An argument in favor of outsourcing.....help

[RadioRaheem84]

GM argues that the reason for its downsizing was fierce competition from Japanese auto manufacturers and that the only alternative to the factory closures in Flint would have been major government subsidies or increased protectionism.

How would you counter this argument?

Also, a libertarian proposed this:


The people with the vision and intelligence necessary to keep an organization viable, will seek to maximize profits for shareholders, who own the company. If the labor cost component becomes too high, managers will naturally look for alternatives to reduce this cost....in order to remain in business and satisfy shareholders. "Let's send those jobs to El Salvador". If the unions preclude this from happening, the company ends up producing a
non-competitive (cost and performance) automobile that no one will buy. Instead of going out of business the government dumps billions of taxpayer dollars in your lap. Not to fix the problem.....but to keep people employed. It's called socialism. A huge delusion. You're still cranking out cars but there's no incentive to lower costs of labor because labor is subsidized by taxpayers. That $30,000 car that goes to market is composed of physical components, non-competitive union labor, taxpayer subsidies.

[blake 3:17]

I don't think it's so much a question of debate as one of understanding. The auto industry is soooo capital intensive (ie real capital not hedge funds or whatever) -- I don't see any easy solutions to the questions you're asking. The article below, which I'd really recommend, doesn't have a whole lot more prescription than basic class struggle socialist politics and unionism. Of course I'm for them, and Gindin has probably done more for them an anyone else I know, but...

Saving the Detroit Three, Finishing Off the UAW: Learning from the Auto Crisis
by Sam Gindin : http://www.monthlyreview.org/mrzine/gindin311208.html

Edited to add: Read the above article. Ignore my editorializing.

[cyu]

The people with the vision and intelligence necessary to keep an organization viable, will seek to maximize profits for shareholders, who own the company.


Left-wingers and right-wingers obviously have fundamentally different assumptions and axioms. Leftists would say while shareholders currently have the legal right to control the company, they don't deserve to - it's similar to saying that while an authoritarian regime may have the legal right to control a nation, it doesn't deserve to.

If everyone had the right to assume democratic control of their companies, their land, and their natural resources, the problem of capitalism would be pretty much solved.

[MarxSchmarx]

GM argues that the reason for its downsizing was fierce competition from Japanese auto manufacturers and that the only alternative to the factory closures in Flint would have been major government subsidies or increased protectionism.

How would you counter this argument?

The exact same way it was countered in 1848:


Workers of the world, Unite!

[BrokenDown]

It's hard for us as individuals to understand why a company (of American origin) would take jobs away from us and give them to another country. Unfortunately the motives of a company is to make money which can be done by cutting costs (or finding cheaper labor). It's really a question of morals over everything.

[blake 3:17]

From the UAW site:


Q: Are UAW members really paid $73 an hour?

A: No. Wages for UAW members at Chrysler, Ford and GM range from about $14 an hour for newly hired workers to $28 an hour for assemblers to $33 for skilled trades workers.

Typical hourly wages at Honda, Nissan and Toyota are only slightly lower. Due to the effect of profit-sharing formulas, however, there have been some recent years in which a typical Toyota worker has taken home a larger annual paycheck than a typical GM worker.

The $73 an hour figure is outdated and inaccurate. It includes not only the costs of health care, pensions, and other compensation for current workers, but also the costs of the pensions and health care benefits of retired employees spread out over the active workers. Active workers never receive any of this compensation in any form, so it is not accurate to describe it as part of their "earnings."

In addition, overall labor costs at Ford, GM and Chrysler were dramatically lowered by mid-contract changes in 2005 and the 2007 UAW labor agreement. As a result of major changes in retiree health care, lower wages for newly hired workers, and other contract concessions, the labor cost gap between domestic and foreign nameplate producers will be nearly or completely eliminated. One independent analyst has projected that GM could soon have lower labor costs than Toyota. (Detroit Free Press, Jan. 13, 2008)

Q: Do labor costs make up the majority of the cost of producing a vehicle?
A: No. Labor costs are about 10 percent of the costs of producing a vehicle. The other 90 percent includes research and development, parts, advertising, marketing and management overhead.

Q: But aren't labor costs going up every year, creating an additional burden for Ford, GM and Chrysler?
A: No. As noted above, contract concessions in 2005 and 2007 have actually decreased labor costs at the domestic automakers.

