Welcome to
Part 2.2 of your quick guide to capitalism and its ruinous consequences. I can
see the next immutable feature of capitalism itching to reveal itself so let’s draw
back the curtain and begin …
Unemployment
Yes,
welcome unemployment. Or perhaps not. Full employment, as Schweickart says, is,
outside of wartime, a textbook fantasy. The guilty secret is that unemployment
is desired by the rulers of our society. Full employment leads to large wage
rises (a seller’s market), which eat into profit as well as causing inflation,
as the much lower unemployment rates in the 1960s and ‘70s, showed. Capitalists
know this and they want the discipline of potential unemployment so employees
are never completely secure in their jobs. “Economics is the method,” said
Margaret Thatcher. “The object is to change the soul.”
But there
is another reason for unemployment which Schweickart doesn’t talk about.
Regardless of its usefulness in disciplining workers, there is a structural reason for unemployment. The
Conservatives in Britain
have made immense political capital from proclaiming the existence of a
‘structural deficit’ – government over-spending that is over and above the
extra spending resulting from the economic downturn. But they – and all
mainstream political parties – are silent about the structural character of
much unemployment – the joblessness that would be there even without a
recessionary economic climate. This is a feature they can never admit.
In the UK, from
1950-73, unemployment averaged 1.6%. Post-1980 it has averaged 7.8%, and
frequently been higher. Even at pre-crisis levels, unemployment was high enough
to have fatally wounded governments in the ‘60s and ‘70s. Now it is seen as
fact of life, when in reality, it is a fact of capitalism. John Maynard Keynes
spoke about technological unemployment as early as the 1930s, and technological
development, spurred on by the desire to reduce costs and increase profit, has
rendered, under this system, a
significant proportion of the population economically superfluous.
The
economist Harry Shutt has written about this systemic problem. The
scarcity of the means of subsistence, he says, has greatly diminished since the
Industrial Revolution, but the scarcity of work opportunities has
correspondingly grown. “Yet it remains true,” he writes, “that for the vast
majority of the world’s people the sale of their labour is their only potential
source of income”.
The Obama
economic adviser, Laurence Summer, has said that high levels of unemployment
are now a structural feature of the US economy, regardless of the
presence or absence of economic crisis (which seems to be the new normal
anyway). “No matter how hard we try, the current economic system needs fewer
and fewer of us,” says the writer Dan Hind.
The
structural nature of unemployment results in a situation where a majority of
people work very hard, but a significant minority don’t work at all, or are
under-employed, and live in
poverty. The employed are employed because they contribute to profit, the
remainder do not. Under capitalism, employment largely depends, not on meeting
social needs, but being needed to generate profit. A great many jobs are, under
any rational judgement, socially useless.
Overwork
Here we
confront a paradox of the system. Capitalism is technologically prolific. It
produces a wondrous variety of commodities and this explains a large part of
its appeal, an attraction we will consider in the next part. But the
technological advances the system makes, while theoretically reducing the need for toil and promising to ‘save
labour’, actually makes work more intense.
“A visitor from another planet
would be perplexed to discover that in a purportedly free and rational society
there are millions of people who want to work more, living in close proximity
to millions who want to work less,” writes Schweickart. “The visitor would be
even more perplexed to learn that new technologies allow us to produce ever more
goods with ever less labour, and yet the intensity of work – for those who have
work – has increased.”
Working hours have increased in
the US and Britain in the
last twenty years, despite technological advance. Between 1998 and 2005,
the number of people in Britain working more than 48 hours a week more than doubled. And one in six now works more than 60 hours.
In 1999, research by the Joseph Rowntree Foundation found
that nearly two-thirds of British workers had experienced an increase in the
speed or intensity of work over the previous five years.
Some great minds of the recent past thought that
technological advance would have precisely the opposite effect. John Maynard
Keynes believed that people in the first half of the 21st century
would work 3 hour days and fifteen hour weeks. Keynes, one of the most famous
economists in history, was grossly mistaken.
According to the theory of conventional economics if people
desire more leisure, they will automatically get what they want, trading income
for more free time (Conventional economics is all about desire – if you want a coffee-maker
the market will provide one). But, in practice, it doesn’t work like that. Work
hours are set, or implicitly set because they are required to get work done and
employees can rarely negotiate more leisure, despite the rhetoric of ‘work-life
balance’.
