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From International Socialism (1st series), No.48, June/July 1971, pp.10-14.
EUROPE’S capitalists find themselves driven by the scale of business operations, the ever greater expense of technological advance and the requirements of military defence to try and integrate their efforts. This cannot be restricted to the mere removal of trade barriers. It seems to necessitate an actual merging of the ruling classes themselves. Only in this way could they develop the resources to enable them to compete with other giants of the modern world economy.
There are a number of steps which would have to be taken for such a merging of interests to occur. They have been outlined in numerous programmes for action by particular capitalist concerns, by governments and by the European Commission,
However, the wish is not the deed. Just because the different national capitalisms regard a fusion of their activities as desirable, it does not follow that it will actually come to pass.
Capitalism is by its very nature a competitive system. The survival of each enterprise depends upon a continual life and death struggle with other enterprises. There is no easy way by which those drawn into the struggle can suspend its effects for any length of time. Much of the history of the Common Market so far bears witness to this.
The whole trend of the development of production might be to transcend national boundaries, but the fact remains that the vast majority of firms continue to be owned from and operate within a particular national base. Even the multinationals usually have such a base from which they spread out (only a few exceptions – Shell, Unilever, have what might be called a bi-national base). Indeed, firms are more closely bound together than ever before into blocks of national capital – by interlocking directorships, the role of banks and financial institutions, and so on.
The role played by the national state in the functioning of the system has increased parallel with the concentration of national capital. It has moved from being a mere tool used by ruling classes to enforce their control over the rest of society to being an active factor in the expansion and rationalisation of their economic activities.
The bureaucracy of the state and the management of industry now interact at thousands of different contact points. The state intervenes to promote the mergers necessary if industry is to compete internationally; it becomes an important economic factor itself as it takes over industries too unprofitable to attract private capital; it has to provide the incentive, and often the capital, for developments in technological industry that are on too vast a scale for private industry to undertake without such aid.
Above all the state remains the chief means by which the capitalist class exercises its political and ideological control over the rest of society. This does not only mean repression, although it remains of crucial significance. Also involved is guaranteeing the conditions under which subordinate classes can identify with the status quo. Left to themselves the rival capitalist concerns would tear society apart in their relentless search for profits. The state prevents this, in so far as it can, in the interests of continued capitalist domination. It tries to integrate the middle classes into the system by all sorts of privileges for them; it attempts to placate working class discontent by ‘welfare’ policies and the like; budgetary and other measures are used to impose some restraint on economic fluctuation and to ensure some evenness of economic development in the different regions of the country.
The increasing concentration of capital on a national scale and the heightened importance of state intervention mutually reinforce one another. The state is by its very nature a national institution. Its increased economic role makes it into one of the key elements binding different capitals into a national bloc. This, for instance, was the task which the Industrial Reorganisation Commission consciously carried out in Britain during the period of the last Labour government – in industry after industry welding together relatively small capitals into firms deemed large enough to compete internationally.
Paradoxically, the very internationalism of capitalism is an important factor enhancing the role of the national state. It is because of the pressures of international competition that the state encourages the merger of national capital and plays an initiating role in the development of technology. When the internationalisation no longer means just world wide markets, but also an increasing tendency for an international organisation of production in certain key fields (through the multinational firms) and a rapidly growing international system of credit (through the ‘Eurodollar’ and other mechanisms), the economic role of the national state is further strengthened.
The growing number of international business operations means that funds cross and recross frontiers on an ever more massive scale. To take one example only: in the eight years following 1960 the amounts involved in the Eurodollar Market rose from 1 billion dollars to 25 billion. But this means that pressures for revaluation of currencies due to short-term speculative movements can build up much more rapidly than ever before. It also means that the normal measures used by individual states to protect their currencies have to be more stringent than would otherwise be the case.
Far from the internationalisation of business operations leading to an automatic withering away of national boundaries, it can have the opposite effect. The national state remains the chief means by which national groups of capitalists provide themselves with a stable environment within which to operate. If an internationalisation of capitalism endangers such stability, then they will resort to the protection of the national state more than ever before.
