Workers World, Vol. 22, No. 23
June 3 – On May 14, 1980, President Carter met with the top auto industry executives and leaders of the United Auto Workers (UAW). The meeting was largely ceremonial and without any substantive results. It was, however, deeply symbolic. It signaled one of the most remarkable developments in the economic evolution of American capitalism.
The auto industry magnates did not come to the White House merely to complain, as they are generally wont to do, about the “high cost” of anti-pollution and safety devices for automobiles or supposed “over-regulation of industry by government.”
On the contrary, for the first time in the history of the auto industry, the auto bosses came to solicit aid from the government. This constituted an historic reversal of the first magnitude, when one considers that auto is one of the richest and most powerful industries in the country and that auto production occupies a key role in the general structure of American industry.
The auto barons soliciting state intervention in their own industry. That would have seemed incredible a decade or two ago. Yet that is what the meeting between the White House, the auto officials, and the UAW was all about.
The solicitation of state intervention by the auto companies, coming as they did virtually hat-in-hand to the government asking for aid, is tantamount to a confession that the main bulwark of the old, passing competitive system is bankrupt.
No longer is the struggle on the international arena to be among individual, large, highly concentrated corporations and industries. What is now happening before our very eyes is the transformation of this struggle, as a result of continual state intervention and amalgamation, into an acute, poisonous rivalry among the imperialist countries.
Hitherto, American capitalists in general and the steel and auto officials in particular contemptuously referred to state capitalist intervention on behalf of industry as the “European disease,” and, ever since the Labour Party has been in and out of office, as the “British disease” and “creeping socialism.”
Statism, that is, the intervention of the capitalist state to aid ailing or collapsing industries, is supposed to be something wholly foreign to the American system of “free enterprise.” Of course, nine-tenths of this capitalist demagogy is for popular consumption and based on a completely false picture of the relationship between the capitalist government and industry in general.
One merely has to bear in mind that such industries as aviation have not only been aided and subsidized by the government, but encouraged, promoted, and supported financially by taxpayers’ funds generously handed out by Congress. It is likewise true, and has been true for many decades, that the U.S. government has subsidized as well as maintained the railroads, the shipyards, the maritime industry, and a host of lesser industries, including agriculture, from which the agribusinesses reap untold hundreds of millions in profits.
In the field of communications, the U.S. government has played a preeminent role and is wholly responsible for development of the aerospace industry and the launching of satellites for so-called peaceful purposes. The making of COMSAT would have been impossible without capitalist state support and maintenance.
Indeed, so widespread has capitalist state intervention become that nowadays when speaking of industry, one must specify whether it is of the public or of the steadily diminishing private sector. Nevertheless, it has been true that automobile production, which is responsible, directly and indirectly, for one out of six jobs in the U.S., has been relatively free from state capitalist intervention.
Of course, it goes without saying that auto, as one of the truly most powerful segments of industry in the entire U.S., has been generously aided by the capitalist state indirectly through fast tax write-offs and other privileges not accorded in the tax laws to smaller industries.
Notwithstanding all that, however, the auto industry has been, when one considers its massive character, the showpiece of the “free enterprise” system. Of course, this has to be understood in the historical context of the domination of monopoly capitalism generally, when there has been the fusion of the banks and industry and the general conversion of competition into monopoly.
However, the development of monopoly capitalism, as Lenin pointed out some 70 years ago, did not abolish competition as such. Competition and monopoly exist side by side and are in constant struggle with each other.
The growth and development of the U.S. auto industry as a virtual world empire within the system of monopoly capitalism has helped to mask the monopoly character of the system as a whole. The very prevalence of acute competition among the auto giants both at home and abroad has helped to mask it further.
At all times, however, the auto industry has been regarded as the incarnation of the very spirit of the free enterprise system, even when the earlier, smaller auto companies were being swallowed by the larger ones. But that, as the saying goes among them, is the name of the game – competition. However, it is this very competition which is responsible for having reduced what were once 25 to what are now basically three large auto companies.
