The silent British jobs crisis

Lazy and workshy

The Jarrow Marchers: feckless and workshy

In 1936, at the height of the Great Depression, unemployed workers from Jarrow marched almost 300 miles to Westminster, led by their Labour MP Ellen Wilkinson, in protest against poverty and unemployment. When they finally got there, their petition was accepted and little more was done. The last marcher died in 2003, though one man who took part in the final leg of the protest held on until 2012 – just long enough to see the same catastrophic mess happen all over again.

The Work and Pensions Secretary Iain Duncan Smith, who has done so little to help the unemployed yet thinks he has done so much, was involved recently in what is usually called a ‘heated debate’ with radio presenter James O’Brien (available here). While there was, as usual, more heat than light, O’Brien was the first interviewer I’ve heard to actually put the concrete figures – not just about unemployment, but about vacancies – to Mr Duncan Smith.

The government have

identified two key problems with the current system:

  • work incentives are poor, and
  • the system is too complex.

We are reforming the system to help people to move into and progress in work, while supporting the most vulnerable.

Reforming the benefit system aims to make it fairer, more affordable and better able to tackle poverty, worklessness and welfare dependency. We are committed to overhaul the benefit system to promote work and personal responsibility.

So the problem, in their estimation, is that there aren’t enough incentives to get into work. The welfare system has trapped people, and the most effective way of tackling the problem is by changing the psychology and incentives of the unemployed.

That’s what the government say. It’s also what the Daily Mail – owned by the 45-year old Viscount Rothermere, a friend of David Cameron who inherited his £1.02 billion fortune from his dad – would have you believe. But what are the actual facts?

According to the Office of National Statistics, there are 2.5 million people unemployed in the UK. That is 7.8% of the working population. The government will constantly tell you that this is down on last year, and indeed it is – by 0.6%. But before you pop out the champagne, it’d be wise to dig a little further.

A sudden burst of laziness?

A sudden burst of laziness?

The first thing to notice about this chart is that unemployment rather mysteriously correlates with the wider economic crisis. How strange! What stood at 5.3% in 2007 reached a peak of 8.5% in 2011. This seems to put into question the claim of the government that the problem is the welfare system, rather than the wider economy…

The second thing to notice is that, after the sudden rise in 2007/8, the unemployment rate was ever-so-slightly beginning to trend down by  2010. This is in keeping with the very tepid growth that stood when Gordon Brown left office. But then, under the Coalition, we see unemployment dramatically sharpen upwards again, to 8.5%. So the boasts of the government that unemployment is falling essentially amount to “We made it worse, and now we made it better again.” Except even ‘better again’ is a stretch: unemployment now is essentially exactly where it was when the Coalition came to power, with a hell of a lot of added misery in between.

So next time you hear a Tory (or a Lib Dem, if they even still exist) boasting that unemployment is falling, remember that.

Now how do these figures break down?

Oops!

Oops!

More than half have been unemployed for over six months. And a third have been unemployed for over a year. It is this final category that is known as the “long term unemployed”. Of those 879,000 long-term unemployed, 442,000 have been unemployed for more than two years. And for all the boasts of IDS and Co, this number has decreased by only 1000 since the summer.

So in Britain today there are: 2.5 million unemployed, of which 879,000 have been unemployed for more than a year. But I’m afraid it gets worse.

There are 974,000 unemployed people under 25, and this is up 11,000 since the summer. The youth unemployment rate in Britain is 20.8%. All that talk of a ‘lost generation’ is no exaggeration. And unfortunately, one of the first acts of the new coalition was to scrap Labour’s Future Jobs Fund, which it subsequently discovered was actually quite a success.

But no! Don’t let out a breath yet! It gets even worse.

The number of people underemployed – that is, people who are working part-time but would like (and in fact probably need) to work full-time – has risen by one million since the crisis began, now standing at 3.05 million people. This is 10.5% of the entire workforce.

ffs.

ffs.

So when you add it all together, there are 2.5 million people unemployed – without work at all – and 3.05 million people underemployed. In other words, there are 5.55 million people in the UK today who want full time work but do not have it.

So let’s recap for the final time before the cherry on the cake.

Unemployed: 2,500,000

Underemployed: 3,050,000

of which

Youth unemployed: 974,000

Long-term unemployed: 879,000

And how many vacancies are there in the UK? How many jobs have these lazy scroungers rejected?

Drum roll please!

“There were 487,000 job vacancies for November 2012 to January 2013…”

Oh.

Oh bollocks.

So there you have it. For the 2.5 million jobless in the UK today, there are just 487,000 vacancies. In other words, less than half the number of youth unemployed alone.

