- by William Briggs
- The Guardian
- Issue #2119
President Joe Biden poses for a photo with President Volodymyr Zelenskyy of Ukraine, European Commission President Ursula von der Leyen, UK Prime Minister Keir Starmer and other leaders, 25 September 2024, in New York City. Photo: Official White House/Adam Schultz – flickr.com (CC0)
Marxists often speak of the crisis of capitalism. The European Union commissioned a report to look into the future of the European economy. Economist and former Italian PM Mario Draghi was given the task of preparing the 600-page report.
Draghi has also been the head of the Italian central bank, and president of the European central bank. His task was to find a way of saving European capital from falling behind global capital and precipitating an even deeper crisis.
The findings of the report make grim reading for those who were hoping for some European miracle. Draghi describes the situation as critical. He goes so far as to say that European capitalism is facing an “existential challenge.”
The Draghi report was released when Germany, Sweden, and Austria are in recession, and while the French, and Italian economies are recording nil growth. None of the EU economies are doing well. The average growth rate across the EU is just 0.2 per cent. When compared with either the USA or Asia, Europe is showing a relative decline in output and productivity growth, in living standards, and in technical progress in the European economy. The EU, it must be remembered, is an economic bloc of 440 million people that accounts for 17 per cent of total global GDP. To describe such an essential sector of the global capitalist economy as facing an “existential” challenge shows just how deep the crisis in capitalism is running.
The EU has long been held up as an example of the benefits that allegedly derived from the capitalist boom that was known as the ‘golden age’ from the end of WW2 until the 1970s. It leads the world in health outcomes, education, and higher education accessibility. It has been regarded as something of a poster-boy in sustainability and environmental protection. Cracks in this vital group of economies send shock waves across the capitalist world and bring into serious question the prospects for European capitalism.
The EU was a big winner from capitalist globalisation. Free global trade regimes benefited Europe. Globalisation was meant to act as a salve for the crisis in capitalism, and to halt and reverse the decline in global profit rates. It was a brief respite. There has been a retreat from globalisation, and a return to economic nationalism and trade war politics. According to IMF research, world trade is set to grow at just 3.2 per cent over the next several years. This is well down on figures from a decade ago. The EU share of world trade is declining even faster.
Draghi observes that Europe’s capacity to grow is further weakened as its relative position in technological innovation declines. Just four of the leading 50 tech companies are now European.
Productivity growth is falling significantly. This is made much worse because the population is shrinking rapidly. It has been shown that from 2040 the workforce will fall by nearly two million workers per year. This will contribute to a reduction in the GDP growth rate of the leading European economies of Germany, Italy, France, and the UK, by as much as one per cent per year.
Draghi’s report is bleak for European capital, and that obviously means that the working class will suffer. The report says Europe will have to lean more on productivity to drive growth. But if the EU were to maintain its average productivity growth rate since 2015, it would only be enough to keep GDP constant until 2050 – at a time when the EU is facing a series of new investment needs that will have to be financed through higher growth. As productivity growth is linked to both population growth and the potential for investments in technology, the future supports his ‘existential’ challenge prognosis.
Faced with a crisis of such magnitude, Draghi the former banker, former prime minister and ardent supporter of the capitalist status quo offers a solution. His recommendations are clothed in economic jargon, but translated into the language of the people it means that EU public spending must be reduced significantly.
The ‘savings’ from this policy would be invested in technology projects. There are two obvious and immediate problems. The first is that developments in technology and the capital investments are likely to remain where they are. Asian markets and American markets already lead the field. What sort of incentives could there be to move to Europe? The second problem is that the cuts to spending mean a cycle of austerity. Those least able to cope would also be those that benefit the least from any ‘technological revolution.’
The poorer economies in the EU, the less developed, the more rural communities, and the eastern states of Europe could hardly be expected to cheer for on-going dislocation and increased poverty for the sake of boosting the bigger economies. The result might well mean a fracturing of Europe as capitalism continues to fracture and move deeper into crisis.
Mario Draghi is right when he labels the economic prospects as an ‘existential’ problem. Capitalism’s golden age is over. All that remains is crisis.
