4: Reindustrialization and the
Capitalist Economic Crisis

For almost a year there has been an intense and heated discussion in leading circles of the ruling class regarding so-called reindustrialization. This discussion of economic and industrial policy grows out of three crises which have engulfed American finance capital.

There is, first of all, the current, ever-deepening capitalist economic crisis which is causing more and more millions of people to become unemployed and is slowly bringing some industries to a virtual standstill.

There is another crisis, one which has long preceded the current economic slowdown. This crisis, as we demonstrated earlier, grows out of the relative decline of U.S. industry in relation to the capitalist rivals of the U.S. in the world market. This crisis has been developing for longer than a decade.

Finally, there is still a third crisis, which in military circles is referred to as the geopolitical crisis. By this is meant the declining military, political, and diplomatic position of the U.S. in world affairs.

This crisis is a result of the loss by U.S. imperialism of its predominant role as the world's policeman. It is no longer the supreme military, diplomatic, and political leader of the "free world."

Of course, the U.S. has more arms and appropriates more money for military expenditures than ever. It finds, however, that it can no longer, by virtue of its combined military and economic strength, maintain the supremacy it had at the end of the Second World War in world affairs.

The ideologists of the ruling class are deeply concerned because these three apparently separate and independent crises are really intimately connected and flow from the same source -- the general decay of the capitalist system.

ATTEMPT TO CONFUSE DIFFERENT CRISES

In their effort to disguise the nature of the general economic crisis, these bourgeois ideologists are concentrating and attempting to get public attention focused mostly on the second crisis, the crisis facing the U.S. from stiff competition with its capitalist rivals. They identify and concentrate on this crisis in the hope of persuading and eventually forcing the broad masses of the United States to accept the ruling class's solution to the crisis.

The solution to the problem, they say, lies in modernizing and retooling the basic industrial structure of the U.S. They summarize it all by the term "reindustrialization." Over and over again the cry from leading bourgeois economic journals as well as the media is "Our plants are obsolescent, we need to restructure them." As Business Week , the organ of big business and high finance put it in its special issue on. The reindustrialization of America June 30 1980 what is needed is to "change or die."

The reader should note that the ideologists of the bourgeoisie deliberately try to confuse the crisis which U.S. manufacturers face in competition with their capitalist rivals abroad with the current economic crisis. The latter is first of all a crisis of capitalist overproduction. The ruling class usually calls it the cyclical crisis. While it is true that these crises of overproduction come in cycles, they are the principal cause of the mammoth unemployment.

The capitalist cyclical crisis is a crisis of overabundance, not of scarcity. For instance, in spite of a drought in many areas of the U.S., especially the Southwest, corn, wheat, soybeans, beef, pork, and poultry are all in superabundance. The supermarkets are loaded with the most varied assortment of groceries. The granaries are overstocked.

Even oil, previously alleged to have been in scarce supply, is now available everywhere. In fact, the world market is awash with a glut of oil. Automobiles, appliances, and literally thousands of manufactured items produced in the U.S. are now glutting the market. And there is an urgent need by the mass of the people for all that is being produced in the United States.

SUPERABUNDANCE DESPITE OBSOLESCENCE

The reason why all these commodities are not being sold is not due to any obsolescence of U.S. plants and equipment. On the contrary with the obsolescent plants U.S. industry has produced overall more than what the mass of the people can purchase.

Why is this so? It is simply due to the fact that the capitalists produce goods and services only for profit and not for need.

Once the capitalist class finds that its commodities can no longer be sold at a profit, it cuts back production severely or stops it altogether. It is this phenomenon of capitalist overproduction which is based on producing for a blind market in search of profits only, which lies at the root of the basic crisis. It's not the obsolescence of the plants. The obsolescence is only remotely related, if at all, to the present economic crisis and is not part of it.

U.S. Steel may not have modernized its plants as it should have. But there is the most crying and desperate need for all kinds of steel products for public housing. The steel industry can fill these orders quickly. But that's not what they want to produce unless there is a huge profit in it.

This is true in each of the industries where there is what is called "excess capacity," meaning that part of the plant is idle. Steel and other goods are available. There is enough to satisfy demands based on human needs for all.

