Henry Ford's model runs into the sand

Global production of cars is coming to a standstill. This is just the most dramatic and immediate result of a rapidly deteriorating crisis which has paralysed the global financial system and rapidly sent the world economy into recession.

Chrysler has halted production at all 30 of its factories for a month or maybe longer. The closures affect 46,000 workers directly, but, should the temporary closure become permanent, repercussions throughout the industry and the rest of the economy will affect millions in America and worldwide.

GM has suspended work on its $370m engine factory in Michigan, dashing hopes that climate change offers a route to a profitable future. It was planning to build a new small car engine, working towards fuel-efficient and all-electric cars, but the market for cars has disappeared along with all of the other things people used to buy, as unemployment rockets upwards.

The demand collapse is trashing all car manufacturers. GM said it was shutting down 30% of its North American production. Also on Wednesday, Ford announced it was to extend the normal two-week Christmas shut-down at 10 of its North American plants for an extra week. The Canadian car parts sector, which employed 120,000 people in 2006, expects to see its profits tumble by two-thirds next year, and employment levels plunge 20% by 2010. Almost 600,000 jobs in Canada would be at risk from a collapse of Chrysler, Ford and General Motors. It’s no different in the UK where car sales are in meltdown and manufacturers are closing their factories well into the New Year and even longer.

Bourgeois economists and analysts have been brainstorming solutions now that everything tried in the last year has failed. Their problem is they can’t see beyond the constraints of the system which depends on capital expansion to generate profits. And right now there’s not much profit-making going on.

The fewer goods people buy, the less the profit made in production can be realised, and as prices begin to drop everything just gets worse. Even the oil-producing nations’ plan to cut production hasn’t prevented the price from falling below $40 a barrel from its peak of around $140 earlier in the year.

With a downward spiral of deflation beginning, governments and central banks are now prepared to consider just about anything that will make us buy the products they employ us to make. Interest rates are dropping towards zero, already a strange enough concept that opens the door to new possibilities.

The one which is perhaps at the same time both easiest and hardest to understand is looking the most popular just now. Instead of pouring taxpayers’ money into banks which just hold on to it to rebuild their reserves, costing each of us many thousands of pounds in the future, the new big idea is that governments and central banks start issuing new money – just printing notes, creating the stuff out of thin air and giving it direct to us in the hope that we’ll go out and start spending it.

Must be the Christmas spirit, you say? No they really mean it. The really, really wonderful thing is that with zero interest rates, the cash bonanza would be a no-interest giveaway. Trouble is – there’s always a catch – printing money devalues the currency and eventually leads to runaway inflation. Higher prices are, in any case, bound to follow the uncontrolled slide in sterling – unmatched in size since 1931, when Labour prime minister Ramsay MacDonald took the pound off the gold standard. Devaluation on this scale could also lead to a flight of capital from Britain and a collapse of the currency, some are warning.

Whichever way you look at it then, the capitalist economy is well and truly broken. In 1908, Henry Ford gave the world the Model T and the production line for cars. A century later, it’s time for a revolutionary new model.

reposted from A WORLD TO WIN www.aworldtowin.net

LEAP comment on rising unemployment

New unemployment figures released today show that those claiming Jobseeker's Allowance rose to over one million, with the claimant count growing at its fastest rate for nearly 18 years. As Graham Turner points out below, this figure is likely to be even higher once the benefit office backlog is cleared. ILO unemployment rose to 1.86 million - an unemployment rate of 6%.

John McDonnell MP, LEAP Chair, said:

"Rising unemployment will have disastrous consequences, ravaging communities and destroy hope for individual lives.

"Today's figures show that Brown and Darling's package is not working. The banks are still not co-operating, and we should nationalise them now.

"Instead of attacking and stigmatising those out of work, we need a huge capital investment programme of public works to create jobs - including on rail, alternative energy and council housing."

