Report of the 5th Congress of Internationalisme

 Belgium-Holland

Crisis and class struggle

If we have decided to publish in the IR a report devoted to the political, economic and social situation in two European countries, this is precisely because they are in no way particular or specific, but are exemplary expressions of the proletarian condition in all the industrialized countries.

The vicious austerity in these two countries, which only a few years ago boasted some of the highest living standards in Europe, and an env­iable level of ‘social security’, highlights the evolution of the economic crisis at the heart of world capitalism and the force of the attack on workers’ living standards. Similarly, the workers’ ability to counter-attack and the bourgeoisie’s efforts at political adaptation provide valuable pointers to the development of the balance of class forces.

We therefore consider that this text is an excellent illustration of our overall approach applied to a concrete situation and that it shows clearly how indispensable is the deepening of our analytical framework regarding the role of the left in opposition, rank-and-file union­ism, the historic course and the process of the generalization of class struggle based on the lessons of the previous wave of struggles in grasping today’s social reality.

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The Fourth Congress of the ICC’s section in Belgium (held in February 1982) took place two months after Jaruzelski’s putsch in Poland, when the working class was still stunned by the full force of the bourgeoisie’s international counter­offensive.

Within this framework, it was no accident that, after years of hesitation and under direct press­ure from the rest of the western bloc, the Belgian bourgeoisie had just brought its policies into line with those of the bloc as a whole and launched a direct attack on the working class. The Congress resolution on the National Situat­ion correctly described the bourgeoisie’s strategy as follows:

“the elections of November 1981 have legalized the bourgeoisie’s new battle order in confronting the class struggle; a qualitative step has been taken in the head-on attack against the working class:

a) a tough and arrogant right, firmly anchored in power as a long-term perspective and speaking the ‘language of truth’;

b) a necessary division of labor within the bourgeois political apparatus, between a tough right in government and a left in opposition confronting the class struggle, as well as various subdivisions in both government and opposition, allowing a more supple development of mystifications;

c) a radical-sounding opposition, whose present themes are no longer those of a responsible team developing the illusory perspective of a return to government and whose sole function today is to derail the class struggle and the reactions engendered by draconian austerity.” (Resolution on the Situation in Belgium and Holland, February 1982).

As early as February 1982, the Resolution clearly indicated the major axes of the bourgeoisie’s policy in Belgium for the two years to come. In Holland, the situation was still less clear-cut, and the left had just returned to power. In the report on the situation in Holland, we nonethe­less emphasized that “the PvdA’s (Social-Democrat) participation in the government was nothing other than a temporary jury-rig solution” (idem), and this was quickly confirmed by the end of 1982. Overall, then, in both countries, the period that has just come to an end was characterized by draconian austerity and the continued sabotage undertaken by the left in opposition.

Under the inexorable pressure of the crisis and the austerity that came with it, the confrontation between the classes was renewed still more vigor­ously in the very heart of the industrialized countries. Belgium and Holland returned to the front rank in the renewal of the class struggle. This is the perspective for our evaluation of the results of the bourgeoisie’s strategy, on both the economic and political levels, and of its impact on the development of the prol­etarian struggle.

Crisis and austerity

A) Belgium: Two Years of Austerity and ‘Sacrifices’

“For several years, the situation of the Belgian economy has been characterized by multiple and severe imbalances. Their origin lies in the effects of the international crisis to which Belgium is particularly sensitive given its openness to the world outside. They also have internal causes, amongst the most important being, on the one hand, an insufficient adaptation of production to the evolution of internal and external demand and, on the other hand, a rigid incomes system which has led to important changes during the 1970s in the distribution of the national income.” (Etudes Economiques de l’OCDE-Belgique Luxembourg, May 1983, p. 9).

Put more clearly, Belgium, since the end of the 1970s has been in a particularly difficult economic situation, caused by:

a) the deepening of capitalism’s world crisis, which hits Belgium more directly and brutally than others due to its dependence on internation­al markets resulting from the small size of the home market.

