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On the class character of the European Communities/European Union:  A Marxist approach

by Spyros Sakellaropoulos 

Abstract

The nature of the European Communities/European Union has been extensively analysed in mainstream studies of International Relations but has not aroused comparable interest among Marxist theorists. This article represents an attempt to outline the historical course of the European Communities/European Union, the elements that contributed to shaping it from its foundation to the present day, including in its acquisition of an upgraded role in the international division of labour, with all the problems of competitiveness that it was called upon to face from a certain time onwards. My basic thesis is that it was established as part of an endeavour to counter Soviet influence in Western Europe and that its subsequent course bore the strategic imprint of the most powerful monopolized sectors of the European economy whose priority was the opening of markets. The rise of neoliberalism and changes in the international balance of forces were to intensify the capitalist drive to increase profitability through the policies elaborated by European institutions, while at the level of member states Germany emerged as the strongest country in the European Union.

 

 

1. Concerning the creation of the European Communities

 

The establishment of the European Coal and Steel Community (ECSC) in 1951 was a significant development in the history of the Cold War. It was not the product of spontaneous tendencies towards collaboration within European states  but in fact was clearly a political initiative of the United States aimed at checking Soviet influence in Western Europe.  

To be specific, on the one hand the fact that the European economy emerged from the Second War in ruins and on the other that a number of European countries (Hungary, Bulgaria, Yugoslavia, Rumania, Albania, Poland, Czechoslovakia, the GDR) came under Soviet influence obliged the USA, as the hegemonic power in the capitalist world, to adopt a policy of forging capitalist productive relations.  This orientation was centred on the Marshall Plan (1947), which provided an economic aid package for each country of Europe to offset the damage that had been wrought by the Second World War.     

The basic prerequisite for the countries^[1] that were ultimately to be included in the Marshall Plan (Program for European Recovery) was agreement to participate in an organization that was to be charged with collective management of economic assistance and elaboration of a programme for European reconstruction. This led to  creation of  the  Organization for European Economic Co-operation (OEECC), with other institutions of European collaboration, such as the Western European Union (1948) and the Council of Europe (1949) being established almost simultaneously.

It was in this way that a climate of joint action between European states came into being. As a trend it came to be conflated with the issue of (West) Germany’s future, the question being whether it would remain under Allied occupation or whether another solution would be opted for.  Finally what happened was acceptance of participation by West Germany (more correctly the Federal Republic of Germany) in the ECSC (European Coal and Steel Community), which was established in 1951 by France, Germany, Italy, Holland, Belgium and Luxembourg (“the Six”).

Establishment of the ECSC facilitated resolution of a number of questions that had arisen: the tendency towards economic collaboration between European capitalist countries, management of the problem of Germany, the focus on two basic parameters of industrial production, namely coal and steel, the incipient operation of a free market. The role of the US was positive in this development, on the one hand because it initiated the European common course and on the other because of the greater stability of the basis on which the European capitalist economy now began to operate.

The ECSC was deemed to be on a successful course and in conjunction with other landmark events (the founding of NATO as the institution securing the Western military alliance, the German Federal Republic’s entry into NATO in 1954, the consequences of the Suez war in 1956) we are led to the Treaty of Rome of 1957 that was to establish the European Economic Community (EEC) and the European Atomic Energy Community (EAEC). The basic objective of the whole undertaking was to create a common Community framework of law, administration and taxation and to restructure the content of production via common directives and agreed specializations, solving sectoral problems  through the adoption of common policies.  It should be noted, finally, that the participants in these two new initiatives were the six countries that had also launched the ECSC.

It is of interest to examine why Britain was not one of the participants, as indeed was also the case in 1951, and the answer is to be found in the colonial crisis in the form that this emerged after the war, reaching its climax with the drama of Suez. Specifically, the end of the Second World War was marked by the rapid achievement of independence by almost the entirety of Britain’s then colonial possessions. Faced with this reality, Britain opted for a strategy of strengthening relations with the former colonies, downplaying the significance of the ECSC and its creation. The painful defeat subsequently sustained  by the French and the British over  Suez,  in  conjunction  with  the  USA’s  abstention  from  active involvement, led these two countries to different conclusions.  Both were brought to a realization that the links they had forged with their underdeveloped possessions in the colonial period had now been broken and that the most powerful country in the world was the USA but, above and beyond that, the French chose to devote themselves single-mindedly to the institutions of European collaboration whereas the British sought to strengthen their trade links with the former British colonies, to pursue more clearly Atlanticist policies and to establish, in 1960, the  European Free Trade Association (EFTA), a free-trade zone comprising the states of Austria, Denmark, Switzerland, Norway, Portugal and Sweden, and naturally Britain, and concerned primarily with trade in industrial products. It presupposed the functioning of relaxed inter-governmental institutions and precluded the existence of common internal tariffs (so as not to affect British dealings with the countries of the Commonwealth). The European communities, by contrast, included inter-governmental institutions with real authority, the free circulation of agricultural products and the introduction of common external tariffs. 

One pertinent question is what kind of entity the ECSC was initially, and the European Communities (ECSC, EEC, EAEC) were subsequently, that is to say whether they were the precursor of a federal Europe. Our position is that they started as an inter-governmental institutional synergy of bourgeoisies whose purpose was the opening of markets and strengthening of capitalist development under the tutelage of the USA. To formulate it somewhat differently, on the one hand the two great losers of the war (Germany, Italy), but also countries with a strong Communist tradition (France, Italy) were incorporated and integrated into the overall framework, and on the other the removal of intra-community barriers encouraged and strengthened higher productivity capital.

But the real question for the 1960s was in fact whether the economic upsurge that was being generated within the European communities had the potential to elevate them into an economic counterweight to the USA. There are various views on this.

