rapid growth by WINFRIED WOLF The principal importance of the crisis of 1974-75 lies in the fact that it has permitted a harsh light to be cast on the fundamental class relations of the Federal Republic of Germany, much more than the recession of 196661. Unemployment and social product Since the crisis began, the number of employed wage and salary earners in West Germany has fallen from 22.7 million in the middle of 1973 to 21.2 million in the middle of 1976, a decline of 1.5 million. Officially, the number of unemployed stood at 967, 000 in July 1976. The difference between these two figures results from the departure of about half a million immigrant workers. The figure on partial unemployment has declined to about 100,000. At the peak of the crisis, during the first half of 1975, there were 1.2 million unem-
17
WEST GERMANY
GNP (in thousands Growth Number of wage & of millions of GNP salary earners Year of 1962 DM) (in %) (in millions) 22,564 (in 1973) 1874 595.0 0.4 22,152 1975 574.8 -3.4 21,421 1976 600.0 4.5 21,200 ployed (1.4 million if seasonal fluctuations are eliminated) and 900,000 partially unemployed, the highest figures since the 1950s. It should also be noted that the present number of unemployed, in the midst of an upturn, is 35% higher than the unemployment figure during the 1966-67 recession. Table 1 eloquently compares the evolution of employment, production, and real incomes of wage workers and salaried personnel. This table indicates that in 1976 social product once again reached its 1974 level and even went slightly beyond it. Nevertheless, this product was created by 21.2 million wage and salary earners as against 22.2 million in 1974. In other words, 1 million fewer people were needed to create the same wealth. The sum of real wages and salaries distributed to workers and employees likewise diminished between 1973 and 1976. The nominal wage bill increased 16.3% (not cumulative) between 1974 and 1976, while inflation increased 18.4% (not cumulative). This leaves a very profitable balance for the capitalist class. The division of social wealth also evolved to the advantage of the bourgeois class. The year 1976 was marked by the lowest share for wages in the history of West German capitalism:
1950: 67.6% 1960: 58.8% 1970: 54.8% 1972: 54.3% 1973: 52.7% 1974: 53.0% 1975: 52.8% 1976: 51.2%(*) Moreover, the decline of the wage share only imperfectly expresses the redistribution of national income to the advantage of capital, for it takes account only of the incomes of employed workers. In fact, how* The wage share is calculated by dividing the national income by employed person and by net income per wage and salary earner. Our calculations are based on the Monatsberichte (Monthly Reports) of the Bundesbank Nos. 6 and 8, 1976 and the Jahresgutachen (year-end evaluations) of the council of economic advisers. 18
TABLE 1
Total Wage Bill. Increase in
(in thousands of wage bill Rate of millions of current DM _ (in %) inflation
470.7 9.4 7.0 487.1 3.5 6.0 503.6 3.4 5.4 ever, all the workers, both employed and unemployed, must be included in the working class. If the wage share is calculated on the basis of the wage bill plus unemployment compensation and divided by the total number of employed and unemployed workers, it declines even further. The year 1976 is the first year in the history of West German capitalism during which the mass of wage workers have suffered a reduction in real income. The labor coniracts signed generally provide for nominal wage increases on the order of 5.4% (except in the publishing industry, thanks to the strike). Taking account of fringe benefits, the increase in gross nominal wages averaged about 6%. The various fiscal losses lead to reductions in purchasing power on the order of 3.5-5%, depending on the levels of compensation, the number of people in each family, etc. The average loss of purchasing power was most probably on the order of 4%. To this it must be added that at least 1 million unemployed workers lost nearly 40% of their purchasing power (the difference between wages and unemployment compensation) and that there are a significant number of youth (it is difficult to calculate how many) who did not find jobs after completing their studies, as well as a number of women who are not represented on the "labor market" because of the scope of unemployment. Finally, the picture must be rounded out by considering the increase in the intensity of labor. It is difficult to calculate this in exact figures. The bourgeois press itself has nevertheless stressed that "labor discipline" has increased strongly. For some trusts, such as Opel and Hoechst, production at the end of 1975 or the beginning of 1976 was equal or superior to the pre-crisis level, in spite of equal or reduced personnel rolls and pronounced partial unemployment. Volkswagen registered record production and a record profit of 1, 000 million deutschemark (DM) in 1976, in spite of the elimination of thousands of jobs. (See Frankfurter Allgemeine Zeitung, July 7, 1976) Another example illustrating the increase in the intensity of labor during the crisis is provided by the coal industry. The West German coal industry is the only coal industry in the Common Market to have increased production (up 4.6% in July 1976 compared with July 1975), while at the same time re-
ducing the number of employed personnel by 4% (the highest percentage in the EEC). Basic production per miner increased sharply. It attained 4.219 kilograms per shift, as against 3.358 in Britain and 2.687 in France.
