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Monday, Feb. 6, 2012

The dark hole of modern capitalism

Special to The Japan Times

HONG KONG — The International Labor Organization last month put out a stark warning about increasingly wretched employment prospects almost everywhere in the world. It wrote: "The world must rise to the urgent challenge of creating 600 million productive jobs over the next decade".

The report was all but ignored except by the very serious press and the BBC. Perhaps it is not surprising. How did the ILO calculate such a figure? Did they count the unemployed? How can anyone count up to 600 million, especially over 10 years into the future? Is it a case of thinking of the highest number that may scare you?

The ILO rather spoiled its case by adding that, even today, 1.1 billion people worldwide are unemployed or living in poverty. As for its suggestion that "the world" must create new jobs, and "productive" ones at that, what is this "world" and who runs it?

It is right to be critical of sloppy thinking, especially when there isn't one world. But the ILO is on surer ground when it gets away from United Nations-speak and warns of clear and present dangers.

Unemployment is the deep dark hole of modern capitalism. You can see this clearly in the United States or Europe, sophisticated societies where losing your job turns your life upside down and where not having a job after leaving school or college leaves you with an empty future.

It is especially true in the 21st-century West, where communities of families would support each other in good times and bad, are disappearing and being replaced by the fast-paced anomie of cities, where losing a job is little short of a tragedy.

In Spain the number of jobless hit 5.3 million or 24 percent of the population last year, and almost half of the youth between 16 and 24 have no job. In the European Union as a whole, there are more than 22 million people without jobs.

The hollowed out old industrial towns of the U.S. are in a worse plight. Adam Davidson repeats a joke in the current issue of The Atlantic from U.S. cotton country: The textile mill is so now automated that it employs just one man and a dog. The man's job is to feed the dog, and the dog's job is to keep the man away from the machinery.

The U.S. is fighting a losing battle with China for the title of the world's largest manufacturer. In gross domestic product, U.S. manufacturing has fallen from 21 percent in 1980 to about 11 percent. More startlingly, manufacturing employment has collapsed and 6 million jobs have been lost in the last decade. Between 1960 and 2010, U.S. employment in producing goods, including manufacturing, fell from about 38 percent to 14 percent, while services similarly rose from 62 percent to 86 percent.

In 1960, the biggest American companies in terms of jobs were manufacturers: General Motors with 595,200 employees; Bell System, the telephone giant that became AT&T, with 580,400; then General Electric, 260,600; Ford, 260,000; and U.S. Steel, 225,100.

In 2010, service companies were the biggest U.S. employers. Walmart led the way with 2.1 million employees followed by Kelly, the temp services company, with 538,000; IBM with 426,751; UPS, the express delivery concern, 400,600; McDonald's, 400,000; and Yum!, the operator of Taco Bell, KFC and Pizza Hut stores. GE came in 14th with 287,000 workers, sandwiched between Bank of America (288,000) and CVS, the pharmacy chain (280,000).

Manufacturing jobs in the U.S. and the West generally have been hit by the devastating double whammy of automation and outsourcing. This threatens to become a much bigger problem, with potentially dangerous moral and social implications. If the only options are notoriously low-paid retail or clerking jobs, the income gap between rich and poor will grow.

How long before workers revolt en masse against bosses and financial whiz-kids collecting multimillion dollar salaries while they struggle to find jobs? Or will they accept that the highly paid are a race apart, the global elite competing worldwide where companies have to pay tens of millions of dollars for talent or lose out?

In the developing world, where after all 80 percent of the Earth's people live, problems of employment are more intense.

A searing series of articles the New York Times recently revealed unsafe and inhumane conditions in some Chinese factories making Apple's iPhones and iPads. China will have to grapple with blatant abuse of its own labor laws.

One striking aspect of the Apple story was the company's last-minute redesign of the iPhone screen and the way that the Chinese workers met the challenge: 8,000 of them were roused from their beds at midnight, given a cup of tea and biscuit and started a 12-hour shift to fit the glass screens into the beveled frames. Within 96 hours the factory was producing 10,000 iPhones a day. It was something that no U.S. factory would be able to match.

Should China be so quick to rescue the American company from its own bad management of a last-minute redesign, especially for such a small share of the profits? China is vulnerable to other lower-income countries snatching the work away.

It is more difficult to know who is unemployed or what employment is in rural Bangladesh or other densely populated Asian countries or large parts of Africa, where many families have no land, the adults get seasonal employment in the fields, and children earn pennies looking after animals rather than going to school. Seasonal employment and underemployment are things that families have had to struggle with for generations.

These days, with the spread of education and trickle-down foreign investment, wives or daughters may have prospects of work in a new garment factory started by U.S. or, more likely, Chinese or Thai entrepreneurs. But it is a precarious process, dependent on continued growth in the West.

There is much more scope for outsourcing of jobs from the West, given that academic studies suggest that unskilled wages in rich and poor countries differ by a factor of 10 to one. This is hardly good news for U.S. and European countries reeling from job losses since the financial crisis.

The ILO says there are 29 million fewer workers now than in 2009, thanks largely to "discouraged workers" who have given up looking. The young are particularly badly affected with the ILO describing their prospects as "bleak".

Perhaps worst of all, there is no sign that anyone has the vision to see the problem and the repercussions of unemployment, let alone to seize upon and remedy the deficiencies. The International Monetary Fund is preoccupied by the Euromess, and even the World Bank is being sucked in. The World Trade Organization is a voice crying in the wilderness as politicians from the U.S. and Germany to Japan and China draw into their narrow fortresses.

Kevin Rafferty is editor in chief of PlainWords Media.

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