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Commentary :: Labor

Unemployment: The Person as Incidental

"For its business, industry in Germany needed 9.2 billion work hours in 1991. Ten years later only 6.2 billion hours were necessary..Those who cause unemployment and crises should pay for their consequences just as the one causing an accident must be responsible for the damages.."
Unemployment in Germany – The Person as Incidental

By Rainer Roth

[This summary of Rainer Roth’s 2003 book “Unemployment in Germany – The Person as Incidental” is translated from the German on the World Wide Web, www.klartext-info.de/haupt_wiesbaden_vortrag.html. Rainer Roth is a professor of sociology in Frankfurt and an Attac spokesperson.]

Oli Kahn was recently criticized for allowing too many goals and not blocking shots that were unstoppable. He said: “Whoever stands in the way of success or money-making is gone. That is the motto of business or pure capitalism” (Frankfurter Rundschau 8/26/2003). He was anxious when as a goalie he stood in the way of moneymaking.

Increasing Productivity – Increasing Unemployment

For its “business”, industry in Germany needed 9.2 billion work hours in 1991. Ten years later only 6.2 billion hours were necessary.

What a tremendous gratifying fact, a third less working hours! The declining work volumes reflect enhanced productivity. The time in which products are manufactured quickly falls on account of the technical revolution. This is also the objective basis for drastically reducing working hours for everyone. However the opposite is occurring. The actual working hours of full-time employees rose from 1991 to 2000 from 1,604 annual working hours to 1,640 annual hours. This has increased unemployment.

Female Workers

2.5 million employees of industry were released from 1991 to 2001. 80% of them were workers. Unemployment is a worker problem. 2/3 of all unemployed are workers. The unemployment rate of workers in West Germany in 2001 was 15.6%. The rate for other employees was only half as great (7.7%). This is pure capitalism. The superfluous workers were often pushed off into unemployment or annuity. They stood in the way of money-making and were gone.

The demand for workers is falling in industry and other sectors of the economy (banks, insurance companies, trade and so forth). Official unemployment altogether climbed from 2.5 million in 1991 to 3.8 million in 2000.

Under the direction of capital, the increasing operational productivity leads to increasing unemployment from a long-term perspective, that is to higher economic unproductiveness and inefficiency. The increasing unemployment is used to increase the work stress of employees and to lengthen their working hours.

Increasing Productivity – Outbreak of Crisis

In 2000 there were officially 3.9 million unemployed. In 2003, 4.4 million were unemployed, not counting the hundreds of thousands removed from the statistics. Why has unemployment risen so quickly since 2001?

This is a result of increased productivity under the direction of capital. To make as much profit as possible, every business will expand its production as intensely as possible. More cars, cell-phones, computers and so forth are thrown on the market. The more goods the individual capitalists produce in competition with one another for unknown markets, the greater is the prospect for profit. Production for the sake of production, growth for the sake of growth is the motto. This pushes production beyond the solvent demand again and again independent of the higher wages. A crisis breaks out. Enormous increased wages can only postpone but not prevent the outbreak of a crisis. A crisis of surplus occurs, not a crisis of deficiency. “Too much” is invested, not too little. More is produced than can be sold. There is “too much” capital.

Capital that cannot be profitably exploited any more on account of over-capacities is destroyed. Workers are laid off because they are too productive.

Workers are “too diligent”, not too lazy. Their diligence has become a danger for capital. Therefore unemployment rose so strongly in the crisis since 2001. Unemployment is a result of the logic of capital exploitation.

What is Necessary from the Workers’ Standpoint?

Firstly, those who cause unemployment and crises should pay for their consequences just as the one causing an accident must be responsible for the damages.

Thus when social securities and state finances fall into crisis, a larger part of the profits should be mobilized to remedy the crisis, not a larger part of the wages. Even if they are not needed, the released should be able to live decently.

Secondly, massive reduction in working hours is necessary without cuts in payment.

Official Diagnosis: Paid Workers are Responsible

The official diagnosis and the conclusions drawn from the diagnosis run in a completely different direction. Agenda 2010 should be “a contribution to full employment in Germany in the long-term – corresponding to the employment guidelines of the European Union…” Full of fury, Agenda 2010 is directed against paid workers whether employed, unemployed or in annuity. Workers and their claims to living standards are responsible for the growing unemployment and crisis, not capital.

Capital that ultimately causes unemployment will be strengthened with Agenda 2010. Employing people is supposedly hardly worthwhile since gross pay and “non-wage labor costs” greatly reduce profits. Wages and non-wage labor costs must be lowered to increase profits. Unemployment assistance and income support must be reduced to accomplish this. Social spending of the state must be lowered so profit taxes can be reduced again. This social spending is responsible for “low” profits.