These are the facts you will rarely hear a government minister or apologist refer to. But they are there in black and white. And when they are raised in the IDS interview, his only response is to say ‘Well I didn’t say there was a magic wand’. Great, thanks!

There is a silent jobs crisis in Britain today, and all the government has done thus far is fiddle the statistics and make it worse. So the next time you hear a government minister say they are on the right track, remember what they choose to ignore.

Oh, and by the way Mr Cameron: there is an alternative.

Update: Since the time of writing – that is, in just sixteen hours – the unemployment rate has gone upIt now stands at 2.52 million. Most stark has been the case of under 25s: youth unemployment has risen from 974,000 to 993,000 – now standing at 21.2%. The total number of people wanting full-time work but unable to get it therefore stands at 5.57 million, with youth unemployment just under one million. Great job guys! Keep it up!

The Spirit of ’45 and the Spectre of ’79

The people made tremendous efforts to win the last war also. But when they had won it they lacked a lively interest in the social and economic problems of peace, and accepted the election promises of the leaders of the anti-Labour parties at their face value. So the “hard-faced men who had done well out of the war” were able to get the kind of peace that suited themselves. The people lost that peace. And when we say “peace” we mean not only the Treaty, but the social and economic policy which followed the fighting.

In the years that followed, the “hard-faced men” and their political friends kept control of the Government. They controlled the banks, the mines, the big industries, largely the press and the cinema. They controlled the means by which the people got their living. They controlled the ways by which most of the people learned about the world outside. This happened in all the big industrialised countries.

Great economic blizzards swept the world in those years. The great inter-war slumps were not acts of God or of blind forces. They were the sure and certain result of the concentration of too much economic power in the hands of too few men. These men had only learned how to act in the interest of their own bureaucratically-run private monopolies which may be likened to totalitarian oligarchies within our democratic State. They had and they felt no responsibility to the nation.

So reads the preface to ‘Let Us Face The Future‘, the 1945 Labour Party manifesto, which ushered in the most radical government in British history. In just six years, Clement Attlee’s leadership saw: the implementation of the Beveridge Report – including child benefit, universal pensions and sick pay; the nationalisation of the railways, water supply, electricity, gas, telecom and the mines; significant improvements in the conditions, hours and pay of workers; a deliberate policy of full employment; over a million new homes built, most of them council houses; and universal health coverage for the whole population in the form of the NHS. This is a remarkable record, especially when set against the misery that followed the First World War. It is this new political programme that Ken Loach’s documentary ‘The Spirit of ’45’ seeks to understand.

The film consists of interviews with ordinary people today (some who remember the Attlee Government, some who are experts in various fields), supplemented by archival footage of the ’45 election and the subsequent government. Sadly there was only one speech by Nye Bevan (I am constantly searching for audio of him speaking…), but there was an amusing party political broadcast by Clement Attlee, and fascinating footage of Winston Churchill being booed on the campaign trial by a crowd shouting “We want Labour! We want Labour!” Some of the stories of the people looking back were dreadful: one man whose mother died giving birth “for want of a pint of blood”; another who slept in a bed with hundreds of bugs and fleas. This was all very moving. But what of the political substance?

In a live question and answer session broadcast after the film, Loach explained that the title is very deliberate. In his account, the key factor was the new consciousness – the ‘spirit’ – that had developed during the war. Tony Benn, reliably appearing as always, gives expression to this new consciousness: “People began to say, if we can have full employment to kill Germans during the war, why can’t we have full employment to build homes after it?” This is undoubtedly correct. The ease with which the unemployment of the Great Depression had been abolished by the war, and the leading role suddenly taken by the state in the organisation of the economy (including temporary nationalisation of the mines and central planning of the railways), opened people’s eyes to the possibilities of a new economic model. Particularly interestingly, this was not merely a passive phenomenon, but was actively encouraged by the wartime coalition: copies of the Beveridge Report were distributed amongst the troops abroad, and they were ordered to form weekly political discussion groups. All rather Red Army!

So the film covers and articulates this new political spirit well. Following this general overview, we are treated to small histories of the major reforms: a section on health, a section on the railways, a section on housing, etc. I felt these sections were somewhat overreliant on personal anecdotes; actual facts and figures would have been helpful (ie. how many new houses were built; how and who did the government pay for the railways and mines?) But the personal stories did bring an important human element to it, with comedy and tragedy often together.

And it is on this note that we are listening to a cute little old man extol the greatness of these reforms, saying “Anybody who tried to attack all that, we should fight”, and then, suddenly, we cut to…

Satan in a skirt?

