The murder of manufacturing: the case of the Australian auto industry

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(Contributed)

The long and agonising death of Australian manufacturing has been hastened by the Abbott government’s refusal to support the Australian auto industry.

The foreign multinational car companies operating in Australia have closed operations here because their loyalty is to a handful of major corporate shareholders and not to the working people of the countries in which they have based their manufacturing operations.

The neo-liberal restructuring of the economies of countries around the world has resulted in severe dislocation, the rise of precarious employment, and the flow of investment capital away from productive applications and into the global financial casino.
In Australia, Labor and Liberal governments have loyally followed the dictates of the World Bank and the International Monetary Fund for deregulation, privatisation, and “free” trade.

Only a few at the top have benefitted.

In this publication, written by a worker in the auto components industry, we look at the impact of imperialist globalisation on the auto and components industries, and suggest the way working people must base their demands around an independent and socialist future for the country.
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PART ONE:

Soon after taking office in 2013, the federal Abbott Coalition government took decisions which resulted in the three main auto companies in Australia announcing they would cease operations in 2016 and 2017. Holden, Toyota and Ford, employ about 9,000 workers nationally. The industry, historically, received about $550 million government support in return for the companies investing $7.3 billion a year. In classic, basic economic theory, capital exploited labour, as the main factors of production, for massive benefit. The business was highly profitable, generating in excess of $21 billion each year, with productivity return for each worker being $128,000 annually. For every tax-payer dollar, a total of $31 was returned each year. (1)

The related Australian-based component sector directly employed an estimated 50,000 workers in over 700 factories, often close to the main auto manufacturers for logistical reasons to reduce transport costs. All the 719 companies are now considered vulnerable. (2) It has been suggested only about 10-20 per cent of the companies will survive the auto closure, with fears some not even reach the final date creating problems for the parent industry with ready access to vital component parts. (3) 

It has been estimated a further 100,000-200,000 workers, indirectly linked to the auto and component sectors, will also be affected by the closures. (4)

Even the business-classes have raised serious concerns about unemployment: many companies received favourable terms from state governments for basing businesses in localities where unemployment was already considered a problem. (5) 

When questioned by trade-union delegations about why the government had taken the decision to close the industry and the problem of job losses, however, Abbott stated, 'that was our policy'. (6) Decisions, about Coalition party policy, had, apparently been taken a few years earlier with every intention of implementation once in office. Where, and from whom, Coalition members received their information for establishing party policy remains a matter of conjecture. Their 'confidential agents' consisted of few, if any, with direct employment experience within manufacturing industries.

A closer study of such decision-making has raised serious questions about how Australia has fared in the era of globalisation. And who has benefited. The era has been marked by a departure from usual, tried and tested, trading patterns. 

Australia, historically, had a small economy and workforce, with strong trade links with Europe. To protect vital and vulnerable interests, the economy was highly regulated. Huge profits were, however, generated with industrial enterprise. Australia, throughout much of its recent near two centuries of modern history, also achieved enviable living standards considered amongst the highest in the world. There was also a strongly egalitarian political culture, marked by social mobility.

During the 1980's period, however, Australian federal and state governments began implementing policies foisted upon them from international financial institutions controlled by the United States. The World Bank and International Monetary Fund (IMF), and others, issued directives for countries to undertake  deregulation, privatisation and liberalisation of their economies. It was conducted on the basis 'of one size fits all'. Governments which questioned the judgements were considered obstacles within the grand plan. 

As the international financial institutions issued more and more directives, the term globalisation became vogue with round-after-round of so-called Free Trade Agreements (FTAs). 

The period was marked by casino-type market-economics, with excessive risk-taking and the development of a human form of cockroach capitalism: market trading would appear more akin to scavenging. Activity on the stock-exchange is taken as good for business, as opposed to other, more reliable means of assessing economic well-being.

The effect of globalisation, upon Australia, was dramatic. A vital prop, and buttress, for the manufacturing base of the whole economy crumbled. The period also coincided with the rise of China as a dominant, regional economic power, driving much of Asia in its trail.

The changing balance of forces with the emergence of China has also thrown considerable light upon the present so-called regional Trans-Pacific Partnership (TPP) FTA of twelve countries which encompass forty per cent of the global economy. It has been discussed in secret, has questionable benefit for Australia and has excluded China. The construction of the TPP, has, in effect, been more in line with US regional defence and security planning and a perceived threat to their hegemonic position, than trade. The TPP will also be a further nail in the coffin of Australian manufacturing.

