September 25, 2011

My Main Man

As part of his high visibility surrounding the ongoing BFI retrospective showcase on him, Ken Loach the filmmaker, was interviewed on HARDtalk (BBC). In times where identities are ambiguous, Ken Loach is the kind of person who has a very strong allegiance in his politics and his oeuvre. Even a perfunctory inquiry into his work reveals a lifetime dedicated to a particular kind of film making and a clear identification of sensibilities. He makes films on working class issues, often with non actors, and with the actors themselves being unaware of the complete script and how their characters will pan out. This elicits genuine responses on camera to the twists in the story line and makes for very strong delivery. The unrelenting lens, i.e. to take on tough issues but at the same time leave the film on an unresolved note (without passing judgement or preaching morality) and refusing to sugar-coat hope where there is none, was something that I was instantly attracted to.

In the interview, he is prodded into delivering a sound byte on the London riots, but he also speaks of the larger system that caused them. He claims that “the way the world is developed, the downward spiral gets more and more intense” and that it is criminal to support an economic system that is exclusionary in its logic. There are other things that he points to, namely the nature of work available and the inadequacies of the market economy, but the clip ends with the eerily familiar phrase that “the economic system demands a proportion of unemployment.” Unemployment has been a much analysed topic in economics and a familiar conceptual companion in the six years I’ve been studying it. It has been explained and codified differently by the different schools of thought. Keynesianism which was the zeitgeist following the post world war boom, promoted Effective Demand as the key to controlling the economy and explained unemployment via the Phillips Curve. This curve indicated that there is an inverse relationship between inflation and unemployment. With the government controlling effective demand (by sanctioning contracts, public work projects etc.), it could create jobs but would have to endure some inflation. This relationship, which was oversimplified to start with, broke down during the stagflation (stagnation + inflation, i.e. both unemployment and inflation simultaneously) witnessed in the 1970s in the United States. This led to another school of thought – monetarism, which proposed money supply and not effective demand as the key to controlling the economy. It re-examined the Phillips curve and suggested that while this trade-off between unemployment and inflation might exist in the short term, once workers expect inflation, they will revise their expectations and thus pre-empt the desired effect that any government policy can have. Thus, in the long run, there is some unemployment which will always exist. This is called the natural rate of unemployment, and any attempt to create full employment will only cause more inflation and instability without creating jobs.

To rewind and conceptualise labour and work from the point of view of Marx, one can still understand the present capitalist system in terms of his concept of ‘reserve army of labour’. To briefly explain this, in capitalism, as productivity increases, there is more capital and less labour that are used as inputs in the production process. Thus, as workers are laid off, they form a reserve army of surplus labour from which they are rehired. The existence of this ‘surplus labour’ in turn, puts a downward pressure on the wages of people who are employed (which means that with the availability of this pool, workers can be fired and hired more easily, and will be willing to work for less wages).

This is intrinsic to the nature of increases in productivity and is arguably an absolute historical tendency. So paradoxically, as productivity increases, the wealth of a society increases, and the larger the wealth of society, the larger the industrial reserve army. The counter argument to this is that if the wealth of society is large, then it can support more people who do not work. This was the idea behind Nehrus’ plans for India’s development as well; first increase the size of the pie, then focus on the distribution of the pie. The advisability of this method is still debated.

However, a downward pressure on wages is not the only effect that the reserve army can have. Depending on the state of the economy, it can expand or contract with the relativesurplus population as the pivot. The economy itself will go through business cycles and crises, and the expansion and contraction of the reserve army will be coincide with these. Thus, it is not the absolute number of working population, but the proportions between working and surplus that is important. One can suggest, that at this point in context to statements made by Mr. Loach on the inability to have a job (and the dignity associated with a particular kind of job), the numbers of the reserve army, as a proportion, are swelling, and hence upturning the earlier balance.

Ben Fine, another unrelentingly crusader, and my professor at SOAS, is someone who has written extensively on the conceptualisation of labour, and this clip triggered some recollections from his lectures. If I was to summarise his economic theories briefly, I would say the following – he insists on a multidisciplinary approach, he decries the overreaching use of technicalities/regressions/equations by proving they are mathematically inadequate, and he suggests that when there are such extensive loopholes in the theory of developed countries itself, it is ridiculous to advocate the same to developing countries.

His most compelling, and recurring argument however, related to unemployment being organised as some short term fluctuation around a long term trend, by both the major schools of thought, Keynesianism and Monetarism. In his many debates on the nature and interaction of this long and short run, he says that this hypothetical long run, with full employment is itself changing. “The problem from the perspective of development is that both the levels and composition of employment are subject to the structural characteristics and changes associated with industrialisation, urbanisation and so on.” This structural change itself has been examined very little in the discipline, and is very germane to a world that is making massive strides in technology changing demographic in workforce etc, with each indicating a structural shift, with severe consequences on the analysis of any kind of long run equilibrium and its corresponding employment levels.

When something like the London riots trigger debates on unemployment and the systemic tendencies of joblessness, one digs into economic theory, only to find it woefully inadequate. While I understood these concepts of the Phillips curve, and its long run inelasticity when I studied them, when I try to relate them to practical situations, I find the concepts are barely relevant. I shall hope, as someone freshly armed with a graduate degree in the same, for my own sake, as much as anyone else’s that this need not be the case as economics continues to grow as an organic subject with tools to explain at least some of the worlds phenomenon.

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