The Common Market represents a deliberate attempt to encourage internationalisation of business. But so far it has not in any way weakened the tendency towards concentration of capital on a national basis.
The removal of tariff barriers has increased competition and caused a rationalisation of industry. There has been a wave of mergers within Europe. But these mergers have been overwhelmingly between firms in the same countries. Between 1961 and 1969 there were 1,861 of these, as opposed to only 257 between firms in different EEC countries. [1]
‘Through mergers and cross-holdings the biggest names in French industry are now closely linked: de Weddel/Sidelor/Pont-à-Mousson/Pèchinay/Saim Gobin/Progil/Rhône-Poulenc. Like the Italina IRI they have a finger in every pie ...’ [2]
Germany similarly has seen a merging of major firms in industries such as steel, in electrical engineering and in chemicals. By contrast, progress towards the merging of companies across national boundaries has been very slow.
‘Apart from the Agfa/Gevaert joint German-Belgian operation in the photographic components business there have been no complete transfrontier mergers of any size ...’ [3]
The different national states themselves have played an important part in bringing about this situation. They have encouraged national concentration and discouraged cross-frontier mergers. The French government has been the most notable in this respect – for instance, preventing a planned merger between Citroen and the Italian firm of Fiat. But although not so obviously, other countries have behaved similarly. The German government, for instance, sponsored a consortium of eight oil companies and gave them a grant of £60m so as to ward off cooperation between them and the French Companie Française des Petroles.
All the time the concentration of industry on a national basis and its dependence on the national state is increased. But this makes much more difficult the ideal of integrating the capitalist classes on a European wide basis and cutting away their links with the separate state apparatuses. The British CBI has concluded:
‘The nationalistic tendencies of governments in discouraging or indeed disallowing cross-border mergers or acquisitions poses real problems. This tendency has now reached the point at which in some sectors the present degree of national concentration makes international restructuring on a European basis, although essential, increasingly difficult.’ [4]
The Common Market’s failure to eliminate the importance of national boundaries when it comes to the organisation of industrial ownership is parallelled in other related fields. Basic to any merging together of the European capitalist classes would be their ability to invest their wealth wherever they wanted to within the area of the Market, without being hindered by different governmental regulations. Yet, in reality:
‘The EEC ... has made no progress towards greater freedom of capital movements since 1966.’ [5]
Again the major obstacle has been the enhanced role of the national state in the functioning of the system. Because funds can flow at a greater rate than ever before from one country to another, upsetting national balance of payments accounts, the individual states can only protect their national currencies by keeping a tight check upon capital movements. The need to do so is re-emphasised by the fact that quite considerable social movements, such as the May events of 1968 and the Italian ‘hot autumn’ of 1969, have hit particular countries, throwing the different national economies out of gear.
Indeed, at certain crisis points, individual governments have felt compelled not only to impede further integration, but even to suspend the most minimal steps already taken. The most fundamental point of the Common Market – freedom of industrial and agricultural goods to move across national frontiers unimpeded by tariffs or quotas – has been threatened.
In 1968, following the ‘May events’, the French government sought to protect industry from the effects by imposing import quotas for motor cars, steel, textiles and domestic appliances for a number of months. When the franc was devalued in 1969, the ministers of the six agreed to a system of levies on agricultural exports which was to isolate the French agricultural market from the other five for up to two years – a serious breach with the idea of a single market for agricultural produce. Even more serious was the result of the effective upward revaluation of the German mark (through it being allowed to float) in the same year. The German government sought to protect its farmers by imposing border taxes without even consulting the other governments – a move which the European Commission and the European Court denounced to no effect. German big business had to keep its political domination over the German farmers – and it could only do so by using the German state, even if that meant a grave blow to the whole concept of the Common Market.
The reaction of the Common Market governments to the most recent world monetary .crises has been again to use the national state to protect national economic interests, even while speaking of the need for European monetary union. Again the result has been to necessitate the use of border surcharges and the like which make nonsense of considerable chunks of the customs union.
