Wednesday, 23 September 2015

Questions For VW Workers

The scandal at VW, appears to have many similarities with the scandals that have hit the banking and finance industry over recent years. As with those scandals, the likelihood is that the scope will extend much deeper, as far as VW is concerned, and much wider, as far as the car industry as a whole is concerned. Despite the fact of criminal activity by bankers and financiers that almost collapsed the global financial system, not one of them has gone to gaol. It will be interesting to see whether any VW executives go to gaol. But, the revelations about VW cheating also raise questions that VW workers also need to answer.

Germany is the country where bourgeois social democracy perhaps takes its most mature form. Part of the reason for that is the fact of the almost complete construction of its polity after WWII. That construction occurred under conditions in which big industrial capital, had already gained hegemony over previous forms of capital, such as money and merchant capital, as well as this big industrial capital also taking the form of socialised capital, in the shape of joint stock companies. That hegemony, after WWII, was also manifest in the hegemony of the US, where this form of industrial capital was most developed, spreading itself out across the globe in the shape of the multinational corporation. It was also manifest in the development by these developed industrial societies of welfare states, the significant involvement of the state itself in the regulation of economic life, including the extension of the same kind of planning that these corporations engaged in to the planning of the national economy.

That was reflected in the dominance of Keynesian theories, and that in turn was even extended to the international sphere, with the creation of global para-state bodies intended for such regulation and intervention, such as the IMF, World Bank, GATT and so on.

The material foundations of this bourgeois social democracy resides in the development of this socialised capital in place of private capitalist property, in the latter half of the 19th century, as described by Marx and Engels, as a transitional form of property, standing between capitalist private property, and the co-operative commonwealth. The political and social foundations of this bourgeois social democracy as the form of state appropriate to this transitional form of property, were also established during that time, as Engels described.

“... these circumstances had turned the English working class, politically, into the tail of the ‘great Liberal Party’, the party led by the manufacturers. This advantage, once gained, had to be perpetuated. And the manufacturing capitalists, from the Chartist opposition, not to Free Trade, but to the transformation of Free Trade into the one vital national question, had learnt, and were learning more and more, that the middle class can never obtain full social and political power over the nation except by the help of the working class. Thus a gradual change came over the relations between both classes. The Factory Acts, once the bugbear of all manufacturers, were not only willingly submitted to, but their expansion into acts regulating almost all trades was tolerated. Trades Unions, hitherto considered inventions of the devil himself, were now petted and patronised as perfectly legitimate institutions, and as useful means of spreading sound economical doctrines amongst the workers. Even strikes, than which nothing had been more nefarious up to 1848, were now gradually found out to be occasionally very useful, especially when provoked by the masters themselves, at their own time. Of the legal enactments, placing the workman at a lower level or at a disadvantage with regard to the master, at least the most revolting were repealed. And, practically, that horrid People’s Charter actually became the political programme of the very manufacturers who had opposed it to the last. The Abolition of the Property Qualification and Vote by Ballot are now the law of the land. The Reform Acts of 1867 and 1884 make a near approach to universal suffrage, at least such as it now exists in Germany; the Redistribution Bill now before Parliament creates equal electoral districts-on the whole not more unequal than those of France or Germany; payment of members, and shorter, if not actually annual Parliaments, are visibly looming in the distance and yet there are people who say that Chartism is dead.”

Preface To The Second German Edition of “The Condition Of The Working Class

That became all the more the case, as the role of the old capitalists in production was taken over by a class of professional managers, increasingly drawn from the working-class, whilst the capitalists became simply money-lending coupon clippers, whose activities revolved around stock market speculation, and whose own interests not only diverged from those of productive-capital, but were also left up to a group of company directors and executives, which formed a bureaucracy with its own set of interests.

The post-war German state was created in this image. In order to emphasise the dominance of the big industrial capital, as socialised capital, the power of the shareholders was limited by the creation of Works Councils in the largest plants, and in 1976 the Co-determination Law was passed, which requires all German companies, that employ more than 2000 people, to have half of their supervisory boards elected by the workforce. But, it is this fact which means that there are questions that the VW workers themselves need to address, as to why they did not, identify these practices. After all, what we know already, poses considerable risks to the employment of tens of thousands of VW workers, but also to many more workers in associated industries.

VW has set aside around €8 billion to cover the immediate costs involved in recalling cars in the US. However, this is totally inadequate for the total costs that will be faced. Already, the US has set out that VW faces fines of around $18 billion. There are already around 50 class action suits being planned in the US by individuals. Just as, years after the event, we still have large numbers of cases of compensation for PPI mis-selling, so we face the same for car mis-selling, as lawyers launch cases on behalf of environmentalists, who have been traumatised at having bought a car, they thought was environmentally friendly, only to find that they have been polluting the atmosphere by up to forty times the amount they previously thought.

Moreover, given the extent to which the cars, on normal running, are pumping out noxious gases, compared to the rigged emissions, its hard to see how VW can quickly bring about the necessary modifications to the cars it recalls, in order to make them comply. The cars when run under the test mode, apparently suffer a considerable deterioration of their fuel consumption. Resolving these technical issues will require the investment of huge amounts of productive-capital, on top of the financial losses the firm will suffer.

In addition, only a very small proportion of new cars are actually bought nowadays. The vast majority are either leased, or else bought on various forms of car plan. Every car producer finances these schemes through various forms of securitisation of the debt. In the US, its already known that a similar development of sub-prime car loans has occurred, as happened with sub-prime mortgages. If millions of cars are returned, and the loans on these cars goes bad, then all of this securitisation, much of which goes through illiquid junk bond markets, will threaten to cause a cascade of credit failures throughout the financial system. There have already been some very sharp spikes in yields for some of these products.

