Adverse Effects of Unemployment on a Community

by , posted on Monday, April 26th, 2010 at 9:01 am

By Geraldine Solomon and Timothy Beushausen

There are many negative effects of unemployment on both personal and social levels. In the realm of the former, the person who loses his or her job can feel a depreciated sense of self worth. On a social level, the entire structure of society can disintegrate, as we can see clearly in the city of Juarez, Mexico. The policies of so-called “Big Government” were designed to stimulate production and ameliorate the effects of unemployment. The problem is, they no longer work. To see why, we have to look at the economy itself.

Demand for goods and services and return on investment drive production, the historic backbone of employment and the American economy. However, there are two different kinds of investors: Bears and Bulls. Charging bulls drive the market to full production, betting on a bright future. However, at some point certain near the peak of a bull market, hungry bears will come out and collect all the picnic baskets, betting against prosperity, driving down stock prices by dumping their holdings, then hoarding as much capital as possible as stock prices bottom out. They give everyone else at the picnic a bad time, and eventually buy back everything that they sold high, and everything else they can get bargain basement prices on. This stymies investment, halts production, and creates unemployment. If people are unemployed, production of goods and provision of services falls off further, and consequently investors are reluctant to invest any money in the production of goods or the provision of services due to dwindling Returns On Investment (ROI). Because they are a socially irresponsible class, investors only look at expected ROI when they decide whether or not to put people back to work. They must serve their stockholders, even to the extreme detriment of workers and the public.

Since the New Deal, the government response to this has been to stimulate investment. In today’s far right political climate, investment in public infra-structure is considered to be “Big Government,” which the Tea Party populists supposedly want to “get out of our pockets.” So, the only investment government can stimulate is “supply side” (what George Bush Sr. called “Voodoo Economics,” after the Cargo Cults of primitive South Sea islanders waiting for cargo planes to parachute food and manufactured goods to them). The hope is that if you give investors incentives, they will invest, create jobs, and the new found wealth will “trickle down” to working people, just as the transport plane cargoes floated down to the islanders on parachutes.  Being socially irresponsible, investors will actually use these incentives to bet money on “high tech” investments, which promise astonishing ROI through the elimination of workers, thereby providing investors with a competitive edge in world markets. So, a new round of investment then produces more unemployment, rather than reducing it. In the late ‘60’s and early ‘70’s, government economists used to juggle inflation and unemployment, trading one off against the other in the hope of maximizing employment. That no longer works since stagflation bowed out the Phillips Curve in the mid ‘70’s, which means that inflation runs riot even when the economy is stagnant, making it impossible to spend on social services and other ameliorative government programs.

So, the bottom line is that none of the Keynesian fiscal policies work anymore. The only investment the “Big Government” can justify making itself is military. This makes it easy for irresponsible Presidents to stir up unjust wars, throwing billions at Star Wars, and just about anything else that destroys rather than helps humanity. Remember that there are over 30,000 corporate raiders in Washington, D.C. these days (called lobbyists, as compared to several hundred when Ronald Reagan accelerated the process of deregulation Jimmy Carter had already started), who have nothing better to do than to use their financial influence to steer legislation. Deregulation simply means that these corporate clones now write all of the regulatory legislation, rather like appointing the fox to guard the hen house. These corporate lobbyists will guarantee the failure of health care reform (that goes beyond Wall Street dicta), with real reform in medical services delivery systems and investment in energy self-sufficiency (solar power) remaining dead issues. The new administration has finally decided to build a few roads and start some high-tech public transportation projects, but never enough to actually stop the crumbling of our civil engineering infra-structure, or put everybody back to work, for that matter.

The guy at WalMart I talked to about computer hardware used to be a systems administrator. The clerk who checked me out was a former computer programmer. For $50,000 in severance pay, he spent six months training the Philipino guest worker to do his job for half-price. These WalMart people are seriously underemployed, which is not reflected in unemployment statistics. The only thing the government does quite well about employment these days is manipulate statistics. Still, they cannot get unemployment out of double digits, even while seriously undercounting the unemployed. They have curtailed unemployment checks, dropping people into limbo who are unemployed more than six months. Where do you find a job if you are over 55? Being a displaced worker at that age is enough to get disability. Meanwhile, Wall Street starts another bull market. Who has gone back to work yet? Who is going to? Don’t bet your marbles it will be anything you like or want, even if you do find a job in this Brave New World, where WalMart puts everyone smaller out of business by refusing to pay more than mainland China prices for anything they sell. We actually compete against slave labor through the World Trade Organization (WTO)!

