implications for the development of Britain in the post-war era.

This not only meant the preservation of antiquated traditions and culture in social life, but that at the point of production many of the old restrictive practices that had built up over previous decades of monopoly capitalism remained intact and even incorporated intothe new Fordist industries. While there emerged distinct move towards a Fordist style national collective bargaining in most industries, which was conducted on behalf of the workers by professional trade union officials, shop-stewards at a plant level still retained an extensive role in negotiating piece rates, the maintenance of particular working practices, and lines of demarcation, which served to restrict the full development of Fordist control of production.

Unwilling to confront the entrenched power of the shop stewards, British capitalists tended to invest abroad wherever possible, leaving British industry with increasingly antiquated and uncompetitive plant and machinery. A response that led to the continuing decline of Britain as an industrial power through the post-war decades.

It was such peculiarities of post-war Britain which gave form to the particular expressions of the proletarian offensive of the 60's and 70's in this country. On the one hand there emerged the distinctly cultural 'youth revolt' against the 'quaint' yet stifling Victorianism that dominated British life and culture. A revolt that, unlike elsewhere in Europe, was largely separated from the questions of class and the economy. On the other hand there was the resurgence in the militancy of the shop stewards movement that was very much of the 'economic' and which found its expression in wave after wave of wildcat strikes and 'secondary "sympathy" actions'.

This overt separation of the largely cultural 'youth revolt' from the economic struggle at on the shop floor meant that the proletarian offensive was far less explosive in Britain than it was to prove to be in for example France and Italy, where the politicisation went much further resulting in the events of May '68 and the 'Hot Autumn' of '69 respectively. Yet while it was relatively easy for the British state and capital to contain the proletarian revolt within the limits of the commodity and the wage relation it could only do so by accelerating Britain's economic decline. This reached crisis point by the end of the 1970s.

The 'winter of discontent' of '78/'79 brought home to the British ruling classes more than anything else the precarious state of the British economy beset by the 'English disease' of 'bloody minded workers' that had made Britain the 'sick man of Europe'. The policy of the Labour government, which had successfully defused the class confrontations of the early '70s and, like other governments of Western Europe, had begun cautiously, and rather reluctantly, to adopt monetarist policies in an effort to claw back the gains made by the working class in the previous decade without at the same time destroying the social consensus, had now come to a dead end. It had become clear that if Britain was to remain a major area of capital accumulation far more radical action had to be taken than that being pursued elsewhere in Western Europe. The election of Thatcher in 1979 cleared the way for such radical action.

Rallying the bourgeoisie behind her, Thatcher began a sustained offensive against the working class. Armed with mass unemployment exacerbated by high interest rates and a grossly overvalued pound, Thatcher took on and defeated various sections of the working class one by one. The steel workers, the health workers, the railway workers, the miners, the printers; each victory served to galvanise the bourgeoisie to sweep away the restrictions on management and ruthlessly impose redundancies and new working practices. As a result the overmanning and restrictive practices that had constrained the profitablity of British industry for decades were swept away during the 1980s.

Thatcher's strategy of uncompromising confrontation was undoubtedly a highly risky one for the British bourgeoisie, and more than once it nearly came a cropper. Indeed, following the riots of July '81 and an impending miners strike it was only by playing the ultimate card of jingoistic nationalism with the Falklands war that Thatcher kept on course in her first term (an episode that was to underline the importance of nationalism in the minds of many of the British bourgeoisie); while despite five years preparation Thatcher's victory over the miners in '84 was far from certain.

Yet the success of Thatcher's counter-offensive fed on itself. The sweeping away of restrictive practices etc allowed a massive increase in the intensity of labour. This meant that capitalists could extract more surplus-value, and thus higher profits, while at the same time as conceding higher wages. As a consequence, for those that escaped the advance of mass unemployment and the low wage economy, wages have far outstripped prices throughout the 1980s. This, combined with income tax cuts and easy credit has allowed the Tories to divide the working class and thereby build a new conservative social consensus built around the infamous 'Essex Man'. A consensus that has ensured the continuing electoral success of the Tory Party.

Such was the success of the Thatcher's strategy that in the euphoria of her third election victory and in the midst of the first flush of the late '80s yuppie boom, the Tories became convinced that they could maintain, if not accelerate the momentum of the Thatcher counter-offensive almost indefinetly. They believed that they could continue to push back the working class and repeatedly re-negotiate the post-war settlement so as to eventually Americanise British society and Japanify production. As a consequence they were confident that Britain would become the land of ever rising profits and, given that the big bang had reaffirmed London as the third pillar in the world of international finance, Britain could compete with the best in the world as a centre for capital accumulation.

This confidence shaped the Tory Party's attitude to Europe at the crucial time of the fall of the Berlin Wall. Thatcher was happy to see freer markets, particularly if they could be broadened to Eastern Europe, but was opposed to any move towards economic or political unification that would inhibit the momentum of her counter-offensive. She was resolutely opposed, as she repeatedly made clear, to 'socialism through the back door' that would impose the timidity of the European bourgeoisie on her policies for Britain. The Tory government therefore sought to stall any moves towards EEC unification.

However, Thatcher's semi-detached attitude towards Europe was to become increasingly untenable for all but the most fanatical of Thatcherites. Facing the stampede towards European unity which followed the collapse of the Eastern Bloc, the British state soon found itself being forced to choose between being left behind on the margins of the new Europe or else making a commitment to its process of unity. Increasingly isolated and unable to stall or dilute European unification, Thatcher's preferred option was to go it alone and preserve 'Britain's sovereignty' so as to press ahead with her Americanisation and Japanification.

