Victory To US Auto Workers

Auto workers, in the US, are the latest group of workers across the globe striking for a pay rise to restore their living standards, after decades of falling relative wages, followed by inflation created by central banks to first boost the paper wealth of the global ruling class's assets, and now to try to protect profits. 

As with many workers who have seen their relative wages (wage share) fall over decades, with some, also seeing falls in real wages (wages relative to the price of wage goods), as huge global relative surplus populations enabled capital to reduce wages, and expand profit share, US auto workers are now faced with having to submit what looks like a very large, 46%, demand for a pay rise. But, that simply shows how far labour fell relative to capital over the last 40 years, and also shows that the fundamental conditions have now changed, and workers are realising their real position.

As with hospital doctors striking, currently, in Britain, not just years, but decades of weakness of labour as against the power of capital, caused relative wages to fall significantly, as the rate of surplus value, and rate of profit grew massively during the 1980's and 90's, as the technological revolution of the late 1970's, and 1980's created huge relative surplus populations, added to by the drawing in of tens of millions of new workers, across the globe, moving from peasant production, as the process of globalisation and industrialisation expanded. It was accompanied by a huge release of capital, as the technological revolution also brought an across the board moral depreciation of fixed capital, as well as fall in the value of materials, causing a fall in the value composition of capital, and consequent fall in the organic composition. Together with a phenomenal rise in the rate of turnover of capital, resulting from the new technologies, and their effect on global communications, and financial systems, and from the effects of globalisation and removal of borders and restrictions, it led to a huge rise in the annual rate of profit, releasing vast amounts of realised profits/money-capital that flowed into capital markets, depressing interest rates, and sending asset prices soaring towards the sky.

The new technologies also changed the way that materials and energy was used, as I have described before. 

At the same time, the new technologies, and rise in productivity meant that, in developed economies, particularly, capital moved into new spheres of production, where the annual rate of profit was even higher than this rapidly rising average annual rate of profit. Those new spheres were in the service industries, as I had predicted back in 1983, when this process was already underway.  But, this process was only the latest response of capital to the previous period, running from around 1962 to 1974, when relative wages were rising causing a growing squeeze on profits that eventually led to the crisis of overproduction of capital that erupted in the 1970's. We have simply come full circle, except that, the material conditions that began to strengthen labour, already led to rising interest rates that crashed asset prices in 2008. It is only the unprecedented actions of the state and central banks, to deliberately damage real capital, and the economy, so as to hold down interest rates, and channel excess liquidity into the purchase of assets, that has suppressed it over the last 12 years that has delayed its manifestation.

So long as capitalism exists, this long wave cycle of stagnation, prosperity, boom and crisis will continue, with all of the attendant features of periods of unemployment and poverty, social division and strife, and of course, the manifestation of that in a continued competition of different capitalist nation states, joined in opposing blocs – as now seen in the growth of military conflict between NATO and Russia~China in Ukraine, Central Asia, the Middle East and the Pacific – which, with nuclear arsenals, threatens to destroy mankind much sooner and more extensively than any natural disaster or climate change. The immediate task for Marxists is to support workers across the globe as they find their feet once more, and fight back against capital, and their domestic ruling class, and its state, but, a real solution can only come from those workers, also realising the need for a political solution, the creation of revolutionary workers parties to represent their interests, and to overthrow capitalism itself.

The wave of strikes across the globe exposes clearly the need to build such workers' parties. In Britain, the so called “Labour Party” of Keir Starmer, is, and has never been any such thing. It is certainly a party, which, like the Liberal Party of the late 19th century, depends upon the support of workers, and their trades unions, much as does the Democrats in the US, the SPD in Germany, PSOE in Spain and so on. However, none of those parties have ever represented the interests of the working-class, only the interests of capital. They are, as Lenin described the Labour Party “bourgeois workers parties”. So, its no surprise that Starmer has failed to back striking workers in Britain, and has sacked ministers that turned up on picket lines, as well as organising the deselection of MP's that have done so. Nor is it any surprise that Biden intervened to block the right to strike of US dockworkers and rail workers, as they sought to defend their wages against the rising cost of living caused by the inflation produced by the policies of the Federal Reserve and Biden's government.

So far, Biden, who has claimed to be the most pro-union President – which tells you how anti-worker all the others have been – has not repeated his scabbing activities seen during the dockworkers and rail workers strikes. He has called on the auto companies to increase their offer to workers, whilst repeating the usual mealy mouthed, opportunist mantra that no one wants to see a strike. Well certainly he doesn't, as we enter the period running up to the 2024 elections. His problem is that he needs to win Michigan to have any chance of stopping Trump regaining the White House, whether he does so from behind bars or not. Michigan is where most of the auto companies are based, in Motown, and its hinterland, although, particularly foreign, companies have set up production in many other parts of America.

Biden has failed to advance the position of US workers. He has continued the global trade war policies introduced by Trump that have increased costs, and so hit workers living standards; his policy of lockdowns, as with those imposed elsewhere, seriously damaged workers interests, and the aftermath has added to it. Lockdowns were always insane and irrational, as Professor Woolhouse described at the time, and in his later book – The Year The World Went Mad. Lockdowns never were a rational means of dealing with a virus that was highly selective, and which the scientists and governments knew was highly selective, despite their statements. By introducing useless, blanket lockdowns, governments failed to concentrate attention and resources on locking down and protecting, effectively, the only part of the population actually at risk from the virus – the elderly. As a result, economies were trashed, young people lost years of education they cannot get back, and yet, the only people actually at risk, the elderly, died in huge numbers because they were not adequately protected in hospitals, care homes, or their own homes!

In the process, millions of workers were prevented from working, the global economy was dislocated, which caused far more death and destruction, particularly in poor developing economies, than did the virus itself. Those that did benefit were those companies with connections to the state or even just to politicians that picked up contracts worth billions to provide largely useless equipment, and computer systems. The Medical Industrial Complex benefits in any such panic, just as the Military Industrial Complex benefits when war hysteria is increased.

