From the December 1984 issue of the Socialist Standard
In addition to their concern with wages and hours of work, all of the five hundred unions in this country have an interest in the number of jobs available to their members, as highlighted by the strike of coal miners.
In this they are confronted with three facts of capitalism. In the first place the total output of each industry is not the maximum that is physically possible but the amount that companies and nationalised industries are able to sell at a profit: production is governed by the market. In capitalism's periodic depressions most industries suffer a decline in sales; hence the present unemployment of over 3 million.
Secondly, companies and nationalised industries, having to meet competition from home and abroad, try to hold their share of the market by producing more cheaply. This they achieve by labour-saving machinery and other methods designed to secure the same output with fewer workers; that is by increasing the output per worker. Official estimates show that, since 1980. average output per worker has increased by the exceptionally high figure of ten per cent, which means that the number of workers in work could have been kept at the 1980 level only if the market had expanded by ten per cent — instead of which it has been shrinking in the depression.
The third factor is that there is no permanence about the size of the different industries. Old ones decline or disappear often with devastating effect on the workers. In recent years manufacturing industry has lost a million workers, because from being a big exporter of manufactures this country is now on balance an importer. The railways, which displaced horse transport and the canals, have themselves been hit by motor transport and air transport. Coal has been largely displaced by oil, gas and nuclear power so that the number of miners has fallen from over a million in 1926 to about 200,000. Postal traffic declined with the expansion of telephones, and farms employ far fewer workers. One industry that has grown remarkably is banking, finance and insurance. In 1965 they employed 645,000 workers; the figure is now 1,366,000 and has continued to expand during the depression.
There is one notable exception to the dependence of output on profitable sales. It is the willingness of all governments, either for political reasons or having wartime needs in mind, to keep some loss-making industries and companies alive with subsidies. For a century governments did this with the loss-making inland telegraph services and have in recent years given big subsidies to agriculture and shipbuilding. Subsidies to the coal industry have been based on the expected long-term position when North Sea oil runs out and coal may expand again.
Unions with members in declining industries have long been to the fore with campaigns to induce governments to grant subsidies to their industries. (It was a big issue in coal mining and agriculture in the years after World War One.) But it is not only the unions. Employers’ organisations in the various industries have been equally active with their claims — companies supplying equipment to the coal industry and agriculture; companies making equipment for railway electrification and many more. Often the unions and the employers make joint representations to the government.
In the nature of the situation conflicts arise within the ranks of the employers and between the unions, as for example in the competition between the railways and road transport. That the railways would lose traffic to the often cheaper and more adaptable road transport was inevitable, but the Labour Party, whose government had protected the railways to some extent, complained that Tory governments “had deliberately encouraged road transport” at the expense of the railways and had "made sure that the railways would be fatally crippled in the contest". (Twelve Wasted Years, Labour Party 1963)
It goes without saying that capitalists in industries not benefiting directly or indirectly from the subsidies protest vigorously about their profits having to contribute through taxation to finance the subsidies.
In recent years there have been similar conflicts in the energy field, as between coal, oil, gas and nuclear power. The claim of the National Union of Mineworkers that coal should be given absolute priority, coal imports restricted, power stations converted to coal-firing and nuclear power reduced or phased out got the backing of the Labour Party but unions with members in the industries that would be adversely affected take a different view. At the Labour Party Annual Conference in October an Executive Committee resolution reaffirming the Party’s policy and condemning “the gross inefficiency of nuclear power stations and the dangerous risk to health they create for us and future generations", was defeated—3,483,000 to 2,967,000. (Financial Times 2 October 1984)
Such claims and conflicts relate to attempts by individual unions to induce governments to promote the expansion of one industry at the expense of others but there have been other policies framed to get joint action by all unions with the aim of increasing the number of jobs for all workers. One such policy is combined action by the unions to raise wages so as to expand total demand and create more jobs. This is arithmetical nonsense; higher wages do not expand total demand.
Marx dealt with this issue effectively over a hundred years ago, pointing to the obvious fact that raising wages reduces profits. Workers’ expenditure goes up but the expenditure of capitalists is correspondingly reduced, changing the kind of expenditure but not its total amount. Marx ridiculed the idea that pushing up wages would avert or cure a depression and so reduce unemployment. Unions affiliated to the TUC and Labour Party have also relied on policies aimed to increase the total number of jobs by government action. This was recently stated by Arthur Scargill when he called for a Labour government which would, he said, “get rid of unemployment and create meaningful jobs". In an early, crude, form this is a belief that any increase of government expenditure would create more jobs. But in 1974 government expenditure was £26,000 million and unemployment was 630,000; in every year since then government expenditure has increased and in 1983 was £115,000 million. Yet unemployment more than doubled under the Labour government of 1974-1979 and has more than doubled again under the Tories.
In a less crude form this theory was set out in the 1983 Labour Party election programme. which admitted that an increase of government expenditure financed by taxation would have no effect at all on employment. The increase of government expenditure would be offset by a corresponding fall in taxpayer's expenditure: “For the increased spending in one part of the economy would be cancelled out by the decreased expenditure elsewhere”. The programme then went on to say that the effect would be different if the increase of government expenditure was financed by borrowing. But how would it be different? Just as a taxpayer cannot both pay increased taxes and spend the same as before, so anyone who lends £1.000 to the government cannot also spend the £1,000. (Incidentally, the Labour government of 1974-9 and the Tory government since 1979 both increased the amount of government expenditure covered by borrowing.)
The theory is wholly fallacious as also is the opposite theory, advanced by the Tories, that the number of jobs would be increased if government expenditure were decreased. There is no way whatever in which government can increase its expenditure without a corresponding fall in the spending power of the population generally. The idea of the number of jobs being increased by some policy of the government is fallacious for another reason in capitalism itself. As has already been pointed out, the volume of production and therefore the total number of jobs rests on market conditions, on sales and profitability. It does not depend on some supposed overall deficiency of spending power which has to be made good by increased government expenditure or any other government policy.
The failure of the capitalists to continue to expand investment and production in a depression is not because they could not continue but because many of them choose not to do so. And they choose not to do so because they see no prospect of profit in it. Specifically it is not because they are all short of cash. As it was put by the City Editor of the Daily Mail (30 October 1984): “Companies have never had so much cash.” He could have mentioned GEC with its cash mountain of £1,500 million. much of it lent to banks. Now, or at any time in the depression, GEC could have spent its cash buying materials and plant and hiring more workers to produce more electrical goods. They have not done so because there was, and still is, no profit in it. If GEC had expanded production, the goods would have been unsaleable, except at a loss, and if they were sold the effect in existing conditions would have been to destroy the market for other electrical companies and put some of their workers out of work. GEC and other companies wait until market conditions make further investment and expansion of production profitable again.
Given the continuance of capitalism with its production for the market and the making of profit, there is nothing unions or governments can do to create more jobs for the workers as a whole. The idea of capitalism without periodic unemployment and depressions is a delusion.