Crisis in the motor industry (1981)

From the May 1981 issue of the Socialist Standard

Set-backs in the car industry are not new. Like other industries, it gets into difficulties each time there is a world depression. This time, however, special factors have combined with the depression to bring many well-established companies to the verge of ruin, and to throw an abnormal number of motor workers out of their jobs. First was the enormous rise in the price of petrol. This reduced overall demand for cars and called for new models more economical in petrol consumption. a change-over to which some companies, including Chryslers, failed to adjust themselves. The whole world pattern of car production and export has been reshaped by the spectacular rise of the Japanese motor industry, challenging the supremacy of the American companies.

In 1960 passenger car production in Japan was a mere 165,000, compared to 6,675,000 in America and 1.359,000 in Britain. Between 1960 and 1974, world production doubled, but output in America rose by only 10 per cent. and their share of the world total fell from 53 to 28 per cent. But in Japan output had jumped to nearly 4 million, putting their car industry in second place to America’s 7,332.000 Now. seven years later. Japan is on the way to being the world’s leading producer of passenger cars, and is already by far the biggest exporter. This happened because output in Japan has gone on growing in the depression while in the rest of the world it has fallen. In 1980 the output of the American company. General Motors, dropped by 26 per cent. and Toyota now challenges General Motors for first place in the world. (The course of events in commercial load vehicles is much the same as in passenger cars.)

The Japanese companies have won their success by invading the home markets of the rest of the world, forcing the local-based companies to compete by reducing prices and often selling at a loss. In spite of motor workers’ wages having been kept below the rise in prices (and in some cases reduced) most of the world’s motor companies are losing money. In America in 1980 the losses were: General Motors £500 million, Fords £677 million, American Motors (owned by Renault) £88 million and Chryslers £767 million — the biggest loss of any company in American history In Britain British Leyland lost £535 million, yet the big Japanese companies all made a profit, for example Toyota £568 million. The number of motor workers has gone on increasing in Japan, but in America 25 per cent have been laid off and the loss of jobs in the British industry is on the way to 100.000. In an earlier setback in 1965-7, the production of motors in Britain fell 10 per cent. Since 1977 output has dropped by 30 per cent.

As far as the world depression is concerned, with its consequent reduction of sales of motor vehicles world-wide (except in Japan), the companies can count on capitalism reversing the downward trend and expanding again some time or other. Many companies (including British Leyland) are investing in new models with that in view. But none of the governments has discovered a method of bringing about recovery and preventing further depressions in the future. Capitalism goes its own way whatever policies governments follow. This ineffectiveness of government policy was highlighted in Britain by the manifesto of 364 economists declaring that the Thatcher government policies are wrong and will not bring about "sustained economic recovery”. There is no policy that will do this, but if the 364 think there is, why have they not let us into the secret? After two centuries of capitalism and a score of depressions during which every possible variation of government policy has been and failed, all they can offer us is that "the time has come . . . to consider urgently which alternative offers the most hope". In other words, the 364, many of them responsible for advising past failed policies, cannot even agree among themselves on what to do.

In all the countries invaded by the cheap Japanese motor vehicles, the companies and the Unions have responded by urging their governments to curb imports; in the first place by agreement with Japan, and failing that, by imposing import restrictions. Officials of the Transport and General Workers’ Union told MPs at a meeting in the House of Commons: “The British car industry will be dead within five years without import controls” (The Times 4/3/81). The demand for import restrictions does not even pretend to be a policy for protecting the world's car workers against unemployment. It would merely reduce unemployment in some countries and increase it in Japan The Japanese companies estimate that a 15 per cent cut in their exports would put 70,000 Japanese workers out of their jobs (The Times 31/3/81).

Japanese motors are not the only ones being sold in the British market. The countries of origin include America, Germany, France, Italy, Sweden, Spain, Russia, Poland, Czechoslovakia, and a Rumanian car is to be on sale here in the autumn. There is, of course, a reverse movement. British Leyland (along with car firms in Europe and America) is hoping to get into the Japanese market, and is planning to export its cars to Europe. Jointly with Peugeot they are to assemble and market a Peugeot car in Australia.

