RELATIVE
STRENGTH OF
GERMAN CAPITALISM
Shanknote UNDERT DEUTSCHE MARK -100
DEUTSCHE BUNDESBANK by WINFRIED WOLF For some time now, West German Chancellor Helmuf Schmidt's refrain has become international: Everywhere people are insisting on the "strength" and "health" of the West German economy. The various capitalist countries are seeking to get material aid from West Germany in order to straighten out their own economies, which are going through crises. There is good reason for them to hope that West German capital will bend to their pressure, for West Germany is extremely dependent on the world market and on exports. During a speech delivered June 29,1974, to a gathering of functionaries of the SPD (Sozialdemokratische Partei Deutschlands - German Social Democratic party), Helmut Schmidt outlined his demagogic campaign: "Wherever one speaks, it is very important to demonstrate clearly to oneself and one's audience that the dislocated state of the world economy stands in sharp contrast to what we have safeguarded here in this country, what we have been able to succeed in and create. " And in the same speech Schmidt observed: "For the moment, employment in Germany is essentially guaranteed. ... We must create conditions such that our wage earners will continue aiways to take home a little more, in net and real figures. " Sixth months later he was singing a different tune. All official bodies were confirming that there would be a million unemployed during the winter of 1974-75 (not counting immigrant workers sent back to their home countries, women forced back into the home, old workers forced into premature retirement, and youth unable to find apprenticeships). And in view of the virtual stagnation of industry and the new rise in the rate of inflation because of a deliberate stimulation, Helmut Schmidt today says quite openly that "in the long run" a fall in real wages will be necessary, even in the Federal Republic of Germany. It is with that in mind that the current wage contracts
are being worked out, especially those contracts overseen by the government and the Sachverstandigenrat (Councils of Experts), bodies composed of five professors of economics who present annual surveys to the govemment. Taken in isolation, claims about the "strength" of West German capital are pure demagogy. Even the observation of a "relative strength, " which is closer to correct, distorts reality. It is more correct to speak of a relative weakness of the other capitalist economies compared with West German capital, to assert that the West German economy is "less sick" than the economies of its "neighbors and partners. " Ar least since the crisis of 1966-67, West German capitalism has demonstrated that it is no exception to the general trend of deteriorating international conditions for the realization of capital. And the current economic recession demonstrates that the 1966-67 crisis was not a unique "fluke, " that it was not political in origin provoked by the Chrisfian Democrats, as the SPD and the trade unions often claim). This point is important above all for the consciousness of the West German working class and for developments within the unions and the SPD. We have now reached a decisive economic and political point in the evolution of West German capitalism. In this article we will analyze the economic situation in some detail. (For the political situation, see "The End of Stability" in INPRECOR No.5-6.) Part of the world economy Today more than ever it is not enough to consider only the "internal economy" of a national capitalism. This is even more true for West German capitalism than it is for the other imperialisms. For some time there has no longer been any question of all countries riding the boom together as they did during the "golden age" of the 1950s or the beginning of the 1960s; but there remains the question of the danger of g generalized slide toward an acute economic crisis. The crises that the other capitalist countries are going through have direct consequences for West German capital that in the event of serious protectionist measures, for example, could take on catostrophic dimensions. The Organization of Economic Cooperation and Development estimates that the West German balance of payments surplus for 1974 will hit the record figure of 7 thousand million Deutschemark; all the other countries of the Common Market (with the exception of the Netherlands) will have balance of payments deficits. The tendency toward integration into the world economy has deepened continuously since the founding of the German Federal Republic. In the 1950s and 1960s exports grew at a greater rate than gross
MAN national product (except in 1958 and 1962), often by fantastic proportions. The growth rate for exports was 50% in 1951, about 30% in 1953, and more than 20% in 1957 and 1959. During the 1966-67 crisis it was precisely the strong expansion of exports that provided the most solid support for the declining production within the country. This development has continued since 1969. Thus, between January 1969 and August 1974 the total number of domestic transactions by West German industry grew by scarcely 60%, while the growth of foreign transactions during the same period was nearly twice as high (132.5%). (1) In this process of export expansion West German capitalism aimed above all at the countries of the Common Market and the states oriented to the Common Market. The patter of West German exports and investments abroad makes that clear. In 1973, of the total volume of German exports (whose value totaled about 177.7 thousand million DM), 48% was sent to Common Market countries and 64% to members of the Common Market and of the European Free Trade Association (EFTA). The figure for exports to the United States and Japan combined was only 10%. Moreover, the growth rate of exports to the EEC countries was 20.4%; that of exports to the United States only 9%. (The growth rate of exports to Japan was 36.8%. But that is explained by the very low volume of exports to Japan up until 1974 and the consequently broad room for expansion. Japan's share of West Germany's exports in 1973 was only 1.5%.) Of total imports into West Germany, 70.8% came from Common Market and EFTA