Meanwhile, NAFTA (North American Free Trade Agreement) is forcing Mexicans (and the rest of Central America) to grow crops for export only, and not enough of their own food to feed themselves. Without work or any means of making money, they must then pay inflated prices for corn and other commodities from the US. This drives them through starvation into the Gringo-owned Maquiladora factories, that purchase tariff and duty-free raw materials and pay their workers $1.00 per hour to assemble them, then ship the finished goods back to WalMart. Anyone who cannot get such a job may flee over the US border in search of a way to survive. This is happening on a world-wide basis, as procurement divisions search the World Wide Web for the cheapest parts, invariably produced for the cheapest labor costs.

In countries like South Korea, the price of labor is traditionally kept low by using the Armed Forces to quell labor disputes and rebellions and crush unions. This so-called democracy has a free hand against labor because troops from the United States secure the border with North Korea. The President of Rebok once said, “Americans don’t want to make gym shoes anymore.” What he should have said is that they would starve to death on the wages he pays in his Third World factories, where workers are subject to the whip hand of fascist repression while the United States aids and abets the dictatorial government. In Juarez, Mexico, social disintegration caused by unemployment has overtaken the whole city, turning it in a miniature “failed state.” The city is ungovernable, as criminal gangs assassinate political leaders and provide their own police. Young men growing up there only want to become drug dealers, so that they can live the few short years they expect in some kind of dignity. What are the real social effects of unemployment? Absolutely devastating!

Social Effects of Unemployment

The most visible effect in the US, a country that now considers double digit unemployment to be “full employment,” even after juggling the statistics, is that the poorest people of the land suffer the most. As Wall Street rebounds, their struggle for survival becomes even harsher. Transportation budgets in cities across the country have been slashed to the bone, making it impossible for people who cannot drive to the areas where the factories are to ever find work. The working class and the poor are the main people who use public transportation, but the services run all the wrong way for those who really want to work.

Without going ten blocks from my own neighborhood of apartment dwellers, people are hard-pressed to pay rent, buy groceries, or keep their utilities paid. Prices did not go down because millions of jobs have been lost, moving to wherever taxes and labor are cheapest. Nationwide, people became stressed, sad, and angry. A lot of them are expressing their fear of losing their jobs, homes, and way of life by attending Tea Party Town Hall meetings. Yet, the only voices the billionaire-owned public media (the same billionaires who funnel hundreds of millions of dollars to proto-fascist and racist organizations such as Tea Party) can hear are the ones crying out against big government, “Get the government out of our pockets!” (These reportedly are Tea Partyers making over $100,000.00 per year). What is the main complaint about Big Government the media reports on? It spends money to help people. Now, the “Tax and Spend” Democrats have the audacity to want to help pay medical bills! The real voices of people at these meetings will never be reported in the monopoly-owned corporate media: people who only want to work and keep their homes. Only the most shrill, who reflect the narrow bias against Big Government (forgetting it is Big Military, Big Corporate Bail-outs, and Big Corporate Welfare the government spends most of its money on) are reported. The ones who point out how bad the new health care reform law actually is are not the ones who cannot afford health care, millions of whom may now get Medicaid cards, at least for a few years. Many of us at the Tea Party meetings are still waiting for some of that wealth to trickle down into our hands, but the most the billionaires who control government spending will do is spit on us.

