I.2. World Economy and the EU: Myths and Facts


Our basic position is that the attacks on the working class are rooted in the capitalist’s desire to increase their profits in a period characterized by the decline of capitalism. Contrary to the illusions spread by various left-reformists and centrists, these attacks are not the result of specific national forms of domination of the imperialist bourgeoisie. Or, in other words, irrespective of membership in the European Union, all capitalist classes are forced to attack their working class precisely because of the decline of their system. This being the case, it is a merely a social-imperialist deflection of the proletariat by the petty-bourgeois anti-EU left to spread the myth that the EU is responsible for Europe’s economic stagnation and that Britain – or any other imperialist country – would fare better outside this imperialist federation.

Let us first look at the development of wealth and compare Switzerland, a very rich imperialist country which has never been a member of the EU, with other Western imperialist countries. In Table 1 we see that in the period from 1950 to 1973 Switzerland managed to double its Gross Domestic Product per capita. Other Western European countries grew even faster including Germany, France, Belgium, and the Netherlands which were all members of the European Union (in fact the EEC, its predecessor organization) from the founding of the federation. Britain, which did not join the EU before 1973, grew less rapidly during this period. However from 1973 until 2008, Britain, now a member of the EU, more than doubled its GDP per head, while other EU members and the US experienced slightly slower growth. However, Switzerland’s per capita GDP grew much more slowly during this period – by only 37.9% in fact. In sum, we see from these figures that there is no empirical evidence that imperialist states prosper better when they are not a member of the EU.

 

Table 1: Western GDP per capita in international comparison 1950 to 2008 [1]

                                                GDP per capita in 1990 Geary-Khamis dollars

                UK          USA       France      Germany      Belgium       Netherlands          Denmark                Switzerland

1950        6939       9561       5186           3881           5462            5996                     6943                      9064

1973       12025    16689      12824        11966          12170          13081                    13945                    18204

1990       16430    23201      17647        15929          17197          17262                    18452                    21487

2008       24602    31251      22057        20801          23701          25112                    24789                    25104

 

In Table 2 we examine the development of industrial production and compare the old EU (the so-called EU-15) with other imperialist countries, the US and Japan. [2] As we see, over the course of five decades there has been a general downward trend of industrial growth in these capitalist countries, one which is not confined to the EU but which is rather a global feature of capitalism. [3]

 

Table 2: Growth Rate of Industrial Production in the Imperialist States (Percent per annum) [4]

                                Growth rate of industrial production (percent per annum)

                                                USA                       Japan                      EU-15

1961-1970                            +4.9%                    +13.5%                  +5.2%

1971-1980                            +3.0%                    +4.1%                    +2.3%

1981-1990                            +2.2%                    +4.0%                    +1.7%

1991-2000                            +4.1%                    +0.1%                    +1.5%

2001-2010                            -0.2%                     -0.4%                     -0.3%

 

We get a similar picture if we examine the rate of capital accumulation during these same five decades (see Table 3). Again, we note a general downward trend and not one limited to the EU.

 

Table 3: Capital Accumulation in the Imperialist States (Percent per annum) [5]

Gross fixed capital formation at 2010 prices; total economy (percent per annum)

                                                USA                       Japan                      EU-15

1961-1970                            +4.7%                    +15.7%                  +6.0%

1971-1980                            +3.5%                    +3.5%                    +1.9%

1981-1990                            +3.5%                    +5.7%                    +2.8%

1991-2000                            +5.4%                    -0.6%                     +1.8%

2001-2010                            -0.4%                     -1.9%                     +0.4%

 

Another myth spread by the petty-bourgeois anti-EU left is that the European Union would be a qualitatively more vicious, pro-austerity enemy of the working class than imperialist nation-states. In fact, the capitalists’ offensive against the workers has as its source the historically declining rate of profit and the general crisis of their system (see below), not by any specific form of political organization of the imperialists (like the EU). To illustrate this, let us examine the relative decline in the percent which wages constitute in the overall expenses of corporations (i.e., wage share in Table 4). As we can see, wages have declined in all imperialist regions, not only in the European Union. In Japan, the decline of wage share has been even more dramatic than in the EU.

