World economic crisis: The explosion of unemployment

The beginning of 1994 has been marked by a major reality: the worldwide explosion of unemployment. The governments of the seven biggest western economic powers organized for the occasion, greatly reinforced by  media propaganda, a meeting exclusively devoted to this question, qualified as 'problem number one'. The American president personally presented 'a global plan against unemployment' based on the 'success' of American methods. At the heart of Europe, in the biggest power on the continent, unemployment beat records unknown since the 30s. The German economic minister, Gunter Rexold, recognized: 'The fact that more than 4 million citizens cannot find work is one of the greatest challenges for the state and society since the foundation of the Federal Republic.' A report of the International Labor Organization affirmed that today 30% of workers in the world are unemployed or under-employed. That means 820 million people: 120 million are officially 'registered' unemployed, 700 million are 'under-employed'. What is the significance of this new aggravation of unemployment? Are the methods of the American government an effective remedy against the sickness? What are the perspectives for the class struggle?

An unprecedented situation

The more the dominant ideology, following in the footsteps of the campaigns on the 'collapse of communism', presents capitalism as the only possible form of social organization for modern humanity, the more devastating are the ravages created by the continuation of this system. The plague of unemployment, source of poverty, isolation, despair,  which incarnates to the highest degree the absurd and merciless dictatorship of capitalist profit over the conditions of existence of the immense majority of society, is without doubt the most significant of these calamities.

The present increase in unemployment, expressing the new open recession in which capitalism has been now stuck for four years, did not sweep down on a world of 'full employment'. Far from it. It is now more than a quarter of a century, since the recession of 1967, which marked the end of the prosperity of the post-war reconstruction, that the contagion of unemployment has systematically infected the whole planet. The sickness has extended according to the slower rhythm of economic 'growth', with moments of acceleration and periods of relative stagnation. But the periods of relief have never annulled the effects of the preceding aggravation and through various fluctuations the number of unemployed has continued to increase in every country[1]. Since the beginning of the 70s, even the term 'full employment' has disappeared from the vocabulary. The adolescents of the last two decades are known as the 'unemployed generation'.

The explosion of unemployment which marked the beginning of the 90s did not therefore create a new problem. It only worsened an already dramatic situation. And how.

Germany, the biggest economic power in Europe, has suffered a massive increase in unemployment since 1991. In January 1994 the official figure of job seekers passed the 4 million mark. If we add to this figure those unemployed on 'social security' we get 6 million. Its the highest level since the 30s depression. The official rate of unemployment has reached 17% in former East Germany, 8.8% in the West.  The perspective for the immediate future is also catastrophic: 'experts' have forecast 450,000 more unemployed from now to the end of the year. Massive redundancies are expected in the most powerful and competitive sectors of the German economy: 51,000 at Daimler-Benz, 30,000 in the chemical industry, 16,000 in aeronautics, 20,000 at Volkswagen...

The expenses of German unification momentarily created a market which allowed Europe to delay a little its entry into the open recession after that of the United States and Great Britain. The decline of the German economy into recession was accompanied by an explosion of unemployment in the whole of Western Europe. So in little more than 3 years the rate of (official) unemployment has gone from 9% to more than 12% in France, from 1.5%% to more than 9% in Sweden, from 6.5% to more than 10% in Holland and Belgium, from 16% to 23.5% in Spain.

According to estimates a minimum growth of 2.5% per year in Europe would be necessary simply to prevent the growth of unemployment. We are far from it. Even the most optimistic don't expect unemployment to diminish in Europe until 1995, or even 1996. For 1994 alone the OECD expects another million unemployed on the old continent.

To this quantitative increase, one must add a rapid qualitative deterioration , marked by the development of 'long-term' unemployment and youth unemployment[2] accompanying the generalized decrease in unemployed benefit both in value and over time.

In Japan, which has suffered the worst recession since the Second World War, unemployment is also increasing. Even if the absolute level is still low by comparison with the other powers, the number of 'official' unemployed has passed from 1.3 to nearly 2 million in three years. These figures however only give a very partial idea of the reality. The Japanese government has followed a policy of keeping the unemployed in the factories, paying them less and reducing work time, rather than putting them in the street. But this policy, accompanying that of 'employment for life' in the great industrial conglomerations, is giving way to the increase in redundancies. Toyota has clearly announced the future by proclaiming the end of its policy of guaranteed employment[3].

Faced with this situation, the government of the United States and, those of Canada and the United Kingdom, claim to have succeeded over two years in creating new employment and stopping the growth of unemployment. It is true that in the 'Anglo-Saxon' powers the official statistics show a reduction in unemployment. But this affirmation hides two major realities:

On the purely quantitative level, the present 'recovery' in employment appears insignificant in relation to that which followed the recession of 1979-82.

