Capitalism is not working!
cover of Socialist View
In country after country across the world, the story is the same. Mass unemployment has returned. Millions of workers have lost their jobs as the capitalist class dumps the burden of the economic crisis onto the shoulders of the working class.
In the US, the official unemployment rate is 7.2%. If the rate were calculated by previous methods, it would be double this figure. In most of Europe official unemployment is already averaging at 7.7%.
In Britain, the numbers applying for the job seekers allowance jumped in January by 74,000 and official unemployment stands at 6.3%, just under two million people. Unemployment in Britain is increasing twice as fast as the average across Europe.
The official rate of unemployment in Northern Ireland is slightly below the British average but that is not a real reflection of the seriousness of the jobs crisis. Unemployment in the North of Ireland is increasing very rapidly. It rose by 6.1% in January and there has been a 62% increase in the numbers on the dole in the course of the last year. What is startling is that 80% of that yearly increase took place in the last six months, a faster growth in unemployment than anywhere else in the UK. Over 40% of jobs lost in recent months have been in construction but it is spreading, with the likes of retail and call centres being particularly vulnerable. Given the historic weakness of the private sector in Northern Ireland, the public sector has always been key in providing employment. Highly publicised attempts at getting US multinationals to invest in "post conflict" Northern Ireland has failed miserably to provide any jobs.
Now public sector jobs are also under threat with thousands of job losses planned in the NHS and the Housing Executive [government housing]. The depth of the crisis in Britain means it is likely that the Westminster government will cut its annual subvention to the Assembly [N Ireland’s power-sharing local government] and that will further undermine public sector employment and the North’s economy.
With roughly one fourteenth of the population, nearly half as many jobs were lost in January in the South of Ireland, 33,650, as were lost in the whole of Britain. In February 2007, official unemployment was 3.7%. A year ago it had increased to 5%. Now official unemployment is 9.2%.
The collapse of employment in construction is continuing apace, with the Construction Industry Federation claiming that 100,000 jobs have been lost so far and predicting a further 55,000 job losses. With the realisation by the retail sector that the global recession was not just a temporary crisis, jobs in this area are being shed at an alarming rate. This will be a feature in all of the advanced capitalist countries as the credit driven consumer spending frenzy of the last ten years has come to a shuddering halt. Financial services, tourism and manufacturing are all being badly hit.
The real level of job losses in the South has been masked because up to 60,000 migrant workers unable to get work have left the country. Goodbody Stockbrokers estimate that another 150,000 will join the live register this year, with another 80,000 in 2010. That would put unemployment way beyond 500,000, an incredible 25% of the workforce. That would actually be higher than the highest level unemployment reached in the United States during the Great Depression – 24.9% in 1933!
It now seems probable that unemployment in Britain and Ireland will exceed even the "mass unemployment" levels of the 1980s and possibly match the levels of earlier decades, such as the 1930s, times which people thought would never return.
The historic weakness of the private sector in Ireland, North and South was not overcome during the boom. An over reliance on construction and property bubbles in both areas has resulted in a rapid rise in unemployment now that the recession has hit hard. Unemployment will be the most important issuing facing the working class for years to come.
Unemployment inevitable under capitalism
The emergence of mass unemployment is a body blow to the ideas of capitalist economists such as Milton Friedman, the inspiration behind neo-liberalism. Friedman argued that the capitalist market, left to its own devices, would develop the economy in a balanced way and naturally tend towards the achievement of full employment. The world recession has shattered Friedmanite ideas and left the capitalists and their governments scrambling for solutions.
The economic crisis will also expose that Keynesianism does not represent a way forward either. Keynes argued that by using the state to ‘pump prime’ the economy, the boom-bust cycle of capitalism could be overcome. This has also been shown to be wrong.