Although quite a lot of noise has been made about the decline in the rate of increase of the cost of living, it is not often mentioned that the rate of increase in the prices of products purchased by industry has diminished much more. The rate of increase in the prices of consumer goods dropped from a yearly average of 5.8%
(first quarter of 1975 compared with the first quarter of
1974) to 5.4% (first quarter of 1976 compared with the first quarter of 1975). During the same period, the rates of increase for products bought by industry declined from 11.2% to 2.7%.
The negative balance-sheet of the capitalist crisis from the standpoint of the workers is logically reflected in a positive balance-sheet for the employers. The following figures indicate the evolution of the declared profits of the 950 largest joint stock corporations of West Germany:
1969: +11.3% compared with preceding year 1970: - 7.3% 1971: -12.7% 1972: +23.5% 1973: +21.5% 1974: - 7.5% 1975: + 3.0% (provisional figures)
1976: +25.0% (predictions for the big joint stock companies. For all companies, the prediction is 16%.)* *See Blick durch die Wirtschaft (Glance at the Economy), Frankfurter Allgemeine Zeitung. For details of sources and calculations, see Was Tun (weekly newspaper of the GIM, German section of the Fourth International), No.113, pp. 6-7. These percentages concern the volume of profits and not the rate of profit.
In addition, the government has accorded about DM5, 000 million in investment aid to the employers in order to compensate for the slight decline in profits in 1974. Although justified with the argument that it would serve
"to create new jobs, " the billions of dollar handout was used almost exclusively for rationalization investments.
The Helmut Schmidt cabinet also reduced taxes on profits and dividends by about DMI, 000 million within the framework of fiscal reform.
Evolution of the conjunctural situation
The fall of production in manufacturing industries was halted during the last quarter of 1975. Production here had reached its lowest level during the second and third quarters of 1975, hitting indices of 102 and 103 (1970=
100). There has been a slight upturn since the beginning of 1976. In the middle of 1976 the index of industrial production stood at 112 and had reached the level of the end of 1972 and beginning of 1973. But this evolution is extremely uneven according to branch, as is shown in Table 2 (calculated on the basis of the Monatsberichte of the Bundesbank). The table reveals that during the first phase the chemical and steel industries acted in a stabilizing (anti-cyclical) manner, but that they contributed to aggravating the crisis when the crisis reached its deepest point. During the upturn the cheinical industry was the most energetic branch, while the steel industry has not yet emerged from its crisis, primarily because of the swamp in which the international steel industry is mired. The electrotechnical industry experienced an evolution comparable to that of the chemical industry, but in a less pronounced manner. The industry of means of transport (automobiles above all) fell into crisis rapidly and more deeply but was able to come out of it earlier than the other branches and initiated the upturn in certain respects. In the final analysis, all these various fluctuations are explained by a single factor: the differing evolution of demand on the domestic market and foreign demand. As we have already indicated in previous conjunctural analyses, exports play a decisive role in the West German economy. Throughout the entire period 1948-1960/67, growth rates for exports were constantly higher than growth rates for industrial production. This was even more true during the recessions of 1966-67 and 1974-75. But while West German capital was able to limit the 1966-67 crisis through an export offensive, this time the offensive only managed to postpone the outbreak of the crisis (especially during 1973 and the first half of 1974) and to hasten the arrival of the upturn in 1976. During the winter of 1974-75, when the crisis seemed to have bottomed out on the domestic market and Chancellor Schmidt gave his well-known speech in support of his conjunctural program ("The upturn is on the way, it has already begun..."), the much-feared combination of a crisis on the domestic market and an ebb in exports had clearly materialized. This combination dragged the economy of the German Federal Republic more deeply into the whirlpool of the crisis. (See table of GNP and exports.)
19
TABLE 2
PHASE 11
PHASE 1
October 1973-June 1974
October 1974-June 1975
Overall growth in manufacturing
Overall growth in manufacturing industry: -8.1% industries: 0.6%
- 81%
5:5
5:4
12:0
-3*81
- 9-9
Stimulating the crisis
Oct '74 - Jun 75
Oct '73 - Jun '74
1: iron and steel industry
2: chemical industry
3: electro-technical industry
4: machine building industry
5: construction industry
6: means of transport industry
TABLE 3
Workers, states
OPEC
Underdeveloped countries not in OPEC
USA
9.7%
/13-9%
3•0%.
