Workers’ Woes
Workers at a non-union Toyota plant in Kentucky
have been offered incentives to retire early in order for management to replace
them with new hires at a lower starting wage. The labor cost advantages
formerly enjoyed by Toyota—the
non-union premium—is no longer available to non-union plants in the auto
industry. It seems the wages and benefits long ago won by a more aggressive UAW
have retreated to the extent that non-union plants must now secure lower compensation
in order to compete!
Since the UAW has conceded
starting pay in the unionized industry down to about $14-16 per hour, Toyota seeks to replace older workers making around $26
per hour in their Kentucky
plant with new hires at $16 per hour. Thus, the union shops are paradoxically
pressuring downward the wages and benefits of non-union employees .
As reported in The Wall Street Journal, industry
experts claim that the non-union manufacturers enjoyed a $29 an hour competitive
advantage in wages and benefits as recently as 2008. By the end of 2011, they
report that non-union labor costs were about equal with General Motors and
actually higher than Chrysler!
It is hard to imagine a more
demoralizing consequence for the union movement in the US: if only the
market, and not a fighting union, is to competitively determine wages and
benefits, how does one entice workers to join the union? For the bankrupt UAW
leadership, union growth comes only from striking a deal with the employers-- a
deal that would promise collaboration and stability at the expense of workers’
pay and benefits.
The decimation of the living
standards of US
unionized auto workers came with the bailout and subsequent temporary
stewardship of the auto industry by a Democratic Party administration. That
same administration demanded plant closings and layoffs as a condition of the
bailout.
With friends like these,
workers are sadly in dire straits.
Clearly, radical changes are
in order, changes that cry out for class struggle unionism and independent
political action. Without a new direction, US workers will continue the descent
towards Depression-era living standards.
Currency Wars
The 1917 text of Lenin’s Imperialism projected intense
struggles between rival capitalist powers. Written during an unprecedented total
war between the most economically advanced countries, a war that when settled
cost the lives of millions of people,
Lenin’s tract explained the First World War as a contest between empires
seeking global advantage for the spoils of capitalist exploitation.
Less than twenty years later,
the same empire-building forces were again unleashed to carve the world in a
desperate attempt to secure markets and sources of strategic resources. World
War Two further confirmed Lenin’s thesis that competing capitalist powers were
unable to collaborate and cooperate for some greater, universal good. Instead,
competition always begets aggression, national chauvinism, and war.
Many were dismissive of
Lenin’s prophecies when witnessing the Cold War expediencies of inter-imperial
cooperation against the emerging post-war socialist community. With well over a
third of the world’s population in the socialist camp, the imperial rivals
found a temporary basis of unity around fears and resistance to the success of
socialist revolution. The survival of capitalism tamed the inherent rivalries for
that moment.
The demise of that threat
with the collapse of Eastern European socialism and the accommodation with
capitalism by Asian Communists has unleashed the beast of imperial competition.
The global economic crisis only serves to fuel the tensions and expose the
rivalries.
I wrote in November of 2008
of the “global crackup”, noting that the US was no longer in a position to
impose its will on the rest of the world, unable to slough its problems easily
upon others. I drew attention to the logic of capitalist competition that, in
the long run, denies any hope of cooperation and common solutions.
Today, that tendency— aggressive
imperialist rivalry—has found its expression in a new war, a war waged around
the relative value of national currencies.
Rulers understand that in a
climate of stagnant or declining world trade, nation-states will draw an
advantage from devaluing national currencies; by cheapening money—the medium of
exchange— domestic enterprises will be able to offer their products at a more
favorable price in international markets.
The US tepid “recovery”
from the depths of the crisis has largely been won by hyper-exploitation of a
docile work force and the dramatic expansion of exports through the Federal
Reserve’s massive devaluation of the dollar via the printing press. The
Qualitative Easing programs aim to suppress interest rates and remove the
corporate garbage generated by the financial promiscuity of the period before the collapse of 2008. But they
also have the not-so-unintended consequence of bolstering the competitiveness
of US
export manufacturing.
At the same time, US policy
makers pointed an accusatory finger at the Peoples’ Republic of China, charging
its leaders with currency manipulation. While the charge got little traction
from those who closely studied these relationships, it served as a useful
diversion from US policies and bolstered rounds of anti-China bashing by
do-nothing politicians and labor mis-leaders.
