If you can have full employment killing Germans …

At the weekend I watched Ken Loach’s latest film (documentary) – The Spirit of ’45 – which was a classic – interesting and disturbing. After watching it I cannot understand how anybody could not achieve a score somewhere well into the south-west quadrant of the – Political Compass. It emphasised how societal values have changed and undermined the collective will that emerged in the early Post World War 2 period which garnered the political process into delivering structures that would never again see the mass unemployment and hardship that the Great Depression created. It was a hopeful period and politicians reflected that hope and acted as a mediating force in the underlying class conflict between workers and capital. The film traces how that “spirit” has broken down and what is required to once again make economies work for people rather than subjugating the needs of people to the economy – which really means allowing a small proportion of people to extract the benefits arising from the hard work of the rest of us. The film influenced today’s blog.

The title of today’s blog comes from an oft-stated piece of wisdom from former British politician – Tony Benn. He regularly noted that if you can have full employment killing Germans why can’t you have it doing other socially useful activities.

Tony Benn was a champion for Britain’s national health scheme, which was introduced during Clement Atlee’s Prime Ministership. US film maker, Michael Moore interviewed Benn for his movie Sicko and to get things off on a good footing today, here is the interview.

Tony Benn also said he became more radical the longer he spent time as a Government minister. Please read my blog – One should become more radical as one grows older – for a twist on that theme.

Tony Benn was also interviewed by – PBS – (October 17, 2000) and was asked whether the Great Depression led to a “huge loss of faith in markets and governments”, to which he replied:

Well, before the Great Depression, the gamblers ran capitalism and brought the economies down. And what happened? The war followed the Great Depression. In war you mobilize everything. Governments tore down the railings in Britain and America to make bullets. They rationed food, they conscripted people, and they sent them to die. The state took over. And after the war people said, “If you can plan for war, why can’t you plan for peace?” When I was 17, I had a letter from the government saying, “Dear Mr. Benn, will you turn up when you’re 17 1/2? We’ll give you free food, free clothes, free training, free accommodation, and two shillings, ten pence a day to just kill Germans.” People said, well, if you can have full employment to kill people, why in God’s name couldn’t you have full employment and good schools, good hospitals, good houses? And the answer was that you can’t do it if you allow profit to take precedent over people. And that was the basis of the New Deal in America and of the postwar Labor government in Great Britain and so on.

The sentiment expressed here was a major theme of Ken Loach’s current film and clearly is a compelling narrative for those who do not see the economy as a separable, natural entity from the people and the natural environment.

An essential element of a full employment policy strategy has to be the provision of a guaranteed job. In other words, there has to be a buffer stock of jobs available at all times that are accessible to the least-skilled workers in any community.

Please read the blogs that the following search string – Job Guarantee – for more discussions about employment buffers.

History shows that the non-government sector and the mainstream government sector in most nations have never provided enough jobs to satisfy the desires of the workers for employment.

One standard line of attack against the Job Guarantee is that the goal should not just be a number of jobs. Apparently, jobs are never an object – rather consuming goods and services is the goal and the jobs are is seen as being instrumental in achieving that goal.

The argument then goes that a job is not worth creating unless it is productive. According to this logic, a free-market devoid of government intervention will always create jobs if they are productive.

So if a job creates more value than the wage, it is argued that finance markets will move sufficient entrepreneurial funds to create the job and take the profit that is forthcoming. In other words, there is no need for government intervention if the jobs are truly productive.

The argument then says that government jobs by definition are unproductive, by which they mean they don’t produce sufficient value to cover the wage being offered, by which they mean the real contribution to society of such jobs is less than the drain on society that is required to create such jobs.

That is, these jobs entitle a person to consume real goods and services but because they create “negative profit”, society is poorer as a result.

In this world, any unemployment that is observed is just a symptom of the constraints that exist, which undermine the entrepreneurial spirit to hire. Accordingly, it would be counter-productive to introduce something like a Job Guarantee that aims to eliminate this unemployment because it would just be enshrining these entrepreneurial constraints into law.

How many times do you think I’ve heard that argument offered to me during presentations on employment guarantees? Answer: many times.