Thus, in the manufacturing sector in the United States, the number of employed has, at best, only been broadly maintained for 3 years, while certain sectors have even seen substantial falls. The big industrial enterprises continue to announce massive redundancies: in the month of November 1993 alone Boeing, ATT, NCR, and Philip Morris announced 30,000 job losses for the years to come. In the course of the Reagan recovery of the 80s industrial employment increased by 9%, while today this increase hasn't gone beyond 0.3%. In the tertiary sector the Clinton Administration claims to have increased employment by 3.8%, but this figure was 8% after 1982. The budget presented by Clinton for 1995 is one of the most rigorous for years: 'we must distinguish between luxury and necessity'. It anticipates the elimination of 118,000 jobs in the public administrations, a stage toward the 250,000 announced for the five years to come.

As far as the United Kingdom and Canada are concerned, the recovery of employment is limited for the moment to marginal, insignificant changes.

The facts are simple: there are today in all these three countries 4 million more unemployed than there were three years ago.[4]

As for the quality of employment, the reality of the United States illustrates the scale of the economic disaster. Workers are more and more reduced to a situation of permanent instability and insecurity. You are unemployed for six months, then work for three. The famous 'mobility' of employment actually means a sort of sharing of employment. You are unemployed for less time than in Europe but more often. According to a recent poll among the people in work in the United States, 40% are afraid of losing their job in the coming year. The jobs created are, in the main, in the tertiary sector. A great part of them are in 'services' such as parking cars for the big restaurants, walking dogs, minding children, packing shopping at supermarket check-outs, etc.  The unemployed have been transformed into (very) cheap servants...30 million people, 25% of the active American population, are outside the normal circuit of employment, that is, live directly under the pressure of unemployment.

Whatever the forms of the sickness, whether in the United States or in Europe, in the industrialized countries or in the under-developed countries, unemployment has become effectively 'problem number one' of our epoch.

What does this reality mean?

The significance of the massive and chronic development of unemployment.

For the working class the negative significance of unemployment is an everyday reality. The proletarian who cannot find work is expelled from the process of production: the basis of social relations. For some time, when he is able to receive benefit, he has the impression of being a 'parasite' on society, then isolation, total poverty. For those who work still more abuse from the dominant class: 'if you are not happy, there are thousands of unemployed who are ready to take your place'. For the proletariat unemployment, whether a threat or a reality, is one of the most effective forms of repression, one of the worst aggravations of what makes the capitalist machine an instrument of exploitation and oppression.

The negative significance of unemployment may appear however less evident for the capitalist class. On the one hand the latter suffers from the classic blindness of exploiting classes, incapable of really perceiving the social damage of their domination; on the other hand it needs to believe and make believe that the irresistible growth of unemployment for more than a quarter of a century is not a sickness belonging to the historic senility of its system, but a 'natural' phenomenon, a sort of fatality due to technical progress and to the necessary adaptation of the system. "We have to live with it friends, yesterday's jobs are not coming back", declared the US Secretary of Labor Robert Reich during the G7 meeting on unemployment.

In fact, the propaganda on the "new recovery" is trying to theorize a situation that is developing in several countries (United States, Great Britain, Canada), where production has begun to grow without producing any significant fall in unemployment.

But there is nothing either "natural" or "healthy" in the massive development of unemployment. Even from the viewpoint of the health of capitalism itself, chronic mass unemployment is an unequivocal sign of senility.

For the capitalist class, unemployment is a reality which, at least to begin with, increases its power over the exploited by providing a blackmail weapon which forces down wages. This is one reason why the ruling class always needs a reserve of unemployed as part of the labor force.

But this is only one aspect. From the standpoint of capital, once unemployment rises above a certain minimum, it becomes a negative, destructive factor for capital, and the sign of a sickness. Capital feeds on proletarian flesh. Profit is made from living labor. Profit comes neither from raw materials, nor from machines, but from the "surplus value" of the exploited. When capital makes part of the labor force redundant, it deprives itself of a part of the true source of its own accumulation. If it does so, then, it is not for pleasure but because market forces and the demands of profitability oblige it.

The chronic slide into mass unemployment gives an expression in real life to two fundamental contradictions pointed out by Marx, which condemn capitalism historically:

- capitalism's inability to create through its own mechanisms an adequate solvent market to absorb all that it produces;

- the need to "replace men with machines" to maintain competitivity, which leads to a permanent tendency of the rate of profit to fall.

Today's explosion in unemployment, added to the mass of unemployed that has built up since 1967, has nothing to do with a "healthy restructuring" due to "progress". On the contrary, it is the practical proof of the definitive impotence of the capitalist system.

Capitalist "solutions"

The G7 meeting devoted to the problem of unemployment was a media manipulation typical of the way that the ruling class governs. The operation's media message could be summed up as: "If you are wondering if you're going to lose your job, or find another one; if you're worried about your children growing up unemployed; then you should know that the governments of the West's seven greatest economic powers are concerned about it, and are taking care of the situation".