In several countries the hard-pressed motor companies have succeeded in getting government subsidies or loans. Contrary to declared government policy, British Leyland recently received £990 million and Chrysler of America have been saved, at least temporarily, from bankruptcy by a US government-backed loan of £360 million last year and £180 million this year. President Reagan’s statement: “This does not imply that this government approves of baling out private companies in difficulties”, sounds like Sir Keith Joseph telling MPs how it comes about that the Thatcher government has reluctantly adopted the same policy.

Having exploited to the full the direct export of cars to foreign markets, Japanese companies are now planning to set up plants inside these markets. They are negotiating to manufacture in Britain, thereby gaining unrestricted access to the whole EEC market, providing they use materials that are 80 per cent EEC origin.

One of these companies is Nissan, makers of the Datsun. They plan to invest £275 million, to produce 200,000 cars a year, subject to finding a site of the right size and location, and reaching agreement with the components companies and the trade unions. Nissan already has. or is planning, car plants in America, Mexico, Spain. Italy, Australia and Taiwan, and plans to manufacture motor components in Ireland. Toyota, Japan's largest motor company, has so far not favoured setting up plants abroad, but it is reported (Sunday Times 22/3/81) that they are considering joint production with Fords in America.

British Leyland has reached agreement to build a Honda-designed car in Britain and discussions are reported to have reached agreement on joint production of the Mini-Metro in Japan. Japanese cars dominate world exports because they are competitive in price and quality. The Chairman and Managing Director of Fords in Britain said:— "The Japanese, more than anyone, have the ability to produce high quality vehicles on a massive scale at low cost." (Daily Mail 4/4/81). (He also said that Nissan’s plan to set up a plant in Britain “could be catastrophic for this country’s motor industry”.)

Whatever may have been true in the past, it is not because wages in Japan are lower. Car workers’ wages in Japan are now higher than the British. The Japanese companies score because their productivity (output per worker) is higher. Their plants are all new, or relatively new, and all use the latest and most efficient machinery and techniques. They have developed more efficient methods of management and work organisation, avoiding costly production hold-ups through delays in the chain of processes, and using fewer staff in supervision and control. Having succeeded in getting continuous strike-free production in motor plants in Japan, the managements are looking for the same in Britain. According to an article in the Financial Times (25.2.81) the Nissan Company in its search for the right site will not look at plants or districts with a record of frequent strikes.

A problem British motor companies have had to handle is the multiplicity of unions. Lord Scanlon said in 1972, when he was President of the Engineering Union, that it takes members of 38 separate unions to make a motor car (Sunday Times 9/4/72).

The Nissan Company is insisting as one of the conditions for setting up its plant in Britain that there must be agreement for only one union to represent all the workers. Whether and how this obstacle can be overcome with the unions remains to be seen. The company is also insisting on the abolition of union demarcation practices. The Japanese style of manning is already being copied to a limited extent by Fords at Dagenham, with a proposal to abolish the whole grade of General Foreman.

As regards the future of American and European motor companies, an article in the Financial Times (23/2/81) takes the line that their only way to survive is to equal the high productivity and quality control of the Japanese companies, by learning to apply Japanese techniques in their factories. Those who fail to do so will go under, as happened in the American television industry, when it was faced with an onslaught from Japanese exporters similar to that in the motor industry.

British Leyland hopes to reduce its losses in 1981-2, but expects to take from five to ten years to achieve “business results of a standard which will attract external funds on normal commercial terms". (Financial Times 20/3/81). Some observers think that it will never pay its way and is doomed to founder.

In the all-pervading gloom that overhangs the British motor industry, there is one small corner in which the sun still shines. The Financial Times (20/3/81) reported: “Sir Michael Edwards. B.L. Chairman, has almost completed arrangements to sign his first contract with the company. This is expected to raise his salary to about £100,000 a year".

