Yes, comrades, we need to talk about crises again, the term recession simply does not explain what is really going on! Just in case you might not have noticed or perhaps the mainstream media where you live ignored it, the obvious has happened and the end of the so-called recession has disappeared into the fantasy novel. Once again there is a slowdown in growth and the financial markets are not particularly happy. This time, Germany and China are showing signs of slowdown. Globalisation has not ended the potential towards crises in the capitalist economic system; in fact, the greater interconnectedness of the world economy has exacerbated the situation and ensured that the contagion spreads.
For those who believe the fantasies of neoliberal economics, the shock of these latest failures of neoliberalism must come as a surprise. But for those of us that have been warning of the stupidity of squeezing wages and destroying work conditions, rising inequality in income and wealth, the dangers of export-led growth when wage incomes are being squeezed meaning that unless governments become the sole purchasers of goods and services that are being produced (and they are not) that obviously there comes a point when working people cannot purchase goods and services as their incomes are too low, wiping out of savings has happened and personal indebtedness leads to default and bankruptcy. Neither of these things helps to maintain capitalist growth, accumulation and profitability in the long run; forget that, it hasn’t even lasted in the short run.
I will be giving a run through on what is going on and why our lives feel as though we are living through the Shock Doctrine (which we are) then address the proposals of dealing with persistent unemployment under capitalism from the Left on which there is significant disagreement.
On recessions and crises
The issue is a rather obvious one and comes down to the fact that if there is production of goods and services, someone must buy them to realise profits. If throughout the advanced capitalist world, incomes for the working class (both employed and unemployed) have deliberately been eroded that takes a big chunk (in fact the largest chunk) out of sales and hence actual realisation of profits. Even with increased exploitation of labour through destruction of gains on working conditions and job protections will do little for profitability if the goods and services produced by the private sector cannot be sold. Yes, we are talking about a realisation crisis once again!
What is characterising this crisis is a series of issues that relate to the nature of how capitalism functions. Capitalism is inherently prone to economic crises which derive out of the nature of capitalist accumulation processes themselves. While Keynesian and social democratic economic policies (depending on which country you lived in) adopted following the great depression and world war II were able to ameliorate the crises, they never could eliminate the booms and busts that derive out of the nature of the system itself.
What would have been crises were reduced to shocks and recessions, but recovery of economic growth and profitability occurred reasonably quickly. What became obvious over time is that these recoveries were recoveries of profitability and that employment was not increasing in recovery after recovery; yes, the good old “jobless recovery.” Moving away from Keynesian and social democratic policies (which relied on direct government stimulation of the economy through investment to stimulate indirect government job creation and effective demand) and direct government job creation which led to has led to the creation of the state sector to provide goods and services that were considered insufficiently profitable for the private sector and were deemed to be of sufficient importance to society as a whole (e.g., education, healthcare) and instead relying on the private sector itself (this is a part of the ethos of neoliberalism) has actually led to the return of capitalist crises of accumulation and profitability.
So what we are living through is not an extended recession, rather it is a capitalist crisis of accumulation and profitability. Moreover mainstream bourgeois economists have absolutely no idea how to deal with these crises; Keynesian policies are far less effective in a globalised open economy than they were previously. Neoliberalism which has been advocated by the voices of the ruling class (i.e., the world bank, IMF, the European central bank, many right-wing publications and advocacy groups) and adopted to a larger or lighter degree by mainstream political parties from the right to the centre-left has clearly not solved the problem. In fact, guess what, impoverishing large sections of the working class in the advanced capitalist world has actually made things more problematic.
Moreover, China has not eliminated the grotesque income and wealth inequality needed to ensure the sale of what it produces domestically and its dependence on sales of exports means that its economic growth is being impacted by the reduction of incomes (and hence demand) for its goods and services and that impacts profitability.
What was done? How have things changed?
Persistent unemployment exists under capitalism because the amount of people that need to be employed by the private sector depend on technical conditions of production and the prevailing level of wages and profits in the system upon which decisions about choice of technique depend. In periods of economic growth, unemployed people can be brought into work; strong unionisation and decreased unemployment enabled the linkage of wages to productivity (along with the destruction of labour militancy as part of the capital-labour accord).
