The Euro as a Tool For Neoliberalism and Colonialism

Single Currency Economics reveals a sinister emphasis on a globalized project of Neoliberal Policy and the fragmentation of working class people across the globe

Recent Developments

On Tuesday, EU finance ministers gave Croatia the final green light to adopt the Euro single currency on January 1, 2023. Bulgaria is the next country in line to join the Euro and has stated its willingness to adopt it as of January 1, 2024. EU commission executive vice president Valdis Dombrovskis insists that joining the euro "will bring tangible economic benefits" for Croatia. He further adds that using the euro" will make it easier and more attractive to invest in your country. It will lower barriers for businesses and remove currency exchange costs". However, many Croatians such as myself are apprehensive about the Euro's arrival. Many anticipate that prices will go up, especially since businesses will have to round up prices when converting from Croatian kuna.

With the ongoing war in Ukraine, several countries are now making the move to take part in the globalized neoliberal project, such as Finland and Sweden joining NATO, as well as more and more European nations taking part in the eurozone central banking system. In the onset of several European crises throughout the 20th and 21st centuries, the political response by EU powers has only been the radicalization of neoliberal integration, instead of tackling the fundamental problem of distribution between labor and capital by creating any sort of sustainable structure for the EU economy. The prevailing view on European integration, namely that more market freedom is always better, has always been considered prosperity enhancing and would lead to an increase in efficiency. Despite these reforms, though, the enforcement of an EU single market has not led to economic growth since the 1970s and instead has weakened growth on a worldwide scale.

As a second-generation Croatian, I would like to examine and demonstrate the introduction of a single currency as a key factor in the advancement of neoliberalism and colonialism throughout the European continent. Through instruments of capitalism such as debt, neoliberalism has evolved into a political agenda that replaces democratic control over economic policy with a system of economic management ruled by elites. The Eurocentric narrative of development throughout history can be seen only to endorse technocratic despotism, financial deregulation, the destruction of democracy, and the debasement of wage earners into a new proletariat regime within the modern world. Yet discussion of the course of the Euro's integration cannot be approached merely as a timeline of events. Instead, it is important to understand why certain events occurred, who the driving forces were, and what impact they had.

The Introduction of European Integration

In fact, the initial attempts at European integration were met with great success. The 1950s and 1960s were characterized by an economic boom, and peace prevailed among the European states. These experiences led to a certain degree of willingness on capital to compromise with employees, thereby avoiding the escalation of conflicts and the associated negative consequences.

In the 1930s, a new development model emerged in the United States as part of the New Deal - aimed at increasing wages and providing social welfare. This showed that such an approach was compatible with dynamic capitalistic development and high-profit growth. As a result, the quality of life was able to improve rapidly for many people. The focus on industrial development during the 1930s can best be understood in light of the global economic recession of that time and the rise of extremist political movements, such as the far-right in Europe. The consequences of this internal struggle were tragically realized with Adolf Hitler's election to power in Germany and the outbreak of World War II.

By the 1970s there was a dramatic decrease in the scale of economic growth. The policy of high-interest rates was introduced by the USA in 1979, creating a major crisis in Europe relatively soon afterward. In view of the fixed exchange rate system and liberalized capital markets, monetary policy could not stabilize the economy as a whole but merely stabilized the exchange rate. Unemployment rose rapidly- but instead of persisting with capital controls on capital movement, European leaders took the opposite route.

Taking Advantage of a Crisis: The Enforcement of Neoliberal Integration Through the Marshall Plan Following World War II

As a key victorious power of the Second World War, The United States was anxious to establish functional capitalist structures in Western Europe. Concrete measures included the Marshall Plan and the establishment of a stable international financial order, the Bretton Woods system. Within it, post-war Europe was crafted to remove trade barriers between European neighbors as well as foster commerce between those countries and America.

In addition to helping to reconstruct Europe, one of the stated goals of the Marshall Plan was to halt the spread of communism on the continent. The plan is also considered a key factor in the formation of the North Atlantic Treaty Organization (NATO). It's also worth noting that the Central Intelligence Agency (CIA) received 5 percent of the funds allocated under the Marshall Plan. These funds were then used to establish "front" businesses in several European countries, some of which were designed to further American interests and others that may have had even more nefarious purposes. The CIA had financed an anti-communist insurgency in Ukraine, which was a Soviet satellite state at the time.

The closer we look at the history of the United States Marshall Plan, we can plainly see it not as a way to aid the recovery of the devastation in post-war Europe, but instead as a tool for consolidating capitalism and spreading business rule throughout Europe.

As historical critic Noam Chomsky once described:

The extension of Marshall Plan aid in countries like France and Italy was strictly contingent on exclusion of communists -- including major elements of the anti-fascist resistance and labor -- from the government; "democracy," in the usual sense. US aid was critically important in early years for suffering people in Europe and was therefore a powerful lever of control, a matter of much significance for US business interests and longer term planning. The fear in Washington was that the communist left would emerge victorious in Italy and France without massive financial assistance.

