Mick Brooks, Ealing – Southall CLP, and author of Capitalist Crisis Theory and Practice, analyses the economic crisis in Europe.
Share prices are booming. Yet all is far from well in the European economy. The eurozone actually contracted by 0.6% in the last quarter of 2012 and could sink into recession again. And that matters to us. Though the idea that rich and poor are ‘all in it together’ is a Tory lie, it is true that all countries are interdependent as part of the world economy. When Europe, our biggest trading partner, catches cold it won’t be long before we start sneezing.
The European capitalist class thought they had got over the worst. Last year headlines screamed about the collapse of the euro. Then Mario Draghi, the head of the European Central Bank, declared that he would do “whatever it takes” to keep the show on the road, “and believe me it will be enough.” Actually he didn’t do much, but he was believed and the markets rallied.
The commentators used to be worried about the PIIGS – Portugal, Ireland Italy, Greece and Spain. They were concerned that these peripheral countries would crash out of the euro, bringing the whole edifice down with them. That worry is so last year.
The crisis hasn’t gone away, just changed its form. Having (perhaps – for the time being) escaped sudden catastrophe, the eurozone is faced instead with never-ending stagnation. These days the FISH are the countries that financial commentators are worried about. The FISH are France, Italy, Spain and Holland. But these are the core countries of the eurozone!
And now Germany, the powerhouse of the eurozone, has also stalled. In the last quarter of 2012 output there fell by 0.6% too. What’s the problem? The problem is that profits on the continent are flat as a pancake. And profit is what drives the capitalist economy. Profits have picked up in the USA and the economy is doing a little better as a result (see Michael Roberts’ blog for details http://thenextrecession.wordpress.com/2013/01/22/theglobal-crawl/).
The Japanese economy, the world’s third largest, has also shrunk in the final quarter of 2012. The newly elected Abe government has been panicked into trying to drive the Japanese Yen down in order to make exports cheaper. This is in danger of launching a round of currency wars worldwide.
Depreciation of the Yen inevitably helps to make goods shipped in rival currencies like the euro uncompetitive. This is another worry for the European capitalist class. Of course a currency war is a zero-sum game, a race to the bottom. But it is an inevitable response to the crisis of profitability that each capitalist, and every capitalist nation, strikes out at their rivals.
Equally it is inevitable that the capitalist class tries to foist the burden of the crisis on to ‘their own’ working class. The bosses are treating the ongoing crisis as an opportunity, a chance to bump up profits at the expense of working class living standards. In Spain they are using the 26% unemployment rate as a hammer against employed workers. Nissan in Barcelona told the trade unions bluntly to curb wage demands and give up hard won conditions if you want to hold on to your jobs. Productivity has gone up by 10% in Spain since the crisis burst in 2008. Fear is the driver.
In Greece the position of workers is even worse. Unemployment is at 27% with 60% of young people out of work. The right wing government has invoked emergency legislation to break a strike of Athens Metro workers and also of ferry workers, both of whom were fighting pay cuts.
The economic crisis in Europe seems never-ending. That means political crisis and instability. It also means growing resistance from the working class all across the continent to the diet of austerity.