Proper Gander: Where the wealth went (2022)

The Proper Gander TV column from the March 2022 issue of the Socialist Standard

Since the financial crisis and through austerity, Brexit and then the pandemic, we’ve had to get used to the effects of the economy at its most volatile. Reminding us of the depressing years from 2008 onwards is BBC Two’s documentary The Decade The Rich Won, which would more accurately be titled ‘Another Decade The Rich Won’. This two-part programme has an all-star cast of politicians, economists and government advisers who tell us how they navigated the last decade’s fiscal turbulence. Instead of a narrator, captions in block capitals flash up on the screen to pull the story along, accompanied by urgent-sounding ominous music.

The documentary begins with the government’s ‘bailouts’ of hundreds of billions of pounds to banks such as the Royal Bank of Scotland. Without this intervention, we would have faced ‘financial armageddon’, according to then-Governor of the Bank of England Mervyn King, and with this intervention, the wealthiest got even wealthier. It’s explained that this is because the bailout funds stayed with the banks, rather than flowing through and boosting the economy. So, an alternative strategy was tried: quantitative easing. This tactic (credited to King and then-Chancellor of the Exchequer Alistair Darling) is when the Bank of England ‘creates money’ to buy government bonds from financial institutions, which then have more funds to lend out to people and businesses. Between 2009 and November 2020 the impossible-to-visualise amount of £895 billion went through the UK’s quantitative easing plan, with more paid out by other countries’ central banks. The effect of this was an increase in the value of assets, and consequently, according to hedge fund head honcho Paul Marshall, the ‘owners of assets have all made out like bandits’. Marshall isn’t the only city bigshot interviewed for the programme who knows exactly how capitalism works, and in whose interests. Private equity supremo Guy Hands says it’s obvious that wealth attracts more wealth, regardless of what the government recognises. If they and the other economists featured didn’t already know this when quantitative easing was used in 2009, then they would have learned it when the same pattern recurred when the strategy was used after Brexit and again when the pandemic hit.

The super-rich haven’t only benefited from bank bailouts and quantitative easing, but also from shrewd management of their tax affairs. The tax havens where the elite stash their cash were revealed in the Panama and Paradise Papers, leaked to German reporters Bastian Obermayer and Frederik Obermaier. Alongside these revelations, companies such as Vodafone, Amazon and Starbucks were outed as paying little or no tax to the UK government, which at that time was implementing its austerity measures. Then-Prime Minister Theresa May wagged her finger and said to these corporations ‘I’m putting you on warning. This can’t go on any more’, although nothing was done because her reduced-majority government became distracted by Brexit, according to ex-minister and senior aide Gavin Barwell. A more fundamental reason (not given in the documentary) is that governments see high profitability as good for the economy, and therefore are reluctant to impose a heavy tax burden on corporations which would reduce the amount of profit they make.

While the richest grew and held on to their massive amounts of money, millions of people were struggling because of job losses, insecure ‘gig economy’ contracts, rising house prices, shrinking wages and cuts to government funding of services. The widening inequalities of wealth led to the normalisation of food banks and global protests. The programme features some of the campaigners with UK Uncut (a direct-action group targeting corporate tax dodgers) and also the Occupy movement. When asked what the movement achieved, Tina Rothery, one of its members says ‘so much… Occupy pulled the conversation back… to real humans’, although she also admits they didn’t offer solutions beyond this. Another way people reacted to the establishment letting them down was by voting for Britain to leave the European Union. Brexit created more financial instability, responded to with more quantitative easing which again boosted the elite’s coffers.