One doesn’t have to do think very much to see the flaws in this argument. First, the concept of value by which the judgement is made as to whether a job is productive or not is extremely narrow and essentially ideological in nature. Second, however we define value, it has to be realised. In other words, the argument presented above is just a replay of the standard neo-classical denial that aggregate demand can be deficient relative to the output that is supplied in any period.

The latter point means that entrepreneurs may perceive a profitable opportunity and assemble working capital accordingly. But because they do not know the future they are prone to errors and it may turn out that actual spending is well below what the entrepreneurs expected it to be.

As a result unsold inventory is the immediate manifestation of the forecasting mistakes and reductions in production levels and rising unemployment are the consequence. Generating income from hiring productive inputs does not guarantee that all the income will be recycled back into spending.

But it’s also worth spending a little time considering this concept of value.

In my early career I did a lot of work on the concept of efficiency – that is, getting the best from what you have available. The questions are, however, what does “the best” mean and how do we define “what you have available”?

At that stage, there was a huge debate among those who styled themselves as progressives about what constituted efficiency.

The neo-classical mainstream view was relatively simple. Their maximising model is concerned with the manner in which individual choices generate efficient outcomes.

Production is construed as a process in which output is the result of combining inanimate factors of production according to relative productivities per dollar, the outcome being determined by some preconceived formula (the production function) which is constrained by relevant technological considerations.

The denial that production is a social process justifies the neo-classical characterisation of Labour as being subject to predetermined productivity.

We might think of this concept of efficiency as defining the greatest possible physical output from a given set of physical inputs.

In terms of use of labour inputs, the standard neo-classical textbook analysis of the labour market, which dominates the public debate when it comes to discussions about unemployment, welfare payments, the impact of taxation etc, makes no distinction between exchanges between labour and capital and the use by firms of other productive inputs.

Many years ago, the then Economics editor of The Financial Times, Samuel Brittain made this statement, which reflects the viewpoint still held by most economists today:

If the price of bananas is kept too high in relation to the price required to balance supply and demand there will be a surplus of bananas. If the price of bananas is below the market clearing price there will be a shortage. The same applies to labour. If the price – i.e. the wage – is too high there will be a surplus of workers, i.e. unemployment. If it is kept too low there will be a shortage of workers … Workers do sell their services just as banana producers sell their bananas.

In other words, the essential insights into how the labour market operated could be gleaned by studying any market exchange. There is nothing intrinsic about labour and nothing intrinsic about Capitalism.

Martin Watts and I published a paper on this topic in 1985 (one of my early published papers) – Efficiency Under Capitalist Production: A Critique and Reformulation – which expanded on these matters. This blog draws on that article.

[Reference: Mitchell, W. and Watts, M. (1985) ‘Efficiency Under Capitalist Production: A Critique and Reformulation’, Review of Radical Political Economics, Spring and Summer, 17(1-2), 212-220. You can read the article – HERE 1.1 mgs.]

At the time, the standard progressive (particularly Marxist) response to the narrowness of the neo-classical conception was to argue that the orthodox conception was about “quantitative” efficiency and ignored a second dimension of efficiency, which was denoted “qualitative”.

This was a view put forward by well-known radical economist David Gordon in his 1976 Monthly Review article – Capitalist Efficiency and Socialist Efficiency. Unfortunately, you have to pay for this article if you want to read it, which I think is poor form from the MR Press given the digital age.

Gordon argued that qualitative efficiency is:

… The ability of the ruling class to reproduce its domination of the social process of production and minimize producers’ resistance to ruling class domination of the production process.

So you see that conflicting social relations become an integral component of capitalist development. The upshot is, that capitalist firms always seek qualitative efficiency and will then maximise qualitative efficiency within that environment.

The practical import of his dichotomy is that a firm might increase quantitative efficiency but sacrifice qualitative efficiency, which would undermine the position of the capitalist as social relations deteriorated.

Thus capitalists are forced to forego an amount of conceptually available physical output in order to maintain worker discipline in the labour process and reproduce their own positions as controllers of the means of production.

