Anatomy of the Economic Crisis [Sam Marcy]

Monopoly and the labor movement

Chapter 7
The UAW crisis: Is Ford really broke?

March 2, 1982

Of all the dramatic developments which have convulsed the auto industry and the United Auto Workers (UAW) union, the most interesting is precisely the one which has received the least publicity. It goes to the very heart of the problem facing the UAW.

When the UAW rank and file voted to give up $1 billion from their wages in concessions for the company, they did so in the shadow of the highly publicized $1.06 billion which Ford supposedly lost last year. The UAW concessions and the savings to the company, it was also widely publicized, were to enable Ford to modernize its plants and thus achieve greater sales.

Lost somewhere in the company's long explanation and multitude of figures regarding its losses was a rather inconspicuous item regarding Ford's financial standing during the year. According to David Healy, an analyst for the investment firm of Drexel Burnham Lambert Inc., a major factor contributing to last year's poor performance was a loss of 576 million mostly sustained while converting British pounds and West German marks from its European operations into dollars.

According to this authority, these currency losses by Ford "masked a real upswing in overseas operations" (New York Times, Feb. 19, 1982).

What does it mean in relation to the Ford contract? It is first necessary to translate the confusing financial jargon into plain language.

The financial losses of the auto industry, which the UAW union leadership has focused so heavily on, are overblown and not put in the perspective of the truly tremendous assets which the industry has available to it.

As we pointed out in an earlier article, the auto industry has available a truly extraordinary sum — $80 billion — which it can invest or use to modernize as it sees fit. The losses of the industry when compared to this truly staggering sum are really negligible. This 80 billion investment fund was authoritatively disclosed in an article in the New York Times as long ago as July 20, 1980.

But even not counting this huge amount, the publicized loss of $1.06 billion is exaggerated.

How multi-nationals profit from currency manipulation

As this investment firm clearly shows there was an upswing in production in Ford operations which would have shown a profit had it not been for currency manipulations and the loss of $576 million on the currency market. How do such things happen?

A vivid example was seen on February 18, 1982, when the Mexican government announced that it had devalued the peso by 30%. Here's how this works: If you had a dollar on February 17, you could have bought 26.8 pesos for that dollar; after February 18, if you had a dollar you were entitled to get 38.5 pesos to the dollar. The peso thus got cheaper in relation to the dollar.

If you were a Ford executive and had to meet a payroll at a Ford facility in Mexico, of which there are several, you would have to pay the workers in pesos. For the same dollar that you purchased 26.8 pesos with last week, you could now get 38.5 pesos.

Thus, the Ford executives paid out less in dollars than previously. If the payroll was 1 million after a 30% devaluation of the peso you gained 30% on the dollar, perhaps as much as $300,000. And the workers, in reality, suffered a wage cut.

Since the currencies of oppressed countries have been unstable and subject to devaluations, especially since the Second World War, the U.S. multi-national corporations stand to make huge profits. Aside from anything else, this is an incentive for the multi-national corporations to not only go after the natural resources of oppressed countries but to generally entrench themselves in the world currency market so as to be able to transfer dollars from one country to another in order to enhance profits.

And this can be done most effectively because of the predominance of the U.S. dollar despite worldwide capitalist recession and its deep and profound effects in the U.S.

It is important to note that on February 23 some of the European capitalist countries, weakened by the deepening economic crisis, devalued their currencies. The Belgian franc was devalued by 3%, and the Danish krone followed suit. The Irish government seems on the brink of doing likewise. And the nervousness among the British, French, Germans, and Italians is becoming steadily more intense.

The question of whether another round of devaluations will occur is not far from the calculations of the West European and Japanese capitalist governments.

What further significance does this have for the Ford contract, aside from the fact that if a currency war breaks out in Europe it could considerably diminish and even reverse Ford's alleged financial losses?

What does it mean from the point of view of the bread-and-butter issues which face the auto workers in the U.S.?

The parasitism of exporting money capital

Giant multi-national corporations like Ford, Chrysler, and GM have at their disposal truly vast sums of money. They invest these sums not merely in production facilities abroad, out-sourcing, etc. They have also accumulated over the years huge sums in the form of "retained earnings," a code word for profits. They use this money at will, to invest throughout the world in so-called capital appreciation, i.e., currency speculation.

