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From The Socialist newspaper, 18 May 2006

Ailing German capitalism slashes workers' wages and conditions

WHEN THE Socialist Party's general secretary Peter Taaffe visited Berlin last month to speak at the very successful Socialism Days meeting, he found a marked difference - evident in the conditions of the city's poor in particular - from the situation when he last visited a few years ago. PETER TAAFFE writes:

PERSONAL IMPRESSIONS are not always an accurate guide, particularly from a short visit, but my observations are backed by a wealth of evidence and statistics - provided by the public sector and services union Ver.di - showing the scale of Berlin's economic and social decay.

These figures are, in turn, a metaphor for German capitalism as a whole. In this, Europe's economic powerhouse, 20% of the population are poor - having a monthly income of less than €940 (£650). 18 million people in Germany have a disposable income of under €50 a month when the fixed costs for rent, food, social security etc., are discounted.

The polarisation between rich and poor is the same as throughout Europe. Germany's ten richest individuals own wealth equivalent to $100 billion but the working class has experienced a shocking and dramatic loss in the share-out of the wealth created by their labour.

Wages as a proportion of total national income dropped from 72.2% in 2000 to 67% in 2005. This is the same percentage figure as in 1965. So, in relative terms, German workers' share of the wealth has been pushed back 40 years. In absolute terms, many sections of the working class have gone back much further than that.

Wealth chasm

This chasm between rich and poor, of course, is not unique to Germany. Britain, through two decades of neo-liberalism, experienced the same thing. But what stands out in Germany is the speed of the descent, the consequences of German 'fast-track' Thatcherism firstly under the 'social democrat' Schršder and now by the measures of the Merkel 'grand coalition' government of the Social Democratic Party (SPD) with the Christian Democratic Union/Christian Social Union (CDU/CSU).

Until recently, the conditions of Britain's working class occupied first place in warning Europe's workers' movement of what can happen if a determined resistance against Thatcherism, neo-liberalism - downsizing, privatisation, deregulation, etc. - is not taken up and the plans defeated.

Britain still remains a neo-liberal 'scarecrow' for the European working class but it is rapidly being overtaken by the plight of the German working class. Here, in stark facts and figures, is the future of all Europe and particularly for the poor and the working class if 'modern' capitalism on a continental scale prevails with its programme of savage cuts in the living standards of working class people.

Neo-liberal policies

AT PRESENT, German exports may soar ahead on world markets, elbowing aside their capitalist rivals in markets like China. The bosses' profitability has risen accordingly. But those who are responsible for the country's economic fireworks, at least on world markets, are rewarded with reductions in wages, the lengthening of the working day and week, and the undermining of national bargaining rights.

This is highlighted by the outcome of the recent public-sector strike of civil servants led by Ver.di, the first for 14 years. The German capitalists, helped by tame trade union leaders, have already successfully attacked some workers in the private sector. They used the threat of 'outsourcing' and lay-offs to enforce longer hours at the same wages for their employees. Now they seem to have achieved the same object with civil servants.

The finance minister of Baden-WŸrttemberg, Gerhard Stratthaus, gloated on radio: "For the first time in a long time, this supertanker [German capitalism] that was always steaming towards shorter working hours has turned in the opposite direction."

These words show the essence of neo-liberal policies, marking a decisive change from the past. In the period 1950-1975, an era of economic upswing throughout the capitalist world, the bosses adopted what Trotsky called the "religion of capitalist progress". Today is better than yesterday and tomorrow will be even better, etc, they argued.

Capitalist 'reality' today, however, prescribes that the working class must give up even their present conditions and rights, never mind looking forward to a brighter future, as German social democracy promised in the past. The post-war boom period was presented as the 'norm' for capitalism. This, in turn, reinforced illusions in reformist ideas that the working class would advance by incremental stages.

However, events have shown - and this will be reinforced in the next period - that this era was, in fact, exceptional in the history of capitalism. This present situation of neo-liberal wage cuts, deregulation and privatisation is, in fact, capitalism's 'norm'.

The very term 'neo-liberalism' harks back to the pre-1914 period of a 'liberal', unfettered, unrestrained capitalism. While capitalism went ahead in this period, playing what Karl Marx called a "relatively progressive" role in developing the productive forces - science, technique and the organisation of labour - it was based on nightmarish conditions for huge swathes, if not the majority, of the working class. In some ways, in this present era of a 'borderless' globalised world - at least for capital - the working class confronts an even more difficult situation than this.