countries and only 12.2% From the United States and Japan. Likewise, if we consider direct West German investments abroad, we find that of a total of 32, 235 million DM (up to the end of 1973), nearly 60% went to countries in the Common Market or to coun tries fightly linked to it, like Switzerland, Austria, and Spain. On the other hand, only 16% of capital invested abroad went to the United States and Canada (but 22% to Brazil). The distribution of investments flowing in the other direction is rather different. Of the total amount of foreign capital invested in West Germany as of the end of 1973(35, 442 million DM), some 43% came from the United States and only 50% from Common Market countries, Switzerland, and Sweden. (2) The picture that emerges from all these figures is unequivocal: The economy of the German Federal Republic is oriented in large part toward the principal European countries. That is where the most important markets and spheres of capital investment are found. Such is the background to the "pro-Euro-
WEST GERMANY pean orientation" of West Germany ever since the world recession of 1957-58. It is above all a material background. Despite everything, it is a contradictory image of "European unity" that West German capitalism contemplates. First of all, it is only during periods of clear German economic superiority that West Germany has aimed at economic and political union (and it thus often came into conflict with Gaullist France). At the beginning of the 1970s, when British entry into the EEC was discussed and finally carried out, the West German capitalists were much less sure of themselves. They feared that close cooperation among important European countries (especially France) and Britain could challenge West German hegemony over West Europe. In the present situation, in view of the "relative strength of West German capital, " the crises that are shaking what remains of the British empire, the agony of Italy, and the political weakness of France, West German capital seems to be pursuing a new strategy. SPD President Willy Brandt indicated what it is in his speech in Paris: strengthened integration of the "strong" European economies; increased "dependence" of the weak ones, especially Italy. It is certain that West German capitalism is tied as a matter of life and death to the European market. Any protectionist measure taken by a "European partner" will be painful; every loss by important European countries of their spheres of export and investment will have catastrophic repercussions on the West German economy. That is what explains all the "friendly" help the West German government offered when it granted a $1, 000 million Ican to Italy; it also accounts for Helmut Schmidt's anxiousness to get involved in the "internal affairs" and political weakness of France. The end of 1974 marked the end of the sixth industrial cycle of West German capitalism since 1948. The year 1974 was one of bitter disappointment tor the "growth theoreticians" who had projected future industrial growth rates as high as those of the 1950g and the early 1960s.
Thus, the average annual growth of industrial production during the first cycle was as high as 24%; during the second cycle it was 8.6%; during the third (1959-63) it was 6,3%; during the fourth (1964-67) it was 3.2%. From 1969 to 1971 the growth rate was 4.5%, and for the period 1972 through the third quarter of 1974 it fell to 2.4%. While the 1966-67 crisis resulted in an absolute decline in industrial production for the first time since the second world war, the figures for the third quarter of 1974 were nearly as bad: less than
2.2% growth for the whole of West German manufacturing industries.
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In one respectthe West German employers are much better off than their European colleagues: The West German working class remains calm in face of the economic recession; the trade unions are bending to the "Social Contract, " which exists practically although not formally, and do not present "exaggerated" economic demands - or if they do, they fold rapidly in face of the Diktat of the employers (the most recent example being the minimal results obtained by the metalworkers). Up to now, the West German working class has had little tradition of struggle. There is no strong classical reformist or Stalinist party. In this country the trade unions have always played the role of "upholders of order" rather than instruments of class struggle. Up to now the struggles of the West German working class (wildcat strikes in 1969 and 1973, new initiatives in the trade unions and more accentuated trade-union struggles from 1970-71 to 197374) have led only to breaks in practice with the trade-union bureaucracy. There has been very little political differentiation. Consequently, the West German revolutionary left remains isolated from the working class, even though it has retained a certain quanfitative strength since the student revolt of 1965-68. Today, in contrast to the 1969-73 period, this working class is confronted with a fundamentally new situation. The specter of massive unemployment has been added to the high rate of inflation. In face of this new situation, the West German working class is disarmed; that explains the present shift by the West German Social Democracy under Helmut Schmidt toward a course that openly favors the market economy and simultaneously rejects "re forms that are costly. " Reduced to its economic aspect, this political quiescence in the class struggle means that West German capitalism is able to plan on and accept long-term de livery dates in international trade, for there are few strikes of any scope. At the same time, the "wage factor" in the cost of production can be set in advance - and af a level beneath that of the annual growth of productivity. It is here, of the level of class politics, that the "strength" of West German capital really lies; it is a strength that is a weakness for the working class. This makes the dangers of the present situation — the crisis, the unemployment, the disorientation of the West German workers movement - all the greater. And it also makes the tasks of revolutionaries in this country all the more important.
