Does economic growth cause unemployment?

Does economic growth cause unemployment?, Econospeak, Sandwichman, October 24

Usually, a question in the title of an article is a teaser and the answer is almost always “no.” Not in this case. The standard argument is that economic growth is necessary to create jobs and that unemployment results from the slowing or interruption of growth.

Even advocates of degrowth or a steady-state economy assume a positive connection between growth and employment. Advocates prescribe reduction of working time as a means to mitigate job losses that would otherwise result from productivity gains.

In chapter 25 of Capital, volume one, however, Marx claimed that the same factors that spur economic growth also stimulate an expansion of the population supplying labour power and the “industrial reserve army.” He proclaimed the growth of the surplus population relative to employed labour to be, “the absolute general law of capitalist accumulation.”

That, of course, was just an assertion. Defenders of the conventional view argue that Marx either didn’t explain a mechanism for his “absolute general law” or if he did it was either wrong or incoherent.

I don’t want to pretend expertise on whether Marx’s theory stands up to rigorous critique. I sort of suspect every economic theory has a crack in it. That’s how the light gets in. 

What I want to do instead is suggest that there was a more compact version of Marx’s surplus population argument in the Grundrisse that hasn’t been refuted because it has mostly gone unnoticed.

This argument is developed in the “three fragments on machines” that I have mentioned several times, including my recent post, Wealth is leisure. Leisure, wealth. It is a macro-economic argument based largely on Dilke’s in The Source and Remedy of the National Difficulties with one fundamental modification: the highlighting of unemployment as both a condition and a result of capitalist accumulation.

Marx’s subtle refashioning of disposable time into the precondition of the accumulation of wealth set the stage for that transformation. Marx’s distinction between necessary labour and disposable time is trans-historical. It applies to all societies at all times — not to mention the plant and animal kingdoms. Simply put, as a rule people don’t automatically stop working the minute their basic needs are met.

Capitalism’s distinctive contribution to that natural dynamic is to categorize the products of the additional time spent working as tribute due to the owner of the means of production. Never mind whether that is fair or just. It is a fact.

Given that the time spent working beyond what is necessary for the workers’ subsistence accrues to capital, the incentive is for capital to either extend the working day or reduce the time — or both — required to produce the workers’ subsistence.

The amount of surplus labour (disposable time) that could be produced by that method would be very limited if there was only a “certain quantity of work to be done” or a certain number of workers to do the work. Therefore it is imperative for the expansion of capital to expand the population of workers by drawing more of them into the labour force. That is, capital creates more surplus labour by creating more necessary labour and the means of subsistence for those workers (because the additional workers also need to eat, etc.).

Where does the surplus population (“which is useless until such time as capital can utilize it”) come in? I will expand on this point in future posts. It is a simple concept but a difficult one to grasp. What capital does in its relentless pursuit of “the superfluous” (surplus labour, surplus value, disposable time) is to invert the relationship between the necessary and the superfluous. 

In this upside-down relationship, the performance and realization of surplus labour become a condition for the performance of necessary labour. Labour necessary for subsistence can only be performed if it produces a surplus for capital. “The relation between necessary and surplus labour, as it is posited by capital, turns into its opposite.” The worker doesn’t get any dinner until capital eats the dessert.

Why is that so difficult to grasp? I suspect what happens is that ‘common sense’ rejects what appears to be an irrational conclusion: “If everybody worked, there would be more total output and if capital simply received the same proportion of a larger output, it would have more — right? So Marx must be wrong.” 

The problem with the ‘common sense’ rejection of Marx’s surplus population argument is the unwarranted assumption that capital would get the same proportion — or any proportion at — of the additional output. The ‘common sense,’ ‘rational’ objection is simply illogical. It would contradict the premise that what capital receives is the surplus above what is necessary. 

But there is still much more to be said.