Satan in a skirt?

And this is where the problems start.

The arrival of Thatcher on screen was greeted with an amusing array of hissing and booing from the audience, and very little else from the film. No context for her rise to power is given. That she won three general elections comfortably is not even shown, let alone explained. No Winter of Discontent, no inflation or strikes, no problems whatsoever. In a mirror of the list of industries nationalised at the start of the film, at the end we are treated to a list of privatisations. Mrs Thatcher apparently swooped into the New Jerusalem, Satan in a skirt, and single-handedly destroyed all that the war generation had achieved.

The film from this point on becomes laced with simplicities. ‘Greed’ replaced ‘working together’. Thatcher ‘made it all about the individual’. No doubt Thatcher brought in (and/or was the product of?) a more individualistic age. But the binary distinction drawn between the selfless post-war era and the selfish Thatcher one is simply untenable. In fact, weren’t we told in this very same film that the only way Bevin was able to create the NHS was by “stuffing [the doctors’] mouths with gold”?

And it is in this contradiction that the film’s problems lie. Although Tony Benn does make passing comment that in many of the nationalised industries, “all that happened was you replaced the corporate manager with a bureaucratic manager”, this is generally glossed over. In fact, even at its peak the Attlee Government only nationalised 20% of the overall economy. The rest was left in private hands, as before (albeit, facing a far more powerful labour movement – to which we will come). In other words, contrary to the claims of some rabid Tories, Britain under Labour was never a socialist country. At best, it was an island of (particularly bureaucratic and state-centred) socialism in a sea of traditional capitalism. What new political consciousness had been birthed by depression and war found precious little room in which it could breathe. And while the railways and the mines – starved of investment for decades – did get the support they needed, the nationalisations set a pattern that became all too familiar in the post-war years: public ownership for failing companies, private ownership for successful ones (including, most crucially, the banks – Alistair Darling was to their left on this one…)

Perhaps it is worth considering the words of James Connolly, writing in 1899:

One of the most significant signs of our times is the readiness with which our struggling middle class turns to schemes of State or Municipal ownership and control, for relief from the economic pressure under which it is struggling. Thus we find in England demands for the nationalisation of the telephone system, for the extension of municipal enterprise in the use of electricity, for the extension of the parcel system in the Post Office, for the nationalisation of railways and canals…

But all this notwithstanding, we would, without undue desire to carp or cavil, point out that to call such demands ‘Socialistic’ is in the highest degree misleading. Socialism properly implies above all things the co-operative control by the workers of the machinery of production; without this co-operative control the public ownership by the State is not Socialism – it is only State capitalism…

Therefore, we repeat, state ownership and control is not necessarily Socialism – if it were, then the Army, the Navy, the Police, the Judges, the Gaolers, the Informers, and the Hangmen, all would all be Socialist functionaries, as they are State officials – but the ownership by the State of all the land and materials for labour, combined with the co-operative control by the workers of such land and materials, would be Socialism.

The great nationalisations of 1945 are certainly impressive. But the idealistic tint given them by the film does not accord with the complex reality. Other failures are also ignored: the House of Lords remained pretty much untouched; so did the monarchy, and the landowning aristocracy. The public schools were not addressed, and nor were the concentrations of press power that soon set about a propaganda campaign against the government.  Social matters, such as women’s rights or gay rights, were left for future generations. (And if it seems unfair to expect such enlightenment in 1945, it’s worth remembering that the Bolshevik Revolution had legalised homosexuality, abortion and divorce nearly thirty years before). Although, to be fair, it wasn’t just negatives; other great achievements – such as independence for India – were also left out.

Loach defended his film in the Q&A (alongside wunderkind Owen Jones and the awesome Dot Gibson from the National Pensioners Convention) by appealing to limited timing, and that’s a fair point (though at only ninety minutes long, it did go by very quickly). But by not even touching on the 1970s – to my mind, as important as the 1930s for the lessons it provides – the strength of analysis is lost, and the documentary can be fairly accused of at least mild nostalgia.

