Unemployed? You’re really, really not alone

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Radicals refer to the global unemployed as an Army and the statistics behind this global army are truly astonishing. Contrary to what some might wish us to think, unemployment is the norm, as this article shows. No wonder the global economy is struggling. What follows is an excerpt from a longer article on the subject written in a Marxist context, but the general information is worth the read.

The Global Reserve Army

In order to develop a firmer grasp of this issue it is crucial to look both empirically and theoretically at the global reserve army as it appears in the current historical context—and then bring to bear the entire Marxian critique of imperialism. Without such a comprehensive critique, analyses of such problems as the global shift in production, the global labor arbitrage, deindustrialization, etc., are mere partial observations suspended in mid-air.

The data on the global workforce compiled by the ILO conforms closely to Marx’s main distinctions with regard to the active labor army and the reserve army of labor. In the ILO picture of the world workforce in 2011, 1.4 billion workers are wage workers—many of whom are precariously employed, and only part-time workers. In contrast, the number of those counted as unemployed worldwide in 2009 consisted of only 218 million workers. (In order to be classified as unemployed, workers need to have actively pursued job searches in the previous few weeks). The unemployed, in this sense, can be seen as conforming roughly to Marx’s “floating” portion of the reserve army.

A further 1.7 billion workers are classified today as “vulnerably employed.” This is a residual category of the “economically active population,” consisting of all those who work but are not wage workers—or part of the active labor army in Marx’s terminology. It includes two categories of workers: “own–account workers” and “contributing family workers.”

“Own-account workers,” according to the ILO, encompasses workers engaged in a combination of “subsistence and entrepreneurial activities.” The urban component of the “own-account workers” in third-world countries is primarily made up of workers in the informal sector, i.e. street workers of various kinds, while the agricultural component consists largely of subsistence agriculture. “The global informal working class,” Mike Davis observed in Planet of the Slums,“is about one billion strong, making it the fastest-growing, and most unprecedented, social class on earth.”

The second category of the vulnerably employed, “contributing family workers,” consists of unpaid family workers. For example, in Pakistan “more than two-thirds of the female workers that entered employment during 1999/00 to 2005/06 consisted of contributing family workers.”

The “vulnerably employed” thus includes the greater part of the vast pools of underemployed outside official unemployment rolls, in poor countries in particular. It reflects the fact that, as Michael Yates writes, “In most of the world, open unemployment is not an option; there is no safety net of unemployment compensation and other social welfare programs. Unemployment means death, so people must find work, no matter how onerous the conditions.” The various components of vulnerably employed workers correspond to what Marx described as the “stagnant” and “latent” portions of the reserve army.

Additionally, many individuals of working age are classified as not belonging to the economically active population, and thus as economically inactive. For the prime working ages of 25–54 years this adds up, globally, to 538 million people in 2011. This is a very heterogeneous grouping including university students, primarily in wealthier countries; the criminal element engendered at the bottom of the capitalist economy (what Marx called the lumpenproletariat); discouraged and disabled workers, who have been marginalized by the system; and in general what Marx called the pauperized portion of the working class—that portion of working age individuals, “the demoralized, the ragged,” and the disabled, who have been almost completely shut out of the labor force. It is here, he argued, that one finds the most “precarious…condition of existence.” Officially designated “discouraged workers” are a significant number of would-be workers. According to the ILO, if discouraged workers are included in Botswana’s unemployment rate in 2006 it nearly doubles from 17.5 percent to 31.6 percent.

If we take the categories of the unemployed, the vulnerably employed, and the economically inactive population in prime working ages (25–54) and add them together, we come up with what might be called the maximum size of the global reserve army in 2011: some 2.4 billion people, compared to 1.4 billion in the active labor army. It is the existence of a reserve army that in its maximum extent is more than 70 percent larger than the active labor army that serves to restrain wages globally, and particularly in the poorer countries. Indeed, most of this reserve army is located in the underdeveloped countries of the world, though its growth can be seen today in the rich countries as well. The breakdown in percentages of its various components can be seen in Chart 1.

