The General Motor Corp. just paid $1.2 billion to buy crucial parts of South Korea’s Daewoo Motor Corp. An April 30 AP article noted that the deal “has symbolic significance for the South Korean government.” It has made good on its vow “to attract foreign investment to restructure the corporate sector following the 1997-98 Asian financial crisis.”

“This is the market we need to be in,” said GM Chairman John F. Smith. The newly formed operation will include GM’s purchase of three Daewoo factories—one Vietnamese and two South Korean. The world’s biggest automaker is centralizing its production by swallowing up a rival.

For more details, we return to Smith. He praised the combining of GM’s research and development with Daewoo’s ability “to develop new products in a very fast manner.” Translation: Increased mechanization in GM’s new Asian factories will increase the exploitation of workers.

Their hourly output, or productivity, will rise. In other words, the workers’ labor will create more value. It will, in turn, flow away faster from them to the owners of GM.

GM’s centralization of production in the U.S. between 1996 and 2001 foreshadowed its current move in the Asian market. Fortune Magazine reported that GM had 365,000 U.S. employees in 2001, down from 647,000 in 1996. However, GM's revenues grew five percent between 1996 and 2001.

On one hand, centralization of production makes workers more productive. On the other, it also increases the number of workers out of a job. This helps to depress the wage demands of those who remain employed.

Daewoo car dealers understand this. They held an April 30 protest against the GM takeover. GM also plans to transfer South Korean sales subsidiaries abroad.

Prosperity for a few means poverty for many. As centralized production forces workers to compete for jobs, companies must also compete for markets. The credit system facilitates this competition.

Take Daewoo. It declared bankruptcy two years ago. Daewoo had “an estimated debt of $17 billion after years of reckless expansion on borrowed money,” according to the AP article.

Before the financial crisis that began in 1997, South Korean firms like Daewoo were part of the booming “Asian tiger economies.” Praise for them was loud from the officials sources. Here was “proof” of capitalist success.

The fact of the matter is that “reckless expansion” is a way of saying that Daewoo made more cars than it could sell. However, overproduction by corporations is nothing but the normal functioning of the capitalist system. Production booms cause production busts.

Consider for a moment the U.S. telecommunications industry. It flew high until overproduction hit, leading to crushing debt loads, employee layoffs and plunging stock prices. WorldCom is a recent case in point.

In addition, “reckless expansion” by corporations begets the monopolization of production. Accordingly, corporations in stronger financial positions take over those with weaker balance sheets. GM ate and Daewoo was eaten.

GM’s centralization of production is nothing nice for the working-class in the U.S. or Asia. Such is the system in 2002!

Seth Sandronsky is an editor with Because People Matter, Sacramento’s progressive newspaper ssandron@hotmail.com

###