In 2005, for example, UAW members agreed to forego a 3 percent wage increase to contribute to the cost of health care, and health care benefits were modified for retirees. In 2007 wages for new hires were reduced by half, and new hires were excluded from the traditional retiree health care and defined benefit pension plans.

Also, in 2007 the UAW and the auto companies reached a landmark agreement that transferred retiree health care liabilities from the companies to an independent VEBA fund. The changes in the 2005 and 2007 contracts reduced the companies' liabilities for retiree health care by 50 percent.

Q: Are the legacy costs at Chrysler, Ford and GM so high because of rich pension and retiree health care benefits?
A: No. The main reason that Chrysler, Ford and GM have higher legacy costs than the foreign nameplate operations in the United States is not because their retiree benefits are much higher. It's because they have so many more retirees. Because the domestic auto companies have been operating in this country for many years, they have large numbers of retirees. But the foreign nameplate operations only started operating in this country 25 years ago, and therefore have very few retirees.

In addition, the overwhelming majority of retirees from Toyota, Nissan, Honda, BMW and Mercedes live in countries where national health systems spread the costs of providing health care across the entire societies. The real solution to the high health care costs which burden all American employers -– not just automakers -- is the enactment of national health care reform.

In the negotiations with the domestic automakers in 2007, however, our members realized that we could not wait for the government to act. We took action ourselves, addressing retiree health care costs by establishing an independent trust -– called a Voluntary Employee Beneficiary Association (VEBA) -- that will take over the companies' obligations for providing retiree health care benefits.


http://www.uaw.org/auto/12_02_08auto1.cfm

[Kayser_Soso]

GM argues that the reason for its downsizing was fierce competition from Japanese auto manufacturers and that the only alternative to the factory closures in Flint would have been major government subsidies or increased protectionism.

How would you counter this argument?

Also, a libertarian proposed this:


I don't know how much experience you have debating libertarian types, but one thing you have to realize is that they tend to work via a system of assumptions, and in order to debate with them they expect you to go by those assumptions. It's like if you argue with a mainstream conservative, and then they immediately think you're an Obama-supporting Democrat. Assumptions...

In this case, the assumption is that union control will automatically mean building cars that nobody wants to buy. First off, who decides what cars to build? Is it the workers' fault that the heads of the American auto industry wanted to keep building tanks like the Park Avenue or Delta 88 when the country had been hit with a gas shortage some years earlier? Of course not- they are given the materials and the means, and build the cars they are told to build. It was the "best and brightest" who fucked that up.

[RadioRaheem84]

I don't know how much experience you have debating libertarian types, but one thing you have to realize is that they tend to work via a system of assumptions, and in order to debate with them they expect you to go by those assumptions.

That is the subject of one of my college papers; the philosophical presuppositions of neo-liberal ideology.

I really grew concerned by just how much libertarians and neo-liberal economists control the debate. There are so many presupposed concepts in their arguments that they just expect you to argue your points based on those assumptions.

For one, I felt like an idiot five years ago, when I knew next to nothing of leftist economics and assumed that socialism = welfare state. I defended the welfare state til I was blue in the face. Then I realized that I had never argued for socialism because I had never argued for the ownership to put in the hands of the workers FIRST. I had simply started to argue from a capitalist framework.

[PRC-UTE]

GM argues that the reason for its downsizing was fierce competition from Japanese auto manufacturers and that the only alternative to the factory closures in Flint would have been major government subsidies or increased protectionism.

How would you counter this argument?

Also, a libertarian proposed this:

The libertarian missed the mark pretty bad. I don't even bother talking to those types on the nets, cuz really they're just an obsession of some fat Yanks who don't work. Also they're well clueless.

Some US auto companies were shifting production to Canada. Why? Because Canada's superior social safety net and public health service made their work force more reliable, healthier, and the company wasn't paying for medical costs, which cost them a fortune due to the backwards private US system. The public, government control of health care made production cheaper.

Ergo all libertarians are once again proven wrong on basically everything they say re economics.

[Kayser_Soso]

Let me give you another reason why you shouldn't bother debating libertarians. One of the assumptions they have is that they get to define capitalism. Non-morons would define capitalism by several objective traits- more or less free competition in the market, labor power and means of production as commodities, the law of private property, centralitity of the profit motive, etc. Not libertarians though. Basically, capitalism = good. So if there are any social ills in a given society, they will admit they are bad, but that is because it isn't "true capitalism". They will always find some way to claim that this or that society wasn't really capitalist, because the state regulated this or that- no matter how small. That is because in libertarian fantasy land, the state and the private sector are somehow entitites that exist in seperate worlds, and if the former has any influence on the latter, and particularly when the results are negative, then suddenly that society is not "true capitalism."

