Capitalism’s Dirty Little Secret: Employment creates unemployment

by Jehu

bushquoteIn my previous post, I argued the aim of fascist state “full employment” policy is maximization of profits, not maximization of employment. The term “full employment” is a deliberately misleading label chosen by the fascists to present the policies of the fascist state as necessary to promote employment in the interest of both classes. In fact, “full employment policies” do not in any way address the need of workers and are only designed to maximize the profits of capital.

This is a significant finding at odds with how the issue is often presented on the Left. To put it simply, “full employment” is only necessary for the working class insofar as the worker is treated as a draught animal to be kept constantly at work.

Since the aim of “full employment” policy is nothing more than maximization of profit and since profit is nothing more than surplus value, it would appear the state is only concerned with employment that is productive, i.e., labor that produces value and surplus value. Yet, labor theorists have documented the existence of a very large mass of employment that can only be characterized as unproductive. This unproductive employment is the expenditure of labor that produces neither value nor surplus value — labor that is totally wasted.

If the aim of “full employment” policy is to maximize the production of surplus value, of profit, what accounts for this wasteful labor?

Why would the fascist state deliberately set out to encourage labor that produces no value when its policy is aimed at maximizing value? Where, in other words, does labor that produces nothing come from?

Surprisingly enough, the answer given by labor theory to this question is the unproductive labor has its genesis in productive labor. As odd as it might sound, for labor theory unproductive labor is the necessary product of productive labor. How productive labor gives rise to unproductive labor requires a look at a little examined process taking place at the heart of capitalism. It is a tale of how the employed worker creates her own competition for her job and drives down her own wages simply by performing her job.

Unlike the economics of the bourgeois simpletons, in labor theory competition among workers to sell their labor doesn’t begin with the unemployed worker, but with the employed worker. Likewise, wasted labor does not begin with unproductive labor, but with productive labor.

In his series of lectures, Wage Labor and Capital, Karl Marx explains that the introduction of division of labor and machinery to production makes possible a great increase in profits for the capitalist. At the same time, these newer techniques of production are forced on other capitalists, who must adopt them to remain competitive. Once the newer techniques are widely adopted, the prices of commodities fall, and it becomes more difficult to make a profit even with the newer technologies. As a result, successive waves of innovation are forced on the capitalists as a whole simply to remain competitive in the world market.

Marx says of this competition:

“While competition, therefore, constantly pursues him with its law of the cost of production and turns against himself every weapon that he forges against his rivals, the capitalist continually seeks to get the best of competition by restlessly introducing further subdivision of labor and new machines, which, though more expensive, enable him to produce more cheaply, instead of waiting until the new machines shall have been rendered obsolete by competition.”

The result is a furious pace of introduction of improved machinery and the increasing sophistication of the division of labor.

This continuous innovation has its expression in the ever increasing productivity of the labor of the worker — with disastrous results: The increasingly sophisticated division of labor and application of technology enables one worker to do the work of ten. At the same time the labor of the one worker, drives ten other workers out of productive employment altogether and into the ranks of the unemployed. The one worker creates an ever larger mass of surplus value and, side by side with this value, she creates an ever larger mass of competitors for her own job:

“Thus, urged on by want, [the worker] himself multiplies the disastrous effects of division of labor. The result is: the more he works, the less wages he receives. And for this simple reason: the more he works, the more he competes against his fellow workmen, the more he compels them to compete against him, and to offer themselves on the same wretched conditions as he does; so that, in the last analysis, he competes against himself as a member of the working class”

Capitalist relations of production are structured in such a way that the worker drives down her own wages simply by engaging in labor. No other mechanism is required for this purpose than her own labor to render her increasingly destitute.

It is not, as most Leftists think, the unemployed who compete for the jobs of the employed but the employed who create their own unemployed competitors. And, by creating their competition, side by side with the production of surplus value, the employed drives down their own wages.

While the Left decries the impact unemployment has on wages they have not the slightest inkling of the role the worker’s labor plays in this process. Therefore, they mistakenly believe the impact the unemployed have on wages can be remedied by creating more labor.

On the other hand, as wages fall, the limited means at the disposal of the working class acts to limit its consumption power and, therefore, the consumption power of society as a whole. The employed not only produce their own competitors who cannot find their place in productive employment, they also produce a mass of capital that cannot be productively employed for purpose of producing more surplus value.

Thus, labor theory argues that the capitalist production process tends to create a mass of unemployed workers at one pole and a mass of idle capital at the other.

It would seem as if it is simply a matter of bringing these two excess masses together in order to resolve them into additional production of material wealth. In fact, many of the proposed remedies on the Left to address chronic overproduction or, as it is popularly referred to today, “secular stagnation”, assume this can be done by fascist state spending financed by a “wealth tax” or deficits.

Why can’t a “wealth tax” be imposed on capital and the proceeds used to hire those who need jobs to rebuild the “infrastructure”? There is in fact nothing that prevents this sort of measure from being implemented.

However, a tax on capital of this sort would reduce the rate of profit and the falling rate of profit is the reason we have excess workers and capital in the first place. A “wealth tax” on capital would not resolve the problem producing unemployment and stagnation — namely, the falling rate of profit. Such a measure would only force society to do what it should have done in the beginning: expropriate the productive forces. Once a “wealth tax” was imposed on capital, society would be forced to go the entire route to expropriation of the capitalist class. (FWIW: Personally, I have no problem with this scenario, but it would be easier to just do it all at once and get the damn thing over.)

In any case, the normal operation of the capitalist mode of production leads to the eventual creation of a mass of excess capital and a surplus population of workers who cannot find productive employment. At the same time, the consumption power of society is limited in a way that employment of these two masses cannot be accomplished profitably. This has the effect of placing a material limit on the mass of profit that can be realized without in any way slowing the fall in the rate of profit.

As a matter of fact, the falling rate of profit actually accelerates the effort by the capitalist to employ improved division of labor and technology to extract more surplus value. The mode of production is now locked into a vicious circle where efforts to increase the rate of surplus value only leads to more excess capital and an even larger population of unemployed. At this point, no increase in the productive employment of capital and labor power can add to the mass of profits.

(To give you a concrete timeline: Historically, I believe, this point was reached at least by the time of the Great Depression.)

However, while it is impossible to increase the mass of profit by productive employment of labor power and capital, there is no limit on the unproductive employment of labor power and capital so long as there is a ready-made mass of excess labor power and capital. Which is to say, while the excess capital and labor power cannot be employed productively, it can be consumed unproductively. Since the excess surplus value has already been produced, it is possible to realize the profit on it provided a means can be found to do this.

I will look at how this can be accomplished next.