How Capitalist Economies Create Unemployment

Published on 28th May 2019

The unemployment rate in South Africa rose to 27.6 percent in the first quarter of 2019 from 27.1 percent in the previous period. It is the highest jobless rate since Q3 (the third quarter of) 2017, as the number of unemployed went up by 62 thousand to 6.20 million and employment fell by 237 thousand to 16.29 million. The unemployment rate usually rises in the first quarter of the year, as temporary staff hired to work over the busy festive season is dismissed. However, a year earlier, the jobless rate was lower at 26.7 percent. Unemployment Rate in South Africa averaged 25.66 percent from 2000 until 2019, reaching an all-time high of 31.20 percent in the first quarter of 2003 and a record low of 21.50 percent in the fourth quarter of 2008. Source: Trading Economics.

On the 15th of May in 2019, all electronic media outlets discussed unemployment in South Africa. It is clear they follow a particular agenda set by the white ruling elite that controls most of South Africa’s wealth and media outlets. There is nothing wrong per se with discussing unemployment. It is problematic to do so from a wrong premise, especially by African pundits, talking heads and media personalities who almost invariably begin from a capitalist perspective.

As Frantz Fanon observed, Capitalism, since its inception in 17th century England, is an essential part of racism, colonialism and imperialism that breeds unemployment. The misery of the unemployed and underemployed fuels the profits, which keep the capitalist economy going. While economists and law makers say that the rich create jobs and if they and corporations get tax breaks and are not regulated, they will create more jobs, this is not borne out by the facts and history.

Why were there jobs for everybody in apartheid South Africa? It was because apartheid South Africa was a socialist state for whites and a capitalist state for Africans where slave labour wages and salaries were paid to African people. Trade unionism was outlawed for African people. Whites did not need trade unions since they had well-paying jobs and legislation such as the Job Reservation Act that gave special and preferential treatment to them.

Society cannot rely on the wealthy to create jobs because the capitalist class – bankers and corporations are not in business to create jobs but to make profits. When they cannot meet the demand for what they produce they hire more workers to increase output. When there are no buyers for their goods and services, they retrench and lay off workers.

Full employment which would be good for everyone because it will boost the economy is not in the agenda of corporations. They will not support it because it will not be beneficial to the capitalist class. When there are many jobs, workers can change jobs if they do not like the pay or working conditions. If there is a paucity of jobs, workers become desperate and settle for any job which is how the capitalists like it. When unemployment is high, companies can choose who to hire and who not to hire which affects the youth and those who do not have connections.

When there is low unemployment, it is difficult for companies to find experienced workers hence they  have to train workers who have no experience. With many experienced unemployed people without jobs, companies can hire people who do not need training. Jobs that are traditionally done by the youth are taken by older unemployed people. Not only will the youth be affected but also many Africans who do not have connections to whites most of whom control the economy.

This unemployment situation invariably does not affect whites because they are given preference by their fellow whites who control the economy. This is exacerbated by the cadre deployment, nepotism, favouritism and jobs-for-pals policies of the ANC government. Many people have reported that ANC membership cards were demanded from them whenever they applied for government jobs. This unemployment situation makes personal connections very important in getting a job. Another benefit of high unemployment to the capitalists is that it can pit workers against each other when individuals are fighting for jobs thereby undermining the unity of the working class and makes it difficult for workers to organise themselves as trade unions. Many African workers are exploited and do not belong to trade unions because their employers do not allow it. An example is Essops Furniture Company in Chamdor, Mogale City. This situation is not being helped by corrupt Department of Labour Inspectors who accept bribes from many companies that flout South Africa’s labour laws.

The major part of the US economy is sustained by the Military Industrial Complex. They must make war in order to fuel their economy. The current US President, Donald Trump, is close to businessmen who are in the arms industry. It is against this background that his administration’s belligerent approach against Syria, Afghanistan, Venezuela, Iran, North Korea, Russia and China should be understood. Hawks such as John Bolton and Mike Pompeo in his cabinet give away the Trump’s administration’s aggressive foreign policy.