In periods of crash and/or stagnation, unemployment increases and under stagnation, it is persistent. To address the obvious fact that there will be persistent unemployment and to ensure that the unemployed can actually provide sufficient demand for goods and services produced by the private sector, during the Great Depression and post-war period initially incomes were provided through the social welfare state and direct government jobs creation. When good union jobs and wages were destroyed through shipping the manufacturing and industrial sectors to low wage economies of the developing world and capitalist periphery to reduce costs and increase profitability, goods produced cheaper abroad in low wage economies were sold in advanced capitalist economies. For the unemployed and working poor (depending on where you live), there was a social welfare state to keep consumption and demand going and to stimulate production and hence profitability.
As the social welfare state and wage incomes were further rolled back, incomes were kept artificially high to maintain by access to easy (but rather expensive) credit, this was for not only small purchases but mortgages for housing (yes, remember the housing bubble bursting? While easy access to credit this started earlier, it was only after the steady decrease and stagnation in wage incomes that borrowing became catastrophic. Somehow, provision of social housing has never been high on the agenda for capitalism and they made sure that this was eliminated as soon as possible … any investment that you have heard recently for public housing? yeah, me neither …).
The state also provided other things which were deemed essential for society due to social pressures and to provide a workforce that actually had the skills needed for the use of the capitalists (aka as the education sector). For essential services like education, housing for the working class, water and energy, transport, fire protection, health coverage (this was universal everywhere but in the US, but the poorest were covered by Medicaid), these were provided by the state as they were not deemed to be profitable for the private sector to cover. Privatisation of these services is part and parcel of the neoliberal liberal agenda in its quest for new areas of exploitation. In fact, the state is often the buyer of last resort which eliminates much of the uncertainty of capitalist production of goods and services. In Britain, the NHS buys services such as cleaning from the private sector while previously it has been part of the NHS itself and these formerly used to be unionised government jobs rather than poorly paid private sector jobs.
Neoliberalism has advocated a series of policies:
1) privatisation: destruction of state and public sector; 2) wage squeeze: destruction of strongly unionised sectors (industry and manufacturing) and their export to low wage economies and the shift to service provision (retail and financial sectors) which also creates significant wage differentials in a country; wage incomes and conditions of work undermined to maintain profitability; 3) destruction of social welfare state provision: part of points 1 and 2 above (as the Tories love to say, why should benefits be rising when wages are falling throughout the country?), this means not only the undermining of benefits but also the reduction in access to services or the outright elimination of services (e.g., child care). Austerity has hit women and disabled people the hardest, that is not an accident; 4) free trade and export-led growth: we produce for overseas markets (since goods and services can no longer be afforded domestically, this will ensure that production and economic growth continue while we can keep wages low); 5) deregulation of the private sector: this is part of the market will provide everything and we should never attempt to interfere with its functioning; 6) Fiscal policy: decreased state intervention both in terms of provision of social welfare state and state services (see 1, 2, and 3 above), limits placed on budget deficits or decreased budget deficits, decreased corporate taxation and personal taxation for the wealthy, introduction of flat taxes, specifically indirect taxation, which impacts on those with lower incomes fall more than the wealthy.
These policies have been advocated for decades by the World Bank for implementation in peripheral, developing, and emergent capitalist economies. More and more they were being advocated and slowly implemented in the advanced capitalist world from Reagan and Thatcher onwards. Following the crisis of 2007-2008, they have been rolled out throughout the advanced capitalist world under the name of “austerity” which essentially means undermining the working class to restore profitability and economic growth of capitalism.
Rather than restore profitability and economic growth, instead we are seeing economic stagnation, increased poverty, increased wealth and income differentials. The latter are not leading to increased investment by the wealthy in productive parts of the economy nor the creation of additional services as there is no demand for them. Let’s face it my dear economist colleagues, Say’s Law only holds in economic theory; neither the classical version of production (supply) creating its own demand or the neoclassical/modern version that savings determines investment holds in the real world which works on principles quite different from mainstream economics analysis. Increased money supply and the government buying up bad debt of the financial sector (see quantitative easing) and centralisation of capital (that is the big fish buying up the parts of the little fish that were not catastrophically collapsing) has also not increased investment in the productive parts of the economy, but rather has resulted in short-term speculative investment in the financial markets. So while the financial markets recovered rapidly, there is a vast difference between the value of financial assets and the real economy.