Keynesian policies played a certain role in the development of the post war boom, but they were not the key factor. Crucial to that extensive boom was the war itself and the devastation it brought and the need to "rebuild" Europe and parts of Asia. By the 1970s, under Keynesian policies, the world hit a major crisis, which resulted in the development of mass unemployment. In a sense, the failures of Keynesianism helped give rise to monetarism and neo liberalism.
It is not an accident that Time magazine had a feature on Karl Marx and that a recent Newsweek’s headline read, "We are all socialists now". Marx put forward the idea that unemployment was inevitable under capitalism. He outlined that competition was innate to capitalism, which forced companies to invest to improve their products and productive processes.
Marx argued that the development of technology etc. would tend to displace labour and create unemployment. Likewise, he said, as it was a constant aspiration of capitalists to squeeze more productivity out of fewer workers this would also lead to unemployment. He also explained that cyclical mass unemployed would emerge when capitalism hit its periodic crises.
Marx referred to the unemployed as the "reserve army of labour" and explained how mass unemployment was crucial to capitalism as a means of holding down the wages of those at work. The existence of the reserve army also meant there was a readymade force that could be mobilised if some new economic development or opportunity came along that capitalists wanted to profit from.
A condemnation of capitalism
Unemployment exposes the bankruptcy of the capitalist system. Workers are being made redundant because there are too many commodities and not a big enough market to make it profitable enough to continue to produce them. It is not the case that people do not need these products and services. There is a huge demand. The problem is that the working class does not have enough money to buy what it needs.
Building workers are being made redundant not because we do not need anymore schools, hospitals, roads or even homes. They are being thrown onto the scrap heap because, for the time being, there is not enough profit to be made for the speculators and investors.
The right for everyone to have a decent job does not just have to be an aspiration – it is entirely possible once production is planned on the basis of providing for the needs of society and not for the profits of the super-rich elite.
The fact that capitalism is incapable of using the talents and labour of hundreds of millions of people means it is wasting huge resources and cutting across the potential to produce food, commodities and services to provide a decent quality of life for every human on the planet.
High unemployment is a clear indication that an economy is operating below its potential productivity level. It was estimated in Britain in the early 1980s that if the 10% unemployed were put to work that there could have been an increase in output of up to 20%.
The world economy over the last 30 years has been much weaker than during the post war boom, and that weakness is reflected in the current crisis. There has not been the same investment, growth and development of manufacturing. The 1970s also saw a switch towards pursuing profits through stocks and shares and the financial markets.
That weakness may have been hidden in some countries by the development of some new sectors like IT or by the profiteering of the last years from asset bubbles, but it was visible in the labour market on a global scale. The "quality" of a lot of jobs has diminished, illustrated by the emergence of jobs which are known by the term "McJobs" and references now to the ‘working poor’. Propaganda from the right-wing political establishment and its loyal media tries to convince all that it is old fashioned and backward to think that you should have job security, never mind decent pay and a living pension.
Even with the growth of the last boom, internationally unemployment stayed at record high levels even though in country after country, they have changed the mechanisms for counting the unemployed, in order to hide the true extent of the problem.
The International Labour Organisation estimate that in 2007 global unemployment was 179 million, just under 6% of the world’s workforce. They have projected that this will increase by 50 million this year.
But these figures do not give an accurate picture of the weakness of the jobs market. Half of the world’s workers live in families that survive on less than $2 a day. The ILO has estimated that 30% of the world workforce is either unemployed or underemployed – that is nearly one billion people! That figure is likely to get much worse over the next few years as mass unemployment returns to many countries and with it the re-emergence of the informal or black economy. The ILO estimates that roughly 50% of the global unemployed are young people between the ages of 18 and 24.
New features of unemployment
In Northern Ireland, Southern Ireland and Britain there is a significant difference in the development of unemployment in this recession compared to the 1980s and even the 1930s. In both of those recessions, unemployment had been developing over a number of years prior to the economy actually going into an official recession. Now mass unemployment has developed at a rapid pace. This is a reflection of the fragility of booms that were built on the back of financial and property bubbles – a house of cards – that as it came crashing down has thrown hundreds of thousands on to the dole.