The present conjuncture West Germany is now experiencing a "divided conjuncture. * It is divided among the rare economic
sectors that are still recording positive economic growth (like steel and some export industries), those sectors whose production has declined absolutely (like the construction industry), and e great number of sectors that are stagnating. In 1972 the average growth of industrial production ("manufacturing industries") was still 8%; in 1973 it was only 4.6%, and in 1974 the "growth figures" of West German manufacturing industries were as follows: first quarter, less than 1.1%; second quarter, O; third quarter, less than 2.2%. Between the third quarter of 1973 and the fourth quarter of 1974, production in the industries manufacturing basic products and means of production dropped 2.8%; production in the investment goods industry dropped 3.4%; in the consumer goods industry it dropped 4.9%; it was only in the foodstuffs industry that slight growth took place (1.3%). If the picture of the present conjuncture is broken down still further and we look at production in given industrial branches, we get the following view: During the period indicated above, growth in the chemical industry (which exports heavily) was 0.7%; in metallurgy, which benefited from the boom in steel, there was alsc (minimal) growth: 0.5%. On the other hand, in the electrical Industry production is stagnating and in the course of the past several weeks has tended toward an absolute decline (even though this branch is strongly oriented toward export). The situation is similar for the machine-tool industry, which is also oriented toward export. In the automobile industry production dropped by nearly 10%, in line with the world crisis of this sector. For the textile industry the fall in production was nearly 5%. For the construction industry, which is particularly sensitive to crises and is oriented almost exclusively toward the domestic market, production has had a downward tendency almost from the first quarter of 1973; by the end of 1974 the industry will have suffered an annual average decline of more than 10%. That exports are the decisive "props" in the present conjuncture in West Germany is proven by the fact that between the second quarter of 1973 and the second quarter of 1974 the foreign transactions of the investment goods industry rose 15.8% and those of the basic goods and means of production industry rose 53.9% (above all because of the steel boom). (3) On the whole, the picture is unequivocal and allows of no illusions, contrary to the claims of
Schmidt and many international commentators: The West German economy is experiencing an internal economic crisis whose impact has been attenuated only thanks to the "divided conjuncture", the main positive fuctor has been the growth of exports up to the middle of 1974. Historic reserves West German capital today is still feeding on its particular historic development. It is here that we find the real core of what Schmidt is talking about when he says that "we must be proud of what we have been able to safeguard, succeed in, and create. " From the end of the war, West German capital benefited from two factors. The first was a working class that had been very much weakened by fascism, the world war, and the defeats of the postwar period (1947-52). Capital could consequently impose especially low wages on the working class. (As late as 1955 wage costs in the United States were four times as high as they were in West Germany; they were 50% higher in Switzerland, 15% higher in Sweden, 14% higher in France, 7% higher in Belgium, and 6% higher in Britain.) The West German workers got back up to their 1938 wage levels only in the middle of the 1950s; at the same time, the average work week was more than 50 hours in twelve industrial branches out of twenty-four. Second, the West German economy was stimulated by the Marshall Plan and was able to recover its old positions on the world market through a big export offensive during the Korean War boom. These advantages brought on a favorable evolution for West German capitalism up through the middle of the 1960s. Before the 1966-67 crisis, West German capitalism had not at all been forced to introduce new technology into the process of production (automatically controlled installations, automated or semiautomated processes, nuclear energy, etc.). This meant two things on the economic level: 1. At a time when international growth rates were generally declining, "contrary" tendencies were asserting themselves in West Germany because of the belated technological renovation, which softened the decline in average growth rates. It was possible to realize special profits through a wave of big investments in rationalization and through the process of concentration. The economic branches that went through important technological renovation experienced an especially strong growth. Out of this there came a so-called "structural effect."
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WEST GERMANY Thus, the growth rates in the chemical industry and the oil-bearing minerals industry were respectively 70% and 133% higher than the general industrial growth rate during 1953-71. Growth in the electronics industry was 75% higher than general industrial growth, and in vehicle manufacturing it was 87% higher (during the same period). It is easy to see that these developments had to have a serious positive influence on general economic growth. According to his own estimates, the Marxist economist Elmar Altvater observed: "This structural effect accounts for 14-16% of the growth in productivity between 1950 and 1970." 2. According to Marxist economic theory, the introduction of qualitatively more advanced technology also means the rise of the organic composition of capital (increase in "dead labor" - machines, raw materials - in comparison with "living labor"). Since only living labor creates value and surplus value, this process also means that the mass of profit realized per unit of capital diminishes; that is, the rate of profit falls. The rise in the organic composition of capital is thus the motor force of the regular increase in productivity; but at the same time it is the motor force of the tendency of the rate of profit to decline and thus of the general lowering of the rate of growth. During the period 1952-56 investments in industry reached an annual averaga level of 9, 596 million DM. For the period 1957-62 the figure rose to 16, 155 million DM. If the year 1950 is taken as a base of 100, an index of the organic composition of capital shows an increase of only 19 units between 1951 and 1956, while the increase from 1957 to 1961 wc; 29 units. There was another increase of 24.3 units between 1968 and 1974. As a whole, the level reached in 1974 was 75% higher than the
1950 level. The latest annual report to the government by the "Council of Experts" stressed this situation: "The constant deterioration of the share returning to the entrepreneur and the capitalist is explained by the fact that the component of capital has become larger than the component of labor power." If it is considered from the standpoint of the bourgeois theory of "three factors of produc tion" (labor, capital, and land), the combination of which contributes to the growth of the annual income, then the observation of the West German
"savants" is merely an absurdity. On the other hand, if one begins from the Marxist labor theory of value (to which these gentlemen hardly feel indebted), according to which only living labor creates additional value and, in the framework of the capita list system, surplus value, then one can clearly see what lies behind the quotation: The growing weight of dead labor at the expense of living labor affects the rate of profit by driving it downward.
