Economic Update: Capitalism's Unemployment Problem

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Capitalism's recurring unemployment problem was never solved and makes the system fundamentally unstable. Today's high levels of unemployment are hugely costly in both human and financial terms. On this week's episode we analyze why capitalism prepares so poorly for and then endures its recurring unemployment. We also examine several alternatives to unemployment that would serve society better but threaten capitalism.

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This transcript has been edited for clarity.


Welcome, friends, to another edition of Economic Update, a weekly program devoted to the economic dimensions of our lives: jobs, debts, incomes – our children's, our own, those looming. And I'm your host, Richard Wolff. 

I want to talk to you all about a problem that is both old and new, well known and shocking just the same. It's unemployment. A topic we need to talk about for many reasons. The first one is the obvious one: It's crashing all around us. We have seen 20-25 million people – and that's an undercount – lose their jobs in the last month in this country. We've never seen anything like it. This is a faster crash into deep unemployment than we've ever seen. The only parallel that comes to mind is the Great Depression of the 1930s. Let me remind you, in 1933 at the worst moment for unemployment, the official rate was 25 percent. We are fast approaching that kind of number. We're not there yet, but we probably will be. And in any case, it will be worse because it's been compressed into four weeks, whereas in the Great Depression it took four years to get to that level of decline. Those people then had some chance to try to adjust, to try to accommodate. And they also didn't have a deadly disease threatening them at every turn. 

So in many ways this may qualify already – and we're not, way not, done from the end of this – this may qualify as capitalism's greatest crisis. That's how serious it is. So let's look at the unemployment, because whatever the dangers were of the virus itself, having a capitalist economic crash on top of a virus is an unbelievable burden and difficulty to put any society through. It should have been, and it could have been, the first order of business of any economic system in any society, but certainly capitalism in modern society, to protect precisely against a crash that might come at such a terrible moment. 

Well let's deal first with unemployment as a topic in itself. It has been part of capitalism for the last four centuries. That's the period of time that capitalism grew from its earliest beginnings in 17th-century England to its modern global dominance. Over that time – and here's a crucial statistic to understand – capitalism in every country where it settled and became the dominant economic system has had a crash, of one kind or another, on average every four to seven years. Capitalism is a profoundly unstable economic system, and always has been. Four to seven years. And we have a lot of words: "recession," "depression," "downturn," "crash," "crisis." I mean it really is endless. Why? Because it happens so often. It's happened in your lifetime many times, and it will in your future as well. I can say that with the confidence that that pattern hasn't been broken for 400 years. 

And let's, in fact, be clear: Capitalism knows that this is a terrible danger. We'll come into that some more in a few minutes. But capitalists have been unable to stop it. Everything has been tried: this government policy, that government policy, letting it heal itself. Everything has been tried to get this economy somehow not to crash every four to seven years. In the last big crash, the 1930s, we even developed a new economic theory and analysis called "Keynesian economics," after the name of the British economist who developed it: John Maynard Keynes. But that didn't work either. Monetary policy, fiscal policy, the government has a Council of Economic Advisers, we have economists working in the Federal Reserve, in the Treasury. We have it all. But we can't solve the problem. The last crash, 2008 and '9. And here we are, 10 years later, the next one. And here's the sad story: When you don't have it every four to seven years – that's the average – if you have a longer run like we did since 2009 – 10, 11 years – then the sad reality is, if you have a longer run-up, you have a worse crash. And boy is that the case now. But the four to seven years holds. Let's take a look at the 20 years, the first 20 years, of this century: 2000-2020. We had a crash in 2000, "dot-com crash." We had a crash in 2008 and '9, "subprime-mortgage crash." And now we have another crash, and we're calling it the "covid crash." Yeah, it's fun to call something a crash named after what triggers it. But the problem is we've had crashes without those triggers, and we've had those triggers without the crashes. Hint: It's the system itself that is unstable. What only varies is what sets it off.

The second thing about unemployment that we're suffering is also, in a bit, historical. Why weren't we prepared? Unemployment affects us all the time. Spurts of it happen every four to seven years. You'd think there was a way in which we were prepared. Just like stock prices go crazy sometimes: We should have been prepared in 2000. Mortgage defaults happen all the time: We should have been prepared in 2008. And viral pandemics have happened over and over again: We should have been prepared. We weren't – and weren't prepared for the unemployment. Amazing. It's like the system suffers something and then needs to pretend it doesn't have this unstable system about itself. 

