By Karl Kautsky, translated by Noa Rodman
In former times we had a saying in Germany: “When the peasant has money, everyone has.” That was perfectly true wherever the great majority of the people were peasants or farmers. It is no longer true in the industrial countries. In such countries the majority is composed of wage workers. There we have to change the old saying. In such countries we can say: “When the workingman has money, everyone has.”
But the workingmen have money only when they are employed. Unemployment does not injure the working class alone, it injures the whole of society. The campaign against unemployment is a campaign for general social interests.
This has by now become a matter of common knowledge. Unfortunately, however, there is no general agreement as to the ways which lead to the elimination of unemployment. To be clear on this question, we must bear in mind one decisive fact which is not so generally recognised, namely: That unemployment springs from two distinct sources, each of which gives rise to a particular kind of unemployment, and each of which requires particular methods for eliminating it.
One of these two sources of unemployment is overproduction, and the other is technological progress.
Occasional crises of overproduction have been known ever since the beginnings of the capitalist system. But as sure as such a crisis occurred, just as surely was it followed by a period of prosperity. They alternated, forming a cycle of about ten years.
Marx observed this phenomenon. But just at the time when he died (about fifty years ago), this ten-year cycle was disappearing, along with the liberal stage of the capitalist economy.
Role of Monopoly
Great capitalist enterprises now began to form trusts and combines in order to obtain exceptional profits through monopolistic restrictions of output and consequent raising of prices. Along with this came the imposition of high protective tariffs, which limited the markets in order that the monopolists might control them. The militarists on their side advocated “autarchy” – the idea that each country should produce every kind of goods it needed, in order that it should not be dependent upon imports in case of war.
Up to that time the world market had been steadily expanding through international division of labor – that is, through the tendency of each country to produce for export such commodities as it could produce most cheaply and to import those which it could not as well produce for itself. Henceforth, under the double pressure of capitalistic monopoly and of militaristic considerations, each country has been striving to produce the same things that all the other produce.
Even before the World War these tendencies had artificially promoted the conditions which make for overproduction crises. The war immensely strengthened these tendencies, and introduced new causes through the general political and economic uncertainties which resulted from it. At times it brought veritable catastrophes, especially through inflation and other forms of devaluation of money, as well as through the emergence of new causes for war. All this led again and again to glutting of the commodity markets.
In earlier times such glutting of the market grew out of the economic laws of the capitalist system of production. Now they result from the wilful aggressions of certain powerful capitalist organizations and of governments which they dominate. During the era of liberalism, as has been said, each crisis was followed, within a few years, by a period of prosperity. Now, in this time of capitalistic monopoly and of militaristic influence upon the productive system, crisis threatens to become the permanent condition, interrupted only by occasional short periods of prosperity, so long as these factors of capitalism and militarism, founded upon private ownership of the means of production, continue to dominate our economic life.
To put an end to this condition and to establish lasting and general prosperity, we need a politically strong, economically well educated, and effectively organized working class, functioning in a democratic state – that is, acting with full independence on all important fields of social action – and we need this in all the most important countries. No one nation alone can overcome the world crisis.
Even if the crisis of overproduction should be overcome and a somewhat prolonged new period of prosperity ushered in, we should be mistaken if we expected this to do away with unemployment. It would for the time be diminished, but not eliminated.
The first of the two kinds of unemployment spoken of near the opening of this article – that is, unemployment due to the glutting of the commodity market, through anarchic overproduction in the preceding period of prosperity and correspondingly high profits – this would for the time be reduced to a minimum, only to reappear as soon as the yet higher profits of the new prosperity had again brought about overproduction. But meanwhile the other kind of unemployment would continue to exist and continue to grow.
We must here turn our attention to this [essential] type of unemployment.
Every industrial capitalist incessantly strives to increase his profits by reducing the cost of production of the goods which he is pouring into the market. To this end he is always seeking to cut down the expenditure for the labor that is required to carry on his production. And of all the means by which he may be able to do this, the principal one is the introduction of methods which reduce the amount of labor required for producing a given quantity of goods.