[Axle]

GM is full of shit. Take it from someone who has lived in Flint his whole life.

They've been closing factories because they've been losing market share, yes, this is true. I don't like it, but its true, and under a capitalist system it really can't be any other way, so please forgive me if I seem to be looking at this initially from that perspective, instead of a socialist one.

General Motors has been closing factories to increase profits, not because they're unprofitable.

The Japanese automakers are generally pretty ruthless businesses, while GM is, even now, fat and happy and still apparently under the impression that they're the big dogs in the industrial game. GM has problems competing against the Japanese because they're far too top heavy and beurocratic and slow moving; not to mention they're just starting to pay attention to market trends instead of building whatever the hell they think the public should want. When the public went for fuel efficiency in the 80s, GM was still building gas guzzlers. When the fuel jumped up high a few years back, GM was still focused on building trucks. The argument you want to counter isn't so much untrue, it just convieniently lacks the crucial fact that all of GM's problems competing stem from the way GM's management runs the company. GM management has a well-known culture of self-service, cronyism and egoism.

And that last paragraph actually makes me feel so filthy, that after I finish this post I may have to take a shower. I almost feel as if I've defended these companies to a point.

To cleanse my pallet somewhat I offer this up:

The idea that paying workers enough to buy the products they build is unprofitable; but moving the work to a country where the workers are not paid enough to buy the cars (and add to that the laid off workers who cannot afford, or will simply no longer buy a GM product) would be profitable is obviously just a line of shit being fed to us...and with GM being so close to going out of business right now (as they have been for several years) after 20 years of factory closures and outsourcing should be enough to paint a picture that what we're being told isn't the truth.

I whole-heartedly agree with the workers taking control over the company, as I would for any company.

However, I would suggest that the autoworkers instigate full worker's control over the union (obviously) and kick the top union officials to the curb, because the UAW has not only been fully compromised as a vehicle for the autoworkers; but has also been one of the main architects of outsourcing, loss of jobs and lowered wages and benefits either indirectly by standing idly by while it happens, or, like recently, more directly by literally shoving benefit and wage reductions down the member's throats.

I've seen what industrial outsourcing does to a community and to its people, and workers deserve better than the short stick they've been given under this post-industrial economy bullshit.

And I apologize for any rambling nature of this post.

[RadioRaheem84]

The idea that paying workers enough to buy the products they build is unprofitable;

How is it not profitable? Or do you mean not as profitable to the top as outsourcing and cutting pay is?

[Axle]

How is it not profitable? Or do you mean not as profitable to the top as outsourcing and cutting pay is?

I'm saying its more profitable now and in the long run.

Outsourcing and cutting pay is only good for quick money, but in the end all they've got left is workers who can't afford those products, and others who just plain won't buy them anymore.

[cyu]

From http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6694962&mesg_id=6694962

"Spending by the uber-rich overwhelms that of the average consumer... The United States is one of the plutonomy countries countries whose economies are powered by a relatively small number of rich people."

In other words, you don't really need to pay your workers much if your finance tycoons can basically print money - workers are no longer consumers that you need money from - they are just producers. The source of money is now places like Wall Street and fractional reserve banking, where they basically pull money out of thin air to buy the labor they need to live in luxury.

[Pogue]

Well obivously we'd counter it by arguing that a situation where out-sourcing can exist is part of the global class system in which members of the working class are played off agaisnt each other by the bosses. Under capitalism we have a situation where because of the balance of the market certain things 'can't work' unless something happens.

Draw parrallells to the current situation with the Royal Mail strikes. Its not that Royal Mail can't modernise, its that management's way of it modernising, i.e. to make profit, is draggin the whole business down. Within the confines of capitalism alot of things like this happen. This hilights how capitalism, with its eratic markets and what not, simply can't work. So this is not an argument in favour of out-sourcing, its just proving how capitalism inevitably leads to a situation where people are fucked over.

Obviously if we didn't have global inequalities and areas with a weak worker's movement nothing like this would ever happen, so again, capitalism.