In both cases, that diverts resources from the real economy, and during lockdowns, it was accompanied by even more liquidity injections to boost asset prices, and, then, to bolster lockdowns, as workers began to rail against their enforced incarceration, and loss of income. As I set out at the time, the real purpose of lockdowns was to curtail the economic growth, which was again causing interest rates to rise, and threatening a new crash of asset prices, but, it couldn't last forever, and when they were lifted, it would simply see the lid blown off, as all of the pressure was released.

So, Biden, like Starmer, will not support workers as this process unfolds. So far, he has not come out to openly oppose the auto workers, but only for his own short-term electoral interests. His comments amount to a call for a fudge, and clearly the UAW bosses are amenable to that too. As with the strikes in Britain, the union leaders have been vacillating, under cover of using clever tactics and strategy. In Britain, workers in various industries have been called out on what amount to being merely protest strikes lasting just one or two days. They are inconvenient to consumes of those services, such as on the railways, or in hospitals, but, ultimately ineffective. What they do do, as union leaders then talk about extending those strikes out for months, is to demoralise the workers, who see no end to it. Health workers eventually voted to accept the bad deal the government had offered them.

The UAW has only called out a small part of its members, and done so in some of the least important plants across the US, outside Motown. The argument is that, it enables it to escalate the strike, and hit plants that the employers are not prepared for, whilst being able to pay high levels of strike pay. But, it also acts to divide the union members between those on strike, and those still working. At other times in labour history that is called scabbing! The history of the labour movement, and of its successes shows that it is built upon large-scale solidarity action, by as many workers simultaneously as possible, not clever tactics and strategy by union bosses.  It also shows the need for that solidarity action to be international, breaking down national borders, in contrast to the growth of nationalistic ideas in the labour movement.  A successful UAW strike will require support from auto workers at car plants in Mexico and Canada, for example.

There have been some cases where targeted action has worked, but those cases involve targeting the action at one particular employer. For example, in the 19th century, here, in the Potteries, the Potters Union would pick out an employer, and call out the workers in all of its factories. Faced with a severe loss of its profits, whilst its competitors stole a march on it, the employer would rush to settle, but having done so, it meant that all other employers had to follow suit, or face both the prospect of being targeted themselves, as well as seeing their workers move to these other employers that paid higher wages. Similar tactics have been used by IG-Metall in Germany. But, that involved taking out all the workers of the given employer, not just some workers of all employers, which misses the point of dividing the employers.

Better would be for the UAW to call an all-out strike, now, across the entire auto industry, in the US, and to call on the rest of the US labour movement to back it, as miners did in Britain, in 1972 and 1974, for example, with a devastating effect, which, in 1974, brought down the Tory government. Of course, the miners did the same in 1984, with quite different results, but the difference is that 1974 was not 1984, and likewise, today, in a period of global economic expansion, and labour shortages it is not 1984 either.

The same is true in Britain and elsewhere. Union members, as they did in the 1950's and 60's, need to begin to by-pass, and replace their complacent union bosses, to begin to build rank and file organisations of shop stewards, within and across different unions, and workplaces. Marxists who have gone through, or been instructed in how this was done in the past, need to be colonised into these industrial workplaces, and need to also turn their Labour Party/Democrat etc. local branches towards these strikes and struggles, to act as the memory of the class, speeding up the adoption of all of those lessons of the past.

In each workplace, its necessary to build cells of the more advanced workers, meeting at least weekly, to further their own education and solidarity, to produce workplace bulletins to educate and organise the workers in the plant on a wider scale, as part of developing factory committees of workers that break down sectional barriers between them, and these factory committees need to build links with other such committees, a function that existing political activists are well placed to do. Then, in the event of a strike, as with the dockworkers, rail workers, and now auto workers, these committees are ready to spring into action, to provide solidarity action and support, in each area.

But, the danger is always, especially in a period like now, where employers may be more likely to cough up in the face of effective industrial action, that workers may take such success as meaning it can simply be continued, as happened in the 1960's, when syndicalist ideas took hold in groups like the International Socialists, who thought that all that was needed was “more militancy”, or a “bigger demo”. That was a dead end when, in the 1980's material conditions changed, and employers responded to the more militancy, by closing down, or sitting out the strikes, introducing labour saving technology, which led to rising unemployment and increased weakness and division amongst workers.

The other danger, in such a period, is that of reformism, and the view that some party sympathetic to workers can simply act on their behalf in government, by passing reforms, or by nationalising this or that company or industry. The problem with that is that the existing “workers' parties”, are not going to do that, because they are bourgeois parties devoted to the interests of capital, not workers. But, even if we did get a revolutionary workers' party, it could not simply legislate socialism, or even seriously pro-worker policies into being, without a massive mobilisation of the working-class standing behind it, and that working-class would have to be organised in its own forms of democracy and state, i.e. workers councils. That would be where the real power resided, in the hands of an armed and mobilised working-class.

For years, reformist, statist socialists made these demands for some kind of Labour government to nationalise the banks, or the top 200 monopolies, and were pissing in the wind, as those governments had no intention of doing any such thing, and certainly not on workers' behalf. But, look what happened after 2008. Governments, and not just “Labour” governments, did quickly nationalise the banks, and then other large companies at risk of going bust. That was to the disdain of the Tea Party Republicans and Anarcho-Capitalists, but illustrating that just because they were opposed to it, does not mean that we have to support it, were any of those nationalisations actually of benefit to workers? No, of course not.

The Tea Party, and their heirs, the Trumpists, as with their international equivalents, opposed those measures, because they are representatives of the petty-bourgeoisie, whose enemy is as much large-scale socialised capital, as it is the working-class. But, when the state nationalised the banks and other finance houses, it was to benefit the global ruling class that owns its wealth in the form of fictitious-capital (shares and bonds), whose value was being completely trashed. To support those financial institutions – as Sraid Marx related in relation to Anglo-Irish Bank – states drained billions from the real economy, and, in the aftermath, to inflate the prices of bonds and shares, they imposed fiscal austerity on that real economy. Similarly, with the US effective nationalisation of car firms, to save them from bankruptcy, did it benefit US car workers? No, of course not. They got no more control over those firms than did British Miners get control over the coal mines after they were nationalised. All they got was real wage cuts and job losses, imposed by the capitalist state as a much more powerful employer than any non-state employer.

