The figure about idle capacity seems especially important.


http://truth-out.org/news/item/20015-ca ... employment

Capitalism and Unemployment
Friday, 15 November 2013 10:25 By Richard D Wolff, Truthout | News Analysis

Capitalism as a system seems incapable of solving its unemployment problem. It keeps generating long-term joblessness, punctuated by spikes of recurring short-term extreme joblessness. The system's leaders cannot solve or overcome the problem. Before the latest capitalist crisis hit in 2007, the unemployment rate was near 5 percent. In 2013, it is near 7.5 percent. That is 50 percent higher despite the last six years of so-called "effective policies to address unemployment."

Capitalism makes employment depend chiefly on capitalists' decisions to undertake production, and those decisions depend on profits. If capitalists expect profits high enough to satisfy them, they hire. If capitalists don't, we get unemployment. Capitalism requires the unemployed, their families and their communities to live with firing decisions made by capitalists even though they are excluded from participating in those decisions. The United States revolted against Britain partly because it rejected being victimized by tax decisions from which it was excluded. Yet employment decisions are at least as important as tax decisions.

Unemployment has three dimensions that often escape public discussion, perhaps because they raise such fundamental questions about the capitalist system. The first dimension concerns the immense losses for society from the kind of unemployment capitalism reproduces and that we suffer today. According to the Bureau of Labor Statistics, the sum of unemployed people, "marginal" workers (those who stopped looking for work), and involuntarily part-time workers (the "underemployed") is roughly 14 per cent of the labor force. That is 20 million of our fellow citizens. Alongside that statistic, the Federal Reserve reports that 20 percent of our "industrial capacity" (tools, equipment, raw materials, floor space in factories, offices and stores, etc.) is sitting idle, wasted, not being used to produce goods and services. Capitalists make the decisions to not hire those millions of workers and to not buy, lease, or use all that industrial capacity.

Capitalists make those decisions based on what is privately profitable for them, not on what is lost to society. And that loss is huge. A simple calculation based on the numbers above proves the point. We as a nation forego about 15 percent of extra output of goods and services because of unemployed people and idled tools, equipment, etc. That comes to roughly $2 trillion per year. Yes, you read that correctly. We could produce an annual extra output far greater than the government's budget deficit ever was. We could use that extra to reduce global poverty by more than what has been done by all advanced industrial nations for decades. In short, we have taken staggering losses for our planet from being entrapped within an economic system that permits employment decisions to be held hostage to capitalists' profit calculations.

The second dimension of unemployment is the actual costs it imposes on society, costs not borne entirely, or even chiefly, by the capitalists whose decisions determine unemployment. A partial list of such costs includes additional government expenditures for unemployment compensation, food stamps, welfare supports and stimulus programs. Since the current capitalist crisis began in 2007, these costs are already in the trillions of dollars. It is also well known and documented that rising unemployment is positively correlated with rising physical and mental health problems, alcoholism, family disintegration, urban decline and so on. Public and private resources are expended to cope with these problems aggravated by unemployment. These resources come from the public much more than from the capitalists whose private decisions produced most of the unemployment. Capitalism socializes unemployment's immense costs.

The third dimension of unemployment concerns how capitalism distributes unemployment among workers. In the United States, when capitalists decide to reduce employment because that is the most profitable decision for their individual, private enterprises, the question is: How will that unemployment be managed? The answer we see most often is that individual capitalists choose which individual employees they will fire. Thus in today's United States, capitalists have selected most of the 7.5 percent of our people who are unemployed or underemployed. These they have condemned to full-time unemployment or reduced to unwanted part-time work.

An alternative option would manage unemployment by reducing everyone's work week by 7.5 per cent, or roughly 3 hours out of a week's 40 hours. Every worker would then have 3 hours of extra leisure for which no pay would be received. Instead, the saved money would be used to hire the 7.5 percent of workers who no longer need to be fired. Their work would substitute for the 3 hours lost from every other worker's week. In this way, unemployment would be shared by everyone and not imposed on a minority selected by capitalists.

Of course, capitalists oppose this alternative option. It costs them the benefits that have to be provided to all workers - more than if they could withhold benefits from fired workers (the usual practice). More importantly, if unemployment were shared, the injustice and waste of it would be driven home personally to every worker by his/her reduced hours and reduced pay. Right-wing ideologies would then find it harder to blame the unemployed for their joblessness. It would also make it easier to persuade and mobilize all workers to fight unemployment as their common enemy. Finally, it could help to spark the long-overdue debate over the social benefits and costs of more work and output versus more leisure and less pressure on our natural resources and environment.