While there was a short-term increase in profitability outside of the financial sector (which has done well out of the crisis, much to the pleasure of world finance capital) along with small (miniscule) increases in economic growth, most of the rising employment has been self-employment in Britain (full-time for men, part-time for women), low-paid unskilled labour (non-union jobs, of course, as the public sector has been decreasing in size and that is where most union labour is in the current period). Moreover, the private sector is also not picking up the provision of direct services for obvious reasons as demand is based upon ability to pay and hence those services are no longer universally available.
Economies that are dependent upon production for export have started to feel the pinch. In many senses, this was obvious. If you cut incomes of those that buy what you produce (for example, Greece in the case of Germany where wage incomes have collapsed due to austerity along with the economy) and you do not have other outlets, economic growth will be affected. This is due in large part to the interrelationship between production, consumption, distribution and exchange in economic systems, in general, but even more so. In the case of capitalist economic systems where profitability and accumulation require the sale of the product (whether goods or services) at a profit to ensure realisation of profits and future investment and, hence, future economic growth.
Part of the problem derives from privatisation of state services; that is the attempt to shift provision of goods and services formerly provided by the state to the private sector in the hopes of securing new areas of profitability for the private sector. This, in itself, creates a series of problems. These services which were formerly provided free at the point of contact (but funded through taxation) now need to be purchased. The former government jobs (which were unionised and had guaranteed conditions of work attached to them) are now subject to capitalist competition, which mean that since they now need to be profitable, wages and work conditions are eroded. Moreover, since they now need to be paid for, only those that can afford to pay for these services can buy them. If they are an intermediate good or service sold to the private sector, cost minimisation will force wages and conditions of work further downwards (if possible, that depends of the social subsistence level of wages or the physical subsistence level of wages if things become even worse). If directly purchased by the state sector and if they are forced to buy from the lowest bidder (and this is part of the privatisation process) that will also further undermine wages and working conditions. Finally, if goods and services are sold to consumers directly, only those that have the income can afford to purchase them. Healthcare will become a luxury. If education is only provided by private companies, the nature of education becomes something where working class children’s actual learning is undermined for the sake of being prepared solely to work in low skilled jobs (McDonald’s high school may not be a joke in the future); this will not affect the education of the rich as they have always had separate and very unequal education institutions.
That will have two impacts: 1) that good or service may not be able to be purchased as people cannot afford to do so (see low incomes); 2) this will mean that it will no longer be produced for the majority and will become in many senses a luxury good available to some and not all.
If that is something like healthcare, then we have a situation whereby people can no longer access it except for those whose income is high enough. If it is provision of clean drinking water (which has been advocated by the World Bank and IMF) that means that clean drinking water (which is essential for human life) is no longer available to the majority. Moreover, if people try to get around the privatisation and get their own water (collecting rainwater or living off the grid), this represents a threat to the private sector and the system itself. In fact, capitalism has always tried to make goods and services scarce in order that they can command a price, and which the system will provide at a profit. In fact, in Florida, living off the grid has been declared illegal.
Unemployment, underemployment, conditions of work, low wage economies
Whilst it is not the job of the left to manage capitalist economies, the obvious impact of these changes is destroying everything that working people had managed to win over the years since the 20th century and especially the gains since World War II. Thus comes the need for advocating a programme that we can use to mobilise working people; aka transitional programme.
This attack has become cumulative and things that working people have taken for granted are rapidly disappearing. Additionally, it is the weakness of the union movement and the left that is enabling the ruling class to move so harshly and quickly. Things will not get better on their own as the ruling class has been demanding many of these changes; however, the ruling class is not united irrespective of the mainstream political parties all advocating version (either harsher or weaker) of the general neoliberal programme. An example is the rising Euro-scepticism of the Tories and strength of UKIP in Britain calling for leaving the EU. Finance capital certainly does not want to do that; while the majority of the ruling class want to eliminate certain guarantees for working people, they do not want to actually leave the EU.