So, for example, there was no program available to do really systematic counseling, how to help people get through an unemployment. This should be a vast network of offices helping people do – learning from the past. How did people get through it in the past? What were the systems that helped out? What were the things to avoid? None of it. Where are the programs to retrain people – take advantage of the fact you can't do the job you used to have, get you upgraded, get you trained, get you . . . . None of it. None of it. We could have been organized to have a vast program of tutorials. We have millions of teachers who are not teaching, and we have millions of people unemployed. You know something? We might put these two together. We might actually do something creative. And then of course – we'll get to it – you could have had the government hire people to do useful things. What in the world is going on with unemployment?

Now let me read you a list I prepared for this program of the things we have noticed over the centuries go with unemployment. In other words, when unemployment goes up, here's what else goes up. You ready? Here's my list: psychological depression, alcoholism, drug abuse, marital problems, child abuse, and criminal behaviors. They all go up with unemployment. But there are some things that go down with unemployment. Let me mention those: individual workers' self-esteem, they feel bad about themselves; they lose their job skills, those go down; personal savings go down because they get used up; and the physical and mental health. What I just listed to you is billions and billions of dollars' worth of lost value. And I'm not even talking about the hurt to the individuals, the communities, the families involved. 

It is a wild inefficiency of capitalism every four to seven years to throw millions of people out of work. I don't want to hear about capitalist efficiency, when what they really mean is the efficiency of the capitalists to save on every possible cost. But what good is it to be efficient inside the enterprise – if even that's true – when you are so inefficient as to have millions of people sitting idle for months, or years, every four to seven years? 

And here's something about unemployment and capitalism that has always amazed me: Employers hate it too. It's not good for them. Employers know, even if they don't admit it, that the only way they have profit is if the workers are working. If the workers are home, your machine doesn't do it by itself, your raw materials don't develop into final products by themselves. Nothing happens by itself. Workers have to do it, have to monitor it, have to fix it, have to – you get the picture. So employers hate it. That's why today many employers are beginning to push workers back into the job even though it isn't safe, even though it is deadly – not just to the worker who's being pushed, but to his or her family – children, parents. You know the story. 

So the system that the capitalists love produces the unemployment they hate. So you have to ask the question: Why would you have a system like that, that is so inefficient, that wastes the human potential and the human resources on the scale that it does? What do they get out of it? Because they're the top of the pile. The capitalists are those people who own the business, are on the board of directors, they make the big bucks, they sit at the top of the system. They make sure the unemployment is other people's problems. And you know something? They recognize – and they have for generations – that there's a good thing to unemployment for them. Because it scares working men and women. It always has. Because when unemployment shoots up, the great question in the minds of workers is, will it come to me too? You know, it's a little like worrying about the covid virus. Will it get me? Or will I escape? The anxiety about being unemployed is often as bad as the unemployment itself.

Well, here's another way to get at it. Unemployment means, side by side, we have workers who want a job but don't get one; we have tools, equipment, and raw materials sitting there not being used, idle, gathering rust and dust; and we have lots of social needs not being met. Capitalism doesn't put these things together. But we, as a people, need it. We need the output, we need the jobs, we need to use the raw materials. Capitalism doesn't do it because it isn't profitable for capitalists to hire. And so we're all held hostage to the profit system of capitalism. That's a failure of a system. That's a system working for a few, but not for the many. And here with this virus? Come on. Why aren't we doing something with this virus? Why didn't we get to work to reconfigure jobs, to do the testing that we haven't done, to clean, to disinfect, to make work safe for people to come back, rather than pressing them to come back before it's safe? You know, unemployed people continue to consume: They eat, they wear clothing, they use up furniture, they use up a car. They use things, but they're not allowed to produce them. Everybody continues to consume, but a shrinking number produce. That's not an efficient system.

Well, folks, we've come to the end of the first half of Economic Update. I want to remind you, please, to subscribe to our YouTube channel. Just go to YouTube/Democracy at Work. It's a way of supporting us, and it's a way of following us on Facebook, Twitter, and Instagram. Please be sure to visit democracyatwork.info, our website, where you can learn about all our other activities, our union co-op store that has interesting things for you to buy, and the two books we recently published, Understanding Marxism and Understanding Socialism. Lastly, special thanks, as always, to the Patreon community that supports us, and encourages us, and that is invaluable for this program. Stay with us; we'll be right back.

