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.
If only being convinced was the same as being convincing.
My operating assumption is that I won’t convince anyone who isn’t already at least considering being convinced. What is wrong with preaching to the choir. Maybe the choir will be inspired by my preaching and sing with more conviction. Maybe someone out in the cheap pews will be convinced by hearing the choir.
“The worker doesn’t get any dinner until capital eats the dessert.”
I am not sure whether you are saying this is how it works or whether this is how Marx says it works. It does no leave room for the worker does not get seconds until capital eats dessert.
“time spent working beyond what is necessary for the workers’ subsistence accrues to capital”
Is this a definition or a model? Is the fact that we live in houses much larger than we need an indication that we do not live in capitalism as Marx defined it, or that his model was wrong? Or possibly that it really only applied at a time in history when there was insufficient productivity to get much above subsistence?
I am saying this is how Marx says it works. Obviously, I wouldn’t be going to these lengths if I didn’t think there was some value to what Marx says, even if I don’t agree 100%. The fact that we live in houses larger than we need is no proof we don’t live in capitalism as Marx defined it. “We” don’t ALL live in houses larger than we need in the global south or among the homeless in U.S. and Canada. Maybe the obsession with house prices and house sizes actually says something about how “we” have become domesticated to the continuing exploitation and extraction of surplus value?
But aside from whether you accept Marx’s analysis, do you accept the labour/leisure choice theory that workers choose their hours of work based on their preference for income or leisure? Do you agree with the Non-accelerating inflation rate of unemployment argument about the relationship between unemployment and inflation? Do you buy competitive advantage theory of trade or the “crowding-out” treasury view of government spending? Are billionaires the job creators? Does wealth trickle down? Is there no alternative? In short, do you stand for something? Do you have a point of view? Is there a conviction behind your objections or do you feel that striking a skeptical pose is conviction enough? Is this or is this not “the best of all possible worlds”?
I really felt that my questions were posed in such a way as to make it clear what I did not understand in your post.
O.K. Arne, here’s your answers: 1. Neither, it’s an analysis. 2. No. 3. No.
There is probably a lot you don’t understand in my post. There is probably much that I don’t understand either. I am not trying to explain everything all at once. I am dipping my toe into a vast reservoir, some of which may be deep, some shallow, and some murky. I used to be in a dialogue group and rules of dialogue resemble the rules of improvisational comedy. The following is not hard and fast dogma, just a taste of the scene constructive disposition:
1) Say “yes… and!”
2) Add new information.
3) Don’t block.
4) Avoid asking questions- unless you’re also adding information.
5) Play in the present and use the moment.
[Answers; despite the obvious reality that simple answers to complex real problems should never be satisfying. There is not now time for more nor is this the place.]
…do you accept the labour/leisure choice theory that workers choose their hours of work based on their preference for income or leisure? [F No! Most workers want more income and those that have enough income rarely have the choice to work less and retain their jobs.] Do you agree with the Non-accelerating inflation rate of unemployment argument about the relationship between unemployment and inflation? [Would not want to argue that NAIRU never applied anywhere at anytime because infinity is naturally incomprehensible, but not here and not now is NAIRU a thing. Globalization and exorbitant privilege of dollar post-Bretton Woods and post-convertibility has stricken NAIRU from the lexicon of US reality.] Do you buy competitive advantage theory of trade or the “crowding-out” treasury view of government spending? [Comparative advantage in trade today is anti-competitive. Financialized corporations are playing global arbitrage games with pricing and regulatory costs for both labor and physical resources. OTOH, for crowding out then see prior NAIRU discussion.] Are billionaires the job creators? [Jobs were created by specialization, an emergent property of settlement as opposed to nomadic civilization.] Does wealth trickle down? [Wealth trickles up where it is accumulated.] Is there no alternative? [Not without change far beyond any liberals in general would ever consider. We must finally bury Hobbes, Locke, Machiavelli, Nietzsche, Ayn Rand, and Karl Marx before this can happen. Groucho Marx can stay if only just for the laughs.] In short, do you stand for something? [Rather sit then die and hope someone lives long enough to see that alternative.] Do you have a point of view? [Asked and answered.] Is there a conviction behind your objections or do you feel that striking a skeptical pose is conviction enough? [Rather not be convicted. It is bad enough that I have come to understand, but that should be no crime.] Is this or is this not “the best of all possible worlds”? [Jesus Christ F No! This may end up just a dead rock if we do not wise up.]