The effects of globalisation are not difficult to openly observe in Australia.

In the five years leading to November, 2014, the Australian manufacturing base lost a further 79,200 jobs, which amounted to 8 per cent of total, even before the planned closure of the auto sector. (7) Whole areas of the country which for generations had strongly localised manufacturing industries have suddenly experienced unemployment. Factories and workshops have closed, the derelict buildings bull-dozed into the ground.

Generational unemployment embedded in sections of the working class is now set to expand, which will serve as a convenient cover for the business-classes to further challenge trade unions as they try to defend wages, terms and conditions. 

The present Abbott Coalition-led Royal Commission into Trade Unions is an institutional approach to undermine workplace-based labour organisation. It is backed by a compliant media which has demonised any trade-union activity. The development has amounted to little other than a massive muck-raking exercise intended to undermine industrial relations in the workplace and the Australian Labor Party which, to date, presents the only credible challenge to the removal of the Abbott Coalition government.

Although Labor is a parliamentary alternative to the Coalition, it must be remembered that it does not present an alternative to the neo-liberal agenda developed to support the domination of imperialist finance capital over industrial capital.  Hawke and Keating pioneered the embrace by Australian politicians of this agenda with their removals of tariffs, deregulation of banking and finance, and promotion of the class collaborationist Accord. 

It would be almost unthinkable for the Abbott Coalition government to subject rich and wealthy Australians to similar smear tactics and dishonest agendas despite the fact a substantial proportion of the 'global super-rich elite' are responsible for hiding an estimated US $21- $31 trillion in offshore banking locations, exempt from closer scrutiny. (8) The amounts of hidden finance amount to as much as the combined Gross Domestic Products (GDPs) of both the US and Japan together, and often have links to organised criminal activity. The Abbott Coalition government, however, remain curiously silent and unwilling to take action to challenging the rich and powerful.

It is not difficult, however, to establish why the Abbott Coalition government have targeted the auto and component industry for 'special attention'. It has remained strongly unionised, with traditional industrial relations procedures, even under previous hostile governments. 

This runs counter to Abbott Coalition objectives, in compliance with their cronies in the business sector, to increase levels of casualisation and precarious employment with the specific intention of weakening trade-unions and reducing bargaining power for workers confronted with unreasonable demands from employers. They seek to reduce wages and worsen their terms and conditions of employment.

Abbott and his cronies, however, appear curiously out-of-step with reality. They continue to blame trade-unions for demanding higher and higher wage-increases. The claim is without substance. The only sensible explanation is that their claim is ideologically driven. 

Wage increases for most Australian workers have not kept up with inflation rates for many years. Most manufacturing workers regard themselves as fortunate if they receive two per cent per annum wage-increases. Even this small amount, for some employers, is not small enough. There are now employers in contemporary Australia demanding the government introduction of wage-cuts to further boost profits. (9)

Despite the endless diatribes issued in the name of respectable journalism from their friends in the media, it was not trade-unions which have destroyed the auto and component industries. To the contrary, international financial institutions and Australian governments were responsible for the destruction. The continual opening of the Australian economy to unfair trade conditions in previous decades effectively undermined manufacturing in general and the auto industry, specifically. 

It is not difficult to establish what happened. Reliable figures are easy to access. Australia possessed only 1.5 per cent of global auto production facilities. The removal of import controls and tariffs has exposed the industry to massive dumping of foreign-manufactured cars subsidised by their own governments onto Australian markets. It was unable to compete.

Some large auto manufacturers clearly understand their industry better than governments.

It has been noted by Ford Australia, in official correspondence, 'Australia's automotive import tariff at 5 per cent is already one of the lowest rates in the world but when new and existing FTA's with automotive producing countries are taken into account the effective tariff is closer to 2.6 per cent'. The company also further noted tariffs would fall even further with the introduction of the TPP. (10)

The amount of foreign government subsidy of their industries has to also be considered, in relative terms.

