• Analysis
  • No Alternative Politics of European Integration without a Progressive European Industrial Policy

  • Maxime Benatouil | 12 Oct 16 | Posted under: Productive Transformation
  • This article soon will be released in a publication edited by the Brussels office of Rosa Luxemburg Foundation.

    Europe at a Crossroads

    Is the European Union on the verge of collapse? We have witnessed a set of events over the past year that would tend to suggest so – from the moment that the SYRIZA-led Greek government was cornered into signing the most socially brutal and economically destructive of all Memoranda of Understanding imposed upon the country on the 13th of July 2015 to the date on which a clear majority of British voters decided that their country would be better off outside the EU, opening up an unprecedented political void. And on top of all that, the conclusion of the EU-Turkey Agreement aiming at deporting to Turkey every single refugee setting foot on European soil – therefore dramatically increasing the death toll in the Mediterranean, with 4000 victims in the first semester of 2016 alone – represents a clear violation of the Geneva Convention, as well as a moral failure for Europe.

    Even before he was firstly elected as Prime Minister in January 2015, Alexis Tsipras made very clear that the fate of Greece was bound with that of the EU. The so-called Thessaloniki Programme was not only about ending austerity policies and promoting sustainable development at home, but rather about proposing a change of course for the EU as a whole. Never before had neoliberalism, gradually constitutionalised through the European Treaties, been so frontally challenged in Europe. And that is the very reason why the Greek negotiation team was systematically greeted with open hostility, if not brutality. The lesson to be drawn from this is that the struggle for another EU cannot be single-handedly managed. One needs partners in crime, even more so a state whose GDP barely exceeds 2% of the EU economy, well-anchored social movements, reinvigorated trade unions and massive transnational solidarity. Social-democratic “European partners” gave up on Greece, and the European movement of solidarity was too weak to exert pressure on national governments.

    However, this defeat should not get us off the wrong path. Genuine cooperation is more needed than ever in the light of all the challenges we are confronted with. To name but a few: opposing casualization of precarious forms of employment, growing social insecurity and social dumping between and within EU countries; tackling climate change and making sure that the inevitable energy transition will be just towards workers; saving the lives of those running from war-torn areas and shaping together tomorrow’s European societies; not heeding the right-wing populist siren’s call the way so many of our leaders do when they sacrifice civil liberties and coexistence at the altar of an elusive fight against terror. A sluggish economy barely offering any perspective, a fear of losing grip over one’s country skilfully staged by far-right parties outside of all logics of class, and the threat – quite real this one – of downward social mobility for oneself or one’s offspring are some of the factors that explain why so many Europeans throw themselves into the arms of social-chauvinist and/or openly xenophobic political forces.

    The Brexit vote is to be understood as the latest example of this trend. A quick look at the results might show a clear divide between the winners and the losers of globalisation, but the reality is more complex. Working class voters massively supporting the leave-vote also used the referendum for expressing their indignation towards the entire political class while simultaneously rejecting the membership of a EU that they perceived as a major cause of their problems. Right-wing populist politicians added fuel on fire by blaming immigrants for the collapse of the social welfare system, carefully concealing the role of decades of neoliberal policies in the dismantling of labour and social rights. But regardless, the Brexit vote can be seen as a further indication of the deep-rooted disbelief over the very possibility of a European project capable of addressing citizens’ needs. The many statements calling for Europe’s reconstruction [1] popping up ever since should not distract us from the bigger picture. What is now on the table is basically more of the same: further “securitisation” of EU borders on the one hand and completion of the Economic and Monetary Union (EMU) on the other. The presidents of the European Commission, the European Council, the European Parliament, the Eurogroup and the European Central Bank have been advocating for over a year further labour market deregulation, the decentralisation of collective bargaining to allow for the maximum wage flexibility and the continuation of austerity. In other words, the very same policy mix implemented since the onset of the crisis which proved to be ineffective and fuelled popular resentment, thus jeopardising the politics of European integration. The main thrust of the so-called Five-Presidents Report is best encapsulated by the following quote: “for the EMU to succeed, labour markets and welfare systems need to function well”[2]. But for whom? Probably not for workers. The European Commission strongly backed the French government in the midst of the massive mobilisation against a comprehensive package of labour market’s structural reforms, also known as Labour Law. As the Commissioner for the Euro and Social Dialogue stated, “this will address the rigidities of the labour market and should boost employment.”[3]

    To be fair, Angela Merkel, François Hollande and Matteo Renzi also stressed the need to boost growth, while meeting in Berlin shortly after the Brexit vote. No details have been communicated so far, but chances are slim that they will go beyond lip service and break with the way the EU sees investment. If it fails to draw from the failures of the Growth Compact approved by the European Council in June 2012 – that is, the lack of fresh money injected in the economy coupled with the extension of “growth-friendly fiscal consolidation”[4]proved unable to create a virtuous circle boosting EU growth and employment – the “Investment Plan for Europe” is doomed to fail. Announced with great fanfare in November 2014 [5], the so-called Juncker plan was officially approved in June 2015 and the European Fund for Strategic Investments launched immediately afterwards in order to tackle the investment deficit affecting Europe since the beginning of the crisis. Its main feature is to use a small fraction of the EU budget as a guarantee for European Investment Bank’s projects that would be riskier and more innovative than the usual ones. These projects were to generate a total of €315 billion of investment over the next three years through leverage and co-financing [6]. Since the plan got underway, only €11.2 billion worth of projects have been approved. The Juncker Plan’s take-off has been slow considering that the plan foresees the EIB disbursing €60 billion in three years, i.e. €20bn/year [7], which falls short of initial expectations, to say the least.

