Christian Fuchs

How Ideology is Policing the Crisis of European Capitalism
Christian Fuchs

Written for the Greek magazine ΒΑΒΥΛΩΝΙΑ (Babylonia)

Times of crisis are times, where ideologies tend to flourish. We can take the current ongoing crisis as an example.

1. Dangerous Immigrants?

UK Politics enter the stage.

In Britain, fears of illegal immigrants taking away British jobs and receiving social services without paying taxes have been massively stirred. Home Secretary Theresa May said: “The aim is to create here in Britain a really hostile environment for illegal migration […] Within the EU, in a wider context, people are increasingly recognising the need to prevent the abuse of free movement”[1]. And not only immigrants are perceived as the problem causing the crisis, but also the unemployed: “I think it’s time to look back at some of the things we’ve already achieved. Welfare reform, so never again will it make sense to sit at home instead of getting a job”[2]. May’s argument is that immigration needs to be curbed in order to preserve Englishness and because immigration in her view results in low wages, the displacement of jobs and lack of social cohesion: “But first, it’s important to explain why we want to control immigration. […] It’s because, if we want our communities to be real communities, with a shared pride in our British identity instead of fragmented, separate identities, we have to understand that a nation is more than a market, and human beings are more than economic units. […] Uncontrolled, mass immigration undermines social cohesion. And in some places, it overburdens our infrastructure and public services. It’s behind more than a third of the demand for all new housing in the UK.  And the pressure it places on schools is clear. We see it in London where almost half of all primary school children speak English as a second language. And we must be honest about the fact that, in some cases, uncontrolled mass immigration can displace local workers and undercut wages”[3].

May’s rhetoric is not so different from the one of the UK Independence Party (UKIP). For the UKIP the causes of the current crisis are the European Union and immigrants. Explaining what it stands for, the UKIP says: “These are anxious and troubled times. As crisis has followed crisis our politicians are seen to be impotent in the face of the dangers rearing up all around us. Violent crime erupts in our cities. Jobs are lost and services failing under a tide of immigration, pensions have been crippled and cash savings yield almost nothing. UKIP alone holds that the rescue of the British people depends on withdrawal from the EU to regain our self-governing democracy so allowing the relief of business from crushing regulation and the less well off from the burden of taxes, shutting off the flood of immigrants and freeing enterprise”[4]. David Cameron argued that he would close the UK borders for Greek immigrants if the Eurozone collapsed: “I would be prepared to do whatever it takes to keep our country safe, to keep our banking system strong, to keep our economy robust. At the end of the day as prime minister that is your foremost duty”[5].

2. Dangerous Southern Europeans?

Germany enters the political stage.

The ideology of the Greek threat has been tremendously flourishing in the country formerly ruled by Hitler. Briefly before the Greek elections in 2012, Financial Times Germany published a warning on its first page in both Greek and German, in which it urged Greek citizens not to vote for Syriza. The call was titled “Resist the demagogues” and said: “Dear Greeks, provide clear political conditions. Vote courageously for the reform agenda instead of angrily against necessary, painful structural adjustments. […] Resist the demagogy of Alex Tsipras and his Syriza. […] Your country final needs a functioning state. In order that it can be orderly ruled, we recommend Nea Dimokratia”[6]. The Financial Times’ basic argument is that Syriza is populist and does not understand that the problem is a corrupt and bureaucratic Greek state and that a left government will result in chaos.

Angela Merkel has advanced an ideology that puts hard-working Germans against the claim of the existence of lazy Southern Europeans. “It is also important that in countries such as Greece, Spain, Portugal one should not be able to retire earlier than in Germany, but that all are making a bit of the same effort – this is important. […] We cannot have one currency and one gets a lot of holidays and the other very little. This does not go well together over time”[7]. On another occasion, Merkel argued: “Living beyond one’s means is the ultimate cause of the problem”[8]. So Southern Europeans in her view are not only lazy and not working, Merkel agrees with the Financial Times that in her view Southern Europeans do not know how to run a state and continuously overspend money that they have not earned in the first instance because they do not work, which requires Germany to pay for everything.

The German cabaret artist Gerhard Polt (http://www.poltseite.de/) has expressed Germany’s obsessive ideology that it pays for everything in a satirical way: “We pay everything. Everything gets paid. We pay and pay. If somewhere in Asia a desert dries out, who pays it? We! If a brothel burns in Taiwan, we also pay it! We pay everything! […] The chancellor smokes a Havanna, and who pays it? Definitely not Castro, we have to pay it!”[9]

The jingoist prejudices were also amplified by the German press with the right-wing tabloid Bild Zeitung taking the lead. Some of its headlines said: “Greek crisis: Bankrupt Greeks won’t get a cent from us!” (March 4^th, 2012). “Germany is to pay €18 billion! Greece is for the German taxpayer a financial nightmare! 18 billion Euros from Germany for the bankrupt Greeks” (April 21^st, 2010). “Greece-bankruptcy: This is how the Greeks burn the Euro. […] The Greeks are living far beyond their abilities” (February 28^th, 2010)[10].