According to one line of thought American capital was using the European communities for its own advantage, to promote its own investment. A characteristic exponent of this view was Nikos Poulantzas, who maintained that 70% of American investments in Europe took the form of direct investment, as against 1/3 of European investments in the USA. In the processing sector in 1950 Europe absorbed only 24.3% of American capital and by 1966 this figure had risen to 40.3%, and while by far the largest proportion of direct American investment in Europe was channeled into processing, only 1/3 of European investment in the USA was similarly oriented, given that investments were mostly going into services, insurance, etc. (Poulantzas 1979: 52) 

By way of contrast, according to another view, the European communities had begun to compete with the American economy, and quite effectively, commencing at a modest level and rapidly expanding its dynamic within a framework of accelerating economic internationalization.  This could result in the emergence of the EEC as a new imperialist pole challenging the hegemony of the USA (Mandel 1968). 

Our position is that in reality, at least up until the beginning of the 1990s, USA’s relations with the European communities were never antagonistic in any straightforward way. As the world’s most powerful imperialist and capitalist power, the USA pursued hegemonic policies whose content greatly outweighed the economic element. What basically interested the USA was the maintenance of capitalist productive relations in Western Europe, something in no way guaranteed given the post-war developments in Eastern Europe, not to mention the more general advance of Communist ideas internationally, particularly after the coming to power of the Communist Party in China. Many years would be required to pass, and the regimes of existing socialism to fall, before there could be a change in the relations between the USA and the European Communities/EU.

In any case the decade of the 60s  was characterized by uninterrupted economic development in the countries of the European communities, the strengthening of Germany, but also the emergence of a multi-faceted impasse in the EFTA. The underlying factor in this connection was London’s realization that it would derive many more benefits from participation in the European communities than it had initially judged. To put it somewhat differently, it had become patently obvious both that the 1957-61 period was going down as a significant phase in the development of the Six and that it was clearly more in the interest of Britain to forge closer economic links with the other European countries than with the countries of the Commonwealth, something that would not be easy if they remained outside the common market of the EEC. The British government therefore set its sights on entering the European communities, but twice (1961, 1967) was rebuffed as a result of a French veto. The factors underlying the rejection were the closeness of ties between Britain and the USA, at a time when the Six, under the hegemony of France, were striving to forge a more independent profile, the weak position of the English pound in the international monetary system, but also disagreements over the Common Agricultural Policy and over capital movements.  

In reality, besides the economic issues, developments in the 1960s unfolded against a backdrop of overall strengthening of the position of the Six in the international arena irrespective of whether this, for the reasons indicated, did or did not cause problems for the USA. The key issue to be resolved was internal to the Six and had to do with the role of France, which sought in every way to confirm its predominance, notwithstanding the economic growth of the Federal Republic of Germany: whether it was a question  of Britain’s entry or the retention of the right of veto or the establishment of an informal “directorate” together with the Federal Republic of Germany via the  Franco-German Treaty (1963). 

 

2. The first enlargements and the turn to neo-liberalism

 

Even in the sixties the successful model of the Six was seen as a decisive factor in the correspondingly significant economic performance of these countries. A decision was accordingly made to adopt new institutional changes in accordance with the threefold formula “integration, enlargement, deepening” through fulfilment of the reforms for freedom of movement of capital and freedom of domicile for persons but also the establishment of a regime of economic and fiscal unification^[2] along with a broadening of the range of issues to be included in   the Community’s institutional framework.  It was assumed that such an orientation would facilitate enlargement of the Community through the accession of Britain, Ireland, Denmark and Norway^[3].  The Europe of the Nine (the Six plus Britain, Ireland and, Denmark), with the old Franco-British conflicts now overcome, was ready to play a central role internationally, with achievement of a common monetary policy as the central goal.  

It should nevertheless be noted that the attempt to implement a common monetary policy had been linked to the price of the dollar, with the result that when the value of the dollar began to fall in the 1972-73 economic crisis the significance of the undertaking was downgraded given that a number of countries (Britain, Denmark, Ireland, Italy) withdrew their currencies from the joint experiment.

But the global crisis was to bring other questions to the surface, putting a damper on the initial optimism.  It soon became clear that the 25 glorious years of continuous capitalist growth had come to an end and new policies were going to have to be adopted if the crisis was to be overcome by the community of the Nine. Such policies could not be limited to further expansion, even though this orientation did in fact mean a larger common market.  What was needed were comprehensive and radical breaks, wide-ranging and penetrating enough to cope with the intensity of the international competition that had accompanied the rise of Japan and the dynamic entry into the arena of the countries of South-East Asia,  the consequences of the two oil crises (1973 and 1979), the problems that had arisen in the wake of the accession of the three new Mediterranean member countries (Greece, Spain, Portugal). This is the context in which the single internal market was opted for as a means of increasing the competitiveness of the European capitalist economies. But for such a strategy to be effective there had to be an  overall restructuring of the existing institutional framework – the more so in the light of the increase in the number of Community members from six to twelve (1986). All the relevant institutional changes were concentrated in the Single European Act (SEA), which was passed in 1986. The Single European Act ruled specifically that the prime objective was completion of the internal market within the Community, i.e. abolition of internal tariffs,  customs barriers and the deployment of technical specifications as an inhibiting  factor against the importation of goods,  an end to discrimination in the granting of state subsidies and tax exemptions, free movement of capital and labour (i.e. orientations which although prescribed in general terms in the Treaty of Rome, had not been adequately implemented).

What should be noted is that the overall context in which all this was taking place was one of shifting of the political map towards more conservative assumptions, a trend explicable from the crisis of the Soviet model, the exhaustion of the dynamic unleashed by the world-wide upheaval of 1968, the incapacity of China and the countries of the Third World to articulate a comprehensive alternative proposal but also the absence of a Social Democratic orientation resistant to the hegemony of neoliberalism. Thus with the election, initially of Reagan in the US and Thatcher in Britain, and subsequently Kohl in Germany, a gradual transformation took place in  the content of Community policies. 

