Issue 205 of SOCIALIST REVIEW Published February 1997 Copyright Socialist Review

Thinking it through

Chris Harman

The merger of Boeing and McDonnell Douglas at the end of last year was a prime example of what Karl Marx called the 'concentration' and 'centralisation' of capital. It means that a world industry that used to contain dozens of rival companies is now controlled by two giant American firms and the European Airbus consortium.

The Boeing/McDonnell Douglas merger (known simply as Boeing) controls 60 percent of global civil aircraft sales. And like its sole remaining US rival, Lockheed, it will have a turnover in military aircraft production twice as great as the whole of the European industry.

But the significance of the merger is wider than that. It challenges a central contention of the 'globalisation' orthodoxy propagated by many politicians, opinion makers and professional economists. They repeatedly insist that capital these days operates internationally in ways that ignore national boundaries or, as Marx might put it, that 'state capitalism' has been replaced everywhere by a return to 'private, market capitalism'.

The merger, however, is a glaring example of how, in the last decade of the 20th century, the state can still encourage rival capitals to merge into powerful national blocs, devoted to driving other national blocs out of business.

The New York Times tells that the merger 'signified the near completion of one of the swiftest and most rapid transformations ever of an industry as a matter of explicit government policy':

'President Bill Clinton's administration has largely succeeded in turning America's military contractors, over a span of just four years, into instruments of one of its most important goals: making the economy more competitive globally... The emphasis has been placed on efficiency, cost cutting and exports.'

The pressure of international competition was an important factor leading to the merger. But the result has been to enhance the national, rather than the international, organisation of production.

As Felix Rohatyn, a major investment banker close to government circles, says:

'You have one national aircraft company now... Our policy is based on a definition of markets on a global basis. Ultimately, the market place would have demanded it, but the Clinton administration saw the need and responded.'

A state capitalist merger on such a scale in the world's biggest single economy has enormous implications for the others especially for Europe's rival companies. They have long been torn between attempting to build links in other continents to compete with each other (as with British Aerospace's joint venture with Taiwan) and merging their activities into a single European enterprise (as with the airbus consortium and the four nation collaboration over the Eurofighter).

Now the Boeing merger puts a gun to their heads. If they do not follow suit, they risk being driven to the margins.

German government ministers call for a much wider integration of resources into projects like the airbus in effect, for a Europe wide state capitalist merger to respond to the one in the US:

'Europe cannot just sit and do nothing,' says one. 'If Airbus Industrie wants to remain competitive and continue to increase its market share, it must be quickly and courageously restructured by its owners.'

In this industry, at least, increased international competition is not leading to a globalisation of production. Instead it has led to its national concentration in the US and is producing pressures to regional concentration in Europe.

The aircraft industry is not unique in this respect. In motors, for instance, Ford and General Motors both run integrated production lines in North America and integrated production lines in Europe. But for neither is there much integration across the Atlantic. And even the Japanese firms tend to look to integrated European operations that are, to a great degree, separated from their East Asian operations.

It is this trend towards regionalism which supplies much of big business rationale for European Economic and Monetary Union and with it, the construction, at least in embryo, of a European state.

The calculation is that the European Union is a bigger economic entity than either the US or Japan, supplying 20 percent of exports to the rest of the world, as opposed to only 15.5 percent from the US.

But at the same time European firms have, on average, slowly been losing out to the US firms over the last 15 years, with European Union manufactured output rising by only 23.4 percent compared with that of the US by 57 percent. One reason for this is the national fragmentation of many European industries.

If only they could merge and rationalise, then they could come into their own, it is claimed.

But overcoming the fragmentation is easier said than done. In each European country there are firms who look to the local national state to protect their interests, not only against the US and Japan, but also against European rivals. While in Britain, in particular, there are firms who fear Economic and Monetary Union will damage their links with US or East Asian capital.

On top of this, unification only makes sense to any of the European capitals if it involves a levelling down of wages, conditions and welfare benefits, not a levelling up hence the stringency of the Maastricht criteria for government deficits and borrowing, criteria which risk pushing all of Europe into slump.

These contradictory pressures underlie the bitter political clashes at the top of society between those who want a European state and those who want to preserve the rival national states. They also reinforce the bitterness at the base of society which has exploded into strikes in so many countries over the last couple of years.

The Boeing merger is part of a pattern which is adding to the pressures on European capitalism pressures which are going to shake up the world politically and economically in ways very different to those envisaged by the globalisation orthodoxy.

Return to Contents page: Return to Socialist Review Index Home page