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Andrew Glyn

Unemployment

How Capitalism wastes human resources

(June 1978)


From Militant, No. 409, 9 June 1978, pp. 8–9.
Transcribed by Iain Dalton.
Marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).



Under the capitalist system, with production geared to private profit, society’s resources are squandered in a thousand and one ways. Any High Street demonstrates this, with mushrooming banks and building societies which produce nothing and with the shops full of goods made more expensive by the duplication of product ranges and built-in obsolescences. But the biggest waste is undoubtedly unemployment.

A worker is at least twice as likely as the ‘average’ to be unemployed if he is 16–17 years old, or if he lives in Northern Ireland, or if he works in the building industry. Between 1973 and 1977 unemployment of immigrant workers rose more than twice as fast as the average. Over 300,000 workers have now been continuously unemployed for at least a year. The dole is so low that about half the unemployed are now drawing supplementary benefit.

But as well as the uncalculable cost of the demoralisation and misery of the unemployed and their families, unemployment represents a monstrous waste of society’s resources in terms of what the unemployed could contribute to production.

There are now around one and a half million workers registered as unemployed. Many more people want a job but are not registered because they are not registered because they are not entitled to benefit or live in areas where there is no chance of finding work. Cambridge economists have estimated that these unregistered unemployed total nearly one million, bringing total unemployment to around 2½ million or 10% of the labour force.
 

10% lost

Ten per cent lost production would be bad enough. But in fact, if all these workers were employed, production would rise much more than 10%. Not because those out of work are more energetic than those in jobs. Nor because they would be working with better equipment – firms will obviously try to keep their most efficient plant operating in a recession.

But the reality is that in many industries unused capacity also means low productivity. A good proportion of jobs are not tied directly to the level of production. The bosses have to keep on most office and sales staff even during a fall in production. A growing number of direct production jobs, moreover, cannot be cut out by the capitalists as soon as sales fall.

Most nineteenth century factories consisted of large numbers of workers doing a small range of jobs, and it was simple to lay off a proportion as soon as output fell. But now many industries involve integrated processes with each worker like a cog in a huge machine which cannot be removed without everything grinding to a halt. And even where there is the technical possibility of cutting employment as output sags, the capitalists’ freedom of action is curtailed by the powerful opposition of the organised workers.

These technical and ‘labour relations’ difficulties explain why so many redundancies now take the form of bosses trying to find an opportune moment to close down a whole plant or section of a plant, particularly if it is old and inefficient, or one with a high level of militancy.

But they also explain why a low level of production means low productivity; and conversely why an expansion of production to provide jobs for the unemployed would involve a very substantial increase in productivity as well.

The economists’ calculations are that to increase employment by 10% (and thus eliminate unemployment), would require increased production of about 20%. Or to put it the other way round, the unemployment of 10% of the labour force involves underproduction of 20%. Confirmation of this figure, and for the really big increase in production which could be achieved without any increase in employment at all, comes from a survey or spare capacity in industry:

Potential Percentage Increases in Output

 

Averages, weighted by employment

With
present
hours

With
additional
overtime

With
additional
labour

Food, drink and tobacco

  6.3

11.0

15.5

Chemicals

16.9

18.2

19.5

Mechanical engineering

13.6

21.5

35.0

Motors

  1.4

  6.7

33.6

Metals

  6.0

10.6

11.5

Textiles

  7.4

13.0

18.8

Clothing and footwear

15.0

20.8

24.5

Paper and printing

13.4

22.4

28.3

Construction

14.9

22.2

36.0

Total

  7.6

12.4

21.5

National Institute Economic Review, February 1977

The massive increases in production which would be involved in taking on all those who require a job is no argument that full employment is impossible. Rather it shows just how essential it is. Twenty per cent lost production represent (in terms of 1976 prices) around £22,000 million. Twenty two thousand million pounds represents:

The extent of the ‘sacrifice’ involved in £22,000 lost production is clearly gigantic.
 