 

 

3. From the SEA to the creation of the Economic and Monetary Union (EMU) ΟΝΕ (1986- 2001)     

Ratification of the SEA was followed by a further series of important treaties (Maastricht, 1992, Amsterdam 1997, Nice 2001) in the interval preceding the introduction of the euro in 2002 as common currency for twelve countries (Germany, France, Italy, Holland, Belgium, Portugal, Spain, Greece, Luxembourg, Austria, Ireland, Finland). 

The Maastricht Treaty, which was signed shortly after the collapse of the Eastern bloc and at approximately the same time as the disintegration of the USSR, terminated the European Communities and created the European Union (EU), with achievement of the European Monetary Union as its key mission. The priorities for the EU were essentially threefold: economic convergence of the member states, the elaboration of a uniform economic and monetary policy through adoption of a single currency - the euro - with the recently established European Central Bank responsible for its circulation. 

In 1997 the Treaty of Maastricht was amended by Treaty of Amsterdam.  The amendment was necessitated both by the requirement for regulation of issues such as the unprecedented procedure for adopting a common currency, decision making in the light of prospective entry into the EU of former socialist countries, and the adoption of mechanisms for legalization of all the related decisions. 

What should be made clear is the totally economocentric character of the European Union  (Kotzias 195: 114), and indeed in a period of contracting rates of profit, made possible a greater mobility of private capital seeking the highest profitability fields for investment, at the same time intensifying the degree of concentration and centralization of production, a phenomenon related to the fact that the creation of the single market has multiplied the opportunities for takeovers and mergers^[4], facilitating the implementation of economies of scale and pursuit of larger-scale investment.

In essence the EER, Maastricht and Amsterdam were simply successive institutional ratifications of the transformation (country by country) of the welfare state (with whatever peculiarities characterized it inside each national formation) into a convergent form of neoliberal governance. The basic orientations of these policies (reduction of deficits, lowering of interest rates, maintenance of low levels of inflation) would lead European governments to adopt restrictive fiscal policies, with wage increases accordingly being kept at low levels,  but with resultant reductions also in company profits and revenue from taxation. Following that,  significant changes were to take place in the insurance sector, where rising life expectancy on the one hand and spiraling unemployment on the other had led to big deficits for the insurance funds. The response to this was a raising of the minimum retirement age and cutbacks in social expenditures (primarily through reductions in health spending). This was just one aspect of a generalized running down of the activities of the social state, with cuts in expenditure on public education, culture, health, and the implementation of measures for further privatization of public services (or their operation in accordance with private-sector criteria (Roumeliotis 1996: 303 ff.)   

Reinforcing all of this orientation was the decision to expand the EU into the formerly socialist countries. The basic factor was the prospect of entering new markets and exploiting new investment opportunities  (low labor costs, high levels of specialization, the existence of infrastructures) but there were also other considerations such as concerns about the Yugoslav crisis spreading to other areas of Eastern Europe with minority problems, with a resultant increase in uncontrolled migration. The emergent Eastern elite, for their part, judged that entry into the EU could shield their countries from the danger of break-up and provide greater opportunities for the more competitive sectors of their economy and new possibilities for commercial capital.            

For it had become patently obvious that the more the Eastern countries were integrated into the EU, the so-called  “Strategy of Lisbon” (see below) was being adopted by the EU. This was happening because from as early as the 1980s the problem of  European economic competitiveness had begun to manifest itself.  It was then that the EU12’s share of industrial production in the international market for manufactured products had started falling, particularly in high-demand sectors such as electrical appliances, electrical equipment, office machines and information technology (Τsoukalis 1997: 34- 35). The automobile industry and the industrial equipment sector also suffered significant losses. Another consequence was a reduction in the proportional production of global surplus value from 35.7% in 1980 to 32.4% in 1990, with Japan at the same time going up from 14.2% to 17.6% and North America experiencing a slight fall from 23.9% to 23.7% (United Nations, 1998).   

The “Lisbon Strategy” aimed at making the EU “the world’s most competitive and dynamic knowledge economy, capable of achieving economic growth together with better employment opportunities and greater social cohesion” (quoting from Blanke and Lopez-Glaros 2004: 1).  It included eight concrete goals: a) to create an information society for all, b) to develop a European research and development area, c) to deregulate markets, d)  to develop network industries in communications, e) to establish efficient and integrated financial services, f) to upgrade the entrepreneurial environment, g) to increase social cohesion, h) to strengthen sustainable development. 

The necessity for a single currency was confirmed in this context. The rationale behind it was that it would bring the following specific benefits that would serve the overall objective of upgrading the EU’s competitiveness in the international arena:

 1) Abolition of the different currencies would lead to a reduction in relative transaction costs  2) Conditions of monetary stability would be generated, promoting stabilization of prices and a brake on inflation (a devaluation always means increase in the prices of imports and so imposes a burden on consumers)  3) The single currency will make economic transactions more transparent, in that way fostering a fall in prices that will make European products more competitive  4) The euro and the single market will be conducive to the establishment of large European enterprises that will be in a position to launch business activities with economies of scale that will make possible successful competition with the corresponding Japanese and American corporate monopolies (Gilpin 2000)  5) The euro will bring about a unification and broadening of the overall scale of fiscal markets (capital markets, currency markets, stock markets, bond markets, etc.), with resultant upgrading of efficiency  6) The new currency will  foster the creation of new financial products, making available a wider range of choice to investors.

In 2001 the Treaty of Nice, amending the Treaty of Amsterdam, was signed by European leaders. The factors that led to it undoubtedly included the looming crisis of the euro as the single currency for twelve countries, but also the readjustments necessitated by the entry of another ten countries (Poland, the Czech Republic, Slovakia, Slovenia, Hungary, Estonia, Latvia, Lithuania, Cyprus) in 2004 and another two (Rumania, Bulgaria) in 2007.