We can't allow that to happen again. We need to build a permanent political solution. That requires building a revolutionary workers party, as a global workers party to confront the global ruling class.

Scrapping Petrol and Deisel

The government has announced that it intends to bring forward its plan to outlaw the sale of new petrol and diesel engine cars from 2040 to 2035.  In part, the announcement seems timed to draw away from the row over Clare O'Neill's sacking from her environment job, and from the other row caused by the government's attempts to censor the media at the lobby.  In fact, there is nothing spectacular about the proposal.

When the initial proposal to ban petrol and diesel from 2040 was made, I pointed out that car makers would long since have, themselves, phased it out before then.  Its simple economics.  Already, calculated over a four year period, electric cars are cheaper than petrol and diesel cars, despite the higher buying cost of electric.  The price of batteries has fallen by 85% in five years, and battery technology is improving by around 30% a year, with a corresponding effect on prices, and range.  The higher initial cost of buying an electric vehicle is down purely to scale.  Electric vehicles currently account for only about 4% of vehicles on the road.  Unless car makers can sell many more, they can produce at the required scale to reduce [production costs, but with all new commodities that is always the case, and a virtuous circle is established.  As demand, and so output rises, so production costs fall; as production costs fall, selling prices fall, and demand rises, causing output to rise, and so on.

The running cost of an electric vehicle is a small fraction of that of running a petrol or diesel vehicle.  The main current problem, is lack of charging points.  But, that can and will be quickly addressed.  Already a 75% discount is given to have a charging point put in to your home.  A further problem is people who live in terraced houses, because you couldn't traipse a cable across the pavement.  That will require charging points to be built into the street furniture itself, outside every house, which could easily have been done alongside providing everyone with hyper fast broadband had Labour's proposals gone forward.

But, with the running costs of electric vehicles falling rapidly every year, with the technology improving every year, and with the initial price of buying electric vehicles dropping each year, the logic for buying an electric becomes inescapable.  I bought a four year old diesel two and a half years ago with the specific intention of running it for just a few years until I swap it for electric, and the time for that is fast approaching.  I looked at hybrids and decided they were the worst of both worlds.  Why carry around a petrol diesel engine if you only do short distances using the electric motor, and why see your petrol/diesel fuel consumption figure deteriorate, because you are carrying around an electric motor, if you are going to be driving longer distances?

If a there is a rapid take up of electric vehicles in the next five years, which is likely to happen, then the price of electric versus petrol and diesel will swing even more in favour of the former.  There are 35 electric models available currently, but 300 more are due to come on the market in the near future, including a Rolls Royce.  In five years time, anyone holding on to a petrol/diesel car is likely to see its second-hand value start to drop through the floor.  For one thing, fleets will swing decisively in favour of electric dumping a load of their existing fleets and lease cars on to the second hand market.  If second hand prices drop that puts pressure on new car prices, which would make many of them unprofitable for manufacturers in a declining market.  It will just be good business for them to be planning to switch to electric sooner rather than later.

But, also, in five years time, we are likely to see an increasing number of self-driving vehicles on the road, and a significant change from car ownership to the provision of cars as a service that you use as and when required.  So, the demand for vehicles in total would hen drop, and the demand for old petrol/diesel vehicles more than most.  The obvious way ahead for car makers is a fast switch to electric, followed soon after by the development of self-driving vehicles, and the creation of service companies like Netflix, for the provision of cars as and when required.

Review of Predictions For 2019 - Prediction 4 - Electric Cars Become Cheaper Than Petrol/Diesel Cars

Over a four year period, electric cars are now cheaper than petrol/diesel or hybrid cars. That is because, although electric cars are slightly more expensive to buy, the running costs are so much lower. The cost per mile is a fraction of that of petrol/diesel, and maintenance costs are also lower. In my prediction, I was, however, also expecting that the actual cost of buying electric would now be cheaper. That hasn't happened, but the price of electric continues to fall rapidly relative to petrol/diesel. Every major manufacturer is now expanding their range of electric vehicles. 

In addition, first time buyers of electric vehicles get a discount of £3,500 off the cost. Other incentives include 75% of the cost of installing a charging point at home, and the ability to obtain low tariff rates for overnight electricity, which is the main time cars would be charged at home. In the meantime, free charging points are being erected in many locations. Employers are being encouraged to provide them for their workers, supermarkets have a clear incentive to provide them to entice customers into their stores. 

The rate of development of technology, and the rapid pace of adoption of electric vehicles means that as production levels are ramped up, the price of electric vehicles will soon itself be lower than that for petrol/diesel. The fact that electric vehicles are cheaper over a four year period itself creates a powerful incentive for people to switch, which, as demand rises, will again stimulate additional production. 

Governments proposed ending production of petrol/diesel-engine cars by 2040, but, in fact, manufacturers will have stopped production long before then. Already some have said they will not produce any new petrol/diesel models from around 2025, leaving them producing only existing ranges as petrol/diesel. But, few people will want to buy a new car that is based on a model that is several years old. So, its likely that, soon after 2025, main car makers will phase out petrol/diesel production altogether. That will be a great contributor to the reduction in greenhouse gas emissions, particularly in China, where many of these new electric cars will will be sold. 

This rise of the electric car will soon after be followed by the large-scale roll-out of self-driving cars, as technology, and, in particular, AI, develops rapidly alongside 5G, and then 6G mobile internet networks. That opens the potential for car ownership to become a thing of the past, as it becomes yet another area in which service industry dominates. Car travel will become a service in the same way that today Netflix and Amazon subscriptions have become the way that people view TV and films, rather than having to buy a DVD player, and rent or buy DVD's. It will simply be a matter of calling up a self-driving car on a smart phone, in the same way as today you might call up an Uber. You tell it where to go, and leave it, when you have done with it. Incidentally, the cheapness and convenience of this form of transport will also spell the death-knell for local bus services, and light rapid transit and tram services.

