The Future of Unemployment – Paul Mattick


I.C.C., Volume 4 Number 1, February 1938

Unemployment and the Labor Market

To the present economic system, unemployment is a necessity. It is capital’s answer to the ‘automatic’ law of supply and demand in regard to labor power, providing an ever ready industrial reserve army needed for the sudden leaps of the capitalist expansion process. As far as unemployment serves these purposes it is welcome to capital. For the workers, however, the ‘problem’ simply means misery.

Should there be at any time in a particular country a shortage of ‘hands’, capital will see to it that this situation is relieved by all possible means of attracting workers and increasing the population. However, in times of depression the desire for abundant labor does not exclude the wish to reduce the unemployed army in order to ease the relief burden. To deport ‘foreign’ workers, or to drive former peasants back to the farms, is not inconsistent with the desire to see many begging for one job; it is simply and attempted ‘saving’, the greatest virtue in present-day society. The existing mobility of labor, rising from the fact that workers are free of all property, and from the simplification of many labor processes and the development of transportation, allows such double-faced policies, which in this country, under the name of Americanism, are widely appreciated not only by the ‘native stock’, but also by organized labor, which prides itself on its share in the passing of certain immigration-restriction laws to combat cheap foreign labor and to safeguard the American standard of living.

It is true that a shortage of workers makes it rather difficult for the capitalists to pay the lowest possible wages. However, should these lowest possible wages be the only guarantee for the maintenance of capitalism, no labor shortage would prevent their introduction. Under unprofitable conditions bankrupticies of some capitalists would throw workers on the streets, and this in return would lower the wages of the workers still employed. The law of supply and demand, whatever its function, ceases to have any meaning in regard to labor power when threatening the profitability of capital necessary for its continuation.

From a profit point of view a labor shortage may also be warded off through the introduction of more efficient means and methods of production; that is, a sufficient increase in exploitation may offset the danger of a rigid wage standard. The relatively high wages of some American workers are rendered possible by the extremely high productivity of these workers. The exploitation is here increased not by way of taking actual commodities from the workers, but by making them increase their output. This method of maintaining or even raising the ‘living standard’ of the workers presupposes the existence of sufficient capital to make the necessary social and technological changes possible.

Capital concentration, credits, and foreign loans often permit the introduction of better means of production without a direct increase of exploitation, which might be difficult because of insufficient unemployment. However, the displacement of workers, connected therewith, creates unemployment, which then brings back a certain wage flexibility; unless accumulation proceeds so fast that the displaced workers are at once absorbed in new industries.

A shortage of workers, the ideal of all trade-unionists, leads under capitalism inevitably to unemployment, and it is not the law of supply and demand which finally determines the wage rates. That means also that the ‘defeat’ of this law by way of trade-unions, conceived as ‘job trusts’, turns out to be an illusion in regard to final realities. Wage limits are not to be found in the realm of the market. It is true, we repeat, what if there are too many workers asking for jobs, capital can force the wages lower than would be necessary to maintain the system. It gets extra profits besides the necessary ones, thus enabling faster accumulation. The struggle of trade-unions can be concerned only with extra profits and is bound thereby to periods which allow of such extra profits. No scarcity of labor and no trade-union activity can result in wages which would eliminate the profitability of capital. For this reason trade-unions will not of their own accord enter a wage struggle at times which preclude a possible success, that is, times in which a wage struggle becomes a struggle against the wage system. For as John L. Lewis has pointed out recently:

“Unionization presupposes the relation of employment; it is based upon the wage system and it recognizes fully and unreservedly the institution of private property and the right to investment profit.”

To increase or maintain wages, reducing the profits to the exclusion of accumulation, means depression and unemployment. An organized or unorganized scarcity of workers must sooner or later cause unemployment and restriction of trade-union activity. From which it follows that if workers think all evil comes from the fact that too many people are asking for jobs, they are in error. If they hope, as many do, that measures like the expulsion of foreigners, the restriction of immigration, the return of the women to the kitchen or the abolition of child labor would solve their problems, they are mistaken. Apart from the fact what all laws related to questions of labor supply are made in a capitalist society, and therefore in favor of capital, even the acceptance of policies forcing the above mentioned restrictions on the ‘right to work’, would mean only a temporary service to capital, without any benefit whatsoever to the workers. Practically it would mean relief savings and the nourishing of such ideologies as distract the workers from the real source of their misery.