As an important aside … the lack of interest in the bourgeois democratic process is increasing as voters actually view that the differences on economic issues between mainstream parties is often superficial as none of them argue for a serious reform of the economic system in which the majority could actually benefit. This is leading to a political crisis of bourgeois democracy; voter participation rates are extremely low where there is nothing that working people see themselves as gaining anything. And while trying to prevent black voters from taking part in voting may enable the Republicans to win seats in the US, this process is undermining the legitimacy of bourgeois democracy itself as already people are less and less interesting in a process in which there is little to gain. In countries in which there is a real left presence, in Greece and Spain for example, participation and interest is higher and if there is an issue that resonates (the independence referendum in Scotland which actually meant something) people do participate and while they are sceptical about what mainstream parties are advocating, they have not completely given up on the process itself.
In many senses what we need to address on the left is what we should be advocating as part of a programme to raise consciousness and demands that the working class can get behind. The low level of political consciousness, the weakness of the left and trade unions, and mainstream parties signing onto the neoliberal agenda which is impoverishing the vast majority needs – or shall we say, demands, a response which is meaningful to working class people while addressing what they want; at the same time it recognises where the level of struggle is actually at. We are not in a revolutionary situation by any means as an understatement, as such, slogans and programmes that were appropriate in 1917 or 1960, for example, are way to the left than where working class consciousness is at currently. High levels of unemployment and being told constantly that decent wages and conditions of work are not feasible and that everyone must bite the poisoned apple of austerity has led, if not to acceptance, but to resignation.
One of the most important impacts of the neoliberal agenda has been the erosion of wages and the incomes of the majority of the working class, the Walmart-isation of jobs where working does not secure sufficient income and access to vacation and sick-days, benefits and healthcare in the US (part-timers do have access to these things in the EU as they are not tied to whether you work part-time or not) , the destruction of conditions of employment through the loss of decent jobs, protections of employment , subcontracting, the rise of precariousness in employment (both forced labour for those on benefits through the use of workfare and the rise of zero hours contracts where workers have no guarantee if they will be called into work as there is no formal schedule and hence there is no guarantee of an stable income).
Given the reality of persistent unemployment and the destruction of industry and manufacturing and hence the union movements associated with these sectors and the shift towards service sectors which are non-unionised and where working people are treated as disposable unskilled labour irrespective of what they do, the question arises what should we advocate to ensure working class people have access to those things that they actually need while also having access to higher incomes?
There are essentially two things that have been advocated by those on the Left that have tried to address the reality of persistent unemployment under capitalism:
1) Full employment;
2) The citizen’s income or a universal basic income.
Indeed, both of these have also in some bizarre form or another by the right as well. George Osborne, Chancellor of the British Exchequer, actually raised full employment, but what he is talking about is not the same thing we are talking about; he accepts Milton Friedman’s NAIRU, a monetarist concept, which accepts a level of unemployment to be consistent with a specific rate of inflation. In fact, Osborne is being completely disingenuous about using the term fully employment. As is well known, capitalism produces unemployment as part and parcel of the system. The monetarist argument advocates that this should exist to avoid rising inflation. Moreover, the manner in which he would achieve said full employment is through the lowering of wages to increase employment following standard neoclassical argumentation. This neither provides the level of income we want and also lowering wages does not lead to increasing employment (this relates to the fact that working people’s income being far too low to actually stimulate production and hence further growth in a sector and in the economy as a whole as Keynes argued).
In the case of the Citizen’s Income or the basic income argument, the Right is advocating this as providing income to stimulate demand for private sector goods and services which people could not access as they have insufficient income. Essentially, the citizen’s income in this context hinges on an acceptance of the NAIRU argument and rejects that the state sector should provide benefits in kind (that is, it would provide childcare directly to those that need it for example, the vouchers for private education is along the same line; the state doesn’t provide education, instead, the private sector does it). So the Citizen’s Income of this type supports privatisation of services and the elimination of the state sector as provider while also ensuring that people have the income to purchase it from the private sector; this argument is supported by both anarcho-capitalists and the hard right economic policy-makers. A win-win for the ruling class as the government pays the working class money which is used to support the private sector and hence bolsters profitability for the private sector to provide it. Moreover, it shifts the manner of provision from the state to the private sector and fits in nicely with the privatisation meme.
