[Marxism] Neo-liberalism: you ain't seen nothing yet!

Jack Cade jack.cade at btinternet.com
Sat May 28 18:10:06 MDT 2005

The Anglo-Saxons are coming!

London Observer, Business section, Sunday 29 May

Today's vote is more about the economic shape of the Union than
the constitution, says Heather Stewart . There is concern that
France would be open to alien corporate influences

JACQUES Chirac's rousing call to arms on Friday, warning French
voters they have 'a part of Europe's destiny in their hands,' may
have swung today's referendum, persuading the French to say 'oui'
to Europe's new constitution – but, whatever the outcome, the
tussle between the French establishment and the 'non' camp has
laid bare profound differences about Europe's economic future.

Chancellor Gordon Brown optimistically announced last week that
he hopes to use Britain's presidency of the European Union, in
the second half of this year, to press for deeper 'structural
reforms'. Brown believes his EU partners should copy UK plc in
making their labour markets more flexible, encouraging
competition, and throwing open their markets to foreign

If the French say no, he has little hope of success. To French
anti-constitution campaigners, proposals such as these represent
exactly the Anglo-Saxon model of unfettered capitalism that they
believe is enshrined in the new document and that France should
reject. With unemployment running at more than 10 per cent –
twice the rate in Britain – and a perception that the new
accession countries in central and eastern Europe are creating
fierce competition for investment and jobs, there is a desire in
France to turn back the tide.

Dominique Barbet of BNP Paribas in Paris says: 'The major element
is definitely a vote against the Anglo-Saxon liberal model of the
economy. This is what is most important. They're worried about
labour markets. The core of the issue is labour market

David Brown of Bear Stearns agrees: 'For the French it seems to
be down to jobs: people see cheaper labour coming from eastern
Europe. Right or wrong, their perception is that European
enlargement is a threat to job security.'

In Germany, too, the willingness to exploit the possibility of
cheap labour just across the border has created an air of
anxiety. Katinka Barysch, chief economist at the Centre for
European Reform, says: 'If you talk to Germans, the majority are
afraid about losing their jobs. People have a sense of crisis.'

The now notorious outburst of Franz Munterfering, chairman of the
governing SPD – that capitalists were 'a swarm of locusts'
attacking Germany – was an attempt to capitalise on exactly those
fears. The SPD's dramatic loss of North Rhine-Westphalia,
Germany's industrial heartland, suggested Munterfering's
intemperate language may not have caught the mood – the
opposition CDU would like to see more pro-market reform, not
less. But with a snap election now due in the autumn, Germany, as
well as France, is uncertain about its economic direction.

Most analysts believe the French are nervous not about the
specific content of the 500-page constitution, which largely
brings together existing treaties, but the very different
character of the new, 25-strong EU. And despite the Elysée Palace
apparently pledging to plough on with ratification regardless, a
'non' could shift the economic debate. 'The idea is not to stop
integration: it's not a question of sovereignty at all. They want
a new orientation for Europe – they want to impress some views on
the rest of Europe,' says Barbet.

Already, Jacques Chirac has sent proposals on creating a free
market in services such as banking back to the drawing board. The
French fear 'social dumping' – countries from central and eastern
Europe undercutting their western rivals because their labour
standards are lower. France has also been at the heart of a
rising tide of protectionism in Brussels, with demands for trade
barriers to slow the pace of cheap textiles imports from China.

All this comes at an unhappy moment for Europe, when governments
and analysts are hastily revising down their forecasts for
economic growth in the region this year. Italy has already slid
into recession. In Germany, cautious consumers have so far
prevented a strong recovery in the corporate sector spreading to
the rest of the economy.

Barysch believes that if France and Holland reject the
constitution, it will not be as a consequence of too much
economic reform, but too little. She blames governments for
pinning difficult decisions on Brussels bureaucrats. 'The British
are the masters at this game: they always go to Brussels, sign up
to everything, and come back and say, "Brussels is doing
something",' she says.

'Gerhard Schröder was too timid for a long time, arguably the
French were, and the Italians certainly were. They stoked fear
among their populations, and by the time they got around to
reform, people were too scared to accept it.'

These fears are amplified by the fast-growing accession countries
to the east. With their cheap workers and flat tax regimes
tailored to attract investment, the former communist countries
tend to look to the US for inspiration as much as to the 'social
market' capitalist model of Germany and France. '[A "no"] would
be seen as a vote against economic reforms and as a vote against
enlargement,' says Holger Schmieding of Bank of America.

For some, a 'no' vote would mean it could be time to think the
unthinkable. Steve Andrew, chief economist at Foreign and
Colonial, says: 'A core founding father of the European project
question­ing the direction of the European Union must surely be a
serious issue and must surely make people ask about the
sustainability of the whole project.'

But Charles Wyplosz, an expert on the eurozone economies at the
Centre for European Policy Research, says it's not time to panic.
'I don't think we will have an unravelling. We will have a pause;
it's not necessarily a bad thing.' He says there have always been
phases, since the EU was founded, of faster and slower
integration. The so-called 'Lisbon strategy', a wave of radical
reforms to make the EU the world's most competitive economy, was
unrealistic, he says, because these are questions that can only
be dealt with by national governments; France and Germany have
always had a different approach to Britain, let alone Poland or
the Czech Republic.

He says: 'In most important respects we are back where we have
been most of the time: it's up to national governments to solve
Europe's problems.'

And if it's not up to the EU, it's certainly not up to Gordon
Brown. While the Prime Minister may be doomed to spend Britain's
six-month EU presidency trying to negotiate the resurrection of
the constitution, Brown may find his plans for an enterprising,
competitive Europe falling on even deafer ears than usual.

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