The scarcity of workers in some branches of industry may often lead to higher wages than would be the case otherwise. Monopolistic positions often allow of extra profits and therefore of exceptional wages. But these monopolistic extra profits are largely obtained through the robbing of weaker capitalists, forcing the latter to employ cruder means of exploitation. In this way exceptionally high wages for some workers find their parallel in exceptionally low wages for others, just as profits above the average necessitate profits below the average. For this reason William Green, for instance, refuses to “digest” the whole of the C.I.O. offered to him, and would feel satisfied with an additional million of organized workers. An organized minority of workers attempts to maintain its high wages at the cost of the working majority. The social average wage, however, moves within the limits of capital necessities. Never could wages rise, with or without unemployment, where they would reduce profits to the danger point. But, unfortunately for capital wages too cannot be reduced, with or without unemployment, to a point where this would exclude the necessary productivity on the part of the workers. Wage reductions doing away with a necessary efficiency in production are self-defeating. In a depression, for example, due to the fact that the workers are willing to endure greater miseries to hold their jobs, and as the less efficient workers are fired first, the average productivity will be raised. After a while the situation will be reversed, as the productive apparatus detoriates and wage reductions make it increasingly difficult to maintain high-speed production. In the Brookings Institution’s analysis of the “Recovery Problem in the United States” (p. 167) it is stated:

“During he first two years of the depression productivity ran according to expected beheavior. The index rose in 1930 and again in 1931. However, instead of continuing to rise as the depression progressed, productivity fell sharply in 1932 and then again in 1934. This downward movement in the productivity index is not contradictory to the experience in previous depressions. It simply indicates that the factors favorable to increased productivity per man-hour cannot be depended upon to operate when the depression lasts for a long time, for then the adverse forces become strong enough to offset the gains.”

It is true that an abundance of workers will induce many individual capitalists to ruin their workers physically in a short time and to replace the outworn with new ones from the overcrowded labor market, just as many slave-owners had found it more profitable and more to their taste to work their negroes to death within a seven-year period rather than scretch their exploitability over 30 or 40 years. But under modern conditions this is not generally possible without inviting revolution. The complexity of present-day society and its production mechanism excludes such simple solutions. And then – even granting the possibility of such solutions – it would solve nothing for capitalism, because it is not a reduction, but an increase in the army of labor that capitalism requires for its further welfare and progress.

Unemployment and Accumulation

To antecipate the future of unemployment it is necessary to investigate the past and the present employment relations. So far, capitalist economists have contributed very little to the understanding of this admittedly most urgent problem. Only lately the force of necessity has led to some investigations which, however, were restricted to the field of statistics, without adequate theoretical support. Economists learned to think in psychological terms. The cry for exactness pertained only to the home, the bank, and the factory. The problem was how to make money, and its investigators sawy in their researches only another way of making a living for themselves. As Hitler is held responsible for Nazi-Germany and as it is believed that the present depression belongs to Roosevelt as the previous one to Hoover, so the economic development and its changing aspects were to be discovered in the changing moods of the business leaders. At wizard, the ingenuity of the industrial pioneer – and sometimes their disappointment in the governments or the world at large, which caused them “to go on strike” as H. L. Ickes, Secretary of the Interior, laments today over the radio. Other economic schools investigate the instituion of exploitation in a more “scientific” manner, by abstracting from such secondary influences as psychology. But their ‘realism’, manifested in their sense for abstractions, goes so far as to overlook exploitation in an exploitative society. It may be said that the greatest discovery of modern economics was the recognition of the wisdom to discover nothing. This caused still another school to find satisfaction in scholastic elaboration of Adam Smith’s position on capitalism of about 200 years ago. The more realistic capitalist practice becomes, the more mystified become the concepts related to this practice. The more open and cruder the exploitation, the more ‘socialism’ enters the phraseology, till one comes to believe with Spengler that a starving worker is a luxury animal, and that in reality the workers exploit the capitalists, as was not so long ago proved by the honored scientist Kotany. Unfortunately he died too son to see himself fully appreciated, as it is only now that the need to explain starving as a symptom of overfeeding becomes really urgent, especially in such progressive countries as Russia. However, the employment of science for the needs of capital is imperfect like everything else. The scientists can not always escape the discovery of certain truths, though the truth has different meanings for workers and capitalists. Facts produced by bourgeois scientists may very well enrich the theory and practice of the proletarian class struggle.