The problem with this approach is that the two aspects of efficiency are not strictly comparable. the neo-classical approach operates in a timeless, ahistorical void while the latter belongs to an historically specific mode of production, capitalism.

In other words, there is no trade-off once we are discussing a capitalist labour process. By treating inputs as inanimate objects the concept of qualitative efficiency must exclude alienated labour which exists in a capitalist epoch.

Once labour in subjective terms becomes important to the objective goals of capital accumulation, then qualitative efficiency has no meaning.

In 1974, American sociologist Harry Braverman noted that the characteristic feature of capitalism was that the workers only sell their capacity to work (referred to by Karl Marx as “labour power”) to the capitalist in what we now term to be the labour market.

Workers are not enslaved under capitalism nor do they sell what we might call labour services. It is clear that capitalism has moved beyond slavery but why would he say that the labour market is not where labour services are sold?

Following Marx, Braverman also argued that the major challenge facing the capitalists is to ensure the labour power they purchase becomes a flow of labour services (or simply labour).

This observation suggests that the capitalist firm faces a control problem pertaining to how the managers extract work from the potential they have bought.

Braverman (year) wrote (pages 57-58):

When he buys labor time, the outcome is far from being either so certain or so definite that it can be reckoned away, with precision in advance. This is merely an expression of the fact that the portion of his capital expended on labour power is the “variable” portion, which undergoes an increase in the process of production; for him the question is how great that increase will be. It thus becomes essential for the capitalist that control over the labor process pass from the hands of the worker into his own. This transition presents itself in history as the progressive alienation of the process of production from the worker; to the capitalist, it presents itself as the problem of management.

[Reference: Braverman, H. (1974) Labor and Monopoly Capital: The Degradation of Work in the Twentieth Century, New York: Monthly Review Press.]

In modern terms, the firm agrees to pay a wage to the worker for a given working day (which itself might vary according to various rules). At that point in the exchange, the firm has purchased the labour power, which is the capacity to work. No actual labour services have been purchased in that transaction.

The task of management then is to organise, muster and deploy that labour power in a controlled way to ensure that for the time the worker has agreed to work they are delivering the desired flow of labour services to the firm.

It is in that way that the firm ensures they produce enough output from the labour power purchased, which upon sale, will return the funds outlaid on wages (and other materials the workers use) and leave a sufficient residual – profits – which will satisfy the objectives of the owners of the firm.

A study of the modern labour market therefore has to be conducted within the context of the primacy of managerial control and the need for the capitalist firm to maximise the flow of labour they gain from the labour power they purchase.

Why is control necessary? The answer is to be found in the observation that the objectives of workers and firms are rarely – substantively – the same. Marx considered the relations between those who sell labour power (the workers) and those who buy it (the capitalists) to be fundamentally “antagonistic” or adversarial.

We might summarise this basic conflict by assuming that workers will typically desire to be paid more for working less and capitalists want to pay the least for the most flow of labour services.

We could frame this tension in more complex ways and, indeed, Marx and his followers have done that. But for our purposes that basic conflict still pervades labour markets in modern monetary economies and has to be understood.

This is not to say that business firms do not provide good working conditions and seek to reward their workers in many different ways. The point is rather that they do that without jeopardising their control function or their capacity as purchasers of labour power.

In that context, American sociologist Michael Burawoy suggested in 1978 that:

… the essence of capitalist control can only be understood through comparison with a noncapitalist mode of production.

[Reference: Burawoy, M. (1978) ‘Toward a Marxist Theory of the Labor Process: Braverman and Beyond’, Politics and Society, 8(3&4): 247-312.]

By which he means that to understand the true nature of the capitalist labour market a student has to have some appreciation of historical arrangements for labour prior to the onset of capitalism.

His main comparison is in detailing the transition from Feudalism to Capitalism. His comparison between these two systems of production allows the student to highlight the differences and the purposes of these differences in relation to the basic challenge of capitalism – to extract labour services from purchased labour power in a conflicting context.

He defines a “mode of production”:

… as the social relations into which men and women enter as they transform nature.

Under feudal relations, the worker (a serf) tills the land their lord has provided them with for some part of the week. They are allowed to consume the production that arises from that work. This production allows the serf to survive and provide for their family.