Exports as a % of production (OECD figures)

	Belgium	Holland	Germany	Main OECD countries
1970	53.2	51.3	26.0	13.6
1980	85.4	64.4	38.3	20.7

b) the Belgium bourgeoisie’s hesitations in applying a rigorous social and economic policy aimed at rationalizing the economy and substant­ially reducing wages and social allowances.

Thus as soon as it came to power, the Martens­Gol government’s action concentrated on:

-- “transferring income from households to business,” (sic!) carried out by a policy of wage controls (with a partial restriction of the sliding scale) along with an 8.5% devaluation of the Belgian franc within the European Monetary System (EMS) and a restrictive budget policy (the aim being to reduce the budget deficit in 1982 and 1983 by 1.5% of GNP in order to diminish the weight of the civil service on the available fin­ancing for the economy (Etudes Economiques de 1’OCDE, p. 9);

-- rationalizing those sectors that are badly adapted “to the evolution of internal and extern­al demand,”: the steel industry (Cockerill­-Sambre), ship-building (Cockerill-Hoboken, Boel), the Limburg mines, the textile industry (Fabelta, Motte) and engineering (Nobels-Peelman, Boomse Metalwerken, Brugeoise and Nivelles) . As Gaudois, the government’s ‘special advisor’ cynically admitted, this is nothing other than a “socially camouflaged liquidation” by means of mergers, partial closures and state aid at the expense of large-scale wage cuts.

After two years in force, what are the results of this draconian austerity? This is an important question to the extent that Belgium, thanks to its situation at the beginning of the ‘years of truth’, has served as a laboratory for the western bourgeoisie in testing ways of imposing generalized austerity and an overall attack on working class living standards.

i) The Situation of the Belgian Economy

Despite two years of restriction and ‘sacrifices’ the economic indicators clearly show a situation that is far from brilliant, as we can see from the growth in GDP (Gross Domestic Product)

GDP – variation in volume	1970-74	+ 4.9
1974-80	+ 2.1
1981	- 1.1
1982	- 0.3
1983	+ 0.25

 

Still more explicit is the graph of industrial production (1974 = 100) which reveals a quasi-permanent stagnation since 1974.

Even in relation to the other industrialized countries taken as a whole, the Belgian economy can hardly be said to have made up lost ground. At best, the recession can only be said to have stabilized:

Growth of GDP in Volume
	67-73	73-80	81	82
Belgium	5.4	2.5	-1.1	-0.3
EEC	5.0	2.3	-0.4	+0.2
OECD	4.9	2.5	1.5	-0.2

 

This general observation will be further detailed by a closer examination of the four factors that allow a more in-depth appreciation of the Belgian economy’s state of health.

a) Competitiveness. For the government, this is the key to the problem and the solution to the crisis: industry’s renewed competitiveness will allow production to take off again and re-absorb unemployment. On the face of it the results of government policy look spectacular.

However, three considerations strongly diminish the benefits of this renewed competitiveness:

-- the recovery in competitiveness is above all tied to a reduction in labor costs and, generally speaking, to a reduction in hours worked due to the increase in unemployment and not to any real development of production or exports (see above);

-- since the other industrialized countries have by now adopted similar measures (see the report on Holland) , the improvement in competitiveness will be quickly eliminated;

-- the recovery of company profits and competitiv­eness on the market has in no way led to a recov­ery in productive investment. The fall in capital equipment deliveries, as well as the volume of gross composition of fixed capital, confirm that investment continues to decline.

Gross Composition of Fixed Capital, annual rate of variation (OECD)
1974	+7.5%	1979	-2.4%
1975	-1.6%	1980	+5.2%
1976	+3.0%	1981	-16.2%
1977	-0.1%	1982	-4.9%
1978	+2.2%	1983	-4.0%

 

Faced with the impossibility of selling on an over-saturated market and with the under-utilization of the productive apparatus, the bourgeoisie in prefers to use its capital for speculation (gold, ­currency, raw materials) . The industrial investments that are still made aim above all at rationalization: “On average, faced with persistently weak demand and the continued high cost of credit, companies seem to have been concerned above all to restructure their accounts and increase their rates of self-financing,” (Etudes Economiques de 1’OCDE, p. 31).

b) Exports. Here again, exports have risen by 2% in 1983.

