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Shifts And Faultlines In
The World Economy
And Great Power Rivalry:
What Is Happening And
What It Might Mean- Part III

The European Union As A
Potential Rival To U.S. Dominance

By Raymond Lotta

06 August, 2008


Part I

Part II

Great shifts are taking place in the balance of economic strength among the major powers. New faultlines can be discerned in the world economy. U.S. imperialism is still the primary economic and military power in the world imperialist system. But its position is eroding. And potential rivals are emerging.

The enlargement and consolidation of the European Union is a defining feature of this changing economic landscape—with the rise of China perhaps the most dynamic of the big tectonic shifts taking place in the world economy (see Part 2 of this series).

The European Union (EU) is a highly developed economic bloc of imperialist and capitalist countries on the European continent. In the last 15 years, the EU has achieved higher levels of economic and financial integration and strengthened its international position. The euro, which is the currency used by 15 EU members, is playing an increasingly important role in world trade and finance. The EU has been more forcefully asserting itself internationally and enhancing military capabilities.

The nature and possible implications of the expansion and strengthening of the European Union in relation to great power rivalry are the topic of Part 3 in this series.


The EU has operated in partnership and alliance with U.S. imperialism in military affairs and in international forums like the World Trade Organization. There are huge inflows of U.S. capital into Western Europe, and huge inflows of West European capital into the U.S. At the same time, the EU represents a major, and growing, competitive challenge to U.S. imperialism within an international framework dominated by the United States.

How the EU challenge further develops will be influenced by the interplay of economic and non-economic factors:

- There is the question of the evolution of NATO, the U.S.-led military alliance of which major EU countries are a part.

- There is the dynamic element of the EU’s relations with Russia and China, both of which are rising powers in the world economy and both of which are becoming ever more significant trading partners with the EU.

- There are the wars for empire in the Middle East and in Afghanistan—where West European imperialism is heavily involved with the U.S.—and whose outcomes are far from determined.

- There is a clash globally between an outmoded world-dominating and world-exploitative imperialism and an outmoded Islamic fundamentalism—which has thrived in response to the onslaughts of imperialism but which offers no real and liberating solution to imperialism. And within Europe reactionary Islamic fundamentalism is gaining ground and influence among sections of immigrants.[1]

- There are the effects of social struggles in Europe today and around the world, and the potential for revolutionary struggle to emerge and to impact the situation in the EU countries and the world as a whole.

Background: The European Union

The European Union is not a single state…but neither is it a loose or informal coalition of powers. It is a unique union of imperialist states in Western Europe that has forged political and administrative and legislative structures to regulate its functioning as a bloc. Its leading core is made up of the major West European imperialist powers: Germany, France, and the United Kingdom. Germany and France are the main political-economic drivers of the bloc.

In 1991, the EU had twelve member states. But the collapse of the imperialist Soviet Union and its bloc in 1989-91 opened new possibilities for West European imperialism. West Germany, already the major economic power on the European continent, absorbed East Germany. The EU looked eastward and incorporated countries like Poland and Hungary, as well as countries in the Baltic region.

This was the dialectic in the 1990s: U.S. imperialism brought most of the East European countries of the former Soviet bloc into its military-led alliance, NATO; the West European imperialists brought most of these countries into the EU’s economic orbit.

The EU still consists of distinct economies with distinct class structures and distinct imperialist or capitalist ruling classes. But the EU has become a more cohesive and powerful bloc. It has created diverse institutions to coordinate policy and exercise powers across the countries making up this bloc. Since 1995 it has grown from 15 to 27 countries; emerged as a market rivaling the U.S. market in size, and developed a currency that has the potential to challenge the U.S. dollar internationally.

Taken individually, the Western European states are not able to compete economically with U.S. imperialism in terms of size. But as a single, highly integrated entity, the European Union can compete on a global scale. In short, with the expansion and consolidation of the EU, the U.S. now faces a large and formidable political, financial, and industrial center. [2]

Culturally, the EU projects itself as an enlightened, civilized, cosmopolitan capitalism. And this is part of the EU’s ideological arsenal as it seeks to strengthen its political-economic position internationally.