In the pre-First World War era, trade unions and mass parties of the working class took shape and offered some defence against capital's onslaught. The workers' organisations even used their power, in some instances, to extract concessions, reforms, from the bosses, which Marxists and socialists welcomed. Now, tame pro-capitalist right-wing trade union leaders preside over the weakening and setbacks for the working class.

Bosses' offensive

IT IS true that in France, the working class successfully resisted, heroically, some of the Chirac government's 'backdoor' neo-liberal measures against the young. These measures were only defeated by mass demonstrations, three million workers coming out on two occasions in one week, as well as the threat of a repeat of 1968 before de Villepin and Chirac beat a retreat.

Ironically, the very weakness, numerically at least, of the French trade unions - officially only 8% of the workforce belong to a union although in practice it is more than that through the social security system, etc. - ensured that in the short term working-class fury at this attack could not be fully constrained by the union leaders but burst out into mass action. This in turn compelled the bosses and the government to retreat.

To consolidate this kind of victory, however, poses the need for a political alternative to capitalism - socialism - and a mass party to fight for this.

The same fury exists amongst German, British, Belgian, Italian, Spanish and Greek workers against the unprecedented assault on their living standards and conditions. But now those very organisations, which over generations they have created, particularly the trade unions, act as a colossal brake. If this capitalist assault is accepted, it means not just a standstill for working-class people but going back to previously unacceptable conditions.

Already, Germany's union leaders - in the first instance the tops of Ver.di which represents public sector workers - have agreed to an extra half an hour to be worked each week for no extra pay for their members. The working week is to be extended from 381Ú2 hours to 39.

This falls short of the government's demand for a 40-hour working week but the capitalists are quite clear that this is just the start of the offensive on longer hours which they will ruthlessly pursue.

Anticipating further retreats, the International Herald Tribune gloats: "Ver.di will now find itself whip-sawed between different [state] governments, and in some cases legally obliged to extend concessions made in one negotiation to another." It quotes a "public sector expert": "The differences are not dramatic among the various settlements but they are going to grow in the future. The trend the unions wanted to avoid has finally arrived."

The Merkel government will also seek to build on these concessions to the bosses. It promises legislation allowing companies to "negotiate a 24-month waiting period during which new employees can be fired on short notice". This is similar to the law on young workers which the French workers defeated in their recent actions.

Moreover, this is against the background of contrasting 'parallel universes' in Germany. Seven million out of 26.3 million workers are low paid - with about half of these working more than 40 hours a week and two-thirds of them are women.

Meanwhile, 300,000 unemployed people are forced to work at slave labour rates with a paltry state top-up of €1 per hour, or have their state benefits cut. In Berlin, 35,000 workers are in this position. This is a modern version of the 'Speenhamland' system existing at the dawn of industrial capitalism in England. This forced agricultural labourers to accept very low wages backed up by 'parish relief'.

What's more, without a minimum wage in Germany, there is no theoretical limit as to how low wages can go. The claim that German workers are the "second most expensive in the world" is completely outdated. One million workers earn so little from their job that they get social benefits.

A Berlin gardener, under the collective wage deal struck between the unions and the employers for his sector, "earns €3.91 an hour, barely half the British minimum wage of £5.05 (€7.27)," reported the Financial Times. Also, if the employers are outside a wage deal, as are shops, hotels, etc, they can "deviate" from wage agreements and pay even less than what the Berlin gardeners receive.

Oskar Lafontaine, the leader of WASG, the new party launched by trade unionists and social activists, claims that wages in Britain have increased by 20% in the past period while German wages have gone down. Lafontaine exaggerates the level of wage rises in Britain but he is right about the stagnation and decline of some workers' incomes in Germany.

In fact, wages are so low in Germany now that capitalists in other countries complain that this gives German exports an 'unfair competitive advantage'! This is because the 'wage cost' element is so low!

On paper, German workers still have quite a high level of legal employment protection, but as the Financial Times gleefully comments: "The market has found a way around the rules." In other words, the capitalists will stop at nothing in their pursuit of policies aimed to boost their profits at the working class' expense.

However, this drive for profitability enmeshes them in a major endemic contradiction of their system. By cutting the share of the working class, it also cuts 'demand'; the working class cannot buy back the goods it produces. This reinforces stagnant production in the home market and high unemployment.

Dire situation

But the leaders of the ex-workers' party, the SPD, originally proposed many of the policies which Merkel is now pursuing. This, together with the ineffectiveness of right-wing trade union leaders, has brought the German workers, potentially Europe's strongest, to this dire situation.

