Detroit financial crisis exposes
decay of the capitalist system

(Based on an article in The Workers' Advocate, May 12, 1976, pp. 1,20-23)

. In the first four months of 1976, the U.S. monopoly capitalist class is still beset with the most severe economic crisis, industrial and financial, since World War II. It is attacking the wages and the working and living conditions of the workers in an effort to shift the burden onto the workers and make them pay for the crisis of the capitalist system. The capitalists want to maximize profits and maintain their positions at the working people's expense. The workers have answered these attacks with powerful strikes to defend their wages and working and living conditions. Recently 400,000 Teamsters went on an unprecedented three-day national strike, 70,000 rubber workers are on strike against the tire monopolies and workers for United Parcel Service have struck throughout the Midwest and Rocky Mountain states.

. To suppress this struggle, the monopoly capitalists are increasing the repressive forces of the government. The monopoly capitalist state is arrogantly kicking aside union contracts and is breaking strikes with its lackey police. At the national level, the capitalist government threatened to invoke the enslaving Taft-Hartley Act to suppress the Teamsters' strike and kept every stage of the negotiations under its control. The aim of this repression is to shift the entire burden of the crisis onto the workers. This can also be clearly seen in the suppression of the struggles of the public sector workers.

. The present economic crisis has not only struck the capitalist enterprises in the private sector; it has also spread into the "public sector," hitting most sharply the state and local governments with an acute financial crisis. This is a further demonstration of the fact that U.S. imperialist society is thoroughly crisis-ridden and in a state of rapid decay. The public sector, which has historically been expanded by the monopoly capitalists as a bulwark against total economic collapse, has now become the arena of a very severe crisis itself. For example, in 1974 the New York City government, with a budget of over $10 billion, became financially unstable. Its budget was swelled by massive indebtedness to a handful of the country's largest banks. The city was on the verge of financial default, being incapable of paying the tribute to the financiers in the form of debt-service payments, due to lack of revenues during the economic crisis and due to the weakening of the municipal bond market. The New York City crisis has had national impact.

. Recently the finances of several states (New York State, Massachusetts, Michigan, etc.) and many large and medium-sized cities (Detroit, San Francisco, Philadelphia, Cleveland, Wilmington, etc. ) have also been hit by financial crises. The monopoly financiers, their politicians and their local governments have proclaimed from coast to coast that the "solution" to the "fiscal crisis of the cities" is to attack the livelihood of the public sector workers and increase the tax burden on the working masses as a whole. Everywhere they are carrying out this program and attacking the masses. To oppose these attacks the public sector workers have mounted a vigorous struggle, rapidly organizing themselves into trade unions and waging strikes across the country. Most notable among these have been the innumerable teachers' strikes last £all and winter, the New York City sanitation workers' strike and the hard-fought strike struggle of the San Francisco municipal workers.

. In Detroit, the capital of U.S. auto production, where the financial crisis has become particularly acute, the city government has been faithfully putting the monopoly capitalists' "solution" into practice. An examination of the financial (fiscal) crisis in Detroit will provide some insight into the crises now gripping the country's city and state governments.

I. Lackey of monopoly capital declares war on
Detroit city workers and the working people

. To "solve" the crisis in Detroit on the terms of the monopoly capitalist class, the city government, headed by Mayor Coleman Young, has declared class war on the Detroit city workers and the entire working class and people. This "responsible" declaration has won Mr. Young the deepest "respect" as a "reasonable man" from the Wall Street financiers, the auto magnates and from the Federal and State government offices. Young's method of shifting the burden of Detroit's financial crisis onto the working class and people is part and parcel of the national campaign against the public sector workers and urban masses. Auto magnate John Riccardo, Chairman of Chrysler Corp., recently boasted: "What we do to help Detroit solve its current problems could become a model for cities across the country." Lackey Young's criminal offensive against the working masses of Detroit is taking place on three major fronts:

a) Attacks on the livelihood of city workers

. The first front of this attack is a drive to undermine the public sector workers' unions and attack the conditions of the workers through layoffs, cutting wages, and intensifying work-loads. An editorial in the Detroit News summed up the program of the monopoly capitalists: "Young must deal with a number of city unions which have proved obdurate about surrendering pay raises or fringe benefits." It added that he must have "the cooperation of all municipal unions . . . in the form of additional days off without pay, a moratorium on wages, and increased productivity." Young has been dutifully carrying this out.