Meanwhile, the EU tightens controls on immigrants, parries with U.S. imperialism in Latin America for economic advantage, utilizes its historical colonial ties, and forges new neo-colonial relations of dependency, to serve its international needs—for instance, investments and military operations in Africa to secure energy and raw material supplies. And the EU has also been party to the subcontracting of torture by U.S. imperialism and its “war on terror.” EU member countries have been the sites of secret CIA prisons. [3]


The EU has moved to extend and further unify a common market, and, in close connection, to raise profitability and increase the competitiveness of EU-based capital in the imperialist world economy.

A. Competitiveness Agenda
and “Flexible Labor”
This has involved a wave of neoliberal “reform.” Neoliberalism refers to policies that further open national economies up to the freer flow of capital, that privatize state-administered industries, that deregulate labor markets and remove restrictions on the terms of exploitation and employment of wage labor, and that cut back social benefits, etc. This has been going on in the United States since the 1980s.

In the Third World, U.S.-dominated international financial institutions, like the World Bank and the International Monetary Fund, oversaw a sweeping and brutal neoliberal restructuring of economies. This cleared the way for the deeper penetration of imperialist capital, including from Western Europe. It also undermined local agriculture in large regions of the Third World and accelerated an unprecedented process of massive and chaotic urbanization. [4]

West European capital has been carrying out its own agenda of neoliberal reform since the 1990s: seeking more flexibility in hiring and firing, wider use of temporary labor, and repression of wages.

In France, efforts have been underway to extend the legal workweek beyond 35 hours. In Germany, various forms of “co-participation” by unions in factories—designed to serve the increase in worker productivity—have been scaled back. Germany is the world’s leading exporter. It has maintained this position in part by driving down unit labor costs, and real wages declined for seven straight years (1998-2006). [5] In France, government support for education and job placement has also been cut, and such policies have been a major trigger of protests. Social welfare benefits, including pensions for the retired, have been rolled back in much of Europe.

The EU’s competitiveness agenda has involved mergers of large enterprises into larger enterprises, as in the steel industry. And it has involved support for strategic industrial sectors and the promotion of leading enterprises. For example, the EU created EADS, the European-wide aerospace company. It manufactures the Airbus and is a global competitor with Boeing.

This “competitiveness” agenda has also entailed efforts to restrict the freedom of movement of U.S. capital in Europe’s more open and integrated market. Microsoft, for instance, has been charged with monopolistic practices. European capital has sought to check U.S. capital internationally. This has taken complex and often disguised forms, such as battles between the U.S. and the EU over environmental standards or controls on imports of bio-engineered agricultural products.

B. Special Role of Eastern Europe

The incorporation of the East European countries into the EU has been a source of competitive advantage of West European capital in the world market. The East European economies are ruled by fully developed capitalist classes—and some of these economies invest capital in the Third World. But they stand in a subordinate relationship to the larger and more powerful ruling classes of the EU. Strategic sectors of these economies, like transport, finance, and telecommunications, are dominated by foreign capital, particularly Western European capital. Low labor costs combined with high-skills levels carried over from the Soviet period are an important magnet for investment.

The EU has restructured and integrated the East European economies into larger region-wide and global production chains. East European workers face poorer working conditions and lower pay scales, along with less generous social programs, than do the populations in much of Western Europe. In Slovakia, wages in the auto industry are one-eighth of those in Germany, while productivity in the auto industry (led by VW and Peugeot) is soon expected to be the highest in the world. [6] In these ways, the absorption of East Europe into the EU has enhanced the bloc’s competitiveness and profitability.