  

4) The problem of competitiveness of the European economy

What needs to be made clear is how both the various treaties negotiated between 1986 and 2007 and indeed the Strategy of Lisbon have been unable to solve the basic problem of the European economy, namely the lack of competitiveness, a particularly important parameter in a period of economic internationalization in the course of which  the EU aspired to emergence as a hegemonic economic power. Thus throughout the period prior to the crisis of 2007-2008, EU performance comes across as notably sluggish. 

For a start, the USA in 2007 remained the country with the highest productivity in the G7: using an index of reference of 100 for productivity (GNP per working hour) in the USA, Italy rates as 76%, Japan 71%, Germany 93%, France 99%, Britain 82%, Sweden 89%, Spain 78% and Canada 82% (OECD 2008).  The average annual increase in real GNP for the 1992-1996 period was 3.3% for the USA,  just 1.4% for the countries of the Economic and Monetary Union (EMU) and 1.4% for the EU-27. For the 1997-2001 period the figures were 3.5% for the USA, 2.8% for the countries of the EMU and 2.9% for the EU-27. For 2002-2006 they were 2.7% for the USA, 1.6% for the countries of the EMU and 2.0% for the EU-27.  (European Economy 2008 no. 6).

Another question concerns the goal that had been set of promoting the euro to the status of global reserve currency.  As it turns out, the creation of the euro has not led to any such result. There has undoubtedly been a gradual process of increasing visibility: in 2007 32.7%  of the total value of bonds in the global markets was in euros, as against 21.7% in 1999, but the dollar remained in first place, with 43.2% in 2007 compared to 46.8% in 1999. 

It should be borne in mind however that while the competitiveness not only of  the Economic and Monetary Union but also of the EU as a whole has evinced a number of symptoms of decline, the phenomenon has not been uniform and there is clearly one country that has been strengthened by it and that is Germany. In 2007 Germany presented a current account surplus in the order of 8%. This became possible because from the turn of the 21^st century onwards German exports skyrocketed (60% increase in the period 2002- 2008) while at the same time workers’ earnings from wages rose by only 0.4% in real terms, a figure much smaller than the increase in productivity. Thus, just taking into account the factor of production costs, we find that in 2009, by comparison with the figure at the turn of the century, a product costs 23%  more in Ireland, 25% more in Greece, Spain, Portugal and Italy and 13% in France.        

The EU’s internal crisis came to it from many directions and was complicated by numerous different factors such as the competitiveness deficit that afflicted the European economy, the growing internal equalities that have accompanied the economic supremacy of Germany, but also the institutional peculiarity of the European Union which, without being a state, has the European Central Bank and a number of members sharing a common currency.

The crisis of Wall Street, in particular, had a significant effect on European capitalism because it meant loss of an important source of demand for its products, and its banks, too, were faced with collapse of American collateralized debt obligations. Confronted with the danger of European banks going under, the ECB hastened to provide them with public money, as indeed had happened in the USA also, with the difference that in the European case: 1) as we have seen, the credentials  of the euro for being the international reserve currency fall short of those of the dollar; 2) the USA is a federal state and is therefore able to transfer surpluses from one state to another; the EU has no such capacity; 3) the USA has created a monetary and financial instrumentality that has enabled American banks to erase toxic collateralized debt obligations from their books at the expense of taxpayers.   This has not been so easy to do in the EU because in 2008-2009 there was a significant fall in the GNP of European countries (Germany -5%, France -2,6%, Spain -3,5%, Sweden -5,2%, Holland  - 4%), with a resulting fall in tax revenues.  It was then that the European banks decided to use a proportion of the public money they had received  for the purpose of investing in the prospect of bankrupting one country (Varoufakis/Patokos/Tserkezis/Koutsopetros 2011: 32- 33).  There then began, immediately, a series of speculative attacks on the weakest economies, with a high level of indebtedness and therefore more likely to declare a suspension of payments.   

It is at this point that the most decisively “internal” factors enter the equation.  Both the EU’s competitiveness deficit and the increasing unevenness of economic development within the EMU (exacerbated by the adoption of the common currency, with resultant elimination of the weapon of devaluation) led to mushrooming current accounts deficits in Ireland, Greece, Spain, Portugal. In a preceding period these countries had been able easily to finance their deficits because the ECB had kept interest rates very low in the Eurozone (Lapavitsas 2014: 430 [in Greek]). The situation was perpetuated because of the predominance of Germany, which – as we have seen – maintained a significant trade surplus. Besides the recession in the real economy, the advent of the crisis introduced a more general risk for the Economic and Monetary Union and for the EU as it threatened to wreak havoc with the functioning of the banks, both because of the toxic collateralized debt obligations and because it was holding bonds from countries threatened with bankruptcy.       

Finally the solution that was adopted was creation of the European Financial Stability Facility (EFSF), from which “problem countries” would be able to take out loans for the purpose of servicing their debts, at the same time, however, signing long-term memoranda accepting harsh austerity (see below). This served to forestall the risk of a serious crisis being transmitted to the interior of the European and Monetary Union and the EU, with the “problem countries’” debt to the private banks being shifted to the stronger European central banks.   

 

 

 

5) The present situation

Above and beyond adoption of memorandum policies, the generalized fear of further deterioration of the European economy, but also the favourable balance of forces socially, has led to a series of new institutional changes within the EU: “Euro Plus Pact”, “Stability and Growth Pact”, “Sixpack”, “Twopack”.  In accordance with these, every state must present a long-term plan for winning the confidence of the financial markets. At the national level, an annual “stability and convergence  programme” is to be drawn up which will determine its goals in relation to deficits, income and expenditures, the strategy by which these goals are to be accomplished and the timetable for their implementation. For this to  be feasible, every member state will be required to embark on a series of structural adjustments. There will be stringent supervision by the EU bureaucracy: the draft plan for every national budget must be presented to the European Council prior to consideration by the national parliament and the recommendations of the European Commission must be incorporated into it.

