Banks versus the People: the Underside of a Rigged Game! (Part 3) – The greatest offensive against European social rights since the Second World War

To imagine that the policies applied by the European elite have failed because economic growth has not reappeared is to be somewhat mistaken on the criteria of analysis. The goal of the board of the ECB, the European Commission, the governments of the strongest EU economies, the boardrooms of the banks and other big companies is not a quick return to growth, nor the reduction of inequalities in the eurozone and the EU, in order to create a more coherent structure that would favour the return of prosperity.

Two of their principal objectives must be noted in particular:

1.Avoiding banking and financial crash that could be worse than that of 2008 (the first two parts of this series dealt with this subject, which will be further developed in the fourth part);

2. The use of a choice of weapons (rampant unemployment, public debt repayment, balanced budgets, promoting unfettered competition between EU member states and between rival companies from other continents) to carry out the greatest aggression by Capital against Workers, on a European scale since the Second World War.

Capital’s objective is to further menace stable employment, radically reduce the capacity of the workers to organise, substantially push down direct and indirect wages while at the same time maintaining enormous disparities, within the EU, so as to sharpen the blade of labour competition. First, there are the inequalities between women and men, permanent and temporary, full time and part time. The inequalities gap has widened over the last twenty years, pushed by employer’s initiatives and helped along by successive governments (including left wing governments that have played an active role). Then, there are the different inequalities between workers in the different EU countries. The differences between workers in the principal economies and the secondary economies within the EU are complementary to those within national boundaries.

Profound disparities between workers in different EU countries

Workers’ wages in the stronger countries (Austria, Denmark, Finland, France, Germany, the Netherlands, and Sweden,) are double or triple the wages of Greek, Portuguese, or Slovenian workers, ten times more than Bulgarian workers, seven or eight times more than that earned by Romanian, Lithuanian, or Latvian workers. |1 In South America, although there are great disparities between the stronger economies (Argentina, Brazil, and Venezuela) and the weaker ones (Bolivia, Ecuador, and Paraguay), there is no more than a fourfold difference in the legal minimum wage there, which is much less significant than in the EU. This difference clearly shows how strong competition is among European workers today.

The major corporations in the stronger European economies profit greatly from this wage disparity. German corporations have chosen to greatly increase their production in the EU countries where the wages are the lowest. Partially finished goods are then reintroduced into Germany, without paying import/export taxes, for assembly and re-exportation, principally to the other European countries. This reduces production costs, puts the German workers into competition with their foreign comrades, and increases company profits. In addition, these assembled and re-exported goods appear, of course, in Germany’s export figures, whereas they are, largely, produced from imported goods.

The German example is the result of the neoliberal offensive

Between 2003 and 2005, German employers were assisted by Gerhard Schroder’s Socialist government to impose sacrifices on the workers. The paper En finir avec la compétitivité (Putting an end to competition) published jointly by ATTAC and the Copernic foundation sets out the steps taken and the attacks against social and economic rights: “The Hartz acts (named after Volkswagen’s Human Resources Director who was also Schroder’s advisor) were passed between 2003-2005. Hartz I obliges the unemployed to accept any job that is proposed to them, even if the pay is less than unemployment benefits. Hartz II created the mini-job at less than €400 a month (exonerated from social contributions). Hartz III limits to one year the right to unemployment benefits for ageing workers and makes access more difficult. Hartz IV merged long term unemployment benefits with other social aid, and installed an aggregate maximum amount of €345 a month. To this was added successive retirement and healthcare reforms: capitalisation of pension schemes (Riester retirements), contribution increases, later retirement ages (objective of 67 years in 2017)” The authors of this paper mention in particular that “Together these reforms have contributed to an impressive rise in social inequalities. This point is often forgotten in the ‘German example’ which may be demonstrated by some precise figures. Germany has become a very elitist country: a parliamentary draft report on wealth and poverty |4 has recently established that the poorest half of the population possess only 1% of the assets, compared to 53% for the richest. Between 2003 and 2010, the purchasing power of the median average wage decreased by 5.6%, but the effect was very unequally spread: -12% for the lowest paid 40%, -4% for the highest paid 40% |5|.

