Volume 44, Number 173,
April-June 2013
Adjustment: Origin of the European Crisis
Andrés Musacchio

There is an intense debate surrounding the weaknesses generated by these new conditions for union actions and the true capacity of union influence to counteract policies favorable to capital (cf. Musacchio, 2011b). What is clear is that the new conditions are markedly asymmetrical. That is why labor flexibility measures have been implemented over the past decade, including the extension of the working day without salary compensation in sectors and/or companies in various countries – including regional powers, and especially Germany – or the extension of the retirement age (cf., for example, Musacchio, 2004b; Busch et al., 2011). The tendency is gradually deepened, as capital migratory pressure obliges partner countries/competitors to force internal competitiveness and, as such, regressive adjustments are rapidly propagated from one country to another. One of the most complex processes that has produced significant institutional conflict (especially in France) is the German “wage dumping” model, to which we shall return at the end.

The imposition of this Europe of capital can be seen in income distribution. Since the implementation of the neoliberal model, salaries have constantly fallen. Taking into account only the 12 oldest members, salaries lost almost 10 points in revenue share, with some extraordinary cases such as Ireland (-20%) or Austria (-15%).

Figure 1. Salary/Revenue Relation, Europe 12, as % of gdp
Source: European Economy. Statistical Annex, Spring 2010, p. 92.

Regressive distribution is no stranger to the neoliberal model. On the contrary, the orthodox explanation of the post-war model of crisis rests on the idea that salaries and public spending would suffocate business profitability and that renewed growth could only be based on better supply conditions that would increase profitability, as well as price stabilization to provide some certainty to companies. Under these conditions – described as “supply-side theory” – the investment process would begin again, as a basis for expansion. The preconditions for both the monetary union as well as the European Central Bank policies were based on these tenets. However, instead of reducing uncertainty, they brought about a strong revaluation, reducing external competitiveness, while the drastic contraction of the internal market as a result of the drop in participation of salaries in revenue, fiscal adjustments and transformations to the national tax systems shrunk regional demand. As a result, investment oscillated, with marked cycles and a slightly downward trend, as seen in the following figure.

Figure 2. Gross Capital Formation, Europe 12, as % of gdp
Source: European Economy. Statistical Annex, Spring 2010, p. 66.

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PROBLEMAS DEL DESARROLLO. REVISTA LATINOAMERICANA DE ECONOMÍA, Volume 49, Number 195 October-December 2018 is a quarterly publication by the Universidad Nacional Autónoma de México, Ciudad Universitaria, Coyoacán, CP 04510, México, D.F. by Instituto de Investigaciones Económicas, Circuito Mario de la Cueva, Ciudad Universitaria, Coyoacán,
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