    It is no secret that the Eurozone’s economy did not escape from stagnation. According to the latest Eurostat figures, the 19-member Eurozone grew by 0.3 per cent in the third quarter of 2015, while the average unemployment rate remains above 10 per cent [8], with striking inequalities between countries. The crisis is still shaping European economies and societies: inequalities have steadily increased since its outbreak, hitting first and foremost low-skilled workers, women and the youth, and a certain idea of competitiveness – understood as a downward spiral towards ever lower wages, social protection and social dialogue – remains the cornerstone of EU-promoted policies in spite of their patent failures. Neither conservative nor social-democratic governments broke out of the iron cage of neoliberalism. Europe deserves better. If not, what would prevent right-wing nationalists to take over the continent, ultimately leading to a reinforced competition between countries and their residents?

    We need to find global solutions for a better, fairer Europe. And to do so, a EU-wide industrial policy matters – or in other words, a strategy for Europe’s productive transformation. The very concept of productive transformation does not only imply the reconstruction of European productive capacities, but also the establishment of a new model of development that meets social needs and ecological imperatives, with economic democracy as a compass. We believe that without a strong industry, deeply transformed in its ends and means, Europe will be unable to escape from the present crisis and will not initiate the economic, social, environmental, and ultimately the political evolution that is urgently needed.

    The Underlying Objectives of Europe’s Productive Transformation

    Labour should be at the heart of our plan leading to a new model of development for Europe. The orthodox discourse on competitiveness keeps considering it as a cost, and never for what it really is: the source of real wealth creation. Above all, it is the contribution of workers – together with their skills and experiences – at every stage of the production process that must impulse the very foundation of a progressive industrial policy. The critical shift away from this false vision of labour will allow for tackling unemployment and absorbing unutilised labour. Equally importantly, it will help us move beyond our blindness to the significance of women unpaid reproductive work in the process of capitalist accumulation. Efforts towards a new model of development would be seriously hampered by a lack of any Marxist-feminist perspective. It is the entire system of waged labour, together with its gender-based set of inequalities, which should be revised. Besides, specific focus must be given to the youth, who has been suffering for too long from the crisis. The brain drain of thousands from Southern EU countries with very high levels of education and skills must come to an end if we are to tackle the problem of growth potential at source.

    The democratisation of the economy must be a core element of any transformative industrial policy. The restoration of the public capacity to act needs a strengthened cooperation between different administrative levels, but also direct participation of citizens and workers. The institutions in charge setting in motion the EU-wide industrial policy must be transparent, democratic and accountable for their choices, as to ensure social participation. Strategic decisions must be carefully chosen on the basis of democratic consulting, taking in consideration other social interests – such as voices of workers, trade unions, and local authorities. It is even the more crucial when it comes to the selection of productive activities that could be granted public funding. Democratic-decision making will be especially needed for the re-localisation of productive activities and the development of short supply chains, as well as for defining what it will mean for concerned territories. The decision regarding the nature of investments must be a collective one. If the state must again become a key player, it is worth remembering that nationalisations do not necessarily challenge neoliberal capitalism or adequately address social needs. Public ownership must be rethought in a way that would make it a step towards social ownership of common goods – and the achievement of economic democracy.

    “System Change, not Climate Change” is one of the most powerful watchwords of the climate-justice movement. It implies that cosmetic changes will not be sufficient to take up the challenge, and that a systemic revolution of our productive structures is needed. We must tackle the ecological emergency with – not against – the industry and its workers. Industry can count on human and technological capacities, as well as on research, to produce goods and services while preserving the environment. In this regard, delivering on energy efficiency is key. There seems to be a basic agreement among trade unions on the way to proceed, as shown by ETUC’s “A New Path for Europe” [9]which recommends to invest two per cent of EU GDP per year over a ten-year period in energy efficiency – with a decrease in greenhouse gas emissions and in energy consumption to lower energy dependency, investment in sustainable industries through a massive support of research and development, as well as in public services whose role must not be forgotten in the completion of the ecological transition and whose quality must be improved.