The same kind of ideological arguments that focus on overspending and blaming everyday people was followed up in the German political and media discourse in the discussion of Cyprus’ crisis. Bild wrote for example: “Cyprus has the presidency of the EU Council since today. A bankruptcy-island takes over the power in Europe” (July 1^st, 2012). Angela Merkel commented on the plan that everyone having a bank account in Cyrus should pay for the financial rescue of the country that this is a good idea because “those responsible can partly be included and not only the tax payers of other countries’. […]. This is a good step that will definitely make it easier for us to agree to a help for Cyprus”[11]. Merkel did not comment on the circumstance that her statement implies that the Cyprian man and woman on the street are responsible for the crisis.

3. Dangerous Capitalism!

Dominant ideologies explain and reduce the crisis to immigrants, European bureaucracy, an alleged laziness of Southern European, the claim that Southern Europeans are lazy, overspend money, do not know how to run a state and the economy and the claim that left-wing parties and movements bring chaos. The conclusion is that hard-working Germans (or other Europeans) have to pay the prize to correct the incapability of Southern Europeans. These discourses are overtly racist, nationalist, chauvinist and shortsighted. They avoid talking about capitalism, class and social inequality.

The rise of neoliberalism has been accompanied by a deregulation of financial markets, an encouragement of financial speculation and a massive redistribution of wealth from wages to profits. By class struggle from above capital managed to increase its profits by relatively decreasing wages. The resulting profits were to a certain degree invested into financial markets and high-risk financial instruments, which increased the crisis-proneness, instability and volatility of capitalism. Comparing the years 1970 and 2013, the wage share, which is the share of wages in the GDP, decreased in the following way in selected European countries (adjusted wage share as percentage of GDP at current market prices, data source: AMECO).

Table 1: Adjusted wage share as percentage of GDP at current market prices, data source: AMECO, data source: AMECO

The data show that in the past 40 years, capitalist class struggle from above has all over Europe resulted in a relative decrease of wages. This struggle has especially been intense in countries such as Greece, Spain, Ireland and Cyprus, where the wage share dropped from values around 65% in 1970 to values around 50% in 2013. But also the wages in almost all either European countries were affected, although to different degrees. Wages in the USA were undergoing a similar development as in Europe.

How have profits developed in parallel with the relative fall of wages in Europe? Net operating surplus is a variable that measures the gross value added of an economy minus fixed capital investments minus wage costs minus capital taxation. Calculating the share of net operating surplus in the value of GDP minus net operating surplus gives an estimation of capital’s net profit rates:

Net profit rate = Net operating surplus / (GDP – Net operating surplus)

Table 2: Macroeconomic data for the development of profits in the EU 15 countries (data source: AMECO)

Table 3: Macroeconomic data for the development of profits in the USA (data source: AMECO)

In 1980, the profit rate was 1.8% lower in the USA than in 1970 and 8.8% lower in the EU 15 countries. What followed was the rise of neoliberal politics in the USA and Europe. The wage rate in the USA and Europe continued to decline: It was 65.7% in the EU 15 countries in 1980, 61% in 1990 and 58.9% in 2000 (AMECO). In the USA the values were 65.1% in 1980 and 63.2% in 2000 (AMECO). At the same time the profit rate rose from 25.4% in the USA in 1980 to 32.8% in 2000 and from 28.0% in 1980 in the EU 15 countries to 33.2% in 1990, 31.9% in 2000 and 34.4% in 2007 (AMECO). Whereas capital was having constantly high growth rates during the 1980s and 1990s and 2000s, wages stagnated or relatively declined. Neoliberalism increased the wealth of corporations at the expense of labour. In the USA, the profit rate fell to 30.1% in 2009 as an effect of the crisis, but was at a high of around 35% in 2012. In the EU 15 countries, high profit rates around 35% before the crisis were reduced to around 30% in the years after the crisis. The all-presence of austerity talk and austerity measures in the European Union can be explained as the attempt to increase profit rates by further decreasing wages, cutting public expenditures that mainly benefit workers, increases taxes paid by employees, etc. There is also economic competition between Europe and the USA, where profit rates have been increasing faster after the crisis than in the European Union.

The working class in European countries that have been severely affected by the financial crisis has already been hit hard in the aftermath of the crisis: The wage share decreased from 55% in 2007 (before the crisis) to 52.4% in 2013 in Cyprus, from 53.5% to 47% in Greece, from 52.9% to 49.6% in Hungary, from 70.1% to 62.2% in Iceland, from 50.3% to 49.3% in Ireland, from 53% to 46.4% in Latvia, from 49.7% to 44.1% in Lithuania, from 57.2% to 55.6% in Portugal and from 55.3% to 52.3% in Spain (data source: AMECO). In Poland and Slovakia, workers have been relatively poor already before the crisis: the wage shares were 46.5% in 2007 and 46.1% in 2013 in Poland. The respective values for Slovakia were 42.3% in 2007 and 43.1% in 2013.

