Misrepresenting the Causes of Unemployment

Pervasive distortion of what 'causes' unemployment undermines the possibility of responding effectively.

By John Treat and Enver Motala · 15 Apr 2014

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Picture: Betakit
Picture: Betakit

While finding solutions to South Africa’s high rates of unemployment continues to occupy a leading place in national debate, ongoing strikes over wages and working conditions continue to be met with threats of job cuts from employers. In a recent Business Report article called, “Job losses loom amid platinum strike”, Implats executive Johan Theron is quoted: “If the strike continues in the months ahead, we will unfortunately be forced to apply for a section 189 process.”

The statement begs a question: Forced by whom? If striking workers can “force” their employer to lay them off, presumably they could “force” the employer to accede to their demands. Alternatively, if “market forces” or “government” compel employers, why then should workers shoulder the burden?

This raises an underlying question about what “causes” unemployment. Mainstream discussion of these issues is dominated by voices allied to the corporate sector, often to the exclusion of other perspectives. For this reason, such discussions are shaped by assumptions – often unstated – about the nature and causes of unemployment. The resulting bias has profound implications for the particular interventions that are considered when addressing the problems of joblessness, and to achieve a social order that is more socially just, more politically tenable, and more ecologically viable.

To pierce through the fog, it is useful to step back and consider the broader range of factors that together determine unemployment levels at a given moment, and to examine the differences among them.

Among the full range of factors that contribute to unemployment, we might recognise three categories in particular: (a) real contributing factors that are portrayed more or less factually in mainstream reporting; (b) real contributing factors that are portrayed in a biased way; and, (c) alleged contributing factors that reflect deep ideological distortions. Any such categorisation introduces a degree of simplification; our concern is not to achieve some definitive categorisation, but to highlight patterns in the dominant discourse regarding unemployment, and to offer an interpretation of these trends that makes sense of them under present conditions and in light of existing social forces.

First, then, we might consider contributing factors to unemployment that are effectively ‘external’ to the productive relation at the level of the firm. Here we might think of: (a) technological developments outside the firm that increase competitive pressure; (b) the availability of cheap imports; (c) price or demand fluctuations of primary commodities; (d) declining mineral reserves. Such factors are ‘external’ to the productive relation in the sense that they are essentially beyond the control of the affected parties, at least in the near term.

For instance, when AngloGold announces plans to cut 400 jobs due to a drop in the price of gold, we can recognise a causal link: fluctuations in commodity prices impose constraints on the firm that call for some adjustment. To be clear, recognising that link does not in itself justify any particular ‘solution’ – in this case, the ‘solution’ of laying off 400 workers.  This contributing factor itself is not on its own a causal basis to exclude alternative solutions – e.g., protective measures or subsidies by the state. The exclusion of such options is a policy choice, made in response to the political pressures through which neoliberalism has been imposed.

A second category of contributing factors to unemployment can best be understood as similarly real, but which are often either ignored or portrayed tendentiously. Two cases are especially noteworthy.

Withholding of investment: When it is noted at all in mainstream reporting, decisions by holders of capital not to invest in production is usually described in terms of ‘investor caution’, ‘weak sentiment’, etc. What is striking here is that it is simply taken for granted that those who hold capital have absolute discretion regarding its disposition. Such a framing elides the social origins of capital: the fact that such capital originates in some combination of past dispossession and expropriation of the value of contributed labour.

An alternative framing might take the social origins of capital more seriously, and with it the implication that holding capital carries social obligations, irrespective of the wishes of the holder. “Corporate social responsibility” programmes implicitly recognise the inescapability of this logic, although their purpose is precisely to limit its effects and repurpose it for marketing purposes; the collective inadequacy of such programmes to address the systemic problems capitalism has wrought on South Africa is plain for all to see.

Off-shoring of profits: The removal of profits from the country in which they are created is often described in mainstream reporting as ‘repatriation’. The underlying metaphor is worth noting: the suggestion seems to be that the claim of ownership over the originally invested capital is tantamount to ‘paternity’, and the nationality of the ‘parent’ (capital) extends to the child (profits). Thus the ‘repatriation’ of profits generated in South Africa to the United Kingdom is likened to bringing home a child who has suffered the indignity of a colonial birth. Critics might refer to this phenomenon as ‘capital flight’. Even ‘kidnapping’.

There is a third category of factors that are routinely blamed for unemployment, but which when examined more closely are difficult to maintain: “high wage demands”, “low productivity”, “lack of skills”, “frequency of strikes”, “excessive regulation”.

There are two striking features that distinguish this category. First, these are often invoked essentially without argument or evidence: their role in “causing” unemployment has surreptitiously come to enjoy the status of “common sense”. Second, each arises directly from the contested power relation at the heart of capitalist enterprise.