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The Factor that we have summed up under the term "historic reserves" means that capital in West Germany has on the whole gone through the same evolution as capital in the other big imperialist economies, but with a time lag. The positive aspects of this process manifest themselves belatedly, precisely in a period marked by recession. The negative effects (the fall in the rate of profit) emerged in significant proportions only during the 1970s. There is no reason to theorize the special nature of West German capital as compared with the developments the other big imperialist countries have experienced. Rather, the same events that are now taking place in Britain and Italy will occur tomorrow in West Germany. To be sure, the process will be belated, but it will be no less dangerous for the West German economy. Strong points Apart from the "historic reserves" discussed above, the major strong points of the West German economy are the boom in the steel industry and West German capital's general export offensive, especially in 1973-74. As we will demonstrate further on, here again it is a matter of extremely dubious factors whose duration appears strictly limited. As far as the export offensive is concerned, it will be called the Achilles heel when the obituary of West
German capital is written.
The situation in the steel industry rests essentially on international factors (this is demonstrated in part by the dependence of West German steel on exports). During the 1960s, some 26% of steel production was exported; in 1974 it was 35%. The boom in this industry is a universal phenomenon, a world boom stimulated precisely by the crisis that entailed a big wave of technological innovation
(investment in rationalization). The general deteriToration of the conditions for the market realization of surplus value led to a strengthened push toward the introduction and generalization of more advanced technology, thus to a rise in the organic composition of capital. At the same time, this meant a growth in the demand for investment goods and therefore, in the final analysis, for crude steel.
Conjuncturally, we are heading toward an ebb in steel on the world market. Especially since the recession of 1971-72, investments have been slowing down, and the expansion of the capacity of the big mills has been eased off by most crude steel producers on an international scale. This phenomenon has been especially marked in the world's major steel-producing country, the United States. To this has been odded interruptions in production by the other main producing countries, like Britain and Japan. All this has generated a transference
of demand toward West Germany. Moreover, West German steel mills have received larger orders from the oil-producing countries and the East European countries. An additional conjunctural factor that explains the steel boom lies in the rise in prices: From the beginning of 1973 to February 1974 steel prices increased 23.7%, and since the latter date the increase has been even greater. It is probable that this factor will not persist much longer, for it rests on a swelling of profits and not on any real development. The situation in the steel industry has had a big effect on the overall economic situation in West Germany. This allows us to shed some light on the ambiguous character of the strong points of West German capitalism. Since 1947 there has been a great wave of new investment on a world scale in the steel industry in order to respond to a ceaselessiy expanding demand. The Commerzbank estimates that the investments that will be needed through 1980 for new installations will total more than 600 thousand million DM. The weakness in this generally positive perspective for the steel industry is that the indispensable development of productive capacity is carried out in a completely anarchic manner, as is all capitalist production. While there is an exiraordinary degree of concentration on a national scale, it is clear that there is no planning among the various competing steel producers. (In 1973 the United States produced 58.5 million tons of crude steel, Japan produced 47.9 million tons, West Germany 25.9 million, Britain 11.2 million, France 10.9 million, and Italy 7.8 million.) So it is appropriate to stress that despite a probable global increase in the need for steel and an increase in productive capacity, a certain number (or most) of the big steel producers are going to be thrown into crisis because of an overcapacity of production. The Commerzbank poses the question: Will the steel industry turn around? Presently available facts indicate a reversal of the present tendency. Such a decline, which remains probable, would represent a hard blow for the West German export industry. (4) The situation with exports, the second major prop of the West German economy, is likewise ambiguous. One of the most important factors accounting for the success of the West German export offensive is the tremendous specialization of certain industries and industrial branches toward export. But this means that these branches are totally dependent on export markets for sales of a great part of their production;. often they are dependent on the market in a very few countries. The overall dependence of West German industry on export is slightly less than 25%. The percentage of production going toward export varies according to industrial branch: In the metal industry it is close to 30%; in machine construction it is close to 40%; in building materials and machinery it is 50%; in machine-tools it is 62.6%; in textile machines it is as high as 91.8%. The export rate in automobile construction is 43.3%; in the office machine and computer industry it is 53.1%; it is close to 60% in the shipbuilding industry. The following points must also be added to those mentioned earlier explaining the success of the West German export offensive: 1. Unlike the United States, West Germany has an extremely limited domestic market; nor does it have an "economic backyard" as Japan does in Southeast Asia and as Britain does in the Commonweaith and Ireland. But it is nonetheless true that the West German economy went through a great development of its capacities and productivity during the 1960s. In order to be in position to translate into money the economy's immediately favorable conditions for realization, West German capital found it absolutely necessary to assure itself a high and rising rate of export. 2. The successful resolution of this internal compulsion to export was assured by these additional factors: *First there was the extremely high level of specialization, which we have alreody mentioned. This specialization was able to compensate for the notural disadvantages capital faces in disposing of commodities on foreign markets. Here we should cite the example of Volkswagen, which has entire units producing exclusively for export; the company has its own fleet for transporting cars to the United States.