The class struggle of capital against the working class that resulted in falling wage shares and high profits has been accompanied by a decrease of capital taxation. The available data on corporate taxation is relatively incomplete. In the EU 27 countries, corporate taxes accounted in 2013 for only 0.3% of the GDP. In the United States the value was 0%, meaning that treated as a collective capitalist, companies in the USA do not pay taxes. Table 4 shows some of the limited available data. It indicates that capital taxation has since the 1970s in general been low in European and North American capitalism, reaching never up to 1% of the GDP of a country and varying in most countries between 0 and 0.3% of the GDP. It is interesting to observe that in 1970 the UK (0.8%) and the USA (0.5%) taxed capital higher than Germany (0.1%) and the Netherlands (0.2%). The rise of neoliberalism has resulted in a subsequent lowering of capital taxation in both the UK and the USA. Overall the data in table 4 shows that European and North American tax regimes are friends of capitalist interests, which has supported the neoliberal class struggle of capital against labour.

Table 4: Capital taxes, percentage of GDP at market prices, data source: AMECO

The working class’ wages have been attacked by neoliberal policies. The resulting profits were invested in finance because capital is driven by the need to accumulate ever more profits and financial speculation promised high returns. The volatility of the economy steadily increased, which resulted in a big explosion in 2008. The result was more of the same: hyper-neoliberalism, which means the intensification of neoliberalism. Banks were bailed out with taxpayers’ money, which means a bailout by taxes predominantly paid by employees because companies hardly pay taxes. The discourse of austerity wants to make people believe that they have lived beyond their means, that austerity is necessary because states have spent too much money, etc. The circumstance that profits have been ever more growing, wages shrinking and that companies have hardly paid taxes is not mentioned in the dominant ideology. The working class was first ever more exploited by capital and the reaction to the crisis is an intensification of exploitation and the attempt to legitimate this form of exploitation that works by redistribution from workers to companies, cuts of public expenditures, wage cuts, tax support for banks and companies. The working class is constantly being dispossessed of the wealth it produces. Austerity measures bring much more of the same.

4. Stuart Hall Revisited

Stuart Hall et al (1978)[12] describe how a moral panic about street robbery (“mugging”) developed in the UK in the 1970s. They argue that this panic must be seen in the context of the crisis of the mid-1970s. This crisis would have been a global crisis of capitalism (recession), a crisis of political apparatuses (such as ruling-class and working-class parties), a crisis of the state and a crisis of hegemony and political legitimacy (Hall et al 1978, 317-319). In crises, people look for causes and answers. Ideology that wants to maintain the system does not engage with the systemic causes of crises, but rather displaces the causes ideologically. There is a “displacement effect”: “the connection between the crisis and the way it is appropriated in the social experience of the majority – social anxiety – passes through a series of false ‘resolutions’, primarily taking the shape of a succession of moral panics. It is as if each surge of social anxiety finds a temporary respite in the projection of fears on to and into certain compellingly anxiety-laden theme: in the discovery of demons, the identification of folk-devils, the mounting of moral campaigns, the expiation of prosecution and control – in the moral-panic cycle” (Hall et al 1978, 322). Crises are “ideologically constructed by the dominant ideologies to win consent” (220f). Moral panics are “the key ideological forms in which a historical crisis is ‘experienced and fought out’” (221).

The current political and ideological situation in Europe precisely resembles the situation that Hall described for the 1970s. The objects of contemporary moral panics in the crisis, the contemporary ideological demons and ideological devils are immigrants, the unemployed, Southern Europeans and the European Union. Crisis ideologies displace the causes of the crisis of capitalism into particularism. Ideology is policing the crisis today: it aims at installing an even more brutal capitalist system and making people believe that this is necessary and will help overcome and avoid future crisis. The opposite is true: The cause of the crisis is prescribed as its solution, which can only result in even worse crises in the future if these politics and ideologies are successfully implemented.

5. Breaking the Ideological Spell!

It is time to end the current ideological play and to stage Bert Brecht and Augusto Boal in Europe.

The European protests against austerity, neoliberalism and capitalism are the only reasonable voices in the crisis discourse. The European protests that have taken place since 2008 in countries such as Greece, Spain, Portugal, Romania, Slovenia, the UK, Iceland or Austria question that profits stand over people, that everyday people are dominated by capitalist interests and that those who produce wealth and the commons should pay for the crisis. No serious debate over the causes of the crisis has been started in Europe at large. It has been displaced and disabled by ideology. Continuous protests are our only hope to save the people, to save Europe and to save the world from the rule of capitalism.