The speed at which this crisis has unfolded and the rapid development of unemployment could push sections of the unemployed to be more open to getting organised than was the case in the 1980s.
Twenty-first century youth in the advanced capitalist countries have had an expectation of leaving school and getting a job and/or going to university and then getting a job. Now this has all changed. A sizeable proportion, maybe even a majority of young people at a certain stage, will leave school and go straight onto the dole with no prospect of getting a job in the foreseeable future. This can manifest itself in widespread anger amongst young people against the government and the political system.
In Northern Ireland, the situation could become potentially very serious. Unemployment benefit, Jobseekers Allowance, for 18 – 24 year olds is only £47.50 a week. It is not possible to live on this small sum. Deep bitterness and anger, as well as serious social problems, can emerge amongst the young unemployed faced with having to endure a life of misery. Serious social problems can develop and unfortunately because of the sectarian divisions in society, rioting and battles at sectarian interfaces between Catholic and Protestant youth is a real if not certain possibility.
In the South, unemployment benefit at €204/week is relatively high compared to the North and the rest of Europe. However, with the government’s fiscal difficulties set to dramatically decline it is hard to envisage a situation whereby they will not attempt to cut these payment levels. In the context of the high cost of living and, as stated, already high levels of personal debt, attempts to cut benefit rates could result in protests.
The scale of the job losses can have a stunning effect on the unemployed and the working class as a whole. However, just as in the 1930s, eventually the scale of the economic catastrophe and its impact on the working class will result in a militant and radical response. In the 1930s, the working class internationally was faced with the choice of starve or fight – today the choice may not be so stark (because of social welfare in many countries) but nevertheless the choice of fighting back or languishing for years in poverty will push millions towards taking radical action.
Organise the unemployed – fight to defend jobs
The unions have not organised any serious resistance to job losses. Their dogged adherence to "partnership" with the employers and the government, either officially through the mechanisms of "social partnership" in the South or the unofficial "partnership" arrangement that exists between the unions and the North’s Assembly parties and Brown’s government, has meant that the interests of union members are coming second to "the national interests" i.e., the profits of big business.
The occupation by the workers in Waterford Crystal to stop the closure of their factory and to save jobs, is the type of militant action that the unions should engage in to stop all redundancies at major companies.
The unions should fight and oppose all redundancies, either compulsory or voluntary. A voluntary redundancy does not just affect the employee who is leaving that company, it means one less job in society – a job that could go to someone on the dole.
During the British miners’ strike, 25 years ago, the NUM fought for a year against Thatcher’s redundancy programme. The attitude of the miners was that they did not have the right to "sell" their jobs, as these jobs should be passed on to the next generation. This same attitude should be redeveloped today and all redundancies, all job losses should be opposed and fought.
The trade unions should not accept the arguments and the reasoning of the employers as to why they have to make workers unemployed. Many companies will argue that they can no longer afford to keep all of their employees on. The unions must demand that these companies open up their books – let the workers see where all of the profits, which they created during the boom, have gone. In a majority of cases, it is simply not true that the bosses cannot afford to keep paying all of their staff. The truth is they cannot maintain their profits! This argument should be rejected and fought – the employers should be forced to not only take a major cut in their profits but to use their reserves of wealth to maintain all jobs. In the case of the public sector, the unions should not accept the thousands of job losses in the NHS which the Assembly is proposing or the loss of teachers in the South or the 600 workers from the bus companies, Dublin Bus and Bus Eireann. The North’s Assembly Executive and Brian Cowen’s government in the South of Ireland must be forced to maintain all public sector jobs.
Any company threatening job losses or closure should be occupied by the workers and a campaign waged for its nationalisation to safeguard all the jobs and working conditions. Many companies who face major financial difficulties in this recession will become the target for vulture capitalists or other companies to take them over. However, experience teaches us that when a company is taken over under these circumstances, the new owners will always attempt to use the crisis to cut jobs and impose low wage rates and harsher working conditions. These job losses and attacks must be resisted.