 

Table 4: Adjusted Wage Share; Total Economy; in Imperialist States [6]

                                                As Percentage of GDP at Current Factor Cost

                                                USA                       Japan                      EU-15

1960-1970                            67.2%                    73.8%                    69.8%

1971-1980                            66.8%                    77.7%                    71.1%

1981-1990                            65.2%                    74.0%                    67.8%

1991-2000                            64.9%                    70.8%                    64.8%

2001-2010                            63.3%                    65.5%                    63.6%

 

As Marxists have noted again and again, the fundamental cause for this decline is the historic tendency of the rate of profit to fall. This is because in the long run the share of surplus value – which is the only basis for profit – declines in relation to the total invested capital (both constant and variable). As Marx explained:

As the process of production and accumulation advances therefore, the mass of available and appropriated surplus-labour, and hence the absolute mass of profit appropriated by the social capital, must grow. Along with the volume, however, the same laws of production and accumulation increase also the value of the constant capital in a mounting progression more rapidly than that of the variable part of capital, invested as it is in living labour. Hence, the same laws produce for the social capital a growing absolute mass of profit, and a falling rate of profit.“ [7]

Marx characterized the law of the tendency of the rate of profit to fall as the most important law of capitalism:

In every respect, this is the most important law of modern political economy, and the most essential one for comprehending the most complex relationships. It is the most important law from the historical viewpoint. Hitherto, despite its simplicity, it has never been grasped and still less has it been consciously formulated.“ [8]

In Figure 1 we show that Marx’s statement about the historic character of the law of the profit rate to fall has been proven by studies on the rate of profit during the past century and a half. The Argentinean Marxist economist Esteban Ezequiel Maito recently published an interesting study on this subject.

 

Figure 1: Average Rate of Profit in Imperialist Core Countries (1869-2010) [9]

 

Michael Roberts, another serious Marxist economist living in Britain, has also verified this tendency in an analysis of the world economy during the past six decades. (See Figure 2)

Figure 2: A world rate of profit (G20 countries), 1950-2012[10]

 



[1] Christian Stohr: Let’s Get This Right: Swiss GDP and Value Added by Industry from 1851 to 2008, September 2014, University of Geneva, WPS 14-09-1 Working Paper Series, p. 39

[2] The so-called EU-15 compromises the old Western European states of which nearly all have an imperialist class character.

[3] See on this e.g. Michael Pröbsting: Imperialism and the Decline of Capitalism (2008), in: Richard Brenner, Michael Pröbsting, Keith Spencer: The Credit Crunch - A Marxist Analysis (2008), http://www.thecommunists.net/theory/imperialism-and-globalization/; Michael Pröbsting: World economy – heading to a new upswing? (2009), in: Fifth International Vol. 3, No. 3, http://www.thecommunists.net/theory/world-economy-crisis-2009/; Michael Pröbsting: The Great Robbery of the South, Vienna 2013, chapter 3, http://www.great-robbery-of-the-south.net/great-robbery-of-south-online/download-chapters-1/chapter3/.

[4] European Commission: Statistical Annex of European Economy Autumn 2006, p.52 respectively, for the years 2001-2010, European Commission: Statistical Annex of European Economy Spring 2015, p.33. Because there are no figures for the EU-15 for the years 1961-70 and 1971-80 in these EU statistics, for these years we have used the arithmetic mean of the figures for Germany, France, Great Britain and Italy.

[5] European Commission: Statistical Annex of European Economy Spring 2015, p.49

[6] European Commission: Statistical Annex of European Economy Spring 2015, p.73

[7] Karl Marx: Capital, Vol. III; in: MECW Vol. 37, p. 217

[8] Karl Marx: Grundrisse der Kritik der politischen Ökonomie; in: MECW Vol. 29, p. 133

[9] Esteban Ezequiel Maito: The Historical Transience of Capital. The Downward Trend in the Rate of Profit since XIX Century, Universidad de Buenos Aires 2014, p. 9. The author takes Germany, USA, Netherlands, Japan, United Kingdom and Sweden as core countries.

[10] Michael Roberts: Revisiting a World Rate of Profit, Paper for the 2015 Conference of the Association of Heterodox Economists, Southampton Solent University July 2015, p. 6