There were, nevertheless, reasons for European-based capitalism to worry and to nag states to take action on its behalf. French and German based capitals faced the dilemma that although they were more productive in output per hour worked than capital based in the US11 they lost out in terms of overall productivity because of the few hours they got from each worker in a year.
European capital therefore found itself under pressure from at least three sides in global markets-from the US and Japan in high technology products and from China in lower technology products. Its response was to push for copying the US approach of imposing "flexible labour markets" so as to get longer working hours and more intensive production (in Marx's terms absolute and relative surplus value) and to try to cut back on welfare expenditure. This was the rationale behind "neoliberal" policies, with counter-reforms of welfare and the use of marketisation and privatisation measures to get workers competing with each other.
German capital followed a policy through the Bundesbank (and then the European Central Bank) in the 1990s of sacrificing economic growth to hold down wages (which rose cumulatively 10 percent less than the European average) and so increasing exports and the share of profits. The paradoxical outcome was that Germany had a big trade surplus and good profits, but a reduced share of world investment and production. This lay behind the pressure it applied successfully in the early 2000s to getting the then Social Democrat-Green government to push through counter-reforms in the Agenda 2010 Programme. Its main planks were a drastic reduction of unemployment benefits by a third, denying any benefits at all to 800,000 people, forcing the unemployed to accept jobs with below average pay, freezing pensions and charging for visits to doctors. Meanwhile, big firms threatened to move production to low wage sites in Eastern Europe if workers did not accept increased working hours. Such "internal modernisation", said Chancellor Schroeder, was "the prerequisite for Germany's assertion into global politics. "32 The overall result was that German real wages fell for the first time in half a century. The same logic lay behind the attempts of French governments to cut back on public sector pensions, to reduce the rights of young workers and to do away with the 35 hour week.
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The New Age of Global Instability