Of course, no concrete decisions came out of this, apart from a request to the OECD to keep better count of the unemployed, and a promise to hold a new meeting of the G7 in Naples, in July, to talk about the problem again.

Clinton's "world plan against unemployment" is in fact nothing but an assertion on the part of the Americans of their firm intention to intensify the aggressivity of their commercial war against the rest of the world. When Clinton asks Japanese capital to open its domestic markets, or demands that the Europeans lower their interest rates to relaunch production (and so their imports from the US), he merely confirmed the warning delivered by his trade representative Micky Kantor: "Nobody should have any doubt about our commitment to go forward, to open markets, and to develop trade, just as we have done since President Clinton took office".

The spectacle offered by the G7 has at least demonstrated that the different national capitals are indeed incapable of finding a worldwide solution to unemployment. The only thing they know how to and can do is to exacerbate the trade war of each against all.

The grand principles asserted at the meeting are nothing other than the demands of competitivity for each national capital. And from this point of view, American capital could certainly propose its recent economic policy as a model. It has certainly put into practice all the recipes designed to improve the profitability of an ailing economy and arm it against the competition:

Lay off "excess" labor

"If we are honest with ourselves, restoring industrial competitivity is inimical to employment". These were the words of a highly placed official of the European Union at the G7 summit, one of the authors of the White Book presented by Delors. We have seen how US capital has put this into practice by improving "labor mobility".

Improve the profitability and productivity of labor

To achieve this, the Clinton administration has simply applied the good old capitalist method: pay the exploited less, while making them work harder. Clinton has put it in these, very concrete terms: "A longer working week than 20 years ago, for the same salary". And this is really happening: US manufacturing industry's working week is indeed longer today than it was 20 years ago. As for wages, during his electoral campaign Clinton promised to revise the minimum wage, and even to index-link it to inflation. Nothing has come of it. And since the minimum has been effectively frozen since the beginning of the 1980s, in reality the minimum wage has been steadily falling during the last 10 years. As for the so-called "social protection", in other words that part of the wage which capital pays in the form of certain services and state benefits, the Democrat administration has presented its famous Health Reform plan as a progress. In reality, there will be no extra spending by American capital in favor of the exploited, merely an attempt to rationalize an absurd and anarchic reality, which has led to medical expenses per employee being amongst the highest in the world.

Intensify the exploitation of labor power by modernizing the productive apparatus

Industrial investment has increased markedly during the last two years in the United States (+15% in 1993, with a similar rate forecast for 1994). These investments, though considerable in some sectors, are not accompanied by any significant increase in employment. For example, AT&T is preparing to invest colossal sums to develop "communication highways", which has been put forward as the investment program of the decade, and yet at the same time has announced 14,000 redundancies.

American methods are in fact nothing other than the good old recipes for capitalist economic warfare against both the exploited and its competitors. The policies of other national capitals are not fundamentally different. The governments of old Europe, which claim to have an exemplary system of social protection, have for years been systematically reducing "social spending". "Some measures, such as the Social Chapter [an annex to the Maastricht Treaty] need to be relegated to the museum where they belong" declared recently Kenneth Clarke, the British Chancellor of the Exchequer. The same attitude and the same practice have been developed by all governments, though they are not always presented in so provocative a manner.

At best, these policies make it possible to unload the effects of the crisis onto competing capitals[5]. In no way can they provide a general solution.

The growth in the profitability and productivity of labor may favor one capital at others' expense, for a time. But from the global point of view, once this increase in productivity has been generalized, it merely poses the problem of the inability of the market to absorb surplus production still more sharply. Reducing the wages and number of employees means reducing the available outlets. More productivity means that extra markets need to be fund.

Each national capital can only combat the problem at the local level by making it worse at the global level.

Finally, last but not least, the recovery in US investment has been financed, once again, by credit. The net national debt alone has risen from 30% to 39% of GDP. A similar movement has appeared in other countries to confront the recession. This can only aggravate the already fragile and explosive situation of world finance, which has been undermined by two decades of debt and speculation.

To encourage the use of credit, the US government has for three years imposed extremely low rates of short-term interest. The increase in these rates is both inevitable and dangerous for world financial stability. The low cost of short-term money has made possible the accumulation of enormous amounts of speculative capital. Wall Street in particular has been inundated with it[6]. The rise in the cost of credit runs the risk of causing a financial crash which would bring to nothing all the efforts at holding back the rise in unemployment.

The "solutions" that governments offer today to confront the problem of unemployment, apart from the fact that they represent direct attacks on the living conditions of the exploited, are build on the quicksands of colossal debt and unlimited speculation.

What perspectives for the class struggle?