Capitalism developed within feudal-agricultural conditions. A small capital means a small number of workers. To exploit more workers, capital must be increased. For this reason capitalist exploitation was particularly ruthless at its starting point. To exploit additional workers, for which capital is needed, always implies greater exploitation of the already existing working population. As capital grows, transforming all social activity into capitalist activity, the modern proletariat develope with modern industry. Accumulation of capital means an increasing working population. Exploitability also grows earlier crude forms of exploitation are replaced by more refined and more efficient ones. The primitiveness of exploitation can not only be dispensed with; it has to disappear, for capital development needs greater ability on the part of the workers for the modern requirements of industry.

Capitalist development is identical with the creation of world economy. All capitalist activity is based on expansion. Whenever expansion slackens, the products of the previous production period, which includes the increased labor army, become temporarily unusable. A stoppage of accumulation means that it is no longer possible to exploit the increased working population. More capital is necessary to continue accumulation, the needed capital must be raised through intensified exploitation. If capital fails to bring this about, the unemployed army must become permanent.

Unemployment is as old as capitalism. But so far, that is, until 1929, each depression with its large-scale unemployment, was followed by a renewal of accumulation. As life is tears and laughter, so also society “naturally” was made up of booms and depressions. Since the biblical Joseph, people had learned to understand that seven fat years are followed by seven lean years. And as regards those unfortunates falling by the wayside in the course of depressions, this also was only natural, as it is obvious that not all trees bear fruits.

To exploit more workers, we said, it is necessary to exploit a given number more intensively to create the capital for the employment of the additional workers. As long as exploitation can be increased, the number of workers may be enlarged. So far this process has been interrupted, but not ended by depressions, which were to be regarded as breathing spells in the exciting race of capital production over the world. But nothing breathes forever. The business cycle is not made for eternity. The reasons for the eventual end of capitalism must therefore be discoverable at any particular stage of its development.

Profits and capital are nothing but unpaid labor power. Labor power is to be masured in labor time, which is limited as regards duration by nature as well as by forms and methods of production. The workers cannot possibly work longer than 24 hours a day, for the day cannot be stretched. Under present conditions in the more important branches of industry they cannot continously work much longer than, say, 8 or 10 hours. If production itself limits exploitation in regard to time, an increase of exploitation can be brought about only by reducing that part of the expended working time in which the laborer creates the equivalent of his wages. This part of the working time cannot be reduced to nothing; zero would mean there the absolute end of capitalist production. To employ more workers, necessitating an increase of capital, implies the reduction of that part of the working time of the employed workers in which they create their own livelihood, that is, implies an ever greater increase in the productivity of their labor, which in turn presupposes more and more capital invested in means of production. As long as this is possible – and it has been, for at a certain period in the development of capital, profitability is high enough to permit this – both will be increased (the labor army and capital which employs it) though the latter increases faster than the laboring population. P. H. Douglas produces in this “Theory of Wages” (p. 129) a table showing the ratio between quantities of labor and capital. We copy only a few lines to illustrate our statement.

YearRelation of Labor to Capital
Relation of Capital to Labor

This shows, Douglas writes,

“That a decreasing amount of labor was combined with each unit of capital and reciprocally that an increasing quantity of capital was united with each unit of labor. This process continued throughout the period save for some cyclical changes, until in 1922 only 37 per cent as much labor was combined with each unit of capital as in 1899, and reciprocally 270 per cent as much capital was combined with a unit of labor as then.”

Any newspaper almanac will show that throughout capitalist development the labor army increased tremendously, even faster than the population as a whole. But, to repeat, not so fast as capital. This is the secret of capitalist progress, – the ability to exploit more and more workers by exploiting the original number more intensively. However, this situation implies a new contradiction.