This was set forth by Marx in his “Capital.” Bourgeois economists have combatted this view, pointing out that before the World War, although methods of producing were being improved, the number of unemployed in the industrial countries was not in fact steadily increasing.
It is true that the tendency to increasing unemployment which is inherent to the capitalist system may be retarded by other tendencies. Marx has not overlooked this fact; indeed, he had himself stated it, saying that unemployment need not increase if the market for the products of capitalist industry and the amount of the invested capital increase faster than the displacement of workers by the introduction of labor-saving methods and machines. This was generally true before the war, but since then there has been a thorough-going change. The expansion of the market has been more and more hampered by the growth of monopolistic combinations, the intentional restrictions of output, and the high-tariff policies that have already been mentioned. At the same time the increase of investment in capitalist industry has been held back, partly through the direct destruction of existing capital by war policies, and by devaluation of money, partly by economic and political insecurity which leads to the public and private hoarding of great quantities of money and thus withholds it from productive use.
But at the same time scientific technique has been reaching an extremely high degree of perfection, and labor-saving methods and devices increase from day to day at an unprecedented rate. A century ago there were but few industrial inventors outside of England and the then incompletely settled eastern part of the United States. The natural sciences, indeed, were already highly developed in Germany and France, but they were as yet only to a small extent applied to industrial technique. How vastly has all this changed! Germany has rivaled and almost surpassed England in the matter of invention. The population of the United States has grown from 13,000,000 to nearly 127,000,000. Great countries, such as Italy, Russian and Japan, have entered the realm of capitalistic production and in so doing have developed the inventive spirit. And the results of [successive] inventions are international. Autarchic tendencies and the closing of frontiers can at best maintain a [natural] monopoly only of improvements in the technique of war. Inventions in the industrial field, in whatever country they may be made, are quickly introduced in other industrial countries if only they are profitable – that is, if they save labor.
The introduction of labor-saving methods and machinery has therefore been going on much more rapidly in recent times than it formerly did – so much so that the extension of markets and the increase of industrial capital can no longer keep pace with it. This is clearly true where these tendencies are being held in check by the monopolistic and militaristic influences of which we have spoken. But even if these retarding influences can be overcome and a new era of prosperity brought in, industry in its present stage of development, so largely equipped with labor-saving inventions, could not absorb the whole of the unemployed.
For this ever increasing evil of unemployment resulting from improvement in the means and methods of production as distinguished from the ever recurrent waves of unemployment resulting from periodic glutting of the market, there is just one indispensable remedy. While making every effort to overcome the crisis of overproduction, it is necessary also more and more to shorten the workday and the work-week. And this requires the use of political power, of legislative action.
Of all legislative measures which are needful in the struggle against unemployment, legal reduction of the working time is the one which the capitalists most stubbornly oppose. In this they are acting in accordance with their material interests. But many economists and statesmen, also, even such as have no personal or property interests at stake, hold theoretical views which lead them to oppose this measure. They believe that reduction of working hours will increase the costs of production, that it will ruin industry, and that thereby, instead of diminishing unemployment, it will throw more men out of work.
Since this view is seriously held, since it strongly affects public opinion, it deserves careful examination. It will, therefore, be dealt with in a separate article.
Society Will Benefit By Shorter Hours (May 1937, Labour, p. 211)
Unemployment cannot be banned without far-reaching shortening of working hours. Of course it is important to the worker that this should be achieved without cuts in daily wages.
No doubt, a far-reaching shortening of hours without reduction of daily pay raises serious economic problems which need to be solved if economic life is not to suffer. But there is nothing more wrong than to say that they have no solution.
In the first place we need to consider that concerns of the highest technical order and of greatest importance to the economics of the country are least affected by the question of wages. For of the capital invested in such concerns only a small percentage is used for wages.
What really affects these companies is the insufficient use made of their enormous fixed capital consisting in buildings and machinery. But it is just here that a shortening of working hours, if coupled with longer business hours, gives them wider scope for profit.
The daily working hours of a hand and the working hours of a plant are in no way identical. If the hours of employees in a factory were reduced from eight to six, profits may rise, even if daily wages remain unaltered and the prices of individual products are not increased.