Chart 1. The Global Workforce and the Global Reserve Army

The Global Reserve Army of Labor and the New Imperialism, chart 2

Notes: The Proportion of “vulnerably employed” and “unemployed” were estimated based on percentages from the “Global Employment Trends” reports cited below. The chart includes total world population (15 years and over) excluding the economically inactive population less than 25- and greater than 54-years of age.

Sources: International Labour Office (ILO), “Economically Active Population Estimates and Projections (5th edition, revision 2009),” LABORSTA Internet (Geneva: International Labour Organisation, 2009); ILO “Global Employment Trends,” 2009, 2010 and 2011 (Geneva: International Labour Office).

The enormous reserve army of labor depicted in Chart 1 is meant to capture its maximum extent. Some will no doubt be inclined to argue that many of the workers in the vulnerably employed do not belong to the reserve army, since they are peasant producers, traditionally thought of as belonging to non-capitalist production—including subsistence workers who have no relation to the market. It might be contended that these populations are altogether outside the capitalist market. Yet, this is hardly the viewpoint of the system itself. The ILO classifies them generally, along with informal workers, as “vulnerably employed,” recognizing they are economically active and employed, but not wage workers. From capital’s developmental standpoint, the vulnerably employed are all potential wage workers—grist for the mill of capitalist development. Workers engaged in peasant production are viewed as future proletarians, to be drawn more deeply into the capitalist mode.

In fact, the figures we provide for the maximum extent of global reserve army, in an attempt to understand the really-existing relative surplus population, might be seen in some ways as underestimates. In Marx’s conception, the reserve army also included part-time workers. Yet, due to lack of data, it is impossible to include this element in our global reserve army estimates. Further, figures on the economically inactive population’s share of the reserve army include only prime age workers between 24 and 54 years of age without work, and exclude all of those ages 16–23 and 55–65. Yet, from a practical standpoint, in most countries, those in these ages too need and have a right to employment.

Despite uncertainties related to the ILO data, there can be no doubt about the enormous size of the global reserve army. We can understand the implications of this more fully by looking at Samir Amin’s analysis of “World Poverty, Pauperization, and Capital Accumulation” in Monthly Review in 2003. Amin argued that “Modern capitalist agriculture—encompassing both rich, large-scale family farming and agribusiness corporations—is now engaged in a massive attack on third world peasant production.” According to the core capitalist view propounded by the WTO, the World Bank, and the IMF, rural (mostly peasant) production is destined to be transformed into advanced capitalist agriculture on the model of the rich countries. The 3 billion plus rural workers would be replaced in the ideal capitalist scenario, as Amin puts it, by some “twenty million new modern farmers.”

In the dominant view, these workers would then be absorbed by industry, primarily in urban centers, on the model of the developed capitalist countries. But Britain and the other European economies, as Amin and Indian economist Prabhat Patnaik point out, were not themselves able to absorb their entire peasant population within industry. Rather, their surplus population emigrated in great numbers to the Americas and to various colonies. In 1820 Britain had a population of 12 million, while between 1820 and 1915 emigration was 16 million. Put differently, more than half the increase in British population emigrated each year during this period. The total emigration from Europe as a whole to the “new world” (of “temperate regions of white settlement”) over this period was 50 million.

While such mass emigration was a possibility for the early capitalist powers, which moved out to seize large parts of the planet, it is not possible for countries of the global South today. Consequently, the kind of reduction in peasant population currently pushed by the system points, if it were effected fully, to mass genocide. An unimaginable 7 percent annual rate of growth for fifty years across the entire global South, Amin points out, could not absorb even a third of this vast surplus agricultural population. “No amount of economic growth,” Yates adds, will “absorb” the billions of peasants in the world today “into the traditional proletariat, much less better classes of work.”

