From Fourth International, vol.3 No.2, February 1942, pp.47-49.
Transcribed, Edited & Formatted by Ted Crawford & David Walters in 2008 for the ETOL.
In a pamphlet called New Horizons of Industry General Motors a few years ago waxed poetical on the auto industry in words that are now ironic:
“Cars ... millions of them ... teeming broad
The Future ... even more miles per gallon
Unfortunately the car that parks itself will be long delayed. The war has brought the shut-down of the auto industry; the world’s biggest manufacturing enterprise has come to an end as a consumers’ industry. The conversion of the industry to war production has destroyed at one blow the object of international awe and envy – motorized America. The full significance of this event has yet to be grasped by the American people.
The army will be put on wheels, but the people of the United States, like those in Europe, Asia and Africa, will revert to the bicycle, the carriage and their feet.
Despite recurring economic crises, a myth of world-wide popularity persisted that the United States was somehow exceptional, that its high standard. of living would go on forever. “Proof” of that myth was that depression or prosperity, millions of Americans drove around in automobiles like millionaires.
Along with the symbol of a nation on wheels, the war has buried the illusion that the United States was immune to the laws of our epoch – the laws of the decline and permanent crisis of capitalism. These laws, unlike the legislation governing excess profits, enforce themselves and cannot be circumvented.
The death of the auto industry as a consumers’ industry destroys that illusion. This industry will be devoted henceforth solely to military production, to which the science, the technology and the productive power of humanity have been condemned by imperialism.
In this new field of production the same auto barons will pursue the same ends with the same methods as before. Only the plants will be converted, not the bosses. The grueling speed-up and stretch-out will be enforced upon the workers, as usual. The purchaser will be squeezed; the difference being that in the case of military production the purchaser is the government. While millions of people will suffer the loss of the use of motor vehicles, the owners of the industry will lose nothing. They will not only maintain their profits-as-usual, their power-as-usual and their privileges, but will acquire in addition an expanding market, extended properties and guaranteed profits. The auto goes ... but the auto profiteers remain.
Many illusions still prevail concerning the automotive industry. The belief is general that this industry swam against the stream of world decline and by its continual growth proved that capitalist enterprise still had a future.
Bourgeois apologists since the 1929 debacle have pointed repeatedly to the motor vehicle industry to prove the viability of capitalism. With their favorite child interred by the war,
these economic commentators are deprived of their fondest argument for the system of private ownership of the means of production. But even before the war their glowing picture of the auto industry was false to its actual history.
Auto was the last major industry to appear on the scene. It became the strongest link in the economic system, providing a new and huge field for the products of heavy industry. Here the technique of mass production reached the apex of development under capitalism.
In a very few years the motor vehicle industry developed into the greatest manufacturing enterprise in the world. Between the years 1900 and 1937 the industry produced and sold almost 30 million cars in the United States – one for every four persons.
No industry ever provided such gigantic profit returns on investment. It is said that steel has been the leader of American industry. To a degree this is true. But when it came to profits, auto was the juiciest plum. In 37 years of corporate life, US Steel earned an average of $76 million a year. But General Motors, in an industry which came later on the scene, in 29 years of corporate life, earned an average of $85 million annually. (Automobile Manufacturers Association, Auto Facts and Figures)
The secret of these huge profits lay in the advanced process of manufacture, in which the most highly developed and rationalized division of labor produced a high rate of exploitation of the workers. Of all industries of comparative size the auto industry was first in value added by manufacture. (Report on the Motor Vehicle Industry by the Federal Trade Commission, 1940) In the year 1935, for example, the rate of exploitation of labor (value added by manufacture divided by wages) was over 220 per cent in the auto industry, and 150 per cent in the steel industry.
At the turn of the century the steel industry was already reaching stagnation. It had come completely under control of Wall Street financiers, and was already suffering from the disease of “stability.” It had become an almost complete monopoly and offered comparatively little field for new investment or expansion.
At the very period in which steel was sinking into stagnation, auto began to grow.
Appearing late on the industrial scene and with all the previous development of productive methods to draw on, auto grew at a terrific pace. It compressed its growth into a few fast and furious years.
