Issue 204 of SOCIALIST REVIEW Published January 1997 Copyright © Socialist Review

Feature article: The union makes them strong?

Gareth Jenkins

Watching the Tories tear themselves apart over Europe is great spectator sport but the European question is ceasing to be merely a Tory problem. The debate will haunt the incoming Blair administration as it already does the governments of continental Europe.

The history of European integration since the end of the Second World War is sometimes seen as a struggle between Europeanism and nationalism. This is far too simplistic. Europe has become far more integrated in a way no one would have thought possible in the prewar years. In fact to talk of Europe as if it were some neutral geographical concept is itself misleading. For much of the postwar period `Europe' meant only a part of the European continent, the non-Communist part, and in effect only part of that. It meant the Europe under US tutelage: France and Britain, plus half of Germany.

Cold War politics explains the first moves to European integration. Rebuilding the shattered economies of Europe went hand in hand with fending off `the Communist threat'. With Marshall aid, the US pumped huge sums of money into the continent. Between 1947 and 1951 American aid was nearly $12 billion. In 1948-49 it amounted to 5 percent of Italian national income, 6.5 percent of French national income and 11 percent of Dutch national income. This went hand in hand with military aid. The US transferred billions of dollars to Western European defence spending ­ between 1953 and 1958 $3.3 billion alone. European integration, for all the rhetoric of healing a war torn continent, was founded on American military might.

Britain was as keen to play its part in this new world as anyone else. Winston Churchill, often mythologised by the Tory Eurosceptics as a forerunner of opposition to European federalism, openly talked of the need to `build a kind of United States of Europe'. But Britain's view differed from that of France, its ally and rival. Unlike France it had emerged from the war with its industry intact. It was much the biggest and strongest European economy and it was a key trading partner for all the other countries in Western Europe. Britain also traded significantly with the rest of the world. In 1950 two thirds of all its trade was outside Europe.

This led it to prefer a looser Europe, one reflecting its pre-eminence in Europe and its desire to preserve an independent world role as well as its important links with Commonwealth markets. As it turned out this was an unrealistic perspective for the British ruling class. The US did not allow Britain to have an international role except as its junior partner in the war against Communism and its economic strength proved illusory. Germany overtook Britain as the largest European economy in 1961 and France as the second largest in 1966.

France faced the need to rebuild its heavy industry after the war from a position of great economic weakness. It feared that a revival of the German state would lead to political and economic dominance, as had occurred after the First World War. The problem was how should Germany be controlled? For France to take direct control of the coal rich Ruhr or the Saar ­ as had been attempted after the First World War ­ was not an option. But France still needed access to these resources.

The answer was to push for the formation of supranational institutions which would regulate all the resources close to or straddling national borders, whether German, Belgian or French. The outcome was the 1951 Treaty of Paris which created the European Coal and Steel Community (ECSC). It recognised that the key elements for rebuilding industrial production in Western Europe (coal and steel) transcended national borders and required a mutually agreed framework. That is not to say that the different ruling classes of Western Europe abandoned the goal of building national economies ­ far from it.

The difference between Britain, which stood apart from this process of integration, and the six countries of France, West Germany, Italy and the Benelux countries (Belgium, the Netherlands and Luxembourg) which signed the Treaty, was one of degree rather than of kind. It was not even certain that this new pooling of resources would work. When cooperation faltered in the mid-1950s it looked as if Britain might have been right. Nevertheless the six attempted to underpin integration by widening its scope into a broader common market whose tariffs with the outside world would be harmonised. This led to the Treaty of Rome of 1957 and the creation of the European Economic Community (the EEC).

One key new element here was the regulation of agriculture. France had over a quarter of its population still working on the land. The Common Agricultural Policy was a way of subsidising and spreading the costs, though at the cost of producing vast, wasted surpluses. The less agricultural members of the Six, West Germany in particular, went along with this because it guaranteed markets.

Western European capitalism developed harmoniously in the 1950s and into the early 1960s not so much because of these treaties of cooperation, but because the long boom, under the umbrella of American arms spending, meant every European ruling class benefited. The increased trade between the European economies reinforced patterns of production within rather than across national boundaries. Europe remained a collection of national economies, not a supranational one. The effect of postwar European integration was not to dismantle the national state but to put it back on its feet.

By the end of the 1960s the long boom was petering out. Britain devalued in 1967, a sign of where it really stood in the pecking order of European economies. France too was forced to devalue two years later. In the early 1970s even the mighty US economy was faltering.

