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What’s Happening to Canada’s Manufacturing Sector?

3 March 2009

It seems like everyday we read in the country’s newspapers of yet another plant closing or shedding jobs. Between 2004 and 2008, according to Statistics Canada, 322 000 manufacturing jobs were lost, 198 600 in Ontario, 18% of its total. The area from Oshawa to Hamilton, known as “The Golden Horseshoe”, has long been recognized as the economic engine of Canada. Now the horseshoe is rusting. While 1.5 million jobs were created in the rest of the economy in the same period, for the most part, they are non unionized, lower paying, and with less benefits. So, for example, we can meet a skilled tool and die maker who has been unable to find work in his trade for three years, working at Canadian Tire for one third of his former salary. Now, with the current recession, the pace of stripping the manufacturing sector is growing at an alarming rate.

All of this is not a new phenomenon. The demise of traditional manufacturing areas in the North-East United states and Ontario and Quebec has been going on for decades, even before the NAFTA free trade agreement in the early nineties. Many areas in the United States have long been described as “rust belts”, Detroit being a prime example. From the 1920s, as the auto industry established there, it grew into a booming metropolis of 1 800 000 people, but today is a mere shell with only half that number and miles of boarded up, abandoned buildings. This has been a long process as production has shifted to other areas and the percentage of manufacturing jobs to total jobs continues to decline.

Globalization, the process of internationalizing trade, has become the scapegoat over the last few years. As production moves to far away places, and job losses at home mount up, fingers are pointed at greedy, uncaring corporations and investors. Yet Karl Marx noted 150 years ago that as capital accumulated and agglomerated, the opportunities to expand production not only became possible, but necessary to keep ahead of competitors. It is a case of grow bigger or be eaten. Thus the search for markets and more profitable opportunities had to expand to cover the globe. The process of globalization, has then, been one that has been going on from the beginning of capitalism and is not something which can be stopped or simply restricted.

Is this recession to blame and will there be a return to former levels of employment in this sector? A recession is a contraction of the economy leading to decreased production, plant closings, and job losses. Once in motion, it has a domino effect as suppliers to those contracting industries and retail businesses in the community also must contract their economic activity. A recession occurs when overproduction creates surplus commodities that cannot be sold quickly enough or must be sold below value. An interruption in the productive cycle and a decrease in profitability is the result. It is the anarchic nature of the capitalist mode of production that creates this situation. There is no concerted attempt to match supply and demand, and, certainly, no company wants to slow production while commodities are selling. On the contrary, production and advertising is ramped up in order not to miss any chance to sell more product. For example, according to one auto industry analyst, it was obvious a long time ago that the over supply of vehicles was coming, but every company must carry on regardless and hope it is the other guy who will cut back or get into difficulty first. The seeds of every recession are, then in every boom – overproduction, overshooting the supply, loss of profitability, and the seeds of every recovery are in every recession – gradual reduction of stockpiles, low costs of raw materials, plant and machinery, and wages. When the chance of higher profitability is seen, then capital will again be invested and a return to normal levels of production. This boom and bust cycle is inherent in capitalist production. The only problem is that the worker is the one whose livelihood is threatened or lost, and who has to ‘tighten his belt’, and wait for the recession to pass. There is no way to predict how and when this cycle will play out, or how long or deep a recession will be. This has certainly affected the job losses, and some will be recovered, but as it is not the only, nor primary, cause of trouble in Canada’s manufacturing sector, it is not likely we will return to former halcyon days of the 1950s and 60s under this present system.

The Real Culprit

Our current economic system, capitalism, is based on private ownership of the means of producing and distributing wealth produced by the workers i.e. the land, resources, the factories and machinery, the transportation systems etc. Goods are produced with a view to making profit that comes from the extra value that the worker puts into the products over and above his wage. That is, after working for part of the day to create enough value to pay his wage, the worker then continues to work to create the value that becomes profit. In a recent Toronto Star article, CAW economist Jim Stanton, was quoted as saying that the average auto worker earns $65 000 per year and creates $300 000 in value. If the figures are correct, then, if the worker starts his shift at, say, 7am, he has earned his wage by about 8:45am and the rest of the day he works for his employer for free. Capitalist production is commodity based, meaning that goods are produced only with a view to making profit. If that profit doesn’t materialize, or is less than expected, production ceases, no matter what the need is. Food, in many parts of Africa, is a prime example of this system in action. No profit, no production, can’t pay, can’t have, is the logo of commodity production. Capital accumulation must take place for the system to work. Investors expect to take away more than they put into an enterprise. Capital, then is value in perpetual search of additional value, and it this continual search for augmentation that drives, or derails, the capitalist mode of production. It must be, of course, predicated on continual expansion, ever greater destruction of the earth to extract resources, ever greater factories, machines, and production systems, ever greater markets to absorb the extra products. Capital’s search for greater value means that the managers of the investment funds and the corporations involved in every aspect of production are charged with finding opportunities for producing the greatest value. In this, they are in a life and death struggle with their competitors. Lose the struggle and your capital investment dries up and you are taken over or, worse, you go bankrupt. Given this analysis of our economic system, it is not surprising that qualities such as ethics, loyalty, or morality are tossed aside when it comes to the economic survival of a business. A Corporation is a paper agreement between groups of risk capital and has no feelings. Its mandate is to protect and augment the capital it has been loaned. If this protection means cutting the payroll, then it is unfortunate but so be it. If returns are better in one area of the globe, then, as water flows with gravity to the lowest level, so capital will flow to the lowest cost area.

What is to be done?

In the short term, there is very little that can be done to reverse the situation. As noted above, when the prospect of profitability returns, capital will be invested again and the recovery will begin. Union activity through pressure on employers, collective bargaining, demonstrations etc. are always available to mitigate the worst aspects of the system, but are even less effective during a recession, as current negotiated concessions of wages and benefits attest. In the longer term, we must examine the system that creates so much wealth but delivers so little to the general population and yet so much to the few owners. It is a change in this ownership that The Socialist Party of Canada proposes. Presently, capital dominates our life. It tells us that we must get a job to survive, then tells us when and how we do it, what the conditions of work will be, and even whether we will work at all. We propose that a new system of producing and distributing wealth is needed, one where the ownership of the world’s resources, and the means to turn them into useful goods, is owned by all, in common, and operated democratically, in the interests of all. That would mean all mankind would get a proper diet, housing, clean water, education, health care, and the need for continual wars over who owns the resources (the major cause of all wars) is ended.

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