The reason, as Schweickart points out, is that consumption
is the lifeblood of business but leisure is often its antithesis. “Any kind of
cultural shift that emphasizes leisure over consumption bodes ill for
business,” he writes. “To be sure individual businesses [like an airline]
catering to the increase in leisure that people would have might profit, but if
this leisure comes at the expense of income, overall aggregate demand will
fall, profits will decline, the economy will stagnate or slip into recession.”
It can be argued that overwork is not an immutable feature
of capitalism. Work hours declined, because of government and trade union
action, in the latter part of the nineteenth and for much of the twentieth
century. In France,
a 35 hour week was introduced in 2000. Theoretically, the EU has a 48 hour week.
But these external restraints on capitalism have proved very hard to make
stick. The French 35 hour week has been incrementally eaten away at since its
introduction.
Instability
This last feature is not one included by Schweickart,
although in the latest edition of After
Capitalism, which I don’t have, there is a section on instability.
Anyway, capitalism is a peculiarly unstable economic system,
and its instability is generated internally, not by uncontrollable outside
factors. All the talk pre-2007 about an “end to boom and bust”, “the Great
Moderation” and the “Goldilocks’ economy” (everything just right, not too hot
or too cold), proved to be errant propaganda. In the UK, prior to the Great Recession,
there were two severe economic downturns in the last thirty years (1980-82 and 1990-92).
Millions of people were made unemployed, thousands of business collapsed, home
repossessions and evictions soared. And now this.
Ha-Joon Chang in 23
Things they don’t tell you about Capitalism has shown that the number of
countries experiencing a banking crisis shot up after the beginning of the
1980s. 20% of countries experienced a banking crisis in the mid nineties, and
35% did following the 2007-8 global financial crisis.
If, for whatever reason, investors lose confidence, says
Schweickart, they will stop investing, businesses will stop selling goods and
the economy will slump. What we are experiencing now is a chronic loss of
confidence in the ability of businesses to sell products as shown by enormous pile
of money, estimated at £750bn in the UK, that corporations are sitting on and not using.
Keynesian economists, Chang included, would argue that,
while instability is a feature of capitalism, it can be overcome. Restraints on
finance and banking, exchange controls which don’t allow capital to leave
countries, and encouraging labour to receive more of a share of profits, can
achieve this. The economist Hyman Minsky said in 1982: “The most significant economic event of the era
since World War 2 is something that has not happened: there has not been a deep
and long-lasting depression.” But actually, the Keynesian era did end in a
recession, in 1974. So Keynesianism was not able to eradicate capitalist
instability.
Many
economists now believe that another financial crisis is just waiting to happen
The
consequences of this recurring instability can be seen in interrupted careers,
destroyed relationships and life chances, evictions, home repossessions, and
social unrest. The economic historian Karl Polanyi, writing during the Second
World War, described capitalism’s strange ability to create “unheard of material
welfare” but a simultaneous “catastrophic dislocation of the lives of
the common people”.
The systemic instability of capitalism is the cause of the current and prolonged
economic downturn and government budget deficits. “Capitalism went into the toilet”
is how the American economist Richard Wolff expressed the situation in very
technical language. It is not the result of poor people being profligate,
immigrants, government over-spending, the EU (although the Euro may have
exacerbated the problem) or selfish human nature in general. But while
capitalism is the cause that cannot be seen as the cause, for the consequences
of that cause and effect equation are unacceptable to the rulers of our
society, other culprits have to be located. Hence this
This
element of capitalist instability is quite apart from the everyday instability
it involves: the speculation, for example, that pushes the price of essentials,
such as cereals, beyond the reach of ordinary people in poor countries and causes hunger.
The best of all
possible worlds
The above
characteristics provide a corrective to the constant drip of capitalist
celebration to the effect that the world we live in is the best imaginable. But
others, not simple capitalist apologists, claim that capitalist amounts to the
best achievable world and is far
better than any humanity has experienced before.
John
Lanchester in his book about the financial crisis, Whoops!, says he believes that western liberal democracies [all
capitalist after all] are best societies that have ever existed, “which is not
the same thing as saying they are perfect. Citizens of those societies are, on
aggregate, the most fortunate people who have ever lived.”
The
foundations of this belief will be examined in the next part. With capitalism,
does the good ultimately outweigh the bad?
I cross-posted this.
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