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Winfried Wolf

Not Yet an Upturn ...

(30 May 1975)

From Inprecor (International Press Correspondence), Nos. 27–28, 5 June 1975, pp. 22–27.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

There was no upturn in the West German economy in the spring of 1975. Nor will there be one during the summer. The federal government was fooling itself, or more likely, was fooling the masses. The whole electoral campaign of the SPD (Sozialdemokratische Partei Deutschlands – German Social Democratic Party) in the Saar and In Nordrhein-Westfalen in May 1975 had been centered around the slogan, “Vote for on upturn; the upturn has already begun.” The masses believed it, and the SPD achieved a good electoral score. But the economic crisis has deepened and generalized.

The beloved neighbors and partners of the German bourgeoisie were foaled as well as the German masses. An upturn in the West German economy was decisive For West Germany’s bourgeois partners. It could have halted the recession and even touched off an upswing in the rest of the capitalist economy in Europe. Fourcade, the French minister of finance, made a significant remark, on May 26, during the celebration of the anniversary of the foundation of the Franco-German Chamber of Commerce and Industry. “The Germans and the French are special trade partners, “ he said. “This is expressed notably by the fact that each waits for the other to make his move first so as to be able to follow in his wake.”

And that’s the way it is, in fact. Each waits – and nothing happens. Obviously, this does not mean that nothing has changed during the past five months, since the publication of our lost analysis of the state of the West German economy. (See Inprecor, No. 16/17, January 16, 1975.] During this period if has been confirmed that the present recession constitutes the deepest and most significant economic crisis that this country has seen since the end of the second world war.
 

Scope of the crisis

From the beginning of 1974 through the end of May 1975 industrial production went steadily downward in West Germany. During the first quarter of 1975 it registered a new regression of 4%. During April and May 1975 it fell to a level corresponding to that of 1970!

As for unemployment, one can say that it has begun to bottom out. The official figure on the number of people totally unemployed reached 1,087,000 in April 1975, which corresponds ton rate of 4.9%. In absolute figures this represents a slight decline.

But the number of workers affected by partial unemployment increased 85,000 compared with the preceding month, to approach 900,000 in April. This is sufficient basis on which to reject official optimism about a decline in unemployment. The slight decline in the number totally unemployed simply means that some companies have extended the system of technical unemployment instead of laying off personnel and that they have “hired” people and then immediately placed them on technical unemployment (that is, they pay them only for a few days a week or for a few weeks a month) in order to profit from the hiring bonuses provided for in the government’s conjunctural upswing program.

The second reason why the slight decline in rhe number totally unemployed does not at all correspond to a real economic upturn is that the decline reflects only the federal average. If the regional breakdown is examined, it immediately becomes clear that those regions hardest hit by the crisis continued to suffer unemployment increases in April and even in May.

For all those who recognize the realities of the capitalist mode of production, it is not necessary to add that the major victims of the unemployment have been women workers, immigrants, and youth. For all these categories, there was a more than proportional increase in unemployment.

In our previous conjunctural analysis we indicated that the two major factors that had slowed down the recession in West Germany during 1974 had been the rapid expansion of exports and the continuation of the boom in steel. And we indicated the vulnerability and limits of these two pillars. These limits have now appeared clearly.

In 1974 West German exports had constituted the counterweight to the contraction of domestic demand (in investment, construction, automobiles, etc.), which had touched off the recession in the first place. Even at the end of 1974, foreign orders for West German industry were still 20% higher than they had been at the end of 1973. This rapid increase in exports was explained in good part by rhe continuation of the upswing in some of the other capitalist countries and by the higher rate of inflation prevailing in these countries, which stimulated the expansion of their imports of German products.

As we indicated in our previous analysis, a reversal of this tendency became visible beginning with the end of 1974. The reasons for this were that the other capitalist countries had begun to fight Inflation vigorously through import restrictions (Italy) and that the recessive tendencies were becoming generalized in all the other imperialist countries. The West German export boom thus reached the end of its rope. With the beginning of 1975 foreign orders began to decline. The effects of this turnabout on a national industry nearly a fourth of whose production goes for exports are obvious.

It can even be said that the situation has turned around completely. Earlier, one could say: Yes, there is a crisis on the domestic market, but it is compensated for by the rapid rise of export. Today, there is a combined crisis on rhe domestic and foreign markets, and one is even tempted to say: the upturn of domestic demand should as far as possible compensate for rhe effects of the contraction of exports.