The huge conglomerates that are spread over the whole capitalist globe are engaging in a form of capital export which Lenin pointed out as long ago as 1917 was a parasitic development characteristic of monopoly capitalism.

In the pre-imperialist epoch, the export of commodities, that is of useful things, was the principal characteristic of capitalist trade and commerce. Today, however, it is the export, not so much of commodities, of useful things, which is primary, but the export of money capital.

It is so much easier to make a killing by currency manipulation like some of the multi-national corporations just did in Mexico than it is to make profits by exporting commodities It is easier for Ford GM and Chrysler to transfer the vast funds which they hold abroad from one country to another and make huge profits than it is to sell U.S. cars abroad.

And it is even more perilous for the auto monopolies to construct an assembly plant or a parts plant abroad due to political conditions which are dangerous to U.S. imperialism although the potential profits there are still enormous.

The easiest and quickest way to make the biggest profits lies precisely in exporting capital in money form, loaning it out transferring it back and forth through monetary manipulation and playing the currency exchanges where billions of dollars can be made or lost overnight. This is what enhances the profits of the largest corporations together with the biggest banks.

Benjamin J. Stein, writing in the February 28, 1982, New York Times Magazine, estimates that the U.S. has $200 billion in loans outstanding in the underdeveloped countries. The auto and banking industries have no small sum in this huge amount.

The $80 billion available to the auto corporations is only a small part of a huge pool of capital which is floating on a world scale.

Capital goes to where profits are greatest

Capital has an undeviating tendency to gravitate to where the rate of profit is highest. It breaks down legal and national barriers with virtual immunity. It owes no loyalty to nationality, has no moral principles, uproots the national cultures of oppressed people, and is concerned least of all with the plight of the workers who have to endure untold suffering as a result of its devastating operations.

Capital on wings soars day and night. The multi-nationals or, more accurately, the transnational corporations, have billions of dollars in numberless banks. They are spread over the seven continents and are particularly active throughout the European money market through the use of what are called Eurodollars.

At any one time, the multi-nationals transfer funds not merely from one bank to another but from one country to another deriving advantage from one currency's devaluation as in Mexico losing some as perhaps in Belgium but over all making lucrative and extortionate profits on the basis of evading taxes at home and engaging in currency manipulation and devious currency transfers abroad.

In 1972, there was close to 800 billion worth of Eurofunds of which the auto funds then represented a small part. Today, with declining profits at home, the auto money has flown abroad where the profits are greatest.

It should therefore be no surprise that the $80 billion auto investment sum is not, as advertised, destined mainly for the modernization of plant and equipment. The gravitational pull on auto and banking generally is from another direction. This development is highly parasitic, adventuristic to the extreme and dangerous to the very shaky stability of the entire capitalist system.

UAW-Ford contract not mere tactical retreat

It is in this world context that one has to view the auto industry, and the UAW-Ford contract in particular. It can not be viewed as if it were the early 1930s or even the 1940s.

The UAW-Ford contract, which was signed on March 1, 1982, is an ominous sign of regression. The leadership conned the rank and file into finally surrendering more than a billion dollars to "save" the company, without giving a clear exposition of the real nature of the retreat.

Tactical retreats by the leadership in times of ordinary capitalist recessions are well understood by most workers throughout the world. But what distinguishes the retreat of the UAW is that the leadership is pursuing a path that is not only ruinous for the union membership but sets a precedent and a pattern which is wholly destructive for the future.

One can easily understand a driver of an automobile taking a particularly dangerous curve but doing so with a very definite destination in mind.

This is not so with the UAW leadership. They took a dangerous curve in the road, but they do not know where to go from there.

It is not just the $1 billion that they have freely given to the company along with so many other concessions which will only come to light after production starts. It is the fact that the auto barons are in the midst of pondering what course they themselves will take-or rather will be pulled along by their investments.

UAW militants have to take a broad view concerning the course which the capitalist worldwide crisis is pushing on the ruling class in order to be able to orient the auto workers and the working class as a whole in a progressive direction.