Profits and new capital can be gained only through exploitation. If the number of workers becomes smaller in relation to the growing capital, although both are increasing, than in relation to the total capital (the wage and the investment capital together), profits and funds for accumulation must decline, as profits are only unpaid labor time which decreases with the capital increase. The faster the accumulation the more it hampers future accumulation. Finally accumulation must lead to stagnation. It must come to a stop when the capital needed to employ sufficient additional workers to counteract the previous decline in profits demands an amount of capital which can no longer be created by the existing army of labor. All attempts to overcome this shortage of profits in regard to continuation of capital formation will then lead to an ever greater replacement of workers by machinery, although this increase in technological devices will not be sufficient to permit sufficient capital formation. The previous relative displacement of workers now becomes absolute. David Weintraub, without being a Marxist or employing Marx’s method of inquity, but by simply examining the facts, describes such an actual situation quite well in his article in “Technological Trends and National Policy” (p. 87):

“The growth in total output from 1920 to 1929 was not sufficient, in the light of the increased productivity and the growth of labor supply, to absorb all the available man-power; the result was a substantial volume of unemployement during this entire period.”

During this entire period, compared with previous periods, the rate of accumulation was slackening. Recent investigations of the trend of American rates of profit led to the discovery that with the rates of profit the rate of accumulation was declining as compared with the rates before 1920. The tendency toward stagnation was reflected long before 1929 in an increasing army of unemployed. The exceptional became the norm. The recovery since 1933 has not led to a return of the already precarious position of 1929, least of all in the field of employment. Weintraub goes on to say:

“… We must look to a much more rapid expansion of production than has taken place between 1933 and 1935 before we can expect a return either to the employment or to the unemployment levels of the pre-depression period. A rough calculation indicates that, in order for unemployment to drop to the 1929 level by 1937, goods and services produced would have to reach a point 20 per cent higher than that in 1929, even if the productivity level of 1935 remained unchanged.”

The Brookings Institution has estimated that for the nation to return by 1941 to the living standard which prevailed in 1929 it will be necessary to increase production of durable goods 60 per cent above the 1936 level. The production of these durable goods would furnish employment for from 8 to 9 million additional workers for a period of five years. It would, it would; but it doesn’t. Before reaching the production level of 1929 a new decline has set in again; the army of unemployed grows by leaps and bounds, nearing again its previous established record at the deepest point of the crisis. In November, 1937, there were, according to the National Unemployment Census, 10, 870, 000 people out of work in America. Since then, according to most of the published reports, this number has been increased by about 2 more millions, and no one dares to predict a change in this situation for the near future.

Unemployment and the Unemployed

Only periods of capitalist expansion are boom periods. Stagnation means depression. But all capitalist production is based on expansion, and if it stops, commodities designed to satisfy the expansion needs and also the commodity labor power, find no buyers. The depression, although the result of a miserable exploitation system of production, incapable of producing sufficient profits for the capitalists, appears to the superficial mind as an overproduction of commodities. The superficial explanation of depressions brings forth similar suggestions for solutions: shortening the working day to employ all workers and increasing mass purchasing power, so that the workers may buy back what they have produced. The proposals sound ‘logical’ and find acceptance. However, this ‘realistic’ approach is pure utopianism. For it presupposes an ability on the part of capitalism to initiate socialism, that is, it expresses the wish for capitalist suicide. In reality the shortage of profits in relation to accumulation needs, appearing on the market as over-production of commodities, only sharpens the competitive struggle, which means a greater effort on the part of capital to increase exploitation. If successful, leading to another temporary economic revival, it is accomplished at the cost of the workers. Even if hours are shortened, productivity will be increased fast enough to preclude the employment of additional workers. As far as the increase of mass purchasing power is concerned, the whole history of capitalism shows that this has been possible only so long as production increased faster than wages, and history since 1929 has shown that even this improvement by way of better exploitation has ceased. Since that time wages stagnate or decline in spite of increasing productivity. Competition among the workers sharpens to the point of the development of new class ideologies within the class. Hatred, not solidarity, grows between the lucky ones and those unable to sell themselves, – a situation which is well employed by capital in its competitive struggle, continuing in spite of all monopolization, which after all is only able to prove the sharpening of competition. Just as the competitive struggle of capital turns more and more from the national to the international scene, the sharpening of the workers competitive struggle for the remaining jobs tends more and more to be reflected in the nationalization of their ideologies, in preparation for the coming struggle for power of their respective imperialistic rulers. Who shall live and prosper, the Japanese capitalism or the English? Who shall work, the Japanese workers or the English? – And so all over the world. If there is no open struggle between capital and labor, there can be only a united front between them both. The “Peoples’ Front” movements of today, which includes Fascism, reflect only this reality. So long as the class struggle is only latent and not actual, continously sharpening, the future of unemployment can only be deduced from the future of capitalism, which points to war and increasing barbarism.