The growth of profits here can result from the fact that two shifts are at work and thus the working hours of the plant are now, e.g., twelve instead of eight. Thus in this case the value of the goods manufactured per day rises by 50 per cent., while the fixed capital invested in the concern remains unaltered. In companies which already have uninterrupted production in three working shifts profits will remain unaltered or even grow, if machines that have to now only worked half of the capacity are, since the shortening of hours, run to full capacity.
Individual concerns may well apply such methods to avoid a decline in profits which shorter hours threaten. But they would not fit every type of business. They would be profitable only for special concerns in particular circumstances. Happily, we are not tied exclusively to such methods. Other possible ways cannot, however, be applied by individual companies alone – Government action is required.
The amount of profits on capital during a year does not only depend on profits made in a single day but on the yearly turnover of capital. If, with a certain amount of capital, goods are manufactured at a profit of 3 per cent., the capital will yield 15 per cent. per year if it is turned over five times. If business becomes brisker, the capital is turning over ten times in a year, it will yield 30 per cent. of profit. Even if profits on daily production decline from 3 to 2 per cent., 20 per cent. of profits may be achieved.
The less fixed capital means to a firm, the more funds spent on wages prevail in it, the more a lessening of profits owing to the shortening of the working day will be balanced by a speeding up of capital turnover, if a general improvement in business conditions sets in. Now the mere addition of extra workers employed at the same standard of wages must improve business, as by this fact the number of purchases in the market increases. Apart from this, a Government, which is so far influenced by the working class as to bring about a radical shortening of hours, must adopt other measures as well to stimulate the economic process. In my last article on the fight against unemployment (“Unemployment Has Two Roots,” Labour, April, 1937), I have already pointed this out.
But in other ways as well the Government can counter possible disturbance of economic life caused by the shortening of working hours where this would lead to a rise in the cost of production. It is a queer idea of some economists that they reckon wages alone as cost of production. It is true that Marx, and with him the School of Classical Political Economy, asserts that the value of goods is established by the amount of labour sunk in their production. But this labour does not merely equal wages, and it is not in the least the case that the industrial capitalists calculating business regards as costs of production merely the wages he pays.
What Marx calls surplus value, i.e., unpaid labour, he subdivides into profits, rent and interest. The individual industrial capitalist has frequently to part with a share of surplus value he makes to the landlord in the shape of rent or lease, and to the banker as interest. But the manufacturer does not assess rent and interest as surplus value – this category is non-existent for him – he classes them as costs of production accruing to him through the agency of his banker or landlord.
If at a stage where costs of production are rising, owing to shortening of hours with stationary wages and prices, individual manufacturers fail to make up for this either by a wider use of their fixed capital or by quicker capital turnover, it is by reducing rent and interest that rise and reduction may be balanced. No danger for society need be apprehended.
The workers, including clerical assistants, are the most important persons for the function not only of socialist production but already of capitalist business. Then only comes the organiser of the enterprise, its manager, or – constantly decreasing in importance – its owner. The roles of the landlord and banker, so far as they derive their income solely from letting their property or taking interest on their funds, are totally superfluous. If by Government measure rent and interest are reduced, society will in no way suffer but, on the contrary, benefit. The industrialist that can borrow “cheaper” money will see his costs of production lowered considerably, the tenant who receives soil for cultivation at a reduced rent will profit as well. Farmers running their own property will benefit if the mortgage interest which for them symbolises the burden of rent, dwindles.
Individual manufacturers cannot do much here. To achieve this aim, a strong, i.e., democratic State, enjoying the confidence and the energetic and understanding cooperation of the masses, is needed. Nationalisation will become a necessity, for example, for the establishment of publicly owned credit banks.
Apart from the above factors that make up the cost of production, there is another one of great importance: the price of raw materials. These prices are artificially raised to a high degree by great monopolies and high tariffs produced by them. How important, for example, is the price of iron for the whole of industry, agriculture and the transport of a country! Already by the reduction of customs by Government action regarding monopolies, which may go and eventually must go as far as their complete nationalisation, it is possible to more than balance an ensuing rise in the cost of production owing to shortening of hours.