Graham Turner said:

"The claimant count accelerated up sharply in November. The October figure was revised up from 36.5k to 51.8k. This has been a persistent pattern since the labour market started to deteriorate. The lack of staff in benefit offices due to ‘efficiency drives’ means not all the claimants are processed in time. And the backlog appears to be growing.

"The upward revision for October was the largest yet. That suggests November could be nudged up significantly, even though it was already the biggest rise since March 1991. And predictions of a rise in unemployment [on the ILO measure] to 3 million look more than realistic."

Download Graham's briefing on UK unemployment in full.

It's worth noting that since 2004, the DWP has sacked 30,000 staff in 'efficiency savings'. In November 2008, the Secretary of State James Purnell announced that DWP would be hiring an additional 6,000 staff to work in Jobcentre Plus . . . See PCS's take on today's unemployment figures

'Extraordinary measures' the order of the day

In reply to my "New Labour's borrowing bombshell"
Andreas Paterson said...
A borrowing bombshell it may be, but really, is there any alternative in the here and now?
01 December 2008 21:21

Here's what A World to Win said on November 26th

The capitalist system is both broke and broken – and neither New Labour nor the Tories can fix it. Banks can’t and won’t lend, the housing market has collapsed, job losses are piling up (Woolworths finally collapsed this morning) and the state itself is being pawned in the hope that there’ll be money in the future to redeem the pledge.

And where will this money to repay the billions in government borrowing come from? From ordinary working people of course, in the shape of higher VAT purchase tax at 18.5%, increased national insurance contribution and cuts in spending in education and health.

As for the so-called increase in taxes for higher earnings, experts have shown they probably won’t raise an extra penny. At least this is the plan, which is based on an economic “recovery” in 2010 that exists only in the imagination of chancellor Darling and prime minister Brown. Yesterday the OECD (Organisation for Economic Cooperation and Development) forecast that the recession would hit the British economy hardest of all the major economies. The OECD’s latest economic outlook cites the housing market bubble and the banking crisis for their assessment.

Mervyn King, the governor of the Bank of England, warned that the recession would be “steep” unless commercial banks started lending again. But why aren’t the banks lending? After all, a bank that doesn’t lend can hardly call itself a bank. King did not answer this question when he was questioned by MPs. For the governor’s information, the banks are not lending because they consider borrowers too high a risk and, most importantly, their capital base is as firm as jelly, despite huge government bail-outs.

The reality, which is admittedly difficult to comprehend, is that there are no capitalist-style policy fixes for an economic and financial crisis that is both global in scope and extremely deep. So the choices are stark: either sit back and let the crisis takes its course (Tories); bankrupt the country (New Labour) in a desperate bid to revive the economy; or put capitalism out of its misery, which is the most difficult option but would be the most rewarding.

How could this done? How can working people be organised and mobilised to take power out of the hands of an undemocratic capitalist state that cannot control the monster it helped create and transnational corporations that drove the credit-fuelled consumer binge that is ultimately responsible for the financial crash?

First, we have to take our case to every corner of the land and say: the economic and financial system isn’t working and can’t be fixed and the consequences for ordinary people are unacceptable in every regard. Secondly, we must show that the existing political system is dominated by the interests of the very people who have wrecked the economy. On this basis, we can mobilise people around the proposal to create a new political democracy that will enable ordinary people to take direct control of economic and financial resources along the lines proposed in Unmasking the State and our Charter for Democracy.

In place of bail-outs for the banks, a real democratic government would re-establish the banking system on a co-operative, mutually-owned basis. It would outlaw fantasy finance activities such as derivatives and “securitisation” of debt and other forms of speculation that have contributed to the crash.

The economy would be reorganised too, developing production motivated by social and personal needs and not shareholders’ profits. These changes would allow for a substantial increase in workers’ income, alleviating the need to build up vast debts in order to buy goods and services. These are, of course, revolutionary proposals. But, as even chancellor Darling himself has admitted, we need extraordinary measures for extraordinary times!

