The Laws of Capitalism Maul an American Icon

Brad Forrest

Brad Forrest

GM has been in business since 1908, 101 years, but has just buckled under the pressure of the current economic crisis. GM filed for Chapter 11 on June 1 with the help of the federal government. The government has already thrown $50 billion of our tax dollars at the ailing automaker, but that’s not enough to cure the automaker of its most terrible burden: the high living standards of its workforce. GM is going to shutter 14 factories, and lay off about 29,000 workers. This is the biggest industrial bankruptcy in history.

General Motors survived two world wars and the Great Depression. At one point in its storied history it managed to acquire over fifty percent of the American car market. To put it bluntly GM was one of the main players in the game of monopoly capitalism. In the 1930s titanic class struggles took place that got industrial America unionized. The working class made major gains during this period. In 1948 the United Auto Workers won Cost Of Living Adjustments. In 1950 workers won health care for life and pensions. The story of General Motors is truly the story of American capitalism in a nutshell.

To understand why GM is falling under the hammer blows of the current economic crisis we need to take a larger look at the system as a whole. Only then can we gain a perspective on what is happening and how to defend workers interests.

Capitalism is a world system. It was the historic mission of capitalism to tie the entire world into one interdependent economic unit and create the infrastructure for a more advanced system. However, the unity of the entire system is marred by the conflict of its various parts. Production and distribution take place on a world scale, but not harmoniously as it would be under socialism. Due to competition there is a vicious fight over increasingly crowded markets, especially given the low wages throughout the world that make buying cars for most people out of the question. The sages at The Economist admit that, “At present, there’s enough capacity globally to make 90 million vehicles a year, but demand is little more than 60 million in good economic times.” Everything in life has its birth, growth, maturity, and decay. The latest victim of the contradictions of capitalism is the once almighty General Motors.

After World War II the strategists of capitalism, such as Henry Dexter White and Lord John Maynard Keynes, helped paper over the glaring faults of the system by concentrating on pulling down tariff (tax) barriers and stabilizing the financial system with fixed exchange rates. This worked for a period, but what concerns us most with regard to General Motors is the bit about lowering tariff barriers on foreign commodities in the U.S. market. Low tariff barriers mean that the Asian car manufacturers like Toyota and Nissan, etc., who pay their workers low wages with few benefits, can compete and oust the likes of GM which has had to deal with a strong workers’ union like the United Auto Workers.

When the U.S. and U.S.S.R were the two world powers, the U.S. could pull together a coalition to stabilize capitalism on the basis of increasing world trade. The problem is that free trade unleashes the tendencies of capitalism in the raw and puts remorseless pressure on workers to increase labor productivity and agree to wage cuts so that the company they work for can remain competitive. But under capitalism free trade begets a race to the bottom. Unions need to make a choice in this situation: adopt a “business unionism” partnership with the company so that workers accept layoffs and lower wages and benefits without a fight or adopt a class struggle approach. This last option would involve forming alliances with other unions where each would support the others, not only here in the U.S. but all over the world, and demand that wages rise internationally. If Asian workers, for example, are paid at the same rate as U.S. workers, then Asian cars will not undersell U.S. cars. Moreover, if workers all over the world are paid more, then more people could afford to buy cars. The alternative is for workers to continue to compete against each other in this current race to the bottom.

The UAW, so far, has adopted a business union philosophy of “partnership” with the bosses at GM. This means that the UAW accepts layoffs and concessions without putting up a fight because of the claim that these steps are necessary to keep the company competitive. In this environment of fierce global competition General Motors has achieved a balance sheet of $82.2 billion in assets, and $172 billion in liabilities and pension costs. Before an agreement with the UAW was reached in 2007, each car had about $1,400 extra dollars in pension and health care costs vis a vis competitors. In addition to this the pension fund was underfunded in 2008 by $13 billion! The gains made by generations of employees are intolerable for GM to compete on the world arena as long as workers in other countries are not receiving comparable compensation.

Reforms in the current period are few and far between, and the “partnership” philosophy of unionism is only tolerable in an era that allows for reforms. Now the union has to work to make the members accept layoffs and wage cuts. The UAW has almost turned itself into an exploiter by running the Voluntary Employee Beneficiary Association (VEBA), a health care funded by a lump sum payment from GM which is then invested in the stock market. When GM emerges from bankruptcy in September, the UAW will have 17.5 percent share in the company! At this point the union has a vested interest in reducing workers health care costs and obtaining wage cuts to pump up GM stock.

The only other option for workers is to adopt a class struggle approach to labor-company relations. Partnership with the bosses is a dead end whose logic ends with the workers exploiting themselves in the company’s interest. And the company interest is and always was pumping out unpaid labor from the workforce. Unions were created against the wishes of the exploiters, and the employers only grudgingly tolerate them. But with the union officials acting as partners and failing to put up a fight, companies have found them very useful. It’s up to us to change the leadership of our unions. The new leaders must understand the class struggle and use it as the basis of all work. They must not let themselves get drawn into the false view that tries to depict workers in other countries as the real problem. There must be no vested interest in exploiting workers. No VEBA. No stock options. Unions should become the impregnable fortress of the working class. The downfall of General Motors should be a lesson to one and all.

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