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Socialist Party of Great Britain - Capitalism In Crisis - Unemployment In The 1930's.

Unemployment in the 1930’s and Now

Every one of the political parties in this country (except the SPGB) claims that it has a policy which, if the government applied it, would reduce capitalism’s unemployment to a very low level and keep it there. It was the late Hugh Gaitskell, leader of the Labour Party, who wrote in 1959:

The great ideal of jobs for all first became a peacetime reality under the 1945 Labour government…The first objective of the Labour Government will be to restore full employment and preserve full employment”.

They had to wait five years, until October 1964, to see a Labour government in office again. At first it had some luck, in a small decline in unemployment in 1965. Emboldened by this, John (to become Lord) Diamond, who was Chief Secretary to the treasury, explained to the House of Commons on 1 March 1966 how this fall had been a result of government policy, and “that is how we propose to continue doing it”. Then the governments luck ran out. Instead of unemployment remaining at 371,000, as instructed by Diamond, it jumped in 12 months to 631,000, and when the Labour government left office in June 1970 the Tories were able to show that unemployment was 200,000 higher when it took office.

But the Heath government which followed was equally unlucky. They, too, were pledged to “full employment” but saw the total rise from 582,000 in June 1970 to nearly a million in 1971 and 1972. Then came the Labour government of 1974-79, during which unemployment more than doubled, followed by the Thatcher government under which it more than doubled again. Then the John Major government saw unemployment peak at over 3 million unemployed in the early 1990’s. All five governments up the Blair government of 1997 sailed on a rising tide of unemployment and there was nothing any of them could do about it except wait for it to subside in capitalism’s own time. Blair was fortunate; he got out of office just in time. Brown was no so lucky when he took over as Prime Minister. He believed in the dogma of “no more boom and bust” fed to him by his economic advisors. It was wrong and his administration now joins previous governments in facing rising unemployment which he can do absolutely nothing to prevent.

However, though the governments cannot do anything about the amount of unemployment, the party politicians can indulge in an old game of challenging the official figures. This needs two teams, the opposition and the government, though anyone can join in. An accepted rule of the game is that the opposition, whether Tory or Labour, is on the attack, and the government, whether Tory or Labour, is on the defensive. Points are scored by the opposition when it can plausibly argue that the real number of unemployed is higher than the official figures; and by the government when it can counter the charge or claim that unemployment is really a blessing in disguise.

There was a splendid match in the winter of 1971. It was then that the official figure nearly reached a million and the Heath government had to meet the charge that the proper figure was higher. The FINANCIAL TIMES (11 December 1971) suggested that it was perhaps 1, 250,000. The OBSERVER (23 January 1972) thought it might be 2,000,000. Not to be outdone Harold Wilson (FINANCIAL TIMES, 8 April 1972) puts it at nearly “3,000,000”, and Peter Jay, (The TIMES, 9 March 72) reckoned it was over “3 million”. An official estimate was that there might perhaps be 400,000 out of work who were not on the register, which would have given a total of 1, 367,000.

Basically the official figures of unemployed on the register were, and are, disputed on the ground that a lot of unemployed workers do not trouble to register –including, in recent years, some redundant workers who do not seek work while they are spending their redundancy pay. The official figures are arrived at in the monthly account of the number of people available for, and genuinely seeking, work. The more extravagant estimates of a higher figure include guesses at the number of people, particularly married women, who are not seeking work but might perhaps do so if they could see the vacant jobs were available at sufficiently attractive rates of pay.

Faced with these embarrassing estimates of much higher unemployment the government at the time thought up some counter arguments to show that real unemployment was actually less than the official figures. They said that the large number of people they described as “unemployable” ought to be taken out, as should those registered unemployed who were only in the process of changing jobs, with a gap of a few weeks in between. And what about the people improperly included in the register who were secretly doing jobs on the side?