It is not only major crises that have imposed restrictions on the movements of goods across frontiers. Although tariffs have been eliminated, a variety of border taxes continue to remain. And here
‘the governments of the six have exercised great ingenuity in thinking up new taxes just as fast as they agreed to eliminate the old ones at the request of the Commission ...’ [6]
The failure of the nationally based capitalisms to begin to merge with one another does not, however, do away with the need for them to do so. Resources have to be mobilised and production organised on a continental, rather than a merely national basis, for survival in the most advanced industries. Europe’s failure to integrate has been paralleled by a failure to keep up with the international leaders in such fields.
‘The existing EEC has not been at all successful in stimulating the growth of high-technology industry. The EEC’S success has been a brilliant increase in productivity in what might be called the less antiquated of the old mass manufacturing industries’. [7]
In the areas of advanced technology, success has gone to those firms that do operate on a continental scale – which means the existing multinational firms, which are in most cases American. based (55 per cent of multinationals are us owned and about 20 per cent British). These have been able to dominate almost unchallenged in fields like computers. Indeed, the point has now been reached at which in these newer industries European firms have preferred to join with an American partner, rather than another European one. [8]
This development has been encouraged by the nationalistic tendencies of governments attempting to protect industries from takeovers by other, European, competitors. Thus de Gaulle objected to the creation of a European computer industry, for fear that it would escape from the control of French capital. The result was that one of France’s leading computer firms, Machine Bulls, was taken over by the us firm General Electric. Similarly, his opposition to a European regroupment in the electrical engineering field led to a takeover of Jeumont-Schneider by the American firm Westinghouse. [9]
The nation states cannot do away with the forces pushing towards the internationalisation of capitalism. All they can do is impede one way these work themselves out – but the process then takes place through different forms, behind their backs.
Similarly, pressure pushing towards an international mobilisation of resources for investment has grown. Over recent years a ‘Eurobond’ market has developed to take account of this. But again, it is dominated by those who operate on an international basis – the American, and, less often, British or Dutch, multinationals.
‘The resources of the Eurobond market are only available to large companies of international standing, and up to now have been exploited more by American than by European companies.’ [10]
It has been estimated that since 1967 two-thirds of the expansion of us subsidiaries in Europe has been based upon their ability to attract local capital. [11]
A vicious circle develops for European capitalism. Multinational, non-European firms dominate the most advanced industries. They alone are able to mobilise capital resources on a Europe wide basis. Local firms that want to remain in industry merge with them. In this way their ability to dominate the field is further strengthened.
The point can even be reached at which a national government wanting to stimulate a particular industry can only do so by giving special advantages to the local branch of a US firm. In this way, for instance, the Italian government at the moment is giving preferential treatment to the US giant, IBM.
But European capitalism as a whole cannot welcome such a tendency. Its ability to fight for its own particular interests over the whole range of industries is threatened.
It wants a ‘Europeanisation’ of capital – but this continually clashes against national state boundaries. The only way out would seem to be to somehow reduce the dependence of firms on the national state by developing some sort of European state.
The hopes of the proponents of integration have usually been placed in the European Commission in Brussels. Its five-thousand civil servants have been seen as the embryo out of which a European state could grow. The theory has been that as the economic integration of Europe slowly proceeds, the Commission will gradually accumulate in its hands decision making powers. Over time the powers of the different national states would gradually be undercut, without there ever being any real clash between them and the Commission.
The aim, as seen by the Commission itself, would
‘... gradually forgo national economic policies into a common short-term and long-term policy designed to secure the fastest expansion possible, economic stability and a smoothing out of cyclical swings and national or regional disequilibria ...’ [12]
Such a perspective was built into most of the early plans for the development of the European institutions. The statutes of the Coal and Steel Community (formulated in the early ‘fifties) explicitly spoke of the Commission as a ‘supranational body’, relegating the meetings of national ministers to an ‘advisory’ role. The Treaty of Rome played down slightly the emphasis on the powers of the Commission. But it foresaw a situation in which the Commission alone would be able to make positive proposals to ministerial meetings, which would then decide on them by majority voting. No single national state would be able to impede the development of policies seen as standing for the interests of European capital as a whole.