For the remaining days in the week, the serf tills the lord’s land and all of the labour expended can be considered surplus to that required to maintain the survival of the serf and his/her family. The goods and services produced in this part of the week are expropriated by the Lord for his/her own use.

Burawoy noted the crucial characteristics of this system of production are that:

• Necessary labour (that required to maintain survival of the worker) and surplus labour are
  separated in both time and space.
• The serfs have possession of their own means of subsistence as they work – that is, they farm
  and consume their own product.
• Serfs undertake this work independent of the Lord.
• Surplus labour (that is,the work expended on the Lord’s own land) is transparent and the Lord expropriates it through extra economic means (that is, by dint of his status in the system as Lord).

The contrast to the capitalist mode of production, which in historical terms succeeded the feudal system, is stark. The essential characteristics of that system are:

• The necessary and surplus labour are not separated in space and time. The worker appears to work say an 8-hour day for a certain hourly wage, which blurs the distinction between the two types of labour.
• The workers do not possess the means of production and hence the means of subsistence. A defining feature of capitalism is that the capitalist owns the productive means and the worker, while free to choose which capitalist to work for, has to work to survive. Survival requires the worker agree to work for, say 8 hours to get the wage which might be equivalent to 5 hours of production.
• The capitalist controls the work process and the worker has to provide labour services within that control system.
• The surplus labour is conjectural – that is, there is no extraeconomic authority based on feudal politics, social position etc to ensure that surplus production occurs. The creation and expropriation of surplus labour becomes an economic struggle that unfolds within the workplace.

All of this is going on within the labour market. Every day, workers are producing goods and services which consumers and firms desire, but in doing so they are producing both necessary and surplus labour.

The production of surplus labour, which manifests as profits if the surplus value embodied in these goods and services is successfully sold, maintains the capitalist social relations. It allows the owner of capital to retain his/her position of power and at the same time ensures the worker has to return each day in order to survive.

Under feudalism, the Lord remains so as a consequence of the manorial politics (the extraeconomic means) irrespective of the surplus output.

The final point to appreciate in this overview is that the hidden nature of the surplus labour under capitalism creates the need for managerial control, which aims to ensure that surplus value is created, but that the system does not make it obvious that workers are working longer than necessary to maintain their existing living standards.

Given these insights, it makes no logical sense to discuss two separate aspects of efficiency, each of which belongs to a separate and conflicting paradigm.

Methodological consistency requires progressives to scrap any notion of quantitative efficiency and embrace a consistent version of qualitative efficiency.

In work I published in 1981 (a Masters Thesis) I defined qualitative efficiency as the maximal extraction of surplus value subject to alienated labour under the historically specific capitalist mode of production. All very academic.

But it means something fairly simple and relates to the way we frame value and output from work.

It means that capitalist firms are always struggling to secure surplus value from their workforces and hope that this value converts to profit when goods and services are sold.

It means that a capitalist is operating at less than full qualitative efficiency to the extent that labour manifests forms of alienation through absenteeism, sabotage, and other forms of militancy which reduce the extraction of surplus value.

The exercise of control in the workplace must elicit workers’ cooperation in the production process but at the same time aims to extract as much from the workers as is possible and pay them the least for it. in other words, the social relations of capitalist production contradictory.

So efficiency cannot be separated from the creation of surplus value, even though the outcomes of capital’s strategies are observed in the sphere of exchange through prices and profits.

There was a good article in the New York Times (November 5, 2011) that I saved – Wanted: Worldly Philosophers – by economists
Roger Backhouse and Bradley Bateman.

They said that:

We now have an economics profession that hardly ever discusses its fundamental subject, “capitalism.”

[Reference: Backhouse, R.E. and Bateman, B.W. (2011) ‘Wanted: Worldly Philosophers’, New York Times, November 5, 2011.]

While I have difficulties with some of the article the point is clear – defining “value” in a timeless, ahistorical void creates meaningless narratives and erroneous conclusions.

