ABSTRACT
The Eurozone crisis is seen mostly as the crisis of the less developed, peripheral countries of the zone, namely Portugal, Ireland, Italy, Greece and Spain (PIIGS). This chapter would like to prove that this is false. The crisis originates from the heart of the capitalist production, i.e. from the developed or ‘core’ countries, but the globalization of the market mechanisms makes it possible to shift the crisis from core countries to the periphery. The analysis begins here with a theoretical approach to the crisis. The crisis, that is to say the manifestation of the inevitably cyclical depreciation of capital, is strongly connected to the distribution of the value added between profits and wages. Every production cycle, be it short (‘business’) or long (‘Kondratiev’), is divided into extensive and intensive periods of growth. During short cycles, production grows on the basis of a given set of technology or ‘technological paradigm’. In this extensive period, the demand for labour grows, hence wages grow as well, and an inflationary pressure is born. Wage increases lift the wage rate (or unit labour cost), reduce the rate of profit and diminish competitiveness. The decrease of the profit rate can be counterbalanced, at least for a while, by increasing the amount of profit through multiplying investments at the same level of technology. The decrease of the rate of profit, however, stimulates inventions, technological upgrading that pays with a higher rate of profit or ‘extra profit’ for those entrepreneurs that apply the new, productivity-enhancing technologies first. This process depreciates the capital of other companies that still apply the older technologies and compels them also to upgrade their technologies. Thus, intensification becomes general. More and more companies replace their technology with newer, more developed forms and the cycle enters the second phase, i.e. the intensive period. However, as productivity grows, there is more and more tangible technology (fixed assets) and less labour, and increased productivity spreads to more and more participants, the competition becomes more fierce, prices decrease and the extra profits of the first inventors gradually disappear. The consequence is that the added value relative to the invested capital decreases. The rate of profit relative to the invested capital decreases too in general and on average. The shrinking of the rate of profit can be, at least partly, counterbalanced by keeping wages down. This pushdown on wages is possible because, thanks to the more productive technology, the
demand for labour decreases and unemployment goes up and inflationary pressure is low in the intensive period. The end result of the cycle is that the rate of profit relative to invested capital and the share of wages relative to the value added decreases. The reduction in the rate of wages, however, evaporates the effective demand of the population relative to output. Markets reach their saturation point, overproduction appears and crisis breaks out. This breaking out of the crisis, however, is usually postponed by a ‘pseudo demand’ boom. It happens as spontaneously as the abovedescribed cycle. As in the intensive phase, more and more capital becomes outdated (uncompetitive) and demand decreases because of growing unemployment as a consequence of the productivity-enhancing innovations, and more and more ‘idle’ capital lies in the banks in the form of money waiting for better possibilities for profit making in the real economy. This ‘idle’ capital represents ‘dead’ capital, loss and crisis. The money then lent out by banks, thereby increasing demand, increases the debt of wage earners. The problem of the insufficient demand caused by low wages is hidden by the artificially increased (‘pseudo’) demand, and outdated technologies can survive for a while. The crisis accumulates while the GDP grows, hiding the growing crisis under apparent growth. The debts, however, will never be repaid as markets become saturated and growth is exhausted. At this point, the crisis breaks out in the form of credit crisis and ‘toxic assets’ of the financial institutions. In the era of global capitalism, investment allocation policies of transnational corporations rule the global economy. The obsolete or second and third line technologies are transferred to the low-wage peripheral economies in the form of foreign direct investments because, with the lower wages in the periphery, outdated technologies can be made profitable. The two periods of the production cycle divide in space but unite in time (Rozsnyai 2002). The extensive period shortens or even disappears in the core countries and the intensive period becomes almost continuous there. The extensive period occurs mainly in peripheral countries, and continues for a longer period of time. Hence, the technological lag, lower productivity and competitiveness, the steady inclination to inflation and indebtedness are preserved or even exacerbated in the periphery and crisis inevitably reappears from time to time. In the Eurozone, this shift of the crisis to the periphery happened in this way, aided by the common currency.