Likewise, the recession should now strike with special vigor at the branches that are more sharply oriented toward exports. Between 1973 and 1974 the share of the iron and steel industry in total exports had grown from 4.9% to 5.6%, the share of the chemical industry from 13.2% to 14,6%. Today these branches find themselves confronted with a decline in both domestic and foreign outlets and seem unable to take quick action to adapt to this new situation.

We aIso mentioned the tendencies toward a geographic reorientation of West German exports. Exports to the other imperialist countries inevitably ran up against the combined effects of the contraction of demand in these countries and the conscious resistance to increasing imports, resistance that could not fail to have an effect in a period of recession. Exports were thus partially reoriented toward the semi-colonial countries and the bureaucratized workers states. Since then, a new feature has arisen: The continuous and more than proportlonal increase of exports to the bureaucratized workers states seems to be running up against an initial obstacle, namely the growing deficit of the trade balance of these countries with West Germany. For 1974 West German exports to these countries (including the People’s Republic of China) were DM 15,880 million, while West German imports from these countries amounted to only DM3,410 million. The function of these markets (which because of the non-capitalist character of their economies were supposed to hove been able to partially compensate for the reduction of exports to the capitalist countries in times of crisis) must thus be understood as extremely limited in view of the still limited resources these countries command both for paying for a large import surplus and for offering a broad range of commodities that can be sold In the West precisely during a period of recession.
 

Uneven development

The uneven development of the various branches had been the major factor propping up the West German upswing during the preceding phase. There had been a series of branches that were growing at greater than average rates and that could thus boost the average growth rate and stimulate the expansion of other branches that otherwise would have fallen into stagnation or decline. The major branches that had played this role were the steel industry, the chemical industry, and the electro-technical industry.

Today these branches are absolutely unable to continue to play such a role. On the contrary, in certain cases there is danger of the West German conjuncture’s being worsened precisely by the decline of some of the branches that had previously been “in the lead” in growth rates.

On the other hand, one can analyse the uneven development that the recession itself has had in the various industrial branches (See table 1.) If we calculate the cumulative rate of growth and subdivide it into successive phases, the picture becomes even clearer. (See table 2.)

According to these tables, the following conclusions can be drawn:

1. All of West German industry entered crisis beginning with the second half of 1974.
    
2. From the beginning of the recession, the construction industry and the industry producing means of transport had particularly determined the deterioration of the economic situation.
    
3. The electrical machine industry and the machine-building industry, each of which exports some 25% of its production, exercised a positive or neutral influence on overall economic development. From the beginning of 1975, however, they began to exercise a negative influence.
    
4. The chemical industry and the iron and steel industry, each of which contributes to West German exports to a more than proportional extent, are manifesting a tendency clearly contrary to that of the economy as a whole. Whereas they propped up the conjuncture throughout the Initial phase of the recession (through the middle and end of 1974), their role was reversed from the beginning of 1973. It is exactly these sectors that are now contributing in a major way to the deterioration of the overall economic situation, with production declines of 6% for the chemical industry and 15% for the iron and steel industry,

Hence, the two central factors neutralizing the recession in West Germany – the export boom and the boom in certain particular branches – have disappeared. The situation has even been reversed. While the construction industry, which had “touched off” the recession, is now ceasing to decline and is instead stagnating (even though at a low level), the steel industry, which was still expanding during the fourth quarter of 1974, suffered a decline of 15% in its production during the firat several months of 1975.
 

Domestic demand

The conjuncture of the West Germon domestic market has now passed its lowest point. The “cleansing” forces have acted sufficiently to generate a turnabout. But the role of foreign outlets is now becoming even more decisive in permitting a reaI economic upswing. This becomes clear from table 3, which compares the evolution of domestic and foreign orders for West German industry.

The table clearly reflects the uneven development. Although domestic orders had hit their lowest point during the fourth quarter of 1974 and registered an increase during the first quarter of 1975, the increase was essentially in orders for the capital goods industry, which reflects the rationalization investment that normally occurs during the final phase of a crisis. On the other hand, foreign orders went through their most pronounced decline during the first quarter of 1975, and this is especialiy the case for the capital goods industry. Foreign orders in this sector have gone through an especially pronounced decline, the index failing from 143 to 124, that is, a reduction of nearly 15%.

