Cooking The Books: More pain ahead? (2010)

The Cooking The Books column from the April 2010 issue of the Socialist Standard

“The true engine of job creation will always be America’s businesses”, declared President Obama in his State of the Union message (London Times, 29 January). We don’t know about the “always” but will let him off because he presumably thinks that capitalism will always exist and, on this assumption, he is right. As long as capitalism lasts the engine of job creation will be business, not just in America but everywhere.

Not that the aim of businesses is to create jobs. That’s only incidental to their aim of making profits. Since profits arise out of the unpaid labour of those who actually provide wealth, making profits involves employing workers. In short, job creation is a by-product of profit-creation.

When business is booming, i.e. when good profits are being made, more jobs are created. But it works both ways. When business is not booming then jobs are destroyed and unemployment grows, as has been happening for the past couple of years. In recent months the economy (as measured by GDP) has begun to grow again slowly in the major capitalist countries, so employment should increase too. But will it? In America there’s talk of a ‘jobless recovery’:

“in which GDP growth is not matched by a larger workforce as employers extract more labour from their existing employees rather than take on new recruits.” (LondonTimes, 12 February)

That’s one way of describing increased exploitation for those with a job.

Obama went on “but government can create the conditions necessary for businesses to expand and hire more workers.” This in fact is the economic rôle of governments under modern capitalism: to try to create and maintain conditions for businesses to expand, i.e. to make more profits from which to accumulate more capital. It doesn’t always work and it brings governments into conflict with the majority wage and salary working class as it means giving priority to profit-making over meeting people’s needs. So, governments oppose strikes, urge (and sometimes impose) wage restraint, and cut back services to keep taxes down.

But can’t governments also “create jobs”? Yes. They can either directly by themselves taking on more workers or indirectly by increasing their spending on goods produced by businesses. This has eventually to be financed out of the wealth created in the business sector and so has its limits (if carried too far it reduces profit creation and so job creation too). In this sense government jobs are ultimately dependent on business activity.

In the present crisis the government has borrowed extensively to bail out the bankers. Sooner or later this borrowed money will have to be repaid. Given the limits as to how far taxes can be raised, this means the government cutting back on its spending. Already observers are suggesting that this could mean a ‘jobless recovery’ in Britain too, with GDP going up without unemployment going down. A report in February by the Chartered Institute of Personnel and Development “indicated a worsening outlook for workers and jobseekers, despite tentative growth in the economy”, and “said that there was more pain ahead for workers as savage cuts start in the public sector” (London Times, 15 February).