According to the same study, the number of employees increased by 1.2 million between 1999 and 2008, reflecting an increase of 1.9 million precarious jobs corresponding to a loss of half a million full time permanent jobs. A quarter of wage earners today occupy unstable jobs and this proportion (as in the US) is 40% for women. “The majority of precarious jobs (70%) are considered women’s jobs |6|.

As noted by Arnaud Lechevalier, this trend lies within the general framework “of a context of erosion of the collective bargaining agreements protecting employees: the percentage of employees covered decreased from 76% to 62% in ten years, and in 2008 these agreements only apply in 40% of German firms. In addition, the unions have had to make many exemptions to sector-based, and/or company-wide collective bargaining agreements” |7|.

The ulterior motives of European leaders and elites

When we try to explain the current attitude taken towards the eurozone crisis by German leaders, we can express the hypothesis that one of the lessons they have learned from the absorption of East Germany at the beginning of the 1990’s is that important wage disparities between employees can be greatly exploited to the advantage of employers. The massive East German privatisations, the attacks against the job security of ex-GDR workers, along with an augmentation of German public debt due to the costs of this absorption (which have been used as the pretexts for austerity programmes) have permitted the employers to greatly erode the situation of East as well as West German workers. The present German leaders see the eurozone crisis, and the brutal conditions imposed on the Greek people, as an opportunity to push further and to reproduce at the European level, the gains they have made at home. The leaders of the other strong European countries and the Presidents of their major corporations are not to be left behind; they make the most of the common European political, commercial and economic zone. The northern European economies and transnational companies are exploiting the strife in the eurozone’s southern economies to improve their profitability and to take competitive advantages over their North American and Chinese competitors. Their objective at this point is not to revive growth and to reduce differences between the stronger and weaker economies of the EU. They are most interested in using the strife in the south to grab privatised sectors at give away prices, helped by the Troika and the southern governments themselves. Big Capital in the southern European countries is in favour of this prospect, hoping to get a piece of the cake it has been ogling for a long time. The grabbing of public sector companies in Greece and Portugal foreshadows what will happen in Spain and Italy where public companies are much bigger, as a percentage of their economies.

The will to push down wages

Let us return to the question of wages. According to Michel Husson, Real unit labour costs were compressed 10% in Germany between 2004 and 2008 |8|.

In the ‘Global Wage Report 2012-2013′ published by the International Labour Organisation’ in December 2012, the authors reveal that “In developed economies, the crisis led to a “double dip” in wages: real average wages fell in 2008 and again in 2011, and the current outlook suggests that in many of these countries wages are growing marginally, if at all, in 2012)” |11|.

The offensive of capital against labour in perspective

The rigours imposed on the workers and benefit claimants in Greece, Ireland, Portugal, and Spain had already been imposed on the populations in developing countries by the 1980s and 90s debt crisis. Throughout the 1980s, the offensive attacked North American workers under the Reagan presidency, in connivance with Margaret Thatcher, the Iron Lady, and their emulators in Europe quickly followed suit. The workers in the ex-Eastern European bloc were also subject to brutal policies during the 1990s, imposed by their governments and the IMF. According to the 2012 – 2013 global wage report previously cited: “In Russia, for example, the real value of wages collapsed to less than 40 per cent of their value in the 1990s and it took another decade before wages recovered to their initial level” |13|.

Whereas for several decades, employers basically increased the relative surplus value, principally through gains in labour productivity, since 2009-2010, they have succeeded in increasing absolute surplus value by cutting real wages and in certain cases increasing the number of hours worked. They have been using the crisis to combine an increase in the relative surplus value with an increase in the absolute surplus value. This tactic gives us an idea of the extent of their current offensive.

