councilor.org
| Source | Seth Sandronsky |
| Date | 01/01/06/11:37 |
| January 6, 2001
Excess capacity in the car industry: the capitalist crisis continues by Seth Sandronsky 972 words As the year 2000 closed, crises rocked the capitalist system. One crisis was the deregulation of electricity in California. It was supposed to bring consumers “choice” and lower prices. It brought neither—just the threats of blackouts and bankruptcies. Another was the swoon of the stock market. Its climb had been a sign of the so-called “New Economy,” featuring digital technology and high worker productivity. But Wall Street's rise was a triumph of myth over reality, of share prices out of ratio to corporate earnings. In the meantime, the car industry was unable to sell all its new cars due to excess capacity, the business press reported. What it covered and covered up speaks volumes about this particular crisis. According to the Financial Times: “The problem dogging the industry—already handicapped by flat volume growth and falling prices—is excess capacity. In Europe, there is enough factory capacity to make about 18m [million] cars a year. But the industry will be lucky if sales exceed 15m in 2000. In the US, the market is expected to shrink from 18m vehicles this year to 16.5m-17m in 2001. Manufacturers fear being left with thousands of unsold models and plants churning out vehicles with no buyers” (12-13-00). General Motors Corp., the world’s leading auto producer, is eliminating the Oldsmobile brand in America. GM will also layoff 10% of its US salaried staff, the London Economist reports (12-14-00). Some 2,000 workers will lose their jobs when the company closes its Luton car factory in England. In all, GM will cut 10,000 jobs. In America, “DaimlerChrysler has been affected by widespread over-capacity.” System-wide, Chrysler is cutting prices and spending and closing plants” (Bloomberg News, 12-31-00). Ford is“ cutting capacity in Europe, most notably by ending car assembly at its Dagenham plant near London. There are too many carmakers in both Europe and the US and too many factories for a shrinking market” (Financial Times, 12-13-00). Why the car “market” is losing size is ignored. And the view that job losses cut workers' buying power? This is also an overlooked factor in the shrinking of the market for cars. On one hand, the car “market” is too large. There are far too many cars locally and globally. I don’t want workers to earn more money to be able to buy all the cars that are produced. As an American, I criticize our use of cars. It’s a catastrophe speeding up world climate change. America has 770 cars per 1,000 people versus 10 in China, 30 in Egypt, 148 in Mexico and 552 in Japan (New York Times, 12-24-00). On the other hand, the car industry is an example of how capitalism creates business crises. The business press is not exactly known for faulting the market under capitalism. Effects, yes. Causes, no. To get at the causes of capitalist crises, we turn to Marx. He focuses on relations between classes, or groups of people, and capitalist competition. Concerning classes, one class works to produce goods and services. The other class does no work but makes money from workers’ labor. Yet these two classes have one thing in common—they depend on the capitalist market to survive. The capitalist market takes no prisoners. It's imperative for employers to pay their employees less than other employers. The business press calls this a "competitive advantage." Take the auto industry. Carmakers worldwide produce cars by holding down employee costs to take profits and market share from carmakers whose employee costs are higher. That's not a conspiracy theory, just capitalist reality. Along with private employers, public services—Medicare, schools and Social Security—are also subject to the capitalist mode of production. Capitalist competition and class relations reinforce each other society-wide, Ellen Wood notes (Monthly Review, 9/99). When factory workers made goods they couldn’t afford to buy, Marx and Engels called it a crisis of overproduction. This was and is a crisis unique to capitalism. They write: “In these crises, there breaks out an epidemic that, in all earlier epochs, would have seemed an absurdity—the epidemic of over-production.” Marx saw the buying power of workers falling relative to the prices of the goods and services their labor produced. Under market capitalism, money flows away from employees to employers. Political elections don’t threaten this class relation. Not when the super rich and corporations control the Democratic and Republican parties. Excess capacity in the car industry is one example of a capitalist business crisis. Another is the industrial agriculture crisis that thrashed California’s Tri Valley Growers in 2000. This cooperative owned by farmers attempted to survive market competition and lost about $200 million in three years. Unsold tomatoes rotted in the field because Tri Valley couldn’t buy them from farmers. There were also too many peaches in the Golden State. “Faced with a sizable over-supply, the peach industry in California plans to bulldoze more than 100,000 trees loaded with ripening fruit that would have been destined for the canneries” (Sacramento Bee, 7-30-00). Andrew Caughey writes: “In the agricultural sector unfettered competition leads to excess production which drives prices below cost. In an attempt to maintain profits, or lower costs, the stronger producers expand their output while weaker ones give up the business. This process goes through numerous price cycles until production becomes concentrated in a handful of producers. Although consolidation has been slow in American agriculture for a number of reasons, we are now at a point where we can envision its completion." (“The Pulse of Capitalism,” October 2000. The Farm Economy). Meanwhile, the United States Conference of Mayors reported that 83% of 25 cities surveyed had increased requests for emergency food assistance in 2000 versus 1999. Most of those requesting the emergency food had low-wage jobs. Hunger isn’t a natural condition of human beings. Likewise, there’s nothing natural about excess capacity or the capitalist system. ### |
Copyright (c) 1998, Joongpil Cho