Yes, as matters stand today, the workers might find large-scale employment in the diverse armies; and will accept it, for it is “better than nothing’, just as 25-cent wages in the depression are also ‘better than nothing’. And they will kill for less than 25 cents and hour to assist a capitalist reorganization of economy in favor of the strongest competitors, and to bring to themselves, besides the glory, a new wage rate of 15 cents and hour. But the unemployment problem would still be unsolved, or solved only for those who died in the heroic attempt to prove the immutability of capitalism in a changing world.

Capital has once more – so it seems today – to reorganize the world in its own way, that is, by adjusting the number of exploiters to the number of exploitables. “Progress” lies in liquidation. To prepare for this day of ‘sudden progress’, capital will be human, it will at least try to organize the misery it cannot abolish. It will appear a great leveller, spreading the existing misery over the greatest possible number, itself always excluded. It will regiment and fascizize even within the greatest of democracies. The order of war will be practized in peace; production for destruction climaxing the era of capitalism. The curtain for this act of history will close also millions of hungry eyes.

Once more unemployment is being converted, for capitalism, from a source of income into a nightmare. Becoming rapidly valueless as a means of wage cutting, it becomes an ever greater item of taxation, eating into the diminishing profits. Capital will always try, although with increasing difficulties, to cut down this item of expenditures. Workers, regardless of all other implications of the problem, will be increasingly forced to fight relief reductions. To eliminate relief altogether is not possible, to live like humans on Hopkin’s canned beef, which would be rejected by many a Park Avenue dog, is also not possible. The unemployed struggle is bound to increase in spite of all war preparations, though the latter will be hastened the more the internal struggle sharpens. There are further temporary ‘solutions’ given to capitalism. For instance, a new inflation of credits or money, setting present miseries aside to be reckoned with in the near future. Prices may rise faster than wages, the capitalist will gain as much as the workers lose. Rents collected in depreciated money means the expropriation of the landlord, paper for potatoes ruins agriculture, money in the banks eliminates itself legally, life-savings lead to suicide, etc. The pump may be primed till it spills blood.

A capitalism forced to feed the workers instead of being fed by them has no future. This situation excludes all demands for work. To ask capital for a job is in many cases just as ridiculous as to ask it for a million dollars. Those labor leaders who tell the world and their masters that you, the workers, want work are in reality, only trying to prove to their masters how well they have trained you. These unofficial ‘social workers’, trying to become official ones, have to prove their ability by proving their total absence of all social understanding. They are not realists, however realistic their proposals may sound, but they are not deramers either; they are simply engaged in maintaining or securing their chosen profession. There are no jobs to be had, and crying for them does not create any. You will have to fight for your very lives. Soon this will be literally true, for soon the only way of making a living will be to learn the trade of dying.

Don’t ask for work; simply fight for food, clothing and shelter. Down in Palm Beach the unemployed don’t ask for work either; they leave that to their servants. And, by the way, your labor leaders really also don’t ask for work. How funny to imagine David Lasser asking for work! Those people are much too important for that sort of thing. If there were work to be had, don’t worry, you would get more of it than you could stand. Make demands for your most direct needs, but not demands for yourselves only. Individualism presupposes cash to exert itself. Unless you can show the ‘proper authorities’ that there is something more begind your demands than a lonely frail voice in the age of the loudspeakers, you will be out of luck. Combine your voice with others. There are relief stations, there are also the streets, and there are the factory gates. Don’t wait till some ex-ministers of the Workers Alliance have colleted enough for a flag and a meeting hall. Your relief station is an excellent starting point for an organization; yes, you can even turn it into an organization. And if you simply must belong to the Workers Alliance, at least see to it that it becomes your organization and not Mister Border’s vehicle to a job in Washington.

All transcriptions were done by Felipe Andrade. Did you find any mistakes? Suggestions? Send e-mail to:
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