BOOTLICKER

Concept of a Car

2018-05-01

So we won’t make cars in Australia anymore. From what I can gather, Holden will be closing down all of its plant sometime next year. After making the decision, Holden made adverts telling exasperated people, “We won’t be making cars in Australia, but we’ll still be making cars for Australia”. Somehow that was meant to soften the blow.

As far as I could tell, the workers making cars in Australia wanted to keep on going. They were proud of what they were doing. Hundreds of thousands of Australian workers will now be unemployed, and millions of dollars of car plant will lay idle and become scrap. It’s the same in the US. We now call the big old car manufacturing regions of the US the “rust belt”.

Isn’t capitalism weird? Both Australia and the US still have the capacity to make cars. We still have the plant ready to do so here in Australia; we still have the trained workers laying idle, ready to work; but we can’t seem to put the two together. Everybody already knows why. Money has gotten in the way of being productive. We can’t make cars here anymore because it is apparently not profitable to do so.

But why should that matter? Why should we be concerned with making things in order to sell them? Why not make things in order to use them, to satisfy a need? The answer is that the entire world is run according to a system called capitalism. Capitalism is the world’s current system of political and economic organisation. A quick term you can use to represent this idea is the “mode of production”. Capitalism is the “mode” in which we satisfy people’s needs socially.

Capitalism is a weird way of going about doing things. Normally you’d go and buy some object or service because you need it—like some food, or a computer, or a movie. But capitalism isn’t oriented towards making things so that people can get what they need. Capitalism is about making things so you can sell them. These objects are called commodities. The idea behind capitalism is to sell commodities so that you can get as much money as you possibly can. The point behind doing this is to have so much money that you don’t really have to work anymore. When you have enough money, you can use this money to get even more money. By getting lots of money, you could be even more powerful, because with enough money you can make or do a great number of things.

The idea is to make your money magically multiply. If you had a lot of money, you could put it in a bank. Banks will give you interest for your savings. This is one of the magical ways money can be turned into even more money. Imagine if you had enough money you could accrue interest on your interest. Wouldn’t that be nice? You’d be very rich. Money that you have that is potentially able to go through the magical process of growing and growing is called capital.

This is a very strange way about organising the world. It’s a very back-to-front way of thinking. It lead to something called the Global Financial Crisis (GFC). This was an event that happened in 2007-2008. The GFC was a big collapse in the value of world markets. Markets are a special way of organising society so that people can trade all of the things they want to sell. Markets used to be actual physical places you could go to trade, and they sometimes still are, but markets are now largely conceptual, and exist only in special computer systems.

What lead to the GFC was the deregulation and expansion of global financial markets. Financial markets are special systems people access in order to trade money, because money is also a thing you can trade. Before, there were strict controls on what you could or could not do when you were trading money. You could only do certain things when you bought and sold financial products, and there were only certain financial products you could trade.

But these controls were taken away. They were taken away because capitalists (people with capital) wanted to avoid having to deal with workers on their own terms. The people who make commodities are workers. They don’t own the means of making commodities, the “means of production”. Capitalists do. Because capitalists need a disenfranchised group of people to make them rich, capitalists are always in a struggle against these people over how hard they can work them, in order to sell the most commodities, to make the most money. During the 1960s and 1970s, workers waged a big wave of resistance against capitalists. They fought for better wages, and better conditions, and in the short term they won.

But capitalists found an ingenious way to avoid having to deal with the difficulties of workers, and this was by turning to finance. They made it easier to speculate on commodities in the market. This means you could borrow money and gamble on what you thought was going to happen in the market. Borrowing money is called getting credit, and it’s a fantastic way to postpone having to deal with the immediate cost of producing commodities. Marx called the ability to get credit in financial markets the “abolition of the capitalist mode of production within capitalist production itself”. You can seemingly do anything if you borrow enough money and play your cards right.

But take a look at what happened to the global economy after the deregulation and expansion of the global finance industry:

Australian Debt Global Debt to GDP

The top graph illustrates the amount of credit given out in the Australian economy. As you can see, there is an incredible increase after the 1970s. The Y-axis details the ratio between credit and Australian Gross Domestic Product (GDP). That’s the value of all the commodities and services produced in the Australian economy. As you can see, the amount of credit now exceeds the entire Australian GDP. The credit exceeds 100%. This means more money has been lent out privately than the whole value of everything produced by the Australian economy.

The bottom graph illustrates the ratio as a percentage between the amount of global debt and global GDP. You can find this graph in a 2014 article in The Telegraph. The type of debt measured here is both public and private non-financial debt. This means the debt of both governments and private companies. As you can see, the global amount of non-financial debt is more than two times the entire value of everything produced in the global economy.

These graphs show that in order to avoid having to engage in a struggle with workers over the way the means of production were used, capitalists resorted to borrowing lots and lots of money in order to keep the process of capital “accumulation” going. By doing this capitalists were able to gain the advantage in the world system. The world capitalist system entered a new phase called “neoliberalism”. Capitalists were able to use their newfound money to both wind back and smash the collective union power of workers. They also began to sell off the public state services that workers had managed to establish. These state services were an attempt by the reformist leaders of unions to soften the inequalities and injustices that capitalism had on workers.

But neoliberalism is nonsense. All that happened after the deregulation of financial markets was that everyone in the economy took on massive amounts of debt in order to keep commodity production going. Eventually, in 2007-2008, the bubble burst. The following is a graph of the Dow Jones Industrial Average. It’s a special calculation of the value of all the top 30 company stocks on the Dow Jones stock exchange.

Dow Jones Index

As you can see, the index lost half of its value in about two years. The huge bubble of debt-fuelled trading burst. There are more graphs. Try looking at the data on public and private debt over this period. Have a look at the growth rates of various national and regional GDPs. Also look at the global and national rates of inflation. The index above may have recovered its value and continued upwards, but this is being fuelled by a new return to the cycle of taking out credit, and going into debt. This is the logic of the current situation.

We can now return to talking about the Australian car industry. Take a look at this graphical representation of some data from the Australian Bureau of Statistics. This graph represents the value of Australian automotive exports in millions of Australian dollars.

Australian Auto Exports

As you can see, there is dramatic collapse in the value of automotive exports around the time of the Global Financial Crisis in 2007-2008. The data set does not continue past 2015, but you can see that the value of car exports has never quite recovered to its pre-GFC levels. The GFC caused an economic phenomenon called deflation. The bursting of the crazy cycle of borrowing and lending on the world market caused the prices of Australian cars to drop. A key reason why the GFC caused deflation is that people are too deep in debt to buy cars, and companies that are also in large amounts of debt tend to try and get out of debt by making cars. Marx calls this over-production.

The huge circus-act of the global capitalist class has cost Australia its car industry. I asked some rhetorical questions at the beginning of this article. Why aren’t we making cars because people need them? The answer is that there is a bizarre kind of rationality behind the way cars are produced in the world. Cars are produced for the efficient accumulation of capital. As we can see, this type of rationality is nonsense. It has led to the closure of a productive activity because an elite group of people wanted to remain in power.

But what about the efficiency of needs? Why can’t we have a system geared towards making cars because they are useful, not because they’re a tool for making money?