Unemployment Has Two Roots

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Business Recovery Alone Will Not Put All Back to Work, Says Great Economist; Working Hours Must Be Cut Down

Recent Growth of Monopoly, Nationalistic Policies and General Insecurity All Tend to Lengthen Depressions and Shorten Spurts of Industrial Activity.

Improvement of Machinery in Age of Mass Production Displaces Workers So Rapidly That Unemployment Grows Even in Times of Boom.

In former times we had a saying in Germany: “When the peasant has money, everyone has.” That was perfectly true wherever the great majority of the people were peasants or farmers. It is no longer true in the industrial countries. In such countries the majority is composed of wage workers. There we have to change the old saying. In such countries we can say: “When the workingman has money, everyone has.”

But the workingmen have money only when they are employed. Unemployment does not injure the working class alone, it injures the whole of society. The campaign against unemployment is a campaign for general social interests.

This has by now become a matter of common knowledge. Unfortunately, however, there is no general agreement as to the ways which lead to the elimination of unemployment. To be clear on this question, we must bear in mind one decisive fact which is not so generally recognised, namely: That unemployment springs from two distinct sources, each of which gives rise to a particular kind of unemployment, and each of which requires particular methods for eliminating it.

One of these two sources of unemployment is overproduction, and the other is technological progress.

Occasional crises of overproduction have been known ever since the beginnings of the capitalist system. But as sure as such a crisis occurred, just as surely was it followed by a period of prosperity. They alternated, forming a cycle of about ten years.

Marx observed this phenomenon. But just at the time when he died (about fifty years ago), this ten-year cycle was disappearing, along with the liberal stage of the capitalist economy.

Role of Monopoly

Great capitalist enterprises now began to form trusts and combines in order to obtain exceptional profits through monopolistic restrictions of output and consequent raising of prices. Along with this came the imposition of high protective tariffs, which limited the markets in order that the monopolists might control them. The militarists on their side advocated “autarchy” – the idea that each country should produce every kind of goods it needed, in order that it should not be dependent upon imports in case of war.

Up to that time the world market had been steadily expanding through international division of labor – that is, through the tendency of each country to produce for export such commodities as it could produce most cheaply and to import those which it could not as well produce for itself. Henceforth, under the double pressure of capitalistic monopoly and of militaristic considerations, each country has been striving to produce the same things that all the other produce.

Even before the World War these tendencies had artificially promoted the conditions which make for overproduction crises. The war immensely strengthened these tendencies, and introduced new causes through the general political and economic uncertainties which resulted from it. At times it brought veritable catastrophes, especially through inflation and other forms of devaluation of money, as well as through the emergence of new causes for war. All this led again and again to glutting of the commodity markets.

Recovery Checked

In earlier times such glutting of the market grew out of the economic laws of the capitalist system of production. Now they result from the wilful aggressions of certain powerful capitalist organizations and of governments which they dominate. During the era of liberalism, as has been said, each crisis was followed, within a few years, by a period of prosperity. Now, in this time of capitalistic monopoly and of militaristic influence upon the productive system, crisis threatens to become the permanent condition, interrupted only by occasional short periods of prosperity, so long as these [factors] of capitalism and militarism, founded upon private ownership of the means of production, continue to dominate our economic life.

To put an end to this condition and to establish lasting and general prosperity, we need a politically strong, economically well educated, and effectively organized working class, functioning in a democratic state – that is, acting with full independence on all important fields of social action – and we need this in all the most important countries. No one nation alone can overcome the world crisis.

Even if the crisis of overproduction should be overcome and a somewhat prolonged new period of prosperity ushered in, we should be mistaken if we expected this to do away with unemployment. It would for the time be diminished, but not eliminated.

The first of the two kinds of unemployment spoken of near the opening of this article – that is, unemployment due to the glutting of the commodity market, through anarchic overproduction in the preceding period of prosperity and correspondingly high profits – this would for the time be reduced to a minimum, only to reappear as soon as the yet higher profits of the new prosperity had again brought about overproduction. But meanwhile the other kind of unemployment would continue to exist and continue to grow.

We must here turn our attention to this [essential] type of unemployment.

Every industrial capitalist incessantly strives to increase his profits by reducing the cost of production of the goods which he is pouring into the market. To this end he is always seeking to cut down the expenditure for the labor that is required to carry on his production. And of all the means by which he may be able to do this, the principal one is the introduction of methods which reduce the amount of labor required for producing a given quantity of goods.

This was set forth by Marx in his Capital. Bourgeois economists have combatted this view, pointing out that before the World War, although methods of producing were being improved, the number of unemployed in the industrial countries was not in fact steadily increasing.

It is true that the tendency to increasing unemployment which is inherent to the capitalist system may be retarded by other tendencies. Marx has not overlooked this fact; indeed, he had himself stated it, saying that unemployment need not increase if the market for the products of capitalist industry and the amount of the invested capital increase faster than the displacement of workers by the introduction of labor-saving methods and machines. This was generally true before the war, but since then there has been a thorough-going change. The expansion of the market has been more and more hampered by the growth of monopolistic combinations, the intentional restrictions of output, and the high-tariff policies that have already been mentioned. At the same time the increase of investment in capitalist industry has been held back, partly through the direct destruction of existing capital by war policies, and by devaluation of money, partly by economic and political insecurity which leads to the public and private hoarding of great quantities of money and thus withholds it from productive use.

But at the same time scientific technique has been reaching an extremely high degree of perfection, and labor-saving methods and devices increase from day to day at an unprecedented rate. A century ago there were but few industrial inventors outside of England and the then incompletely settled eastern part of the United States. The natural sciences, indeed, were already highly developed in Germany and France, but they were as yet only to a small extent applied to industrial technique. How vastly has all this changed! Germany has rivaled and almost surpassed England in the matter of invention. The population of the United States has grown from 13,000,000 to nearly 127,000,000. Great countries, such as Italy, Russian and Japan, have entered the realm of capitalistic production and in so doing have developed the inventive spirit. And the results of [successive] inventions are international. Autarchic tendencies and the closing of frontiers can at best maintain a [natural] monopoly only of improvements in the technique of war. Inventions in the industrial field, in whatever country they may be made, are quickly introduced in other industrial countries if only they are profitable – that is, if they save labor.

The introduction of labor-saving methods and machinery has therefore been going on much more rapidly in recent times than it formerly did – so much so that the extension of markets and the increase of industrial capital can no longer keep pace with it. This is clearly true where these tendencies are being held in check by the monopolistic and militaristic influences of which we have spoken. But even if these retarding influences can be overcome and a new era of prosperity brought in, industry in its present stage of development, so largely equipped with labor-saving inventions, could not absorb the whole of the unemployed.

For this ever increasing evil of unemployment resulting from improvement in the means and methods of production as distinguished from the ever recurrent waves of unemployment resulting from periodic glutting of the market, there is just one indispensable remedy. While making every effort to overcome the crisis of overproduction, it is necessary also more and more to shorten the workday and the work-week. And this requires the use of political power, of legislative action.

Of all legislative measures which are needful in the struggle against unemployment, legal reduction of the working time is the one which the capitalists most stubbornly oppose. In this they are acting in accordance with their material interests. But many economists and statesmen, also, even such as have no personal or property interests at stake, hold theoretical views which lead them to oppose this measure. They believe that reduction of working hours will increase the costs of production, that it will ruin industry, and that thereby, instead of diminishing unemployment, it will throw more men out of work.

Since this view is seriously held, since it strongly affects public opinion, it deserves careful examination. It will, therefore, be dealt with in a separate article.