Welcome back, friends, to the second half of today's Economic Update, devoted to the topic of unemployment. In the first half, we discussed what the costs, causes, nature of unemployment are, and how it has dogged capitalism from the beginning – never overcome, never solved, as a fundamental problem. Now I want to turn the attention to what we could do about it. What are the alternatives to unemployment that a rational economic system – or anyone living who's rational about economics – might want to consider? None of these are new. And if you're not familiar with them, it's because the education in our society has – for reasons I think will become clear – not made that learning a priority.

Okay, I'm going to begin with the simplest. Here's an alternative to unemployment. Usually, unemployment is a decision by an employer to fire you, and that employer is making that decision. Oh, and I know, we can call it "layoffs," or "redundancy," or all kinds of other fancy words. You're fired is the bottom line, and you know it. You're fired because it isn't profitable to hire you. I can't sell as many of whatever it is you helped to make – whatever the goods and services are – as I used to, and so I'm not going to pay you a wage to produce what I can't sell. You're fired. And there's always been an alternative to that, and that alternative exists now too, as I'll explain. Don't fire people, but give everybody fewer hours. It accomplishes exactly the same thing, but what it does is share the unemployment equally across all workers. Everybody goes from 40 hours to 30, or to 20, or whatever it is. 

And you know, even today when we have this special kind of capitalist crash – the one stimulated by a virus – it's clear that many people were not working anymore because the assembly line was set up so you couldn't be six or more feet away from the next person. Okay, well, uh, stretch it out a bit. 

Have people working fewer hours if that's, if there isn't the demand, but you can do that as a substitute for unemployment. In many countries around the world, trade unions, where they're strong, demand this. They want the unemployment shared by everyone equally, and not imposed by some on the others. And you know why? Because then it can't be used as a club over the working class. It doesn't serve the employer, who can terrify some by saying I'll fire you and I'll let your coworker go. You can't divide workers if there's a rule that what afflicts some afflicts all, when it's none of their fault.

But I, put that one aside. I want to talk about what we've got now, the unemployment of the covid virus. Here's a better way to go than unemployment. We now have – whatever the numbers actually are – 20, 30 million people who were working a month ago who aren't working today. Well, what are they doing? The vast majority of them are doing nothing. Or they're finding something around the house to do, getting on each other's nerves, upset, anxiety-ridden, wondering: My god, will the job be there when this is over? Will my unemployment run out before I get my old job or a new . . . . The anxiety, the tension – it's disgusting, it's horrific, and it's all unnecessary.

Let me borrow from American history, so I'm not misunderstood to be advocating something we don't do in America. Here's what we did in America the last time we had unemployment like this: the 1930s. Franklin Roosevelt, in response to pressure from the labor movement and the socialist and communist parties that were big and strong then – you know what he did? He created a public employment program. That's right. If the private companies were either unable or unwilling to hire, well, then the government would. And it did. From 1934 to 1941, somewhere between 12 and 15 million people were hired. 

Let's see, what could we do today? How about this: We have tested one million out of the 325 million people in this country. You know what we could do? Train and deploy an army of testers across America – with their masks, and gloves, and their six-foot distancing – to do the testing. Train the people to do it. Give millions of people a job testing the remaining millions of us. That would be an enormous service to every possible way we have of fighting this virus. We're not doing it.

Here's another set of jobs for hundreds of thousands. In other countries they're called "tracers." You know what they do? When they identify someone who has the virus they trace, who are the other people you saw in the last two weeks – who did you go out with, who did you have dinner with, who did you go for a walk with – in order to check them, because they are the ones in danger. We don't do any of that.

Here's another group: cleaners. People whose job it is to clean and disinfect, on a mass basis, every workplace, every store, every athletic arena. And we need to do it over and over again, so it's an ongoing job. Wow.

What about the millions of teachers who could be tutoring on the internet, one-on-one, with four students a day over four hours, times five days a week. That's 20 students. Each unemployed teacher could be working one-on-one, interactively, with a student, making people learn and benefit out of this catastrophe.

And then there's the greening of America. Converting us into an ecologically sound place, by planting trees. By a thousand other things. 

There could be a public employment program that could have been planned, and could be up and working now. Instead leaving people idle – that's a disastrously failed response to the failure of capitalism in the first place. Not only did we not prepare for this virus, we haven't any mechanism to cope intelligently with the unemployment that has crashed around us. Think about it: This is a waste of human potential, and a waste of human resources, that stands as the most profound criticism of capitalism one could ask for.

