Prasad V //
The coronavirus induced lockdown in India has created a condition of unprecedented levels of unemployment in history. Further the situation is aggravated by the failure of the government to introduce any labor-intensive programs in health sector or public sanitation which was a great necessity in this situation of pandemic and which has been undertaken in many of the capitalist countries previously in crisis situation. As the Modi government is trying to cover up most of data, only partial information is available in the form of statistics. According to the estimates from the Centre for Monitoring Indian Economy (CMIE), over 122 million people lost their jobs in April. Over 75% of them are small traders and wage-laborers. A significant number of salaried workers too lost their jobs.
With the available data (May 2020), India’s unemployment rate is now 27.1%. This is four times that of USA. As a result, the disturbing scenes of desperate migrant workers fleeing cities on foot to return to their villages dominated the television screens and newspaper columns in May/June, etc. This reflects a major human tragedy. The relaxations in the lockdown since April 20 have not shown much impact on the unemployment rate. In fact, the urban unemployment rate stood at 27% during the week ending May 17, higher than the rural unemployment rate. As per the statistics, one in every four Indians is unemployed now.
The discussion happened in parliament in this regard is a shocking exposure of the attitude of the central government towards this grave issue. Derek O’ Brien, a Member of Parliament asked to the Minister of State (MoS) for Labour and Employment regarding the monthly unemployment rate. But the Minister couldn’t give the answer. He has given the unemployment rate of 2018-19 financial year. Further question was asked about the number of people who lost jobs due to the pandemic-induced restrictions in the last six months. In reply, Mr. Santosh Kumar Gangwar, the Minister of State (MoS) for Labour and Employment said on 16th September – “As per the PLFS 2018-19, the estimated unemployment rate … for persons of all ages on usual status basis in the country was 5.8%. Responding to the questions of some other members of the Parliament also the minister has given such misdirecting answers. In essence he declined to give any specific figures of monthly unemployment as well as the impact of lockdown on the employment.
The Covid-19 pandemic followed by lockdowns has affected economies across the globe including India. Government has taken some so called initiatives for creating jobs at local levels through Pradhan Mantri Garib Kalyan Yojana (PMGKY), Aatmanirbhar Bharat & Pradhan Mantri Garib Kalyan Rojgar Abhiyaan (PMGKRA).” Even though Finance Minister Nirmala Sitharaman has announced a five-phased stimulus package, that has failed to boost the demand and for that reason failed to generate any positive impact on employment generation.
While the lockdown was imposed upon the Indian people, already the country has entered into high levels of unemployment rate. Then itself the unemployment rate was at 43-month high. The unemployment rate has increased from 3.4% in July 2017 to 8.7% as per the official statistics. Many financial advisory firms have already predicted that by the year FY 2021, the economy may shrink by 10%.
Even though there was some relaxation in the lockdown from April 20th onwards that has not created the required upward momentum in economy. Naturally, the unemployment rate remained as high as earlier. During the week ending on May 17 the urban unemployment rate stood at 27%, higher than the rural unemployment rate. Even though the lockdown was imposed with the purpose of curbing the spread of coronavirus that has not done any help in containing the rate of spread. On the other hand that has made the economy in standstill. While due to the unscientific management of lockdown period the trend of spread of virus has only accentuated.
In recent weeks massive layoffs were announced by large companies across various sectors, including aviation, hospitality, automobiles, retail, etc. Regarding the small and medium-sized enterprises are concerned, how many of them will re-open in future itself is unclear right now. The unprecedented job loss and salary cut will further decelerate the recovery process also. Thus the fast-rising unemployment produced by the systemic failure to prepare for and cope with the pandemic has already set off a vicious downward spiral in economy and the condition of employment market. Modi government has done too little to counter the unemployment set off by the pandemic by increasing employment opportunity elsewhere in the system.
The government could have undertaken a massive program to fight the spread of covid-19 virus itself by undertaking regular cleaning/disinfection of public spaces, reorganizing public facilities to maintain social distancing, campaigns for massive social coronavirus testing, etc. That could have re-employed millions fired by employers who has shut down their firms in private sector. Even the capitalist economies have undertaken such massive employment generation schemes in the past when the economy has confronted major crisis. But here in India the Modi government has shown a blind eye towards any such proposals. The much-touted ‘Atmanirbhar Bharat Abhiyan’ package has done nothing to provide employment to the people impacted by the pandemic.
During the period when the Indian GDP grown at a speed of more than 7%, more or less double of the world average, the employment generation growth rate was only nearly 1%. This is according to official statistics. While even in the pre-liberalization (pre-1991) period, GDP growth of average at about half that rate (3.5-4%), the employment grew at 2 percent, double the average of the liberalization phase. This was an important feature of the high growth phase of the Indian economy.