Back To Review of Prediction 3

Forward To Review of Prediction 5

Running To Standstill

Well, I've more or less finished all the concreting, slabbing, landscaping and dry-stone walling. There's still a few more jobs to do, but I've been able to spend some time working on the details of why the recession is over. The trouble is that in the recent week or so there has been so much data coming out that backs up that thesis that no sooner have you looked at one than another comes out to replace it.

In the last few days the most important have been the fact that Japanese manufacturing industry saw a large increase in output. The Japanese Finance Ministry now says the Japanese economy has bottomed and is turning up. In Europe the Eurozone Purchasing Managers Index saw the largest rise on record. In the US Pending Home Sales have turned up sharply.

Rio Tinto signed a new contract for the sale of Iron Ore that was 30% below the previous price, but it has to be remembered that Futures prices for basic materials had fallen off a cliff over the last 8 months. In fact, basic materials prices are rising again, and the CRB Index, which measures all such commodities has turned up quite sharply. When the price of oil fell sharply at the end of last year with the sharp contraction of economic activity, I said that the fall would only be termporary, and that within months the price would rise back towards $90-$100. The reason for that is Peak Oil. The world has reached its maximum capacity for oil output, and the marginal cost of a barrel of oil is around $75. In other words, if oil companies are to be encouraged to spend money developing new oil wells they need a price higher than that before it becomes profitable. Some small companies might be able to develop wells at cheaper prices, but not on a sufficient scale to meet global demand. Existing producers will be able to continue producing profitably at a lower price, because their existing wells have lower costs - they can base their calculations not on the Mrginal Cost, but their average cost of production. But, once the surplus is taken out of the market, a surplus which had largely built up as a result of the specualtion that drove prices to $150, then producers will have their eyes on that marginal cost. OPEC has now said that it is looking for a price of around $90, and prices have already risen by more than 50%, to nearly $70 a barrel.

For reasons I'll set out in my more detailed analysis, that may not be true for other basic materials, which may have seen a peak in their prices, or else be close to it.

The other big developments look to involve the dollar. Last year, I argued that the Chinese and others would not push for the role of the dollar as reserve currency to end until such time as the world financial crisis, and recession was over. That is now more or less the case, and the Chinese and Russians are beginning to increase the demands for more currencies to play the role of reserve. China has already done deals with Brazil and other coutnries to deal in their own currencies rather than the dollar. The idea of using the IMF's Special Drawing Rights (SDR's) as a reserve currency is probably a non-starter for similar reasons that problems arose with the Euro during the current crisis. A currency needs a state standing behind it. The Euro at least has the EU, but the IMF could not fulfil the function of a state. Its lijkely that the task of acting as world currency will fall to the Euro, and that prospect is already causing concern in the Eurozone, because it will mean a consierable strengthening of the Euro against other currencies, and a fall in competitiveness.

Ultimately, that role will have to fall to China, but as yet China does not have the financial infrastructure, nor the confidence of financial markets to undertake such a role. But, China is flexing its economic muscles. It is using the falling dollar to buy up more basic materials on the cheap using its stache of dollars, it is again using those devalued dollars to buy up US based companies priced in those devalued dollars - a Chinese Company has just picked up Hummer from GM for next to nothing. Meanwhile, the US now afraid of what would happen to its economy if the Chinese stopped buying its Treasuries is in no position to refuse to allow Chinese companies to buy up US strategic assets. That is especially true now that China has said that its worried about the extent that the US debt is ballooning, and the Fed is monetising the debt. IN an interview today with CNBC's Steve Liesman, TReasury Secretary Geithner, said that there should be no fear that the US is going to monetise its debt, but as Rick Santelli pointed out, it was already doing precisely that, that is what Quantitative Easing is!!!

In fact, financial markets have already made that call. A number of rating agencies last week considered downgrading the US's creditworthiness, and in even before that cocnern at the US's ability to pay back its debt in the longer term had pushed long term interest rates up, even though the Fed has been pushing them in the other direction by buying them up with newly printed money!

In fact, its inevitable. The current restructuring of Capital taking place on a global scale of which the bankruptcy of GM and Chrysler is a part, will necessarily see the relative position of the US decline. Currencies are an indication of relative standards opf living. In the US both are going to decline relatively. The falling dollar will mean that the US pays more for what it imports both to consume and to re-manufacture. That means that US workers will have to work longer, and harder to buy those things. Within the confines of Capitalism, only the restructuring of Capital taking place - the movement of Capital and Labour away from those old inefficient areas like auto production, towards areas where US Capital and labour can compete on a global scale - will act to mitigate that process. As Marxists we have to make that truth clear to workers at the same time as we support their inevitable struggles to save existing jobs, and to ensure the rights and interests of workers as new types of industry arise. The real answer cannot be simply Trade Union action to defend those existing jobs in the longer term, because as was seen in Britain that process will simply mean a slow agonising death marked by some victories for the workers, but with many more compromises agreed by the Trade Unions such as those agreed at GM.

Only the establishment of industries in workers ownership, and under workers control can provide a solution, and even then only if those industries are in areas that can compete effectively on a global scale. The current deal whereby the United Auto Workers get a sizeable stake in GM are a sham. That stake will be used by the union bosses not the GM workers to exercise any kind of control. As a Minority stake the workers even were they to have any say would be outvoted. It will be used in a similar way to the Works Councils in Germany that effectively tie the workers into taking responsibility for the fate of the company without any real control over it. Only Worekr Owned Co-operatives under the direct control of their workers can provide workers with the kind of control to choose the best solutions under given conditions for them, including what to produce and how to produce it.

Building on Confidence

For the last fortnight or so, I’ve been busy laying slabs, landscaping and building dry stone walls, so I’ve been too busy to proceed much further on putting together my analysis of why this will be the last quarter of negative economic growth. However, the economic data continues to come in showing that the basis thesis is being confirmed. The latest was the US Consumer Confidence Data which came out on Tuesday. It showed the largest increase in 6 years, and went up to the level of September last year prior to the onset of the recession.