Australian governments have only subsidised auto-manufacturing to $18 per capita per annum. It amounts to paltry support in comparison to other competitors. Their counterparts, in Germany and the US, for example, subsidise their own auto-industries to the tune of $90 and $260 respectively. (11) There is hardly a motor vehicle made anywhere in the world which is not heavily subsidised by their governments. And the reason, good business practice. 

Today, however, there are a total of 67 different brands and 400 models of car are available in Australia for about 1.1 million sales annually. It is not good business practice. Even the huge US market restricts importation of cars to a maximum of 51 brands. (12) 

There remains widespread concern throughout Australia that successive governments have sold themselves very short indeed with economic decisions taken about manufacturing and the auto industry. Their decision-making has not been particularly clever.

Government support for other parts of the economy raise serious questions about their commitment, or lack thereof, toward manufacturing,.

Manufacturing, for example, still employs about 8 per cent of the Australian workforce with more than 910,000 jobs. The finance sector of the economy, by contrast, which only employs an estimated 2 per cent of the workforce, receives $763 per capita per annum in government subsidies. (13)The support would appear generous toward a small and privileged section of the Australian workforce. A recent study of the industry conducted by Michael Page Australia of 449 finance organisations, however, found 68 per cent had no intention of increasing their workforces in the coming year. A total of 60 per cent were also awarding their existing workforces with between 3-5 per cent wage-increases. (14) 

The mining sector of the economy, likewise, which only employs another 2 per cent of the workforce receives about $4 billion per annum. (15) Many of those in control of the mining companies remain strongly supportive of the Abbott Coalition government.

It is as if Abbott and his cronies live in the misty realm of ivory towers, totally detached from real life. Serious questions arise about their competence, and the hidden agendas they appear to pursue. There have been questionable benefits, for example, from most FTAs, to date. They are unlikely to improve life for the mass of the population in the future. 

The problems resulting from unfair trade practices are not only a major trade-union concern. Even business-groups recognise the problems arising from FTAs, and the requirement of 'mutually reciprocal trading conditions for Australia's automotive manufacturing industry'. (16)

To date, the Abbott Coalition government have not even commented yet alone made a political statement on business decisions taken by General Motors to re-locate to Germany and produce Holden vehicles from March, in a country where labour costs are higher than Australia and trade-union density is greater. 

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PART TWO:

A number of significant points emerge from the continued imposition of imperialist globalisation policies upon Australia. It has altered the industrial landscape and created a wasteland for most working people.

The policies of globalised finance capital have also been responsible for strengthening power relations between class and state. They have greater room for manoeuvre. Too many trade unions remain at present cowed and over-powered by the triumphalism of capitalism.

It has also led to massive discrepancies and ever-widening levels of wealth accumulation. Reliable sources have shown that the seven wealthiest billionaires in the country hold more wealth than the poorest 1.73 million households combined . (17) There has been no 'trickle-down of the wealth'. It has been grabbed and kept by those in higher-socio-economic circles who possess no intention of sharing any bounty from ill-gotten gains. 

Similar studies including the World Wealth Report conducted by Capgemini have revealed how already well-heeled Australians increased their wealth with a further 226,000 people being assessed as High Net Worth Individuals (HNWIs). It has had the effect of strengthening the middle-classes. To enter the select club, one has to possess more than US$1 million over and above the value of their own home. (18) The wealth has largely been accrued through investment in real estate, not manufacturing. No doubt the Abbott Coalition government view such developments favourably: they strengthen traditional authority-patterns and  upper class sections of society which historically have been their electoral powerbase.

Serious problems, however, are looming.

Decision-making and political expediency shown with the Abbott Coalition government in Canberra has been short-term. Even the IMF has 'raised concerns that austerity budgets in the post-Global Financial Crisis world not only contribute to inequality but also act as a major brake on sustainable economic growth'. (19) 

One of the only real indicators of economic growth and well-being remains the documentation of GDP, which in classic economics is a measure of the total flow of goods and services produced by an economy over a year. Levels of GDP growth reveal sustainable economic development for most developed countries, but the opposite in Australia.

