The fault lies within the system itself

The recall of fault-ridden products, which is spreading throughout industrial manufacturing, tells us much about the acute contradictions that permeate the global corporations within the capitalist drive to maximise profits.

Yesterday Nissan announced a recall of just over half a million vehicles, mostly in the US, because of problems with brake pedals and fuel gauges. Toyota leads the field with 8.5 million cars, trucks and sports utility vehicles recalled in the last few months. Toyota’s recalls are for faulty accelerator pedals, jamming floor mats, and braking problems. The pedals are supplied by CTS a US corporation.

General Motors has blamed the supplier JTEKT, a joint venture between Toyoda Machine Works and Koyo Seiko with five manufacturing plants in the US, for a faulty car part that led to the recall of 1.3m Chevrolet and Pontiac cars in North America. The fault in the cars’ power steering has been linked with 14 crashes. Last month Honda recalled 438,000 cars with faulty airbags.

The problem isn’t restricted to cars. On Monday, Sony told millions of PlayStation 3 users not to use their games consoles as it rushed to fix a bug. The warning appeared to be another blow to one of the biggest names in the electronics industry.

Last week Akio Toyoda, the Toyota chief executive whose family name appears on every one of the company’s products, appeared before the US House of Representatives Oversight Committee to explain and apologise. His simple explanation gets right to the heart of the problem. “I fear the pace at which we have grown may have been too quick,” he said.

Though it didn’t come out in the questioning, unpicking Toyoda’s simple statement gets us to the real cause of the crisis which has engulfed the interdependent worlds of finance and production. After World War II, US occupation forces introduced modern production control methods into Japan. These had been developed by it’s the US War Department.

Toyota adopted these as the basis for its development of the “kaizen” philosophy of continuous improvement. Kaizen is a process that, when done correctly, humanises the workplace, eliminates overly hard work ("muri"), teaches people how to perform experiments on their work using scientific methods and how to learn to spot and eliminate waste in business processes.

And it worked. Over the decades, Toyota grew to lead the world in quality, building cars with a reputation for durability and reliability. Other companies followed Toyota in their competition over quality and price.

So what went wrong? Akio Toyoda’s simple statement encompasses the consequences of decades of the fierce competition for profit which obliged Toyota, like all corporations, to globalise, to export production volumes to cheaper labour regions to cut costs. At the same time, the company led built highly-sophisticated vehicles dependent on ever more complex software and computer chips.

In the process it was obliged to outsource production of its components to companies over which it has little control, whilst all the time driving up productivity at a faster rate than its competitors. In the end, the complex, globalised supply chain was Toyota’s undoing and it engaged in a cover-up of mounting problems.

Toyota’s rush to expand simply added to a global saturation of the market, which is another inescapable feature of the capitalist system of production, one which is driving the present recession towards outright slump. Car sales are dropping off the cliff. In Europe they are expected to fall by 10-15% this year. GM is cutting European production by 20%. Europe has a production overcapacity of 6.5m vehicles.

The whole saga demonstrates beyond all argument that capitalism is simply not sustainable. Intense competition has meant the building of cars that are increasingly unsafe to drive, that add to carbon emissions and then lead to over-production with the consequent loss of jobs and pensions.

Gerry Gold
Economics editor

A Tom Paine for the 21st century!

The economy is in such a steep decline that the top global corporations are now feeling the impact. The collapse of consumer demand is cutting the ground from under giants like Sony, which expects a record $2.9 billion annual operating loss, and Microsoft which is cutting 5,000 jobs worldwide – about 5% of its estimated 96,000 employees – and refusing to make a forecast of future profitability. 

With the news that December car production by global manufacturers operating in the UK declined to barely half of its 2007 level, the Society of Motor Manufacturers is looking for government support to sustain “valuable industrial capability during this exceptionally difficult period”. This is a hardly veiled threat to cease production altogether following Honda’s doubling of its two month Christmas shutdown. 

Some market watchers are at last beginning to appreciate the scale of the problem in the economy beyond the financial markets. "It is pretty bad when things are deteriorating so fast that even the largest companies in the world don't know how rapidly it is happening," said analyst Katherine Egbert. "We are certainly in the midst of a once-in-a-lifetime set of economic conditions," according to Microsoft’s chief executive Steve Ballmer. "The economy is resetting to a lower level" of spending, he said, adding that he did not expect a quick economic rebound. 

A UK survey of 100 major private sector employers reveals the toll that the crisis is taking on company pension schemes. The bursting of the credit balloon has driven the collective deficit of the UK's final salary pension schemes up to £195bn in December, and 25 of the 100 will act soon to end the schemes for current contributors, thereby abandoning the companies’ responsibilities for their employees’ future. 

The Pension Protection Fund said the deficit rose by 43% from the £136bn recorded at the end of November. The deterioration in pension finance has been largely due to the international credit crunch, the worldwide economic slowdown and the accompanying slump in share prices. In other words, the value of private sector pensions has simply blown away. Those who manage to hold on to their jobs until retirement age in the UK will have nothing to live on beyond what the state offers, which is now the worst in Europe. 

January 2009 marks 100 years since Lloyd George, Chancellor of the Exchequer under the Liberal government led by Herbert Asquith, paid the first UK state pensions. Lloyd George was influenced by the ideas of Tom Paine and especially his book The Rights of Man published in 1791. Paine strongly recommended progressive taxation, family allowances, old age pensions, maternity grants (as well as the abolition of the House of Lords and the creation of a democratic republic). 

The 21st century deepening global financial and economic disaster demands a renewal of Paine’s ideas in a radically fresh context. Paine’s ideas were ultimately incorporated into most bourgeois democratic states and economies. Now the state cannot deliver a basic standard of living for older citizens, and companies are destroying workers’ pensions. A transfer of political and economic power along the lines advocated in our People’s Charter for Democracy  is where we should begin. 

Gerry Gold
Economics editor