by PRABHAT PATNAIK
IMAGE/Bureau of Labor Statistics/Business Insider
Unemployment has become so persistent a phenomenon in contemporary times that there is a common feeling that it is a “natural” state of affairs, that nothing can ever be done about it, and that the only way to have greater employment opportunities coming your way is either to oppose the system of job “reservations” for the deprived segments of the population altogether, or to demand that your own “caste” or “community” be included in the category of those eligible for such “reservations”.
But this view that unemployment is a “natural” state of affairs is based either on ignorance or on loss of memory, for barely over a couple of decades ago there were societies, a large swathe of them, headed by the Soviet Union, that were so perennially characterised by labour shortages, which is the very opposite of unemployment, that tomes used to be written analysing the key to their unique and remarkable modus operandi. The most celebrated economist-critic of the Eastern European socialist system, Janos Kornai, while analysing these economies, had actually argued that full employment, or even labour shortage, was a central feature of these economies. This raises the question: why do we have unemployment? Just to say that it is because we have a capitalist economy is not enough; we have to look at the causal links carefully.
There can be two possible proximate reasons why unemployment exists in an economy: either there is inadequate capital stock to employ everyone willing to work, or there is inadequate demand in the economy to employ everyone willing to work; in the latter case unemployment must co-exist with unused capital stock. Within the first reason again we have to distinguish between two factors: there may be inadequate constant (including fixed) capital; or there may be inadequate variable capital, ie, wage-goods, to employ everyone at the prevailing “customary” level of subsistence.
This first reason, of capital shortage, has never been a decisive one. Even if there may be occasions when such shortages might have appeared, such as for instance at the top of some boom (though even that is doubtful), they certainly do not explain the perennial existence of unemployment. In fact as Michal Kalecki the renowned Polish Marxist economist had said “the typical condition of a developed capitalist economy” is that the “resources of the economy are far from being fully utilised”. And this is now the situation even of economies like ours where, under the neo-liberal regime, unutilised capital stock and excess stocks of foodgrains (the main wage-good) have become a more or less permanent feature.
The perennial existence of unemployment together with unused capital stock and unsold foodgrains in the Indian economy in its contemporary setting must therefore be attributed to inadequate aggregate demand in the economy. Aggregate demand in turn is made up of four different components: consumption, investment, government spending and net exports (ie, the excess of exports over imports). For a given income distribution, ie, share of economic surplus accruing to the propertied classes in total output, consumption demand itself depends upon the level of employment and output, ie, upon the level of aggregate demand. Hence if consumption demand is to be increased, then (barring transient measures like greater consumption credit) income distribution must be altered in an egalitarian manner, ie, through an increase in the share of the working people in total output, which capitalists would obviously resist.
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