The Index rose by nearly 30% from last month rising from 40.8 to 54.9. See: US Consumer Confidence . Other US data showed that although house prices were still falling on an annualised basis, the fall is being reduced. In fact, detailed figures showed on a monthly basis house prices were rising in some parts of the country. In addition, US Existing Home Sales also increased by around 4% compared with the previous month, though housing inventories remain at very high levels. In Britain, Net Mortgage Lending fell. This appears to be due, however, to a reduction in remortgaging as people benefit from the existing low rates. At the same time, the number of new mortgage approvals rose by about 4% compared to the previous month continuing the rising trend from the beginning of the year.

In fact, most economists now agree that the worst of the recession is over, and that the second half of the year, or the beginning of 2010 will see a resumption of growth. The discussion has shifted to the strength of that recovery with all sorts of descriptions using various letters of the alphabet from L to W, and various other symbols such as the Nike Swoosh, and the Square Root to describe the shape of the graph of decline and recovery. Those who refuse to see the end of the recession tend to be those on the Right, the Libertarians, Austrians and their attendants who ideologically are committed to the view that only disaster can result from the kind of “socialistic” state intervention in the economy that the last few months have seen, and those on the Left, who are equally ideologically committed to the view that Capitalism is always on the verge of imminent collapse, which they hold to out of desperation in the hope that it might provoke some kind of working class revolt, thereby removing from them the arduous task of having to actually relate to and work with the existing working class.

In fact, as I will show when I can present my overall analysis, the recovery is likely to be stronger than most people envisage. Part of the reason for that is the fact of the Long Wave boom in which we continue to exist. The other part, and related to that is the nature of the recession and recovery. In short, it is to do with the innovation cycle. I’ve been fascinated to watch a number of programmes about the extent to which the US is beginning to invest in alternative energy – now surpassing Germany to become the lead producer of Wind Energy, for instance. There is an interesting article by Bjorn Lomborg in the NYT, about why such investment offers opportunities for Capital. Lomborg . This emphasis on Research and Development to create new low-carbon technologies not only offers the most efficient means of reducing carbon emissions and climate change, but offers technologically driven economies such as the US a means of dealing with the economic situation they face of being unable to compete with low wage economies. Not surprisingly, we see the US government beginning to provide incentives for such industries, and beginning to talk about the introduction of carbon taxes on the old polluting industries, as well as similar moves in relation to vehicle emissions, and incentives for fuel efficient cars. Even oil men like T. Boone Pickens are investing large sums in this new technology. As Lomborg pointed out in another article, this kind of development is much more efficient to some of the other options like planting forests. See: We Don’t Need Five Planets .

In fact, the nature of this economic crisis, sparked by the Financial Crisis, is basically structural. Exacerbated by the nature of Monopoly Capitalism, which allowed Capital to be locked up for long periods of time in huge monopolistic firms such as General Motors, Capital failed to be efficiently allocated. The nature of crises according to Marx is to bring about in violent form the necessary readjustment and reallocation of Capital. Now huge amounts of Capital that was misallocated in firms like GM – along with the Labour that it kept employed – is being reallocated, and the kind of adjustment that Marx described is taking place – along with the corresponding readjustments on a global scale – See my blog: A Crisis Out of All Disproportion amongst others.

In short, in a global market, and global labour market, countries like the US can no longer compete in the production of many manufactured commodities, which require large amounts of unskilled labour, because US Labour Costs are simply too high compared to those in countries in Asia, Eastern Europe, Latin America, and increasingly even Africa, where these commodities can just as easily be produced. Marxists have to tell the truth to workers in developed economies that in the longer-term, these kinds of industries and jobs will either have to go, or else workers in developed countries will have to accept a huge fall in their living standards, unless Capitalism is overthrown – and even then they might still struggle to compete in these types of production. It is no wonder that we see a rise in Nationalistic sentiment, and of Protectionism such as that of No2EU.

The solution for Capital in the developed economies is to move to those areas where it has an advantage – areas which require large amounts of skilled labour, which require huge expenditure on Research and Development, which require large amounts of innovation. Again this ties into the nature of the present conjuncture. I was looking recently at figures for my own area in North Staffordshire. Although the figures for job losses were higher than the average, the figures for new business start-ups were also higher than the average. In periods of Long Wave downturn there can be lage numbers of start-ups as people made redundant and with little hope of new employment in the immediate future look to become self-employed – especially where they have some kind of skill – and scrape around for work. However, in periods of Long Wave boom such as now the start-ups are different. They tend to be entrepreneurs who see an opening for some new commodity or market.
Look at the number of bio-tech companies that have started up in the last ten years. Look at the number of Science Parks that now adorn every University Campus in the country. Why? Because these kinds of businesses CAN compete on a global scale. The low organic composition of Capital, by which they are characterised means a high rate of profit, and the Universities are happy to welcome and encourage them, because like the old time Landlords, it means that they can charge high rents out of these high profits!!!

It is this nature of the conjuncture, the possibility of large amounts of Capital flowing out of long moribund firms such as GM into vibrant new industries based on base technologies created during the last innovation cycle, industries with high rates of profit that will give, the recovery from the present recession its powerful impetus. In addition, the rapidly developing economies in Asia – now also benefiting from the fact that the investments in new mines etc. of the last decade has begun to bring on stream new raw materials supply, with a consequent fall in primary product prices – continue to grow rapidly. Their domestic markets will soak up not just the increasing production of manufactured goods from the new workshops of the world, as Capitalism does what it has always done and creates its own market within these economies, but will also be markets for these new products from the already developed economies. The downside is that these new industries in the developed economies will not employ vast numbers of people. They will, however, go some way to providing the resources to continue to employ large numbers of lower paid workers in various forms of service industries.

At the same time that on a global scale living standards will tend to come together – because given the above the living standards of many workers in the developed economies will fall relative to those in developing economies – we are likely to see a widening of living standards WITHIN economies, between those very highly skilled, highly educated workers in these new industries, and those employed in unskilled service sectors.

European Car Industry

Following the deal to pick up Chrysler with the aid of cash from the US Government, Fiat, is now looking to pick up GM Europe (Opel and Vauxhall) for free, and with cash support from the German Government. For Marxists, the question of ownership is irrelevant. Its not our job to choose our executioner. Its our job to prevent the execution! In other words, we do not have a preference between one Capitalist solution and another, we look to defend the interests of workers, whichever set of Capitalist robber barons are in charge.