MODERNIZATION AND UNEMPLOYMENT

The obsolescence of the plants in the U.S. is a product of neglect by the ruling class. Their efforts to modernize them, as they hope to do, is to meet the competition of their capitalist rivals, even if modernizing has to mean millions upon millions of more unemployed.

The ruling class tries to hide the cause of the crisis because it cannot be cured except on the basis of the abolition of the private ownership of the means of production and the reconstruction of society on a socialist basis.

Their effort to confuse the capitalist cyclical crisis with their competitive crisis abroad leads them to focus completely on the retooling and modernizing of their entire industrial structure. They hope to do this by presenting such persuasive arguments as to lead the working class to accept their solution, which calls for the most devastating attack on the living standards of the masses and unprecedented unemployment.

Focusing in on the plight of the obsolescence of plants and equipment in the industrial structure of the U.S. is one aim of this new ideological attack by the ruling class. The other aim, of course, is to reestablish U.S. military supremacy, which entails not only a further modernization of the military equipment of the U.S., including its most sophisticated weapons systems. It also entails a massive diversion of capital from the civilian to the military sector.

INDUSTRIAL NEGLECT FROM WARS ABROAD

The obsolescence of U.S. manufacturing and industrial equipment which is not confined just to steel auto or shipbuilding is due in large measure to the neglect by the industrial barons and manufacturing magnates in this country which began immediately after the Second World War.

The neglect arises from the fact that during the entire period from 1945 to the present day, the U.S. ruling class precipitated two major wars conducted by American finance capital in Korea and Viet Nam and dozens of counter-revolutionary military and paramilitary clandestine operations which include the overthrow of governments in Chile, Guatemala, the Congo, Brazil, Argentina, and Indonesia, just to name a few.

During this period, the U.S. became a virtual garrison state. Much of the research and development as well as capital investments were diverted into military-industrial channels. Thus, some of the most highly industrialized plants and equipment centers in the U.S., where rapid development is most essential, became dependent on cost-plus, fixed-fee contracts. This, in turn, rather than stimulate innovation, new inventions, and general inventiveness, only retarded them.

STIFLES COMPETITION

There is usually no bidding in cost-plus, fixed-fee contracts between the government and a defense contractor. The cost is what the contractor estimates it to be. The fee for the services is the one that is agreed to by the government and the contractor.

Competition for prime defense contracts usually takes place in closed door sessions. Contracts are shared out between a small group of the most powerful defense corporations, most of which are intimately allied with the big banks. There are laws that enable the government to renegotiate contracts when the costs become scandalous as they did with the C-5 transport plane. This, however, is the exception rather than the rule.

The absence of real competitive bidding in these industries stifles what the ruling class generally boasts about most -- competition. Moreover, it drains away so-called venture capital into the military-industrial field where the investments are secure and the returns are extortionate.

The overall effect is not only inflationary to the economy but engenders a period of false capitalist prosperity such as existed during the entire Viet Nam era and beyond. Moreover, this phenomenon spills over into all the industries, notwithstanding that some are only remotely related to the military-industrial complex.

In the wake of this false prosperity generated by cost-plus, fixed-fee contracts the vast industrial and equipment apparatus of the U.S. was neglected and decayed relative to the U.S. imperialist rivals abroad, such as Japan and West Germany, and became somewhat obsolete.

PERSPECTIVE FOR CRISIS

As we said, American finance capital, faced with a triple crisis, must first of all concentrate on the crisis which they hope can best appeal to the workers in order to get them to accept the ruling class's solution, namely, the loss of the U.S. competitive position in the world market.

It is necessary not to confuse the latter with the basic economic cyclical crisis. The reoccurrence of these cyclical crises again and again, ever since the first general crisis of 1825, is the underlying cause of the general crisis of capitalism.

Equally important is to avoid confusing the geopolitical crisis with the other two. This crisis grows out of the very nature of the military-industrial complex, which is a product of monopoly capitalism and which relentlessly pushes in the direction of imperialist adventures and war in order to restore the old and bygone era of U.S. military supremacy.

