Behind the massacre of manufacturing jobs
European business mounts new offensive
Trade union leaders, 'Guardian' columnists and backbench MPs have been united in the solution they propose for the current crisis in the motor industry and in British industry more generally.
All agree with the employers that the central problem is the high value of the pound and that devaluation is the answer. Some go further and argue for adopting the Euro as quickly as possible - a cause which now seems to unite people as different as Ken Livingstone and Peter Mandelson.
But is this really the way forward for British manufacturing? Andy Kilmister reports.
There is no doubt that a high currency can cause difficulties for capitalists in a particular country. A recent example is the rise in the Swiss franc through most of the 1990s, largely caused by speculators buying it because Switzerland was certain not to enter the single currency.
The result was to plunge the country into recession for several years. Something similar does appear to be happening to British manufacturers now.
More generally, Marxists like Robert Brenner and orthodox economists like Ronald McKinnon and Kenichi Ohno have agreed in seeing the problems of the Japanese and German economies in recent years as caused by American pressure leading to high values for the mark and yen.
The view is that this has made Japanese and German industry uncompetitive and allowed the USA to seize the initiative in key sectors.
But while exchange rates do play a role they are real problems for Marxists in seeing them as central to industrial crisis.
It is important to remember that a fall in currency values means a cut in real wages, as import prices rise. This is especially true since imported inputs will rise in price, so any extra competitiveness has to come from keeping labour costs down.
In this way, trying to boost industry by devaluing means undercutting foreign workers just as much as accepting a wage cut. The main difference is that bringing down the value of the pound would affect all workers equally rather than being concentrated in specific industries, so it is believed to be more acceptable.
Just as important, though, is the fact that in a world of increasingly internationalised capital, exchange rates no longer play the role they used to in determining the profitability of individual companies or national industries. If a multinational is investing in Britain a strong pound can raise profits if components are bought more cheaply, say, from Europe.
Those profits will in turn be worth more to the company, since they are denominated in pounds which are more valuable. And since many manufacturing companies now make large proportions of their profits from financial activities, they may have as much interest in keeping currency values high as the financial sector does.
The focus on exchange rates implies that British and European companies are each simply producing at home and then competing against one another in export markets.
It ignores the massive restructuring of European capitalism which is currently taking place and which lies behind the crisis in the motor industry and elsewhere.
This restructuring has several dimensions. First, there is the huge growth in merger activity. Between 1997 and 1999 the value of European mergers and acquisitions roughly tripled from around $500 billion to $1.5 trillion.
More and more of these were hostile takeovers; the $400 billion worth of such deals since January 1999 is more than four times the combined total for 1990-98.
Key sectors include:
telecommunications, with the massive takeover of Mannesmann from Germany by Vodafone Air Touch, the largest hostile takeover ever, and the takeover of Telecom Italia by Mannesmaan's former partner Olivetti;
pharmaceuticals, with the merger by Rhone-Poulenc and Hoechst to form Aventis;
banking, with numerous large deals in France, Italy, Germany and Spain (although the biggest one between Deutsche and Dresdner Bank has been abandoned for the time being);
electricity, where the link between Veba and Viag has created Germany's third largest company;
and aerospace, where Deutsche Aerospace and Aerospatiale have merged.
The current car industry crisis needs to be seen against the background of the recent links between Nissan and Renault, Daimler-Benz and Chrysler and Fiat and General Motors.
But corporate restructuring in Europe is not just about mergers. Just as in the USA in the 1980s, merger activity has gone together with splitting up companies and imposing harsh financial controls on the remaining parts of the business, backed up by the threat of closure.
The restructuring of European capital, rather than exchange rates, is the central issue for workers
An early example of this was Daimler-Benz, which shed a number of divisions after 1995 to concentrate on vehicles, trains and aerospace. Currently, all divisions are required to make a profit of 12 percent on capital or face closure.
Hoechst is selling its chemical and industrial subsidiaries to concentrate on pharmaceuticals. Unilever plans to cut the number of products it sells by 75 percent, and to close a quarter of its factories, with about 10 percent of the workforce set to lose their jobs.
But the company currently serving as a model for European capitalists is Siemens.
Over the last two years Siemens has sold £9 billion worth of businesses, involving a third of the workforce. Each division now is targeted to achieve a return on capital employed of between 8 and 11 percent, with 60 percent of top managers' pay linked to profits.
