European Union imposes neo-liberalism and austerity by design

Many left-leaning people accept the notion that the EU is a progressive force. But the EU is a project that has always been a profoundly capitalist one.

As capitalist firms grow, they face a contradiction. On the one hand, they are tireless in their drive to expand the scope of their operation, to obtain inputs, market their goods and exploit workers on the widest possible scale.

On the other hand, firms require a state, tied to a particular national territory, which can provide them with important infrastructure, ensure the right kind of labour power exists, and secure their interests at home and abroad, using force if necessary.

By the end of the Second World War each European capitalist class had, as Chris Harman once put it, “discovered in the most damaging and harrowing ways that the scale of capitalist production could no longer be contained within narrow national boundaries.

“The monopolies and cartels that dominated each national market found that to compete internationally they had to spread their scale of operations beyond state boundaries. But this meant clashing with rival capitalist enterprises operating from within other states. In the last resort such conflicts could only be resolved by the military forces which national blocks of capital had at their disposal.”

The EU and the EEC before it are how the European ruling classes sought to overcome this contradiction. Alone, even the biggest European economies are overshadowed by their rivals.

The largest, Germany, is responsible for just 5 per cent of global GDP. The US weighs in at 23 per cent, China 13 per cent and Japan 6 per cent. Yet taken as a whole the EU makes up 24 per cent of the world economy.

The logic of the EU is to allow the major European powers to continue to play a role on a global scale. It secures for their capitalists a large domestic market and a big pool of labour to exploit, and, for those opting to abandon their national currency, it creates a form of money that can compete with the dollar.

European integration has always been somewhat dysfunctional. Most political decisions are still taken by particular states—there is no pan-European government, whatever the pretentions of the European Commission.

The recent economic crisis has also exposed the problems of a currency shared by countries with no common system of taxation and with only minimal redistributions of wealth between them. Nonetheless, for the bulk of capitalists the EU continues to offer advantages.

The increasingly neo-liberal approach taken by the EU has always been combined with rhetoric about a “European social model”.

This was proclaimed most loudly in the 1990s, just as the budget deficit limits imposed by the 1992 Maastricht treaty triggered a wave of unemployment and welfare cuts across the continent.

Recent events demonstrate even more clearly the EU’s neo-liberal character. During the first decade of monetary union weaker European economies were subjected to a wave of cheap credit from banks of the most powerful states. When the global crisis erupted, banking bailouts, rising social spending and sharp declines in tax revenue sparked a debt crisis in countries such as Greece, Portugal and Spain.


The EU responded by doing what the International Monetary Fund (IMF) has been doing to indebted Third World countries for decades. The European Commission is part of the hated troika of institutions seeking to foist the most brutal austerity on Greece and doing everything it can to tame or depose the Syriza government.

Breaking Syriza is about maintaining a system of austerity across the region, an approach now enshrined in the European Fiscal Compact, which limits state spending across the eurozone.

The EU secures free movement within its borders. However, the EU’s support for free movement is based on its desire to create a European-wide labour force that can be profitably exploited. It is not motivated by humanitarianism or anti-racism.

The point when EU states began to harmonise immigration policies in the late 1990s also saw them launch intensified attacks on “outsiders”—unleashing a new wave of detention and deportation on those from Africa, Asia, Latin America and the Arab world.

There is no greater indictment of the EU than its treatment of those making the desperate voyage from North Africa. Here the policies being promoted across Europe amount to drowning as a deterrent—which has been the fate of 1800 migrants in the first five months of this year alone.

The EU is a capitalist institution with commitment to neo-liberalism hardwired into its structures.

The punishment it is inflicting on Greek workers should shatter any myths that it can play a progressive role.

By Joseph Choonara
Socialist Review UK


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