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Mass Unemployment Amid the Pandemic Is an Indictment of Capitalism

Worker co-ops lack capitalism’s irrational fixation on profit, so they are not subject to boom-and-bust job cycles.

A man sleeps in front of closed shopfronts in what would be a normally busy fashion district in Los Angeles, California, on May 4, 2020.

Today’s headlines scream at us about the trauma, pain and loss from an historic explosion of capitalist unemployment. Unemployment always stood as a mocking indictment of capitalism. Unemployment also threatens capitalism. This system rewards employers with profits from the waged labor of employees. Yet it fails to keep them working and thereby undermines its profits. Worse, that failure recurs quite regularly — a phenomenon known as the business cycle.

Its cycles expose capitalism as intrinsically socially irrational. Unemployed workers continue to consume, albeit in reduced quantities. They just stop producing. It would obviously be better to keep workers producing what they keep consuming. Capitalism cannot do that during its recurring cycles despite countless efforts, including Keynesian economics and policies since the 1930s. The cycles repeatedly cause much suffering and loss.

Still another irrationality of capitalism resides in most capitalists’ obstinate refusal to consider, let alone implement, an obvious alternative to unemployment. When workers start being fired (because of falling demand, automation, etc.), employers could instead maintain employment but reduce workers’ hours per week. Instead of 10 percent unemployment, cut the basic work week for all from 40 to 36 hours. All workers go home at 1 pm, not 5 pm, each Friday.

The costs of unemployment versus reduced hours are difficult to measure and thus compare. What likely explains most capitalists’ preferences for unemployment is the power it allows them to wield over workers. The real prospect of unemployment keeps workers anxious, competing with one another to avoid eventually being the one fired. In this case, what is rational for the employers (a social minority) prevails despite it being irrational for employees (the majority). Even in a pandemic like today’s, wherever social distancing can secure safe workplaces, substituting reduced hours for unemployment makes sense but remains rare.

The prospect of unemployment plagues workers and their families with anxieties. The experience of unemployment is associated with rising levels of depression, alcoholism, drug abuse, marital problems, child abuse, and other social ills. It is likewise associated with declining levels of worker self-esteem, job skills, personal savings, and physical and mental health.

Unemployment is unwanted by both employees and employers, yet it hits them again and again. Defenders of capitalism always worry: unemployed workers, as victims of capitalism, provide receptive audiences for its critics. Alliances of capitalism’s victims and critics have challenged the system in the past and threaten it now again.

Unemployment is often part of a vicious cycle in capitalism. Unemployed workers lose incomes and therefore cut their consumption. That deprives capitalists producing workers’ consumption commodities of market demand, sales, and thus profits. In response, those capitalists fire portions of their workforce. That worsens unemployment: the vicious cycle.

Many phenomena can trigger unemployment in capitalism. Whether each initial instance of unemployment descends into a vicious downward spiral depends on conditions within capitalism being triggered. For example, suppose changing consumer tastes mean less of commodity A gets purchased, and capitalists fire workers producing A. This might lead to a vicious downward cycle — but not if, for example, consumers shifted to buy more of commodity B. Capitalists might then hire the workers fired from A to take jobs making B.

The staggering, fast-rising unemployment spawned by capitalism’s failures to prepare for and cope with the COVID-19 pandemic is different from our example. It has already set off a vicious downward spiral. The virus was the trigger, but a weakened capitalism reacted to the trigger with an economic crash. In the U.S. especially, much too little was done too late to counter — by increased employment elsewhere in the system — the unemployment set off by the pandemic. Increased hiring by delivery services, for example, fell far short of absorbing the millions fired from restaurants, bars, department stores, hotels, airlines, and so on. So, the downward spiral exploded.

None of this was necessary. As in the 1930s New Deal, the U.S. government could have undertaken a massive federal jobs program. That could have re-employed millions fired by employers who shut down the private sector. The list of socially useful tasks for such federal job holders includes campaigns across the U.S. for massive social coronavirus testing; for regular cleaning/disinfection of public spaces; for reorganizing public facilities to maintain social distancing when needed; for ongoing tutorials via social media for public school students (but also for the general public seeking to learn new skills); for “greening” the economy; for establishing a worker-cooperative sector of the economy, and so on.

Capitalism sees itself as a “rational” economic system. Yet, it is irrational to deprive employees of jobs when the tools, equipment and raw materials needed to produce socially useful goods and services are available. It is likewise irrational to allow workplaces to sit idle gathering rust and dust rather than reconfiguring or restructuring them to be safe as locations for socially useful production. It is irrational to undercut the needs of unemployed millions for the mental and physical health associated with meaningful labor. Last but not least, it is irrational to deprive the whole society of the goods and services capable of being produced by re-employed workers. If the private capitalist sector either cannot or will not re-employ in the socially most useful manner, then the government can and must do so.

If profit considerations lead private capitalists to decisions that are socially irrational — like firing millions of employees — then profit should not be society’s decisive criterion. We should replace the profit system with different criteria, different “bottom lines” driving enterprise decisions. Such a system might usefully combine private and public enterprises organized, in both cases, as worker cooperatives. In them, workers make enterprise decisions democratically: Each worker gets an equal vote. Moreover, two other stakeholder groups participate, equally democratically, in reaching those decisions: (1) the consumers of each enterprise’s output; and (2) the residents of the communities in which each enterprise functions.

Such a system would target the qualities and security of jobs, consumption and residence as key goals — “bottom lines” alongside enterprise profitability.

Proposing worker co-ops as frameworks for re-employing the millions deprived of work in capitalist crashes has a particular objective. Workers in worker co-op enterprises would much sooner see and act on unemployment’s basic irrationality than capitalists typically do. The Italian region of Emilia-Romagna provides a useful example of a region where worker co-ops are institutionalized and comprise 40 percent of the economy. Its large co-op sector is a major contributor to the region’s low unemployment rates (lower than Italy and also lower than the EU), its higher productivity rates, its outstanding GDP figures, and so on. Building such a sector in the United States would enable its residents to genuinely choose economic systems. Citizens could observe, purchase from, and work within enterprises organized as worker co-ops and thus compare them to their capitalistically organized counterparts. Then informed, democratic choices could be made as to what mix of the two alternative economic systems are wanted by the U.S. population.

Moving in such directions would go a long way toward finding and building on positive possibilities now buried under the catastrophic pile-up of a viral pandemic and a major capitalist crash.