Some of the interviewees who represent the status quo are more candid than might be expected because they’ve since retired or left their previous careers. For example, Mervyn King (now a life peer) says it’s ‘deeply unfair’ that banks get bailed out when in financial trouble, but other businesses wouldn’t. Ex-Deputy Prime Minister Nick Clegg, who looks like he’s still recovering from his spell in government, tells us there was no debate about further cuts to public spending, as the coalition agreed they would be necessary, despite his talk of ‘difficult decisions’. The Chancellors of the Exchequer (Alistair Darling, George Osborne and Philip Hammond) all seem to be sticking strongest to the decisions made during their tenures. In contrast, Gary Stevenson, a Citibank trader between 2008 and 2014, has shifted his views because of his experiences during those years. As an ‘interest rate trader’, he discovered he could make a fortune by betting on the economy getting worse and as a result became Citibank’s most profitable trader in his area. Realising that economic crises have led to increases in the value of the capitalist class’s stocks and assets, Stevenson felt guilty and left his job. He now works as an economist campaigning against inequality, although the documentary doesn’t mention his proposal to remedy this by placing a time limit on property ownership, thereby forcing the elite to sell their assets, which no government would agree to.

The Decade The Rich Won shows that the way the economy works has enabled the capitalist class to prosper through the turmoil of recent years. The wealth owned by UK billionaires has risen by 310 percent since 2010, little of which has trickled down to those of us scraping by on low incomes. The documentary is worth watching not only because it’s a grim reminder of how capitalism functions but also because it reveals the views of those in prominent positions. Their openness now makes the spin we heard last decade – ‘we’re all in this together’, ‘stronger economy, fairer society’, ‘aspiration nation’, ‘strong and stable leadership’, ‘a country that works for everyone’ – sound even more hollow.

Mike Foster

Fear, Hate and Greed (2014)

From the December 2014 issue of the Socialist Standard

Capitalism is riddled with fear. Fear of its ever present wars. Fear of crime and criminals. Fear of being alone. Fear of being consumed by personal debt. The divisive fear of immigrants. And the fear common to all who are compelled to work for wages – the fear of unemployment.

Fear and hate are frequent bedfellows and Josef Goebbels, the master of Nazi state propaganda, knew exactly where to exploit those emotions when he affirmed: ‘Think of the press as a great keyboard on which the government can play’. Where state benefits are concerned the media has peddled hate to the fearful – pounding the keyboard with glee. Cutting back on benefits when capitalism is in crisis is nothing new. During capitalism’s last depression those workers who had paid into the scheme received the dole for 15 weeks. The National Government, another coalition, cut the benefits of those on the scheme who were unemployed by 10 percent leaving them to rot alongside the other millions relying on poor law relief. In August of 1931 means testing the unemployed was implemented. Underpinning the poor laws and its sibling, the dole, are the deeply entrenched ruling class ideas of making claiming benefits so, ‘unpleasant that, people would not claim it, stigmatising relief so that it became an object of wholesome horror’ (wikipedia.org). Governments, whether claiming to be left, right or centre have been cutting benefits since the post-war boom of the 1970’s ended. And the reason why? Because they are a charge on profits, and thus detrimental to the real orchestrators of the tune and the owners of the keyboard – the capitalist class.

Handouts and handouts

The words benefits and scrounger have become conjoined. Goebbels would have been proud of the media hacks who have slavishly followed his guidelines: ‘The most brilliant propagandist technique will yield no success unless one fundamental principle is borne in mind constantly – it must confine itself to a few points and repeat them over and over’. Thus the fearful have been given their slogan and its corollary is revealed in, ‘a YouGov survey which shows: Up to 212,000 have been physically attacked because they’re on benefits’ (mirror.co.uk, 8 September).

Benefits, dole, and handouts are what is made available to the unemployed, and those surviving on low wages. Subsidies, funding and support are invested by the state in corporations. A report written for the TUC entitled ‘The Great Train Robbery’ showed, amongst other things, that the, ‘train operating companies are entirely reliant upon public subsidies to run services. The top five recipients alone received almost £3bn in taxpayer support between 2007 and 2011. This allowed them to make operating profits of £504m – over 90 per cent (£466m) of which was paid to shareholders’ (tuc.org.uk, 5 June 2013). Publicfinance.co.uk can report that the total government subsidy to the railway businesses now stands at £4bn per year (16 April). With just a small slice of the subsidy benefitting ‘a top executive from Network Rail who will become head of construction. . . on an annual salary of £750,000, making him one of the country’s best paid public servants’ (ft.com, 17 January).