South Africa’s 2019 “official” unemployment figure which stands at 27.1 percent only counts the people who are actively looking for work during the period under discussion. If we need the real unemployment rate, then those who have given up on looking for jobs and those who are under-employed should be counted. Since their number is twice the official figure, the real unemployment rate in South Africa is 54.2 percent. In western countries they prefer to keep the unemployment rate in single digits for double digits unsettle their governments. In Africa, double digit unemployment rates are the order of the day and they do not bother the governments of these countries. In Zimbabwe the unemployment rate is about 95 percent.

Concerned people who are serious about eradicating unemployment, especially socialists and real communists hold that, “A better way to evaluate whether the economic system is working, and making the most out of society’s vast human resources and potential, it is the employment-to-population rate. This rate takes into account millions of men and women that are not even counted in the ‘official’ labour force”.

The sorry state of unemployment is a clear indication of an inexorable trend to cast people out of the productive process completely. According to Ben Becker, “The system of capitalism cannot resolve unemployment for several reasons:

“The unplanned economic system leads to periodic crises of overproduction. Competing with one another to control the market, the capitalists inevitably produce too much to sell at a profit, and so start to lay off workers to maintain their profit margins.

“Technology is used against workers, not for them. Nearly every technological advance is used to replace jobs; while the workforce shrinks, the remaining workers are expected to produce more. The working class is punished for its own productivity.

“The system requires a section of workers to be unemployed. If everyone had a job, workers would demand higher wages and would not fear being replaced. The capitalists actually aim for a 4% unemployment rate—which they misleadingly call “full employment”—but this amounts to 5 million workers out of a job.

“The vast resources that could be used to employ idle workers are in the hands of a small number of capitalists. Because of the banks’ economic dictatorship, all the government does is give more and more concessions to these capitalists to make them feel more ‘confident’ to invest.

“The capitalists only offer employment based on profitability. The capitalists will not spend their trillions of dollars in cash until they believe it can return a steady rate of profit for them.

“These problems are all related to one another, and cannot be solved piece by piece. We have to put the operation of the economy on an entirely different basis.

“There are tens of millions of people who want to work, or would be willing to go back to school to become trained in other fields if their jobs have become obsolete.

“There are vast social needs in the country—in the fields of science, education, health care and infrastructure, to name a few—but since these are not immediately profitable enterprises, they are systematically neglected.

“It is not Utopian to demand a society in which its vast human resources are used to address its vast needs.

“It is not Utopian to demand a society in which technological advances are used for the benefit of everyone, and in which workers replaced by machines are provided a guaranteed wage while they are re-trained for other work.

“In fact, we need such a society to escape a future of increasing unemployment and impoverishment.

“Socialism—the public control and ownership over society’s productive resources—is no longer a question for the far-off future. It is now an elementary and basic demand”.

One could not agree more with this analysis.

The unemployed, especially the youth should note the statement, “The current sorry state of unemployment is a clear indication of not only unemployment but an inexorable trend to cast people out of the productive process completely” and reflect deeply what happens to people when capitalist governments have no use for them and regard them as a baggage, excess population or “useless eaters.” History has shown that they got rid of them through various ways. They are either going to make them kill each other or they are going to do it themselves. The massacre of the Marikana miners serves as a typical example of what a capitalist government can do to its people to safeguard the interests of the capitalist class.

They have already started raising concern about over-population. The problem is not over-population but that too few people own disproportionate amount of wealth when the vast majority owns nothing. In the US, 1 percent owns that country’s wealth while in South Africa it is about 5 percent of whites who own the country’s wealth.

Sending protesters to prison for fighting for what rightfully belongs to them the same way the apartheid government was doing is another method that is going to be used. The US sends soldiers, especially African Americans, to go and die in wars they have no business fighting in.

Former US Secretary for Defense and World Bank President Robert McNamara once said there were several ways of reducing the world’s population in this thermo-nuclear age. He continued to say it could be achieved through wars, famine and inoculation of disease.

The powers that be are not worried about unemployment or the welfare of their citizens since they have an elaborate plan of how to deal with them should they rise up. Lawmakers or Members of Parliament will not help solve the unemployment problem; they get fat cheques every month, so they are not affected. Everybody, youth and students included should organise for the establishment of a socialist economic and political system.

 By Sam Ditshego

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