As regards labour costs, they are to be monitored closely and compared with the corresponding figures for other states in the Eurozone and with those for the EU’s principal trading partners. If it is judged that wage levels in a state are not commensurate with its competitiveness, they will be submitted for re-examination.  Correspondingly, the viability of the pension system will be kept under close and continuous scrutiny through institution of special indices for correlation with levels of indebtedness. A further objective will be to align retirement age with life expectancy and cut back on early retirement arrangements. Also proposed is further reduction of employer contributions to insurance cover, and another key priority is development of a common consolidated corporate tax base.

            At the same time there is provision for establishment of a mechanism to put a brake on increases in indebtedness. Countries whose indebtedness amounts to more than 60% of GNP are required to reduce debt levels over  60% by 1/20th each year, necessitating budget surpluses, given that the debt of most EU member countries comes to more than 60% of their GNP. This directive must be incorporated into the national law of the member states through provisions that are permanent and binding in character and preferably written into Constitutions, or else provisions whose observance is vouchsafed through procedures governing the national budget. In order to make sure that policies of budget surplus will be adopted, the qualified reverse majority principle is applied, whereby a reinforced qualified majority  is required, not for a fine amounting to 0.1% of GNP to be imposed on the state not complying with these directives, but for it not to be imposed. The penalty is determined by the European Court following a related submission from the Commission or after one state takes action against another state. Apart from imposition of fines there exists the possibility of terminating payment from the Cohesion Fund. Nevertheless, to minimize the risk of unpleasant surprises, an “early warning system” has been introduced and incorporated into Regulation 1176/2001. Included in it is the so-called “European Semester”, in the course of which the Commission monitors all the funds in each budget, commencing from some months before it is voted.  There is also the medium-term fiscal strategy framework, covering a period of four years and updated and providing for binding targets for deficits and surpluses and binding ceilings on ministry expenditures.

Finally, provision is made for a regime of “enhanced monitoring”, covering countries that apply for funding from the European Support Mechanism.  This means that states that have received assistance through the mechanism remain under a regime of supervision following completion of the programme if they have not repaid 75% of the money received.  

 

6)  Is there a movement towards a united European federal state?

Bourgeois theories on the content and evolution of the European unification project are in accord that its point of departure was the attempt to adapt to the dual pressures exerted on Western Europe in the postwar period both from the Eastern bloc and from the United States in the latter’s determination to curb the Soviet influence  (Rosamond 2000).  Apart from that there are a number of approaches postulating that the institutional changes carried out from the mid-80s onwards, which are moreover explicable from the elimination of the dual pressure that Europe had hitherto experienced,  have until now  been regarded as contributing to creation of conditions for establishing a supranational European entity, or at least that we are in the process of moving towards such a goal. These are theories which, whatever  differences of detail exist between them, are in agreement that a gradual weakening of state powers is under way, with corresponding strengthening of the institutions of the European Union. A basic component of this viewpoint is that the national states of Europe are being obliged to submit to decisions from the European centre, without any concrete possibilities of autonomous action. At the opposite pole to this are the theories according to which the national states continue to play a decisive role in the evolution of the European project.

Let us try to obtain an overview of these positions.

According to the theory of Federalism all the changes that have been carried out, albeit at a snail’s pace, lead towards establishment of a federal Europe.  Each national state is forfeiting elements of national sovereignty to the benefit of a nascent European federal state. The theory of  Functionalism  can serve, in a way,  to supplement Federalism, maintaining that we are indeed on the way to a political union and that this is to be achieved by virtue of spillover from successful outcomes in one sector of European collaboration into another new one, with the emphasis on economic institutions, the proper functioning of which will also generate the prerequisites for successful construction of common European political institutions. A different approach is adopted by Institutionalism, which maintains that a process of supranationalization of the EU is indeed under way but that within it one should take into account the relative autonomy enjoyed by the EU’s central institutions and also the growing osmosis that has been created between the European and the national institutions (Peters  1994, Wessels 1997).  The theory of Multi-level Governance puts forward the view of the EU as a system characterized by different levels of governance in which there are supplementary functions and overlapping powers, with the supranational institutions possessing autonomous influence over the whole process (Marks/Hooghe, Blank 1996). A significant role is played by the creation of networks that can mediate in the relations between internal (subnational) institutions and European institutions.

At the opposite pole to this stand the state-centred views, and first and foremost  the theory of intergovernmental relations, according to which the evolution of the European project is the outcome of related decisions taken by the member-states that are in a position to regulate the processes taking place within European institutions. The behaviour of the national states is dictated by the requirement that they serve  their own specific national interests (Milward 1992; Hoffmann 1995). One variation of this current,  the pluralistic theory of intergovernmental relations, argues that what happens in the European Union is decided in negotiations between the stronger states, with the consent of the weaker states being secured via the grants they receive from  community funds.  Each state has its own specific objectives from the moment that it participates in the negotiations and there is no lowest common denominator on the basis of which the most important decisions can be taken (Moravcsik 1991).

Whatever the important differences that exist between them, and despite the fact that, in our view, the state-centred theories put forward more persuasive arguments, all the above theories suffer from a general weakness stemming from the theory of international relations itself, of which they represent sub-categories. And quite apart from that, there are certain separate issues that pertain to the particular  character of the EU.

Traditional international relations theory concerns itself with rather simplistic notions of state tactics and strategies based on narrow definitions of national interest or with equally narrow mechanics of force. On the one hand, we have the narrow empiricism and methodological individualism of the Realist School that considers states and their balance-of-force relations as the main forces shaping the international system, ignoring non-state relations and antagonisms. The main problem of Realism is that it tends to treat states as rational and self-conscious actors, leaving no theoretical space for any attempt to use class analysis as an explanation for the behavior of states. On the other hand, we have the varieties of idealism, or more generally speaking normative conceptions of international relations, with their belief that norms can be more powerful than power relations, e.g. in current theories of a possible cosmopolitan democracy arising out of the combination of globalization and global civil society institutions, theories that tend to underestimate the force of political and social conflicts and the role of capitalist states as political factors.