Of course, the Trade Union bureaucracy do not see things in those terms. Their whole reason for existence is to do precisely that; to fob the workers off with crumbs off the Capitalist table, to persuade workers that their interests are best served by looking to alliances with one group of “better” Capitalists against some other group of “worse” Capitalists; to negotiate for crumbs off the Capitalists table as the pay-off for such alliances. The same servile mentality runs through the ideology of reformism, and its reactionary twin Stalinism, as the reactionary, Nationalist “No2EU” campaign demonstrates. So, it was no surprise this morning that the response of Tony Woodley to the announcement was to suggest that such an eventuality would be a disaster.

Woodley’s arguments made no sense. He began by talking about the fact that Fiat itself was recently close to bankruptcy. Perhaps a reasonable argument other than the fact that Chrysler IS in bankruptcy, and GM IS only avoiding it on the basis of huge financial support by the US Government. But, besides its not our job to be concerned with advising the bosses of Fiat or any other company about how to run their business. If they want such advice they will have to hand the company over to us the workers, or at least place it under Workers Control; an eventuality that, as I’ve written elsewhere, isn’t going to happen.

Then he said that the deal would mean that the current overproduction of vehicles would continue. Actually, you would think that the deal would be most likely to have the opposite effect! One reason that Fiat and other companies HAVE been in trouble, is precisely due to that overproduction that has existed for around a decade. The logic of the deal for Fiat is surely that it will enable it to rationalise production, and thereby take out some of that excess capacity, putting a floor under prices! But, Woodley’s alternatives WOULD have ensured that the overcapacity continued. His first option was for Opel and Vauxhall to remain under the aegis of GM. Even he recognised that wasn’t going to happen. His second, option was for a car version of EADS to be established with the assistance of EU Governments. This option at least has the advantage of seeing things in EU and internationalist terms, unlike the reactionary Nationalism of “No2EU”. But, were it likely to happen, which, of course its not, then it would only make sense if the Company could produce cars on a large enough scale to make it profitable. That is it would continue the current overproduction. Logically, it would mean that other companies such as VW were then placed in difficulty, saving one group of workers at the expense of another! But, in fact, all experience of such nationalisations by the Capitalist state show that this would not be the case. Every one has been used to use the greater power of the State to rationalise production by shedding labour, and putting in necessary investment, prior to the business being once more returned into the clutches of private Capital.

In fact, what Woodley is doing is avoiding dealing with the very obvious problem that has to be confronted; the same problem that exists in North America, as my previous post in reply to the comrades of he Socialist Project set out. That problem is that we now have a globalised Labour Market, and in respect, of industries such as motor vehicles, the labour costs for production in existing developed economies are just too high to compete with the low-wage production in Asia and elsewhere. European companies have overcome that problem to an extent by sourcing production in low wage Eastern European economies, Asia and Latin America. Its likely that Fiat would look to increasingly shift production towards Albania and the Balkans for that reason. As Marxists we should welcome that, because it means that workers in these countries can better organise and develop, but, also, as Marxists, we have to explain those basic economic facts to workers in the developed economies – not just in car production, but other similar areas, and begin to provide them with practical solutions and alternatives to their problems. Simply calling for “more militancy”, “Socialism Now”, or worse “Nationalisation by the bourgeois state”, are not such practical solutions.

In fact, a European auto industry would be a good idea, but it needs to be an EU Motor Industry owned and controlled by workers. But, for the reasons I set out in my blog on “The Economics of Co-operation”, such an industry has to be different from the existing set up. It needs to be focussed on providing the vehicles of the future. It needs to focus on producing electric cars, hybrids, fuel cell powered cars etc. Such an industry would be much smaller than the existing industry for that reason. It would be a high-tech industry employing very skilled workers. For that reason, it would be necessary to diversify production into many other areas in order to find employment for all those other workers freed from car production. It would be necessary to look at using some of that technology used in producing efficient cars, to be used in other areas, the production of fuel-cell technology for other applications, the production of solar panels and photo-voltaic cells for energy production and so on.

As Engels pointed out where such worker co-operatives are set up, THEN socialists can demand that the bourgeois state treat them on an equal basis to private capitalists. If the bourgeois state can give billions without strings to the banks, and other Capitalists, we can demand it give the same amount without strings to the workers Co-operatives. When it does not, its true class nature is revealed.

As every day passes, the call I made last week that this is the last quarter of the recession is confirmed. Although, the German Retail Sales data out today showed a decline, its likely that part of the reason for that could be the diversion of spending to car purchase in light of the scrappage scheme introduced by the government. IN the meantime the German Purchasing manager’s Index rose by around 10%, and was above expectations, though its still below the 50 level that indicates growth. EU PMI data also showed a similar increase. In the US Pending Home Sales also came out much stronger than expected, and data on manufacturing has seen similar strong results.

I don’t have time at the moment to properly collate and present all this data, but its now becoming clear that this will have been a deep but relatively short recession.

North American Auto Industry and the Socialist Project

Over the last week or so I have been having a discussion with comrades at the Socialist Project in Canada, who very kindly have been sending me a copy of their e-bulletin. You can get it free by subscribing via the above link.

I wrote to them concerning an article they had about the auto industry in Canada. The correspondence is below. I agreed with them to reproduce it here as part of my further comments, in order to open up wider discussion.

The main points I would want to raise initially relate to the questions of the international division of labour – for which see some of my recent blogs – and the question of Workers Plans for Production, which ties into what I have been writing about Co-ops.

Firstly, Herman in his response states,

“Auto companies do not exactly compete on "world markets" in the sense that they are not competing in a North American market with Chinese-made and priced vehicles that are imported en mass into this continent. Actually, competition tends to operate on the basis of regional markets, such as Europe, Asia and North America. In this way it is wrong to argue that GM must lower its costs to match those of Chinese or Indian workers - who produce mainly for Chinese and Indian markets. When it comes to mass producing passenger and commercial finished vehicles there is no global labour market, although those who firmly support full capital mobility and trade liberalization see this as an ideal to work towards.”

I don’t think this view is correct. The following gives some general background BERA On The Auto Industry .