But, in fact, this is only a reflection of what probably lay behind this crisis in the first place. Oligopolies do not compete on the basis of market prices, unless they have to, because such competition is massively destructive of their profit margins. Instead, they try to raise their rate of profit by reducing their production costs by continual innovation. They also attempt to capture market share by such continual innovation, either real or imagined. In other words, if they can create some entirely new type of product they can create a new market for it, and thereby capture market share. When that is not possible they try to convince consumers that their latest manifestation of an existing product is something new. Hence various versions of iPhone, regular launches of new car versions, rather than new models, and so on. All of this is backed up by large amounts of advertising and marketing, to create a brand image.

In the US, tight legal emission limits on cars, has given an advantage in this regard to all those producers, most notably the Japanese, who have developed hybrid, or wholly electric cars. It is quite clearly difficult to produce a wholly diesel or petrol engine car that can have the same emission levels as a car that runs on electric for all or part of the time. But, German manufacturers have not put the same kind of productive investment into developing such cars as have the Japanese. It would always then be difficult for VW, which wanted to seriously expand its US market share, to do so in competition with all of these electric and hybrid cars. The temptation to cheat on the emission figures was then quite high. Instead of putting productive investment into actually reducing the pollution, VW simply introduced software that enabled it to cheat.

This is, in fact, symptomatic of the problem, of capital “eating itself” discussed recently. The owners of fictitious capital, having engaged in massive speculation in shares, bonds and property, over the last thirty years, have pushed up the prices of all these asset classes, and thereby reduced the yield to be obtained from them. By attempting to compensate for that by taking out a larger proportion of produced surplus value as rents, and interest, leaving a smaller proportion to be reinvested in productive-capital, they have continually narrowed the base upon which their revenues depend. They have killed the goose that lays the golden eggs.

But, the question that VW workers have to ask, is why this has happened in Germany, where this bourgeois social democracy is most developed, and where, therefore, the avaricious nature of the money-lending capitalists (shareholders) should have been more under control. Of course, it may well be the case that it has been, and that we will find that the situation in other economies has been even worse, leaving a huge chasm of productive investment that needs to be filled, which will push interest rates up sharply once it is uncovered, and thereby crush asset prices.

Part of the reason that workers at VW did not identify this situation is fairly obvious. The workers do not have a majority position on the supervisory board, where the shareholders appoint the Chair who has a casting vote. Moreover, if the capitalist shareholders in companies do not always have the necessary oversight and control of the actions of executives, as the instances of Enron, Tyco and so on demonstrate, then it is not surprising that Worker Directors are unable to undertake such oversight. What this demonstrates is the need for Committees of Workers Inspection, to be established, who can undertake such supervision, on a day to day basis over the activities of the company.

But, that would require that workers themselves were in a strong enough position to be able to demand such an arrangement, which amounts effectively to the establishment of workers control. Yet, as Trotsky points out, workers control is impossible outside a revolutionary situation.

“If the participation of the workers in the management of production is to be lasting, stable, “normal,” it must rest upon class collaboration, and not upon class struggle. Such a class collaboration can be realized only through the upper strata of the trade unions and the capitalist associations. There have been not a few such experiments: in Germany (“economic democracy”), in Britain (“Mondism”), etc. Yet, in all these instances, it was not a case of workers’ control over capital, but of the subserviency of the labor bureaucracy to capital. Such subserviency, as experience shows, can last for a long time: depending on the patience of the proletariat.”

Workers’ Control of Production

Which is the situation that already exists in Germany.

“The closer it is to production, to the factory, to the shop, the less possible such a regime is, for here it is a matter of the immediate, vital interests of the workers, and the whole process unfolds under their very eyes. workers’ control through factory councils is conceivable only on the basis of sharp class struggle, not collaboration. But this really means dual power in the enterprises, in the trusts, in all the branches of industry, in the whole economy.

What state regime corresponds to workers’ control of production? It is obvious that the power is not yet in the hands of the proletariat, otherwise we would have not workers’ control of production but the control of production by the workers’ state as an introduction to a regime of state production on the foundations of nationalization. What we are talking about is workers’ control under the capitalist regime, under the power of the bourgeoisie. However, a bourgeoisie that feels it is firmly in the saddle will never tolerate dual power in its enterprises. workers’ control consequently, can be carried out only under the condition of an abrupt change in the relationship of forces unfavorable to the bourgeoisie and its state. Control can be imposed only by force upon the bourgeoisie, by a proletariat on the road to the moment of taking power from them, and then also ownership of the means of production. Thus the regime of workers’ control, a provisional transitional regime by its very essence, can correspond only to the period of the convulsing of the bourgeois state, the proletarian offensive, and the failing back of the bourgeoisie, that is, to the period of the proletarian revolution in the fullest sense of the word.”


It is clear then that such Workers Control is impossible, outside a revolutionary situation, unless the workers themselves own the means of production, in other words, although both joint stock companies and worker owned co-operatives constitute socialised capital, are both the transitory form of property, it is only the worker owned co-operative which enables the workers to exercise their own control over production. As Marx puts it,

“The capitalist stock companies, as much as the co-operative factories, should be considered as transitional forms from the capitalist mode of production to the associated one, with the only distinction that the antagonism is resolved negatively in the one and positively in the other.”

(Capital III, Chapter 27)

Of course, even were VW a worker owned co-operative, this would not of itself prevent the kind of situation now revealed. The very fact that such an enterprise would need to compete within the global capitalist economy, would drive it towards the same kind of activities, if that was what was required to survive. That is the consequence of alienation, as the workers, as producers of commodities, are separated from themselves as consumers of products. It is why worker owned co-operatives need to develop close links with the consumers of their products on a human level rather than simply on the level of the purely cash nexus of the market.

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