Capitalists defend their "right" to hire and fire as an "entitlement" that cannot be questioned. Yet it surely should be challenged on grounds of its undemocratic nature and its perverse social results. Employing people in socially useful work (however a democratic society might define that) is more humane to the individuals, families and communities involved, and more productive and less costly than rendering them unemployed. Yet a private profit-driven capitalist system yields the endless unemployment, spiking repeatedly, that society does not want. Except, of course, capitalists want it because it keeps them at the top of capitalist society.


Richard D Wolff

Richard D. Wolff is Professor of Economics Emeritus, University of Massachusetts, Amherst where he taught economics from 1973 to 2008. He is currently a Visiting Professor in the Graduate Program in International Affairs of the New School University, New York City. He also teaches classes regularly at the Brecht Forum in Manhattan. Earlier he taught economics at Yale University (1967-1969) and at the City College of the City University of New York (1969-1973). In 1994, he was a Visiting Professor of Economics at the University of Paris (France), I (Sorbonne). His work is available at rdwolff.com and at democracyatwork.info.

That's a very articulate and thorough misunderstanding of the reality of the knowledge-based globalized economy.

which part?

For starters, the part where he suggests the US economic system is still the traditional capitalist model. It's more like corporate socialism than capitalism at this point.

How does granting that change anything else that follows?

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You are welcome to actually take the time to actually refute a post. Until then, Doks, I remain unimpressed.

heh I wonder what employment decisions would be made if employees had a say. My guess is "everyone keeps their jobs! yayyyyyyyyyy!"



or constant employment, with unemployment cratering repeatedly, that society does want. I guess it depends on whether you're a glass half empty or half full guy.

there are plenty of instances of this happening in employee owned or unionized workplaces. Usually, but not always, companies prefer to reduce hours or pay. We had that at my school a few years ago, where it was a 5% salary reduction and the loss of some benefits or the firing of junior faculty. We voted for the reduction, which, as a junior faculty member, I appreciated.

edit

Well, it means that he is suggesting solutions to a fictional American economy but implying these are solutions to problems facing America today. It would be like our President spinning a story about some middle eastern country having WMDs and then suggesting an invasion and occupation should be national policy based on that fallacy.

Even if we were to ignore that, his assumptions are too broad to apply beyond a high school freshman economics textbook. For example, contrary to what he asserts:

1.) Profit is not the only factor in increasing or decreasing production and the capitalist class are not the only ones who make these decisions. Most Americans are employed by small businesses after all.
2.) The underutilized "industrial capacity" may not be capable of producing goods that provide a value to society regardless of profit.
3.) The unemployed or underemployed may not possess skills that could be utilized by existing employers
4.) The unemployed or underemployed may not have the intellectual capacity to be retrained to work in viable industries
4a.) The unemployed or underemployed may not have the desire to work
5.) Wages may be too high in the US to make products with competitive prices even at zero profit
6.) He assumes lowering everyone's hours would still make those jobs provide enough income to keep people off the entitlement programs he claims capitalism enlarges. But provides no evidence it would not take the millions whose 40/week is just enough to keep them off the dole and put them right into the situation he wants to avoid
7.) And potentially most importantly, much of the production and employment in the US is already directed by powers other than the "capitalist" class. The US government subsidizes otherwise unprofitable industries and grants protected cartel status to others based on the corruptible nature of central economic planning. From the MIC to farm subsidies to entitlement programs to corporate bailouts and quantitative easing, what are these if not exactly what he is suggesting: democratically directed employment?

I am a believer that what we call "financial innovation" is destroying the US, and by extension the global economies, but this type of tripe is not a solution nor is it useful to attempt to demonize a economic system that, while far from perfect, has provided more to humanity than anything else we have so far conceived of.

I'm with you on this, and I think it's the only idea in the article that wasn't complete nonsense, even though I suspect he's wrong on this front as well. But is the bolded actually true? I will freely admit I don't know the answer to that, so my only experience with it is anecdotal. The teachers union in my county took the opposite route of your school and was more than happy to cause about 600 teacher layoffs and 1,000 support staff layoffs in order to avoid paycuts a few years ago. For the next couple of years they fought for pay raises even while further layoffs were still occurring. They were unsuccessful and the county instead chose to begin hiring (or re-hiring) teachers as funds slowly became available, and I can assure you that the union was begging the county for pay raises instead and that many teachers were very upset about the new hiring since they hadn't received a raise in several years. Personally, I can't stand the position some of them were taking. So I'm definitely not disagreeing that this would be nice, but I'm questioning whether if we left those decisions to employees it would actually turn out the way the author thinks it would.

I listen to this guy's radio program sometimes. He addresses all this stuff on a regular basis. People shouldn't judge him on one article. People who think our future lies with some other economic system, or a much different looking capitalism (which I don't think is nonsense) should check out his website.