EEC
EEC
= 47%
464%
46-4%
Others
WEST GERMAN EXPORTS
1971
20
PHASE 111
October 1975-June 1976
Overall growth in manufacturing industry: 5.25%
5-25%
11-21
Oct '75 - Jun'76
= stimulating the crisis
= curbing the crisis
Workers' states
OPEC
Underdeveloped countries not in OPEC
USA
5-5%
139%
7-5%
7
Others
1976 Jan-Jun
EVOLUTION OF GROSS NATIONAL PRODUCT & EXPORTS* Year GNP Exports 1973 +4.0% +11.0% 1974 first quarter +1.0% + 9.5% second quarter -0.5% 0.0% third quarter -2.0% - 3.5% fourth quarter -2.0% - 3.5% 1975 first quarter -2.5% - 8.5% second quarter 0.0% + 1.5% third quarter 0.0% + 0.5% fourth quarter +3.0% +1.5% 1976 first quarter +2.0% + 6.0% *Calculated according to the Monatsberichte of the Bundesbank, Beiheft 4, No.7, 1976, p. 2. It inay thus be concluded that for a brief period the international capitalist economy in crisis aggravated the recession in West Germany. But over the period of the recession as a whole, the opposite observation remains valid: the boom of West German exports improved the economic situation in Wesi Germany. For the whole period 1973-1976 exports grew 18% and the GNP only 4.5%. Even for the period from 1974 to the first quarter of 1976 exports grew 7% and the GNP only 0.5%. The conclusion is obvious: the share of exports in the GNP increased. Without the export boom the economic crisis in West Germany would have been much more pronounced. This is why it is interesting to examine more closely the markets to which West German exports are directed, as well as which countries exhibit a higher than average rate of increase. This is indicated in Table 3, which is calculated on the basis of the Monatsberichte of the Bundesbank and the Statistisches Jahrbuch der BRD 1975 (Statistical Yearbook of the Federal Republic of Germany 1975). In the table the heading "other countries" refers essentially to the capitalist countries of Europe that are not members of the Common Market. A comparison of the geographical structure of West German exports in 1971 and the structure of the first half of 1976 indicates that the Common Market countries maintain a constant share. There was a decline in the share of the United States, in particular following the open and concealed protectionist measures that were taken and the modifications in the dollar-yen-deutschemark exchange rates. There was an increase in the share of the countries of OPEC (Organization of Petroleum Exporting Countries) and the bureaucratized workers states, whose share doubled. This latter point is especially interesting. Two varieties of demagogy are now prevalent in West Germany. The first claims that the "oil sheikhs" are responsible for the crisis. The second relates to the "gifts" that the Social Democratic-Free Democratic coalition has allegedly granted the "socialist countries." Well, what do the figures show? Although the total price increase on West German imports of raw materials (including oil) came to only DM2, 500 million in 1975, West German exports to the countries of OPEC increased DMI1, 000 million compared with 1973. A similar remark applies to exports to the bureaucratized workers states. Paradoxically, it could easily be asserted that both the "oil sheikhs" and the "socialist countries, " far from having "cost" West Germany anything, have in fact enabled West Germany to reduce the scope of the crisis because they have increased their purchases. As for the debt of the "socialist countries" to West Germany, while it is real, it is well inferior to West Germany's debt to the OPEC countries. World's second imperialist power During the thirty odd years of its existence the Federal Republic of Germany has usually been presented as an "imperialism lacking power." It has generally conducted itself cautiously on the international scene. Very recently, however, a change in behavior has been noted, reflected in the headlines of the international press: the revelation of close collaboration between West Germany and South Africa, in particular in the military domain and in nuclear energy (the Rall/Ball affair); ine failure (at the last minute) of the plan to furnish South Africa with atomic reactors; the nuclear energy contracts concluded with Brazil and Iran; the role of blackmailer played by the West German government during the Puerto Rico conference on the question of financial aid to Italy, and so on. In order to grasp the material base of the emergence of a West German imperialism which is speaking more loudly on the international scene, two developments must be followed: that of the growing share of West German commodity exports in world trade and that of the boom of West German capital exports. These are indicated in the following tables*:
SHARE OF VARIOUS IMPERIALIST POWERS IN WORLD TRADE (in percentages) West United
Year Germany Britain France States Japan
1937 6(9)* 14 5 12 5.6
1950 4 12 5 17
1953 6 11 6 18
1959 9 10 5 16 3.0
1974 10.8 4.7 5.6 11.9 6.9
*The 6% refers to the present territory of West Germany; the 9% refers to the total territory of the Third
Reich in 1937. *For exports, see Die Internationale, No. 1, p. 123 ff. and Statistisches Jahrbuch der BRD 1975. For capital exports see ISP, Theorie, No. 3, p. 60 ff. and Der Spiegel, No.46, 1975.