‘The private finance initiative (PFI) is a way of creating public–private partnerships (PPPs) by funding public infrastructure projects with private capital’ (wikipedia.org). Benefitting from this is a clique of banks, builders and service providers who build, and sometimes run, schools, hospitals and related public projects. And the benefits to the clique: state payouts over a 20 or 30 year period. However, ‘PFI has been controversial in the UK; though the National Audit Office felt in 2003 that it provided good value for money overall’ (wikipedia.org). Not so thought the disenchanted Treasury Secretary Vince Cable six years later: ‘The whole thing has become terrible, opaque and dishonest and it’s a way of hiding obligations. . . PFI has now largely broken down and we are in the ludicrous situation where the government is having to provide the funds for the private finance initiative’ (bbc.co.uk, 3 March). And the funds continue to flow to those that benefit: ‘As of 2013, it was forecast that 725 PFI contracts for public facilities across the UK, with a total capital value of £54bn, will cost the Exchequer more than £300bn by the time they are paid off’ (newstatesman.com, 20 February).

Mindfulmoney.co.uk’s headline asked the question, ‘What is the cost to the UK taxpayer of supporting our banks’? It answered itself by referring to The National Audit Office’s estimate: ‘it peaked according to the NAO at £1.162 trillion’ (17 July, 2013). Support? Obviously, this isn’t the same as Income Support, which currently is awarded, after means testing, to a couple aged over 18 at £113.70p per week. Some commentators are more impolite and call it a bail-out. One of the main beneficiaries in the UK was the Royal Bank of Scotland which is labelled by the media as ‘our bank’. ‘We’ own 82 per cent of it after the state invested £37 billion of its funds in October 2008. But, dear oh dear, ‘our’ investment has lost a few quid even after more funds were invested. That scourge of the benefits scroungers The Daily Mail could run the headline, ‘RBS has lost all the £46bn pumped in by the taxpayer’. The editor got out his calculator to let his fretful readers know that, ‘In total, the lender has since paid out £4.6 billion in bonuses – £1 billion for every £10 billion it has lost’. Also included in the £46 billion was, ‘a £3.8bn bill for customer mis-selling’ (27 February). Note the word bill. That couldn’t be a fine like those slapped on a benefit scrounger and imposed by the state law courts could it?

Swindlers and swindlers

Such as the case against, ‘ a mother of three who was jailed for five months for swindling more than £70,000 in benefits… DWP Minister Lord Freud said: In addition to the sentence imposed by the court, the department always seeks to recover the benefits falsely obtained, to ensure that fraudsters do not benefit financially from their criminal activities’ (Bristol Post, 6 June 2011). Or a man who gained notoriety via the BBC news site for ‘falsely claiming £28,332 in disability benefits. . . Judge Recorder Richard Booth said the offences were disgraceful and so serious that a prison sentence was necessary (3 November). Or, ‘a man who stole to eat after his benefits were stopped. . . admitting stealing three packets of casserole steak. . . after changes to his benefits left him hungry. . . he pleaded guilty to stealing the food, worth £12.60, and was sentenced to six weeks in prison (The Northern Echo, 22 October).