The EU—more particularly, German imperialism, which has a special interest in East Europe and the Balkans—has invested heavily in rebuilding the transport, energy, and other infrastructure of East Europe. This has been costly and played a significant part in dragging down growth rates in Germany. But this retooling is also a key part of a longer-term strengthening of a more integrated and competitive continental market in which Germany is the economic anchor of an increasingly cohesive EU bloc.

Strategically, East Europe is also important to EU geopolitical ambitions. It is geographically closer to Russia, which provides much of Western Europe’s energy needs—and so Eastern Europe is also a kind of buffer zone. In addition, West European economic penetration provides a certain counterweight to U.S. military dominance in East Europe. [7]

C. Migrant Labor in “Fortress Europe”

With more open economies requiring both high and low skills and increasingly “flexible” workers (shifting in and out of jobs and sectors of the economy with less job security), immigrant labor plays a particular role in restructured labor markets.

An estimated 5 to 6.5 million undocumented workers currently live and work in Europe. They are an “illegalized transnational labor force”—working in such sectors as agriculture, construction, domestic services, etc. Some of these sectors would, as a recent study by three progressive scholars observes, “likely collapse without access to cheap and unregulated migrant labor.” [8] These undocumented workers are often not able to gain minimum wages or work with labor contracts.

Immigrants are now being threatened with special ID cards and databases with biometric details. France will be using DNA testing on new immigrants coming into the country. Chauvinist hysteria against immigrants in the post-9/11 atmosphere often takes an anti-Arab and anti-Islamic form. And this is part of the official discourse as well—Nicholas Sarkozy, president of France, was elected in part on a “get tough” with immigrants platform in the wake of immigrant youth rebellions against police brutality and social discrimination in 2005. [9]

EU officials glow with pride about new means to fortify borders against “illegal” immigrants. The results? Spanish authorities alone reported that in 2006, 6000 drowned in the Atlantic, trying to reach the Canary Islands (part of Spain) from West Africa—where European commercial fleets have emptied out fisheries and destroyed livelihoods of local fisher people. Hundreds more immigrants in 2006 suffocated in containers and trucks and cargo boats in ports.


The EU has been expanding—and faces a compulsion to expand its international reach and competitiveness—if it is to thrive as a geoeconomic power in a world economy now still dominated by U.S. imperialism and with other new competitors and challengers arising within the world system. It is also possible that this U.S.-dominated international economic framework could suffer major jolts. Such jolts, in combination with other factors (like military setbacks), might create new openings for rising powers such as China and the EU to vault to significantly stronger positions.

Geopolitically, the EU is playing a more assertive international role. It has been a partner to Middle East talks. The EU oversaw elections in Congo in 2006. It took over the UN mandate of occupation in the western Balkans.

The bulk of the EU’s global, strategic military capability is contained within NATO. But one of the unexpected outcomes of the collapse of the Soviet Union was that “the triumph of the West” led to a Western Europe less militarily dependent on U.S. imperialism—since there was no longer a powerful and militarized Soviet bloc abutting Western Europe in the context of intensifying conflict between the U.S.-led and Soviet-led blocs. As Dominique Moisi, a French geopolitical scholar and policy adviser, described it: “the Cold War configuration of one West and two Europes” is being replaced by “one Europe but two Wests.” [10]

The EU has established or expanded a number of multinational “intervention forces”—a benchmark goal is to have 60,000 soldiers available for overseas missions of up to a year. The EU has been enlarging its military industry, investing in the Eurofighter combat jet and long-range aircraft. It has developed a European satellite navigation system (Galileo). These are all EU-wide, joint initiatives. And the EU has also been attempting to develop an overall command structure.

None of this can match, it does not even come close to matching, the military weight of U.S. imperialism right now. But this greater assertiveness is occurring at the same time that the U.S. is downsizing forces in Europe—while more ambitious EU plans for military deployments are unfolding, especially on the part of Germany. Moreover, the EU has the “industrial assets” to undergird rapid militarization.