European Union leaders,
occupied with the desperate effort to save the Euro, offered little resistance
to US
currency manipulation.
But with the election of
Shinzo Abe in Japan,
the currency war was joined. Abe, a right-wing nationalist, exploited the
Japanese public’s frustration with years of ineffective governance and economic
stagnation to scorn cooperation and offer an aggressive economic program geared
towards restoring Japanese competitiveness. Assuming the office of Prime Minister,
he launched an aggressive campaign to devalue the Yen. His pressure on the Bank
of Japan has already (in less than two months!) produced a drop of 10% in the
Yen’s value against the dollar and 15% against the Euro. This means that
Japanese products are enjoying a growing competitive advantage in international
markets.
International bankers see
these moves clearly as the opening salvos in a major escalation of the
currency/trade wars. Politicians in countries throughout the world have quietly
made similar moves to spur competitiveness, but never with the open audacity
shown by Abe.
Perhaps even more disturbing
is the unabashed belligerence and arrogant nationalism accompanying these
economic moves. The Japanese government has provoked disputes with nearly every
Asian Pacific government over barren islands claimed as part of Greater Japan. Imperial
aggression is as great a danger today as it was nearly a hundred years ago when
Lenin established it as a structural feature of mature capitalism.
A Hushed Mea Culpa
Capital’s policeman, the
International Monetary Fund, has offered a quiet confession of an arcane
theoretical mistake of enormous consequence. As the leading cheerleader for
decades of the “fiscal responsibility” approach to public programs, the IMF can
take dubious credit for the policy of austerity as a general panacea for
economic duress. A cursory look at the IMF legacy shows a constant, unrelenting
enforcement of balanced budgets and meager public spending. Developing
countries seeking IMF loans have felt the lash of austerity as a condition of
relief.
A cornerstone of IMF thinking
was a little discussed macro-economic assumption of the compounding effects of
debt reduction. Where “unschooled” common sense might suggest that removing a
dollar of public spending from economic activity would remove at least a dollar
from a nation’s gross domestic product, the IMF postulated that it would reduce
economic activity by only half of a dollar. That is, the “multiplier” for a
reduction of public spending was only .5. The assumption, of course, is the
neo-liberal axiom that the dollar spent elsewhere in the private sector MUST
always be far more productive, must always be greater than unity and,
therefore, must always outweigh the loss of “inefficient” public sector
spending.
Unfortunately, the axiom is
wrong. IMF empirical studies show that, in fact, the multiplier of public
spending reductions ranges between .9 and 1.7. In other words, the negative
impact of public spending cuts was underestimated by two to three times! The
IMF confessed as much in its October report. Unstated, however, is the negative
impact of this “error” on hundreds of thousands, perhaps millions, of people
who have lost public benefits to the discipline of IMF imposed “fiscal
responsibility”. Even more have suffered from the constraint on economic growth
produced by the regimen of austerity.
And yet debt reduction
through choking government spending remains a priority of political parties
from the far right to the social democratic left.
The Sky is Falling, but not on Everyone yet!
You would never know it from
the Wall Street pundits loudly proclaiming the best January stock market in two
years, but the US GDP shrank in the final quarter of 2012 (as it did in the UK,
the EU, and even the seemingly bullet-proof German economy).
Generally, negative GDP
panics investors and disrupts markets, but we live in special times. To the extent
that labor remains quiescent and social movements fail to translate into
anti-capitalist uprisings, investors and the capitalist class have made their
peace with historically unacceptable unemployment and stagnating, but stable
economic growth. It’s the earnings that catch the eye of the investors and the
wealthy. And they have been holding up rather well so far.
In fact, they are creating
the conditions for another round of risk-taking. Money market funds are flush
with cash and seeking greater returns, securitization of debt is on the rise
again (securities built on auto loans are greater than at any time since 2005),
and banks are again growing their real-estate loan portfolios. Capitalism and
the lust for ever greater accumulation never sleep!
Of course it is the very
mechanism of accumulation, the search for yield on swelling capital (and the
accompanying pressures on profitability), that announces the next round in the
crisis.
Zoltan Zigedy
zoltanzigedy@gmail.com
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