A shocking report by the International Labour Organisation (ILO) recently predicted that global unemployment could rise by more than 50 million and leave more than 7 percent of the world’s labour force without a job by the end of 2009.
Some firms that have slashed jobs are blaming the recession. But in reality, unemployment is not a temporary phenomenon that arises during economic crisis – it is a permanent feature of the system.
The degree to which it is allowed to grow is determined by a number of factors, including the balance of forces between bosses and workers, the extent to which capitalists are prepared to risk confrontation, as well as whether the economy is expanding or contracting.
The ILO’s report suggests that many firms are using the recession as a means to both reduce the number of workers, and to make those who remain work harder for less money. It predicts that the number of people in “working poverty”, those earning less than $2 a day, could rise to 45 percent of all workers by the end of 2009.
The revolutionary Karl Marx pointed out that as capitalism develops, bosses invest in labour-saving machinery that can be operated by fewer workers.
Marx pointed out the irony of the workers manufacturing machines that would later put others out of work, saying, “The labouring population therefore produces, along with the accumulation of capital produced by it, the means by which it itself is made relatively superfluous.”
He also noted that, rather than stabilising the system, cutting the number of workers ultimately undermines profits because value comes from workers’ labour.
Investment in technology can bankrupt those smaller and weaker producers who cannot compete. It also means those who keep their jobs find that their bosses are demanding ever more productivity out of them.
And those who are left without work flood the labour market and may act as a break on wages.
In Marx’s words, “The industrial reserve army, during periods of stagnation and average prosperity, weighs down the active labour army.”
But allowing unemployment to rise can be dangerous – which is why capitalists rarely agree on whether large scale industries should be allowed to go to the wall.
The closure of firms will have a knock on effect on more profitable sections of industry. Employing fewer workers has an impact on the rate of profit over the long term.
A rapid growth in unemployment can also lead to an ideological crisis – a lack of faith in capitalism’s ability to make good the guarantees that it once seemed to fulfil.
This can generate enormous bitterness and become the detonator for social explosions. The experience of the 1980s shows how this can happen.
During the 1979 election, Tory leader Margaret Thatcher received the backing of almost every boss in Britain to implement monetarist policy that would mean large scale cuts in public spending and no more state aid for failing firms.
They hoped that the resulting unemployment would curb the power of the unions, drive down wages and improve profits.
But when these policies sparked large scale conflicts, many in the ruling class started to fear what they had unleashed.
Within two years of Thatcher taking power, industrial output had fallen by 15 percent. Within three years unemployment had risen by around 250 percent to about 4 million.
Meanwhile bosses drove up productivity among the remaining workforce – between 1980 and 1984 output per person rose by over 20 percent.
The early years of the Thatcher government were marked by a wave of strikes and protests over cuts and job losses. Steel workers in 1980 responded to the attacks by taking part in their first all out strike for 50 years.
The following year major riots fuelled by unemployment shook nearly every major city in Britain.
There were other struggles in car industry, the NHS, water industry and newspaper printing. Some sections of the ruling class understood that many of these conflicts had the potential to develop into general opposition to the government.
But it was not just the social costs that divided the ruling class. There were economic reasons to doubt the effectiveness of the monetarist policies.
In 1982, after three years of the offensive, the Economist magazine said that wages needed to be cut by 20 percent if British industry was to become competitive. Yet paradoxically, Thatcher could only win the 1983 general election by claiming that those in work were better off than they’d ever been.
Although the Tories had been successful in driving down living standards in the years when the recession was deepest, as economic pressure started to ease, wages shot up.
Few in the ruling class would now admit to believing in monetarist solutions to the economic crisis. Instead of demanding that “lame duck” industries go under, bosses are demanding that the government use public money to bail out businesses in trouble.
Many firms are, however, hoping to use the recession to drive through job cuts, pay cuts and improved productivity, but are at the same time fearful of the threat that such attacks could pose – both economically and in terms of provoking social unrest.
The question of how workers respond has never been more vital.
The JCB industrial equipment firm, for example, used the threat of the dole to push through attacks on pay and hours last November. The idea was that, by accepting the attacks, jobs would be saved. But JCB went on to slash jobs anyway.
Unemployment and attacks on workers’ conditions are best fought when the working class is united in resisting both.
And the fact that unemployment can grow while millions more are overworked shows up the madness of the system and can generate an ideological crisis that can challenge the system as a whole.