Britain's entry into the EEC (now the EC) in 1973 under the Tories was recognition that it was no longer the strongest economy in Europe. By 1985 Germany was responsible for just over a quarter of gross domestic product of the Community of 12. Though Harold Wilson promised renegotiation of the terms of entry by the incoming Labour government and a referendum (which took place in 1975) he achieved virtually nothing.

Despite enlargement of the EC, and the promise that this would begin to address the impact of crisis, the 1970s marked the beginning of a long period of uncertainty, even `eurosclerosis'. Japan (and some of the newly industrialising countries of the Far East) began to capture European export markets in Africa, Asia, North America and even Europe itself. There was `overcapacity' in the steel, textile and chemical industries. The attempts to protect these industries resulted in conflict with the US over free trade. Unemployment rates rose from 2.3 percent in 1973 to 7.3 percent in 1979. Average growth rates between 1978 and 1988 for the twelve countries making up the EC was 2.1 per cent (as against 2.9 per cent for the US and 4.3 percent for Japan).

Not even the mighty German economy could pull Europe free. Output might remain impressive (in 1984 it was 44 per cent of the OECD total) but Europe was lagging behind both Japan and the US in terms of investment and research development. The danger was of losing out in the new technologies based on semi-conductors and consumer electronics. It was also losing out in terms of productivity. Welfare benefits and strong trade union organisation, tolerable in the long boom, had now become too costly.

These were the problems which prompted changes in the structure of the European economy. In the 1960s capitals had merged into ever bigger units ­ but still mostly within national state structures, seldom across different European countries. The 1970s saw significant restructuring of these large units in an international direction. Even so these tended not to be trans-European ventures, but links with US companies. The main multinationals operating within Europe remained American.

The 1980s, on the other hand, produced a steady shift towards intra-EC mergers. European wide companies became much more common in the fields of retailing, finance and transport. That did not mean links with non-European firms were not important. British companies such as ICL computers merged with Fujitsu, and British Aerospace pushed co-operation between Rover and Honda, another Japanese firm. French firms also looked beyond Europe and bought up American companies.

This might appear to be good news to the European ruling classes. In fact, it produces fresh problems which explain the ferocious arguments within the British ruling class, and the more muffled ones among the continental ruling classes, over monetary union. The pressure of international competition has resulted not just in bigger national units of capital closely tied to the fortunes of its national state. It has also created new international units of capital, operating both within and outside Europe, with sometimes the same large national unit of capital having one field of operation in Europe and another in Japan or the US. This is particularly true of British capitalism, which has extensive investment and ownership in US companies, as well as considerable interests in European business and strong links with Japanese firms.

Monetary union expresses the need to minimise the friction between different national economies to enable European capital to compete successfully. But it also carries a high risk of damaging those self same national economies.

This means that there are no simple choices for the British ruling class. The sharp division between `Eurosceptic' little Englanders and pro-European enthusiasts obscures the fact that most of the ruling class are looking both ways at once. They want the advantages that come from greater European integration and they fear the price that must be paid. They want to ensure that their considerable non-European interests are safeguarded and they fear being excluded from influence over collective European decision making. Derided though it is as neither one thing nor the other, John Major's wait and see policy over monetary union fairly accurately sums up the ruling class's dilemma. The disadvantage, of course, is that they cannot wait for ever.

The British ruling class are not the only ones affected. Sections of the German ruling class have expressed scepticism about the desirability of monetary union and leading French politicians, including ex-President Valéry Giscard d'Estaing, have questioned France's strong franc policy, hitherto the sacrosanct expression of its link with the Deutschmark.

Finally, it is mistaken to view the division between Britain and Europe as one between rulers determined to stamp hard on welfare and workers' rights and rulers who defend them in the form of a Social Chapter and the like. The social dimension to European Union is no more than window dressing. Whatever the divergences between Britain and the rest, all operate in the context of cutting back hard on welfare, jacking up exploitation to increase productivity and reining in workers' organisation. It is ridiculous to suppose that Juppé, Kohl or Prodi are collectively less nasty than Major while individually they attempt to ram through deep cuts in pensions, benefits or jobs. They are desperate to regain rates of profit which match their non-European competitors.

The record of Europe's rulers demonstrate how little European union is for the benefit of its ordinary people, and how much it is about smoothing the path to exploitation. That is why socialists are opposed to the bosses' European union ­ while supporting the struggles of Europe's workers against their attacks.

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