Labour market recession

Published : 29 Oct 2010, 03:11 PM
Updated : 29 Oct 2010, 03:11 PM

The Great Financial Crisis generated by stagnation in the matured capitalist economies has pushed labour into a troubled time that has increased tension in socio-political scenario. Long "labour market recession" worsens social outlook in many countries, says ILO's "World of Work Report 2010 – from one crisis to the next?"

It's not only poor countries that are facing this reality. The advanced capitalist nations are also having similar experience. The United States, UK, France, Germany, Japan are passing through a tense socio-political situation. China, the newly emerged economic power, and countries across Europe, Greece, Spain, Portugal, Ireland, Iceland, Latvia, Lithuania, Bulgaria, Italy, Poland, are experiencing the same.

Quickly vanishing social benefits, decreasing real wages, widening income inequality, and slashed down employment are an old "story" in advanced capitalist countries. Cutting down wages, pensions, etc., are now the "wise" austerity measures being taken by capital. The day before yesterday, it was in Greece; yesterday, it was in France; and today, it is in Britain. This is actually a violation of contract, and an act of snatching away of a portion of wage earners' income. The austerity measures, planned/implemented, are creating turmoil as labour finds no alternative other than fight for its rights that were achieved long ago. The easiest way capital finds is to put its burden on labour, its inherent tact. But "fiscal policy shifted to austerity …," the ILO report said, "if badly designed, will prolong the job crisis."

Europe has witnessed reactions to austerity measures on September 29, 2010. France has experienced this in September, and is witnessing in October, 2010. Spain and Portugal are not exceptions. Austerity cutbacks, however, are an economic "disaster", said Nobel Prize winner economist Joseph Stiglitz in early September. "If that [austerity] happens … the economic downturn will last far longer and human suffering will be all the greater." He warned that Europe was heading towards more economic difficulties if politicians cut back spending rather than calm down the financial markets. "If the UK, Germany or other countries [follow austerity policies], then it is going to have systemic consequences for Europe and the whole world." A country like Bangladesh cannot escape the impact either.

The ILO study said: employment "prospects have worsened significantly in many countries". If the present policies persist, a recovery in employment to pre-crisis levels will be delayed until 2015 in advanced economies. A year ago it was projected to be 2013. More than 8 million new jobs are still needed to return to pre-crisis levels in the emerging and underdeveloped countries.

This is the limit capital is bound within. "Unemployment" as Michal Kalecki wrote, "is an integral part of the 'normal' capitalist system" ("Political Aspects of Full Employment"). The Great Financial Crisis has only reiterated this fact.

"In … 35 countries … nearly 40 per cent of jobseekers have been without work for more than one year…", the ILO report said. Labour hence faces "significant risks of demoralisation, loss of self-esteem and mental health problems." Since the onset of the crisis, 29.4 million jobs were lost in 68 countries. Of these, the "Advanced countries" lost 18 million jobs. It was followed by the former Soviet republics, and the central and eastern Europe: 4.7 million. They were followed by Latin America and the Caribbean: 3.1 million. In Asia and the Pacific, and Africa the numbers were 2 million and 1.6 million respectively.

In at least 25 countries, ILO has found cases of social unrest related to the financial and economic crisis. A number of recovering emerging economies experienced social unrest over the level of wages and working conditions.

Protests, expanding horizontally and vertically, are increasing in frequency and force. Occupation of plants and blockades by workers are now a common feature in advanced bourgeois democracies. "Strikes for wage increases and improvements in conditions of work would create political tension" (Kalecki, op. cit.).

The ILO report informs that by the end of 2009, more than four million jobseekers had stopped looking for work in different countries for which information is available. This information speaks of a frustrating situation in the life of job seekers.

In more than three-quarters of 82 countries, the report said, people perceive that their quality of life and standard of living declined in 2009 compared to similar data from 2006. Satisfaction at work has deteriorated significantly among the people having job. A sense of unfairness was growing in 46 countries. In 36 countries, people have less confidence in governments now than prior to the crisis.

ILO suggests stimulating job creation, better-quality economic growth, strengthening of job-centred and active labour market policies, support vulnerable groups. It also suggests promoting a closer link between wages and productivity gains in surplus countries, and financial reform. The report said: Income-led growth depends on reinforced collective bargaining and social dialogue, well-designed minimum wage policies, and social protection systems.

The report, however, misses the fundamental flaws, repeatedly discussed by Paul Baran, Paul Sweezy, John Bellamy Foster, Fred Magdoff since long, in the matured capitalist economies: 1. the secular stagnation, 2. absence of opportunity for profit in the so-called real economy, 3. financialisation, and 4. shift of centre of gravity from productive economy to finance sector.

Labour is being blackmailed with threat of relocating plants to countries with low wages, low union intensity, and lax regulations. Labour is being compelled by capital to enter into new contracts with lower wages, longer working hours, etc. Workers, a few years back, in the Siemens factories in Rhineland Westphalia (Germany) had to accept extension of their workweek from 35 hours to 40 hours without additional compensation and revoking bonuses for Christmas and vacations. In return, the company promised not to relocate its factories to Hungary. Hundreds of companies are now in that bandwagon. DaimlerChrysler, Bosch, MAN and others moved with personnel cuts, longer working days/weeks, etc. Some European leaders consider the measures taken by multinationals as "corporate blackmail." Cutting down of unemployment insurance payments from 32 months to a maximum of 12 months have been done in some European countries. In France, small companies revoked the 35-hour workweek. In an automobile plant in Spain, workers had to agree to work an average of 37 minutes more each day, by shortening their break periods. Out sourcing, sub-contracting, export processing zone, special economic zones, etc. measures are well known weapons of capital to press labour.

Years ago Fred Magdoff and Harry Magdoff wrote: "These are difficult times for workers. … [L]abor is struggling to maintain existing wages and benefits … while conditions of workers in the periphery are even more difficult. ("Disposable Workers: Today's Reserve Army of Labor")

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Farooque Chowdhury contributes on socioeconomic issues