The most ingenious government defence came from John Eden, Minister for Industry, who said that the large number of unemployed on the register “reflect in part the redeployment which is under way; which means that it arose out of the government’s policy of moving workers from contracting industries into expanding ones. “We can now look forward to what could be our greatest period of sustained growth in decades” (FINANCIAL TIMES 11 December 1971). The Thatcher government in the 1980’s used the argument that the unemployed largely owed their condition to having pressed for two-high wages, and that it would take a long time for Tory policy to get things right.

This type of thinking has its absurd variations. Some US economists before the 1930’s depression, held the view that unemployment under capitalism is impossible and that workers who cannot find employment have just not lowered their price of labour to a level for employers to find attractive to buy. And then there are the market anarchists of the Libertarian Right who claim that capitalism cannot cause unemployment because it does not yet exist yet!!!!

In the politician’s game about the employment figures points are scored by the opposition if they can claim that unemployment has reached a record level. For months on end, during the Labour Government of 1974-79, the Tory opposition was able to do this, as unemployment climbed by over a million, from 629,000 to 1,636,000 in 1977. The form of the attack was that the figures were a “post-war record”. During the John Major government the Labour opposition said the unemployment figures of 3.1 million was “the highest ever recorded”. If the unemployment figures top 3.3 million at the end of 2009 then the Tories will claim these are the highest figures to date although they have to be careful since, if they form the next government, they will be associated with high levels of unemployment. Even if the unemployment figures do reach 3.3 million as some economists are claiming, unemployment in 2009 will not be as great as the 1930’s.

The point is that the severity of unemployment has to take into account not only the number of unemployed but also the total number of workers to which it is related. For example, 2 million unemployed out of 10 million workers would be as twice as severe as 2 million unemployed out of 20 million workers. Firstly, in 1932, the total number of wage and salary earners was perhaps about 19 million compared with the present 26 million. Secondly, fewer than 13 million of the 19 million were covered by the Unemployment Insurance Scheme and the official figure of unemployment in 1932 (over 2,900,000) took into account only those of the unemployed who were insured. If unemployment was as severe among the other 6 million workers as among the 13 million who were insured, the number of unemployed would have been shown as well over 4 million. Among the workers who were not insured were agricultural workers and non-manual workers generally.

Writing about unemployment in 1936, when it had fallen far below its peak of 1931-2, G. D. Cole dealt with the point:

There are, as we write, roughly 1,600,000 of them in Great Britain in the insured trades alone. There are really a good many more altogether; for there are also 110,000 uninsured workers on the register of the Employment Exchanges and an unknown number more who are neither insured nor registered” (THE CONDITION OF BRITAIN, p. 219).

Cole mentioned that at any time there were nearly 250,000 unemployed coal miners.

In 1932, when there were over 2,900,000 unemployed insured workers, on the register, it is a fact that 23 percent of the insured workers were out of work which gives a more accurate picture of the severity of unemployment generally, among both insured and uninsured workers. Unemployment was therefore very much more severe in 1931-32 than it is in 2009, when it is currently 2.26 million some 7% of the workforce. The same is true of the United States where unemployment in 1933 was over 25 percent, compared with about 10 percent at present. Needless to say the “numbers” game was in full swing in the 1930’s and with even more scope for guessing, since nobody knew how many of the millions of uninsured workers were out of a job.

As unemployment under the Labour government had risen from 1,164,000 (9.6 per cent) in June 1929 to 2,813,000 (21.9 per cent) in August 1931 when they went out of office, they got little satisfaction from seeing it go on rising under the National government that followed. Among the points made in the Labour Year Book 1932 was that a seeming 60,000 drop of unemployed among women late in 1931 was due to “changes in the conditions for the receipt of unemployment benefit, by which claims of a large number of married women were disallowed”.

Gordon Brown now boasts he has a cunning plan to steer British capitalism out of depression (INDEPENDENT May 23rd 2009). Of course the Brown government’s much heralded recovery has not yet produced many results, and unemployment might yet rise to the levels of the 1930’s. In June 2009 unemployment rose to 2.38 million some 7% of the workforce. Capitalism respects no plans whether they are drafted by Labour or Tory. Such is the failure of capitalism to meet the needs of all society.

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