21
WEST GERMANY
TOTAL OF DIRECT WEST GERMAN INVESTMENT ABROAD
(in thousands of millions of deutschemark, the yearend figure in each case)
1961: 4.1 1967: 8.0 1970: 20.0 1973: 32.2 1975: 42.0* * In view of the rise in the value of the deutschemark compared with the dollar, if this figure were evaluated in dollars it would come to three times the 1970 figure. The Federal Republic of Germany is thus the only imperialist country to have succeeded in substantially increasing its share of world trade since 1937 and at the same time has been able to increase its direct capital exports tenfold since the beginning of the 1960s. In fact, the value of investments abroad by West German trusts goes well beyond the DM42,000 million (about USS18,000 million at the current exchange rate) indicated for 1975. The reinvestment abroad of nondistributed profits by these trusts is not included in the statistics, but it ought to be. Solely for the period of the 1974-75 recession direct West German capital exports would have been sufficient to create 1 million jobs in the German Federal Republic! In certain respects, West German commodity and capital exports exhibit similar regional structures:
1. The major shares of both go to the countries of the EEC or to countries closely linked to them (about 60%).
2. The share of the colonial and semicolonial countries is practically the same in both categories (around
3. Nevertheless, there is an important differentiation among the underdeveloped countries. West German capital treats the terrorist regimes with a special preference. It is toward these countries that a massive offensive of commodity and capital exports has occurred during the past several years. West German exports to Iran quintupled between 1970 and 1975; capital exports to Iran have doubled during the past two years. Commodity exports to Brazil tripled between 1970 and 1975, while capital exports doubled between 1973 and 1975. Commodity and capital exports to Indonesia grew in the same proportions during the same interval. West German exports to South Africa rose from DM1, 900 million in 1970 to DM3, 300 million in 1975. The share of these four countries combined in overall West German exports rose from 3.1% in 1970 to 5.6% in 1975, thus attaining the same share of West German exports as the United At the same time, the concentration of capital has strongly increased in West Germany. For 1975 alone 22 the number of declared mergers increased 41% compared with 1974. The share of the 100 largest firms in total turnover in the West German economy increased from 21.7% in 1972 to 24.6% in 1974. During the same period, the twenty-five strongest firms increased their share of the total turnover of the 100 largest firms from 54.5% to 56.8%. And it should be noted that the 100 strongest West German firms account for half of West Germany's exports. The major West German trusts are in the process of acquiring the dimensions of the great American trusts. Fifteen West German trusts have annual turnover of more than DM10, 000 million (more than USS4, 000 million at the current exchange rate). The five largest (VEBA, Thyssen, Hoechst, Daimler-Benz, and BASF) each exceed DM20, 000 million in annual turnover. In the well-known Fortune list, they would occupy positions between 11 and 20, directly behind ITT. New mergers between "giants" have occurred or have been announced: the Thyssen-Rheinstahl merger; VEBA-Gelsenberg; KlöcknerMaxhütte; Karstadt-Neckermann, etc. (See Frankfurter Allgemeine Zeitung, July 2, 1976, and September 4, 1976; Extradienst, July 27, 1976, etc.) The conferences, regroupments, and reorientations of the imperialist forces during the 1974-75 crisis threw harsh light on the emergence of West German imperialism as the world's second imperialist power. This has also been expressed in a freshly nationalist tone, which appeared particularly during the 1976 election campaign. This has been adroitly exploited by West Germany's foreign competitors, especially France, to provoke a backlash of anti-German nationalist sentiments. Is the situation turning around? Toward the middle of 1976 indices began accumulating pointing to a rapid halt to the upturn of the West German economy. Orders in the machine building industry declined 7% during the first seven months of 1976. The foundries of West Germany now count on increasing the volume of their production only 1%; they explain this stagnation by the fact that orders from the sectors of
means of transport, machine construction, and housing and road construction are in clear decline. Even production in the machine building industry stagnated until the middle of 1976 at the level of the deepest point of the crisis, an index of 97(100=19701). Automobile construction, which had led the way during the second quarter of 1975, also seems to be slackening off. Production has barely increased since the beginning of 1976. Only the chemical and metal industries have experienced important increases in their production (8% and 9.8% respectively), thanks to exports. The situation becomes clearer if we examine the following figures concerning orders received by industry (index 100=1970 at 1970 prices) :