But the balance of trade (the difference between exports and imports) is still in the red. Moreover, this improvement is explained:

-- by the drop in imports, due to devaluation and austerity policies;

-- by the devaluation, which reduced the export prices of Belgium products.

However, given that Belgium exports essentially to other industrialized countries (83% to the OECD, of which 70% goes to the EEC, as against 2% to Comecon and 5% to OPEC), the increasing austerity and subsequent import restrictions in these countries is likely to have a disastrous effect on Belgian exports.

c) Inflation. Despite the stagnation of industrial production and the drop in wages and consumption (see above) , inflation - after falling at the end of the ‘70s - is once again on the rise.

% Variation in Consumer Prices
70-75	75-80	80	81	82	83
8.4	6.4	6.6	7.6	8.7	9

 

d) Budget Deficit and State Finances. The budget deficit of the Belgium state remains catastrophic - 16.2% of GNP in 1981, 15.8% in 1982 and 15.5% in I983, according to government estimates - against a European average of 7%. Belgium’s current account deficit was 190 billion francs ($1 = 510 BF) in 1982 while the cost of servicing interest on state debts is today 8% of GNP - 20% of the administration’s regular income.

Interest Charges as % of GNP
	1971	1975	1981
Belgium	3.3	3.5	8.0
13 OECD majors	1.5	1.8	3.1

 

Moreover, since a large part of this indebtedness (the foreign debt) is calculated in dollars, the recent rise in US currency will have catastrophic effects on interest charges.

ii) The “Reduction of Social Costs”

If we had to sum up succinctly the last two years, it would undoubtedly be in terms of the head-on attack on working class living conditions.

Certainly workers’ living standards were already being bitten into in the 1970s, but indirectly through increases in income or indirect taxat­ion, through rising productivity (see graph) and through galloping inflation. But with the ‘years of truth’, especially since the installation of the bourgeoisie’s present strategy (right in power, left in opposition), the attack has become brutal, massive and generalized: falling wages and social benefits, an accelerated rise productivity and constantly increasing unemployment.

a) Real Social Wage

“Belgian experts estimate that if consumer prices rise by the forecast 7.5% in 1983 (8-7% 1982), the effect of the measures of wage restraint will be to reduce wages by about 7.5% between December 1981 and December 1983, of which 4.5% occurred during 1982,” (Etudes Economiques de 1’OCDE, p 16). Since inflation in 1983 stood not at 7.5% but at an estimated 9%, the “official” drop in wages should exceed 8%. Another indication of the extent of the attack is the index of labor unit costs in manufacturing industry, calculated in relation to the 15 major OECD countries which in 1982 had fallen well below its 1970 level. At the same time, individual consumption is falling as we can see clearly from the collapse in the volume of retail sales:

b) Increase in Productivity. The improvement in competitiveness through devaluation and the reduction in wages has in no way led to a drop in unemployment, which continues to increase (see below), but to a strong growth in productivity through rationalization (a higher rate of use of the productive apparatus) and through intens­ive mechanizations and automation.

Productivity in manufacturing industry: Percentage variation on the previous year
	1979	1980	1981	1982
By employee	6.5	0.7	2.7	5.1
By hour worked	5.5	3.2	4.1	5.5

 

c) The Growth in Unemployment. At the end of January 1984 there were 523,000 full-time unemployed receiving benefit and this figure gives a highly inaccurate picture of the real situation. According to the OECD, the real number of unemployed (including those not receiving benefit) in March 1983 was about 600,000 and the rate of increase had scarcely altered (over 16% in March 1983 against 20% for the previous 12 months).

