Jun 22, 2009
The following article is adapted from a presentation at a Spark public meeting held in Detroit in May.
Obama says that his Administration intervened to rescue the auto industry in order to save jobs and protect working people.
If that had been true, his auto task force would have started by putting a moratorium on all job cuts in the auto industry. Instead it demanded that GM close or idle 12 plants, cutting its hourly employment in half, and that Chrysler close eight plants, cutting its employment by 6,500.
Not only that, Obama's task force also demanded the auto companies cut massive numbers of dealers. According to the dealers' association, that will cost another 193,000 jobs.
And of course, job cuts at the major companies don't stop there. The parts makers, the steel industry, the glass industry, rubber, textiles, electronics, plastics, copper, other metals, aluminum – not to mention health care providers, insurers, will all cut jobs when GM and Chrysler cut.
And it doesn't stop there. With banker Steven Rattner leading the pack, the task force demanded that Chrysler and GM cut wages and benefits nearly in half. It demanded that the auto companies gut retiree health care. All these cuts means less money in the pockets of auto workers and retirees, less money to spend on other products like refrigerators, homes – even cars themselves. These wage and benefit cuts can only translate into more job cuts, across the board in every other industry.
No, Obama's intervention in the auto industry is not about saving jobs and protecting working people, but protecting auto company profits at the expense of workers' jobs. It is the very worst thing that could be done from the standpoint of making the economy run in the population's interests.
And yet it would be possible for a government that worked in the population's interests to stop and reverse this increasingly downward spiral of job losses breeding more jobs losses. It's not practical issues that make it impossible to put everyone to work. It's the fact we live in a system organized around the pursuit of profit, and the fact this government defends the capitalists' interests.
There is a contradiction built into capitalism. On the one hand, the drive for profit pushes the capitalists to search to increase productivity, to make production more efficient, to use technology as widely as possible. And that is what, over several centuries, enabled living standards to go up. But to make use of this increased productivity profitably, the capitalists have always had to find more people to buy their products, that is, they have to expand their markets. They expanded the market inside their own country, so long as there was somewhere to expand to. More commonly, they drove competitors out of existence, grabbing their market share. They went into the markets of other countries, leading often to wars over who has the right to grab those markets. But at a certain point, no matter how much the capitalists fought each other, there weren't enough new markets to be found – the market for their goods became "saturated."
This capitalist expression – "saturated markets' – does not mean, for example, that every person who needs or wants an automobile has bought one. It simply means that everyone who has enough money to buy an auto, and wants one, has bought it.
In fact, in reality, in recent decades, people with not enough money have been lured into buying a car at an outrageous amount of interest, allowing the capitalists to expand their already saturated market for just a few more years. The auto companies vastly expanded the use of credit, pushing people into four-year notes on their cars, then five-year notes, and finally, even, six-year notes – leading to the situation in the last few years of your loan that you owe more than what the car is worth because of the enormous amount of interest piled on.
This expansion of car credit was paralleled by the push of people into riskier mortgages – riskier and carrying higher interest rates – bringing the economy into today's impasse.
No matter how much credit was pushed on people, no matter how many home equity loans were taken out, the market – that is, the people with money to buy – didn't keep up with the amount of goods and services that could be produced. There were always plenty of people with needs and wants. But not enough people with money to buy.
In order to maintain or increase their profits, the capitalists have used productivity increases to cut jobs. When one company does that, it may not be a problem. You lose a job, you can find a job. But when a lot of companies were doing it all at the same time, it became a big problem, not only for the people who lost jobs and couldn't find another. It became a big problem for the capitalists themselves. In laying off workers, they were shrinking their own market.
Another thing the capitalists did to increase profit was to cut wages, directly among their own workers, or indirectly by farming out production to lower wage producers in this country or in other countries.
By the way, just a comment here, since so much propaganda is made about shipping jobs overseas. The vast amount of the jobs that were lost in this country stayed in this country – they just went to smaller, lower wage companies on U.S. soil. The auto industry itself is the best example of how production has been farmed out. What's Visteon? Former Ford plants. What's Delphi? Former GM plants, whose production has now been sold off to still lower wage producers, mostly in this country. Today Chrysler says it has 2,300 suppliers – the majority of whom make parts that Chrysler itself once made in its own plants. Chrysler workers who might have once worked at one of Chrysler's four glass plants, now closed, know that much of that production was shipped out to the non-union parts plants owned by the late Bill Davidson, the famous Pistons owner and infamous anti-union strike-breaker.