They have been abandoned by 'their' party, the SPD, which historically helped to raise them out of the mud of capitalism, and trade union leaders with pro-market views are impotent against capitalism's offensive. This lack of a mass political alternative is also reflected in recent elections throughout Europe.

This underlines the rejection by the mass of the population in different countries of the neo-liberal nostrums propounded by the different capitalist parties. Merkel has no mandate for her policies; she had a narrow lead over Schršder's SPD in the elections but both were 'losers' in the sense that both their actual votes and their percentage share fell.

Moreover, the German elections followed a pattern evident in the US in 2000 and continued in Italy's recent elections where those who voted were divided almost 50-50. Commenting on this Jonathan Freedland of the guardian now agrees with our analysis made many times in the socialist since the 1990s that Europe's population "know what they are against, but they are yet to gather around a programme they're for. The result is a stagnant stalemate, repeatedly reflected at the ballot box."

Fighting alternative

THIS MAKES developments around the WASG (Die Wahlalternative fŸr Arbeit und soziale Gerechtigkeit - Election Alternative for Work and Social Justice) vital both for Germany and Europe. This is a serious attempt to provide an alternative reference point for German workers in revolt against the main capitalist parties' neo-liberal policies.

Unfortunately, however, the party leadership has gone along with the policies of the Party of Democratic Socialism (PDS), the remnants of the former Stalinist ruling party in East Germany, who are in coalition with the SPD in Berlin's state government and presiding over cuts in living standards (see the socialist 439 for details).

For workers, socialists and Marxists, the very minimum for any new formations within the working class must be clear opposition, not just in words but also in actions, to neo-liberal policies. Without such a commitment, including a refusal to participate in capitalist coalitions at national, state or local level, then any new development will inevitably became just another variation of the old discredited models and could be strangled at birth.

In this sense, the struggle of the SAV, the German section of the Committee for a Workers' International (CWI), is vital, not just for Germany but for all of Europe. Its determined advocacy of a fighting socialist alternative for the WASG points the way for the workers' movement in Germany and Europe at present.

Economic crisis

EUROPE ITSELF is at a crossroads. Capitalist Europe is split and demoralised after the recent defeats of the European constitution. However, the capitalists are absolutely determined to pursue their neo-liberal agenda. In countries like Britain and now Germany the 'race to the bottom' has already had a serious effect on wage levels and conditions at work.

The 300,000 immigrant workers who have come into Britain since 2004 - most of whom came from Eastern Europe after EU enlargement affected these areas - have been used as a huge reservoir of cheap labour, which capitalists have used successfully to undermine wages and conditions.

It has now reached the stage in Britain where Polish workers who came here three or four years ago now find themselves priced out of the jobs market by 'newcomers' from their own country working on wages even lower than this.

This has resulted in a bonanza for the rich and a further polarisation between the poor, particularly the very poor, and the super-rich. The solution is not to build a new 'Berlin Wall' to 'keep them out', as the far right argues, but to organise these workers into unions to fight for a living wage.

At the same time, Europe's capitalists are politically split. Economically, European capitalists as a whole have also given up the dream of catching up with and outstripping US imperialism. The latter now contemptuously say that the rulers of the continent are presiding over a "museum".

The shambles of the European constitution and continuing problems over the EU's enlargement show that capitalism cannot completely overcome the limits of the nation state. The national barriers of the separate capitalist states reasserted themselves in the form of economic nationalism by France and others when 'foreign companies' attempt to take over 'strategic' industries.

The result is a stagnant European economy with mass unemployment in key countries such as France, Germany, Greece and others. In Europe's periphery, the ex-Stalinist states that are clamouring to get into the EU are a picture of decay and destitution for the masses. In the hastily constructed ramshackle state of Bosnia, 70% of the budget of its 'government', constructed through a Byzantine constitution, is used just to pay for its politicians and officials!

Yet Europe is potentially a mighty reservoir for economic development and for the raising of the living standards of the great majority of the population and, with it, the elimination of poverty and want throughout the continent. However, capitalism is incapable of doing this.

Wealth polarisation, endemic unemployment, environmental degradation; all this exists in the so-called 'boom'. What will happen if the bottom falls out of the economy on a world scale? If the capitalists now seek to unload the burden of their system's problems onto the shoulders of the working class, it will be even more the case then.

The present travails of the German working class will be common and become much worse for the continent's working class on a capitalist basis. Socialists and Marxists, particularly the new young forces entering the struggle, are determined this will not come to pass. The left in the WASG, with SAV to the fore, are in the vanguard of this battle.

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In The Socialist 18 May 2006:

Socialist Party NHS campaign

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