Come to think of it, most of what I've read about this is in books that are really pushing the shared ownership idea, and I don't recall if studies have been done in this or if they are just full of anecdotal stories. It's a great question. I wonder too if the size of the orgainization matters. We were about 120 faculty largely on one campus, so the layoffs were not abstractions.

Or maybe your union is full of assholes

I'll try and respond to this tonight. I have a squirming baby right now and company later and this deserves attention

Strawman argument at best. What does the tax revolt (and fiduciary complaints) have to do with capitalistic issues?




Why aren't these able bodied people working and contributing to society? Are the benefits from not working underemployed greater than the working? If so that is a poor incentive program system.




A good question to ask: What has the author (and others) done with the capital that they possess and are under-utilizing to create jobs? What kind of contribution are they making to society with their excess to create jobs? Why aren't they developing new businesses that create jobs if it may not be financially prudent for them to do so? Why aren't they hiring people at minimum wage, even if the value of their job is less than what they are paid?



Yet that is the point of the article.



In his resume/bio, not one item lists any companies he has owned nor, any job creating experience.

Agreed.

Is it? The idea underneath his comment here (which I agree with) is that the idea that people should have a voice in the decisions that affect them is at the heart of the principles the country was founded on and that we claim to value. The revolt was not really about taxes. Taxes were fairly low, and the ones imposed during and after the war by state governments were often much higher. The issue is not 'no taxation'. it is 'no taxation WITHOUT REPRESENTATION'. The complaint was a complaint about process, not outcome (not that people felt like paying more in taxes).

This country (and the model of capitalism it practices) believes that economic decisions are private transactions between individuals, and that things like employment are private goods that their owners can distribute as they see fit. Wolff is challenging that understanding, arguing that all stakeholders (certainly workers and to a point the public as a whole) should have some say in the decisions that are made--ESPECIALLY decisions about who works and who doesn't, since we attach your ability to have shelter, food, health care, a life, etc. to your ability to find work. that gives people who control access to work a tyrannical power that should be unacceptable on the basis of the principles of the revolution.



That may be. I would like to see how that 14% is broken down. People no longer looking for work or voluntarily staying unemployed is a problem. Underemployment is a different problem.



Oh for fuck's sake, do you really truly think this is a serious point? People need to save for retirement, and the hire people to clean their house, mow their lawn, go out to eat, etc. The overwhelming majority of people in this world are not sitting around with investment capital that is sitting idle
.

What?




Really? I almost don't even know where to begin with this.

Running a business gives you the ability to talk knowledgeably about the ins and outs of running your particular business. It lets you know when it is beneficial for your bottom line to hire workers and when it is beneficial for your bottom line to fire workers. That's it. 'Job creators' create jobs as an incidental consequence of trying to make more money for their business. They are in no way qualified, on that basis, to make larger comments or observations about the needs of a larger economy, or to talk about job creation needs from the standpoint of what workers need. Every job creator is also a job destroyer based on what personally will benefit them or their organization at that time. That is not a particularly compelling vantage point from which to make decisions about what is good for the workers (who need to work in order to consume, to say nothing of larger concerns about their health, well being, quality of life, etc), or even the economy as whole.

I still need to get back to you, broken iris

well he doesn't say it is the only factor, just the chief one. What trumps it? Also, aren't many of the decisions made by small business going to piggybacking off of the larger gravitational pull of the larger companies (wages, prices, etc).




I would assume he would argue, and I would agree if he did, that the work these jobs produce is probably providing a value to society. I guess this also depends on what constitutes 'value'. Most of the shit we buy now is of dubious value. We buy it because it's there, or because we're convinced it would be good for us if we did. I'm not sure why that couldn't continue.




that's possible, although many of the unemployed HAD skills that were potentially useful at one point. And it's not like service jobs require advanced degrees. And what skills these people have are likely to atrophy while they are out of work. I'd argue that while some jobs are better than others, employment is just a flat investment in human beings.



As long as we deem that work is necessary to be able to access the resources necessary for survival work becomes a positive good in itself. There's a larger question underneath some of your points that is probably worth its own thread, which is whether or not we need to rethink the nature of the relationship between work and access to resources as we just need fewer workers to staff the 'viable' industries.




I'm sure there are some. Enough to be significant?




it's certainly true that you would need to address a whole number of issues simultaneously to deal with this.




that is a very good point



When it comes to economic policy the United States is essentially an oligarchy, and most of the policy competition that exists is between various corporate factions. So these decisions are made by the 'capitalist' class through the state's administrative apparatus they so often control.


Something else to keep in mind is that this was an article about reconceptualizing unemployment (which is why I linked it) more than it was a discussion of serious policy solutions to the problem of current employment. The alternative option was one small part of this, and if it was the focus may very well have perfectly reasonable responses to some of your concerns.