. Since the beginning of the economic crisis in 1973-74, there has been constant reduction of Detroit's city work force. In the past, city jobs have been known to be stable and secure. However, in the present deep crisis, public sector workers are in constant danger of being thrown into the streets along with the unemployed workers from the private sector. Aside from a hiring freeze on city employees there have been several massive lay-offs, the most recent one having taken place this April 4, when over 1,000 city employees were laid off. The largest sections of workers in this latest lay-off were health care workers, firemen, library staff and recreation workers. The city has also cut entire sections of so-called "fat" from the budget, for example, firing all 300 crossing guards for school children. (The 5,400 man police force is by far the largest in manpower and the most expensive part of the city's budget, yet there has been almost no decline of the uniformed police on the streets. When Mayor Young came into office he moved 500 police from doing paperwork jobs or non-essential jobs onto the streets, so despite a short work-week for police there is equivalent police strength to that before the fiscal crisis.)

. In the present crisis, the monopoly capitalists are using repression in an attempt to push the entire burden onto the working class. The capitalists are trying to outlaw even ordinary trade-union activity, wiping out the basic defense organizations of the workers. In the public sector, where the government assumes the role of employer as well as lawmaker and law-enforcer, there have been particularly fierce attacks against the workers' trade unions. In Detroit, the city government has made crude threats that it may sack thousands more workers right away by tearing up existing union contracts. The city has also withheld negotiated pay from the workers by not making $29 million in pension fund payments. The state legislature has made the sinister proposal that union contracts be "by-passed" or rescinded if the city deficit grows to a certain level. The legislature also proposed state-regulated pay and benefit scales for the city workers. There have been numerous proposed plans to destroy the union seniority system and increase job insecurity among the existing workers. Also, the government is trying to use unemployed workers on federal payroll as scab labor. A U.S. Labor Department official and some city bureaucrats are trying to have the workers with many years seniority replaced by new employees whose wages would come from federal CETA funds (Comprehensive Employment Training Act). Faced with the problem that the workers would resist such a move, the Labor Department official suggested that the city establish separate public corporations with non-union labor and lay off the unionized city workers.

. By smashing the organized resistance of the workers, the city government aims to squeeze more labor out of them. With the reduction in the city workforce through the hiring freeze and the lay-offs, the city government has been increasing the work-loads of the remaining workers to the maximum. Three years ago, five firemen used to man each truck whereas today there are often only three men on these trucks. This has increased the number of injuries suffered by the firemen and increased the time it takes to fight fires. Recently the Detroit city government has started an experiment to see if it can have one man per garbage truck instead of the present three-man trucks. Even though the city would have to buy 300 new garbage trucks to switch from three-man to one-man trucks, the city government is quite intent on developing ways to sweat the labor out of one worker that it normally takes three to do. Detroit's nearby model for this is Dearborn, Michigan, Henry Ford's private city. In Dearborn, one-man garbage trucks have been instituted, causing the elimination of many garbage workers' jobs and tremendous speed-up. In fact many older workers in Dearborn, who waged a 23-day strike in 1969 against one-man trucks, refuse to operate them. Dearborn's response to this is to have half of the one-man trucks operated by non-union workers paid by federal CETA funds at $3.60 an hour, nearly half of the union wages. As for other sections of Detroit city workers, workers at Detroit General Hospital have an unbearable work-load. The hospital has recently lost its accreditation mainly because of a lack of nurses and other employees to administer health care. But the monopoly capitalists are still not satisfied with the weight of the work-loads of the hospital workers. A recent study done by General Motors Corp., Ford Motor Co., Wayne State University and the Mayor's Productivity Center has "proved" that the problem with Detroit General is the "high wages" and "inefficiencies" of the workers.

