Editorial
Is a
Bailout of the Auto Industry the Answer?
The “Big Three”
American auto manufacturers – GM, Ford and Chrysler – have been demanding
massive government handouts to remain in business. GM and Chrysler have
threatened to declare bankruptcy within weeks if they do not receive billions
of dollars from the U.S. and Canadian governments, while Ford is hinting it
could do the same some time in the future if it does not receive a handout. Both
the United Auto Workers union in the U.S. and the Canadian Auto Workers union
have been lobbying their respective governments to hand over the money.
The Ontario and
federal governments have now announced they will be giving the auto companies approximately
$4 billion. The U.S. Senate voted down a bailout of approximately $15 billion,
largely as a result of Republican senators demanding massive wage concessions
from autoworkers in return for the bailout of their employers. However, it has
been announced that the Bush administration will go through with the bailouts
regardless in the form of $17 billion in “loans”, transferring funds from the
$700 billion bailout of the banks and other financial institutions. However,
Bush has made it clear that the auto monopolies will have to repay the money if
their workers’ wages are not reduced to non-union levels by March.
Both the auto
companies and the auto unions have been justifying the government bailouts on the basis of the central role played by auto manufacturing
in the North American economy. Both emphasize the hundreds of thousands of jobs
that will be lost if the auto giants are allowed to fall. The $3.4 billion
handout in Canada was accompanied by tough talk about job guarantees. However,
the money has not even changed hands and the auto companies are talking about
eliminating another 15,000 to 20,000 jobs in Canada. Both GM and Chrysler have
announced that all of their North American plants will be shut down for at
least a month this winter.
While it is true
that something should be done to stop the massive loss of manufacturing jobs,
especially in southern Ontario, handing out money to the auto capitalists is
not going to solve the problem. The massive handouts to the banks in the U.S.,
Europe and Canada were supposed to solve the credit crisis. However, to date
most of that money has gone to shareholders in the form of dividends or has
been used to buy up other banks and the credit crisis continues. There is no
reason to believe that the auto monopolies will behave any differently;
capitalists are in business to maximize profits, not to provide jobs to
workers.
The problems
posed by the economic crisis cannot be approached on a company-by-company or
industry-by-industry basis. Every sector and every job is important and it is
unacceptable for corporations and trade unions to pit one section of the people
against another by demanding that the government provide bailouts for some
capitalists and not for others. Furthermore, at best these bailouts may provide
some short-term benefits (in the form of delayed layoffs) to the workers in the
companies receiving the bailouts, but it is important to look at the effect
bailouts have on the entire economy.
The current
economic crisis is the result of a massive overproduction crisis. The
overproduction crisis, in turn, has two causes. The first cause is the huge
expansion of productive capacity which has taken over the past several decades
as a result of improvements in technology and the industrialization of the
developing countries. The second cause is the reduction in markets resulting
from the unprecedented transfer of wealth from the poor to the rich since the
adoption of neo-liberalism in the mid-1980s. Of the two, the second is the most
important factor at this time.
In order to
solve the crisis it is necessary to address these two causes. The first is an
inevitable consequence of the anarchy of production under capitalism. Every
corporation produces blindly for the market, not knowing what levels of
production their competitors are planning. The solution to this problem is
neither allowing companies to be destroyed and/or taken over by their
competitors, nor throwing money at those in danger of collapsing. Rather, the
solution is to organize production on a conscious basis, taking into account
both the rising needs of the domestic population and the trade needs of other countries.
The second cause can only be solved by transferring wealth from the rich to the
poor, that is by increasing the buying power of the
vast majority of the people, not only in the advanced countries but in every
country.
Neither problem
is addressed by simply handing over money to the capitalists. In fact, doing so
actually exacerbates the problem. If the capitalists receiving the money are
able to remain in production as a result of the handout this means that the
overproduction of commodities will continue and the recovery phase of the
crisis will be further delayed. Eventually either those capitalists or their
competitors will go bankrupt anyway because there will still be too many
commodities for the existing market. (Given their track records, the most likely
candidates for bankruptcy are the North American auto monopolies.) The second
problem will also be exacerbated because every dollar handed over to the
capitalists is one less dollar available for consumers to buy commodities and
thereby reduce the excess commodities on the market. Therefore, bailouts of
capitalists will do nothing but compound the problem and prolong the crisis.
How then should
the problem be addressed? The depth and duration of the economic crisis could
be reduced to some extent if the money being handed over to the capitalists
were to be distributed to working people and the poor in the form of increased
wages and social expenditures. That would speed up the depletion of surplus
commodities and therefore would hasten the recovery phase of the business cycle.
Many governments may eventually be forced to adopt such measures, depending on
the severity of the crisis and the degree of social unrest that it creates.
However, that will still leave the underlying problem of the anarchy of
capitalist production which will lead to yet another overproduction crisis of
equal or greater severity a few years down the road. Alternately, another
inter-imperialist world war which destroys a significant portion of the world’s
productive capacity could temporarily alleviate the overproduction crisis, but
at an enormous cost in terms of human lives and suffering.
Clearly, an
economic system which periodically destroys capital and livelihoods and which
cannot survive without massive government handouts and wars of mass destruction
is an economic system which does not work and must be replaced. Only a system
based on the scientific organization of production can solve the problems of
the anarchy of production and only a system based on satisfying the ever
expanding material and cultural needs of the people can solve the problems of
under-consumption caused by the tendency for the rich to get richer and the
poor to get poorer. Socialism is such a system and it is the most urgent necessity
of the day.