Unemployment – Fact and Myth

There are some fields of study in which, as time goes on, false theories are abandoned and understanding deepens: unemployment is not one of these. In this field, though economists and research organisations studying unemployment multiply, old fallacies never die and new ones are added.

There are still politicians, business men and economists who believe, like their predecessors of the early nineteenth century, that capitalism contains within itself an innate tendency to absorb all the unemployed and that if only it is left alone by governments it will do so. At the other extreme are the Labourites and Keynesians who believe that what is needed is precisely the opposite, more and more government intervention in the form of nationalization or manipulation of taxes and bank lending. Likewise those who advocate, as a sure cure, more wage increases and shorter hours or alternatively lower wages and harder work, more strikes or fewer strikes, lower profits or higher profits. Inflation, to push prices up, and the currently fashionable “incomes policy” to keep wages and prices down, are just as futile as means of preventing unemployment.

Rising Figures
In the years since 1936 when Keynes popularized the idea that governments had only to follow a “full employment” policy to do the trick (accepted by all political parties in this country except the Socialist Party of Great Britain), nearly all the economists have been agreed that the old nineteenth-century trade cycle of alternate booms and depressions was dead for all time. Events, here and in other countries, have dealt shattering blows to their belief without however convincing all of them that they have been wrong.

The annual averages in the past seventeen years show clearly how unemployment rose and fell in spite of government policies of “full employment” being operated all the time: —

It will be seen that the peaks have been rising, a point emphasized by the numbers unemployed in March of the three years 1958, 1963 and 1972 — 575,000, 747,000 and 1,014,511.

Fallacy of Productivity
This rising trend, and particularly the large numbers of workers made redundant in the past three years, has led to the revival of a fallacy very common in the years between the wars. It argues that the cause of unemployment has changed, so that it is no longer mainly due to falling sales in a depression but is the result of a fantastic rise of productivity caused by mechanization and automation. In the nineteen thirties those who held this view foretold that at an early date the majority of workers would be replaced by machines and never be employed again, with, as an incidental consequence, the disappearance of organizations with a working-class membership. It was false prophecy: the number of workers actually in employment at the present time is several millions more than it was forty years ago. The fallacy has been widely believed in the recent depression. It was put in an extreme form in a letter in The Times (6 Dec. 1971) by a trade-union official who said that productivity in industry had increased a hundredfold and the unemployed would never get jobs again.

The misunderstanding arises out of a failure to understand what an increase of productivity means. Marx was almost alone in recognizing that account has to be taken of all the labour socially necessary to produce a commodity including all the processes from first to last. For a motor-car this means the labour required to produce and transport all the raw materials, the power, the machinery, etc., etc., not just the labour required at the assembly stage. Measured in this way, productivity does not increase a hundredfold but somewhere in the range, at most, of 2% or 3% a year.

Growth and Expenditure
Provided therefore that the total output of industry, transport, etc., increases by a percentage which is equal to the percentage by which output per worker increases, unemployment remains the kind of problem it has always been. At the present time the estimate is that total production is increasing by perhaps 5% a year and output per worker by about 3½% a year, which would explain why, contrary to forecasts of no reduction in the number of unemployed, the number registered has fallen by nearly 250,000, from over a million in the spring of 1972 to 782,000 in December.

Professor F. W. Paish risks the forecast that total output will grow at the rate of 5 per cent, for the next three years “and perhaps indefinitely”. If it did, it could be assumed that the unemployed figure would fall further — until such time as the boom faded out and unemployment rose again. For there are snags in this. First, it is not true that as the TUC, for example, believes, expanding production and reducing unemployment is just a matter of “pumping more money into the economy”. Between 1966 and 1972 production was nearly stagnant and unemployment grew by 600,000, yet those were years in which the amount of money spent on consumer goods was rising fast, by over 50 per cent, in all; by over £3,239 million in 1971 and still more in 1972. The principal result was not increased output but higher prices, to the tune of nearly 50 per cent.

Competition and Crisis
Second, it is not enough to produce things; the real problem is that they have to be sold at a profit. Much of British industry has found itself unable to compete with more efficient foreign rivals, one reason being that such countries as Japan and Germany (largely with the help of American capital) were modernized and re-equipped after the destruction of the war. While both of these countries have been able to expand exports greatly in spite of raising the exchange value of their currency, British exports have faltered in spite of the several devaluations of the pound designed to make the goods cheaper to foreign buyers. So it is not to be wondered at that the London and Cambridge Bulletin group of economists are fearful of another trade crisis for British capitalism before the end of the year.

Rebels in Check
The moral of all this is that capitalism has not changed in essentials. It has not evolved into something different and better, and it has not come under the control of “full employment” policies. It offers no more security for the workers than it ever did. But in one respect there has been quite a considerable change. The capitalists have not solved the problem of unemployment, but they have largely contained the problem of the unemployed. In the eighteen-nineties when Frederick Engels was among those who envisaged the unemployed “taking things into their own hands” and in the nineteen-twenties, violent discontent, protests and riots were the order of the day. There are still romantics who dream of organized “revolutionary” action by the unemployed, but in fact capitalism has been sufficiently resilient and adjustable to devise unemployment pay and social security, and thus take most of the heat out of capitalism’s perennial problem.

H.

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