The Organisation of Economic Co-operation and Development (OECD), of which Australia has been an active member for over thirty years, has noted in official research that levels of our GDP growth have been in continual decline since 2002 when it was recorded as standing at 3.967 per cent to this year when it fell to 2.306 per cent. Total GDP growth for all OECD countries during the same period rose from 1.689 per cent to 1.914 per cent. World totals, also rose from 2.862 per cent to 3.129 per cent. (20) 

The Australian economy, in reality, is going in the opposite direction to other OECD members and world, with an ever-downward spiral of decline, together with rapidly increasing unemployment and deprivation. The closure of the Australian auto and much of the component sector will further exacerbate and hasten an already established pattern. The policies of globalisation imposed by the imperialist world’s largest financial institutions are shown quite clearly to be responsible for the destruction of the manufacturing base of the economy.

The 'one size fits all' approach adopted by imperialism in its restructuring of Australia is totally unsuitable for the country. Or for most other countries, for that matter: evidence produced by international financial institutions would appear to contradict their aims and objectives. 

A statement from the World Bank at the beginning of the year, referred to 'another disappointing year in 2014', and 'underneath the fragile global recovery' were growth estimates for high-income countries of a mere 2.2 per cent for the period 2015-17. The developing countries, by contrast, achieved growth estimates of 4.8 per cent rising to 5.4 per cent for the 2015-17 period. (21) It remains highly significant to note the latter have temporarily benefited from huge flows of capital in search of higher returns and have also tended to increasingly ties with the BRIC countries which sometimes offer more favourable trade terms.

Since the World Bank issued the statement in January, furthermore, deterioration in the US economy has been duly noted. The new estimate, an official 'Mid-Session Review', revised previous forecasts down from 3 per cent to only 2 per cent. (22) The terse, two, extra-short column media statement, issued by the White House was subsequently hidden in various business media outlets. 

Such developments are not good for those who rely upon generous handouts to lobby governments and businesses with policies which do not foster economic improvements, but rather, only lead to further decline. It might be noted which Australian lobby organisation has been the first to collapse under the strain, not even making the finishing-line of the Senate Enquiry into the auto and components sectors in November.

The Federation of Automotive Products Manufacturers (FAPM), recently announced it had folded. The Australian business and employer-based lobby group, with about 120 members, was liquidated in July. (23) They may well have established richer pickings and pastures elsewhere. The FAPM, however, could hardly deny they were oblivious to the problems created by their incessant lobbying to implement globalisation policies. The organisation had a research department. The likely outcome of globalisation policies was already predicted among those who read newspapers and monitored developments from reliable source material. 

One of the most damning criticisms of globalisation was issued in 2000, from official US government circles. During the late 1990s period the top US intelligence body National Security Council (NSC) commissioned an 18-month research project with 'independent experts' into the likely effects of globalisation. The final report concluded 'it is unlikely that economic globalisation will lead to general well-being during the next 15 years, because the gap between rich and poor – both between countries and within them – is growing'. (24) The report, which was leaked to a Spanish-language media outlet, caused huge embarrassment, also warned of growing unemployment levels, alienation and political instability. 

It has not been difficult to monitor the accuracy of the report over the past fifteen years.

It is highly relevant to note the major drama being played-out in contemporary Australia. While the Abbott Coalition government remain intent on policies which include 'the balancing of the budget' and an austerity package, reliable sources have shown total global wealth has doubled since 2000 to an estimated $263 trillion. During the short 2013-14 period a further $20.1 trillion was added. (25)

The Abbott Coalition government austerity policies have been aimed at penalising the lower socio-economic groups while opening further possibilities for those at the 'top-end of town' to further amass wealth. Their rapid increase in wealth, however, has not made society or the world a better place for the mass of the population.

Those who reside in dreamland and think the benefits of increased global wealth will eventually 'trickle down' to lower socio-economic groups continue to live in their ivory towers. There is no evidence of any distribution of wealth taking place, whatsoever. World-wide, the richest one per cent own more than 48 per cent of all wealth. (26) In Australia, a recent study found the wealthiest fifth of households owned an estimated 70-times more than the poorest. A spiral had been created, escalating out of proportion. Those at the top had accrued a 28 per cent increase in their wealth, in recent years, while the bottom fifth achieved only a further three per cent. (27) 

The report was also supported by research conducted by Oxfam Australia, which found, ' the rise in income that the top one per cent have enjoyed in the past three decades was second only to the increase experienced by their peers in the US'. (28) 

The problem also has implications which are counter-productive. The rapid escalation of wealth is unsustainable. It is purely speculative, not based on firm ground. The unequal distribution, likewise, has raised serious questions about its prolonged viability. In fact, even Credit Suissehave raised fears that growing inequalities 'could trigger a recession'. (29) 

The policies of imperialist economic globalisation, which have enabled the rich to fling capital to the four corners of the globe in search of ever higher returns with no social responsibility for the outcome, carry within themselves the seeds of their own destruction. The people responsible, the finance capitalists of the major imperialist powers, are not productive.  They are indeed their own grave-diggers as they impose directions on the economic development of capitalism that make that system unstable and prone to crisis.