The Commission, it was implied, would represent a political projection of the economic trend for national boundaries to be superseded. What the international companies were accomplishing in economic terms, the Commissioners would accomplish politically. Eventually they would concentrate in their hands the budgetary and monetary prerogatives of national governments, and oversee on a European scale the economic and social needs of the system as a whole. At this point the present national governments would be effectively redundant. Such was the dream of the more extreme ‘Europeans’ [13] – and the nightmare of those who criticise the Market from the point of view of ‘national sovereignty’.
However, there is little evidence that the Commission has been able to fulfil this role at all, even in an embryonic form. So far the European institutions have not begun at all to rise above the squabbles of opposed national interests.
The Commission’s chief impact so far has been in encouraging national states to drop restraints on trade between them. But it has had little success in furthering positive integration or in acquiring greater powers.
The only area in which it has been able to implement on a European level anything comparable to the ‘planning’ of national governments has been agriculture. Here the Commission does intervene with considerable powers. It ensures the imposition of import levies on produce coming from outside the area of the Market and intervenes by buying produce to keep prices up.
However, it is no sort of ‘supranational’ interest that lies behind this policy. Rather it corresponds to the needs of a very concerete national force – the French government. The most advanced sectors of European capitalism resent the agricultural policy and would like to see it deeply modified, or even dropped. Integration has proceeded where they would rather it did not. Meanwhile, in those areas where they would like to see integration, it has hardly proceeded at all.
‘In the other main managed-market sectors, energy and transport, the Community has made relatively little progress towards an effective common policy.’ [14]
The Coal and Steel Community seemed able to offer positive guidance to industry in its earlier days. But this was in conditions of an overall shortage of the raw materials concerned. Since the ‘sellers’ market’ disappeared, the role of the Commission in providing a mechanism for control over national programmes has been minimal.
In one of the central fields from the point of view of advanced technology, the use of atomic energy, the Euratom programme for Community-wide collaboration in research has virtually fallen apart. The different governments put most of their resources into competing national research efforts, and not into the integrated Euratom one.
‘Up to now governments have tended to back European projects only to the extent that their national companies are involved.’ [15]
Taxation is one sphere in which any body aspiring to be the embryo of a European government would need to develop considerable powers. But although national governments have been prepared to adopt similar approaches for indirect taxes, based upon value-added tax (VAT), they have been unwilling to concede positive taxing powers to the Commission. In deference to the national states the Commission has never even used to the full the small taxing powers given to it under the Coal and Steel Community. And although it now receives directly the product of levies on agricultural imports and will eventually receive all customs duties collected by the constituent governments, these revenues will hardly cover the cost of the agricultural fund. At present that fund consumes £1,096m of the Commission’s total expenditure of £1,273m (itself only a small proportion of the spending of the different national governments).
These facts are indications of the real weakness of the Commission. Its lack of financial autonomy makes sense if it is merely an executor of the decisions agreed between six individual governments, but not if it is supposed to gradually take over their powers. In reality there are virtually no indications of it developing such independent powers. In formal terms these have been curtailed, not enlarged over the years.
‘... In the Coal and Steel Community the Special Council of Ministers (originally purely an advisory body) has become more important than was really intended.’ [16]
The key to greater powers for the Commission under the Treaty of Rome, the introduction of majority voting in the Council of Ministers, was abandoned when it was agreed in 1966 that ‘majority voting would not be used where a vital national interest was at stake’. [17] And a measure which would give the Commission a degree of legitimacy independent of the national governments, the introduction of direct voting for the European Parliament, has been indefinitely shelved.