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WEST GERMANY *The possibility of honoring delivery dates for foreign contracts (at least until now). West German capital owes this "reliability" to the very low number of production hours lost through labor conflicts. *The West German rate of inflation, far lower than the international average, has been able to compensate for the sometimes very significant revaluations of the Deutschemark, the normal effects of which would have been to make West German commodities more expensive on foreign markets and thus reduce German competitiveness. Thus, while world market prices (for foodstuffs and industrial raw materials) went up cumulatively by 85% during the period 1963-73 and by 35% just between 1972 and 1973 — we are leaving aside the increases in energy and raw materials prices that have occurred since 1973 — the prices of West German manufactured products suffered an accumulated increase of only 24.3% between 1963 and 1973; they went up scarcely 20% if the calculation is stopped in 1972. What about the present pattern of West German exports and the evolution of this pattern? We have already mentioned some figures in this regard: Some 50% of West German exports go to the countries of the Common Market, another 15% to the countries of EFTA, and 8.5% to the United States. The "countries with state trade monopolies, "that is, the bureaucratized workers states, especially the Soviet Union, Poland, and Czechoslovakia, absorb 6.5% of West German exports. (5) As for trade with the "developing countries, " it represents about 17%. In the second section of this article we indicated what had been the structural developments and changes in centers of gravity of exports up to 1973: a relatively high rate of increase in exports to the countries of the EEC and a not very high increase in exports to the United States. Interesting changes in the pattern of exports can be gleaned from the latest available figures: *Exports to the EEC countries, which, let us recall, represent the greatest share, increased continuously until the middle of 1974; in the third quarter of 1974, however, they stagnated. *Exports to the United States, the third-largest category, have been declining continuously since the first quarter of 1974; for the third quarter of the year they represented only 6.5% of exports. There were tendencies toward expansion only in: *Exports to the EFTA countries (the second- largest category). These exports increased from 8.48 thousand million DM for the first quarter to 9.01 thousand million DM for the third quarter (15.2% of total exports). 28
*Exports to the semicolonial countries ("developing countries"). This category of exports, which since 1969 had stood at about the same level as exports to the EFTA countries, increased more strongly beginning with the end of 1973, and in 1974 took on a greater importance than the exports to the EFTA countries. In all, they rose from 9.9 thousand million DM in the first quarter of 1974 to 11.38 thousand million DM in the third quarter, which represented 19.24% of total West German exports. *Exports to "countries with a state trade monopoly" (bureaucratized workers states). The rates of expansion were high for 1973 and 1974: 25% for each year. Nevertheless, structurally these changes did not come close to attaining this breadth, as might have been expected. In 1969 the share of exports going to the "countries with a state trade monopoly" was 5.1%; in 1974 it was still less than 6.5%. In view of the world economic recession, it is difficult to generalize by beginning from the present development of the export sector. Nevertheless, exports are so important to the economy of West Germany that we will try, though cautiously, to offer on interpretation: 1. Exports to the imperialist states — to the United States, for example - are stagnating or declining (exports to Japan are an exception). This means that because of the growing crises they are facing on the national level, the economies of these contries are doing all they con to conserve their domestie markets and to keep foreign competitors at the greatest possible distance. 2. Exports to the weakest European countries (EFTA) are growing. In this area the pressure of West German capital exerted through its export offensive is decisive, and the protectionist measures taken by these countries are scarcely capable of holding back West German capital. 3. Exports to the semicolonial countries are expanding at a greater rate. The structural changes to which this is linked appear to lie essentially in the increase in imports of raw materials and oil. 4. Exports to the "countries with a state trade monopoly, "which are also increasing more than proportionally, correspond to the expansion of trade relations deliberately undertaken by the bureaucracies of the Comecon countries. But the growth possibility of this trade with the Eastern countries is limited. The workers states can agree to such expansion of exchange only up to a determined percentage. In this sense, this growth must be understood as "grabbing hold" of a possibility of expansion that is already almost in existence. That said, we should not ignore the positive effects of
this trade (guaranteed "market" over the long term; no industrial fluctuations). Energy and raw materials West German capital, like capital in most of the imperialist economies, has suffered negative effects from the scarcity and price increases of energy and the rapid price increases in raw materials between the end of 1973 and July 1974. It is absolutely wrong to deny these negative repercussions, as some left groups are now doing, or to see them as nothing more than a "big stunt" by the multinationals. (This is not to say that the "oil crisis" has not had an important ideological function, particularly in West Germany; at the end of 1973 and the beginning of 1974 the federal government succeeded in fomenting a real obsession out of the crisis and the climate of latent rocism.) During the first four months of 1974 West Germany had to pay 7 thousand million DM for its imports of crude oil, as against 2.7 thousand million DM during the corresponding period of 1973 - and this despite an 11% reduction in the quantity imported. In April 1974 prices for imported raw materials stood on the average 27% higher than they had in April 1973, and there have been only small reducfions since then. The consequence of this state of affairs has been that the share of total imports accounted for by industrial raw materials has risen from 12.3% in 1972 to 19.6% for the first quarter of 1974; during the same period, the share of imports made up by oil rose from 5.8% to 12.9%. It is obvious that this development changes the valuecomposition of capital and that it consequently has a negative effect on the national rate of profit. Contrary to the normal rise in the organic composifion of capital, which leads to an increase in productivity, there is no growth in productivity in this process. This means that both "production of relative surplus value" (drop in the relative price of consumer goods necessary to sustain the working class), which is a corollary of the law of the tendency of the rate of profit to decline in cases of an increase in productivity, and the counter tendencies this gives rise to are absent here. The increases in oil and raw materials prices reflect no increase in productivity (at the most they can impel a new wave of investment in rationalization), and their negative effects hit the capitalist economy fully. (We have already drawn attention to the important role played by "petrodollars" in this context of scarcity and price increases in energy.) The development of the energy sector is henceforth to be marked by attempts to reorient energy policy. What is being projected is increased research