In the post liberalization period of Indian economy, the GDP growth rate was more and more delinked from the employment generation rate due to multiple reasons. The output per employee has gone exponentially high due to unprecedented mechanization of production and utilization of high skill. This was aided by the global competition and the necessity of becoming part of global production from the Indian corporate side. Equally the poor people’s earlier existing smaller employments were destroyed by the capture of land as well as the destruction of rural economy. Thus the output gone upwards while the employment generation gone downwards as happened in most of the major industries. But the industrialists were happier because liberalization put them effectively in charge of industrialization; it gave them incentives with almost free gifts of land and tax holidays as well as other concessions.
Unemployment turns out to be a vicious cycle in capitalism. When the workers are losing the job, their consuming power reduces significantly. As a result of that, they will not be able to purchase consumer goods as well as other necessary things. The capacity of the market of such things will come down as a result of that and capitalist have to reduce the production of such things. This affects their profitability. In return, in order to maintain the profitability, the capitalist fires some of the employees. Again the capacity of the market shrinks due to that. So the unemployment leads to reduction in market and reduction in market leads to further unemployment. Thus it turns out to be a vicious cycle.
In India, the economy was in severe crisis at the beginning of the pandemic due to its own reasons. But the pandemic has further triggered the economy to still downward trajectory. The unemployment crisis was already there but the pandemic has pushed the unemployment level to unprecedented levels due to the crisis in economy. The government has done nothing to improve the employment condition by undertaking some type of massive employment generation scheme.
Reduction of workforce that is creation of unemployment is a result of the decision of the capitalist class. The capitalist class considers only their profit and that is the criteria for them to decide upon the size of the workforce. The capitalists have to take their decision according to the necessity of the capitalist economy. Otherwise the economy will punish them. If their decision is correct, the economy rewards them. That is how the capitalist system which bases itself on profit works. Thus the difficulties caused to workers by unemployment either during the pandemic or other times is a result of the very process of capitalism.
The capitalists cannot generate profit without workers. The workers cannot pull on without adequate employment. It means the industrial production is a necessity of both the classes. The government also cannot exist without favoring industrial production. Because the income of the government also flows from the tax revenues which is a part of the profit from the industry. Then what is the necessity of this periodic economic crisis that reduces the profitability as well as employment levels and make the condition of the workers very bad? Just like the advanced capitalist world, India also has gone through capitalist crisis in 1992, 2000, 2008 and now. As such prim fascia, the crisis is not the interest of the capitalist class or the government. But the system periodically generates that. They cannot escape from that. That is the basic contradiction in the capitalist system where the production is motivated by profit.
There are some reasons why capitalism produces and reproduces unemployment; because they as a class accrues some benefits from that. The high profits are always followed by higher investments and high cost of labor. The rising wages at some point in time kick starts reducing profitability. The reducing profitability is to be countered by the capitalist class in the interest of their business. The unemployment situation increases the size of the reserve army of the unemployed laborers. This enhances the competition among the workers to get an employment for pulling on. In such a situation a good number of unemployed workers who has to find out an employment in some way become ready to accept lower wages, either in a new employment or to replace an old worker working on higher wages. Thus the increase in the reserve army of the unemployed exerts a downward pressure on the share of the wage. This helps the capitalist class to reduce the wages. This enhances their profit share. This strengthens their investment decisions. Thus the capitalist class benefits from the increase in size of the unemployed labor force. Thus capitalism as a system needs both unemployment and employment in order to boost their profitability. Thus the periodic cycles of unemployment flows from the capitalistic crisis of systemic nature and the capitalist class utilizes that for their own benefit.
The capitalist system is incapable of solving the problem of unemployment. It keeps the long-term unemployment rate more or less steady. That is the necessity of the system itself in order to exert the downward pressure on the wages. In the short living higher investment periods, many workers may get jobs with better salary. But that is an exception. The general rule is steady unemployment and periodic crisis leading to extremes of unemployment and poverty.
Capitalism generates the unemployed. But the unemployed is not involved in the decisions that has led to the high level of unemployment. Even after this is true the workers and their families suffer maximum with the problem. Not only the unemployment leads to extreme types of poverty, but also it is associated with rising levels of depression, alcoholism, drug abuse, marital problems, etc. It affects the workers and their families with anxieties. It is associated with declining levels of worker self-esteem, job skills, etc. In short it affects the total well-being of the worker and their family including physical and mental health.
The defenders of capitalism often make complaint that the affected workers fall to the speeches and propaganda of the critiques of the capitalist system itself. Unknowingly such defenders of capitalism defend the bourgeois system. They fail to understand the mechanism of the unemployment problem. That is, they fail to understand that it is system generated and the capitalist system cannot prevent that. On the other hand the system continuously generates unemployment problem which is a secondary to the periodic economic crisis the system is affected with.
If the consideration of profit is the central cause that is leading to the unemployment problem, the solution lies in that understanding itself. We have to create a system that is above profit considerations, where production is not based on profit motive. Such a system only can ultimately save the society and the working class from the present problem of unemployment which is periodical in nature. It means ultimately the solution lies in overthrowing the capitalist state itself and establishing a socialist system.
Originally published in The Truth: Platform for Radical Voices of The Working Class (Issue 6/ October ’20)