The neo-classical concept of efficiency treats the organisation of production, the production technology and the division of labour as being socially neutral. These things are merely the material interface between humanity and nature, and engineering construct.

A particular production process may or may not be “quantitatively efficient” but it is certainly free of ethics according to orthodoxy. The choice of a particular production technology implies a particular organisation of production and division of labour under cost minimisation.

However, the notion of qualitative efficiency outlined above necessarily implies that the organisation of the labour process during any historical face of capitalism reflects the prevailing state of capitalist social relations and is therefore definitely non-neutral.

In other words, how we conceive of value is not independent of the conflicting social relations within which the value is created. Value is a loaded concept.

To bring this discussion down to earth, the idea that value is created when an entreprenuer finds a worker who makes more than they cost both ignores the whole question of historical context but also confines value to the domain of capitalist production.

What about social value? What about outcomes that will not manifest a “market value” but which advance the welfare of humanity? Capitalist production will not occur in these areas because the capacity to realise surplus value as profit is limited.

The conceptualisation of “markets” by the Hungarian economic anthropologist Karl Polanyi is also relevant to this discussion.

[Reference: Polanyi, K. (1944) The Great Transformation, Holt, Rinehart and Winston.]

He considered the objective of the capitalist institutions (we have described above (which he termed the “market economy”) was to organise the production of goods and services by bringing together all the main elements of production (labour, raw materials, machines etc) via a system of markets.

The labour market provided the labour power necessary for the labour process – the actual production process where workers delivered the labour surpluses under supervision of the management.

Of relevance, was his insights based on anthropological studies that human behaviour within these market systems is not adequately described by the notion of homo economicus, which is the behavioural foundation of the mainstream textbook approach to labour markets.

Homo economicus (or “economic man”) casts people as being rational in all of their decision making and capable at all times of achieving outcomes that maximise their satisfaction (“utility”). This view considers that consumers maximise their satisfaction or welfare and business firms maximise their profits via free exchanges within markets.

This free exchange is conducted in competitive terms between free agents. In fact, there is no distinction made between say the supplier of labour and the supplier of bananas or the would-be purchaser of either. These free agents are motivated by their own narrow self-interest but in this pursuit they combine to maximise the outcomes of all.

Polanyi and other anthropologists have found that in many societies humans behave with reciprocity where cooperation rather than competition is paramount.

While the mainstream textbooks imply that the selfish behaviour they assume is common across all societies and cultures is a reflection of a basic “human nature”, the evidence provided by the anthropologists and others doesn’t support that conclusion. There is, in fact, a plethora of behaviours observed depending on the social institutions that have developed and the modes of production adopted.

Their work informs us that the capitalist institutions and mode of production is a particular system and the human behaviour that is moulded by that system is context dependent.

Polanyi argued that within a capitalist system the market economy becomes central and begins to dominate the importance of other aspects of society. The society increasingly becomes an economic society and market terminology becomes the way in which we calibrate our perceptions of the health of society.

That perspective also conditions our framing of value.

If we consider the co-operative rather than competitive elements of human interaction, then value becomes significantly broader and almost any job might qualify as one that adds more than it costs in real goods and services to sustain.

After all the “cost” of the Job Guarantee, which I prefer to express as the investment required to garner the necessary workforce, is the real goods and services that are consumed by the “job”, both in terms of the required capital and the extra consumption that the workers are permitted as a result of being employed rather than unemployed.

Finally today, a job is not necessarily just a source of income, which allows us to achieve our ultimate goal in life being consumption of goods and services. This is the narrow conception that the neo-classical approach to economics has.

A job may be conceived as an end in itself given the plethora of research evidence that shows the massive benefits that flow from being employed rather than unemployed. These benefits go well beyond the mere receipt of income. There are social benefits in being employed that are largely ignored by the mainstream approach to labour markets.

Conclusion

So if we can have full employment by killing Germans, then as long as we value alternative activities such as first-class health care, education, recreational services, environmental care services etc then we can certainly “productively” engage any idle labour that the capital system creates by offering a Job Guarantee.

The introduction of a Job Guarantee is not the panacea for all ills. But it should be an essential part of any progressive policy intervention.

That is enough for today!