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Ernest Erber

Open the Books – Towards
Workers Control of Production

(29 April 1946)

From Labor Action, Vol. 10 No. 17, 29 April 1946, p. 1-M.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The demand of the United Automobile Workers that General Motors “open their books” to the union has been greeted with more enthusiasm than understanding in the ranks of even the politically advanced workers. Very much of what one hears and reads about the slogan is terribly naive, if not infantile. But worse, most of the comments reveal that the far-reaching revolutionary implications of the slogan are not understood.

Let us first set straight what the demand did not mean. It did not mean, as so many assume, that General Motors make public its earnings for the last years. These are not a closed book. Anyone can go to a public library and secure one of the various annuals that give reports on the financial situation of joint-stock corporations and secure a record of General Motors earnings before and after taxes, and various other data on its financial situation.

No investor would sink a dollar into the stock of a corporation unless he had such information. The financial pages of the newspapers, special investor’s reports and services, monthly reports by the large banks, and other sources, regularly report on these matters. This is required by law and has been almost since joint-stock corporations assumed important dimensions. The law which established the Securities and Exchange Commission further tightened up the requirements for public reports by corporations on their financial standing. These “books” are always open to accountants from the Treasury Department for purposes of checking on tax remittances. Any single stockholder can secure a court order for access to the financial records of the corporation if he has grounds to suspect that his interests are not being safeguarded.

It is, of course, true that the financial reports which are public property often conceal hidden assets and, in other ways, juggle the accounts to add to the corporation’s wealth without full payment of taxes or declaration of maximum stock dividends. The stockholders are often milked by the “insiders” who control the corporation by means of special “bonuses,” often consisting of blocs of stock, voted to the officers, or by means of inflated salaries to the executives. It must also be remembered that if the earnings show up badly the price of the stock will fall. The “insiders” may manipulate this for one or two years in order to buy up the stock at deflated prices but this cannot be a consistent practice even if they could avoid prosecution by the SEC. It is these malpractices that the SEC was created to combat. This, however, has mostly to do with the defrauding of the middle class investor by the big capitalist or the defrauding of the government. Its main aim is not to hide the corporations earnings from the unions.

What the Auto Workers Wanted to Know

If the demand of “open the books” merely meant the right of the union to know how much the company earned it would certainly not be anything new in the labor movement. The practice of demanding that the employer make known his financial standing has been a standard procedure in negotiation for a long time, particularly on the part of the AFL unions who deal with small employers, as for instance the teamsters, printing, building trades, food industry, etc. The best organized system of examining the employers’ books is operated by the ILGWU in the ladies garment trade. The small shop character of this and other needle trades industries requires that the union deal mostly with privately-owned shops or partnerships. In these cases the union has no other means of checking the financial records of the employer except to examine his books. The ILGWU maintains an extensive accounting department that occupies itself exclusively with this task.

That the auto workers were not concerned with this aspect of “the books” is obvious from the brief which they submitted to General Motors as the statement of their case in the negotiations. Their brief contained a detailed account of General Motors earnings from 1917, when the corporation was organized, to 1944.

What, then, DID the auto workers demand to know?

What they wanted was access to the production data of General Motors or, as it is usually known, the cost accounting system.

What is the significance of this?

Precisely in order to know, not what GM earned last year, but how much GM will make this year and, therefore, how much it can pay.

What the union wanted to know were the exact figures on increased productivity of labor in GM plants, how many man hours it takes to machine an axle, how a new power press has reduced the man-hours per so many fenders, etc. What the union wanted to know was just how much did it cost the corporation to manufacture a Buick in 1936 and 1940 and how much will it cost in 1944. What the union wanted to know was just how many cars does GM expect to produce in 1946? What the union wanted to know was just what effect has the expansion of GM plant space by government building of war plants had on GM production costs? Just how has the replacement of thousands of machine tools by new equipment furnished by the government during the war increased industrial efficiency? Just what new wrinkles have GM production engineers added to the assembly line process? Just what degree of speed-up is involved for the workers? Just how is GM planning to make use of new discoveries in chemistry, electronics and other fields during the course of the war? What will be the “workload schedule” for the some 92 odd GM plants all over the country? How much over-time is being scheduled? When and where are layoffs indicated?