Its semiconductors division, Infineon, and its electronic components joint venture with Matsushita, Epcos, are being sold off as separate companies. Share prices have risen by more than 50 percent over the last eighteen months.
These developments have led to an attack on workers' conditions and trade union rights across the continent. The most dramatic developments have been in Spain where there has been an explosion in the use of temporary contracts.
This so impressed Tony Blair that he proposed to write a joint pamphlet with the Spain's right wing Prime Minister Aznar on the virtues of flexible labour markets in the lead up to the recent Spanish elections.
Intervention by the Socialist International stopped this happening, but Blair and Aznar linked up regardless to push for labour flexibility at the recent EU summit in Lisbon.
In France companies are using the new 35 hour week to push for concessions on wage moderation and weekend shifts. Companies like Asea Brown Boveri have been able to make thousands of workers redundant, even with a rising order book, without significant resistance.
There are two immediate causes for the current restructuring: increased competitive pressures in the product market and changes in the financial markets. But each of these in turn rests on a number of deeper developments. Four are particularly important.
Firstly, there is the impact of 'globalisation'. In areas like telecommunications and pharmaceuticals European capital is facing increased competition from the USA. But equally importantly, European companies are restructuring in order to mount their own assault on US and Japanese capital.
In industries like water, power and mobile phones French, German and Scandinavian companies have been buying up American businesses. European companies are increasingly obtaining finance on a global basis.
The restructuring at Daimler-Benz followed it becoming the first German company to obtain a listing on the New York Stock Exchange. Siemens plans a similar listing this year. British and American investors now own more than a third of the stock in the largest French companies.
As this develops the old 'European' model of stable shareholdings, largely controlled by banks, with companies substantially immune from takeovers, is being broken up, and replaced by a more aggressive concentration on shareholders interests. The recent merger between the London and Frankfurt stock exchanges both reflects, and is likely to speed up, this process.
The second development is the introduction of the Euro. While the Euro was formally launched sixteen months ago the current period, before it actually comes into use as a currency, will entail a further rush of frenzied activity as different capitals jockey for position in preparation for a more unified market.
Fixing exchange rates between the different European currencies has encouraged cross-border investment and heightened competition, by removing the risk of currency movements and by making price differences more transparent.
Thirdly, there is the wave of privatisation and deregulation sweeping Europe. Between 1992 and 1998 privatisation proceeds were more than $60 billion in Italy and around $50 billion in France and $45 billion in Spain.
This represents a massive new flow of money on to European stock markets. Deregulation has been especially important in the electricity and telecoms markets where it has led to a surge of cross-border investments.
The next important battle ground for European capital is pension reform. A move away from pension schemes funded from taxation towards Anglo-American style pension funds based on stock market investment would back up the initial boost to the stock markets provided by privatisation and dramatically change the financing system for European companies.
Spurious scare stories about the costs of the ageing population across the continent are being used to force through pension ‘reform’ and lay the basis for such a development.
Finally, technological change is playing an important role. Behind all the hype about the internet and the ‘new economy’ directed at consumers lies the main use of information technology as an instrument of restructuring relations between businesses.
This is especially the case with supply networks; in motor components for example the French company Valeo has now shifted dramatically towards using the internet for its operations to cut costs, while at the same time following Renault in making the first big European car components investment in Japan.
It is this restructuring of European capitalism that is the central issue for workers across the Western half of the continent, rather than exchange rate values.
Financial analysts and the business press are now looking to Europe to provide the kind of capitalist leadership in the next decade as that which they saw as coming from the USA in the 1990s and Japan in the 1980s.
But just as the Japanese model is now seen to have been deeply unstable, and the USA is increasingly recognised as having generated a dangerously speculative boom, the prospects for European capitalism are not easy.
Over the last decade European workers have resisted strongly the rationalisation demanded by the Maastricht Treaty, notably in the 1995 French strikes, the action against Berlusconi’ s pension proposals in Italy, the general strike in Spain and so on.
The plans of European companies to exploit the marketplace created by the Euro are likely to generate as much resistance as the plans of governments did following the Maastricht Treaty.
Yet given the increasingly international nature of capitalism in Europe such resistance is unlikely to succeed if it takes place purely on a national basis. A central issue is the development of Europe-wide links between workers, which can lay the basis for resisting the capitalist offensive which is now taking place.