In a countermove, we were promised that employment would be expanded, unemployment would be massively reduced, the social state would be secured for the long-term and growth would do what it must do, namely grow.

Everyone who must bleed today should have a better life in the future after these severe operations.

What if the opposite happens? What if prosperity is only for a few and not for everyone? What if capital wants to rescue itself from its crisis so the situation of the multitude of paid workers permanently worsens?

Is Unemployment the Result of High Wages?

Michael Rogowski, president of the German Industry association, said: “The price mechanism, the central controlling element in a market economy, only functions inadequately on the labor market. The great divergence of labor supply and demand cannot be otherwise explained” (Frankfurter Rundschau 6/9/2001). If there are few open positions and more jobless, the reason is that the wages (=the price of the commodity labor power) are too high.

That the price mechanism doesn’t function means wages must be lowered as long as unemployment rises until no one is jobless any more.

This is a completely ruthless view toward paid workers and their needs. The needs of people are totally incidental compared to the goal of capital exploitation. Wages should be transformed into capital. This should solve the crisis. If full employment can only be achieved with lower wages, how much must wages fall by 2008? Super-minister Clement sees prospects for full employment in 2008. Several years ago Norbert Walter, the chief economist of the Deutsche Bank, said full employment could be attained with a general wage reduction of 20-30%. Other economists think that unemployment could be cut in two with that reduction. The widespread opinion that income support must be cut 30 to 50% corresponds to these “visions” of capital.

When Rurup says: “social spending is the Achilles heal of the labor market,” (FR 9/22/2003), this is only one variant of the “theory” that excessively high wages cause unemployment. Social spending, i.e. contributions to social security and spending for pensions, health care, the unemployed and persons needing care, must be lowered until full employment is reached.

However:

Firstly, capital uses the technical revolution to incessantly release workers entirely independent of the amount of wages. Industrial workers became massively redundant in the cycle from 1991 to 2000 when they renounced on 30% of their wages and social security payments declined.

Secondly, unit labor costs are decisive. These measure the relation of the total wage costs including social security contributions, wage continuation in case of sickness and so forth to the produced assets, that is the relation of wage costs per 1 billion Euro produced domestic product. The wage costs per unit, the piece-labor costs, declined considerably in industry in the 1980s. This is no wonder since sales increased a quarter with a third less working hours.

Unit labor costs fell and simultaneously a quarter of industrial employees were released. The increasing industrial productivity under the direction of capital is reflected in the long-term both in higher unemployment and in declining labor costs.

Thus cutting wages or so-called non-wage labor costs cannot be a means for combating unemployment in the crisis. Cutting wages is a means for increasing the profit of capital.

Increasing Productivity Leads to Falling Profit Rates

Why is it necessary to increase profits? Aren’t profits high enough? Increasing productivity leads to a growing existential uncertainty of paid workers and strangely enough to falling profit rates. The number of those producing the surplus value diminishes with growing productivity. On the other hand the capital invested in machines and tangibles increases. This cannot produce any surplus value but can only transfer value to the products.

Profit rates express the relation of the surplus value (profit) to the total invested capital. When the surplus value falls relative to the invested capital, the profit rates fall. This occurred in all industrial countries in the last decades according to analyses of the OECD and also in countries like the US where wages are low, social security contributions minimal, unemployment benefits not enough for the rent and income support for the unemployed unknown.

Profit rates fall. In my book “Nebensache Mensch” (Incidental Person, 2003), I explained in detail why and how capital reacts to this. In crises, the tendency of falling profit rates breaks through to new depressions.

Counteracting declining profit rates is central to capital in crises like our crisis. This explains the aggressiveness of the German government resolving ever more severe steps against paid workers.

Capital makes “exorbitantly high” wages responsible for unemployment because it wants to lower wages in the interests of its profit rates. This is also the project of the German government and its council of experts.

Capital makes “excessively high” social security contributions responsible for unemployment because it wants to reduce these contributions to raise its profit rates. This is also the intention of the German government. The CDU (centrist-conservative party of Helmut Kohl) and its Herzog commission today would like to lower contributions from 42% of the gross pay to 25%. Every percentage point gives 7.5 billion Euro in more profits. Social security spending for pensions and health care must be cut 40%

Capital makes “enormously high” profit taxes responsible because it wants to lower these taxes in the interest of its net profit rates. Capital will lower them in the midst of a crisis while the state doesn’t give a damn. The CDU strives for a uniform profit tax rate of 25%. The greater the tax cuts, the more spending must be cut. Billions are collected in reduced social benefits and personnel while the great coalition of the SPD (“Socialist” party of Gerhard Schroeder) and the CDU in Berlin pass on sensational tax cuts to capital and the rich. This is all sold as without alternative and as the general interest so the interests of a minority can be enforced against the majority.