    A sustainable development should not rest upon cyclical factors, but should emerge from structural factors decided upon within societies. That is, it will have long-term characteristics and will not depend on international economic fluctuations to a large extent. However, the sustainability of development is directly related to its relationship with the natural environment and natural resource. Environmental costs cannot be considered as another component of the total costs, but as nothing less than a key limitation for any productive activity. Even in times of crisis, we are in no position to sacrifice environmental protection at the altar of (reckless) development. The climate emergency requires an in-depth transformation of both the production and the consumption models. The shift towards a new model of development will not occur without an improvement of civic-minded attitudes and collective skills shaping the even more necessary strong political will.

    Re-localising productive activities is crucial for a progressive European industrial policy. Let us be clear: it is not about reducing social and fiscal charges, lowering the cost of fuel or benefiting from infrastructures sponsored by local authorities. It is a about exiting the rationale that sets workers and territories into a framework of generalised competition. This firms/territories relationship is not sustainable. It prevents the implementation of a new model of development by applying the same logic than that of the markets and of finance. As a result, outsourcing and subcontracting have skyrocketed over the past three decades. No company has all the needed skills for its development and each company is dependent on the system it has created around it – its network. This network of interdependences, though based on market competition, can lay the basis for another type of cooperation binding together the different levels where companies operate, from the local one to the European one.

    Finance needs to be re-regulated, so that its grip over the real economy gets loose. Decades of triumphant neoliberalism have allowed shareholders to gain considerable influence to the detriment of wages and productive investments. The extreme volatility of capital flows makes the return on such investments much less profitable, hence paving the way for the destruction of numerous industrial sectors and a concentration of highly competitive industrial fabrics in core EU countries’ most dynamic regions. It is therefore of utmost importance to set up a coherent body of efficient mechanisms for slowing finance down, which would include a tax on financial transaction, the ban of high frequency rates trading and the strict reparation of deposit bank from merchant banking activities.

    A plan for Europe’s productive transformation cannot be progressive if it is not about reducing core-periphery asymmetries. As it stands, the Economic and Monetary Union has fuelled imbalances in the trade and current accounts, and sharpened the divides in terms of national industrial fabrics. Since 2008, the industrial output has massively but unevenly declined in most EU countries, therefore leading to further polarisation. Apart from Poland, whose industrial production rate grew by 18% from 2008 to 2013, core EU countries managed – at best – to catch up with their pre-crisis level. They benefited from a specific (and Germany-led) industrial relation system relaying on property and profits centralisation through outsourcing of production. However, the huge majority of EU member states did not succeed in reversing the profound de-industrialisation trend. Regional and structural funds failed at fulfilling their initial purpose of bringing living standards closer together and of helping economically challenged countries to develop sustainable economic structures. After eight years of crisis, the EU is more polarised and fractured than ever. Economic activities and political power tend to be more and more concentrated in a centre that limits the damage on its industrial fabric, while the periphery has been disempowered by the Troika – politically, economically and socially.

    A recovery plan for Europe cannot ignore these growing asymmetries. The on-going “exporter centre / importer periphery” dichotomy must be overcome. EU periphery countries need a major investment package in their industrial and productive fabric, while the core must actively foster its internal demand. The reconstruction of value chains requires differentiated regulations regarding exchanges with the rest of the world and within the Eurozone in order to mitigate the pressure exerted on the weakest. However, such a radical change of rationale will never see the light of day if free and fair competition is not replaced with cooperation.

    Will the Brexit or further gains of far-right parties with a nationalist, anti-European agenda be the electric shock leading to other policies than those being implemented since the beginning of the crisis? Looking at what the EU has to offer in order to counter popular resentment – further labour market deregulation and more sophisticated policing of EU borders –, one cannot be all too optimistic. Business as usual will do nothing but feed the far-right, which has already proved to be – with too few exceptions – the main beneficiary of the crisis. The politics of European integration is at stake. And it might very well collapse if progressive political and social forces do not come closer together to promote a progressive EU-wide industrial policy. Given the current state of the balance of power in Europe, we cannot afford the luxury not to.

    Notes:

    1. http://www.theguardian.com/politics/2016/jun/29/brexit-reshaping-domestic-politics-eu-member-states-merkel
    2. European Commission Press Release, 22 June 2015: http://europa.eu/rapid/press-release_IP-15-5240_en.htm
    3. https://www.euractiv.com/section/social-europe-jobs/news/commission-backs-french-labour-law-reforms/
    4. Expression favoured by the European Council instead of austerity
    5. http://europa.eu/rapid/press-release_IP-14-2128_en.htm
    6. See the discussion on the Juncker Plan in transform! Discussion Paper #1/2015, Towards Europe’s Productive Transformation – An Emergency, 2015, pp 3-4, http://www.transform-network.net/uploads/tx_news/paper__5_PRINT.pdf.
    7. http://ec.europa.eu/priorities/sites/beta-political/files/1_en_act_part1_v11.pdf
    8. Eurostat figures, July 2016 : http://ec.europa.eu/eurostat/statistics-explained/index.php/Main_Page
    9. https://www.etuc.org/sites/www.etuc.org/files/EN-A-new-path-for-europe_3.pdf

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