Why has unemployment risen?

If it were true that the unemployed were scroungers, it would certainly be a magnificent testimony to capitalism, would it not, that it turned a large section of society into parasites? Parasites there are, of course, who live on the labour of others – but out of choice and in great comfort derived from their stocks and shares.

The vicious and reactionary theory that the unemployed are there from choice has no basis. One of the reforms of the 1964–70 Labour government was to raise the level of unemployment and supplementary benefit relative to earnings. Bearing in mind that unemployment is concentrated among low-wage sections it has been calculated that the average dole for a married worker relative to take home pay in their most recent job rose from about 50% in the early ’Sixties to around 60% since the late ’Sixties. Those receiving earnings-related benefit get 75–80% of their take-home pay when at work, but only for six months. It is quite possible to find individual cases where these ‘improved’ rates have caused workers to quit a lousy job a bit earlier or to stay on the dole a week or two longer before being forced into some sweatshop on starvation wages.

But there is no evidence whatsoever that this applies to very many workers on the unemployment register. And even if it did, it just means that their place in a particular job is being taken by somebody else. The Tories and the gutter press never explain how cutting down workers’ capacity to hold out on the dole while looking for a job will increase total employment. It would do nothing of [the sort. – NB missing line, guess at what it should be – ID]

The campaign against ‘scroungers’ and in favour of making the dole less ‘generous’ has got nothing to do with unemployment. What the capitalists are after is making unemployment even more intolerable, so that fear of the sack is a more potent weapon for ‘disciplining’ the workers – that is for keeping down demands for wage increases.
 

Is new technology responsible for unemployment?

A hundred years ago the church told people to accept their fate as the will of God. In 1978, when a TV pundit mutters darkly about technology and presses a button which makes “2 to 3 million unemployed in the 1980s” appear in computer readable lettering on the TV screen beside him, he is also conjuring up the idea of a process beyond the control of men.

But this new technological fatalism is just as much of a smokescreen as its religious counterpart.

The idea that the mass unemployment of recent years is due to a sudden acceleration in technical progress has no basis. Certainly, the tendency to replace men by machines (the increase in what Marx called the technical composition of capital) has been a feature of capitalist development in recent years. But this is nothing new: it is a permanent feature. It was just as true of the booms in the ’Fifties and early ’Sixties when there was more or less ‘full’ employment.

There is no evidence that there has been an acceleration in this process in recent years. Certainly, there now seems to be the possibility of a leap forward by automation opened up by the use of microprocessors – the tiny silicone chips with the power of a computer – in many sectors of industry and especially services. But this process has hardly begun and has no connection with the mass unemployment of recent years. And even if the possibilities for the replacement of human labour in the direct production process are speeding up, this would spell unemployment only in the context of stagnant production.
 

Too few new jobs

The reason for the rise in unemployment over recent years has not been a sudden acceleration of productivity – in fact it has stagnated. The ‘number of people registered as unemployed at some time during the year’ has only increased from 4 million to 4½ million each year, and all this increase is accounted for by women, the main explanation apparently being their greater readiness to register rather than an actual faster rate of job loss.

The very stable number of men registering each year – practically three million – does not seem consistent with the idea that technical progress is destroying more and more jobs each year. In fact, the rise in unemployment is explained mainly by the slower provision of new jobs rather than the faster destruction of old jobs.

Almost all the rise in unemployment reflects the fact that each worker put out of a job, or leaving for some other reason, is finding it much more difficult to find a new one – the average unemployed worker has been looking for a job for 17 weeks, compared with 8 weeks in 1967.

But, some will say, isn’t the labour movement stranded between the horns of a dilemma? If investment does not rise British industries are driven out of world markets – and unemployment rises. If investment does increase, it means more and more workers replaced by machines – and unemployment rises.