Therefore, even where such a rise occurs, it does by no means prove the harm of a shortening of hours. It just proves that it is necessary that this should not be considered as an isolated action but should have its place in a far-reaching system of social reform.
In the history of the legal shortening of the working day one can distinguish two phases: one primitive, which begins already in the middle of the last century, and a later one, of the last decades. In the first phase the normal working day was introduced, to protect the labourers of large industry against limitless over-work and to save them from complete deterioration. This has been achieved, legal labour protection has placed the working class of the capitalist states on a higher level, physically, morally, intellectually. And not only the working class has been organised. The transition to the shorter working day, succeeded among businessmen the sooner, the more intelligent and diligent they were, the better they understood new methods. The dumber and more apathetic, slovenly a businessman was, the easier he went bankrupt with a shortening of the working day. Thus a shortening of the working day performs a regeneration not only of the labourers, but also of the capitalists and their businesses. It raises the whole economic system on a higher level.
This applies for the first era of labour protection, as long as the labourers are degraded and demoralised by over-work. Likewise a shortening of labour time functions today. Yet not in the same manner. Not over-work, but unemployment threatens now enormous numbers of workers with degradation and demoralisation. If unemployment is successfully eliminated, then thereby one suspends the most grave, moral, physical, intellectual hazard of the working class of our time, one elevates the proletariat on a higher level.
Simultaneously thereby however, as in the beginning of the labour protection, also the whole production system is raised. And yet a difference exists. Back then this elevation was obtained by the capitalists themselves. Today the shortening of the labour time makes a series of measures desirable or necessary, which one can not leave to the capitalists alone; which often also go beyond their powers. They require for their implementation a strong intervention of the state power, which already must lead to an expansion of the state economy.
Such interventions can only be expected in democratic states with an as strong as intelligent working class. The fist alone does nothing, it must be lead by a thinking, learned head. And also the intelligence of a leader does nothing, the masses must be intelligent as well.
Since the World War a narrow-minded worship of violence spreads itself not only with the fascists, but also with many socialists. They imagine that we need only possess the necessary force and violence, to beat our opponents, then the socialist society will arrive by itself. Unfortunately the matter is not so simple. If a ruler applies brutal power without knowledge, then he damages often not only the opponent, whom he beats, but also himself.
The stronger the proletariat, the greater its power in the state, the more daunting and difficult its tasks, the more momentous their solutions. Only a working class, which besides the required power, possesses the required knowledge, namely, the economic, will be able to achieve fruitfulness, to bring about an enduring higher order of society. The winning of power depends however not only on the workers, but also on numerous circumstances, which they can not induce at discretion. Much sooner they can procure the required knowledge, this is everywhere in all circumstances an essential task for them.
Note by translator, Noa Rodman on: The crisis of capitalism and the shortening of working time (Die Krise des Kapitalismus und die Verkürzung der Arbeitszeit.)
The following blurb is from the The New Leader, 27 March 1937:
Business Recovery Alone Will Not Put All Back to Work, Says Great Economist; Working Hours Must Be Cut Down
Recent Growth of Monopoly, Nationalistic Policies and General Insecurity All Tend to Lengthen Depressions and Shorten Spurts of Industrial Activity.
Improvement of Machinery in Age of Mass Production Displaces Workers So Rapidly That Unemployment Grows Even in Times of Boom.
This was originally a two-part article which appeared originally as “Kampf gegen die Arbeitslosigkeit” and “Die Verkürzung der Arbeitszeit und der Kapitalprofit.” in Gewerkschaftliche Rundschau: Zeitschrift der Zentralgewerkschafts-Kommission des Deutschen Gewerkschaftsbundes in der Tschechoslowakei. (March, April 1937). The title used here comes from a reprint in Neue Gesellschaft, – 31 (1984), H. 2, S. 123–129.
Different translations appeared in The New Leader and in Labour. The transcription is based for the first part on The New Leader (this first part was titled “Unemployment Has Two Roots” in Labour), for the second on Labour (the last 6 paragraphs were dropped there, so I’ve added my translation based on the original German: https://www.marxists.org/deutsch/archiv/kautsky/1937/03/arbeitszeit.htm).