The problem of the absorption of the massive relative surplus population in these countries becomes even more apparent if one looks at the urban population. There are 3 billion plus people who live in urban areas globally, concentrated in the massive cities of the global South, in which people are crowded together under increasingly horrendous, slum conditions. As the UN Human Settlements Programme declared in The Challenge of the Slums: “Instead of being a focus of growth and prosperity, the cities have become a dumping ground for a surplus population working in unskilled, unprotected and low-wage informal service industries and trade.”

For Amin, all of this is tied to an overall theory of unequal exchange/imperialist rent. The “conditions governing accumulation on a world scale…reproduce unequal development. They make clear that underdeveloped countries are so because they are superexploited and not because they are backward.” The system of imperialist rent associated with such superexploitation, reaches its mature form and is universalized with the development of “the later capitalism of the generalized, financialized, and globalized oligopolies.”

Prabhat Patnaik has developed a closely related perspective, focusing on the reserve army of labor in The Value of Money and other recent works. He begins by questioning the standard economic view that it is low labor productivity rather than the existence of enormous labor reserves that best explains the impoverishment of countries in the global South. Even in economies that have experienced accelerated growth and rising productivity, such as India and China, he argues, “labour reserves continue to remain non-exhausted.” This is because with the high rate of productivity growth (and labor displacement) associated with the shift toward production of high-technology goods, “the rate of growth of labour demand…does not adequately exceed the rate of growth of labor supply”—adequately enough, that is, to draw down the labor reserves sufficiently, and thus to pull wages up above the subsistence level. An illustration of the productivity dynamic and how it affects labor absorption can be seen in the fact that, despite rock-bottom wages in China, Foxconn is planning to introduce a million robots in its plants within three years as part of its strategy of displacing workers in simple assembly operations. Foxconn currently employs a million workers in mainland China, many of whom assemble iPhones and iPads.

Patnaik’s argument is clarified by his use of a dual reserve army model: the “precapitalist-sector reserve army” (inspired by Luxemburg’s analysis) and the “internal reserve army.” In essence, capitalism in China and India is basing its exports more and more on high-productivity, high-technology production, which means the displacement of labor, and the creation of an expanding internal reserve army. Even at rapid rates of growth therefore it is impossible to absorb the precapitalist-sector reserve army, the outward flow of which is itself accelerated by mechanization.59

Aside from the direct benefits of enormously high rates of exploitation, which feed the economic surplus flowing into the advanced capitalist countries, the introduction of low-cost imports from “feeder economies” in Asia and other parts of the global South by multinational corporations has a deflationary effect. This protects the value of money, particularly the dollar as the hegemonic currency, and thus the financial assets of the capitalist class. The existence of an enormous global reserve army of labor thus forces income deflation on the world’s workers, beginning in the global South, but also affecting the workers of the global North, who are increasingly subjected to neoliberal “labour market flexibility.”

In today’s phase of imperialism—which Patnaik identifies with the development of international finance capital—“wages in the advanced countries cannot rise, and if anything tend to fall in order to make their products more competitive” in relation to the wage “levels that prevail in the third world.” In the latter, wage levels are no higher, “than those needed to satisfy some historically-determined subsistence requirements,” due to the existence of large labor reserves. This logic of world exploitation is made more vicious by the fact that “even as wages in the advanced countries fall, at the prevailing levels of labor productivity, labor productivity in third world countries moves up, at the prevailing level of wages, towards the level reached in the advanced countries. This is because the wage differences that still continue to exist induce a diffusion of activities from the former to the latter. This double movement means that the share of wages in total world output decreases,” while the rate of exploitation worldwide rises.

What Patnaik has called “the paradox of capitalism” is traceable to Marx’s general law of accumulation: the tendency of the system to concentrate wealth while expanding relative (and even absolute) poverty. “In India, precisely during the period of neoliberal reforms when output growth rates have been high,” Patnaik notes,

there has been an increase in the proportion of the rural population accessing less than 2400 calories per person per day (the figure for 2004 is 87 percent). This is also the period when hundreds of thousands of peasants, unable to carry on even simple reproduction, have committed suicide. The unemployment rate has increased, notwithstanding a massive jump in the rate of capital accumulation; and the real wage rate, even of the workers in the organized sector, has at best stagnated, notwithstanding massive increases in labor productivity. In short our own experience belies Keynesian optimism about the future of mankind under capitalism.