It is in this connection that the heated discussion in the ruling class concerning reindustrialization must be seen. It is important to note that both capitalist parties, the Republicans and the Democrats, are drafting or have already drafted planks in their programs which in one way or another call for the so-called reindustrialization of America.

THROWING MILLIONS OUT OF WORK

Among those who are leading the discussion in the public press of the bourgeoisie is Peter Drucker, a professor at Claremont College and a management consultant and adviser to the huge corporations. He sums up his view on reindustrialization in the Wall Street Journal.

"The only way," he says, "for a developed economy [meaning, of course a capitalist economy like the U.S.] to regain its international competitiveness [in relation to its imperialist rivals] is to encourage a fairly rapid shrinkage of traditional blue collar employment."

In other words, Drucker proposes a wholesale retooling of the industrial plants and equipment in such a way as to throw millions of workers out of work. The scale of industrialization about which he is talking is so vast that it would be comparable to the scale on which the farm labor force of the U.S. was decimated years ago.

For instance, Drucker cites the fact that farmers made up 60% of the total U.S. work force in 1900, but account for only 3%-4% today. This "demographic change," as he calls it, is the type that must inevitably take place in the U.S., and quickly too.

And what will happen to the millions of displaced workers? That is left up in the air to be dealt with presumably by government, industry, and labor!

THE 'LIBERAL' VIEW

The more liberal proponents of reindustrialization, such as Felix Rohatyn, an investment banker from Lazard Freres and former head of the Municipal Assistance Corporation, advocate the setting up of a huge government corporation, such as the Reconstruction Finance Corporation set up by Franklin Roosevelt in the 1930s. Rohatyn's idea is that the government would pour billions of dollars into this corporation, which would be used to assist obsolete and decaying industries and revive them.

Rohatyn, in outlining his plan in a June 20, 1980 op-ed article in the Washington Post, says that this corporation is necessary because "private lenders [meaning the banks] are not able to cope with the needs of this magnitude." In other words, what the investment bankers for whom Rohatyn speaks really want is that the funds for this vast reindustrialization be first obtained from the government which, of course, will get it in turn from the workers, through either taxation or other means.

Rohatyn fears that if the bankers and industrialists proceed on this hazardous course alone it would cause such million-fold unemployment that they would find themselves in a very dangerous position. The government would more easily be able to accomplish the same thing indirectly by financing it. In reality, it would all come out of the hides of the workers.

Among those in the banking and industrial fraternity who share Rohatyn's views is Henry Kaufman of Solomon Brothers, another powerful investment banking combine from the so-called Eastern capitalist establishment. Included is Cyrus Vance who is also a spokesperson for the liberal element among the bankers and who is for stopping subsidies "merely" for the purpose of continuing obsolescent industries and for developing the modern high-technology industries. Vance proposes a "shift from obsolete industries, instead of propping them up with protectionist trade barriers." (Speech at Harvard University, June 5, 1980.)

FRANK AND BRUTAL

Perhaps the best summary as to what the ruling class has in mind in respect to reindustrialization is stated by the so-called father of the idea in the first place. He is Amitai Etzioni, described in the New York Times as the senior adviser in the executive office of the President. He's a right-wing bourgeois sociologist and a former professor at Columbia University.

Etzioni makes clear what the platform writers for the Republican and Democratic conventions and the horde of liberal economists try to dress up and conceal with alluring and exotic pictures of reindustrialization: Robots do all the work and somehow the mass of the workers laid off are lost in the shuffle in a barrage of utterly incredible semantic doubletalk.

Etzioni states,

"Decades of over-consumption [by the masses] and under-investment [by the capitalists] have weakened America's productive capacity Therefore in order to restructure American industry it is necessary to go through a decade [yes, a decade] of public and private belt-tightening if all the obsolescent elements are to be replaced and others adapted to the current environs." (New York Times, June 29, 1980.)

This is the most brutal and frank statement by someone with authority on what the reindustrialization will really mean -- a decade of belt-tightening by the working class and oppressed people.

It is plain that American finance capital is readying for a war against the bulk of the American people -- the working class, the oppressed youth, women, lesbians, gay men, and the disabled. All are the object of the planned anti-labor offensive of big business.

How can the working class meet the challenge posed by this ruling class offensive?

-- July 3, 1980

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