What is missing is a more thorough theoretical definition of the very terms and notions that most mainstream varieties of international relations use. It is in this sense that we insist on the analytical superiority of a Marxist theory.

Marxism entails a definition of power that goes beyond the tautologies used in traditional political science, in which political power is just taken as given. Marxism, instead, offers a definition of power as the “capacity of a social class to realize its specific objective interests” (Poulantzas 1978: 104). This priority of exploitation over domination offers an explanation of power as class power, ability of social groups to control the extraction and distribution of surplus labour because of their specific objective structural class position. It offers a possible explanation of the class character of power relations and struggles and therefore also of state apparatuses. The key point, in our opinion, is to stress at the same time the analytic priority of exploitation over repression and domination, and the importance of the fact that the object of political practice is the condensation of all the contradictions of the various levels of a social formation (Poulantzas 1978: 41). This notion of the political escapes the shortcomings of mainstream political science’s notion of political power as administrative command and insists on the class character of political power.

In light of the above we cannot take states as the primary forces in shaping the international plane, but instead we must look at the different class alliances and power blocs and how these affect the formation of objective capitalist class interest. It is this class interest that is then expressed as political strategy, state policy and consequently international policy. The importance of Marxism is that it brings forward how states’ behaviour in the international plane is itself conditioned by the articulation of class contradictions and political strategies and the emergence of hegemonic power blocs. It offers the possibility to treat interstate relations as class based relations, as relations (and conflicts) between different power blocs. Marxism stresses the importance of particular historical modes of production for interstate relations. Contrary to the ahistorical stance of traditional International Relations theory, Marxist theory provides a theoretical framework that helps understand how the emergence of the capitalist mode of production changes the very notion of international relations. Marxism offers a more comprehensive account of social and political power and antagonism that goes beyond the mechanics of power versus normative considerations dichotomy that marks mainstream International Relations theory. Marxism is not only a social theory or explanation of power as a crucial stake in international relations and a theory of possible changes in international relations due to changes in social relations. It is also a way to explain the interplay of political and ideological relations that induces the emergence of normative considerations. Marxism offers the possibility of a theory not only of interstate conflict but also of interstate hierarchy (Sakellaropoulos/ Sotiris 2008).

The above position epitomizes Marxism’s capacity to provide a more concise account of developments at the international level.  The non-reduction of every species of international conflict (military or otherwise) to explanations of self-interest contributes to acquisition of a more rounded approach to changes in the international scene. Thus, for example, we can understand the outbreak of the Second World War as reflecting not so much a drive towards geographical expansion as a struggle for hegemony between two powerful imperialist formations, and limitation of the extent of military conflict in the postwar era as a by-product of American hegemony over the Western world. A hegemony expressed through its provision of elements of a collective strategy for the entirety of the imperialist chain (rapid industrialization, ‘fordist’ accumulation strategies, mass consumerism and individualism, an amalgam of anti-communism and technocratic ideology) (Sakellaropoulos-Sotiris 2015). Correspondingly, the relative downgrading experienced in the postwar period by  the significant colonial powers of Britain and France has to do not with some kind of military failure but with the fact that the United States succeeded in articulating a more acceptable hegemonic imperative for reproduction of the capitalist system internationally. 

Having made this basic methodological distinction we may return to the question of the EU, which we argue constitutes a multilevelled collaborative endeavour between social capitals and collective national capitals (states). This amounts to creation of numerous mutually penetrating networks of social (economic, political, ideological) interconnections with – on each occasion – different participating bodies, which may be supranational mechanisms,  national states, regional administrations, multinational groups of companies, interest groups whose reach is international, etc.  But all this complex puzzle can be clarified through analysis of its basic components, which are on the one hand the private interests of companies and on the other the operations of the national State to safeguard the terms of reproduction of these capitals, in conjunction with the particular hierarchical position of each country within the European Union. As has been noted, aptly, each state acts separately on the basis of its specific strength within the configuration of the EU, with the result that this situation is also reproduced in the new institutional forms and functions that are being constructed (Kotzias 1995: 47). The weaker nation states participate in the whole process in full awareness of the structural restraints, hoping on the one hand that the tension of the antagonisms and consequent transference of adjustment costs to the detriment of the incomes of the dominant classes will serve to strengthen their own national economies, and on the other that even if all the above does not come to pass, the country’s position will have been upgraded by comparison with that of the countries remaining outside the European Union.

This is particularly true of the eleven former socialist countries that were incorporated into the European Union where, whatever the difficulties of achieving competitiveness with the states of the European centre, it was judged that entry would offer many more advantages to the elite of these countries. Something similar occurred a few years previously when economically less developed countries such as Ireland, Spain and Portugal were included in the then European Communities. The common ground was that the ruling classes of those countries thought the dynamic of the European unification project would override whatever relative backwardness and other endogenous problems might persist. 

The increase in EU membership from the initial six to 28 would inevitably lead to more complex institutional procedures, so that repeated treaty amendments would become necessary. These were to introduce institutional modifications entailing an upgrading of the supranational dimensions of certain entities such as the European Court and enhanced potential for intervention in the shaping of decisions by others (e.g. the European Parliament).