In any case, no matter how companies cut wages – directly or by shipping out the work – those lower wages weighed on the whole economy. Workers whose wages are cut buy less. The capitalists were, here again, shrinking their own market.
Finally, in order to increase their profits, the capitalist class turned more and more to the state apparatus – at every level, federal, state and local – getting more tax breaks, more subsidies, more schemes by which money was drained out of public coffers, that is, out of education, out of public services, out of social services.
This also weighed on the population – and at the same time, it boomeranged on the productive economy. We are constantly bombarded with demands to pay for what is supposed to be socially provided. We end up paying for supplies and our children's schools because the school board doesn't provide them or we pay to repair our cars because the city doesn't repair potholes.
As the state apparatus takes money out of public services, social services and education to give handouts to the big and little corporations, the population has less to spend on daily needs. And thus the capitalists shrink their own market still further.
The very things the capitalists did to increase profits – that is, to cut jobs, to cut wages, to cut social programs, to cut public services, to cut education. This limited possibilities for the capitalists themselves to realize profit from production, since less and less could the population buy what the capitalists produced in their factories and service industries.
So, as the capitalists' profits continued to mount, they shifted their capital from production, putting it into speculative ventures. Look at GM – more and more they produced only for the most profitable market at the time: trucks and SUVs. Then they took their profits and funneled them into GMAC, which used them to buy up 11 different mortgage companies, and then went head over heels into the speculation in sub-prime mortgages.
The wizards of Wall Street bought and sold whole productive companies, draining money out of production in order to speculate.
Cerberus is the perfect example. It bought up Chrysler from Daimler. No one knows exactly how much money exchanged hands in that deal, or how much Cerberus drained out of Chrysler before it was done.
We do know that Cerberus, immediately after buying Chrysler, mortgaged the whole company, using all its plants and productive facilities for collateral. Cerberus quickly put Chrysler 10 billion dollars in debt.
Cerberus did not spend a penny of this 10 billion to develop new models for Chrysler – there weren't any developed in the two years Cerberus was in control. Cerberus did not spend money on new plants – there were none. It didn't spend money on retooling old plants. It didn't spend money on hiring additional workers. It cut workers. As for production – Cerberus announced that Chrysler had made a 1.1 billion dollar profit during the first six months of production under Cerberus.
Cerberus took at least 10 billion dollars and who knows how much more and ran away – less than two years after it bought Chrysler.
Cerberus is not the only one involved in financial wheelings and dealings.
For the last 20 years, vast amounts of money have been drained out of production over into the financial sphere – and from there up in the smoke of financial speculation – and eventually into a deadening collapse.
Years before the current collapse broke out last September, the outlines of what would happen could be seen. The wizards of Wall Street should have been able to see the dangers in the speculation.
In fact they did. That's why they took out insurance on their risky ventures with companies like AIG. But they did nothing to stop their economy from slamming into the wall.
So now what? The very same people who told us that they had everything under control – even as the speculation was growing more uncontrollable – are now telling us that things are beginning to look up, beginning to look a little bit better, if not this month, then next month, if not next month, then next year, but soon, sometime soon.
They don't know and we certainly can't say exactly where things will go. Are we going to definitively slide into that new "Great" depression in the next months? Or will all these maneuvers being engineered in the banking system pull the economy out for a very short period of time? In any case, if this monstrous many trillion dollar bail out works, it will work only to give still more money to the same people who speculated before, and they will do the very same thing, but at an even crazier level. They will speculate. In fact, they already are. They are taking all that government money they are getting from the bailouts and pouring it into the stock market and markets for oil and energy – driving up stock prices, as well as the price we pay at the pump.
At the same time, the capitalists are continuing to slash jobs, pay, pensions while the government slashes jobs and services.
In other words, if the bailout pulls us out of this latest speculative collapse, it will only be to feed a still greater bout of speculation that itself can end only in a still more brutal collapse.
We have to remember that this latest financial speculation and collapse are not the first. Since the mid-1970s, we"ve lived through a number of recessions precipitated by the collapse of speculative manias – in oil, in the savings and loans, in precious metals and the dollar, or in the so-called "new economy" stocks, etc. And after each collapse came a new round of speculation – leading only to another collapse.
Capitalism has brought us to a complete dead-end. And working people will not get out of it by waiting on the capitalists or their political representatives.
And we have no reason to wait. The force represented by all those workers coming under attack today is more than enough, way more than enough to back off the capitalists, to force them to pay for the crisis they created.