In its earlier years, and particularly during the darkest days of the witch-hunt and cold war, Walter Reuther, the then-president of the UAW, frequently used to boast, particularly during his anti-communist missions abroad, that “free labor and free management collectively bargain without government compulsion or intervention.”
The White House meeting between Carter, the auto magnates, and the UAW officialdom signaled the end of that much vaunted era in collective bargaining. Today, it is the capitalist government, operating supposedly “in the interests of the good and welfare of all the people of the country,” which has set the onerous anti-labor terms of the UAW-Chrysler collective bargaining agreement and is also placing rigid financial terms in the functioning of the Chrysler Corporation, one of the three giant legs on which the U.S. world auto empire still rests.
Several months before the negotiations for the UAW contract began, President Douglas Fraser sternly admonished the Carter administration to “stay the hell out of the negotiations.” Six months later, he was imploring the same administration for its benevolent intervention.
As late as May 14, the collapsing Chrysler Corporation announced through its chairman, Lee Iacocca, that the company might not need any of the emergency public financing approved by the Congress after all. “The banks,” he said, “are definitely moving to help the corporation” so the government money presumably won’t be needed anymore!
“It looks,” he triumphantly said, “like we may now really be set.” He attributed his optimism to “a stronger than anticipated market.” And now that the president had signed the bailout law, Iacocca said, “Everyone seems to want to come to the party” (New York Times, May 14, 1980).
Only 14 days later, it was revealed that the Chrysler Corporation was unable to raise the money from private banking sources without the U.S. billion-and-a-half dollars aid. The Chrysler Corporation was forced to yield to the government the most sweeping powers, which, in the words of the Wall Street Journal of May 28, 1980, “would allow Washington to dictate to Chrysler everything from long-term strategy in major contracts, to such relatively minor things as office space, rent, and plant maintenance.”
Such a sweeping, full-scale surrender of power by a giant multinational corporation to the capitalist state could have come only as the result of urgent, imperative need and deep-seated objective causes that go far beyond the surface manifestations of lack of efficiency, poor management, lack of alertness in not changing over quickly to fuel-efficient cars, and so on. The smaller the car, the smaller the profit.
When the Chrysler Corporation first announced more than a year ago that it was unable to meet its financial obligations and would need assistance from the government, the management of Chrysler was attacked from both left and right. The bourgeois liberal arguments were based primarily on spurious assumptions that the cause of the virtual bankruptcy of the corporation was inefficient and stupid management, mistakes which a more capable, more wide-awake management could have avoided.
This is a garden variety argument dished out on the eve of every economic crisis to explain why large corporations or banks go under. While it is true, of course, that the Chrysler Corporation did not show eagerness to opt for the smaller, more fuel-efficient cars, the same is equally true of Ford and General Motors.
The argument about efficiency is the least significant. The Chrysler Corporation is the tenth largest industrial corporation in the world. So far as efficiency goes, Chrysler can argue in its defense that it was renowned for its engineering innovations – it had invented the first streamlined car, it invented the fluid drive which became the automatic transmission, it invented power brakes, power steering, and power-operated convertible tops.
Chrysler’s real fault is that it is one-third the size of GM and one-half as big as Ford.
This has prevented it from taking advantage of the economies of scale and design, engineering and production that giants like Ford and juggernauts like GM enjoy. For example, designing and building a four-cylinder production line costs $500 million because the line is highly automated, it can run 24 hours a day, costing GM half as much per car to produce its 600,000 cars as Chrysler spends on 300,000.
When the UAW was in a stronger position many years ago, its leaders could speak more frankly in laying bare the real reasons for the collapse of smaller auto manufacturers swallowed up by the larger ones, especially in the face of automation.
“If you are selling a car at a certain price,” said Walter Reuther, then-president of the UAW, “and if you can double the volume of the production of that car, then you get the benefits of that greater volume, and the efficiency of that greater volume and you can then lower the price – this is true of the automotive industry. It is clear that the larger producer will have greater advantages out of automation that a small producer will not have access to. If you get the volume up high enough, you can get the unit cost of production down to make yourself competitive. If your volume is not sufficiently high, then all the king’s men cannot solve the problem of high unit cost because of low volume.” (Testimony at hearing before joint committee on the economic report of the U.S., October 14-28, 1955, Automation and Technological Change.)