This partially explains the above-mentioned phenomena of unemployment that is still rising in certain regions and of the growing number of workers on partial unemployment. This results from the decline in exports and foreign orders. In the framework of capitalist logic, the upturn of the conjuncture and of demand on the domestic market must in no way automatically entail hiring new workers again. Just the contrary, toward the end of the crisis rationalization investment predominates, and that reduces employment instead of expanding it. To this are added the consequences of a general acceleration of the work pace and production rhythms. In many factories the same volume of production and/or labor is assured by a reduced number of workers. (See, for example, the article by Werner Hülsberg on the crisis of the Volkswagen trust, Inprecor, No. 26, May 22, 1975.)
 

The state primes ...

The efforts so far undertaken by the government to boost industrial production through various conjunctural pump-priming measures, notably granting the capitalists expanded capital and credit facilities, have clearly failed. The judgment we made at the beginning of the year has been confirmed. The program that the Helmut Schmidt cabinet announced December 12, 1974, which was supposed io inject a sum of DM 1,700 miIlion into the economy (which amounted to a total “priming” effort of DM 2,500 miIlion, taking account of the previously decided aid to the construction industry), suffered a stinging defeat, it came too soon. The implementation of this plan was determined above all by political factors (elections in Nordrhein-Westfalen, pressure from West Germany’s Common Market partners, etc.). All the poIls of companies confirm that these priming measures have had practically no influence on investment decisions.

The financial press has noted shamelessly that this “investment aid” has been utilized above all to buy automobiles! In other words, the “leaders” of the West German economy have acquired new luxury cars at discounts of at least 7.5% and sometimes as much as 20%.
 

... inflation

What remains incontestable in any case is that the policy of state aid will be fuIly successful in priming the rate of inflation. This turn has already occurred. Although the rate of inflation had declined slightly {down to 5%) at the beginning of 1975, it started to increase again beginning in April. This is especially the case with respect to consumer goods purchased by the households of workers and pensioners: Here the rate of increase has once again gone beyond an annual rate of 7.5%.

The prospects for public debt are especially bleak for 1975. In 1974 public debt grew by DM 25,000 million. In 1975 the overall deficit in public expenditures threatens to be as high as DM 50,000 million, twice that of rhe preceding years. And these figures do not even include the deficits for the railroads and the federal post office.

Considerable additional charges for public financing In 1976 are now looming. The fiscal reform decided on in 1974 involves tax rebates. Undoubtedly, these will have to be paid for with new taxes, as will the aid to investment. In addition, there is a shortage of resources in the social insurance treasury, which was not prepared for such high and protracted unemployment. This will cause additional deficits in 1976 of several thousand million deutschemark.

The solution being discussed openly in the West German press today is clear: The hole will hove to be filled with money taken from the toiling masses. There is discussion of raising taxes, especially indirect taxes; of further reducing social expenditures; of cutting down on expenses and eliminating jobs in the postal system, the railroads, the urban transportation system, hospitals, etc.
 

Prospects

The year 1975 as a whole will remain a year of crisis, at least as far as the working class is concerned. The evolution or export markets – that is, the economic situation in the United States, France, Italy, and Britain – will play an even more decisive role than at the beginning of 1975. In view of the situation in these countries, it can be expected thar Industrial production in West Germany will continue to decline until the beginning of the second half of 1975; then it will bottom out toward the end of the year.

The West German economy will increasingly be characterized by “reversed desynchronization.” The sectors oriented mainly toward export (above all lhe chemical and steel industries will experience an aggravated recession, while certain branches producing more especially for the domestic market could begin to improve sooner.

Unemployment will continue to hover at about one million throughout the year; a new growth of unemployment is not excluded if exports decline further. This means that the working class will suffer another year of massive unemployment pressure, and real wages threaten to decline for the second year in a row if tariff negotiations are conducted with the same argumentation as in 1974. The SPD government is insisting on the fact that it is precisely now wages. Undoubtedly, we will hear the same refrain in 1976 as well. Then it will be said that because of the fragility of the upturn it is especially crucial not to “threaten” the upturn with “excessive” wage demands. That is a refrain that is already overworked, but it will reappear with the same regularity as the crisis itself.

May 30, 1975

 
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