The gravitational pull from the parasitic export of money capital as part and parcel of the blind chase after superprofits is only one aspect of a twofold process of decay in auto, steel, and other industries which are being devastated by the capitalist recession.

There is still another pull which is more ominous and eventually more catastrophic.

Why Chrysler sold its most profitable division

The announcement by the Chrysler Corporation that it is selling its lucrative and highly profitable military tank division got scant if not perfunctory notice in the capitalist press. It was mostly covered in the financial pages.

The sale of a very lucrative and highly profitable division by a virtually bankrupt corporation is in itself a most unusual and extraordinary development.

The tank division was probably one of the few sources for a possible recovery of the Chrysler Corporation, if that's what its directors were seeking to attain. Selling it at what appears to be a meager price is cutting the company off from its only certain lucrative investment (guaranteed by the Pentagon).

Such practices in the ordinary course of business transactions would be regarded as nothing less than collusion compounded by corruption of one sort or another.

How could this happen with the seeming consent of all parties concerned-Chrysler, the government, and the esteemed president of the UAW who sits on the Chrysler board and presumably has a vote on it? Is it not unusual that there should be such unanimity where there are usually so many conflicts based on divergent material interests?

Was there not even a single obstreperous dissenting stockholder who would venture to test the dubious validity of this unusual transaction?

In the course of ordinary business transactions an injunction would have been obtained almost immediately and the sale stopped.

But nothing like this happened, nor is it likely to.

Civilian economy being swallowed up by military

The sale of the Chrysler military tank division to General Dynamics, a giant octopus within the military-industrial complex, is highly indicative of a growing trend. This has been long evident ever since General Dwight D. Eisenhower's famous memorandum of 1946 validating the establishment of the military-industrial complex Eisenhower also warned about the perils this posed for the capitalist system as a whole in his farewell address before leaving the presidency.

What does the sale mean in terms of the social evolution of the military-industrial complex in relation to civilian industry particularly auto?

The military sector tends to gobble up the latter, to squeeze out its vitality, to reduce it to an appendage of the military behemoth.

Thus the autoworkers, along with the rest of the working class, are faced with this two-pronged gravitational pull by finance capital. One is the destructive economic consequences of the parasitic export of money capital. The other is the ever-growing encroachments of the military-industrial complex.

Each of these two prongs of finance capital is devastating in its effects and tends in an economically destructive and militarily catastrophic direction.

Union must take over investment fund

The failure of the UAW leaders to view the $80 billion investment fund of the auto corporations as a security fund that comes from the labor of the workers and is part and parcel of their earnings ignores the fundamental reality of the relationship between capital and labor, between the exploiters and the exploited.

The correct tactic for the UAW is not merely to address itself to the individual employer but to the industry as a whole. It is wrong to focus in on the losses of the auto corporations while disregarding the $80 billion investment fund which properly belongs to the workers and which affords a solution at least in part to their problems.

The union should sit in jurisdiction over the money and have a say on where and how to spend or utilize the allocation of funds. By not directing itself to this the UAW loses sight of the most fundamental question Directing the union's attention to the wage and benefit problems alone vital as they are, is like trying to stop a leak in a cabin when the ship is headed straight in the direction of an iceberg.

As matters turned out with the Ford contract, the choice that the workers were faced with was not a real one. They were constrained to do what Fraser and the ruling class had long conditioned them for.

It is impossible to construct a program for the auto workers without directing the attention of all the workers to the gargantuan investment fund available to the auto barons. This, in reality, is labor time wrung out of the workers over years and years. It belongs to them. Fighting for it will lead the workers to take a broader view concerning the whole course of the capitalist worldwide crisis, which the auto crisis is only one aspect.

What the Frasers and their ilk are proposing in the space age is no better and has far less justification than the practices of the early Luddites who disrupted production during the early phase of capitalist development.

Nothing less than a radical reevaluation of the UAW's strategy in the light of the fundamental problems posed above can lead to a truly progressive solution to the mounting problems confronting the UAW and the working class as a whole.

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Last updated: 17 December 2017