So what happened in the 1970s? Why did the post-war consensus break down? It’s a crucial question. Just as the spirit of ’45 did not come out of nowhere, the spirit of ’79  (or perhaps, more accurately, the spectre of ’79) was shaped by the struggles that preceded it. In the case of the 1970s, these were the precise opposite of the struggles of the 1930s. Not deflation, but inflation. Not mass unemployment, but a labour shortage. When Ted Heath held the 1974 election on the slogan ‘Who governs?’, the answer was pretty clearly ‘Not you mate’. Difficulties had begun around the world in 1968/69 as inflationary pressures rose, and economic and political militancy increased. The ‘Siouxante-Huitards’ – ’68ers – had not experienced war or depression. The new prosperity of the ‘Golden Age of Capitalism’ created new consumer and wage expectations, and these came to a head in the late 60s. As labour militancy increased, Barbara Castle – then Employment Secretary – offered a white paper called In Place of Strife as an attempt to curb strikes. But this was considered an unacceptable intrusion by the union leadership, and with the support of some in the Labour cabinet – including, ironically, James Callaghan – the bulk of the proposal was dropped and a voluntary concordat formed with the unions instead. Additional factors in the inflation rise may include increased American armaments spending as the Vietnam War escalated, and the devaluation of sterling in 1967. But it was in the following decade that the monster really took off.

Babs > Maggie

Babs > Maggie

Three factors came together in the 1970s to produce explosive rates of inflation. The first was the sharp rise in the oil price in 1973 (following the Yom Kippur War and the subsequent OPEC embargo) and 1979 (following the Iranian Revolution). The second was the liberalisation of monetary policy around the world: most importantly the final destruction of the Bretton Woods system when Richard Nixon closed the gold window in 1971 (and the inflationary expectations that arose thereafter), but also through more specific deregulation. In Britain for example, the Heath Government introduced ‘Competition and Credit Control’, a new policy whereby the Bank of England no longer directly regulated the creation and allocation of credit. The shocking result was a large increase in the money supply.

But most important of all was the historically unprecedented bargaining power of labour. Here is a chart showing crude oil prices since 1970 set against inflation in the United States…

https://i0.wp.com/static.seekingalpha.com/uploads/2011/3/8/saupload_oil_inflation.png

Here is the inflation rate in Britain…

The inflationary parallels (both between Britain and America, and between inflation and the price of oil) are remarkable. But notice something else: there have been steep rises in the oil price since. Yet these have not led to similar bursts of inflation. One of the major explanatory differences must be the following:

The bargaining position of the working class grew dramatically in the period following the Second World War. (In fact, it was growing during the Depression and the war itself, but unemployment and price controls respectively kept wage demands in check). But it was precisely in that militant period of 1968-79 that trade union membership peaked. This empowered the workers to demand wage increases to meet the price increases, and this in turn set off an inflationary spiral. The initial crisis of ’73-75 came to an end with the end of the OPEC embargo, slightly more restrictive monetary policy, and the election of a Labour government. But as Hegel famously said, all historical events must happen twice. The return of the inflationary crisis in the late 1970s made it clear that this was a systemic problem. And the new Conservative leader was the only one in Britain who showed an understanding of what this meant.

The distribution of income between wages and profits – between labour and capital – is a political phenomenon. It occurs according to the balance of economic power in society. In the post-war era, and particularly from 1968 onwards, the balance of power was significantly in the hands of the workers. This power allowed them to acquire an ever-greater share of revenue:

http://duncanseconomicblog.files.wordpress.com/2011/04/wage-share.jpg

But this presents an almost insurmountable problem for a capitalist economy. For just as growth depends on investment, under capitalism investment depends on profit. It is the profitability of a company, and of an economy more generally, which provides both the funds and the motive for new investment. But when the pool of revenue accruing to the capitalist begins to dry up, so too does the basic mechanism of the capitalist economic system. If capitalism is to be preserved, the barriers to its profitability must be smashed.

It's the class war, stupid!

It’s the class war, stupid!

As you can see, this is precisely what occured. The great Marxian economist Michal Kalecki not only created the Keynesian solution to unemployment three years before Keynes, he also identified the limitations to the liberal-Keynesian model in 1944 – before it was even implemented:

We have considered the political reasons for the opposition to the policy of creating employment by government spending.  But even if this opposition were overcome — as it may well be under the pressure of the masses — the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders.  Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a ‘disciplinary measure.  The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow.  Strikes for wage increases and improvements in conditions of work would create political tension.  It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire, and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests.  But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders.  Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.

Neoclassical economists refer today, without a hint of irony, to the ‘natural rate of unemployment’. As in so many things, Marx pre-empted them by a century, in discussing the ‘reserve army of the unemployed.

This then is the explanation for Thatcherism, and this was what was lacking in Ken Loach’s film. Thatcherism was not the product of one woman, nor was it the product of ideas alone. Thatcherism was the only logical solution to the crisis short of moving beyond capitalism itself – something that obviously wasn’t on her radar. While most of the left were woefully ill-equipped to understand the historic question before them, some did. But that is a topic for another day.