Even if capitalism were to collapse completely, it would not disappear for all that. Without the revolutionary action of the proletariat, capitalism will continue to rot on its feet, dragging humanity down into endless barbarism.

What part will unemployment play in the course of the class struggle?

For the working class, the generalization of unemployment is worse than having police stationed in every home and workplace. It makes the struggle more difficult, because of the ignoble blackmail that it allows the ruling class exercise on the workers.

However, once it reaches a certain point the revolt against this repression itself becomes a powerful stimulant to the class struggle and its generalization. What percentage of unemployed is necessary for this to happen? The question cannot be answered, because it is not a matter of a mechanical relationship between the economy and the class struggle, but of a complex global process where the consciousness of the proletarians has a prime role to play.

Nonetheless, we know that the situation is totally different from the Great Depression during the 1930s.

From the economic viewpoint, the 1930s crisis was resolved by the development of the war economy and the application of Keynesian policies (in Germany on the eve of war, unemployment had almost entirely "disappeared"); today, the effectiveness of the war economy and Keynesianism lies behind us. They have been used to the hilt to bring us to the present situation, leaving a financial time-bomb ready to explode.

From the political viewpoint, the situation of the world proletariat today has nothing to do with that of the 1930s. Sixty years ago, the working class was weighed down by the bloody and dramatic defeats it had suffered during the revolutionary wave of 1917-23, especially in Germany and Russia. Ideologically and physically beaten, the proletariat let itself be atomized and enrolled under the banners of its national bourgeoisie, to march into a second world massacre.

Today's generations of proletarians have not suffered any heavy defeats. Starting with the struggles of 1968 - the first response to the beginning of the economic crisis - they have, with ups and downs, with advances and retreats in combativity, opened and maintained a new historic course.

The governments are right to tremble before what the experts call the "social unrest" which may result from the increase in unemployment.

They are still able to use those aspects of unemployment which make the proletarian struggle more difficult: its repressive, divisive, atomizing aspects, the fact that it is pushing more and more fractions of the revolutionary class - and especially the youth, who find it increasingly difficult to "enter active life" - into a decomposed and destructive marginalization.

But because it attacks the living conditions of the working class so violently, because it is universal and strikes without distinction in every sector and every country, unemployment demonstrates that for the exploited class the solution lies not in improved management, in reforming or restructuring capitalism, but in the destruction of the system itself.

The explosion of unemployment reveals the full extent of capitalism's failure, and the historic responsibility of the world working class.

RV

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[1] In 1979, after the ‘recovery' which followed the recession of 1974-75 (known as the "First Oil Crisis"), there will still 2 million more unemployed than in 1973 in the United States, 750,000 more in West Germany. Between 1973 and 1990, on the eve of the present recession, the ‘official' number of unemployed in the OECD countries (the 24 industrialized Western countries, including Australia, New Zealand and Japan) increased by 20 million, from 11 to 31 million. And these are only the richest countries. In the "Third World" or the old "Socialist bloc" the extent of the disaster is incomparably worse. Many under-developed countries have never recovered from the recession of 1981-82, and have fallen without a break into the pit of poverty and under-employment.

[2] At the beginning of 1994, 50% of the unemployed in Europe had been without a job for more than a year. The "experts" predict that by the end of 1994, 25% of unemployed will be under 20 (International Herald Tribune, 14th March 1994).

[3] Japan has to confront a sharp drop in exports, which are the main motive force behind its growth. The effects are being felt throughout the economy, but they are especially significant in the consumer electronics sector where Japan is traditionally very strong. This sector's exports fell by almost 25% in 1993, and are now only 50% of their 1985 level. In 1993, Japan for the first time imported more color TVs than it exported. The paradox is that most of these imports came from Japanese subsidiaries set up in other South-East Asia countries to take advantage of lower labor costs. The exceptional economic "boom" of certain Asiatic economies springs in reality from the economic crisis, which forces the capitals of the major powers, subjected to the most merciless trade wars, to "delocalize" some of their production to countries where labor is cheap (and more disciplined) in order to lower their costs.

[4] 2.3 million more in the USA, 1.2 million in the UK, 600,000 in Canada.

[5] For example, the recent American "recovery" was achieved in part at the direct expense of Japanese capital, which lost market share to the US in some sectors.

[6] This is the case with so-called "derivative" stocks, which are based not on economic criteria linked to the health of the companies they are supposed to represent, but on mathematical equations built on purely speculative mechanisms (it is a sign of the times that a large part of recent US computer investments have been designed to modernize and increase the capacity of companies which speculate with these ultra-modern systems). These stocks represent a colossal sum of money: Salomon brothers holds $600 billion, the Chemical Bank $2,500 billion. These two alone come to $3,100 billion, which is the equivalent of the combined GDP of Germany, France and Denmark!