In the advanced capitalist countries, the notion of “precariousness,” which Marx in his reserve army discussion employed to describe the most pauperized sector of the working class, has been rediscovered, as conditions once thought to be confined to the third world, are reappearing in the rich countries. This has led to references to the emergence of a “new class”—though in reality it is the growing pauperized sector of the working class—termed the “precariat.”

At the bottom of this precariat developing in the rich countries are so-called “guest workers.” As Marx noted, in the nineteenth century, capital in the wealthy centers is able to take advantage of lower-wage labor abroad either through capital migration to low-wage countries, or through the migration of low-wage labor into rich countries. Although migrant labor populations from poor countries have served to restrain wages in rich countries, particularly the United States, from a global perspective the most significant fact with respect to workers migrating from South to North is their low numbers in relation to the population of the global South.

Overall the share of migrants in total world population has shown no appreciable change since the 1960s. According to the ILO, there was only “a very small rise” in the migration from developing to developed countries “in the 1990s, and…this is accounted for basically by increased migration from Central American and Caribbean countries to the United States.” The percentage of adult migrants from developing to developed countries in 2000 was a mere 1 percent of the adult population of developing countries. Moreover, those migrants were concentrated among the more highly skilled so that “the effect of international migration on the low-skilled labour force” in developing countries themselves “has been negligible for the most part…. Migration from developing to developed countries has largely meant brain drain…. In short,” the ILO concludes, “limited as it was, international migration” in the decade of the 1990s “served to restrain the growth of skill intensity of the labour force in quite a large number of developing countries, and particularly in the least developed countries.” All of this drives home the key point that capital is internationally mobile, while labor is not.

If the new imperialism has its basis in the superexploitation of workers in the global South, it is a phase of imperialism that in no way can be said to benefit the workers of the global North, whose conditions are also being dragged down—both by the disastrous global wage competition introduced by multinationals, and, more fundamentally, by the overaccumulation tendencies in the capitalist core, enhancing stagnation, and unemployment.

Indeed, the wealthy countries of the triad (the United States, Europe, and Japan) are all bogged down in conditions of deepening stagnation, resulting from their incapacity to absorb all of the surplus capital that they are generating internally and pulling in from abroad—a contradiction which is manifested in weakening investment and employment. Financialization, which helped to boost these economies for decades, is now arrested by its own contradictions, with the result that the root problems of production, which financial bubbles served to cover up for a time, are now surfacing. This is manifesting itself not only in diminishing growth rates, but also rising levels of excess capacity and unemployment. In an era of globalization, financialization, and neoliberal economic policy, the state is unable effectively to move in to correct the problem, and is increasingly geared simply to bailing out capital, at the expense of the rest of society

The imperial rent that these countries appropriate from the rest of the world only makes the problems of surplus absorption or overaccumulation at the center of the world system worse. “Foreign investment, far from being an outlet for domestically generated surplus,” Baran and Sweezy famously wrote in Monopoly Capital, “is a most efficient process for transferring surplus generated from abroad to the investing country. Under these circumstances, it is of course obvious that foreign investment aggravates rather than helps to solve the surplus absorption problem.”

The New Imperialism

As we have seen, there can be no doubt about the sheer scale of the relative shift of world manufacturing to the global South in the period of the internationalization of monopoly capital since the Second World War—and accelerating in recent decades. Although this is often seen as a post-1974 or a post-1989 phenomenon, Hymer, Magdoff, Sweezy, and Amin captured the general parameters of this broad movement in accumulation and imperialism, associated with the development of multinational corporations (the internationalization of monopoly capital) as early as the 1970s. Largely as a result of this epochal shift in the center of gravity of world manufacturing production toward the South, about a dozen emerging economies have experienced phenomenal growth rates of 7 percent or more for a quarter century.