Waterford Crystal is an example of this process. The Unite union leadership has been involved in negotiations to try to get either the companies Clarion or KPS to buy the Waterford Crystal plant. Yet both companies have only ever proposed to maintain a small number of jobs with lower pay rates, lower pensions and small redundancy payments. These two companies are hoping that the workforce will reluctantly accept these terms because the alternative is the closure of the factory.
Yet Waterford Crystal is viable. It produces a high quality product which has a worldwide market. If the government was to nationalise Waterford Crystal, all of the jobs could be saved and the company could have a bright future, run by the workforce under democratic workers’ control. The Unite leadership has raised the idea that the company should be nationalised but they have not pursued it at all and may back a deal from Clarion or KPS which could involve up to 600 redundancies!
Nationalisation is the only way to secure the jobs, wages and conditions of the Waterford Crystal workers, but this also applies to all of the other companies who are threatening closure or large scale redundancies.
According to The Independent newspaper, “The number of non-UK-born workers in jobs increased by 214,000 to 3.8 million in the year to December, while employment of UK-born workers fell by 278,000 to 25.6 million.”
The recent strike by construction workers at the Lindsey Oil Refinery in England is an example of the difficult issues that can arise as employers attempt to sow division amongst the working class and use the unemployed and migrant workers to impose a ‘race to the bottom’. This strike also shows how it is possible to fight in a principled way and win a victory for trade union rights and all workers.
It was correct for the workers to strike against their replacement by teams of Italian workers who had been specially brought in. That was not racist, as some on the left argued, but a completely justified defence by workers of their jobs and basic trade union rights and conditions.
It is completely correct to oppose the attempts of the employers to use unemployed or migrant workers to drive down pay and conditions, while at the same time trying to organize the unemployed and migrant workers so that a united struggle for jobs and decent conditions for all can be waged.
The outcome of the Lindsey Oil Refinery strike was an important victory, with 102 jobs being won for those who were being made redundant and all of the Italian workers also kept their jobs.
The demand of the workers that the union should have control of registering the available unemployed and local skilled union members and that they should have the right to nominate who gets employment as work becomes available, is a principled basis to deal with such issues and fight for jobs for all.
A fighting programme to end unemployment
The starting point for the trade unions should be that everyone has the right to a guaranteed job with decent pay and trade union rights.
The Socialist Party believes that in the current climate of mass unemployment emergency measures must be taken to create jobs. The trade unions should campaign for an emergency programme of public works to build roads, schools, hospitals and homes.
Two million households in Britain need social housing. The major building companies should be nationalised and the thousands of unemployed building workers should be put to work building houses for these families, constructing the schools, hospitals and roads we need. The public transport systems in Britain and Ireland should be modernised, and in the case of the South completely overhauled – we need more railways, we need more nurses, teachers and doctors.
The list of what our society needs goes on and on – there is plenty of work to be done – we just need the right political system to ensure it is carried out.
The working week should be reduced to 35 hours without loss of pay – share out the work, take people off the dole. Britain has the longest working week in the EU. In the early 1980s it was estimated that if the working week were cut to 35 hours up to 1.8 million new jobs would be created. If this was done today it would take nearly 90% of those officially out of work off the dole in the UK.
The Socialist Party supports the nationalisation of companies threatening closure or redundancies. But this is not enough. The current worldwide economic recession shows that capitalism is not working. The capitalist system has proven time after time that it cannot provide for the needs of the majority of people. It should be replaced by a democratic socialist society; a society in which the banks and financial institutions and all major industry would be nationalised under democratic working class control. The economy could then be planned to provide full employment with decent wages, working conditions and quality public services for all. This would be a society run by and for the needs of the majority of people and not the profits of the super-rich elite who are currently throwing millions onto the dole.