The Left, coming from quite a different perspective, also recognises the persistence of unemployment in the capitalist economic system relating to choice of technique, productivity of the working class meaning that less workers per capita are needed to produce what is required, and the usefulness of the reserve army of the unemployed for the capitalist economic system (workers are weaker as they are forced to compete with the unemployed, union power is weaker, and the capitalists can lower wages and undermine working conditions … all of which we are seeing today).
On the one hand, some members of the Left want to disassociate income from work itself; the Citizen’s Income is then viewed as ensuring income without having to work. Everyone receives an income payment irrespective of wealth; the money given to the wealthy is then clawed back through taxation. This is seen to ensure consumption of the working class without having to worry about finding employment. It is also seen as a way of guaranteeing that we have the income to purchase what is needed in the context of a capitalist economic system; whether that means accessing childcare, people to help with caring responsibilities, housing, etc. This was something that was fought for by the disabled rights movement in Britain; they are given money by the state and they themselves are responsible for using that money to cover support services that are hired from private sector agencies that supply labour. There are some problems in that having the money does not mean that the services which you need actually exist (or are provided) as that depends on … profitability considerations … unfortunately. It takes the worry out of having a job and allows people to purchase what they need. I have also seen it advocated as a way of providing for consumption without too much production and economic growth which will negatively impact upon the environment (this is a very simplified argument along the lines of John Bellamy Foster).
On the other hand, other members of the Left have been arguing instead for full employment brought about through job creation in the state-public sector through investment in Green jobs, energy production and public transport, sufficient funding for education, socialisation of caring — childcare, care for the elderly and sick, personal assistants for disabled people (either through provision of funds to communities and local governments) and initial funding support for cooperatives. This does not mean that all jobs are created at the national level, but that the state would ensure that those services would be provided in kind and not through the private sector. There are several reasons for this, the public sector is still strongly unionised and we can fight for better incomes and working conditions while providing the services that the working class wants and needs. In order to produce accessible social housing, green energy and transport, we need people to build it. Consumption without production just doesn’t happen (housing does not appear just because we wish it and if there is insufficient profits to be made, it won’t happen) and while we know that capitalism is essentially inconsistent with full employment through the private sector, the actual provision of what we need rather than money would channel investment into social investment and what people need not what the capitalist system needs. Support for decent wages, working conditions and the quality of service provision can be done far easily if we have lower unemployment and stronger unions which can pressurise the government and it shifts the whole discussion away from the private sector’s control over the economy. Moreover, it halts the race to the bottom which is a linchpin of neoliberalism.
What the Left needs to decide is the best proposal which can galvanise working class support behind it? I am sceptical about the amount of money that can be provided using the citizen’s income in the context of the capitalist economic system. As much as we would prefer otherwise, “the work to eat” argument is deeply embedded in the minds of the working class irrespective of the existence of the social welfare state which has already weakened that link. Also, I am also unconvinced whether providing the income for the private sector to provide the services we need makes sense. Wouldn’t providing the services themselves unconditionally make more sense? Yes, we need to revise the social welfare state and make it truly universal and unconditional, but do we trust the private sector to provide what is needed while not exploiting those working for it?
As an example, carers are some of the most exploited workers, predominately female, overworked and underpaid and there is nothing that can force a change. Yes, unionisation can help without question, but it is the fact that this is seen as “women’s work”, unskilled labour, gender segregated at low pay. We need to change the perception of the work itself; care-work is hard, requires skills that are not profitable and it will remain so unless we can desegregate it from being “women’s work”, increase its prestige – these are things which women have been struggling for and derives out of the sexism and patriarchy which pervades the system itself.
While I certainly agree with Bellamy-Foster on the need for an ecosocialist perspective; we need to transform the economies in which we lives towards green sustainability and that will require production to do it. There is also desperate need for social investment in health, education, caring, etc. and that requires movement towards full employment to create it. In a socialist system, we certainly will need far less labour and hence shorter work weeks to fulfil the needs of the population. But we are not in a socialist system by any means and our control over production, distribution and consumption is weak as an understatement.
Discussing employment, the conditions of work and income is merely one important step that the Left needs to come to grips with, but it is one which is of essential importance to the working class (employed and unemployed). Yes, ultimately we want to get rid of the whole system, but at this moment, support for this demand is at a rather low level. We need to provide proposals which not only raise consciousness but also articulate a different way of doing things.