(Weekly Organ of the Communist Party of India (Marxist)
June 13, 2010
From Financial Crisis to Job Crisis & Wage Depression
THE structural crisis of the capitalist system, which had been worsening for decades, has now reached a point where it requires urgent attention in every region of the globe.
The crisis that erupted like a volcano, particularly after the Wall Street crash on September 15, 2008, could not, by the very logic of the system, remain limited to a financial crisis. It has rather engulfed all aspects of the capitalist economy --- industry, agriculture, social and political life.
The sum total of resources involved is overwhelming --- trillions of dollars destroyed in the last few months. The crisis of capitalism, with a reduction in industrial, agricultural, and services outputs, is all too evident. Since 1929, capitalism has not seen so deep a crisis. One veteran Marxist scholar has come to the conclusion that, having no limits to its expansion, the system of capital ends up as a destructive and deeply uncontrollable process. It is made up of what Marx called second-order mediations --- when everything becomes controlled by the logic of capital's valorisation process, with no regard for vital human and social imperatives. Superfluous production and consumerism corrode labour, leading to precarious employment, structural unemployment and a level of destruction of nature never before seen on such a global scale.
Thus, unlike the alternating periods of expansion and crisis, which has shaped capitalism throughout its history, we now find ourselves immersed in continuous depression, showing the characteristics of a structural crisis.
The widening gulf between production truly dedicated to meeting human needs and production dedicated to the self-reproduction of capital intensifies the destructive side effects, which put the future of our species at risk: the structural precariousness of labour and the destruction of nature.
This underlines another fundamental contradiction in which the world has sunk more deeply since the beginning of the century. If unemployment rates continue to rise, the levels of social degradation and barbarism, intrinsic to unemployment, also spiral. If, on the other hand, the world resumes its former rate of growth, increasing production and the way of life founded on superfluity and waste, we shall see an even higher rate of nature's destruction, intensifying the now dominant destructive logic.
This systemic and structural
crisis has another
central component: the corrosion of labour. After the crisis worsened
Let us look at the situation of joblessness since 2008.
In a recent report using fairly
moderate data, the
International Labour Organisation (ILO), forecast the loss of 50
in 2009. If only one large car maker in the
The same ILO report adds that
almost 1.5 billion
workers will see their salaries cut and unemployment spreading in the
period. But it is a well-established fact that official statistics on
employment fail to detect the disguised unemployment. If unemployment
No. of jobseekers in the live register in December 2000: 4 crore 34 lakh 36 thousand
No. of women jobseekers in December 2000: 10 crore 45 lakh 7 thousand 3 hundred
No. of SC jobseekers in December 1999: 59 lakh 48 thousand
No. of educated SC jobseekers in December 1999: 39 lakh 61 thousand 6 hundred
No. of physically handicapped jobseekers in December 1999: 45 lakh 5 thousand 9 hundred
No. of minority community jobseekers in December 1999: 57 lakh 26 thousand 2 hundred
On the basis of the ministry’s 2000 figures, we can assume that unemployment now surely stands somewhere above 5 crore.
However, statistics of rural unemployment are not available except some in Dr Arjun Sengupta’s report. If we take into consideration the rural unemployment or underemployment together with urban unemployment (registered and unregistered), it will stand somewhere between 12 and 13 crore. It is a devastating figure.
According to the government of
At the product group level, the survey states, the moderation in growth has been selective. Industries like chemicals, food products, leather, jute textiles, wood products and miscellaneous manufacturing products witnessed acceleration in growth, while basic metals, machinery and equipments, rubber, plastic and petroleum products and beverages and tobacco recorded lower but strong growth during April-December 2007. Other industries including textiles (except jute textiles), automotives, paper, non-metallic mineral products and metal products slowed down visibly during the period. The slowdown in the case of less import-intensive sectors like textiles is coincident with the decline in the growth of exports arising from the sharp appreciation in the rupee vis-à-vis the dollar. Within automobiles, while passenger cars, scooters and mopeds witnessed buoyant growth, the production of motor cycles and three wheelers slackened. In a nutshell, the industrial sector has produced mixed results in the current fiscal. The picture is somewhat clear about the downward trend of industrial production.
The ILO has done some study on the wage situation in the wake of the global capitalist crisis. Its updated Global Wage Database includes official wage statistics for 53 countries, consistently till 2008 end. Based on this sample, it appears that the global growth in average wages declined from 4.3 percent in 2007 to 1.4 percent in 2008. Overall, while a majority of countries could maintain declining but positive wage growth in 2008, more than a quarter of countries experienced flat or falling monthly wages in real terms. These countries include the USA (0 percent), Austria (0 percent), Costa Rica (0 percent), South Africa (-0.3 percent), Germany (-- 0.6 percent), Switzerland (-- 0.7 percent), Israel (-- 0.9 percent).
The statistics on wages used in this report, consist of the total monthly remuneration received by employees. ILO noted that international comparability of wage levels is affected by the different measurements in national surveys.