It is precisely this information which is necessary in order to know how much GM will earn in 1946. But this information is the most guarded secret of any large corporation. This is what Charles Wilson, GM president, referred to when he said that “we don’t open our books to our own stockholders.” This is what the head production manager of GM sparred around with in an exchange with Walter Reuther during the Pittsburgh sessions of the negotiations. In answer to Reuther’s question as to how GM computes the cost of a certain part, the production manager grinned and replied: “We make a good guess.’’. It is this information which GM refused to turn over to the War Production Board during the war on the grounds that it is their top commercial secret and turning it over to the WPB may lead to it falling into the hands of GM’s competitors.

The Significance of This Demand

What is the tremendous significance of the union wanting to base its wage demands upon what GM will earn in 1946 instead of what they did earn last year?

The tremendous, even revolutionary, significance comes under several headings:

Firstly, it runs counter to the entire basic principle upon which capitalism pays wages. Under the capitalist system, wages are paid out of existing capital. As Marx pointed out nearly a hundred years ago, the capitalist buys labor power, that is, he buys the workers ability and availability to labor rather than paying for labor performed. Marx used the term “variable” capital to describe that portion of capital which is used for the payment of wages. The capitalist pays wages in accordance with its market price, that is, pays as little as he can to get the kind of labor power he needs, just as in buying any other kind of commodity. The market price of labor power (wages) is determined, roughly, by the cost of living (based on a prevailing standard) and the law of supply and demand (the amount of competition for jobs).

The union demanded, on the contrary, that General Motors reveal what it expected to earn in 1946 and base its wages on ability to pay as revealed by those figures. The union does not want labor power to be regarded as a commodity to be purchased in the market for the lowest price it can be obtained. The union does not want the workers to produce tremendous profits for GM in order to be able to ask for a little more in 1947 by pointing to the 1946 earnings. The union demands that if the “books” show that GM will produce at lowered costs in 1946 and increase its income, that labor share in that increased income by higher wages now.

In short, implied by the union’s demand is a rejection of the whole basis of the relationship between labor and capital that prevails under capitalism and the establishment of a principle for the remuneration of labor which, in the last analysis, can only prevail under socialism.

Secondly, the demand to open the production schedules and cost accounting records to the union means to admit the union into what the capitalist press refers to as the “sacred rights of management.” It is this which caused GM executives to get blue in the face and scream about labor getting a “finger in the pie.” The crucial importance of keeping labor away from any voice in problems of management has long been recognized by capital. This is why almost every union contract has a clause inserted by the company’s attorney which states that nothing in the contract can be construed as authorizing labor’s interference with the rights of management in the sphere of production.

A Step Toward Workers’ Control

To “open the books,” in this sense, is the first stage toward workers’ control of production. For the right of labor to keep itself informed on production data to be effective, it must be done on all levels of labor-capital relations from the main office of GM to every division plant, to every separate building, to every department. Who will exercise this right on behalf of the union? Only the hired accountants of the union? No! The latter will work under the jurisdiction of union committees. On a department and plant level these will be the shop stewards’ councils and shop committees.

What will happen to the authority of management if the shop committee can go to the superintendent and ask to see his production plans for next month? What will happen if they demand a 10% slow-down of the assembly? What will happen if they demand that the wages of milling machine operators be increased because of the introduction of a fixture which permits doubled output? What will happen if they demand that he cut down on overtime in department 12 and quit laying off men in department 9?

This is what will happen: the workers will enter stage two in workers’ control of production – the right of the shop committees to veto, to counter-propose, to countermand, in short, to use their organized strength to impose,their own ideas on production upon management.

Can such “dual power” prevail in the shop indefinitely? No. Such industrial democracy is incompatible with the industrial dictatorship of capitalism. One or the other will prevail in the long run. For workers’ control of production to prevail, it must be fortified with a political power that is also “dual,” in this case, to the capitalist government. In the last analysis it is control of the power of government that decides. That is why workers’ control of production must lead to a workers’ government and, through it, the nationalization of industry under democratic management. This is, of course, what we call Socialism.

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Last updated: 20 January 2019