It should be clear that Chrysler, notwithstanding the oil crisis, and notwithstanding the current economic crisis, is a victim of the very competition which the so-called free enterprise system champions and which eventually leads to monopoly.
It has also been a matter of pride for Ford and GM that in general they have had only an insignificant share of their production in defense contracts – at least until now. (Chrysler, on the other hand, is 13th among the 100 largest prime defense contractors.)
One need not take the word of Karl Marx that the very nature of competition ultimately leads to monopoly. There are almost daily reminders of this in the capitalist press these days. For instance, a report recently published by the Organization for Economic Cooperation and Development (OECD) states that “There is a growing realization that significant further increases in the level of [industrial] concentration can present risks.” Among the risks of concentration, meaning the growth of larger and larger corporations on the basis of mergers and the swallowing up of smaller companies, is that “in the highly-concentrated industries prices will tend to be higher and output lower than would be the case in the conditions of competition.” (New York Times, April 28, 1980, our emphasis.)
The automobile industry in the United States, this report finds, is among the most concentrated in the world. The study verifies that once competitors are eliminated, as may be the case with Chrysler, the end result can be for prices to rise, even on smaller cars. Rather than being a hedge against inflation, the growing monopolization of these huge means of production in fewer hands will again regenerate the engines of inflation.
The OECD report also verifies that improvements in technology and managerial efficiency, the lack of which are said to be in part responsible for the collapse of the Chrysler Corporation, may be discouraged as a result of the elimination of competition, thereby adding to costs and prices and ultimately adversely affecting foreign trade.
But the Chrysler Corporation is only a spectacular example of how the auto industry in general is now falling victim to world competition among the monopolistic groups in the world auto industry, which threatens the position of Ford and to a lesser extent GM, which have done so much to undermine Chrysler. The competition is coming mostly from Japan, but also from West Germany, and it is of a dimension that cannot be overcome this time merely by increasing the volume of cars produced.
It is necessary to sharply reduce the unit cost per car if it is to be fuel efficient and meet the standards required at a time of rising oil costs. To do so requires a virtual retooling of the entire auto industry. Large infusions of capital are required in amounts estimated to be beyond $80 billion. It is this requirement which has forced the auto barons to finally come to the White House hat in hand and apply for assistance, either direct or indirect, overt or covert, as is frequently done in order for the capitalist state to intervene.
What it means in terms of social cost is that the ailments of these giant industries are transferred onto the capitalist state, which in turn distributes the malaise onto the shoulders of the mass of the people and, in particular, the working class.
It is one thing for a growing, vigorous capitalist state in its early stages of development to protect an infant industry and support it financially with a view toward its further progressive development. It is an altogether different matter when a capitalist state in its decadent stage, overburdened by a gargantuan and ever-expanding military budget and having absorbed a multitude of insolvent, decaying industries, has to also absorb the financial woes of the last significant bulwark of the free enterprise system.
The capitalist state thus becomes the collective exploiter on behalf of all the individual giant conglomerates, who are no longer able to continue the so-called normal exploitation in the old way.
This in turn means that the auto industry, which until now has been regarded as a principle contributor to the general trough from which some of the giants of American industry have been fed, will now also become dependent on being fed from the same trough.
Its role is thus changing from that of a contributor to an appropriator. This diminishes the general availability of funds. Either the industrialists will be able to raise the necessary capital to crank up the industry anew by themselves, which is doubtful, or they will shift the burden to the capitalist state, which is more likely.
In either case, the retooling can only come as a result of intensified exploitation of the workers. If the industrial magnates have their way, they will try to overcome their shrinking role in the world market by intensifying the struggle against the workers. Such an effort by the giant auto corporations, now allied with the state, will, as a result of the economic consequences which will fall on the backs of the workers, inevitably bring about a counter-attack.
It should be the countervailing force to that so-called European or British disease of which the industrial magnates are so fearfully contemptuous of – namely, a new, more powerful and unprecedented radicalization of the workers.
Last updated: 11 May 2026