World View: Europe’s industrial reserve army

Last November the leaders of the 15 member countries of the European Union met in Luxemburg for a summit on unemployment. At the last count there were about 18 million registered unemployed in the Common Market or 11 percent of the active population.

As was to be expected nothing spectacular was decided. Led by fellow conservatives Kohl and Blair, they limited themselves to endorsing measures aimed at helping the economy recover of its own accord. The buzzwords were “flexibility” (making it easier to sack workers), “competitiveness” (not placing any extra cost burdens on employers such as shorter hours with no proportionate loss of pay) and “employability” (sending people on training courses). Not only this but a public works programme, which even pre-Keynesian governments used to resort to in times of slump, was ruled out.

Marx called the unemployed “the reserve army of labour”, as a pool of workers which employers can draw on in periods of rapid growth and send back to in times of slump and stagnation. Changes in the size of this reserve army–the level of unemployment–depend on a number of factors. The growth of the working population obviously, but also on the rate at which jobs are destroyed by the rise in productivity (resulting in the same amount being produced with less workers).

So, for unemployment to fall, the economy must grow not just faster than the growth of the working population but faster than the rise in productivity as well. As Marx put it in a talk given to German workers in 1847, ironically enough in Brussels, “the most favourable situation for the working class” under capitalism is “the most rapid possible growth of capital” in the sense that “the more rapidly the worker increases the wealth of others, the richer will be the crumbs that fall to him, the greater the number of workers that can be employed and called into existence, the more can the mass of slaves dependent on capital be increased” (Wage Labour and Capital).

This basic fact of capitalism is recognised in a discussion paper “Long-term growth potential in the EU and its relation with employment and unemployment” produced by the European Commission’s Directorate-General for Economic Affairs. According to this, the working population in the EU countries is more or less static while productivity is growing at 2 percent a year. The rate of growth since 1990, however, has only been 1.4 percent, clearly not enough to reduce the current level of unemployment.

Defining full employment as 3 percent of the working population, the paper calculates that to get unemployment down to this level from its current 11 percent within ten years would require a sustained rate of growth of between 3 and 3.5 percent in each of the coming ten years.

That this could in theory happen is not the question (such rates have been achieved in the past). The question is: how likely is it to happen in practice? The European Commission itself clearly didn’t think it likely as the paper was not presented to the summit and remains a mere departmental discussion document. And the paper itself is not very confident either as its ideas are presented as a mere possible “scenario”.

It does not even offer any reason as to why the rate of growth should suddenly and spontaneously more than double from its current 1.4 percent to the required 3-3.5 percent. It merely mentions in passing increased exports (to where?) and expresses the hope that the currency stability, which it expects the Euro to bring, will give employers the confidence to invest more than up to now.

This is all pretty flimsy. Both the logic and the history of capitalism, which is a system driven by the accumulation of capital out of profits, show that the rate of accumulation only increases as a result of a sustained period of technological innovation (such as the application of the internal combustion engine to transport or the electrification of industry) which requires the stock of capital equipment to be renewed. It has never been consumption-led.

Increased consumption has always been a consequence, never the cause, of a sustained period of economic growth. So it is no good pointing, as reformists do, to the vast unmet need for better schools, hospitals and housing and for more food and clothing for the between 10 and 15 percent of the population living on or below the poverty line. That is not relevant since capitalism as an economic system is not geared to satisfying consumption but to accumulating capital, in the form of more and more productive plant, machinery and equipment.

So there is every reason to remain sceptical and to doubt that in ten year’s time unemployment will be down to 3 percent. Those who claim otherwise are either wishful thinkers or illusion-mongers.

ALB