As an indication This Link points out that South Korea alone exported 700,000 cars to the US last year compared to just 5,000 US imports to Korea!!!

Moreover, for some time the scale of Auto production has been such that in order to obtain the necessary economies of scale it is necessary to produce to meet the needs of a global market. Whilst, the US and North American market remains the biggest single market, North American producers are dependent upon sales into the world market in order to produce on that kind of efficient scale. Yet, North American producers seem unable to compete against European producers such as VW, who have been able to locate substantial amounts of production in Eastern Europe, let alone with the increasing production of autos and auto parts by a number of Asian economies, including now a growing industry in India.

Indeed, that failure of the North American producers to respond to changing market requirements by producing smaller, more fuel-efficient cars, whilst Asian and European producers have been increasingly supplying that demand in the North American Market, appears to be one of the reasons why North American producers such as GM have done particularly badly in the last couple of years, as fuel prices rose sharply.

No doubt, North American producers COULD respond to those changes in consumer needs, but they would still be at a competitive disadvantage compared to Asian producers of similar range cars. In part, that disadvantage resides in the wage differential, in part it resides, in comparison with European producers in the legacy costs of large pension and health costs for retired employees – at least in the US – due to the absence of a socialised healthcare system.

In the short-term workers in North America can respond to the crisis in the auto industry, by refusing to accept responsibility for it, but as Marx spelled out, short of socialism, Capital will always win out in such bouts of strength in the end. If the Capitalists simply shut up shop, workers can – and should – occupy the plants, but they still need wages, and ultimately that means they have to produce something. A Workers Co-operative can produce goods in a more competitive way than a private Capitalist enterprise, but as I’ve set out in recent blogs on the Economics of Co-operation, there are limits! Its no good investing workers time, effort and Capital producing goods that those workers have previously produced, if the conditions of the Capitalist market mean that they cannot do so profitably. It is necessary in developed economies for workers to establish Co-operatives in those areas of production where they do not face international Capitalist competition from low-wage economies.

That is why I raised the question of the Lucas Plan, because it did demonstrate how workers can come up with those kinds of ideas of alternative production. The problem with the Lucas Plan was that it could not have been implemented within the context of “Workers Control” within a private Capitalist enterprise, for the reasons I have set out elsewhere i.e. outside a situation of dual power, Capitalists are not going to allow workers to “Control” production, and their Capital! Such plans only make sense in the context of Workers Ownership and, thereby, control of the means of production.

But, in the US and North America in particular at the moment, I see vast potential for such new industries to develop, because Capital needs desperately to come up with solutions to some of the problems it faces, such as new forms of energy, and means by which of dealing with environmental problems such as Global Warming. It will probably, also have to deal with questions of resource shortages as production around the globe is ramped up, and both natural raw materials get used up, and traditional synthetics, which have relied heavily on oil by-products, become too expensive. Base technologies for many of these solutions already exist in the form of bio-technology, and nano-technology, and once Capital feels the risk-reward is right to develop them, these new industries will probably form a dynamic cutting edge over the next 50 years. If workers could get involved in developing them through their own Co-ops, they could make a significant advance.

I have to say that I am not at all convinced that attempts to restrict the free movement of Capital and goods is not Protectionism. It seems to me that that is precisely what it is. Workers should by all means refuse to pay for the crisis that arises from the consequences of such “Free Trade” – consequences which as Marx pointed out are destructive and thereby lay bare the real class struggle. Workers should combine internationally to support workers in Asia and elsewhere to unionise, and to raise wage rates etc. But, the argument “We shouldn’t allow imports from Country A, because wages are low,” is not an argument a Marxist should advance, because without the increase in production, and consequent demand for labour in Country A, that arises from its being able to trade and sell its goods on the world market, workers in Country A, NEVER WILL be in a position to unionise, to organise adequately, and push up their wages. That has been the lesson of developing economies over the last 100 years or so.

And, in the meantime, who would police such arrangements? As Herman says, thre are no “democratic” institutions, certainly no workers institutions that could police such arrangements, so the only people who COULD police them is the individual Capitalist States!!! Similarly, Herman although, recognising the role of that State as an enemy of the working class, still ends up looking to it as the saviour of the working class!

“That's why I would argue for a nationalized sector to replace the auto companies, that would include the energy sector, and work along side a publicly owned financial sector, to produce the kinds of goods that you argue for: mass transit, ecologically responsible manufacturing goods and services, etc. This can't be done privately, and could only be made to work publicly, if it were part of a larger political movement to run enterprises differently and create a different kind of economy.”

There is no reason why this State capitalist enterprise would be any more efficient, let alone any more “socialist”, just because it incorporated a larger area of economic activity. The means of production would still be in the hands of the Capitalist class, and of that class’s state! As Herman says, if a political movement existed that could bring these means of production under Workers Control, then maybe something progressive could arise out of that. But, what this really amounts to is the idea that this could happen during a period of dual power, because outside such a situation there is no way that Capitalists let alone their state are going to give workers such control. The experiments with “Municipal Socialism” were necessarily a failure, precisely because there is no more chance of socialists having real “power” or “control”, simply by forming a Majority in the Council Chamber, than there is of them forming a majority in Parliament, so long as the machinery of the permanent state remains in the hands of the Capitalist class!