This overlap is not accidental. The bias in how these factors are described by the dominant voices in the press arises precisely from their proximity to that power relation; it both reflects and confirms the corporate bias of mainstream discourse on these issues.

The pervasiveness of this bias must be attributed to the pressure to keep wages down – a pressure that is ever-present under capitalism at the level of the firm, due to the unrelenting pressure to maximise profits. The negative effects of suppressed wages, however, have wider social and economic effects beyond the firm through their suppression of demand across the broader economy.

The actual contribution of any of these factors to a loss of jobs cannot be assessed in isolation from consideration of the macroeconomic and socio-political context in which a dispute arises. To ignore that context is already to have taken a political decision that disadvantages workers. This matters because boosting workers’ wages can translate into a rise in demand for goods and services, and thus into potential jobs.

There is an urgent need to tackle the challenges posed by South Africa’s endemic unemployment. The dominant discourse itself is often part of the problem. It is vital that we eliminate its distortions, that we recognise the structural nature of unemployment under capitalism, and that we begin to plan more honestly and more ambitiously for work and livelihoods and a society beyond neoliberalism.

Treat is an independent researcher, writer and advocacy strategist. Motala is a researcher at the Nelson Mandela Institute, University of Fort Hare.

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15 Apr

But Is It a LABOUR Market?

Great article and very timely and a good antidote to the analysis that is provided by the mainstream media and economists. Given we have Schusslerian and Roodtian economics that are to guide us to neoclassical nirvana economically, we need to ask do we have a labour market that behaves like a market. We have had low wage increases for those on the lower percentiles. This is the opposite of what should happen. Low wages should lead to decreased unemployment...so great that you both move to explore the real issues instead of the fantastical notions that keep the mainstream occupied...

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Rory Verified user
19 Apr

Economic Freedom

The authors are pointing to the systemic causes of unemployment. These causes will virtually always be ignored or down played by those in the mainstream. This is not at all surprising as people in the mainstream are not those who are suffering under the lash of the systemic causes. It is therefore highly unlikely that such people will question the system as such because after all it is what is feeding them. It takes people who are to some extent able to distance themselves from the system who are able to question it.

If one starts from an understanding that we, from birth, are actors within the economic sphere both as producers and consumers then we have a solid measuring rod with which to assess the effectiveness of, any economic system, in fostering both aspects of our nature. Our current economic system is heavily reliant on the dominance of the consumer aspect of our natures.

The players in the system mouth concerns about the high levels of unemployment extant in the system but can only offer solutions to reduce these high levels which fall within a consumerist paradigm. In other words, they call for more jobs to be created in the formal [consumer oriented] economy and shout about all the impediments to that happening. There is absolutely no recognition of the fact that, through how our money system is currently organised, the current economic system offers absolutely nothing to those who are not already in the system. The unemployed are not in the system so their only recourse is to find employment from someone who is already in the system and they clearly cannot, that is why they are unemployed. They are in a double bind not of their own making. The current economic system only offers a way forward to those who are employed in the formal economy. It only recognises the productive aspect of the unemployed if that aspect is put to work by someone who is already in the formal economy, i.e. has money and access to money.

All economic life is based on the voluntary exchange of goods and services.

Once money is introduced as facilitator of these exchanges however it becomes, in the ordinary person's mind, an essential component of the process of exchange with others. Thus everybody, whether currently in possession of money or not, should have access to money so that they can freely enter into the process of exchange. The current money system needs to be changed so that those currently without money can be issued with new money, as and when they need it, for making exchanges. Obviously there would need to be an upper limit on the amount of new money that can be issued to any one person but the amount of new money issued to any one person would be reduced whenever that person received money from other people in exchange for goods or services that that person supplied to them. See 'The Physics of Money' on my blog at http://roryshort.blogspot.com/

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MartinC Verified user
20 Apr

Too Much Labour

The amount of labourers in China is huge and well known for the lack of humane treatment by their employers. However in recent years the scales have been tipping. Availability of labour has decreased and companies started to struggle keeping labourers. Labourers started to leave jobs to work for companies that offer higher wages.

The South African labour market is very big. I've seen statistic that 95% of South Africans are labourers. Which means that employers can take the stance that labour is 'freely' available.

There is only two ways in which this can change.

1. We follow the leadership of President Mandela when he said we should study. In other words start to move people out of the labour market thus shrinking the amount of labourers, this making labour more valuable for employers

2. We do it the same way the Chinese did it. Work hard and become a manufacturer (not mining) power house. Government and businesses work together to set policies that favour long term goals and address the cheap import, high material price (we import metal cheaper than we can buy it from local sources)

Only with these two ways will it be possible. Trying to point finger at corporate for being greedy is like asking a dog to stop barking. It is what they do. The labour market must know that the scale can tip but it comes through hard work, not complaining.

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