“In its early days, at least 1,500 distinct species of automobiles came into the market,” wrote Alfred P. Sloan, Chairman of General Motors. “But in a scant score of years this number was reduced to about 35.” Thus not only the growth of the industry was unprecedented, its rapid development into monopoly was equally unprecedented.
More than any other industry, auto, as the preceding figures show, got rich quick by means of ruthless exploitation of workers. It developed to an exact science the method of squeezing the last possible ounce of energy from its workers. The tens of thousands of farmers, hill-billies, immigrants, and boys who were herded into the plants were subjected to a productive regime that strung their nerves and their muscles taut in the murderous “stretch-out” and “speedup.
To explain and justify the murderous hell of the conveyor system, Henry Ford wrote: “Some of our tasks are exceedingly monotonous, but many minds are monotonous many want to earn a living without thinking, and for these men a task which demands no brain is a boon.” To assure that these brains would not suddenly appear and assert themselves, Ford organized his Service Department, an army of 5,000 trained thugs, skilled in the science of intimidation.
Frederick W. Taylor, father of the conveyor system and exponent of scientific speed-up, said: “The idea of efficiency in industry is to simplify the work to such a degree that it can be done by trained gorillas.”
Ford and Taylor express the social outlook of the industry. Theauto barons combined the most advanced application of division of labor with the most barbaric attempt to reduce human beings to the status of trained animals.
By means of this intense exploitation, the auto tycoons made greater fortunes out of less actual capital investment than any potentates the world has ever seen. One original $10 share of General Motors stock in the 22 years ending with 1929 brought in (including cash and stock dividends) almost $13,000 to its owner. Every single hour in the last fifteen years, the Du Ponts, who control one-fourth of General Motors stock, harvested about $5,000. (Compiled from GM annual reports.)
As the industry grew rapidly during the first two decades of the century, it was just as rapidly monopolized by Wall Street. In 1920 its income was 18 times greater than in 1908. At the same time it became centralized. By 1911, Ford and General Motors were selling 36 per cent of all cars. By 1921, when the, industry was only about fifteen years old, Ford and General Motors controlled 67 per cent of the market. Since 1929 the Big Three, Ford, Chrysler and General Motors, have divided between them 90 per cent of the market, and 98 per cent of the profits.
Thus the development of the new industry, far from proving that in the United States there was room for new independent enterprises and the flourishing of free competition, proved the opposite. By the time the auto industry appeared, manufacturing was under the control of big banking. The real founders of auto, men like Buick, Nash, Studebaker, Chevrolet and Durant, were crushed by the Morgan and Rockefeller banks. Ford, the sole survivor of the original founders, had to become a banker himself, and though he “hates and despises” bankers, is a big financier in his own right, with a major interest in the National City Bank of Detroit, which is part of a huge international banking systern.
The fall of American economy after 1929 did not except the automotive industry. In fact, it took only 20 years for the industry to approach exhaustion as a field for investment and expansion.
In General Motors, for example, investment in its division of motor vehicle ‘manufacturing decreased more than one hundred million dollars between the years 1928 and 1937. To resolve the problem of auto’s stagnation, and to find new fields for profit, the corporation expanded into all sorts of subsidiary fields. It developed ethyl gasoline, on which it has a monopoly; it invested in Nylon, Frigidaires, appliances and gadgets of all kinds. Since this was not enough to keep its huge profits in action, General Motors exported capital to all countries and continents. All the big auto corporations built plants in Europe, South America, Africa and Asia.
General Motors in 1928 expanded and improved its plant by reinvesting over a hundred million dollars of its profits in the business. This high point was never again reached and has steadily declined, despite minor spurts. In 1939 only $23 million were reinvested in the business.
The illusion of expansion of auto after 1929 was created not by the growt of the industry as a whole, but by the aggrandizement of the Big Three at the expense of the small independents.
The rise in the amount of inactive surplus suffices to prove the stagnation of capitalism’s favorite child. In General Motors the average inactive surplus in its reserve fund rose a quarter of a billion dollars between 1928 and 1937.