in nuclear energy and the setting up of a greater number of atomic reactors. The share of nuclear energy in the production of West German electricity is still extremely modest, only about 5%; electricity produced by atomic reactors so far accounts for only 1.1% of so-called primary energy consumption. Presently, eleven atomic reactors produce a total of 2,315 megawatts (MW) in West Germany. Twentyone additional reactors are planned; some are under construction, others have been ordered. West Germany is very far behind the United States and Britain (fourteen reactors, 5,381 MW) but very close to France (nine reactors, 2, 631 MW). According to the plans of the federal government, nuclear energy production is to be developed to such a degree by 1985 that some 15-20% of primary energy needs will be covered, and it will be possible to produce 40-50% of the total electricity necessary by reactors. Nevertheless, the debates about the "energy sources of the future" have not yet resulted in a purely nuclear orientation. The move to this orientation has been slowed down by massive protests called by "citizens' initiatives" in the regions concerned, by warnings issued by some scientists, and also by certain "incidents" and accidents in the reactors now operating. That is why the federal government pushes the idea of the most diversified possible energy supply, from which one conclusion clearly emerges: The share of energy production based on oil must be reduced. Construction of power plants working solely off oil has been banned; only power plants capable of using at least two sorts of fuel are permitted. The other energy sources are coal, which accounts for 35% of electricity production, lignite (20% of primary energy), and natural gas (about 10% of primary energy production) . (Natural gas is one of the energy sources that has registered the highest growth rates. In 1960 energy production from natural gas accounted for 0.4% of total energy; since 1970 the figure has more than doubled. It is notable in this regard that West Germany is heavily and increasingly dependent on imports for natural gas: In 1973 nearly 45% of natural gas corsumed was imported, as against 2% in 1965 and about 33% in 1971.) The conclusions that flow from the restructuring of the energy sector are these: Apart from the increased sums that will have to be devoted to importing oil, which remains indispensable, gigantic investments will be necessary in the energy sector in order to carry out an effective transformation. And in the medium and short term, the capitalists cannot count on a reduction in energy prices; this represents an important factor in production in the highly developed capitalist coun tries.
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Thus, in the case of natural gas, large investments will be necessary, especially for transport (pipelines, transport by water). Growing investment is also necessary today in the hydrocarbon sector. The federal government's program calls for expenditures of upwards of 1.5 thousand million DM in this area by 1977, despite the fact that before the energy crisis the same government had demanded a reduction in coal production and the fact that the coal mines of the Ruhr have been suffering from a structural crisis for two decades. That is a good example of anarchic production. But the most costly projects are those relating to nuclear energy. If the present program of the federal government is to be realized by 1985, simply the construction of the planned atomic reactors (at present prices) will require a total expenditure of 70 thousand million DM. We do not think that West German capital will have the opportunity to carry out these long-term plans. But even if that is possible, it is obvious that in view of the general deterioration of the conditions for the realization of capital, these gigantic sums will represent an enormous supplementary expense for the capitalist economy. And we have not yet figured into the restructuring process the ancillary expenditures that will also be necessary (environment, research, development). The internal market We have observed above that the West German internal market today finds itself in a state of regression and that this situation is the primary cause of the current recession. What are the causes of this regression? Grosso modo, it is a question of a classical coniradiction of capitalist production. On the one hand, profits have declined under the blows of various increased expenses - wages among them - and the employers are consequently seeking to combat this pressure, which directly affects the conditions of the realization of capital: They are in turn putting pressure on wages, resorting to layoffs (there are 1 million unemployed), blocking the immigration of foreign workers, and so on. On the other hand, the internal market is shrinking precisely because of the countermeasures being taken by the capitalists. From the standpoint of bourgeois production, the various interested parties are arguing in diverse ways, depending on their positions, stressing this union), fills virtually every column in his newspaper, Metall, with articles demanding "the increase of the buying power of the masses" and stressing that the employers are ignoring a whole gamut 30 of economic theories demonstrating that the vitality of capitalism depends above all on the income of the workers. Is this true, "colleague" Loderer? One can say Yes if one considers the concrete figures on the income of the wage earners: During the period 1970-74, the increase in the income of "dependent" wage earners in West Germany was only 0.3% (whereas for the period 1960-65 it was 7.2% and for 1965-70 it was 2,3%). The real income of the wage earners diminished 1.3% during 1973 and 4.2% during the first half of 1974. Such an ebb had not been seen in West Germany since the crisis of 1967, a year in which there was a decline of 2.5%. Since then, there had been continuous and relatively high increases (1969, more than 7.2%; 1970, more than 8.2%). But one must say No to "colleague" Loderer if one observes the development of the conditions for the realization of capital. We have already cited one important negative factor: the rise in the organic composition of capital; and we have put forward figures that illustrate this tendency. For the capitalists, the way to combat the pressure being exerted on the rate of profit is to increase the rate of surplus value. If one calculates the direct relationship between "the income of the activity of the employers and their holdings " and the "income of nonindependent labor, " one finds that there has been a declining tendency since 1960. Nevertheless, since it is not possible with these figures to observe a production of relative surplus value, because of inflation, these indications must not be given too much weight. (6) The "share of wages and salaries in business transactions" has increased continuously since 1969; in 1973 a squeeze started, and in 1974 there was a fall to the 1970 level. The conjuncture of the West German internal market cannot be analyzed without considering a particular factor: the policy of very tight restriction of credit, the increase in interest rates, and the relatively modest increase in the state budget. Through this policy, which is not very pleasing to many capitalists and which irritates the trade unions, the state tried to combat the growing rate of inflation until 1972. And it must be recognized that some success was achieved. The rate of inflation was reduced to 6%. During 1974 it oscillated between 6.5% and 7.5%; it can be expected to rise to 8% during 1975 because of the relaxation of the policy of credit restriction. Today West German capital can afford the luxury of a restrictive policy, but it will certainly not be able to do so very much longer.