Five Propaganda Lies

Numerous propaganda lies help in the necessary disinformation. They are on the same level as the supposed weapons of mass destruction with which Bush declared the war against Iraq as necessary to preserve humanity from terrorism. Ultimately cracking open the Iraqi “vault” was crucial for US capital, especially for the oil conglomerates.

a) The demographic development is responsible for the crisis of pension schemes.

The demographic development supposedly forces us to cut the pension schemes.

What is this demographic development? The Federal Labor Office defines it as a trend “that more older people leave gainful life than young persons move up” (Labor market statistics 2002). Expressed differently, fewer and fewer workers must feed more and more pensioners. Therefore the pensions should be lowered by a demographic factor when this relation changes to the disadvantage of employed persons.

Capital hinders young people more than ever in moving up in working life. 30% of all youths under 25 only have a job for a limited time. Many youths are jobless or in a holding pattern. With increased productivity, capital needs few young people who move up.

Capital also reduces the number of full-time paid workers and provides that more and more pensioners depend on a relatively declining number of employees. The problem is not that workers out of pure egoism remain childless and thus selfishly deprive the expected rising generation of capital. The problem is that capital needs fewer and fewer people at an employable working age. Simultaneously the wage level is depressed and the average time of employment is shortened.

On the other hand, the productivity of the still employed paid workers has risen considerably. Fewer and fewer payees feed more and more pensioners as fewer and fewer farmers feed more and more people and fewer and fewer industrial workers produce the necessary products for more and more people.

The cause of the crisis of pension schemes was the 1993 economic crisis, not birth development. The crisis of pension schemes is a crisis of worker pension schemes…

The crisis of pension schemes accelerating the crisis of state finances is caused by capital that uses the increased productivity to make more and more people superfluous.

Therefore the crisis must be solved at capital’s expense. A uniform pension scheme for everyone is necessary. If subsidies are needed with increased productivity, they must be financed from business taxes.

b) Non-wage labor costs must be lowered so investment can occur again

“We must reduce non-wage labor costs so more will be invested in our economy. That is the central challenge.” So chief-economist Joschka Fischer spoke for the German government (FR 5/7/2003). This is simply the dulling of the people by Germany’s most popular politician. Unemployment increases in the long-term because investment occurs and productivity rises. Unemployment increases in crisis because too much was invested and investments had to be destroyed. Unemployment is a product of investments in hundreds and thousands of billions of Euro.

c) Profit taxes must be lowered to increase investment

“Broad tax cuts are the best investment promotion programs” (Hundt, 3/14/2003, German Employees association).

Taxes were lowered in an unparalleled way in 2001 and a crisis immediately erupted in which investments were drastically driven down. Nevertheless these clichés were not retracted.

What happened with the 20-30 billion Euro that the state provided corporations and enterprises? No control or evaluation occurs here. Capital demands: “No benefits without return favors” from the unemployed. For itself, capital insists: benefits without any return favors, no evaluation, no control, no quality management and so forth.

Increasing capital is an end in itself. The goal is reached when profits rise 20-30 billion Euro. Therefore the tax reform was successful. Basta.
For 2-3 decades, capital has been seized by a strong weariness of investment caused by the fall of profit rates.

· The investment rate falls since investments are less rewarding with falling profit rates.

· To counteract the fall of profit rates, there is a strong tendency to throttle down investments and utilize the already invested capital better (lengthening machine running times and operating schedules and so forth). The total invested capital referring to profits diminishes.

· The need for investment falls when there are enormous over-capacities.

Capital exploitation itself is the brakeman on investments, not the assets mentality of wage-earners who insist on pensions or other social benefits.

d) No money exists.

Money for investing exists in over-supply. Money need not be gathered from pensioners, the sick and the unemployed. The increasing productivity obviously produces a surplus of more and more workers and an enormous oversupply of capital that could be described as the mass unemployment of capital.

Surplus capital increased by leaps and bounds in the 1990s. Total financial assets rose from 6,700 billion Euro in 1991 to 16,600 billion Euro in 2001 (for comparison, the annual gross domestic product amounted to 2,1000 billion Euro). The surplus capital that flowed in stocks, credits to the state, businesses and private persons and investment funds grew from 6,500 billion Euro in 1991 to more than 10,000 billion Euro in 2000 (German central bank). The extent of finance capital exploded while investments in industry, trade and transportation fell.