Industry as Foreign Domestic Year a whole Orders Orders 1974 first quarter 116 149 106 1975 first quarter 100 120 94 second quarter 106 117 102 third quarter 102 123 95 fourth quarter 107 131 100 1976 first quarter 110 132 103 second quarter 109 139 99 Source: Monatsberichte of the Bundesbank, No. 4, August 1976.. The table confirms that the whole of the growth of orders for industry since the middle of 1975 (and a very modest growth it is) results from the increase in foreign orders. Orders from the domestic market are stagnating around their 1970 level. Domestic orders for capital goods have even fallen during the second quarter of 1976 to their lowest level since 1975, an index of 92! The major reason for this stagnation of orders on the domestic market, and this is the major brake on the upturn as well, is classic: insufficient purchasing power among the masses. The major function the crisis is supposed to fulfill is to increase the rate of surplus-value and to lower real wages. This is reflected in the fact that the real incomes of the masses practically ceased rising in 1975 and even diminished slightly in 1976, the year of the "upturn. " If one compares the evolution of the purchasing power of the masses after the recession of 1966-67 to that of 1976, one notes that there was an increase of 3.7% during the first year of the upturn that began in 1967, while there will be a reduction of 0.3% during the first year of the 1976 upturn. In the years 1969 and 1970 the real purchasing power of the masses in West Germany attained record growth levels, 7.8% and 9.4% respectively. But the employers have already announced that for 1977 they are preparing a collective bargaining strategy similar to that of 1976, which implies reductions in real wages. Moreover, the figures we have just cited prettify the real situation somewhat, for they do not take account of a more than proportional rate of savings in 1975 and 1976, a result of the workers' fear of losing their jobs. It must thus not be assumed that there will be any stimulus to overall demand resulting from the evolution of the buying power of the masses in 1976. In addition, the volume of complete unemployment is barely dropping. The elimination of partial unemployment has already occurred. It may even be expected that the growth of partial unemployment during winter 1976-77 will further decrease the overall purchasing power of the masses. Likewise, public budgets will hardly stimulate overall demand. The year 1976 will end with a record increase in the public debt of DM70, 000 million, a sum equal to that of 1975. The rate of increase of the public debt is thus attaining the limit of what is possible. The situation will probably improve somewhat in 1977, for the upturn of 1976 will mean an increase in fiscal income for 1977. There will also be an increase in the sales tax (VAT). This will be able to lead to an increase in public expenditures, but most probably not significantly higher in volume than the reduction in purchasing power of the masses. It is true that in 1977 private households will have at their disposal some D M25, 000-30, 000 million deriving from the law stimulating savings. Judging by past experience, a third of this sum will be spent, entailing an expansion of private consumption of 1-1.5%. But all this hardly alters the conclusion: the reduced purchasing power of the masses curbs domestic demand and threatens to strangle the upturn. At the end of the 1960s the West German economy still commanded favorable conditions of exploitation established on the basis of particular historical conditions, which permitted it to successfully wage the competitive struggle on the world market, in spite of a technology that was often inferior to that of its American competitor. With the crisis of 1974-75, however, times have definitively changed. This is clearly expressed in the fact that this time, contrary to the years following the recession of 1966-67, virtually no extension investments at the same level of technology are being made. Instead, investments are almost exclusively aimed at rationalization, that is, at a higher level of technology. This means that an equivalent or greater volume of products is produced by a reduced number of workers, which has two consequences:
1) an overall reduction in employment;
2) an accentuated contradiction between increased production and decreased purchasing power, while the mass of real wages stagnates or declines and the mass of products manufactured mounts, products which, at least during the first phase of the upturn, must be sold at equivalent or even slightly increased prices. This market situation is reflected in a rate of utilization of productive capacity that still remains very low (plus or minus 82%), which in turn intensifies the employers' tendency to orient their investments toward rationalization (with a view to reducing unit produc-
23
WEST GERMANY tion prices), without any important increase in the volume of production. This tendency is confirmed by the rapidly declining proportion between expenditure for investment in construction of buildings and expenditure for investment in machinery. The proportion between fhese two categories of investments has evolved as follows:
