Deliberate Unemployment
August 5, 2000, Financial Post The current economic system is dependent on having large numbers of unemployed. There must always be more people than there are jobs to keep the economic system going to ensure low wages and a work force willing to take low wages and poor working conditions. "Meanwhile the U.S. unemployment rate edged down to 4%... normally a move in Economists prescribe how much unemployment is needed to keep wages down and workers "flexible"; this measure is called the NAIRU, the non-accelerating inflation rate of unemployment. (Hazel Henderson) In Canada, they have determined the 'natural' rate of unemployment to be 8%. This is something you can be sure you will never learn about in your job club. That means if there were suddenly more jobs and the unemployment rate fell below that level, they would raise interest rates to "cool down" the economy so as to create more "slack" in the labour market.
"The more rigid wages and salaries are, the more unemployment is necessary to convince individuals that it is appropriate to accept smaller increases in income." Linda McQuaig, quoting an economist from the Bank of Canada in Shooting the Hippo, 1993, (pg. 151)
A Bank of Montreal economist writes "Past experience shows that whenever the jobless rate falls below this rate, [NAIRU] wage inflation, and ultimately price inflation, accelerates." Thus the unemployed have a very important job: they are a safety net for the wealthy.
"While that may sound like bad news to most folks [the loss of 40,000 jobs] it is the stuff dreams are made of for stock mad investors who have been worried
[about] a booming U.S. economy."
Globe & Mail, So even if we suddenly had a magic pill that would make every unemployed and poor person a super-worker: skilled, healthy, eager and with the 'right attitude', the current economy still could not function without large numbers of unemployed people. "Everybody, including the NDP, boast about their ability to create more jobs. See also: NAIRU - Economic Paradox Of course, the creation of unemployment, underemployment and ever-lowering wages also makes worse the problem of economic gluts and over capacity. This seems to be short sighted stupidity in the extreme. Businesses need to keep cutting costs whenever possible so they lower wages, automate jobs or lay off people as much possible. But what is good for individual businesses is bad for them on a large scale. What they are essentially doing is firing their customers.
This is discussed in a short satirical novel called The Parachute: "Look at your payroll today compared with 20 years ago. The customers you have manufactured in the past few decades belong to the class you are now working to destroy. Who is going to be buying your shoes tomorrow?" (by Sinclair Dumontais, anonymous pen name of a marketing insider) With a growing wealth gap, the "global oversupply of commodities is a direct consequence of the decline in purchasing power and rising levels of poverty." The Globalization of Poverty by Michel Chossudovsky, 2003 (See also the section Gluts of Goods) There is much in the news these days (2005/6) about the booming economy and high consumption. This came from the cuts in interests rates that happened in 2001 when things were really slumping and layoffs were being announced almost daily in the business section of newpapers. But now interest rates have been going up again. "It was easy money that helped fuel a boom in housing and consumer spending on big-ticket items, and each quarter-percentage point increase seemed barely perceptible to most consumers and business executives. But two years later, the overnight rate is at 5 percent, and the cumulative impact is increasingly apparent across the most rate-sensitive segments of the economy, including housing, automobile sales and financial markets." (MSNBC, June 28, 2006) One could as why, if endless economic growth is the goal and people are supposed to be working harder and harder, why would they raise interest rates to "cool" things off? "The Federal Reserve is almost certain to raise interest rates for the 17th successive time to 5.25 per cent at the end of its two-day policy meeting on Thursday." (Financial Times, June 28 2006) Could it be that they want to use unemployed people to protect wealth from "inflation" and to keep wages low? A command economy is really one where people with money command those without. Interest rates are raised if those with money feel their command slipping and they want to discipline the workers. Next: Summary |