In acTVism Munich’s series Reexamining History series, an interview with Noam Chomsky further reveals the United States’ effort to establish an economic world order and restore radical conservative policy to create a massive US-dependent economy and to destroy any and all social reform or anti-fascist resistance, often in favor of Nazi and fascist collaborators:

Most of the Marshall Plan money actually was transferred from one bank to another in the United States. There was a big problem at the time, a major problem, of industrial overproduction. The US had a big surplus of industrial production, and the world just didn’t have markets. The world was virtually devastated by the war. So part of the attempt to create markets for US excess production, ensuring that the former colonial areas would provide dollars to Europe, so they could purchase US industrial production, called triangular trade programs.

Another was the Marshall Plan, which did provide funding to purchase American exports. In the course of it Europe did develop. Incidentally, I think, about probably 2 billion dollars of the 13 billion dollars went for oil imports. That was part of the US effort to turn Europe into an oil-dependent economy. The United States controlled the oil, Europe had coal, not oil, same in Japan. They tried to turn them into oil-dependent economies; the reason that was expressed clearly by George Kennan was that if we did that we would have what he called veto power over their policies, because we would essentially control the energy spigots.

Unequal Development

The 1990s saw the introduction of further integration measures in accordance with the neoliberal approach. The abandonment of fixed exchange rates in 1992 paved the way for the introduction of the euro. The collapse of the European Monetary System (EMS) and the idea that a single currency would help to curb Germany’s influence also led many unions to advocate for its adoption. However, many expected that a neoliberal institutional structure would be put in place to administrate it. As it turned out, this was exactly what happened; deregulation continued apace and Europe increased competition.

The consequence has been the suppression of wages and redistribution of wealth from wage earners to capitalists. In Germany, wages declined in real terms for a long period, mainly due to Agenda 2010 and the Hartz reforms. Although declining wages usually result in demand problems and stagnation, it was possible in this case to prevent this. The neoliberal institutional structure of the euro turned out to be functional in this regard: it allowed Germany to maintain large export surpluses at the expense of the European periphery.

Radical Neoliberalism and the 2008 European Debt Crisis

The economic crisis in Europe can be attributed to the fact that capital flowed out of countries that were dependent on exports. This was due to speculation against government bonds, which then turned into capital outflows. These affected euro-area member states most severely because the neoliberal European Central Bank wasn't intended to act as a lender of last resort for them. Instead, bailouts and other similar measures were drafted at the European level to prevent the complete collapse of the monetary union. However, these did not benefit the countries in the periphery but mainly functioned in the interests of banks and other creditors in the core member states, essentially socializing the financial sector. The costs were borne by countries such as Greece and Spain who were forced to introduce austerity policies which have led to dramatic cuts in wages and benefits for their citizens. At the same time, labor markets have been liberalized to favor employers over employees and have reduced competition for jobs.

Take Aways

European Monetary Integration has taken away the ability of nations to devalue their currency in a time of economic turmoil. This has led to a conservative package of austerity measures being put into place - essentially what conservative economists have recommended since the 1930s. The policy response has been orthodox packages of austerity and downward pressure on wages. These measures have intensified social conflict in Europe and still haven't addressed the root causes of economic decline.

The reluctance of the European Commission and ECB to utilize labor flexibility is indicative of their class bias. Moreover, this rigid approach has been integral to the EU's policy package in the face of macroeconomic volatility. The Euro area does not have many options when it comes to policy when faced with external shocks; other than wage adjustments, there are little to no solutions left.

Moving Forward

European integration has not been an entirely linear process. In fact, its history is rather complex primarily because the union has undergone a number of different forms and implementations throughout its existence, mainly in the favor of capital markets and conservative economic policy.

As demonstrated, the neoliberal variant is not the only possible form of economic and political integration, but rather one of a number of possibilities. The stubborn implementation of this neoliberal form of integration was both the result of social class struggles throughout history and an answer to the burgeoning market crashes at that time. It occurred mainly at the expense of wage earners, while capitalists reaped the benefits.

The European periphery was institutionalized at the EU level, with new and even more neoliberal rules derived from the initial ad-hoc measures. These rules were thought to result in a brighter future for the people living there, but instead have resulted in a loss of democracy and are authoritarian in nature. As such, economic devastation was not "solved" in favor of capital, capital profited from it. In particular, capitalists took advantage of the crisis to push through radicalized neoliberal forms of integration in Europe. This has already led to violent reactions from workers in the periphery.

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The problems of neoliberal economic policy and European Integration have never been more apparent. Yet, more and more countries are joining the EU single market, further weakening the economic growth of these countries at the expense of wage earners and the working class. As a result, contradictions of neoliberalism, as well as the economic conditions of the EU, are only getting worse and worse as time goes on.

This article was written by the artist/content creator BigMadCrab as a contribution to the Independent News Network (INN). Please follow our socials and substack for more relevant news, articles, and updates.

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Sources:

https://www.globalpolicyjournal.com/blog/23/01/2017/noam-chomsky-long-history-us-meddling-foreign-elections

https://www.foreignaffairs.com/reviews/capsule-review/1992-03-01/cia-and-marshall-plan

https://www.thebalance.com/eurozone-debt-crisis-causes-cures-and-consequences-3305524

https://www.theguardian.com/sport/2022/jul/12/protests-disrupt-tour-de-france-stage-10-pogacar-covid-cort-nielsen