Most important among these of course is China, which is not only the most populous country but has experienced the fastest growth rates, reputedly 9 percent or above. At a 7 percent rate of growth an economy doubles in size every ten years; at 9 percent every eight years. Yet, the process is not, as mainstream economics often suggests, a smooth one. The Chinese economy has doubled in size three times since 1978, but wages remain at or near subsistence levels, due to an internal reserve army in the hundreds of millions. China may be emerging as a world economic power, due to its sheer size and rate of growth, but wages remain among the lowest in the world. India’s per capita income, meanwhile, is one-third of China’s. China’s rural population is estimated at 45–50 percent, while India’s is around 70 percent.

Orthodox economic theorists rely on an abstract model of development that assumes all countries pass through the same phases, and eventually move up from labor-intensive manufacturing to capital-intensive, knowledge-intensive production. This raises the issue of the so-called “middle-income transition” that is supposed to occur at a per capita income of somewhere between $5,000 and $10,000 (China’s per capita income at current exchange rates is about $3,500). Countries in the middle-income transition have higher wage rates and are faced with uncompetitiveness unless they can move to products that capture more value and are less labor-intensive. Most countries fail to make the transition and the middle-income level ends up being a developmental trap. Based on this framework, New York University economist Michael Spence argues in The Next Convergence that China’s “labor-intensive export sectors that have been a major contributor to growth are losing competiveness and have to be allowed to decline or move inland and then eventually decline. They will be replaced by sectors that are more capital, human-capital, and knowledge intensive.”67

Spence’s orthodox argument, however, denies the reality of contemporary China, where the latent reserve army in agriculture alone amounts to hundreds of millions of people. Moving toward a less labor-intensive system under capitalism means higher rates of productivity and technological displacement of labor, requiring that the economy absorb a mounting reserve army by conquering ever-larger, high-value-capture markets. The only cases where anything resembling this has taken place—aside from Japan, which first emerged as a rapidly expanding, militarized-imperialist economy in the early twentieth century—were the Asian tigers (South Korea, Taiwan, Singapore, and Hong Kong), which were able to expand their external export markets for high value-capture production in the global North during a period of world economic expansion (not the deepening stagnation of today). This is unlikely to prove possible for China and India, which must find employment between them for some 40 percent of the world’s labor force—and to a mounting degree in the urban industrial sector. Unlike Europe during its colonial period the emigration of large pools of surplus labor as an escape valve is not possible: they have nowhere to go. China’s capacity to promote internal-based accumulation (not relying primarily on export markets), meanwhile, is hindered under today’s capitalist conditions by this same reserve army of low-paid labor, and by rapidly rising inequality.

All of this suggests that at some point the contradictions of China’s unprecedented accumulation rates combined with massive labor reserves that cannot readily be absorbed by the accumulation process—particularly with the growing shift to high-technology, high-productivity production—are bound to come to a head.

Meanwhile, international monopoly capital uses its combined monopolies over technology, communications, finance, military, and the planet’s natural resources to control (or at least constrain) the direction of development in the South.

As the contradictions between North and South of the world system intensify, so do the internal contradictions within them—with class differences widening everywhere. The relative “deindustrialization” in the global North is now too clear a tendency to be altogether denied. Thus the share of manufacturing in U.S. GDP has dropped from around 28 percent in the 1950s to 12 percent in 2010, accompanied by a dramatic decrease in its share (along with that of the OECD as a whole) in world manufacturing.69 Yet, it is important to understand that this is only the tip of the iceberg where the growing worldwide destabilization and overexploitation of labor is concerned.

Indeed, one should never forget the moral barbarism of a system that in 1992 paid Michael Jordan $20 million to market Nikes—an amount equal to the total payroll of the four Indonesian factories involved in the production of the shoes, with women in these factories earning only 15 cents an hour and working eleven-hour days. Behind this lies the international “sourcing” strategies of increasingly monopolistic multinational corporations. The field of operation of Marx’s general law of accumulation is now truly global, and labor everywhere is on the defensive.