1967:132.9 1968: 127.4 1969: 108.1 1972: 103.5 1973: 100.9 1974: 100.4 1975 (first quarter): 95.2 (fourth quarter): 87.8 1976 (first quarter): 84.1 (Calculated according to the Monatsberichte of the Bundesbank, Beiheft 4, July 1976, p. 2.) This development is reflected in the facts on individual firms even more than it is in such general indicators. Thus, according to the September 4, 1976, Frankfurter Allgemeine Zeitung, the Volkswagen trust decreased its worldwide employment 13.2% during 1975, while increasing its turnover 11%. In West Germany itself the reduction in employment was 19.5% and the increase in turnover 1.4%. Under these conditions, the only support for the conjuncture lies in the export boom. Up to what point can this boom continue? Competition on the European market, especially in the EEC countries, is further intensifying. It is precisely this increased competitive struggle that is blocking political union within the Common Market. West German capital holds many trump cards in this competitive struggle, and it will probably be able to improve its positions slightly at the expense of its EEC partners. Nevertheless, the share of 60% of exports already attained for the EEC and the countries closely linked to the EEC is so high that resistance to an increase in this share will necessarily limit any success of an offensive of West German exports toward these countries. West German exports to the United States and Canada have ebbed strongly since the beginning of the crisis. It is possible that they will increase again, although without reaching the level previously attained (nearly 10% of all West German exports used to go to the United States). West German exports to the bureaucratized workers states considerably contributed to the general growth of West German exports up to 1974. But since then this reservoir has also run dry. The debts of the countries of the East to the capitalist countries have mounted strongly. Their industrial products are not very competitive on Western markets. Their monopoly of foreign trade functions too well to permit a new growth of West German exports. In 1975 only exports to the USSR and Bulgaria still increased significantly. As for exports to the countries of OPEC, here again there are many signs of saturation. The share of West 24
German exports going to these countries has been on the decline since the beginning of 1976 (from 7.5% in 1975 to 6.8% for the second quarter of 1976). Exports to the so-called stable underdeveloped countries (that is, the bourgeois-terrorist regimes) seem also to have levelled off, with the exception of those to Argentina, since this country has only recently taken the road that Brazil, South Africa, or Indonesia had taken long ago. The conclusion is thus clear: at first glance it is improbable that an offensive on the world market will be able to fuel a significant upturn of the West German economy. The only possibility for a broader than anticipated expansion of these exports would be a boom of the entire international capitalist economy from which West Germany could profit. The article by Ernest Mandel in this issue of INPRECOR summarizes the reasons why this is an extremely unlikely eventuality. It is true that there is one "way out" for West German capital, already revealed during the recession of 197475: accelerate construction of industrial installations abroad. Provisional figures suggest that direct West German capital exports for 1976 will amount to an unprecedented DM7, 000 million (nearly US$3, 000 million), as against D MI0, 000 million for the whole of the years 1974 and 1975. For the working class of West Germany, this is reflected in a new reduction in jobs. The case of the Volkswagen trust is significant in this regard. This trust has decided to construct a subsidiary in the United States. Some DM500 million have been allocated for this. Satellite enterprises will absorb supplementary investments of DM300 million- 500 million. Thus, VW will invest nearly a thousand million deutschemark in the United States. This factory's production will cover the whole of the North American market (in which Volkswagen's share is on the decline), which means that 10% of the production of the West German Volkswagen factories, which has hitherto been exported to the United States, will no longer be manufactured in the German Federal Republic; production and employment in West Germany will consequently decline. All indicators thus concord in confirming that the West German economy has definitively turned the corner of rapid growth and is heading into a period of much slower and more spasmodic growth. There will probably be tough wage negotiations in 1977, perhaps accompanied by significant workers struggles, which could bolster domestic demand. But this would trigger the same mechanism that led to the crisis of 1974-75: the fall of the rate of profit. It is thus probable that the upturn will terminate at the end of 1977 and this with an unresolved structural unemployment of at least half a million workers and a new accentuation of inflationary pressure. In the event of an "upturn" of international inflation, the level attained by the upturn in 1977 might be maintained for six to twelve months, but without this preventing unemployment from again reaching the level of 1 million during the winter of 1977-78. September 8, 1976
yugoslavia