A ghost is haunting Europe

Published 04.06.2016 00:16

I think the ongoing street protests in France are not temporary, but a historical consequence of a process that tells the fate of current Europe. Although the 2005 protests in Paris stemmed mainly from the young immigrant population, today's demonstrations do not include immigrants and minorities alone. A mass labor movement and a wave of strikes particularly in traditional industries are at the core of this new insurgency.

For me, what is happening in France today goes beyond what happened in the country in 1871 with more profound consequences. The great crisis, which ended with World War I, emerged in Paris in 1848. The productivity of French industry, which aspired to catch up with Britain's industrial bourgeoisie, could increase through the intense exploitation of labor. Following the 1818 crisis, industry flourished in France and Europe. Steam power dominated the 19th century and boosted capital development at the time.

Parallel with the industrial development, cities grew, the flow of rural population to cities gained speed and woman and child labor entered the industry as a result of the decline in the need for physical power in the labor market. According to the result of industrial surveys conducted between 1840 and 1845, a total of 131,000 children, 254,871 women and 672,446 men worked in industrial enterprises that employed more than 10 employees in 63 different sectors. Based on all these developments, concentration in industry and the accumulation of private properties in certain groups became faster. This minority class, which owned a large amount of capital, consisted of 124,000 in 1851. People in this bourgeoisie stratum were not only property owners, but were the ruling class in the country. They had the right to elect and be elected. The small bourgeoisie and working classes were ostracized from the management by the electoral system that granted rights to elect and be elected in line with people's income. The French Revolution of 1848 broke out under these conditions.

Although current protests are different from the 1848 incidents, they have many similarities. A new industry based on steam power was emerging and capital was accumulating in the center – which boosted labor exploitation during the 1840s. We are on the brink of a new industry that is based on knowledge. Whether you call this new situation "Industry 4.0" or a knowledge era, it is certainly the beginning of a new crisis and a new period. French economist Thomas Piketty's formulation in his "Capital in the Twenty-First Century" explains the dynamics of new crisis. He puts forward a "r>g" pattern, where r stands for the average annual rate of return on capital, including profits, dividends, interest, rents, and other income from capital, expressed as a percentage of its total value, and g stands for the rate of growth of the economy, that is, the annual increase in income or output. This means that the annual rate of return on capital, including profits and interests, surpasses the economic growth rate, which consists of an annual increase in income and output. As in 1848, this skewness and the accompanying crisis will not end unless a new economy, where knowledge and qualified labor has a large share, completely dominates the system.

Meanwhile, the Paris-based Organization for Economic Cooperation and Development (OECD) has released a report on global economic outlook and underlined that the global economy is stuck in a "low-growth trap." The report said that expansionary monetary policies, which have been implemented to overcome low growth so far, no longer work, but further intensify the problem. The OECD argues that we should give up hope on central banks. In other words, Europe and developed countries will not be able to get favorable results from the European Central Bank's (ECB) expansionary monetary policies and negative interest rates practice.

At this point, I need to underline that mainstream economic policies that were practiced in developed countries after World War II, as well as governments and economy administrations that pursued these policies, have collapsed. Obviously, countries that insist on these policies will face a new and very deep wave of economic and political crises that starts with mass uprisings, as such policies were developed in accordance with the economic dynamics of the previous century. We need to acknowledge that the world's production centers and structures have changed and technological proliferation determines production on a new scale.

Today, 40 percent of global production takes place in developing countries, which have reached this rate over the past 20 years. Cities in developing countries, which have a share in the 20-year process, have rapidly developed by improving their infrastructure and smart industries. Small- and medium-size enterprises (SMEs) in developing countries have started producing technology that is used by global monopolies and even surpassed them.

Noisy and bulky production counters established in a large area have rapidly changed and flexible and technology-based production has equally spread all over the world. For instance, the emergence of 3D printers is one of the most concrete indicators of this change. Can you discover the potential of young entrepreneurs, who produce technology to commercialize it, through the traditional banking system and the 20th century's outdated economic policies that are based on Fordist production systems?

Regardless of the number of expansionary policies developed countries implement, they simply wrongly support old sectors and reproduce crises. This is what happens in Europe today. As in the 19th century, a ghost is haunting Europe at the dawn of the 21st century. However, this time it invites something different from fascism and communism.

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