We need first to unlearn the hierarchal public education system that Horace Mann brought to us from Prussia that previously originated in Egypt. Despite some effectiveness and equality among the lower classes, it was primarily designed to engender the qualities necessary to labor and military if they were to remain obedient servants to elites rather than participants in self-rule.
1) Re: “Simply put, as a rule people don’t automatically stop working the minute their basic needs are met.”
I wonder about the mathematics of this. There’s a quantization of work. People rarely work precisely to the need of their labor. They are usually hired by the day, the hour, the lot and so on. As the Ultraviolet Catastrophe and Planck’s resolution of same showed, the mathematics of quantized phenomena is not the same as continuous phenoma. Has any economist addressed this?
2) Re: preaching to the choir
This is how slavery was ended in England. It was perhaps the first mass social movement to actually result in a major policy change. Early accounts are full of groups, congregations and the like who brought in anti-slavery speakers, and the listeners expected to be convinced and then took action. So, keep on preaching.
Sandwichman:
Labor becomes more efficient improving throughput either by efficient procedure or the addition of capitol thereby allowing for fewer weekly hours. No more Overtime or excess hours to maintain production to meet current demand. More leisure
If the throughput improvement increases so much as to reduce Labor, management cuts superfluous staff. Capital has desert.
If there is more than enough for demand, I am not going to make more, either I will cut hours or reduce Labor. Unless we had a seasonal increase in demand coming, I sure as hell would not make more product beyond planned throughput and let it sit in the warehouse.
Maybe I am full of crap here? I have planned enough production, shifted production, or cut inventory level to meet additional demand during capacity crunch due to takedown.
‘Does economic growth cause unemployment?’
Nah. Unless maybe when it comes to robotics.
starting a robot company?
Simplifying somewhat, economic growth will almost certainly
lead to ‘the rich getting richer’. One may hope (*) that Trickle
Down may lead to the (some of) rest getting richer also,
but the accompanying technological changes will displace
many people into less-well-paying jobs. If not unemployment.
(* In vain?)
The robotics industry is booming in the
Boston area. (One might be reminded of
certain scenes in Woody Allen’s ‘Sleeper’.)
A lot of high-salaried tech jobs available.
Ultimately, those robots are going to
put people out of work, but hey…
(No Luddites allowed here!)
Fred,
Define a lot. The top 0.1% has always needed intermediaries allowing them to stay at a safe distance from the teaming masses along with masons, physicians, chemists or alchemists, hunters and farmers, clothiers, carpenters, and engineers. Within each base-ten order of magnitude in wealth distribution there lies another social segregation and class of wealth. Life ain’t bad in the top 10% where one can be comfortably half-assed instead of a total asshole.
‘A lot’? Not being in the job market, I can only guess.
As many as the the local tech universities can handle I think & then some.
MIT, WPI, UMass/Lowell, Olin College of Engineering, Wentworth Inst, etc.
My point is, really, that in the US economy, employment
will – in these times – be high for those with hard-to-acquire
skills, particularly in those areas which are thriving.
Elsewhere, not as much. Deal with it.
Fred,
My job is being retired – from a 47 year career in high tech. I am even better at my new job of being retired than I was at my old job in IBM large systems technology. In short time though, the skills of my new job will be harder to acquire than the skills that placed me in tech for so long.
With one exception, every outfit that ever hired me went under.
Even my branch of the Army no longer exists, as such. But my
current volunteer position (which demands considerable
computer skills) pays nothing but demands much, and I
have been able to do it for over 25 years, due to savvy investing.
Nothing lasts forever, but a few do last a long time, fortunately.
There’s probably some irony in this.
Biotech is also booming in Greater Boston of course.
Moderna is headquartered here.
labs replace offices across Greater Boston
… 10 million square feet of office and industrial space in Greater Boston (is) being converted for use by the booming life sciences industry. As lab developers migrate from Kendall Square and the office parks along Route 128 to the dense blocks of Somerville and tree-lined cul-de-sacs of Newton …