Why is there so much unemployment?

Australia has been much luckier than most countries in the current international recession. While unemployment has certainly increased, it has not risen as much as in most of the world and, at 5.4%, it is still lower than it was throughout the 1990s. Partly this is because some unemployment is disguised as underemployment (people not being able to work as many paid hours as they would like), or because the official statistics don’t count people who have given up looking for work. Mainly, however, it reflects the particularly fortunate position of Australian capitalism, which has raked in huge fortunes over the past two decades by selling vast quantities of raw materials to countries in Asia, particularly China.

So the relatively mild impact of unemployment here is an exception, a stroke of good luck that will vanish when economic changes in Asia and the rest of the world reduce the demand for Australia’s raw materials. The overall tendency of capitalism is to continually increase unemployment. This is evident even in Australia, if we look at a longer period than the last two decades. In the 1950s, unemployment in Australia averaged around 1%. In the 1960s, it was around 2%, in the 1970s 4%, in the 1980s 7.5% and the 1990s almost 9%. The rate for the 2000s, which will be about 5.5%, is thus considerably higher than in the 1950s, ’60s and ’70s, and it is likely to increase in coming years.

Necessary and surplus labour

Unemployment illuminates a striking paradox in capitalist economies. Capitalists obtain their wealth by exploiting workers. The more workers they exploit, the wealthier they become. Yet the capitalists, in managing their businesses, constantly seek to reduce the number of their workers — that is, they seek to get rid of the source of their wealth!

The explanation of this is that the values of the goods and services that workers produce during part of the work week cover the value of their wages. Marx called this part of work “necessary labour”, because it produced what was necessary to keep the workers alive and ensure their replacement when they died. The work performed during the rest of the work week is “surplus labour” because it is during that labour time that workers produce the values that make up capitalists’ profits.

It is to the advantage of the capitalists as a whole to exploit the greatest possible number of workers. But it is advantageous to each individual capitalist to reduce the number of his/her own workers to the extent that can be done without reducing output. When they can, capitalists will do this by forcing workers to work harder, but the easiest and most profitable way is usually to replace workers with machinery. While machinery itself does not generate values, it increases the productivity of labour, and hence decreases the cost per item of the capitalists using it, allowing them to gain an extra profit until the use of the machinery becomes general throughout the industry. Capitalism’s effort to increase surplus labour by reducing necessary labour therefore takes the paradoxical form of reducing the number of workers.

Unemployment also benefits the capitalist class as a whole by dividing the working class into two groups: those with and without jobs. Individual workers move back and forth between the two categories, which creates a constant pressure on wages from workers who are desperate to return to the active workforce. So, despite shedding occasional crocodile tears for the unemployed, the capitalists have every motive to oppose anything that relieves their situation.

A large pool of unemployed and underemployed workers functions as a “reserve army of labour”, as Marx and Engels termed it. This means that the capitalists can easily find the workers they need during economic booms, and dismiss these workers, without taking any responsibility for their survival, during bad times.

In the modern era, imperialist capitalism has concentrated the largest part of the labour reserve army in the Third World, the so-called developing countries. This reserve is made up of peasants driven off the land and workers formerly employed in industries that could not compete with the more technologically advanced imperialist firms. Thus much of what is often called “overpopulation” in the Third World is really a specific form of capitalist unemployment. It has often been pointed out that there is more than enough wealth in the world to feed and provide a reasonable standard of living to everyone. “Overpopulation” exists because it suits imperialist capital to maintain a high level of global unemployment.