[Marxism] Too much capital in Europe's paper industry

Joonas Laine jjonas at nic.fi
Fri Mar 17 06:54:58 MST 2006

Last week the paper company UPM-Kymmene, one of Finland's biggest
monopolies, announced that it will sack 3.600 workers (3.000 in Finland,
the rest abroad). It is the biggest single announcement of workers to be
sacked in the history of Finland.

The reason for this measure, according to the CEO Jussi Pesonen, is the
chronic oversupply of glossed magazine paper in Europe. Capacity is 161
million tons while demand stands at 145 million tons. This of course
presses the prices too low. Last summer there was a lock-out in the
paper industry here, and the union lost the struggle by yielding to work
on a few holidays, to keep their jobs. Ironically the lock-out paid the
capitalists also in the way of decreasing the oversupply of paper, thus
rising the price per ton.

According to the company, the new markets are in South America and
China, where UPM will now direct its activities. Stora-Enso, another big
Finnish paper monopoly, has already built a pulp mill in Brazil.

The Finnish equivalent of Financial Times, Taloussanomat, ran a story
entitled 'There's too many paper factories even after the cuts':

"The overcapacity haunting the paper companies will not leave Europe
after the announcements of the Finnish companies about major cuts.
However [..] over 0,8 million tons of UPM and Stora-Enso's capacity for
lwc paper will disappear, which makes up over a third of the
overcapacity for the said paper in Europe. The cuts of the Finnish will
be felt, because they rule the markets of glossed magazine paper."

"Judging by the signs in the stockmarket, investors seem to believe that
tearing down overcapacity will also better the possibilities to rise the
price of lwc." (Taloussanomat 9.3.)

The parliamentary left (the SDP and the Left-wing League), the Paper
workers' union, and the central trade union SAK have merely been able to
beg for the continuation of class collaboration - of the kind that was
the rule in Finland before capital flows were gradually freed in the
mid-80s, and the final nail being the attachment of Finland into the EU
in 1995. Thus, capital now free to go down more lucrative avenues, the
Finnish bourgeoisie has abandoned the class collaborationist tactic a
good while ago.

In the depression of the early 90s, the unions agreed on a strategy of
wage moderation as a means to boost the profitability of Finnish
companies. The trade-off was to be that the companies would then use the
extra surplus to invest in Finland, creating jobs.

However, a recent study by the Labour Institute for Economic Research
revealed that between 1995-2004, the companies have not invested in
Finland; in fact, the investments have not been enough to cover even the
depreciation of fixed capital. Instead the money has been dealt out as
dividends, or used to buy companies abroad. Around 40 billion euros, or
40% of the wealth at the disposal of the capitalists, has been taken

As a result of wage-moderation, as well as tax breaks for those with
capital income, the division of income between labour and capital has
streched as wide as it was in the 60s, when some industries still had
six-day working week. In the 90s the gap started widening again, and the
productivity of Finnish labour is now top of the world.

For the first time in its history, Finland has become a country that
exports capital. It is very descriptive of the capital oligarchy that,
to cite the study, "four major transactions and deals by three Finnish
companies explain almost half of the combined investments abroad by
industry and services sectors in 1995-2003." The three companies are
Stora-Enso and UPM-Kymmene, and the telecommunications company Sonera.

(Paper industry has been a major - and for most of the time, the -
export industry in Finland. Some decades ago around 80-90% percent of
Finland's income was generated by forest industry related products. It
is also descriptive that telecommunications capital should play such a
big part in today's Finland, given that the share of Nokia the mobile
phones company alone makes up 4% of Finnish GDP, and 20% of exports.)

The long-time leader of the central union SAK commented the study in the
union's paper 'Palkkatyöläinen': "Making job-creating wage deals and
leaving a share of the growth of productivity unclaimed have been means
to reach for increase in domestic job-creating investments. The trouble
is, this has not taken place", but goes on regardless, that "one should
not reach the conclusion here that we were now to shift to a more
aggressive wages policy."

jjonas @ nic.fi

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