But the fundamental point is that investment in new equipment does not itself cause loss of jobs. Certainly, in the context of a stagnant market, investment will tend to have that effect, as new capacity, which can produce more cheaply and employs fewer workers, drives out older plant. But in the context of an expanding market, higher investment would increase employment immediately in the industries producing the investment goods. In the longer run, extra workers could be taken on in work with the new plant to supply the growing market. Increased production would accommodate this without requiring the scrapping of old plant.

To see investment and technical progress as destroying jobs is to see just one side of the two-fold relation between the accumulation of capital and unemployment. As Marx explained, on the one side, accumulation of capital means more jobs on the new capacity. On the other hand, accumulation ‘repels’ as the new capacity drives out old. In Japan, for example, in the 1950s and 1960s, the industrial capital stock grew at 12.5% a year, three times as fast as the British capitalists managed. But far from meaning that employment grew slower, it grew at 3.7% a year in Japan and not at all in Britain, despite the fact that industrial productivity in Japan also grew three times as fast.

The crucial difference is that Japanese capitalists were able to expand their share of the world markets on the basis of this tremendous rise in productivity, and that their home market was propelled forward by the massive level of investment. So the basic reason for the rise in unemployment faced by British workers over the past four years is not too high investment; it is too low growth of production. In capitalist terms, this means just one thing: too slow a growth of a profitable market.
 

The world market

If the immediate factor behind the rise in unemployment is the slow growth of the market, is the solution simply to put pressure on the other capitalist countries to end their obstinate refusal to expand their economies, as Denis Healey suggests? The following table, however, shows that it is not mainly exports which have slowed down and are responsible for the slow growth of the last four years. The stagnation has predominantly come from workers’ living standards (private consumption), public investment and investment by the capitalists.

Rates of Growth

% per year

 

1961–73

1973–77

Exports

5.6

  4.1

Private consumption

2.8

−1.2

Government investment

4.9

−3.4

Capitalists’ investment

4.3

−3.4

Source: Economic Policy Review, 1978 [Appendix, Table 4]

These cuts cannot be blamed on the world economy. The basic factor behind these developments was the catastrophic fall in the rate of profit sustained by British capitalism – from 13.5% in 1960 to 3.5% in 1975 according to the Bank of England’s figures for the pre-tax rate of profit of industrial and commercial companies. In response to this the British capitalists demanded savage cuts in living standards which the Labour government has implemented through the various stages of the ‘Social Contract’.

With the take-home pay of the average manual worker having fallen by 8–10% since 1973, it is not surprising that ‘private consumption’ has fallen. Moreover, the capitalists have insisted that the government radically prunes its expenditure. It is no use, from the capitalists’ point of view, if the extra profits they can extract by driving down living standards are borrowed back by the government to finance the social services.

The public spending programmes for 1977 were cut by £2½ billion in the announcements of February and December 1976 and by a further £4 billion through the operation of the vicious ‘cash limits’ system, which meant that the local authorities etc. were given quite inadequate resources to cope with inflation.
 

Profits up 140%

The cuts in living standards, and downward slide in the value of the pound which increased export profits, have led to what is probably the fastest rise in profits in the history of British capitalism – by 140% between the summer of 1976 and 1977. But still investment has hardly increased. Investment in manufacturing industry after replacement of capital used up is now still lower in real terms than it was in 1951.

As well as increased profitability – and the capitalists are still ‘looking for’ the rise in profits to continue since it began from such a low base – the capitalists require an expanding market. But the very cuts in living standards and public spending, of course, lead to a decreased market. So all the investment which is going on is necessarily aimed at rationalisation, cutting costs and employment, since only an idiot would invest for an expanded market in conditions where there was no prospect of this happening.
 

Stagnation

The government’s whole strategy has been that an export boom would provide the growing market necessary to “justify” the capitalists ploughing back their higher profits in increased investment. But the reason for slow growth in the world economy is not some out-dated prejudice against expansion on the part of the German and Japanese governments. They are all holding back on expansion in an effort to hold back wages, restore their profits and prevent an acceleration of inflation. So instead of expanded openings for British capital there is stagnation and intense competition.


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