52. European Union and the euro



The European Union (EU) arose from the attempt of European capitalism to overcome the contradiction between the growth of the productive forces – science, technique and the organisation of labour – and the existence of separate national states which hemmed in these productive forces. The giant monopolies, transnational companies, looked not just towards the national sphere but the markets of whole continents and even the world. Yet the attempt to unify Europe on a capitalist basis – a ‘United States of Europe’ – was doomed to fail because capitalism could not overcome fully the limits of the nation state.

Even a common currency was unlikely to succeed in the long run, although the capitalists over the next two or three decades made Herculean efforts to achieve this. A European Exchange Rate Mechanism (ERM) was constructed before the common currency, which Britain joined for a short period before crashing out of it in 1992. We predicted – in the teeth of much opposition, even from some Marxists – that even limited measures towards unity would clash against the reality of the interests of the different national capitalist classes of Europe. Yet without a unified Europe, capitalism would be incapable of standing up to its rivals internationally: the US, China and Japan.

During a boom it is possible for significant collaboration between the different national capitalist classes to take place. This can even appear to go very far and be ‘irreversible’. It seemed at such moments in history that it had become possible to create a unified ‘European bourgeoisie’. Indeed, the CWI at international meetings sought to argue that this was not possible; for instance, at an International Executive Committee of the United Secretariat of the Fourth International (USFI) in 1997, Lynn Walsh, who argued this for the CWI, was virtually laughed down by ‘fellow Trotskyists’. For many Marxists and Trotskyists, the unification of Europe seemed obvious and could be carried out on a capitalist basis.

The EU’s proposals to introduce a common currency, the euro, generated intense discussion within the ranks of the CWI. Some, such as our Swedish and Greek comrades, argued that the euro could be introduced. Others, the leadership in Britain, for instance, were sceptical. This was linked to economic perspectives. We reasoned that if the European and world economy continued to expand –  as proved to be the case – the European bourgeoisie could succeed in introducing the euro. If the crisis struck immediately, then the euro would not be introduced. With the onset of the crisis in 200708 and a looming repetition of this in the next period, it is possible that the euro in its present form can collapse.

The irony is that rather than banishing nationalism – which the EU amongst its aims was supposed to have achieved – exactly the opposite has taken place. We fought against illusions on this score. Even in the 1990s, we warned: “The social upheavals, largely against the Maastricht criteria, show the limitations of the process of European union. The very policies needed to fulfil the criteria for economic and monetary union threaten to provoke upheavals which put the whole process in jeopardy. Germany alone could drag Europe into a recession.” Is this not what has happened in a somewhat different form in Greece and, in the future, may happen in Spain, Portugal, Ireland, Italy and even in Britain itself? We also pointed out: “It is no accident that there has been a resurgence of Euro-scepticism in France and devaluation of the franc is a possibility.”1

However, these problems and difficulties standing in the way of a unified monetary system were very real from the outset of the Eurozone but the European capitalists, led by the French and the Germans, were able to proceed, mainly because they were still rising on the crest of the 1990s boom. It was this factor which allowed the bourgeoisie to drive through the European ‘project’. It was also the inevitable collapse of this boom at a certain stage that allowed us to predict the undermining of the euro and the placing of a huge question mark over the very future of the currency and the Eurozone as a whole.

The majority of the bourgeoisie and their ‘social democratic’ echoes did not just entertain illusions on Europe but also on the prospects for the world economy. We consistently argued against the illusions generated by the 1990s boom that capitalism had managed to overcome the normal cycle of boom and bust. Gordon Brown – British Chancellor of the Exchequer following the 1997 general election – predicted that he and his bourgeois counterparts in Europe, the US and Japan had indeed abolished ‘boom and bust’. This in turn generated certain illusions, even in the labour movement. The capitalist media were full of references to the ‘economic paradigm’ which capitalism had now firmly established. We subjected these ideas to a rigorous analysis in the pages of The Socialist and Socialism Today.

