Capital, Labour, and the Eurozone Crisis

Most of the coverage regarding the Eurozone crisis has understandably focused on the politics of austerity. Less attention, however, has been paid to the longer term trends in the industrial relations of those countries hardest hit by the crisis: Portugal, Italy, Ireland, Greece and Spain; the so-called PIIGS countries.

Recent data from the European Industrial Relations Observatory reveals some interesting trends in the relationship between capital and labour in the context of the Eurozone crisis. More specifically, it reveals a trend towards declining labour costs and rising labour productivity, meaning that the so-called ‘recovery’ is being constructed by squeezing workers, not just through the politics of austerity (although that is also the case), but also through wage suppression via the institutions of ‘social partnership’ and the intensification of the labour process.

The following charts shows two different variables.  Labour productivity, defined by EIRO as ‘GDP at current prices (national currency) per employment, persons: all domestic industries’, is shown in blue. Labour costs, understood to be compensation per employee in relation to productivity, is shown in green. With the exception of Italy, all of the countries of Southern Europe suffering from the Eurozone crisis – including Ireland – exhibit similar trends, albeit with varying degrees of intensification.

Greece:

Greece2

 

 

 

 

 

 

 

Portugal:

Portugal2

 

 

 

 

 

 

 

Spain:

Spain2

 

 

 

 

 

 

 

Italy:

Italy3

 

 

 

 

 

 

 

Ireland:

Ireland2

 

 

 

 

 

 

 

In all cases, the turning point appears to be 2008-2009, when labour costs and labour productivity rates begin to diverge. This is one year before the general turn towards austerity in 2010, during the apparent ‘Keynesian’ phase of the crisis, when neoliberal doctrine was apparently losing its legitimacy.

Italy appears to be the exception; labour costs are rising and productivity is declining. This may, however, change, if the Renzi’s PD government is able to pass its labour reform packages that entail wage suppression in return for a moderate increase on corporate taxes to finance social spending in order to compensate the wage freeze proposed to organized labour.

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