Finance and Industry

Controlling unemployment
We have referred many times in these columns to the fact that American academic economists are seriously questioning the adequacy of traditional Keynesian policies to deal with unemployment. One leading American economist wrote in 1963: “Our problems of unemployment have seemingly become chronic.” But it is precisely chronic unemployment which Keynesian policies are supposed to prevent.

In his General Theory of Employment, Interest and Money which appeared in 1936, Keynes set out to show how it was that capitalist economies of the free enterprise variety did not automatically lead to full employment. He said that unemployment and stagnation were caused by a lack of “effective demand.” Keynes went on to suggest a number of ways of dealing with such “demand deficiency” unemployment: stricter control of investment, a redistribution of income in favour of the poor, budget deficits and various other fiscal and monetary measures to encourage effective demand and investment. This is the so-called Keynesian revolution, the application of deliberate fiscal and monetary policies by the government to try to affect the workings of free enterprise capitalism.

From 1958 on, unemployment in America has averaged 6 per cent despite the application of Keynesian policies. It is this that has started economists questioning. Consider the views of Robert Lekachman expressed in a book published last year. Of the advanced countries he writes,

“The original simplicities of keynesian policy prescriptions have been overtaken by the actual complexities and contradictions of applying monetary and fiscal techniques to situations simultaneously subject to inflation and unemployment, or high interest rates and gold outflows, or falling demand and rising prices. The dilemmas of recent American economic policy exemplify this point. President Kennedy’s major response to unsatisfactory rates of unemployment was the 1963 program of tax reduction and tax reform. Now if simple Keynesian fiscal policy were enough, such a program would dependably stimulate aggregate spending, diminish unemployment, and restore the economy to some approximation of full-capacity operation. Yet even Administration spokesmen hive made comparatively cautious claims for the spread and the adequacy of this policy, and few economists indeed believe that by itself tax policy is capable of reducing unemployment to tolerable levels. It is a sign of the times that this tolerable level has itself shown a secular tendency to rise from 2½-3 per cent to 4-5 per cent. For the sad, uncomfortable fact may be that just about the time that some version of the simplest Keynesian revelation has at last won the hearts of businessmen and politicians, the nature of the economic problem has sufficiently changed to require different remedies and different theoretical justifications to support them (Keynes’ General Theory: Report of Three Decades).

It is true that the American economy did show signs of increased activity in 1964 but unemployment was still around five per cent with four per cent as the “tolerable level” as Lekachman suggests.

Capitalism will not break down in depression and stagnation as a result of the inability of the working class to buy back what they produce, as has sometimes been suggested. If this were so, the Keynesians would have some justification for their claim to have found an alternative to socialism. In fact, the capitalist system will continue until the working class organise to end it. In the meantime its growth will be accompanied by a trade cycle involving periods of unemployment and prosperity. So the shoe is on the other foot. It is we Socialists who are in a position to point out that the Keynes theory on its own admission has proved incapable of dealing adequately with the problem of chronic unemployment in America.

African capitalists
The capitalist system is still spreading rapidly throughout the world turning peasants and tribesmen into wage-workers. In Asia, Africa and Latin America new capitalist states are emerging. Some of these, as in Cuba or Ghana, are totalitarian state-capitalist regimes in which the emerging working class is subjected to an industrialising elite. In others like India and Nigeria the emergence of capitalism is not forced and controlled to such an extent.

It is under such regimes that from the motley collection of shopkeepers, traders and contractors a more substantial group of big capitalists is allowed to evolve. A recent supplement to the international edition of the New York Tis introduces some of the new capitalists of Africa to American businessmen. In Nigeria there are Sir Mobolaji Bank-Anthony and Chief Shafi Lawal Edu. Sir Mobolaji is, we are told, “either owner, chairman or director of 10 large corporations.” His compatriot is “chairman of the African Alliance Insurance Company, and serves on the boards of several companies.” In Somalia there is fish-processing magnate Abdullahi Omar who:

“… for several years operated his own general store in Hargeisa, and then moved to Mogadiscio, Somalia, in 1960 after independence. He established a wholesale import agency and interested himself in the fishing potential of his country. He recently established Somalia’s first steel and wood furniture factory and is negotiating with American interests for the opening in June of a pickled-skins plant.”

In Uganda there is Jayant Madhvani who is supposed to be the wealthiest man in East Africa. He:

“. . . heads the Madhvani group of companies based on Jinja. These include sugar, tea, coffee, textiles, steel, paper and more than a dozen other companies operating in Uganda, Kenya and Tanzania. In Uganda alone, Madhvani enterprises account for more than 10 per cent of total product.”

At present this group of “non-European” capitalists is only small in number but as capitalist development proceeds more can be expected to appear. The working class in Africa has the choice of being exploited by and subjected to such a group of wealthy magnates or to an industrialising elite of nationalist political leaders. Either way they suffer. Either way the fact is brought out that the important social division in these newly emergent capitalisms is that of class, not race or colour.
A.L.B.