On the occasion of the downfall of the long-standing British bank Barings in 1995, we took the opportunity to remind our readers of the realities of capitalism which lay behind the boom. Without the check provided by the labour movement, capitalism was running riot, engaging in all kinds of speculation of a parasitic character, piling up a mountain of debt – which the Barings scandal laid bare – thus preparing the way for a massive crash. This was indicated by the development of ‘junk bonds’. George Bush senior had to act in 1989, in effect nationalising the savings and loans industry. It was the American ‘consumer’ who paid the bill for this.

Despite the fact that the ruling class faced no real challenge from the labour movement – held in chains by right-wing leaders – they nevertheless enjoyed only very low and feeble growth. Speculation on financial markets, always a feature of capitalism, assumed a frenzied character. New and dangerous ‘financial instruments’ such as derivatives developed on a huge scale. This involved gambling on future price increases where derivatives were contracted by currency or interest rate swaps purchased relatively cheaply, with the sole intention of selling them on at a higher price. This ultimately led to the crash a decade or so later. The Barings shock – involving as it did a relatively small merchant bank – nevertheless was one of the first tremors indicating the earthquake to come. We compared the trillions of dollars moving around the money markets to unsecured cargo on a ship that could result in opening up a huge hole in the hull which could sink the ship itself. While capitalism, in the wake of the collapse of the Berlin Wall and the liquidation of the planned economy, seemed to have ‘won’, as the Wall Street Journal expressed it in 1990, nevertheless, the whole period was characterised by insecurity on the part of the majority of the population and dissatisfaction with the deterioration in the ‘quality of life’. Particularly heinous crimes could provoke mass outrage, as shown in the scandal in Belgium involving the kidnapping and death of at least four young girls. A vast world of criminal activities and corruption involving police, judges and politicians, including a paedophile ring led by Mark Dutroux, was revealed. In the process, large-scale crime in the 1990s came to light, also involving the murder of Belgian Socialist Party ex-minister Andre Cools. These revelations led to a mass demonstration, the ‘White March’, involving a third of a million people and highlighting opposition to the police’s handling of the issues. Brussels workers carried the slogan: “Clean up the state”. Factory workers walked off the job to “occupy motorways”. The tempo of the class struggle increased, with the CWI’s Belgian organisation Militant Links (Militant Left) intervening.2 But a combination of the state cracking down and the refusal of the trade union leaders to give a clear lead resulted in the movement ebbing away.3

As mentioned earlier, our Irish comrades had been involved in a number of mass campaigns. In 1996 an epic battle was taking place in Ireland against the introduction of water charges, whose leading spokesman was Joe Higgins. There were 20,000 signed up members of the anti-water charges campaign in the south of Ireland. Moreover, in Dublin North constituency, the Socialist Party in Ireland was at the head of a campaign against heroin on the estates, against drug pushers and for a socialist approach to the problems of addiction. Mass meetings took place, including one of 1,500 parents and youth on the estates, which was overflowing and where speakers outside had to relay what was being said inside. Joe Higgins was a candidate in a by-election for the Dáil, the Irish Parliament. He came within 370 votes of winning – a tremendous achievement for a small party with limited resources.

We were encouraged when Joe and the Socialist Party achieved a magnificent victory and became a TD (MP) in the Dáil in June 1997. This was on the back of the great victory in the anti-water charges campaign, which had successfully defeated the Irish government and was led by the Socialist Party.

This was followed by a tremendous intervention in the 50,000 strong European March for Jobs on 14 June 1997. This was probably the first major international intervention of the CWI under its own banner. Alongside the Italian unions and others, the CWI had its clear international political colours on the demo. The German section of the CWI, Sozialistische Alternative, organised over 600 people to go on the march. As well as these campaigns on specific issues, the CWI was involved at this stage in organising discussions with other socialists – and particularly those from a Trotskyist tradition – to see whether we could arrive at common action and from this to explore and discuss how to build the socialist movement and a new international.

Despite the collapse of Stalinism, the basic organisations of the working class – the trade unions – although weakened, remained intact. The historic goal of the labour movement, the realisation of a socialist society, seemed to have receded in the consciousness of the working class, following the collapse of Stalinism in Russia and Eastern Europe and the ensuing dismemberment of the planned economy. But the working class retained its instinctive resilience in the face of newly emboldened capitalism’s onslaught against their rights and conditions. Although significant sections of the top trade union leaders moved towards the right, this was not necessarily the case for the mass of working people.