What will be the scope of this economic re-priming, 1 thousand million DM or 2 thousand million? That is the question being asked today. Pressure is being exerted on the West German government by its European compefitors. It is obvious that the relative drop in the prices of West German exports is not very popular abroad. Nevertheless, the European states that have been greatly affected are expecting the "conjunctural shots in the arm" administered by the "strong" Federal Republic of Germany to have effects not only on the German economic situation, but on the situation throughout the Common Market as well. The West German weekly Der Spiegel has revealed something that might surprise bourgeois economists: "West German capitalists are trying to lift . .. the rate of profit back to what they consider a normal level. Undoubtedly (!), they are contributing through this price policy to accentuating inflation. But they have not succeeded in braking the falling tendency of the rate of profit, this law discovered by Karl Marx (a law that only Marxists resist recognizing today). " There is not much point in spending a lot of time talking about the sort of "Marxists" Spiegel is referring to - Helmut Schmidt is no doubt among them. What must be noted in this statement is Its essential observation, which sums up the second side of the classical contradiction mentioned above: the decline of the profit realized by a given capital. Der Spiegel cites figures: "In 1964 the Daimler Benz company earned 49.9 pfeunigs on every mark invested; last year (1973) the rate of profit fell to about 30%. ... In the AugsburgNuremburg machine factory, profitability has declined almost continuously, from 20% in 1963-64 to 8.2% in 1972-73. For the retail commerce giant Kaufhof the rate of profit passed from 29.8% to 12.5%, for the Ph. Holzmann construction trust from 53.5% to 23.6%. If one deducts the apparent profits due to inflation (profits engendered by deductions that do not cover the costs of reproduction) and the apparent profits engendered by fiscal deductions greater than the effective devaluation, the West German capitalists pocketed an average real profit of 15 DM on each 100 DM invested in factories, workshops, and computers in 1972; in 1960 that figure was still 25 DM." Thus, the circle of the classical contradiction is closed. The solution reconmended by bourgeois economy is also classical: Supposedly the year 1974 and the beginning of 1975 are the periods during which the "purifying forces" of the crisis are at work, capital is devalued (there have been 5, 529 bankruptcies since the beginning of 1974), the costs of industrial production are held down, massive pressure is put on wages, masses of workers are thrown onto the streets, and, finally, a series of investments in rationalization is made at the same time.
Is there a way out? In the present situation, the West German govemment is frying above all to bring the crisis under control. This "crisis policy" is illustrated by a series of measures: conferences with specialists (more exactly, with people who pass for specialists), discussions of the national level with the Lander (states) about the program for moving to an upturn, consultations at the international level (like Schmidt's visits to Washington and Moscow), and finally, the Common Market summit of December 10 in Paris. But no serious solutions for getting out of the general impasse (and not just the current one) in the conditions for realization of capital have been broached. In fact, there is no clear line on this point. The government camp is divided by differences of opinion. Minister of Economics Friedrich, a member of the Free Democratic party and a junior partner in the government coalition, has infinitely less faith in "shots in the arm" than has his Socialist colleague Minister of Finances Apel. Friedrich places greater hope in the "self-regulating forces of the economy" than in an injection of monetary mass into the industrial sectors. That is why he is arguing for only a minimal re-priming of the economy. Apel on the other hand, pressed by the electoral defeats of the Social Democracy and the approach of elections in the most important of the Lander, Nord-Rhein-Westfallen (in the Ruhr region), is aiming at success in the area of employment and calls for strong aid from the state treasury. He knows very well that if unemployment continues to grow through the elections of May 1975, it will mear a new electoral defeat, the loss of the Nord-RheinWestfallen government to the Christian Democrats, and the challenging of the coalition government in As far as "ways out" of the economic recession are concerned, prospects are not brilliant. Three basic solutions have been advanced by various circles: (1) There should be increased state intervention. (2) There should be an export offensive. (3) There should be an increase in investments abroad. The three solutions converge in the same direction: They call for moving the factors of the crisis out of the realm of the immediate conditions of realization of capital. In fact, these points represent no solution. They are either unrealizable or else lead purely and simply to shifting the crisis to other levels. An increased intervention by the public powers can in no way act as a brake on the crisis; it can only level out the economic cycles, that is, put on the brakes in the boom periods and accelerate at the end of the crisis. And when it is a question of measures that include direct public investments and subsidies, the question of where the money is going to come from is raised immediately. If on the other