Credits and stocks helped change ownership relations. They encouraged the formation of mammoth monopolies that produced a greater number of pieces with fewer persons and made more workers unnecessary. Credits and the stock market boom increased the solvent demand of the state, businesses and consumers and made possible a growth that wouldn’t have occurred otherwise. Growth in Germany is just as credit-financed as in the US.

However credits are not a means for solving crises but ultimately intensify crises. They drive production far beyond solvent demand and aggravate crises.

Unfortunately credits must also be paid back. But when the over-production crisis breaks out, credits hand like millstones on businesses and the state and drag them down or ruin them. This shakes the finance system as a whole. The “monetary adjustments” that banks resolved for rotten credits, that is the credits that they had to write off, increased in 2002 to 32 billion Euro or four-fifths of corporate revenue.
The wealth of this society embodied in fossilized capital made possible by millions of paid workers lives its own life. Wealth becomes an additional threat even though the pensions can be effortlessly financed, the unemployed well nourished and state spending paid from it.

The only problem is a capitalism that spends its surplus capital for the vital needs of paid workers instead of for increasing capital would not be a capitalism any more. Still paid workers must strive for this goal. They must think first of all about themselves and not about promoting capital that is less and less able to utilize the productive energies of people.

The problems of state finances and social security can only be mitigated insofar as a large part of the surplus value is appropriated through business taxes. The profit tax cuts of the tax reform must be cancelled. The property tax must be reintroduced and the deficits of social security paid by the capital that ultimately causes these shortages. Capital should pay for the consequences of its trade just like those who cause an accident must be held responsible for the damages.

Advocating wage cuts and fighting to lower non-wage labor costs with the so-called Alliance for Work cannot be our interest. Nevertheless the German union DGB has done this. This mammoth German union wants to strengthen profits and capital although capital exploitation is the cause of the problem, not the solution.

a) The laziness of the unemployed causes their unemployment

At the beginning of the 2001 economic crisis, (German chancellor) Schroeder railed that the unemployed had no right to laziness. He commented that there was an open job for 7 unemployed. Then he threatened on 3/14/2003: “We (with Agenda 2010) set a clear signal for those people in our society unemployed for more than twelve months. In the future no one… will be allowed to recline to the burden of the community.”

In the meantime there are eleven unemployed for one open job. In the eyes of the chancellor, the reason was that the German government in the past allowed them to lean back to the burden of the community. This should finally end. Schroeder and Joschka Fischer concentrate on the long-term unemployed to “combat” the rising unemployment. But who are the long-term unemployed? 60% are older workers who are over 45. In large part, they are severely disabled and turned down for health reasons. Since the demand of capital for workers falls with increased productivity, the average duration of unemployment increases. More than half of the unemployed have been jobless for over a year. In 1971 they were 5%.

When the demand for workers falls on account of increased productivity, the released are called “weak performers” in the words of Infineon head Schumacher. However isn’t capital a problem group that sacrifices the experience of seniors to profit, squeezes and throws away the less efficient who can hardly do anything? Isn’t the problem that the increased productivity is used to lengthen annual working hours and life working hours, not to reduce working hours?

The SPD and the Greens foment animosity toward older workers. Why? Older workers cost too much. The German parties cut their time of unemployment benefits. They (including their so-called rebels who describe themselves as leftist) want to abolish unemployment assistance and reduce aid below the level of income support. They want to change the unemployed into social security recipients. All this should presumably remove the “false incentives” that encourage the unemployed not to want to work.

In reality the German government responding to employer associations wants to lower costs caused by the dismissed. The contributions to unemployment insurance are reduced.

The budget holes torn by lower taxes for capital should be stopped by cuts in spending for the unemployed and other weak performers whether in Wiesbaden or Berlin. The wage level is forced down. The lower the support and the stronger the pressure to accept any work for net wages at the level of income support as reasonable, the more the standard wages fall… The planned pressure that all those who find no job and have to do so-called charitable communal work for income support plus one Euro leads to driving out standard paid communal employees. The abolition of unemployment assistance and intensified exactions are massive attacks on the wage level, the standard wage system and the German DGB union…

Paid workers whether unemployed or employed must take responsibility for themselves. They may not abandon responsibility to capital and its parties…

Paid workers must learn to think independently, act independently and organize independently inside and outside the unions if they don’t want to perish. The nationwide demonstration on November 1, 2003 in Berlin is an opportunity to prove this independence.

The standpoint of capital is that the causal agents of unemployment and crises should pay the bill. This is not our standpoint. Capital itself caused the economic crisis, the crisis of state finances and the crisis of social security, not the unemployed or paid workers with their claimant mentality. Capital increasing its economic interests – measured in money –creates a ruthless claimant mentality and an unrestricted assets orientation that are realized at the expense of the whole society.
 
 

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