. So the first major front of attack on the Detroit working class and people is the attack on the public sector workers. This attack takes the form of attempts to smash up the city workers' trade unions, lay-offs, reduced wages and benefits, as well as the speeding up of the remaining workers.

b) Increased taxation on working masses

. Young's second front of attack against the working masses on behalf of the capitalist parasites is to increase taxes and levies. There have been numerous schemes proposed to suck even more revenues from the ever-more impoverished masses of Detroit. (The workers in the Detroit area, with the sharp crisis in the auto industry, have suffered some of the highest and most prolonged unemployment in the country. ) Mayor Young is pushing for an increase in city income taxes from 2% to 3% for city residents and from . 5% to 1.5% for non-residents who work in the city. Others suggest instituting a state nuisance tax on cigarettes and alcohol or a levy on automobile owners in the Detroit area and so on. The city has just imposed a charge on garbage pickup which will cost the masses some $15 to $20 million this year and also make a general increase in property taxes. Certain capitalist politicians are even proposing legalized casino gambling to swindle the masses (it could then be taxed).

c) Shifting the funds to best serve monopoly capital

. The third front of attack on the masses is the shifting of city government funds to best serve the needs of monopoly capital irrespective of the hardships placed on the masses. The funds are not being cut in general but are being concentrated in the sectors most needed by the capitalists during the present crisis. The police department is being continually beefed up, which is particularly needed to enforce the shifting of the economic crisis onto the working class and people. Also, there is an increase in city handouts to the capitalists for industrial enterprises (in the form of industrial parks, subsidies, etc.), for the banks (in the form of ever-increasing tax-free bonds at high interest, etc.) and for the contractors and real estate entrepreneurs (in the form of expanding capital construction for a shopping center, a stadium, etc.). All these handouts are being expanded to lighten the burden of the capitalists' crisis on the capitalists themselves.

. At the same time, expenditures in sectors affecting the people's well-being are cut mercilessly as soon as they stop offering opportunities for maximum profit.

. Mayor Young's declaration of class war, this three-pronged attack on the Detroit city workers and the entire working class and people of the area, is a great injustice to the working people.

II. The present crisis is part of the decay of capitalism

. According to the monopoly bourgeoisie and their spokesmen, the city's fiscal crisis is caused by the city workers for being "obdurate about surrendering pay raises" and by the "greediness of the powerful city unions". The bourgeoisie claims to have been granting "overly generous handouts" to the unemployed and poor. They even claim that the crisis is caused by the very existence of the poor! For instance, a study done by GM, Ford, the Mayor's Productivity Center, et al., of Detroit General Hospital states that "half the higher costs are due to the kind of patient DGH serves: typically poor, generally unhealthy and requiring extended medical attention". How dare the poor slaves of the auto magnates get sick and cause such expenses!

. But facts prove that economic crises are not caused by the workers but are inherent under the capitalist economic system. Ever since full-scale capitalism developed in the early 19th century, there have been periodic economic crises. Thus economic crises are inherent in the capitalist system and are not caused by the workers.

. Further, experience shows that the city government {like the state and federal governments) is an instrument of the capitalists for the oppression and exploitation of the working masses. The monopoly capitalists used the government apparatus to avert total economic collapse -- enforcing stepped-up exploitation, and as an area of economic expansion itself. However, the state machine thus enormously expanded is still more parasitic and decayed and is bound to be afflicted with crises.

