From the official beginning of the current economic crisis in December 2007 to the present, the number of unemployed workers has risen roughly from 7 to 15 million members of the US labor force. But there is no government program directly to hire these millions of the unemployed. The Bush and Obama administrations quickly and boldly addressed the crisis by socializing a major part of the credit system, replacing or guaranteeing private debts with a ballooning US government debt. While aggressively becoming the lender or guarantor of last resort in many credit markets, the federal government has been inactive about unemployment in the labor market. The private sector provides ever fewer jobs, yet the government refuses to become the employer of last resort.
To understand why government employment is not used to deal with mass private unemployment, we can benefit from examining US history’s last experience of a major capitalist breakdown, the Great Depression of the 1930s. Consider below the official record of unemployment in the Statistical Abstract of the United States: 1950: Table 209 on page 175.
The stunning rise in unemployment after the crash hit in 1929 peaked in 1933 at almost a quarter of the labor force. FDR’s efforts at anti-depression measures were inconsistent and ineffective in terms of their employment effects. Unemployment stayed at 20-25 per cent of the labor force from 1932 through 1935. While it fell in 1936 and 1937 — although not much below 15 per cent — it rose again in 1938 to almost 20 per cent.
From 1929 to 1940, the total US labor force grew by almost 7 million workers, but the total number of people employed in 1940 was still less than the number employed in 1929. The unemployed numbered over 8 million in 1940 as against 1.5 million in 1929. The huge and long-term social costs of unemployment piled up across those 11 years of economic depression.
Yet the table above also shows what a serious government employment program can do. What finally ended unemployment was NOT an effective anti-depression economic policy or program. Leaders then never produced that. Instead, what “solved” the economic problem of unemployment was rather a military policy, namely US entry into World War 2. What brought the number of unemployed people back down to the 1929 level was (1) inducting over 11 million US citizens into the military and (2) simultaneously providing another 5 million jobs in the civilian, private sector to provision the armed forces. All this happened even as the US labor force grew dramatically. Under certain economic and political conditions, the government can function very effectively as the employer of last resort.
Yet it so rarely does so. The capitalist economic system, always unstable in its recurring business downturns/cycles/busts, periodically produces deep and long depressions. Today’s is the second of these in 25 years, and between these two there were a dozen business cycles. Economic policies other than massive government jobs programs, under both Democrats and Republicans, have been insufficient to cope with the unemployment in most of these downturns and especially in the deep and long ones. So it is today.
Capitalist instability and crises are always political as well as economic problems. Their solution has always required particular combinations of economic and political conditions and movements. Absent those, government policies tend to be inconsistent and ineffective. Across the 1930s, economic policies lacked the accompanying political policies and conditions to succeed in overcoming mass unemployment. So far in the current capitalist crisis, economic policies have once again lacked the political conditions needed to succeed.
Today, as in the 1930s, the political problem is not lack of mass popular support on the subjective level. Then and now, most people want massive government activity to end unemployment, foreclosures, reduced public services, and so on. Then and now, the opposition to such massive government intervention comes chiefly from capitalists (corporate boards of directors and major shareholders) who do not want to pay additional taxes for a larger government that might control or regulate or compete with them. The corporate boards that receive the bulk of the profits produced by US workers can and do use them to block the government from becoming employer of last resort. Their strategy today aims to keep that issue off the agendas of legislative bodies or even of public discussion.
The private sector generates massive unemployment and then prevents the state from ending it with the kinds of massive programs needed to do that. The exception to this rule occurs when powerful political forces arise that push in the direction of massive government employment. Adversaries who became enemies in World War 2 provided the political conditions enabling the US government to undertake the mobilization that ended the 11-year mass unemployment of the Great Depression. But war need not be the only means for the political mobilization needed to enact a government employment program (even though that has been the norm in many capitalist crises).
Obama today, like Bush and FDR before him, faces a basically similar situation. He has the political space and support to help banks, securities dealers, insurance companies, etc. to revive collapsed private credit markets and to rescue firms that his administration designates as “too big to fail.” However, he seems unable or unwilling to mobilize the mass political support needed to make the US government become the employer of last resort. And there is plenty of corporate opposition. Absent such active political support for a government jobs program, Obama will continue to be at least as ineffective in solving today’s unemployment problem as FDR was in the 1930s. Indeed, Obama’s record may well be worse, since we lack today the strong labor union, socialist, and communist movements that pressured FDR.
A serious government jobs program was never a matter of economics and economic policy alone; it was always a matter of political economy.
Richard D. Wolff is a Professor Emeritus at the University of Massachusetts in Amherst and also a Visiting Professor at the Graduate Program in International Affairs of the New School University in New York. He is the author of New Departures in Marxian Theory (Routledge, 2006) among many other publications. Check out Richard D. Wolff’s documentary film on the current economic crisis, Capitalism Hits the Fan, at www.capitalismhitsthefan.com. Visit Wolff’s Web site at www.rdwolff.com, and order a copy of his new book Capitalism Hits the Fan: The Global Economic Meltdown and What to Do about It.