More and more oppression of workers

In a European Commission document entitled “The Second Economic Adjustment Programme for Greece” from March 2012 |18|, it is clearly indicated that the wage reduction program must be continued. Table 14 on page 41 shows that the Greek minimum legal wage is five times that of Romania or Bulgaria (neighbouring countries to Greece), three times that of Hungary and the Baltic States, double that of Poland and the Czech Republic and superior to the minimum legal wage in Portugal and Spain. The objective is to line-up Greece with the more ‘competitive’ countries, in other words the lowest paid. Evidently, if Greek wages continue their vertiginous fall as the Troika and Capital wish, wages in Ireland, Portugal, Spain, and the stronger economies must follow this downward trend, and at an accelerating pace.

European leaders are at the service of a logic that increases the surplus-value extracted from European labour for Capital, and permits it to strike points against Asian and North American competitors.

These leaders are prepared to push the European unions to the wall by seriously reducing the negotiating options that they have enjoyed for decades

Capital scores more points against Labour

In several EU countries, the offensive of Capital, the European Commission and its leaders, against social protection systems has succeeded in radically reducing the reach of inter-professional collective bargaining. This is the case in the ex-Eastern bloc countries, and in Greece, Ireland, Italy, Portugal, and Spain among others. In several countries, they have also succeeded in lowering the national minimum wage and retirement benefits. They have succeeded in radically reducing protection against redundancies and in imposing later retirements.

The worsening of the crisis in the peripheral eurozone countries

During 2012, the crisis worsened in Greece, Ireland, Portugal, and Spain as a result of the brutal austerity policies applied by their governments in line with the requirements imposed by the Troika. In Greece, the aggregate drop of GNP since the crisis has attained 20%. The purchasing power of the great majority of the population has been reduced by 30% to 50%. Unemployment and poverty have literally exploded.

The mainstream press announced, in March 2012, the official line that Greek debt had been cut by half |19|.

The press mentions Ireland much less often. Since the beginning of the crisis in 2008, |21 bank welfare has sucked 40% of GNP from the economy (Close to 70 billion euros out of 156 billion euros in 2011)) |22|, unemployment has risen to enormous proportions, forcing 189,200 young Irish to leave the country, one in three young workers who previously had employment has lost their jobs, the economy has contracted 20%, the government in Dublin has confirmed that it will axe 37,500 public sector jobs by 2015.

In Spain, youth unemployment is up to 50%. Since the beginning of the crisis 350,000 families have been expelled from their homes because of repossessions |23|.

In Portugal, austerity measures have attained such violence, and the economic situation has become so degraded that one million people rallied spontaneously on 15 September 2012. This was the biggest demonstration since the first of May 1974, which celebrated the victory of the Carnation Revolution.

The situation in the ex-Eastern bloc countries continues to worsen, especially for those that have joined the eurozone.

In short, Capital has engaged in an offensive against Labour throughout the world. It is in Europe that this takes the most systematic nature, starting with the peripheral countries. Whereas the banks (and the capitalist system as such), which have caused the crisis are systematically protected. Public debt is the pretext used to justify the elimination of people’s economic and social rights everywhere. If the social movements and, amongst them, the unions, are really serious about opposing this devastating attack and coming out on top, they must take up the question of public debt to show that the principal argument put forward by the dominant powers is false. The abolition of the illegitimate part of the public debt and expropriation of the banks, to integrate them into a public service of savings and credit are essential measures in any programme that would be considered an alternative to the capitalist management of the crisis.

Eric Toussaint, Senior Lecturer at the University of Liège, is president of CADTM Belgium (Committee for the Abolition of Third-World Debt), and a member of the Scientific Committee of ATTAC France. He is the author, with Damien Millet, of AAA. Audit Annulation Autre politique, Seuil, Paris, 2012.

Parts one and two of this series were originally published at 2007-2012: Six years that shook the banking world and The ECB and the Fed at the service of the major private banks” . Part three can be found at http://cadtm.org/

The first three parts of this series have been reprinted in the LPJ with kind permission from the author.

Translation : Mike Krolikowski and Charles La Via

Footnotes

|1 See Le Monde 22 and 23 January 2012, based on Eurostat statistics

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This post was written by Eric Toussaint