When the Commission was founded in the ‘fifties its members saw their roles as that of enlightened idealists, who could foresee better than the national states what the long term needs of European capitalism were. Today they are generally reckoned to be cynical bureaucrats, whose only function is to find the lowest common denominators which will reconcile the interests of rival powers and to ensure that routine details already agreed upon are enforced. [18]
Things have now reached the point where a member of the Commission has been able to describe it as:
‘An illiberal and bureaucratic leviathan, obsessed with harmonising things just for the sake of harmonisation ... This Europe is also ceasing to function. The Common Agricultural Policy is threatening to fall apart as country after country gets special treatment for its farmers, and the customs union threatens to be nothing more than a fiction ... The check to economic and monetary union as a result of disagreement between France and Germany ... (is) a further example of how weak the Community has become ... It is time to abandon the idea that the nine-man Brussels Commission is the embryo which will one day grow into the government of Europe.’ [19]
The failure of the Commission to develop as an autonomous power has effectively left real power with the separate governments. But these remain under the sway of different national economic interests and political orientations. Their interaction so far has failed completely to produce the sort of single minded direction that would correspond to the needs of the advanced sections of capital seeking integration.
‘Far from the establishment of the Community proving a source of ever closer political union between the six countries ... international events between 1962 and 1969 were marked by increasing dissension between France and her five allies’. [20]
The Council of Ministers has been nothing like a body discussing how to plan the integration of Europe on the basis of shared assumptions. It has resembled more a prolonged poker session – with members even threatening to break the rules and leave the game if they do not get their way (as the French threatened to in 1965-6, when they boycotted the institutions of the Community for seven months). What has emerged has been a series of ad hoc compromises, not a strategy for unification.
The fact that one of the issues that divided the Market’s members – the question of British entry – has been settled does not at all mean that the pressures preventing the integration of Europe have been overcome. The dependence of industry in each country upon the national state to protect it from instabilities means that in a period of considerable international financial turmoil, the obstruction to a real capitalist unification of Europe can grow more insistent than ever before. The pressures driving the European capitalist classes to mutual integration are growing, but so too are the centrifugal forces driving them apart. The failure of the six to present a common front in the recent financial crisis has shown the power of these forces.
Of course, the development of the forces of production demands the creation of a European state. But then the development of the forces of production also demands a socialist revolution. It may well be the case that the former will take place after the latter.
Indeed, it is an important fact that there seems to be no historical precedent for the peaceful integration of different bourgeois states. A minimum of physical force has always had to be used. The examples of Germany, Italy and the us bear this out. In the modern world national ruling classes are more closely linked to national state structures than ever before. There is no certainty that such an obstacle to unity can be removed.
It is, to say the least, extremely unlikely under modern conditions, that one European power will physically coerce the others into common state boundaries. There are external forces pressing to integration – fear of Russian military potential as us forces withdraw from Europe on the one side, fear of us dominance of the most profitable industries on the other. It is impossible to predict at this stage whether these will be strong enough to have the necessary coercive effect. All that one can foresee is that British entry into the Common Market will by no means solve the question of the final form of capitalist Europe. We face a long period of hard bargaining between rival, national capitalisms, in which national ideologies will remain of key importance to the ruling classes and in which political and social struggles will by and large remain nationally based.
1. Layton, Cross Frontiers in Europe, p.3.
2. S. de la Mahotière, Towards One Europe, London 1970, p.79.
3. Ibid., p.83.
4. CBI, Britain into Europe, London 1970, p13.
5. Ibid., p.8.
6. Mahotière, op. cit., p.28.
7. Economist, May 16, 1970.
8. Ibid.
9. E. Mandel, Europe versus America, London 1970, p.55.
10. CBI, op. cit., p.15.
11. J.H. Dunning, Lloyd’s Bank Review, July 1970.
12. Action Programme for the Second Term, quoted in Coombes, D., Politics and Bureaucracy in the European Community, London 1970, p.63.
13. For such a blue-print, see Economist, May 19, 1970.
14. J. Finder, in G.R. Denton, ed., Economic Integration in Europe, p.159.
15. CBI, op. cit., p.12. Cf. also, Economist, op. cit.
16. Coombes, D., op. cit., p.44.
17. Ibid., p.45.
18. For an account of this ‘bureaucratisation’ see ibid.
19. Summary of an anonymous article – generally thought to be by R. Dahrendorf the sociologist and leading member of the German Free Democrat Party – from Die Zeit, in The Times of August 2, 1971.
20. Coombes, op. cit., p.294.
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