III. Growth of Detroit city government as instrument of bourgeois dictatorship

. Over the last 25 years, there has been an enormous growth in the violent and repressive aspect of the Detroit city government as part of this national process. Today the Detroit police expenditures alone comprise over 35% of the entire city expenditures, while in 1950 they were under 7% of the city expenditures, a per cent increase of five times. In 1967 the Black people of Detroit stood up in a heroic rebellion against racial discrimination and violent repression. To suppress such struggles, in this same period police expenditures more than doubled, increasing from $36 million in 1965 to $80 million in 1970. In the period since 1970 Detroit has had, on the one hand, the continuing resistance of the Black people (such as the rebellion in the Livernois area last July), the growing restlessness of the hundreds of thousands of auto and other workers, employed and unemployed, as well as the increasing dissemination of Marxism-Leninism and the development of Marxist-Leninist organization. And, on the other hand, Detroit has had a steady growth of the local police force, with police expenditures almost doubling again from $80 million in 1970 to $157 million in 1975. In 1971-3 the city government unleashed its police murder gang known as the STRESS squad to terrorize and gun down the Black people and youth. It has its "red squad" to attack the revolutionaries and has even developed an armed police air force consisting of 8 helicopters. In addition to attacking the masses with force, this tremendous growth of police apparatus has been a heavy financial burden on the people. While police costs were $10 per capita per year in 1950, in 1975 they were well over $100 per capita per year.

IV. Use of Detroit city government to maximize and insure capitalists' profits

. The various capitalist parasites also use their state apparatus to maximize and insure maximum profits and as a field of investment. There are three important ways in which the Detroit city government gives "generous handouts" to the capitalists:

. The big monopoly financiers have a virtual monopoly over the municipal bonds market. Therefore, they are in a position to determine the terms at which these tax-free bonds are sold. Not only do the bankers set the rate of interest but also directly dictate over the handling of the local government budgets, demanding, as in the case of Detroit, increased "productivity" from the workers, and so on. Through the control of government debts (the combined federal, state and local government debts totaled $647 billion in 1973) the financial oligarchy has another way in which it exercises its tyranny over the entire society. Detroit has not developed these handouts to the millionaires as rapidly as the police aspect of the city government and not nearly as rapidly as many local governments nationally. However, during the present financial crisis this aspect of the city budget has not been cut back and capital construction has increased. This April, when the city was cutting back in various sectors, it sold $4.5 million in urban renewal bonds, which was a relatively small handout to the capitalists. These bonds are for road improvements in an industrial park and a housing project and for the purchase of property for a shopping center. All this is a real boon for the real estate speculators, contractors, industrialists and chain store monopolists. At the same time, Northern Trust of Chicago, which bought the bonds, will receive $3.5 million dollars in tax-free interest from this $4.5 million loan. The city has plans for much more of this type of hand-out, including the construction of a $750 million rapid transit system and a $60 million stadium in the next several years.

. Along with the development of the massive repressive machinery of the city government and the hand-outs to the millionaires, the government bureaucracy itself expands. Many of the high-level bureaucrats become very wealthy gobbling up the working masses' tax money, not only with their high salaries but also through the common practice of graft.

. Thus the growth of these three aspects of the state apparatus, and not the "greediness of the city unions", accounts for the massive increase in the Detroit city budget over the last 25 years. In 1950, the city budget was $140 million, but by 1975 it had grown to $808 million, a 190% increase (allowing for 100% inflation of the dollar over that period). Over the same period, the population of Detroit has declined by 27%, making the increase in per capita expenditures by the city even more staggering. Also, jobs decreased over 37% between 1953 and 1970. Thus the base on which to levy taxes declined greatly, making the burden all the heavier on the remaining population. The vast majority of revenues for the swelling budget costs are extorted from the working masses by means of increases in the rate of taxation on property, the imposition of an income tax on the workers, and various other taxes and levies on the use of utilities, on sales, etc., etc. Another 20% of city revenues comes from state and federal taxes. This huge growth of the city budget has put an intolerable burden on the masses and has further impoverished them.