There is yet another element: Russia. The EU would have significantly greater geopolitical strength in alliance with Russia, with its still formidable military power. This is a wild card of sorts, but quite real—all the more so, given Western Europe’s increasing dependence on Russian energy supplies.

Russia already supplies more than a quarter of the natural gas consumed in Western Europe, and this share is growing. On the other hand, Russia is highly dependent on the European market: the EU accounts for about 75 percent of Russia’s export earnings. [11] German capital is the major supplier of credits to Russian gas and oil giants (and former chancellor of Germany, Gerhard Schroder, is now chairman of the supervisory board of a subsidiary of Russian natural gas giant GAZPROM). [12] At the same time, European transnational firms have been seeking an independent presence in Central Asia to bypass Russia.

The question is posed: will the energy relationship with Russia—which is rocky—lead to a more general repositioning and collaboration of these two powers on the world stage?

The EU is also taking advantage of its historical ties of domination and exploitation in Africa to meet its energy requirements and to reduce its dependency on Russia. European transnational firms have recently accounted for 60 percent of new investment in West African oil and gas enterprises. Royal Dutch Shell is the leading foreign producer in Nigeria. It has been the object of protests and armed attacks by local residents in response to its drilling activities which bring few benefits to the surrounding communities but enormous environmental destruction. [13]


The euro has been playing a bigger role as a world currency. EU market enlargement and regional currency integration have provided an advantage in scale and efficiency for globalized West European capital. And since its inception in 1999-2000, the euro has become the biggest and only currency to rival the U.S. dollar as the world currency. The growing importance of the euro stems from the strength of the EU as well as from erosion in the U.S. international financial position. The dollar has been under huge downward pressure as a result of the tremendous deficits incurred by the U.S. and the more recent financial turmoil in the U.S.

The potential world impact of the euro is captured in the introduction to a collection of articles on the euro by mainstream analysts: “As the currency bearing the brunt of the U.S. dollar’s decline from its overvaluation of the late 1990s, the euro’s value and management is critical to the successful adjustment of international imbalances. And as a long-run competitor and collaborator with the dollar, the euro creates the potential for a bipolar international monetary system, offering unprecedented challenges and opportunities to economic policymakers.” [14] Already, the euro has surpassed the dollar as the world’s chief currency in the international bond market.

This does not rule out the possibility of the dollar being reinvigorated. And it is important to keep in mind that the strength of the dollar and its role as the world’s reserve and transaction currency are not simply a function of U.S. imperialism’s economic strength. “Confidence in the dollar” is also linked to the global military dominance of U.S. imperialism, to military-security linkages between foreign holders of the dollar and U.S. imperialism (as with a country like Saudi Arabia), and to the overall stability of U.S. capitalism and its highly developed financial markets relative to economic and political risk elsewhere.

On the other hand, a more gradual, long-term trend towards a “bipolar monetary system” does not rule out the potential for a massive flight from the dollar and sudden eruption of financial chaos, perhaps of a magnitude not seen since the 1930s. Such an attack on the dollar could be triggered by a combination of economic events and political developments. For example, China could stop financing U.S. Treasury debt on the scale that it has been and diversify its foreign exchange holdings away from the dollar.

Financial institutions and financial markets in Western Europe have been hit by the financial crisis that erupted in the U.S. in early 2008. But this much seems to be clear: the euro is gaining competitive ground on the dollar and being increasingly looked to as an international reserve and transaction currency.


In the aftermath of World War 2, U.S. imperialism shaped state structures in Europe and deeply penetrated the social formations on the continent, including culturally. In the expansion of the post-World War 2 period, U.S. and West European trade and investment links grew deep, and the larger geopolitical framework dominated by the U.S. constrained strategic challenges by West European imperialism. This continued after the collapse of the Soviet Union. In addition, the United Kingdom, which is a member of the EU, has a “special relationship” with the United States. And this influences the jockeying between the EU and the United States.