 Nevertheless, these changes in no way invalidate the essential content of EEC/EU integration, whose purpose is to facilitate capital accumulation and profitability for the most powerful monopolies. The overall conjuncture in the 60s and 70s made it possible for the accumulation to be effected on Keynesian terms, something that was overturned in the 80s with the advent of neoliberalism, and with the overturn further intensifying subsequently with the fall of the Eastern regimes and reaching its peak with the outbreak of the recent economic crisis.   Whatever changes were instituted in the various treaties, they have not altered this fundamental operating principle of the EU. It is a mode of operation that is not questioned because its content and its priorities emerge from closed decision-making centres that are hermetically sealed from any citizen input. When the final directives have been decided upon, then and only then are they communicated to the various representative bodies. And even at that point there is no possibility of democratic amendment, let alone retraction.  This is because of, on the one hand, the labyrinthine bureaucratic structures of the EU, with their coexistence of entirely incommensurate institutional configurations (some transnational, some supranational, some elected, some nominated), in some, all the member states are represented, in others only certain of them (e.g. those of the Eurozone).  The same asymmetrical character of these arrangements has an inhibiting effect that can forestall any grass-roots intervention. On the other it is explicable by the fact that after the rejection of the proposed treaties by referendum (in France, Denmark, Ireland) the European governments decided not to resort to this procedure, for fear of popular opposition.                                     

Finally, what needs to be underlined is that the present situation with the institutions of the European Union and their mode of functioning is imbued, now as in the past, with two basic contradictions, which register both at the level of state policy and at that of the institutional organization of the European Union: on the one hand, at the institutional level, the simultaneous coexistence of elements of a federal state, a confederated entity and an international organization, on the other, at the political level, the presence within the EU of a plethora of states of unequal strength, with different concerns, different priorities and different levels of productivity, make only too evident the limits to its potential for transformation, casting considerable doubt on its prospects for evolution into a single state entity unambiguously federal in character. In any case, recent developments, with the downgrading of Greece, Cyprus, Portugal, Ireland and Spain and the continuous strengthening of the role of Germany, only serve to corroborate the way that Lenin’s theory of uneven development between states operates in practice. In reality the institutional changes, involving elements that transcend nationality, have reinforced, not annulled, German hegemony and the framework it is introducing to fortify the most powerful factions of European monopoly capital.      

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7) What, when all is said and done, is the European Union? 

The founding objective of the European Union was to support the interests of the most powerful factions of capital through formation of a single market whose operations were to be based on the existence and co-ordination of a range of supranational institutions and their collaboration with the member states.  For this to be achieved it was necessary to employ a range of mechanisms for reproducing and diffusing the class materiality of their  structures. At the level of the state administration an important role has been played by those sectors of the state machinery that have undertaken the handling of liaison and contacts with the supranational institutions, while at the same time a continuing transfer of competences has been observable to bodies sealed off from outside scrutiny, lacking in transparency and beyond public control (Nugent 1995: 130-133). A substantial proportion of the negotiating process has been conducted outside of official agencies in informal, non-institutional ways (social meetings, dinners, off-the-record discussions, etc.)  So the European integration process has enabled member states to dispense with the burden of imposing a range of unpopular measures concerning the increase of productivity  (cutbacks in social expenditure, a fall in labour’s share in the manufactured product, changes in labour relations, etc.), given that all these crucial decisions are seen to have been taken at a considerable distance from national governments, in the inaccessible precincts of the European Commission and its Directorates.  

This makes it possible to overlook the reality that, on the one hand, national governments are in no way required to consent to proposals with which they are supposedly in agreement (Moravcsik 1993: 515) and on the other that it is subsequently at the discretion of state institutions  to handle the implementation of these policies (Braun 1996: 159-60; Moravcsik 1993: 517).  In the light of such findings,  what happens in reality is not a transference  of real powers to the level of the EU but more a temporary recasting of them followed by relegation back to the national/state level, which then undertakes implementation of whatever decisions have been taken.. In reality the EU’s mode of operation leads not to a weakening of the national state but rather to a reinforcement of the power of the upper echelons of the state bureaucracy, which in close collaboration with the Executive undertakes the preparation,  and monitoring of implementation, of legislative reforms whose aim is to shift to the side of living labour the cost of increasing  economic competitiveness at the national level.  

The recent economic crisis has instigated a dramatic break with all the abovementioned adjustments, moving  everything in an even more conservative direction and at the same time significantly augmenting the influence of Germany. Essentially through all the new agreements pushed through since 2011 what has been achieved is a gradual  deadening of bourgeois democracy, which has been replaced by a range of inexorable compulsions dictated by the European bureaucracy under the hegemony of Germany and corresponding in an ever more linear fashion with the issues posed by capital movements.

At this point there should be a comment on the alignment of the demands of capital, or to be precise its strongest monopolized factions, with the decisions of European power centres. Up until now this has taken place in a rather refracted way whereby, even if indirectly, governments expressed balances of forces in society and registered popular demands so that the political element, possessing as it did a relative autonomy, imposed certain limits on realization of the plans of the entrepreneurial world. But the sharpness of the crisis, in conjunction with the absence of an alternative plan on the part of the dominated strata and their political representation has produced a new framework. The role of the national parliaments is being downgraded continually: they are simply informed of what is going to happen and/or brought in as an afterthought to ratify decisions that have already been taken.  

In other words, up until the outbreak of the crisis there was a discussion in the public sphere on the democratic deficit, with frequent references to the fact that the majority of decisions on the future of the EU were taken by a narrow official circle and lacked popular legitimation.  In an attempt to rectify this problem the powers we have mentioned were accorded to the European Parliament through a series of treaties, with the Treaty of Lisbon (2007) providing for consultation with national parliaments as well.   

Our position is that in relation to the national parliaments these changes could not transcend the structural limits of the bourgeois state (a hard  core of oppression, states of emergency in the event of challenge to dominant social relations). Moreover the European Parliament on the one hand continued, as before, to have no right of legislative initiative and on the other hand in many cases there were provisions for either sidelining it or consigning it to a purely advisory status.  But that is not the point under the present conditions.  The point is that decisions are taken under the dominion of Germany, with very limited room for manoeuvre, with the participation of the European Central Bank, of some senior officials from the European bureaucracy and representatives of the more powerful member countries, in an increasingly unbalanced manner.  Britain appears to be trying to work out an autonomous  strategy for itself and in any case does not participate in the euro. France and Italy, caught up in economic problems of their own, are obliged to adopt such policies as Germany and the European bureaucracy can agree with. The stances both of the European Parliament and the national parliaments are conditioned by this reality, which parliamentary institutions are in no position to transform.   