Yet such an option now looked increasingly unpalatable. Commentators on the Left of the British bourgeoisie had long pointed out that the cost of Thatcher's success had been the decimation of Britain's manufacturing base and a failure to reverse the chronic lack of real investment in plant and machinery. This weakness in the British economy soon became evident with the dramatic rise in the balance of payments deficit that accompanied the late '80s boom. For the first time in a hundred years Britain's balance of trade in manufactures went into the red. At the same time the great stock market crash of 1987 reminded all of the perilous nature of the high seas of international finance on which Thatcher had hoped to sail single-handedly.

With Thatcher's economic 'miracle' increasingly being revealed as a 'mirage', the government was forced to seek the protection of the Europe. To avoid escalating interest rates and to bolster international financiers confidence in Britain the Tory government was eventually obliged to seek to the protection of the EEC by joining the 'Exchange Rate Mechanism' - much to Maggie's chagrin.

But what more than anything else sunk Thatcher's counter-offensive was working class resistance. Within weeks of the triumphant celebrations of ten years of Tory rule which proclaimed the lowest level of strikes for fifty years came the wave of public sector strikes of the Summer of '89. London was repeatedly brought to a halt by wildcat strikes by underground workers and industrial action on the buses, oil production was disrupted by wildcat strikes by offshore oil workers, solid one-day strikes on British Rail were then followed by more than a million local government workers coming out on successive one-day strikes throughout the country.

While these strikes did not result in major victories over the government, they did not result in a major defeats either. If nothing else they began to undermine the apparent invincibility of the Thatcher regime. Indeed it was only through a long and perhaps pyrrhic victory over the ambulance drivers six months later that the government was able to regain its hardline reputation and restore some of the confidence of international capital. But no sooner had it done so than it had to face the emergence of the campaign against the poll tax.

The mass campaign against the poll tax, which exploded into the civil disorder of March 1990 and the biggest movement of civil disobedience ever seen in the UK, finally made it clear to the British ruling class that the momentum of the Thatcher counter-revolution could not be maintained. There was little option but to back off and slow down. As a consequence the policy of making Britain an offshore haven of profitablity outside mainstream Europe was no longer appeared as feasible. As the Europhiles in the both the Tory Party and the Labour Party made clear, the British bourgeoisie had no option but to sink or swim with its counterparts in European Community. For all her great service to the British bourgeoisie Thatcher had to be dumped.


The dilemma facing the British state is now the dilemma facing the bourgeoisie over Europe as a whole - it is the question of organising class rule in the New World Order and within the new economic reality of global finance capital. A dilemma made all the more acute by the current world economic recession that is threatening to turn into a full scale economic slump.

While Norman Lamont waits for Godot, in the form of an economic recovery that never comes, and while the more idiotic backbench Tories dream of Britain overhauling Germany as the economic anchor of Europe with the eventual realisation of zero inflation, more and more of the British bourgeoisie are becoming alarmed at the prospect of prolonged stagnation or even of a full scale economic slump. With the pound locked into the ERM and the Government committed to European economic convergence the British bourgeoisie face the continued world economic stagnation with little room for manoeuvre.

With the devaluation of the pound ruled out and interest rates dictated by the Bundesbank both the government and British capitalists are being driven towards a full scale confrontation with the British working class. Industrial capitalists face increased foreign competition handicapped by an overvalued pound and crippled by extortionate real interest rates, and as a result are being forced to hold wages down by throwing thousands onto the dole. Consequently the government faces an exploding budget deficit.

Indeed, at the time of the election last March, the government forecast an alarmingly sharp rise in the annual budget deficit to around £30 billion (5%-6% of GDP), and roundly denounced the Labour Party's modest, if not pathetic, proposals to add a few extra billion to public spending as wildly profligate. Yet such forecasts were based on the rosy assumptions of an imminent economic recovery. Four months later such assumptions have become laughable. With the prospect of a continuing decline in tax revenues and rising social security payments due to the prolonged economic recession, most economicforecasters are now predicting the budget deficit to rise to at least £40 billion (7%-8% of GDP) on current trends! If the Government is to contain its budget deficit to a level that it can confidently finance, let alone reduce it to the levels demanded by the Maastricht convergence conditions for EMU, then it has no option other than to make further substantial cuts to public spending, and may even have to raise taxes despite all its election promises.

Meanwhile, Major's attempt to salvage the new social consenus that Thatcher built around the dream of the 'property owning democracy' is beginning to flounder. The hope of reducing interest rates, and thus mortgage rates, has run aground against the Bundesbank's insistence on tight monetary policies. With falling house prices, restricted wage increases and rising unemployment there will be little respite in the mounting number of house repossessions in the coming year or so. The 'property owning democracy' has turned into a nightmare for increasing numbers of working class people and nice Mr Major's assurances of a new dawn are now being revealed as all too false.

The next few years will therefore be a testing time for both the government and the British bourgeoisie. With their room for manoeuvre restricted much will depend on the reaction of the working class to the coming wave of attacks. However, what has become clear following the anti-poll tax campaign is how weak the Labour Party has become as a means of both controlling and containing class conflict. Outside of Scotland and its few remaining strongholds in the cities of northern England and Wales, the Labour Party has lost all connection with the working class. Indeed, it is rapidly becoming a party of the middle class, a process that can only accelerate under the leadership of John Smith. In transforming itself into a 'modern social democratic party' on the European model, and as such fully committed to the bankers' Europe of Delors, the Labour Party has as little hope of controlling future social unrest as the French Socialist and Communist Parties had in controlling the recent lorry drivers blockades!