. The present financial crisis in Detroit has been brought about by the industrial crisis. The industrial crisis has been expressed particularly sharply in Detroit with the collapse of the automobile market in the fall of 1973. As a result, on the one hand, the monopoly capitalists need an increase in city expenditures more than ever -- to maintain the police power of the government at a high level (to suppress the laid-off workers) and to use the public sector to cushion the effects of the present crisis on their profits. Thus, in the crisis years of '73-'74 to r76-'77 the city budget has grown from $533 million to $880 million. And, on the other hand, the crisis has increased the impoverishment of the masses, thus reducing the city's tax base, making it difficult for the monopoly capitalists to extort the ever-increasing revenues they require from the masses. The decline in industrial production has had a strong effect on city revenues. For example, Chrysler's two-week lay-off over the past Christmas alone is said to have caused a $275,000 loss in city income taxes. There has been massive unemployment of up to 60% in certain sections of Detroit and Mayor Young confesses that 80% of the young people are out of work. In the fiscal year 1975-1976, city revenues through local taxation were $6 million less than the previous year. The increased rates of taxation have not prevented the relative decline in revenues compared to the growth of the city budget. Young predicts that by the end of this year the city government will not be able to make $100 million of payments to the banks and that by 1980 there will be a $760 million deficit.

. This deficit is being "covered" by selling more bonds and notes to the bankers, at rapidly increasing interest rates. However, Detroit is even having difficulty selling its tax-free bonds at 10% interest, double the pre-crisis rate. The municipal bonds market has been weakened in the general economic crisis and Detroit has become a relatively insecure investment. Mayor Young's offensive against the working masses of Detroit has as one of its stated aims stabilizing Detroit's finances so that the city can become a more secure investment and thus be able to sell more bonds to the bankers and further increase the city's indebtedness. Recently one of the Wall Street bond rating services, Standard and Poor's, lowered Detroit's bond rating to the lowest municipal rating in the country. But the vice-president of Standard and Poor's told Mayor Young that Detroit would still be able to sell its bonds to increase its indebtedness because the financiers arc "impressed with the Mayor's forthrightness" and because "he doesn't pull any punches" in attacking the city workers and working masses. This stepping-up of the sale of very high-interest bonds simply means that some revenues are not collected from the masses today, but even more will be collected tomorrow in order to pay back the huge debt-service to the monopoly financiers. Increased deficit spending and the resulting increased taxation guarantees that the Detroit fiscal crisis will become ever more compounded in the future.

V. Make the rich pay!

. The present deep economic crisis is bringing forth an upsurge in the workers' movement. The capitalists are frantically seeking to lay off and speed up the workers and to cut their real wages through wage-cuts and by having the capitalist government inflate the currency. The workers are waging strike struggles and resisting the attacks of the capitalists and their state. The financial crisis of Detroit and other cities have resulted in the city and state governments declaring war on the public-sector workers under the slogans of "fiscal honesty" and "realistic, hard-hitting fiscal policies. "

. The "liberal" Democrats and the conservative Republicans have complete unanimity on the need for so-called "fiscal honesty" and a "realistic, hard-hitting approach to fiscal matters". What this really means is illustrated by Detroit. There this "honest" program has been executed by the most "left" of "liberals" Coleman Young. His "fiscal honesty" meant to declare war on the city workers and the working people as a whole. In New York and other cities a similar "realistic approach" has been taken. This is the very heart of the program of the big city mayors and the "liberal" Democrats.

. Thus attempts are being made to smash the unions of the public-sector workers. The public-sector workers are resisting those attacks, as shown by the recent strike in San Francisco. The public-sector workers constitute 1 out of every 6 U.S. workers. The attacks on them are very sharp as they confront the state as employer. Their struggle is of great significance for the whole working class. Other struggles have occurred over cut-backs in city services affecting the well-being of city residents.

. If the workers don't wish to be reduced to the status of mere slaves, they have no choice but to fight to make the rich pay for the crisis. . The correct orientation for their struggle is to resist actively at the place of work, in their sector and as part of the entire working class against the attacks of the capitalists and the capitalist state. The immediate aim of the struggle is to make the rich pay while the ultimate aim is the overthrow of the capitalist system and the establishment of a socialist, workers' republic, that is, the dictatorship of the proletariat. <>


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