A significant contribution to all this was made by the memoranda imposed on Greece, Ireland, Cyprus and Portugal. Of course the policies implemented by these countries comprise an extreme variant of the overall orientation of the European Union (drastic reductions in salaries and pensions, abolition of grants and allowances, a generalized extension of flexible working arrangements, public sector firings, wide-ranging reductions in social benefits, appropriations from bank deposits in the case of Cyprus) and have been carried out in violation of constitutional principles and parliamentary norms. Nevertheless, given that they commenced in the spring of 2010 (in Greece), they are perhaps best interpreted as shots across the bows, as a foretaste of the future for what the strongest imperialist power of the EU, Germany, in alliance with the most powerful monopolized factions of  European capital, would like to be the capitalism of the 21^st century.   

            It is nevertheless worth emphasizing that there should be nothing surprising about the development we described above. The movement towards an authoritarian capitalism is a by-product of the class struggle. As early as the end of the 1930s Hayek had drawn attention to the need for a transnational European system. Not inspired of course by some kind of high-minded cosmopolitanism but by the consideration that an institutional framework of this kind would on the one hand discourage national policies of economic protectionism and on the other, faced with the activity of the subaltern classes, contribute to the depoliticisation of economic relations (Hayek 1939: 255). As aptly noted by Bonefeld, what is important is that the popular strata be kept out of the centres of decision-making, in this way undermining the capacity of the working class to pressure national government into providing guarantees on welfare and employment (Bonefeld 2002: 77)   This position of Hayek, which seems to have been welcomed with open arms by today’s European elites, shows quite clearly that there is no unbreakable link between capitalism and parliamentary democracy. The reality is precisely the opposite: the democracy of mass representation was instituted as a result of popular struggles within the capitalist framework. This does not mean that in a subsequent phase, again as a result of class struggle, parliamentary institutions cannot atrophy, both operationally and from the viewpoint of content. This is where the recent changes in the functioning of the European Union’s institutions come into the picture. A series of amendments extending certain additional rights to elective instrumentalities (national parliaments and European Parliament) were on the one hand the outcome of management by the European elites of previous expressions of social discontent (e.g. the referenda that rejected Maastricht and the Constitutional Treaty) but on the other were subsequently used as mechanisms for blunting the renewed reactions against the anti-democratic content being acquired by European institutions, particularly after the outbreak of today’s economic crisis. The crisis presents clear opportunities for the dominant European elites to introduce a capitalism without political representation and social accountability. 

    

 

Conclusions

What we have attempted to show in this article is that the European Communities/European Union have from their inception borne a pronounced social and political stigma. The European Union is a child of the Cold War and made a significant contribution to materialization of European capital’s plans for an opening up of markets and its own upgrading in the international division of labour. The frequent institutional changes introduced between 1951 and 2015 were not conducive to formation of a supranational polity but neither were they purely and simply the result of intervention by the national states. The national states are the political representatives of the bourgeois power coalition of each social formation, and one of their functions is to devise policies for upgrading of the status of “their own” bourgeoisie within the imperialist chain. This has happened, and happens, in the case of the European Communities/European Union: the bourgeois governments, articulating the interests of the strongest factions of indigenous monopoly capital have participated in the creation of an institutional construct to be characterized by free movement of capital and goods and to provide functional support against competition from other bourgeois classes outside the EU.  The rise of neoliberalism in conjunction with the fall of so-called “really existing socialism” had the effect of strengthening the abovementioned orientation. The objective, in an ever more integrated economic environment, to increase the profitability of the most powerful monopolies at the expense both of the working classes and of the less competitive factions of capital. The continual institutional changes represented an attempt on the one hand to facilitate this process and on the other to create the framework for a European integration that would improve its position in an economically internationalized world.  But two problems arose at this point: difficulties with maintaining the overall competitiveness of the European economy began to arise in the 1980 and on the other the adoption of a multitude of common economic policies, culminating in the creation of the euro, elevated Germany to the status of hegemonic power in the EU.  

The onset of the crisis of 2007-2008 both within the Economic and Monetary Union and in the EU was to highlight not only the more  general problem of restoring profitability that confronted capitalism as a whole after 1973  but also the contradictions and backsliding of Europe that would be epitomized in the deficit problems of a number of the EU’s weaker economies (Greece, Ireland, Portugal).  The solution that was chosen, as always under the hegemony of Germany, through the implementation of the so-called memoranda, was marked by a dramatic reduction in the income of the dominated classes and a process of transforming parliamentary institutions into an empty shell.  All this was nothing more than an extreme variant of an orientation that was to be institutionalized in the 2011-2013 period of conservative restoration that extended to all the countries of the EU. Its basic ingredients were permanent austerity, cuts in social expenditures, the imposition of sanctions on all countries declaring deficit budgets,  reduction of pensions, etc., and all this under German hegemony in a context of contraction of parliamentary powers and parallel strengthening of centres out of the range of popular control.    

            Our final conclusion is that the historically path-breaking project of the EU has in recent years been stamped both by the consequences of the international economic crisis and by the political repercussions they have triggered. Thus on the one hand the dominant institutions have been taking decisions that lead in the direction of an authoritarian capitalism and on the other the fact that supranational, transnational, elected and nominated instrumentalities all coexist inside the EU is a factor inhibiting the access of popular demands. The result is that EU policy-making is  mediated less and less by the political element: it is acquiring ever greater autonomy from the desires of  citizens. Capital accumulation is thus facilitated, having been freed, largely, from the burden of needing to secure political legitimation. The existence of a state power, that of Germany, which is able to exert its hegemony  through this process, and of  numerous national formations that suffer the consequences of these predominant European policies, makes it clear that for all the institutional peculiarities of the EU, the accumulation of capital is as much associated as ever with uneven development.

 

 

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