RT.com on the 28 October reported on a speech by the BoE Deputy Governor, Nemet Minouche Shafik who, ‘denounced the actions of UK traders in foreign exchange, currencies and bonds markets, warning financial misconduct in these sectors goes well beyond a few rogue financiers. . . the BoE’s deputy governor said the tired argument that financial misconduct relates to the behaviour of a ‘few bad apples’ is no longer credible. Shafik suggested UK financial regulation lacks efficacy and robustness, and a regulatory overhaul is needed to fix the barrel and to get rid of the bad apples’. This statement acts as a sop to a very long list of so-called financial misconducts amongst an elite that has made the news, albeit unsensationally, since 2008. Misconduct such as the extremely beneficial practice amongst banks of mortgage selling about which Dean Baker, economist and director of the Centre for Economic & Policy Research said, ‘Knowingly packaging and selling fraudulent mortgages is fraud. It is a serious crime that could be punished by years in jail’ – However – ‘No senior bank executive has faced criminal charges following the mortgage crisis’. William D. Cohan, a former senior mergers and acquisitions banker, wrote in the New York Times that ‘not only has the government barely punished those on the hook for Wall Street crimes, the Justice Department has also offered ‘sanitized’ versions of events that led up to the crimes in its accounts given to the public following investigations (rt.com, 22 August). So Nemet, looks like there might be a few barriers in place when it comes to fixing the barrel. Or maybe that’s just on Wall Street?

It’s easy under capitalism, given all of its contradictions, to see the whole thing as some sort of lunatic asylum. But a better comparison is a prison run by the most proficient thieves. The media is utilised like the pickpocket that directs your attention elsewhere whilst another robs you. One of the things that is stolen is your capacity to think like a human being. Fear, hate and greed permeate the prison walls. But the prison isn’t escape-proof. All it takes to get out is to decide that is what you want to do, and join with others working to bring down the prison walls.

Andy Matthews

Editorial: It’s capitalism that’s to blame (2009)

Editorial from the March 2009 issue of the Socialist Standard

In the space of a few months bankers and the rest of the financial sector have gone from being the self-styled "masters of the universe" to little more than "Scumbag Millionaires" in the words of the tabloids. Even social workers, teachers and imams are getting a better press these days.

On both sides of the Atlantic, bankers are being hounded by journalists and interrogated by politicians in televised show trials. They're having to hand back the private jet and cancel the company team building event at Florida. (Realising it might look bad to take the private jet, Bank of America’s CEO slummed it on a train for 8 hours travelling to Washington to give testimony at the Senate hearing). Not all executives take well to the sackcloth and ashes: Eric Daniels, Chief Executive of LloydsTSB, tried to claim his £1 million was a "modest salary".

The blame game is in full swing with politicians, bankers and regulators all trying to place responsibility with someone else. And every so often of course, the working class are dragged into this and accused of starting the problem by daring to imagine that they could lead the lives of the class above them that have been trailed endlessly over the years in the media, so ending up over-stretching themselves to accept all those mortgages and other loans.

The current stand-off between the banks and the government exposes one of the hidden features of the market system. While the government has provided the banks with mind-bogglingly large sums of financial support, they still seem reluctant to lend. (There is even a joke doing the rounds. Apparently Gordon Brown has told the police that they should now turn a blind eye when they see a bank robbery. The reason? - he's realised that given the current stand-off between the banks and the government, it’s probably the quickest way to get some money into circulation).

But of course, while capitalism may be going through interesting times at the moment, that does not mean that the fundamental rules of capitalism are not holding. In fact we are going through such apparent upheavals in order to maintain an orderly and even conveyor belt of profit to the capitalist class. Recession is a natural part of the life-cycle of capitalism.

Economists may be confused, and financial modellers may be bamboozled, but capitalism is actually acting true to form. The fundamental requirement is for investment to deliver a return commensurate with the risk. The banks don't see many parts of the economy where they can confidently see a return on their investment, so they are refusing to lend. For the 5 percent of the world's population who don't need to work but instead live off their monopoly and the profit generated by others (or its close relations, rent and – with particular relevance to the banking sector – interest), this may be a period of uncertainty. But it’s all in a good cause, ensuring the maintenance of a healthy profit stream into the future.

There will be many innocent by-standers caught in the cross-fire of this latest in the long list of economic crises of the market system, but ultimately it’s an issue for the capitalist class. Workers shouldn't waste their time trying to sort out this mess, or to try and better regulate it. Instead its high time we posted notice on an economic system that creates chaos and is, by its nature always in crisis.