Paul Feldman
AWTW communications editor
26 November 2008

'Snubbed' Brown should nationalise banks

The UK banking sector has snubbed the Prime Minister by refusing to pass on in full the 1% cut in interest rates announced on Thursday.

John McDonnell MP, LEAP Chair, said:

"The banks are deliberately snubbing the Prime Minister by refusing to pass on interest rate cuts.

"These banks have betrayed our country, brought about this economic crisis and recession by their obscene profiteering, and now are refusing to co-operate in even the slightest way in the Government’s attempts to protect people’s jobs and homes - despite the fact the entire system has been bailed out with public money.

"The only viable solution now is to bring the banks into public ownership and control. There is no other way and the Government should not delay."

Missing billions . . . and logic

Yesterday the Government announced the closure of 93 tax offices with the loss of 3,400 jobs.

Earlier this year, the TUC published a report The Missing Billions, penned by Richard Murphy, which showed that the Government lost at least £25bn of tax revenue through evasion.

As we all know, unemployment is rising steeply at the moment. So, here's the question: why at a time of rising unemployment and constrained Government budgets - and with HMRC not having the resources to collect the tax owed - would the Government throw 3,400 tax officials onto dole queues?

As Mark Serwotka, General Secretary of PCS - which represents staff in HMRC, said:

"Job cuts are already damaging the ability of HMRC to function and undermining public confidence in the department. Office closures and job cuts will do nothing to tackle the £21.5 billion worth of uncollected tax and £25 billion lost through tax evasion."

"As the recession deepens and people become more reliant on public services, the department and the government should stop adding to the growing number of unemployed and call a halt to the office closure and job cuts programme."

John McDonnell MP, Chair of the PCS Parliamentary Group, added:

"At a time like this, it is absurd to be laying off staff - especially those who help collect taxes". Indeed.

Welfare for All

PCS has issued a statement 'Welfare for All' to support the campaign to keep a fair and just welfare state, and to oppose the government's welfare reform proposals - which the BBC reports today are about to get even worse.

Mark Serwotka said: "The government needs to pay heed to the growing chorus of opposition to its plans for welfare reform. The plans are regressive and will lead to the removal of the state safety net and the introduction of the free market, where the only motive is profit for the few and not help for the many. As recession bites these are the wrong proposals at the wrong time."

The welfare state is one of the UK's greatest achievements and supports us all especially vulnerable and unemployed people and their families.

In July the government published the green paper 'No one written off: reforming welfare to reward responsibility' announcing plans to change the current provision of support.

Many of the plans were unacceptable when they were first published and the worsening economic situation should lead to a fundamental rethink. However the government is pressing ahead despite the current global economic downturn which is leading to increasing levels of unemployment. As a result we have come together.

The government's proposals remove entitlements and fail to value the important work of parents and carers. Parents with young children, carers, sick, disabled, people with mental health problems and other vulnerable groups face tougher tests to qualify for benefits. If they fail they could be cut off with no support.

We are opposed to the abolition of Income Support which ends the principle that those in need deserve help. We are opposed to compulsory work for benefits. People should be paid the rate for the job or at the very least be paid the national minimum wage.

Jobseekers Allowance is shockingly low at less than £10 a day, if it had increased in line with earnings over the past 30 years the rate for a single person over the age of 25 would be more than £100 a week.

The government wants more of the welfare state to be handed over to the private sector. It is wrong to profit from the sick and unemployed. There is also the intention to share information with the police which raises real concerns about civil liberties.

We want voluntary skills training and life long learning opportunities for unemployed people. The government should focus on ensuring that there is more support to access jobs that have fair pay and decent conditions with a guarantee that when people cannot seek work they will not face poverty.

The government should introduce positive measures to challenge discriminatory attitudes held by employers, encourage flexible working practices and expand the provision of affordable childcare.

We want the government to rethink its plans. Support our campaign to help create a better welfare state and society.

See the PCS website for a full list of supporters, which includes LEAP.