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 …
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.
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.
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?