Lies, damned lies and statistics

Apparently the number of people imagining that there will be more jobs available in the next six months in the United States has increased. This measure of “confidence” sent markets soaring yesterday. But these are the kinds of reports that sustain the now-fading springtime images of economic green shoots. Those who believe them should be warned about too much optimism.

The real story can be found in a variety of statistics and stark lines charting the continuing relentless descent of every part of the global economy. The latest chapter in the slow, drawn-out death of the US car industry sees Chrysler already officially bankrupt, and GM in its last days. The Union of Auto Workers is busy signing cost-cutting deals they hope will save some jobs. Canadian GM employees have accepted pay cuts of 30% in an attempt to keep plants open in Ontario.

With falling incomes for those in work and increasing unemployment there won’t be much spare cash around to sustain spending in North America. Japanese parts and machine tool suppliers are getting worried. According to Ikuo Mori, CEO of Fuji Heavy Industries. “Whatever happens to GM, the impact on the overall (U.S.) economy is going to be huge and it's going to hurt demand."

Standard and Poor’s Case-Shiller index of US home prices since the peak in 2006 – when the effects of the crisis first began to be felt – shows that the deterioration is accelerating. US home prices fell a record 19.1% in the first three months of this year. From the peak, they are down 32.2%. "We see no evidence that that a recovery in home prices has begun," said David Blitzer, chairman of the committee which compiles the index.

No green shoots there, then.


How about Japan and Germany? These two countries hosting major manufacturing corporations became heavily dependent on exports to the rest of the world as a consequence of globalisation. This chart shows Japan’s production, domestic consumption and exports since 2004. It’s been pretty much downhill all the way, and catastrophically so since the end of 2007.





The next one zooms in on Japan’s exports and capital investment over the last year, quarter by quarter.


Note the steady decline in capital investment approaching -40% as exports shrink by more than 70%. Measured by the market value of all final goods and services, Japan was the world’s second biggest producer in 2008 after the US and China, so it’s very important as an indicator of the health of the global economy.


Green shoots? Where? Germany, perhaps? The rest of Europe?

Germany was in fourth position in 2008. In the first quarter of this year, German exports and investment were in free fall, dropping by 9.7 per cent and 7.9 per cent compared with the previous three months. Industrial orders in the Eurozone in March were almost 27 per cent lower than a year before.

These are all quantitative indicators of a deepening crisis with no bottom in sight. At a certain point, quantitative limits are reached and qualitative changes must occur. This is a universal law of nature.

There are two possibilities contained within the contradictory, fast approaching historical moment. In its strange, insane way, retaining capitalist production as the organising principle of society requires the destruction of productive capacity on a scale to match the surplus built up by decades of ballooning credit-led investment.

The other choice is for social ownership and democratic control of the world’s productive resources, creating the things we need to survive in a sustainable way that protects the environment. When you think about it, the choice is obvious.

Gerry Gold
Economics editor

Ownership but no control

Get your head round this one. Members of the United Auto Workers of America (UAW) are voting today on a deal which would give them majority ownership of Chrysler, one of the big three US-based global car makers. But don’t get the wrong idea – the corporation is not throwing in the towel and handing control to its workforce.

Far from it. In fact, the employers, with the insistence of the Obama administration and the connivance of a compliant, supine union UAW leadership, have devised a new way of getting workers to cut their own throats on the grounds that bankruptcy would be worse.

Some 55% of shares in Chrysler, the world’s fourth largest seller of cars, are to be handed over to the UAW. Another 35% are to be given to the Italian car maker Fiat.

The union leadership has agreed to reduce health and pension benefits and abandon agreed pay deals. In exchange for what, exactly? A single representative on the board alongside directors appointed by the US government and Fiat.

Since the company is on the brink of bankruptcy, haemorrhaging sales and profits, along with most of the other car makers in the world, the workers can expect to be left prisoners of a pretty sick loss-making baby. Fiat isn’t handing over any cash for its minority holding, but is offering access to its new productivity-enhancing small car technology as a way of breaking into the US market.

So the workers will be majority owners of company that’s taking on investment that will be used to intensify the rate of their own exploitation. Nice. No wonder Chrysler said that it "commends the UAW's leadership for their endless determination and perseverance in reaching this tentative agreement, especially during these unprecedented economic circumstances that plague the automotive industry".

Chrysler has a debt of $6.9 billion but Obama has cooked up a deal. He’s swapping the otherwise worthless debt for $2 billion of taxpayers’ money in cash, which he’s giving to JPMorgan Chase, Goldman Sachs, Morgan Stanley and Citigroup who between them hold 70% of the total.

In Canada, the auto workers union has already agreed a similar deal, with leaders telling members that there was no alternative. Hourly wages of Chrysler's 8,000 unionised Canadian workers will be cut by about C$19 an hour. The agreement includes the elimination of the C$1,700 Christmas bonus, a reduction in health care benefits and flexible working.

The North American car workers’ unions were forged in militant, pitched battles with employers like Fords. Today’s leaders betray not only those traditions but the interests of their members. Their surrender to the employers sounds the death knell for the UAW in its present form. According to Gary Chaison, a professor of labour relations at Clark University in Worcester, Massachusetts, said: "This is the eclipse of the UAW. It's going to be a shadow of what it once was, I'm afraid.”

A similar process is under way in Britain, where union leaders have negotiated wage cuts, unemployment and short-time working. None of these measures will, of course, prevent the global capitalist downturn from turning into a full-blown economic slump that, if left to run its course, will destroy hundreds of millions of jobs and futures worldwide.

Ultimately, corporations like Chrysler and Fiat need the workforce if they are to make and sell cars for profit. But in handing over most of the shares to employees, the company is in practice saying that the workforce doesn’t need shareholders. This is the best case yet for a complete takeover of car production by workers worldwide and a new system of democratic ownership and control – and it’s been made by the employers! Creating a movement with leaders who can inspire such a leap in theory and practice is the key to a future beyond capitalism.

Gerry Gold
Economics editor