People who are unemployed cannot afford to continue to purchase goods and services at a level that keeps Big Government and Big Corporate capitalism afloat. Many are losing their homes through foreclosure, and entire families end up living out on the streets. Go to Los Angeles in the winter these days, and see the tens of thousands of people standing in soup lines, living under viaducts, and sleeping in McArthur Park. See Gary Indiana, where houses are simply abandoned, garbage piles up for decades, rats run rampant, and property values deteriorate as a result of the closing of the steel mills. I once suggested to an economics teacher that the government should invest in steel mills, and he nearly tarred, feathered, and ran me out of the classroom on a rail. Renters not able to continue paying skyrocketing rents get evicted. Families are forced to move in with relatives or friends. Families of three and four move into cheap, single room occupancy hotels (SROs). The low tax base resulting from high unemployment results in bus services being cut in crucial neighborhoods, where public is the people’s main means of transportation. Many don’t own automobiles. Evictions and bankruptcies are common throughout the community. The New York Time reported that over sixty-thousand people who are no longer covered by the cold-weather protection laws are getting their utilities shut off. Physical and mental illness increasingly ravage communities of homeless families. Women with children lose their job, become homeless, and are forced to sleep in doorways, or prostitute their bodies for shelter. Divorce and crime rates rise as people are no longer employed. The tax-base thins out: no work, no tax revenues for government. So they come up with the “stupid tax,” and further impoverish working people through state lotteries because no one has the guts to raise taxes.  Have they improved the schools yet, as they promised they would do with lottery revenues? Duh! Smart people would stop buying lottery tickets!

The ability of government to provide for people is also seriously compromised. When unemployment is high, people pay less in income and sales taxes because they make less money and purchase fewer goods and services. This leads to cuts in public services, which includes everything from police and fire protection to staff for the municipal swimming pool and garbage collection. Did anyone get a gander at Chicago’s public parks the year Mayor Bilandic decided not to have them cleaned? The negative effects of unemployment fester on both personal and social levels. On a social level, unemployment causes a greater reliance on government assistance, at the same time the tax base for it dwindles. This increases economic stress on social programs as well as on taxpayers, from both directions at once!

As we can see, unemployment is a bad thing for everyone, especially for those who remain unemployed and will suffer longest. The main impact unemployment has on society and the economy is the productive power that it withholds — i.e. any person who is unemployed could be doing something productive and thus contributing to the economy as a whole while actually paying for his or her own food, energy, and health care! To compound the problems, the longer a person is unemployed the harder it becomes to find a job. You get behind on your credit card payments, and you will never find a good job, because the employers pick and choose whom they employ on the basis of credit ratings! The long-term unemployed can really suffer as employers are unwilling to take a chance on someone that no one else is willing to hire.

Unemployment is always bad for the economy. A capitalist economy (or a socialist one, for that matter: both are grounded in the same Taylorist/Stalinist principles of speed-up, concessions, and unemployment) cannot tolerate 0% unemployment because that would eradicate the army of reserve labor that drives down labor costs. Furthermore, all economies now cater to the world market, where unemployment would also have to be 0% to prevent the fully employed workers in the developed countries from competing against slave labor in the underdeveloped nations. As more and more Chinese, Russians, and others command high-tech jobs for a bowl of rice and a dollar a day, no matter how productive they are, workers in industrialized countries simply cannot compete.

I once explained to a striking worker (Pay Day candy bars) that her job was being shut down not because her company had not made enormous profits in recent years, but because it could evade taxes, environmental regulations, workers’ protection laws, and pay slave wages to non-union employees, without ever having to negotiate a contract, simply by locating its new high-tech automated production facilities in Malaysia. Meanwhile, the local government could use all of its military force to suppress union organizing, while the American military (with its rapid deployment on three major fronts capability) protects their borders. She told me, “Well, then we ought to ensure that everyone in the world makes union scale.” Then, her company would have nowhere to flee, and could continue raking in enormous profits out of the sweat of her brow. With one sentence, she solved the entire unemployment problem. If full employment were the first priority of our government and society, it could divert capital into investments that create new jobs and new wealth; and by making peace our first priority in foreign and domestic policy, we could expand and share the wealth with the entire world, as our productive power expands because we are all working! Everyone could go to work without creating hyperinflation because we would find more energy efficient ways to live and work, applying our collective mental powers to solving the world’s problems.

There is not a nation in the world that cannot feed itself, if that were their first priority, rather than producing for the world market. By putting human values above profits, workers and the public above investors (Henry Ford’s idea when he doubled wages for production workers, thereby creating the mass market for his newly invented mass production line and sparking the epochal Dodge Bros. lawsuit against Ford Motor Co.), and investing real money and time in the creation of peace, rather than more nuclear armaments, we could build a whole new world in which unemployment would be the measure of the numbers of the sick and disabled. The American government never really gave the New Deal a chance, because before the Supreme Court and other far right elements could shut down everything, World War II intervened. Suddenly, everyone went to work, and Rosie learned how to drive rivets. What if we all went to work to help people rather than kill them? What a wonderful world that would be!


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