– kk

Notes

  1. Theo Sparreboom and Michael P.F. de Gier, “Assessing Vulnerable Employment,”Employment Sector Working Paper, no. 13 (Geneva: ILO, 2008), 7; James Petras and Henry Veltmeyer, Multinationals on Trial (Burlington, Vermont: Ashgate, 2007), 70; Mike Davis, Planet of Slums (London: Verso, 2006), 178.
  2. International Labor Organization, Key Indicators of the Labour Market (Geneva: ILO, 2009), chapter 3-3; Sparreboom and de Gier, “Assessing Vulnerable Employment,” 11.
  3. Michael Yates, “Work is Hell,” May 21, 2009, http://blog.cheapmotelsandahotplate.org.
  4. ILO, Key Indicators, chapter 1-C, and chapter 5.
  5. Samir Amin, “World Poverty, Pauperization and Capital Accumulation,” Monthly Review 55, no. 5 (October 2003): 1–9, and The Law of Worldwide Value, 14, 89, 134; Prabhat Patnaik, “The Myths of Capitalism,” MRzine, July 4, 2011, http://mrzine.monthlyreview.org; United Nations,World Economic and Social Survey (New York: UN, 2004), 3; Yates, “Work is Hell”; Davis, Planet of Slums, 179; United Nations Human Settlements Programme, The Challenge of the Slums(London: Earthscan, 2003), 40, 46.
  6. Prabhat Patnaik, The Value of Money (New York: Columbia University Press, 2009), 212–15; “A Perspective on the Growth Process in India and China,” International Development Economics Associates, The IDEAs as Working Paper Series, Paper no. 05/2009, http://networkideas.org, abstract, 4; Lee Chyen Yee and Clare Jim, “Foxconn to Rely More on Robots; Could Use 1 Million in 3 Years,” Reuters, August 1, 2011, http://reuters.com.
  7. Prabhat Patnaik, “Notes on Contemporary Imperialism,” MRzine, December 20, 2010,http://mrzine.monthlyreview.org; “Capitalism and Imperialism,” MRzine, June 19, 2011,http://mrzine.monthlyreview.org; “Labour Market Flexibility,” MRzine, May 9, 2011,http://mrzine.monthlyreview.org; and “Contemporary Imperialism and the World’s Labour Reserves,” Social Scientist 35, no. 5/6 (May-June 2007): 13.
  8. Prabhat Patnaik, “The Paradox of Capitalism,” MRzine, October 22, 2010,http://mrzine.monthlyreview.org.
  9. For example, Guy Standing, The Precariat: The New Dangerous Class (New York: Bloomsbury Academic, 2011). On the current role of the reserve army of labor at the center of the capitalist system see Fred Magdoff and Harry Magdoff, “Disposable Workers; Today’s Reserve Army of Labor,” Monthly Review 55, no. 11 (April 2004): 18–35.
  10. Ghose, et. al., The Global Employment Challenge, 45–49.
  11. On the interrelation of these two negative elements affecting employment in the advanced capitalist countries see Foster, “The Stagnation of Employment.”
  12. Baran and Sweezy, Monopoly Capital, 107–8.
  13. Michael Spence, The Next Convergence (New York: Farrar, Straus, and Giroux, 2011), 19–23, 48, 53–54, 85–86, 107.
  14. Spence, The Next Convergence, 100–3, 194–98.
  15. Samir Amin, Capitalism in the Age of Globalization (New York: Zed, 1977), 4–5.
  16. Louis Uchitelle, “Is Manufacturing Falling Off the Radar?” New York Times, September 11, 2011, http://nytimes.com.
  17. Walter LaFeber, Michael Jordan and the New Global Capitalism (New York: W.W. Norton, 1999), 106–7, 14–48.
  18. Samir Amin, “The Democratic Fraud and the Universalist Alternative,” Monthly Review 63, no. 5 (October 2011): 44–45, The World We Wish to See (New York: Monthly Review Press, 2008).
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