But the current world economic and political arrangements are not written in stone. They can evolve in new directions and radically change in connection with major geoeconomic and geopolitical shifts. Again, the Russia factor looms large. The EU may find itself torn between those within its imperialist ruling classes calling for a more robust European military capacity and those that still want to rely on the NATO alliance. The pathways towards a greater or lesser EU international geopolitical role would be profoundly influenced by a major move by China to wrench more initiative in the world economy and/or to forge closer alliance with Russia.

In June 2008, the French government announced a reorientation of French security policy towards deeper relations with NATO. But note closely: this was presented as a turn towards NATO and the EU—along with bolstering the EU’s capacity to plan and conduct its own military operations.

Contradictions between France and Germany, core forces of the EU, and the U.S. over the war in Iraq have been very acute. And there have been other contradictions; for instance, a dispute broke out in 2005 when the EU lifted an arms embargo imposed on China after the 1989 Tiananmen uprising of students and workers. And even where there is more (apparent) unity, as in putting pressure on Iran, it is also the case that rivalries are playing out within the NATO alliance.

The EU has necessity and freedom. The overall EU strategy seems to be one of “biding time”: promote further institutional integration within the EU bloc, seek out closer partnerships with other major powers, and take advantage of difficulties and setbacks of U.S. imperialism. But the pace, direction, and assertiveness of the EU will be influenced by underlying global trends and by unforeseen developments—internal and external to this bloc.

NEXT, Part 4:
A Resurgent Russian Imperialism


1. On the conflict between Western imperialism and Islamic fundamentalism and the ways in which they oppose but also reinforce each other, see Bob Avakian, Bringing Forward Another Way, [back]

2. For more on the development and nature of the EU, see Peter Dicken, Global Shift, 5th Edition (New York: Guilford, 2007), chapter 6; and Jozsef Borocz and Mahua Sarkar, “What is the EU?,” International Sociology, June 2005, Vol. 20 (2), pp. 153-73. [back]

3. See Dick Marty, Secret Detentions and Illegal Transfers of Detainees Involving Council of Europe States: 2nd Report (June 7, 2007), [back]

4. For a Marxist analysis of the origins and logic of neoliberalism, see David Harvey, Neoliberalism (London: Oxford: 2005). [back]

5. Perry Anderson, “Depicting Europe,” London Review of Books, 20 September 2007, [back]

6. Anderson, “Depicting Europe.” [back]

7. On the EU and Eastern Europe, see Dorothee Bohle, “The EU and Eastern Europe: Failing the Test as a Better World Power,” Socialist Register 2005: The Empire Reloaded (London: Merlin, 2004), pp. 300-12; Jozsef Borocz, “How Size Matters: The EU as a Geopolitical Animal,” 2005, [back]

8. Markus Euskirchen, Henrik Lebruhn, and Gene Ray, “The Changing European Border Regime,” Monthly Review, November 2007, pp. 41-42; [back]

9. On biometrics and “immigration control,” see “Special Report on Migration,” The Economist, January 5, 2008, pp. 8-10 [back]

10. Dominiqe Moisi, “Reinventing the West,” Foreign Affairs, November-December 2003, On growing EU-U.S. rivalry since the Kosovo war of 1999, see Kees Van Der Pijl, Global Rivalries From the Cold War to Iraq (London: Pluto, 2006), pp. 287-90. [back]

11. Quentin Perret, “Wither Gazprom? The EU and Russia’s Gas,”, November 1, 2007. [back]

12. John Vinocur, “For Schroder and Putin, Linkup No Coincidence,” International Herald Tribune, January 3, 2006. [back]

13. On EU energy investments in Africa, see Michael T. Klare, Rising Powers, Shrinking Planet (New York: Metropolitan Books, 2008), pp. 155-57. [back]

14. See summary, Adam Posen, ed., The Euro at Five: Ready for a Global Role? Special Report 18, Peter G. Peterson Institute for International Economics, 2005, [back]


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