Average wages and wage shares are aggregate measures of wages and therefore do not help us to understand how wages are distributed among workers. As the wage share is declining in many countries, the issue of wage distribution gains further importance. Of course, wage inequality is a complex issue, involving multiple dimensions. Particular interest has been paid in recent years to wage inequality between different groups of workers, for instance by sex, level of education, age, ethnicity, migration status or formality. Due to the complexity of these issues and the paucity of relevant data for global analysis, ILO could not address these issues in this year's report. Instead, it examined some simple indicators that compare high- and low-wage earners, and also compare these two extreme groups with the median-wage earners.
ILO also considers trends in wage inequality in relation to both economic growth and gender. Before considering it, however, we address the more fundamental issue of why inequality matters. Debates around this issue have intensified in recent years. As a general principle, it is widely accepted that wage compensation needs to reflect workers’ contributions and performance. Since these inevitably show individual variations, it follows that wage inequality is a fair indicator of economic reality. This is important for public policy, particularly in the light of recent findings on what determines the people's levels of satisfaction. Population surveys show that subjective perceptions of happiness depend more on how an individual’s income compares with those of other people than on the absolute level of their income. There are also many economic costs associated with higher inequality, such as higher crime rates, higher expenditures on private and public security, worse public health outcomes and lower average educational achievements. A growing body of studies also highlights the importance of reducing inequality to achieve poverty reduction.
To present some trends, ILO first compares high-wage earners with low-wage earners, in particular the wage level of the bottom 10 per cent of workers (this wage threshold is commonly referred to as D1) with the wage level of the top 10 per cent of workers (referred to as D9). These data show the difference in this ratio of overall wage inequality for two periods, 1995-97 and 2004-06. ILO found that more than two thirds of the countries in the sample experienced increases in wage inequality. There are, however, some important exceptions, primarily in Latin American countries.
The underlying reasons for the
inequality vary across countries. ILO compares the years 1995-2000 with
years 2001-06. Among the countries which experienced increases in
the more developed countries such as the
Similar diversity can be found
in countries where wage
inequality has fallen since 1995. In case of
On the issue of wage inequality
in the context of
economic development, one widespread perception is that inequality is
part of the
wider process of growth. This understanding is often expressed in the
"Kuznets curve," named after Nobel laureate Simon Kuznets (1901-85),
which says that inequality first increases, then stabilises and
falls during industrialisation. Many interpret it as evidence that
is somehow a "natural" byproduct of early economic development and
that it will decline "naturally" in the later stages. This view is
often associated with recommendations against policy interventions to
inequality --- usually with the argument that such policies may
jeopardise economic growth. An alternative view of the decline in
Another fundamental dimension of
inequality is the
difference between men's wages and women's wages --- the so-called
pay gap." While this issue deserves special attention, constraints in
data and research make it difficult to present a comprehensive analysis
gender pay gaps from a global perspective. The ILO observes that this
is still wide and is closing only very slowly. Measuring the gender pay
using the ratio of female average wages to male average wages, ILO
overall pay gap has been decreasing in recent years. In about 80 per
the countries for which data are available, this gap has narrowed.
size of change is small and in some cases negligible. Overall, this
in line with the existing studies that show that the gender pay gap has
rather stable or decreasing only very slowly. Hence, reduction in the
pay gap has clearly been disappointing in the light of women's
progressive closing of gender gap in work experience, and the
economic context. In a majority of countries, women's wages are between
90 percent of men's wages. In case of European countries, the ratio on
average is around 0.75, but it is not uncommon to find much higher
other parts of the world, particularly in
On the basis of the above facts, we can take a different track from those who confine the crisis to the world of banking, a "crisis of the financial system," or a "credit crunch." It is an enormous speculative expansion of financial adventurism, particularly in the last three or four decades and is by its nature inseparable from a deepening of the crisis, in the productive branches of industry as well as from the ensuing troubles arising from the utterly sluggish capital accumulation (and indeed failed accumulation) in the productive field of the economy. Now the crisis is increasingly worsening in the field of industrial production. A necessary consequence of this ever deepening crisis in the productive branches of the real economy is the growth of unemployment and associated human misery on a frightening scale. To expect a very happy solution to these problems from the capitalist state's rescue operations is a great illusion.
In his The Structural Crisis of Capital, Istvan Meszaros adds: "the recent attempts to counter the intensifying crisis symptoms, by the cynically camouflaged nationalisation of astronomic magnitudes of capitalist bankruptcy, out of the yet to be invented state resources, could only highlight the deep-seated antagonistic causal determinations of the capital system's destructiveness. For what is fundamentally at stake today is not simply a massive financial crisis but humanity's potential self-destruction at this juncture of historical development, both militarily and through the ongoing destruction of nature."
If capital's answer to its structural crisis is the neo-Keynesianism of a fully privatised state, the answer from the social forces of labour must be radical. The fallacy of the neo-Keynesian "alternative," always welcomed by those on the so-called "left" acting to promote "order," is fated to fail. This type of alternative (!) visualises the line of least resistance to capital.
The deepening global crisis of capital in all aspects of economy, jobs, wages, social sector and culture necessitates a determined struggle to finally defeat the rule of capital. With correct vision and ideological conviction, trade unions and the working class party need to organise an uninterrupted and prolonged struggle for a step by step march forward to a socialist alternative so that humanity can be saved. The other alternative is to revert to barbarism, as Rosa Luxemburg warned long ago. The validity of her warning is now proving to be correct.