 

Employment/Unemployment variation (in thousands)
	74-80	81	82	83
Wage earners	-28	-78	-53
In administration	+110	0	0
In industry	-241	-49	-35
Full-time unemployed	+239	-97	-79
Rate of unemployed	2.4%	10.4%	12.3%	13.7%

Moreover, some 180,000 people benefited from a program of state-aided employment (putting the unemployed to work, special temporary measures, etc) so that, in all, about 19% of the working population is outside the normal job circuit.

To conclude, the fierce austerity imposed by the5th Martens government is the first direct and generalized attack on the whole Belgian working class, without opening the way to an economic recovery which “is entirely dependent on external demand,” (OECD, p. 46) . The relative improvement in Belgian industry’s competitiveness is only a passing phenomenon which will soon be eliminated by the austerity and wage reduction programs being applied in the other industrialized countries. Capitalism’s generalized crisis leaves no other way out for the Belgian bourgeoisie than redoubled attacks on the working class.

B) Holland: An Ineluctable Economic Dead-end

Two years ago, the Dutch economy, in the wake of the German locomotive, still passed for one of the strongest; today, it boasts the most widespread unemployment and, after Belgium, the second largest budget deficit of the industrialized world. The economists can no longer see the end of the tunnel, but hope that it may still be found in the long-term, after several governmental terms - perhaps in the year 2005!

During 1982-83, the economic indicators abruptly deteriorated:

 

 

Fall in investments, indicated by gross fixed capital composition as a % of GDP (source: OECD)
60-70	70-80	81	82
25%	22%	19.3%	18.3%

 

Moreover, the rate of utilization of the productive apparatus has fallen to 77% of total capacity in 1983, the same level as in 1975.

In 1982, the rate of utilization of the product­ive apparatus was 8% less than in 1973 and 6.5% less than in 1979. The budget deficit, which rose by 6.7% in 1981, rose by 9.4% in 1982 and a rise of 12.5% is forecast for 1983.

The growth in the Dutch state debt has been stunning, rising by 19% in 1981 and by 22% in 1982, to reach the impressive sum of 144.7 billion florins.

The foreign trade figures seem to contradict the above data since the balance of payments surplus rose by 9.8% in 1982 and by 12% in 1983. However, the significance of these figures is limited since they are largely the result of increased sales of natural gas and the fall in imports in turn resulting from the fall in domestic consumption. In reality, Dutch capital is not so well placed. “It owes its reputation to several powerful multi-nationals - Phillips, Royal Dutch Shell, Unilever. But its structure and its presence in the most buoyant sectors are weak. The textile, clothing and ship-building industries are in headlong decline. Over the years, Holland’s industrial fabric has worn thin. The strength of the florin and a strong tendency to invest abroad have played their part here,” (Le Monde, February 5, 1984).

As a result, from late 1982 onwards, the direct attack on the working class has increased in Holland as well, following the bourgeoisie’s reorganization of its political forces, with the left’s move into opposition and the right’s arrival in power (with the Lubbers government). While wages were already stagnant or falling at the beginning of the 1980s, thanks to the right wing Van Agt/Wiegel government and to more direct measures of the centre-left Van Agt/Den Uyl government in 1982, by the end of 1982 the attacks on workers’ living conditions fell thick and fast:

-- a 3.5% wage cut in 1983 and even a 5% cut for state employees;

-- a 15% cut in wages and benefits forecast for 1984-86.

Variation in Dutch wages (1972 = 100)
1972	1980	1981	1982
100	103.9	101.2	100.1

 

At the same time, unemployment has taken off spectacularly:

Unemployment as % of working population
67-71	72-74	75-80	81	82	83
1.3	2.3	5.5	8.6	11.4	14.0

In a few years, Holland has gone well beyond the OECD average of 10%.

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In conclusion, the years 1982-84 are characterised by an inescapable deepening of the economic crisis from which no country is immune, and by the unleashing of an unprecedented and generalised attack on working class living standards and conditions. In this framework, we have seen Holland - which, in Germany's wake, seemed to stand up better to the crisis in1981 - gradually join Belgium in the midst of the social and economic whirlwind.