Those of us who manage to keep our health into older age might even witness the whole pantomime created by those who seek mega-profits over any semblance of social responsibility collapse and disappear without trace into the rubbish bin of history. They will be, largely, responsible for their own destiny. 

Those on the receiving end of the economic policies of US and other imperialisms, including the Australian auto and component sector workforce, will be better-off without them.  

Australia can have a productive manufacturing sector but the guarantee of that cannot come from within the economic and political system of capitalism, the Australian version of which is totally enmeshed in the web of imperialism.

Manufacturing and other workers must raise demands for the independence of our nation from imperialism, and for the replacement of capitalism with socialism.

These demands already exist in embryonic form within a developing independent agenda of the working class.  It is not constrained by the Labor Party.  It refuses to rely on the Labor Party and instead seeks to apply rank and file pressure to Labor leaders to support elements of the workers’ own demands.

Only when the people’s immediate demands are connected through a vision for anti-imperialist independence and socialism will we have the key to a better and less precarious and uncertain future.

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(1) Thousands of jobs lost at Holden, AMWU News, Summer 2014, page 5.

(2) Federal Parliamentary Submission for Senate, 2015,
Government of South Australia, Section 2, page 4.

(3) Ibid, Business SA, February 2015.

(4) Op cit., AMWU News.

(5) Op cit., Business SA.

(6) Information provided by Mike Smith, AMWU, FORUM. 25 February 2015.

(7) Manufacturing, Australian Jobs,
Australian Government – Department of Employment, (ISSN 1832-7230), page 20. 

(8) Super-rich hide $21 trillion,
The Guardian Weekly (u.K.), dated, 27 July 2012.

(9) Carnell supports real cuts to wages,
The Australian, dated, 5 November 2014.

(10) Parliamentary Submission for the Senate, 2015,
Ford Australia, February 2015.

(11) Macro Business: Car Industry Subsidies in Perspective, 11 April 2013, and
The Conversation – Fact Sheet, FactCheck,, quoted Lateline, 22 July 2014.
(12) Federal Parliamentary Submission for Senate, 2015,
Federal Chamber of Automotive Industries, March 2015.

(13) Op cit., Macro Business.

(14) Finance industry feels the pinch,
the Australian, dated, 14 July 2015.

(15) Manufacturing, Ibid., and,
Financial and Insurance Services, page 19, and
Mining, Industry Overview, Employment by industry, page 14, and,
Macro Business, Ibid.

(16) Federal Parliamentary Submission, 2015,
Federation of Automotive Products Manufacturers, April 2015,
Recommendation 28/Market Access.

(17) The Australian Institute, quoted, Richer rich bad news for us all,
Money Section, the Age (Melbourne), dated, 16 July 2014.

(18) World Wealth Report, Capgemini Asia-Pacific, quoted,
World Wealth Report, The Australian National Review, dated, 10 July 2015.

(19) Trickle-down theory all washed up now,
The Age (Melbourne), dated, 28 May 2014.

(20) OECD STAT., Economic Outlook, Number 97, June 2015.

(21) Global Economic prospects, World Bank, Washington, 13 January 2015.

(22) Review cuts US growth forecast,
The Australian, dated, 16 July 2015.

(23) Decline sees car industry group fold,
The Age (Melbourne), dated, 8 July 2015.

(24) Hunger does not subside and slavery returns,
Granma, Cuba, dated, 24 June 2001.

(25) Global Wealth Report, October 2014, Credit Suisse Research Institute, page 15, see also,
Davos salutes DWF's in a celebration of global capitalism,
The Australian, dated, 29 January 2008.

(26) Ibid.

(27) Wealthiest get wealthier as gap widens on poorest,
The Age (Melbourne), dated, 22 June 2015.

(28) Op cit., Global Wealth Report.

(29) Ibid.

 

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