That is the question, which has to be addressed. How do Marxists enable workers to deal with the intervening period, during which time State power resides with the bourgeoisie. Simply wishing that away and raising false hopes in “The State” whether national or local will not do, for the reasons Marx set out in the Critique of the Gotha Programme. And a failure to explain to workers that although they can make temporary victories through their own militant action will not do either, for the reasons Marx set out in his letter to Rouge. We have to point out to workers that by its nature Capitalism will constantly suffer crises, which the Capitalists will attempt to resolve at the workers expense – through job cuts, wage cuts or both. Workers can resist, and may for a time succeed in their resistance, but without taking over the means of production the workers will ultimately be thrown back. They need to own the means of production. The bosses will resist that too, which is why ultimately they will need to take state power. But, workers will not come to that realisation, or accept that conclusion automatically or simply because Marxists say that. They need proof, they need to know, understand and believe in an alternative, a replacement. That is why the only solution during that intervening period is the development of Co-operatives as part of an overall strategy of class struggle.
--------------------------------------------------------------------------------------------
Comrades,

Thank you for sending me your e-bulletin. Its always good to get information from around the globe. There were two things I wasn't sure about in your piece here though. First, I agree with you that its crap to blame UAW members for GM's problems. However, I do think we have to face a bit of reality. Productivity has clearly risen as the figures you give show, but my understanding is that GM's productivity was previously low compared to other auto firms in the US such as Honda. If we compare US auto-workers wages with those of auto-workers in China - who work with the latest kit, and also have high productivity - then we can see the problems GM must have competing in the world market, and consequently that GM's workers have competing in what is now a global labour market. Finally, on this point. My understanding is that the biggest labour costs that GM face is not those of current workers, but the huge costs it faces for that much bigger number of former worekrs in the form of their healthcare and pension benefits.

Now, none of that should be taken as in any way excusing GM, apologising for them or any other such crap. But, if we are going to deal with the situation - and I'm sure you'll tell me if any of the above is wrong - we have to deal with the facts to know what is possible. I'm sure you would not for example, support Nationalist policies such as Protectionism as a solution. WE should of course, give whatever support we can to Chinese workers to get higher wages and better conditions, but that is not going to be a short run soluiton. Besides the fact that I don't support statist solutoins or calls to the bouregois state to act in workes interests, nationalisation is no solution, because all experiecne is that if the State took over GM, the first thing it would do would be to initiate huge job losses, and would probably run it even more bureaucratically than the present lot.

I don't know if you are familiar with the Lucas Plan. It was developed by workers in Britain during the 1970's at the Lucas Plant which amde car electrical component and aerospace equipment. The workers looked at ways of producing socially useful commodities at a profit, and with workers control. I think that GM workers rather than trying to compete against low wage auto production from the rest of the world should look at the possibility of producing high value added products - that could sustain high wages and high skills - via a Workers Co-operative using much of the existing GM equipment, and workres skills. Obama says he favours all htis high tec alternative energy stuff, so what about a plan to do just that electric vehicles, solar panels, and so on and demand funding from Obama for a Workers Co-op with a Workers Plan for production of such stuff.
-----------------------------------------------------------------------------------
Arthur,

Thanks for your thoughtful comments.

Here in Canada autoworkers belong to the Canadian Auto Workers (CAW), which split from the UAW in 1984, over the issue of concessions. The Canadian region of the UAW rejected the idea of concessions and so was forced to start a new union.

Auto companies do not exactly compete on "world markets" in the sense that they are not competing in a North American market with Chinese-made and priced vehicles that are imported en mass into this continent. Actually, competition tends to operate on the basis of regional markets, such as Europe, Asia and North America. In this way it is wrong to argue that GM must lower its costs to match those of Chinese or Indian workers - who produce mainly for Chinese and Indian markets. When it comes to mass producing passenger and commercial finished vehicles there is no global labour market, although those who firmly support full capital mobility and trade liberalization see this as an ideal to work towards.
On the other hand, I - and many other socialists - would argue that auto production and wage rates need to be highly regulated, the former, by democratically/politically-constituted institutions (that don't currently exist), and the latter, by unionization. Limiting the free movement of capital of the ability of capitalists to ship products wherever and however they wish is not the same thing as "protectionism", but needs to become part of democratic planning, working towards the production of needed goods and services as much as possible, locally, serving the needs of national and regional communities and trading for mutually beneficial needs.
Arguing that Chinese or Indian capitalists or US-based capitalists in these markets should be able to sell massively into North American or European markets is really not a form of international solidarity, but an acceptance of principles of neoliberal globalization and would only result on massive job loss. Opposing it is hardly what one would denounce as "nationalist" or "protectionist". The real questions have to do with regulating overall vehicle production, access to markets and, even more importantly, reducing our reliance on private cars and moving towards environmentally sustainable options, such as mass transit, non-fossil fuelled vehicles, and the production of other goods that would help the transformation to environmental sustainability.

I would have to agree with you, though, that what are called "legacy costs" - the private provision of services to worker such as pensions and other benefits that should be socially provided - (and, in the US, that includes basic medical care) - places a terrible burden on companies that compete with those who have a very small number of retirees (such as the so-called "transplants" in North Amerca, such as Honda and Toyota). This can only be relieved by socializing those costs, which requires a political movement to demand it.

As for your reference to the Lucas Aerospace example, I would heartily agree that the model has always been an inspiration to many of us on this side of the pond. I would, however, analyze this experience a little different than you. While the collective ability of workers to develop socially responsible products is key, the idea of developing it in the form of a private capitalist profit-making enterprise, would not work. There are hardly any real networks of worker co-operatives in Canada and the US, and developing this kind of enterprise in the context of capitalist Canada or the US would only recreate the current problem that exists in all privately owned auto companies. Financing, sourcing of parts and materials and competing in all of the market segments would force the company to act just like other capitalist enterprises. That's why they call capitalism a system, because of the systemic patterns that force all market entrants to act similarly.

Which brings us to public ownership. Like you, we here know that the capitalist state runs enterprises in ways that recreate the traditional forms of exploitation and market operation, as well as with a kind of bureaucratic hierarchy which also does not provide positive models for the kind of enterprises we would like to see. As well, if state-owned enterprises accept the logic of the capitalist marketplace, the enterprises they run will end up looking like the private companies they are supposed to replace (see the experience of British Leyland).

That's why I would argue for a nationalized sector to replace the auto companies, that would include the energy sector, and work along side a publicly owned financial sector, to produce the kinds of goods that you argue for: mass transit, ecologically responsible manufacturing goods and services, etc. This can't be done privately, and could only be made to work publicly, if it were part of a larger political movement to run enterprises differently and create a different kind of economy. If my memory doesn't fail me, that entire project of the socialists who worked through the Greater London Council and Lucas, was to do this in a way that helped to build a diffferent kind of public sector model.

Our task is to contribute to the building of that kind of a movement,

Herman Rosenfeld, Socialist Project (These are my personal opinions).