Here's another thing we could do. We can make a transition in our economy to worker co-ops. You know, we talk about this, but let me explain to you why it particularly affects unemployment. Capitalist corporations have what they call the bottom line, the number-one objective they seek to achieve, what they maximize in their activities. It's called profit. That's how the system works. Yeah, but we don't just want profit, do we? We want job security, millions of us. We're being fired because it's better for the profits of business not to have us working than have us working. That's why unemployment happens most of the time. But wait a minute. For us, the majority, the people, the job security is crucial. Just like the job conditions, the benefits – those are crucial. Those are more crucial to us than profit. Profit is more crucial to the employer. Okay, let's work something out here. No, no, no, we don't work anything out. We have a system that says "the" – as if there were one – the bottom line is profit. 

In a worker co-op, that wouldn't be the case. In a worker co-op you would have multiple bottom lines. Sure, you'd be interested in having the revenue greater than the cost; you want to make a profit. Absolutely, I understand that. But you also want job security. You also want people with mental and physical health coming out of your job. You'd like to make people come out of a job happier than they went in, better educated than they went in. You want it to be a place people look forward to going to – because they'll be more productive, by the way, which is also good for your profits. So you want . . . a worker co-op isn't a profit-driven enterprise. It isn't capitalism. Because there isn't an employer who gets the profit, versus a group of workers who get wages. Because the workers are themselves the employer. That's what worker co-op means. They are as concerned about the wages as they are about the profits because they get them both. And therefore the tension isn't there, the tension that leads millions of workers to lose their job to a small number of employers who are calculating what's best for their profits. 

So a worker co-op would be an institutionalized way of having more objectives than profit. And guess what. Workers in a worker co-op would right away understand having anybody not working in the enterprise is stupid. There's no reason for that. Even if the things you produce in your enterprise are no longer what people want, fine, then develop a way to move workers from one workplace to another, from a place producing goods people don't want to a place where workers are producing what people do want. That's not rocket science. An intelligent worker-co-op economy would spend a lot of time, energy, money, and personnel helping people to move. 

Here's a system. When you work at a factory, or an office, or a store, there's a point system. You get points if you've worked there a long time, you get points if you have a big family, you get points if you are more skilled than the next one. And those points then will determine if people have to be moved from this workplace to another. You get your choice whether to stay or not depending on how many points. It's like a seniority system. And it can mean that there's a lot of fairness built into when people have to move from one job to another. 

But have adult, healthy people sitting idle, by the millions, for months? That's nuts. And a worker-co-op economy sees it, feels it, experiences it, right then and there, and therefore won't go in that direction. It understands the people we're here to serve – the majority, the working class – doesn't want unemployment. And so we're going to do everything to prevent it because it's not good for anybody. The workers, as their own boss, will understand, like the capitalist does, that unemployment is bad news. And they will take the steps to stop it, because they have no interest in not doing that; whereas the capitalist – to keep the workers divided, to keep them fearful, and to keep making money – will choose unemployment, even though it hurts him, because it solves other problems for him. Worker co-ops don't have that situation.

 Look, there's a fundamental thing at work here in the whole analysis of unemployment. Unemployment never serves the unemployed. They don't want it, they fear it, they endure it, and they suffer it. For the employer, it's the lesser evil. All right, I've got to get through this period. My profit situation . . . I'm going to do without workers for a while. Not a good thing, but I'll do it. The workers suffer the most. The capitalists tend to be people with higher incomes; they can get through the unemployed period a lot easier than the average working people.

So here we got it, folks, bottom line: profits for the few versus unemployment for the many. It's not so hard to understand why capitalists choose to keep such a system, irrational and wasteful, in place. But the mystery for me is how and why working people – you and I, who work for a living – would ever tolerate and endure a system which every four to seven years throws people out of work, wasting their lives, hurting their income, smashing their families. And for what? For the profits of a small minority, which is what employers are.

This is Richard Wolff. Thank you very much for being on this program with me, and I look forward to speaking with you again next week.


Transcript by Marilou Baughman
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Showing 1 comment

  • Bruce Smith
    commented 2020-04-28 12:49:59 -0400
    So true, Prof Wolff. The cruelty of unemployment, that always returns, now faster than ever.
    Elsewhere, I really enjoyed your previous speech remarking on Basque Country Co-ops. I lived up there 2 years and it really works! When Europe & Spain fell apart during 2008 crisis, Basque was in much better financial shape. Also, the “workers” are far more ‘hands on’ in production, and more creative.

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