Since 1928 profits in GM fell from 66.24 per cent to 37.30 per cent in 1937. It never again reached the 1928 high.
Automobile production became “stabilized” in General Motors. The total production remained stagnant from 1929 to 1940, save for minor fluctuations. In 1929 the net sales reached $1,532,213,000. The average annual net sales since 1929 have been about one billion dollars. The market was saturated; the industry could no longer expand.
The Ford Motor Company history even more graphically illustrates this decline in the automotive industry. From the early 1900s to 1922 Ford grew by leaps and bounds. The Flivver King added hundreds of millions of dollars of capital investment to his plant. But from 1922 to 1937 the amount of profits reinvested by him annually in auto production declined from $102 million to a scant $8 million.
Ford’s inactive surplus mounted from $167 million in 1920 to $608 million in 1937.
Ford profits fell to unbelievable depths. He had built up a plant which turned out the automobile almost from beginning to end with Ford machinery and Ford labor. He had invested in minis, oil fields, fleets of ships, and made a high proportion of his own parts. But he had thereby over-capitalized. The result was that since 1927 the average annual rate of return on capital investment has been only 0.04 per cent, a fall of over 13 per cent since 1929.
Despite the huge total profits and seemingly great production of auto, the industry has used less than one-fifth of its productive capacity. B.D. Kennedy, in his book, The Automobile Industry (1941) says: “Had the auto maker gone in for maximum production he would have turned out 24 million cars a year.” Never, however, has the industry produced more than five million cars – one-fifth of capacity. Capitalism has made it impossible.
A system which in such a short period of time dooms an industry to stagnation is obviously outworn and sick unto death. This industry, tooted as the young champion of capitalism, has been able to breathe in recent years only by means of artificial respiration. Three out of every four cars were sold on time payments, and most of these by means of tradeins. And every year the number of used cars increased and further glutted the market. General Motors, Ford and Chrysler were forced to go into the finance and used-car business, to pump the sale of cars into a saturated market.
The auto barons attempted to hold on to the consumers’ market as long as possible, despite the war. The employment of many workers in military production created an enlarged consumers’ market which the auto barons could not resist.
They had a chance to chalk up a huge record of sales and profits. This they did in the first nine months of 1941 when they sold $430 million worth of cars, more than in the entire year of 1940.
During 1940 and 1941 the auto barons consented to operate in the field of military production only if the government built and paid for new plants for this purpose while regular auto production would continue. On those terms, with Knudsen’s help, General Motors, Chrysler and Ford went into the armaments business. But auto is the industry which draws most heavily upon the product of heavy industry. It drained the supply of steel, rubber and oil, of which it was the largest single consumer. It also consumed more glass, malleable iron, nickel, lead, gasoline, etc. than any industry. It used 12 per cent of all available lead, 10 per cent of the zinc, 65 per cent of the leather and crowded the railroads with shipments which demanded one out of every eight freight carloads. These figures are for earlier years; in 1941 auto used even larger amounts of strategic materials. Despite these wellknown facts, and with the above listed products among the major needs of military production, the auto barons insisted on “business as usual.” The government did not step in until the last desperate moment after Pearl Harbor. The needs of plutocracy were more important than the needs of “democracy.”
Capitalist America used to point to auto as the keystone of the economy. Now, in the war crisis, it became the wrench in the works.
The wiping out of auto production also demonstrates more than anything else how modern war must cut down the production of consumers’ goods or eliminate them completely, and consequently wreck living standards. This dying system can utilize the science and technology of society only for destructive purposes. Auto’s blackout is the blackout of a tremendous industry which immediately affects the average American. But this is only a particularly dramatic case of an all-enveloping process. Every day the making of things which are the sustenance of the American people will be sacrificed to the manufacture of the means of mass murder.
Far from proving the viability of capitalism, the fate of automotive production proves that Wall Street to save its property and its profits must destroy piece by piece the industries upon which the American “high standard of living” has been based. This “high standard of living” has been among the first victims of the second World War. So long as a handful of parasitic capitalists control the major productive resources of the country, industry will be used for the aggrandizement of a few and perverted for imperialist slaughter.
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Last updated on 19.8.2008