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WEST GERMANY hand, it is only a question of paper money, the measure will have the effect in the present situation of accelerating inflation. If it is a question of money representing real values, all we have is a new division of the money supply. If credits were freed up, as many branches weakened by the crisis are demanding, that would also have negative consequences: The private companies, the employers, the municipal governments, the Lander, and the central state would then try through a strong demand for credit to cover the expenses that they cannot assume with their usual incomes because of the present economic difficulties. The real function of interventionist measures by the state is the deeper cause of the differences of opinion that are coming to the surface in capitalist circles around the question of what economic policy the government should foilow. Most bourgeois specialists who do not have to defend the interests of a particular capitalist or a given industrial branch fear above all the negative effects that interventionist measures would have. Also, they are not at all sure of the effectiveness of the "purifying forces" of the crisis and do not know whether a state "shot in the arm" will really have any effect. For them it would be a catastrophe if thousands of millions of DM were injected into the West German economy only to be swallowed up, with the economy turning around only very slowly and inflation strongly reactivated. The "Council of Experts" really defended an "expert" position when it mentioned these dangers and recommended retention of a restrictive policy in coming months. Obviously, the federal government will not be able io hold strictly to these recommendations, for reasons of internal and external politics. An offensive aimed at export markets is no longer practically possible today. The most recent figures (November 1974) indicate a turn and herald the end of unbridled expansion of exports. We have already analyzed the pattern of the export boom and the modifications it is undergoing. In an overall sense, it is very improbable that West German capital will be able to obtain great export advantages in any of the three important sectors. Insecurity and the lack of internal markets in the "developing countries" will set up a limit. In the imperialist states the generalized economic crisis and the measures taken by each country will clash with the West German export offensive (we have already alluded to the initial effects of this). The monopoly of foreign trade and the particular interests of the bureaucracies of the Comecon countries will place limits on the expansion of West German exports in that area as well. A growing transference of West German capital abroad is another of the "alternative solutions" 32
West Germany is different from its ano it will come to them more and i called for by a good part of the employing class. They expect in this way to get around the difficulties with which West Germany is faced in its for- -eign trade. It is especially-the big banks like the Commerzbank that are demanding such a policy. In reality, the slogan of "the development of production abroad" only serves to make things look better and amounts to self-deception. First, it is now too late to launch such a process on a grand scale: The situation in the countries with low wage rates (internal market structure, political insecurity, etc.) is absolutely not ideal for such investment of capital. The example of Rollei-Voigtlander is rather
not very partners resemble nore significant: Although this optical equipment trust opened a sector of production in Singapore a few years ago under the assumptions that goods could be produced more cheaply there, that the company would be more competitive there, and that this would assure the company's position in West Germany, today this company is laying off masses of workers in both Singapore and Braunsweig. Manifestly, the company was not in position to stand up to international competition. Second, West German capital today is hardly copable of advancing the capital necessary for such investment. The best example of this is Volkswagen, which for many years has been nurturing the hope of constructing production lines in the United States. This plan has still not been realized. Third, the growth of the development of production abroad would inevitably lead to the appearance of surplus capacity on the internal market and to loss of employment. There is no need to say any more about the alleged solutions West German capital is working out to try to escape the generalization of the tendencies toward economic crisis. They are not ways out, but are instead culs-de-sac, detours, and bypasses. And everywhere they point to the same result: West German capital has entered a phase that will increasingly eliminate all the particular factors that have played a positive role for so long. The present crisis is the expression of this process. West German capital and its crisis are affected by the same evils of capitalist production as the rest of the imperialist world: falling rate of profit, inflation, unemployment, structural crisis, pollution, and so on. In spite of all the praise heaped on the country by Chancellor Schmidt and by certain representatives of international capital who for various reasons hail the "strength" of West German capital, West Germany is not very different from its partners and neighboring states. And it will come to resemble them more and more. December 11, 1974 Footnotes: 1. Sources: Jahresgutachen der Bundesregierung, 1964, p.7 and Monatsbericht der Deutschen Bundesbank, November 1974. 2. Figures on exports in: Monatsberichte, July 1974. Certain facts on direct investment come from: Aussenhande Isblatter of the Commerzbank, June 1974. 3. Monatsberichte, November 1974, No. 6-8. 4. Source for figures on steel production: Wirtschaftsnotizien, Commerzbank, Europartners, 7/8, 1974. 5. With a sigh of nostalgia for the "Great German Reich, " the West German statistical department does not list trade with the German Democratic Republic under the heading "countries with a state trade monopoly, " but rather under the heading "inter-German trade." 6. The figures reported by the MoBe (Monthly Report) of September 1974 (p. 64) are the following: a relation of 65.1 for 1960, 53,5 for 1965, 49.3 for 1970, 46.4 for 1971, 45.7 for 1972, and 43.9 for 1973.
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