Capitalism and unemployment

Mass unemployment has been a feature of capitalism since it emerged as the dominant social system in 17th century England and spread throughout the world. It is also an essential part of the system — the misery of the unemployed and underemployed fuels the profits, which keep the capitalist economy going.

That’s not what we hear from big business economists and their Republican congressmen. They call the wealthy class “job creators” and claim that if rich people and corporations are freed from taxes and regulation, there will be plenty of jobs. History shows they are wrong. The Great Depression followed, a decade of low taxes and unregulated capitalism, with government at all level supporting the interests of business against workers and farmers. Just like the depression we are now experiencing.

Why can’t we rely on the wealthy “job creators” to create jobs?

Capitalists as a class — the people who own the banks and the big corporations (the 1% in today’s language) — are not in business to create jobs. They are in business to make profits. When they are unable to meet the demand for whatever they produce, they hire more workers so they can increase output. When they can’t find buyers for their products or services, they cut back and lay off workers.

There are some who argue that full employment would be good for business. After all, full employment would mean a booming economy and lots of customers. So you would think the Chamber of Commerce, the Wall Street Journal and Fox News would all be calling for passage of President Obama’s American Jobs Act. But you’d be wrong.

Capitalists and the economists, and politicians who work for them, don’t like full employment. When there are plenty of job openings, workers can say, “If I don’t like the pay or the conditions or the boss, I can quit and find another job.” A former factory worker explained it this way: “I never had trouble finding a job in my life until now. I was laid off, and my unemployment benefits ran out at the start of 2009. I lost my house, I have so many bills I can’t pay including hospital bills. I’ve looked for industrial work and even tried door-to-door sales. Anything looks good now — which is probably where business likes it. Everyone’s so desperate they’ll take anything.”

“They’ll take anything!” With unemployment at 9 percent this year, A Pennsylvania newspaper quoted a warehouse worker who described intolerable working conditions and speedup, and added, “They can do that because there aren’t any jobs in the area.” 

The statistics are dramatic: since the start of the economic crisis in 2007, the number of workers quitting their job each month has fallen by more than a third, from over three million to less than two million.

With high unemployment, businesses can be choosy about who they hire. This particularly affects youth, as well as African Americans, Latinos, women, and anyone without connections to an “old boy network.” When unemployment is low, it can be hard for a company to find experienced workers, and they have no choice but to train someone with little on-the-job experience. But now, with lots of experienced people out-of-work, companies can hire someone who doesn’t need training. We see this with some traditional youth jobs, like minimum-wage jobs at tourist destinations, being taken by older unemployed workers. In general, the bad job market makes personal connections — always a big factor — even more important in landing a job.

This leads to another benefit to capitalists of high unemployment: it can pit workers against each other in individual fights for jobs, and undermine working class unity. And it makes it harder for workers to organize unions.

Because of these benefits (to the capitalists), they favor policies that prevent unemployment from falling too low. If overall unemployment falls below about 5 percent, business-oriented economists support policies to “slow” the economy and create more unemployment. They are very open about the reason: if unemployment falls, workers are in a better position to demand higher wages and benefits. This can reduce corporate profits and/or result in inflation. 

Even now, with official unemployment over 9 percent, the capitalist class is successfully resisting any government policies that would create jobs. A recent article in Fortune reflects typical business views. It quotes the owner of a small grocery who supports extending unemployment benefits because it puts money in consumers’ pockets. Then, it quotes the CEO of giant supermarket chain Safeway saying the longer people can collect unemployment benefits, the longer they stay unemployed. Then, “The CEO went on to cite the theory that extending unemployment insurance artificially props up wages, slowing the pace of economic recovery.”

Some corporations favor government policies that would bring business, and jobs, to their particular industry. But they rarely support policies that would reduce unemployment across the board.

That said, overall unemployment is not in the control of either the capitalist class or of the government. Capitalism is inherently an unstable system. It has periods of rapid growth with relatively low unemployment, followed by economic crises (or recessions), when unemployment soars. Until three years ago, virtually all US economists (except for a few Marxists and a handful of others) thought capitalism would never have another severe crisis. Wrong! The U.S. and most of the “advanced” capitalist countries are now experiencing the worst crisis in 80 years. And, unlike most of the post-World War II recessions, instead of a rapid recovery there is every indication the U.S. is in a prolonged depression. 

That is not to say that government policy doesn’t matter. Policies in the years before the crisis, particularly those of the Bush administration, contributed to the severity of the current depression. And new government programs could alleviate the present depression and speed a recovery. The stimulus bill enacted just after Obama took office provided real help, but it was too small and didn’t last long enough.

The fight for jobs is a fight to enact policies to overcome the economic crisis and to provide relief to those who suffer the most. The immediate task is to build a movement that starts with President Obama’s American Jobs Act and U.S. Rep. Jan Schakowsky’s, D-Ill., more ambitious jobs bill, and keeps fighting for useful, productive jobs for all. 

While working with many others for emergency jobs programs, the Communist Party also works for socialism — a system where “people before profits” is not only a slogan, but a principal that can provide for full employment in a stable, growing economy without crises. Capitalism is the first social system that features mass, involuntary unemployment as a permanent and essential feature. It will also be the last.

Art Perlo can be reached at

Photo: Pepe Lozano/PW.


Art Perlo
Art Perlo

Art Perlo lived in New Haven, Conn., where he was active in labor and community struggles. He did research and writing on economic issues in Connecticut, including work with the Coalition to End Child Poverty in Connecticut which helped pave the way for the movement for progressive tax reform in the state. He wrote on national economic issues for the People's World and was a member of the CPUSA Economic Commission.