The usual neo-liberal argument is that labour markets must become more "flexible" to solve the problem of unemployment. This is done by weakening unions, reducing (or abolishing) the welfare state, and so on. However, we should note that the current arguments for greater "flexibility" within the labour market as the means of reducing unemployment seem somewhat phoney. The argument is that by increasing flexibility, making the labour market more "perfect", the so-called "natural" rate of unemployment will drop (this is the rate at which inflation is said to start accelerating upwards) and so unemployment can fall without triggering an accelerating inflation rate. Of course, that the real source of inflation is capitalists trying to maintain their profit levels is not mentioned (after all, profits, unlike wages, are to be maximised for the greater good). Nor is it mentioned that the history of labour market flexibility is somewhat at odds with the theory:

"it appears to be only relatively recently that the maintained greater flexibility of US labour markets has apparently led to a superior performance in terms of lower unemployment, despite the fact this flexibility is no new phenomenon. Comparing, for example, the United States with the United Kingdom, in the 1960s the United States averaged 4.8 per cent, with the United Kingdom at 1.9 per cent; in the 1970s the United States rate rose to 6.1 per cent, with the United Kingdom rising to 4.3 per cent, and it was only in the 1980s that the ranking was reversed with the United States at 7.2 per cent and the United Kingdom at 10 per cent. . . Notice that this reversal of rankings in the 1980s took place despite all the best efforts of Mrs Thatcher to create labour market flexibility. . . [I]f labour market flexibility is important in explaining the level of unemployment. . . why does the level of unemployment remain so persistently high in a country, Britain, where active measures have been taken to create flexibility?" [Keith Cowling and Roger Sugden, Beyond Capitalism, p. 9]

If we look at the fraction of the labour force without a job in America, we find that in 1969 it was 3.4% (7.3% including the underemployed) and rose to 6.1% in 1987 (16.8% including the underemployed). Using more recent data, we find that, on average, the unemployment rate was 6.2% in 1990-97 compared to 5.0% in the period 1950-65. In other words, labour market "flexibility" has not reduced unemployment levels, in fact "flexible" labour markets have been associated with higher levels of unemployment.

Of course we are comparing different time periods. A lot has changed between the 1960s and the 1990s and so comparing these periods cannot be the whole answer. After all, the rise in flexibility and the increase in unemployment may be unrelated. However, if we look at different countries over the same time period we can see if "flexibility" actually reduces unemployment. As one British economist notes, this may not be the case:

"Open unemployment is, of course, lower in the US. But once we allow for all forms of non-employment [such as underemployment, jobless workers who are not officially registered as such and so on], there is little difference between Europe and the US: between 1988 and 1994, 11 per cent of men aged 25-55 were not in work in France, compared with 13 per cent in the UK, 14 per cent in the US and 15 per cent in Germany." [Richard Layard quoted by John Gray in False Dawn, p. 113]

In addition, all estimates of America's unemployment record must take into account America's incarceration rates. Over a million people more would be seeking work if the US penal policies resembled those of any other Western nation. [John Gray, Op. Cit., p. 113]

Taking the period 1983 to 1995, we find that around 30 per cent of the population of OECD Europe lived in countries with average unemployment rates lower than the USA and around 70 per cent in countries with lower unemployment than Canada (whose relative wages are only slightly less flexible than the USA). Furthermore, the European countries with the lowest unemployment rates were not noted for their wage flexibility (Austria 3.7%, Norway 4.1%, Portugal 6.4%, Sweden 3.9% and Switzerland 1.7%). Britain, which probably had the most flexible labour market had an average unemployment rate higher than half of Europe. And the unemployment rate of Germany is heavily influenced by areas which were formally in East Germany. Looking at the former West German regions only, unemployment between 1983 and 1995 was 6.3%, compared to 6.6% in the USA (and 9.8% in the UK).

So, perhaps, "flexibility" is not the solution to unemployment some claim it is (after all, the lack of a welfare state in the 19th century did not stop unemployment nor long depressions occurring). Indeed, a case could be made that the higher open unemployment in Europe has a lot less to do with "rigid" structures and "pampered" citizens than it does with the fiscal and monetary austerity required by European unification as expressed in the Maastricht Treaty. As this Treaty has the support of most of Europe's ruling class such an explanation is off the political agenda.

Moreover, if we look at the rationale behind "flexibility" we find a strange fact. While the labour market is to be made more "flexible" and in line with ideal of "perfect competition", on the capitalist side no attempt is being made to bring it into line with that model. Let us not forget that perfect competition (the theoretical condition in which all resources, including labour, will be efficiently utilised) states that there must be a large number of buyers and sellers. This is the case on the sellers side of the "flexible" labour market, but this is not the case on the buyers (where, as indicated in section C.4, oligopoly reigns). Most who favour labour market "flexibility" are also those most against breaking up of big business and oligopolistic markets or the stopping of mergers between dominant companies in and across markets. The model requires both sides to be "flexible," so why expect making one side more "flexible" will have a positive effect on the whole? There is no logical reason for this to be the case. Indeed, with the resulting shift in power on the labour market things may get worse as income is distributed from labour to capital. It is a bit like expecting peace to occur between two warring factions by disarming one side and arguing that because the number of guns have been halved peacefulness has doubled! Of course, the only "peace" that would result would be the peace of the graveyard or a conquered people — subservience can pass for peace, if you do not look too close. In the end, calls for the "flexibility" of labour indicate the truism that, under capitalism, labour exists to meet the requirements of capital (or living labour exists to meet the needs of dead labour, a truly insane way to organise a society).

All this is unsurprising for anarchists as we recognise that "flexibility" just means weakening the bargaining power of labour in order to increase the power and profits of the rich (hence the expression "flexploitation"!). Increased "flexibility" has been associated with higher, not lower unemployment. This, again, is unsurprising, as a "flexible" labour market basically means one in which workers are glad to have any job and face increased insecurity at work (actually, "insecurity" would be a more honest word to use to describe the ideal of a competitive labour market rather than "flexibility" but such honesty would let the cat out of the bag). In such an environment, workers' power is reduced, meaning that capital gets a larger share of the national income than labour and workers are less inclined to stand up for their rights. This contributes to a fall in aggregate demand, so increasing unemployment. In addition, we should note that "flexibility" may have little effect on unemployment (although not on profits) as a reduction of labour's bargaining power may result in more rather than less unemployment. This is because firms can fire "excess" workers at will, increase the hours of those who remain (the paradox of overwork and unemployment is just an expression of how capitalism works) and stagnating or falling wages reduces aggregate demand. Thus the paradox of increased "flexibility" resulting in higher unemployment is only a paradox in the neo-classical framework. From an anarchist perspective, it is just the way the system works.

And we must add that whenever governments have attempted to make the labour market "fully competitive" it has either been the product of dictatorship (e.g. Chile under Pinochet) or occurred at the same time increased centralisation of state power and increased powers for the police and employers (e.g. Britain under Thatcher, Reagan in the USA). Latin American Presidents trying to introduce neo-liberalism into their countries have had to follow suit and "ride roughshod over democratic institutions, using the tradition Latin American technique of governing by decree in order to bypass congressional opposition. . . Civil rights have also taken a battering. In Bolivia, the government attempted to defuse union opposition . . . by declaring a state of siege and imprisoning 143 strike leaders. . . In Colombia, the government used anti-terrorist legislation in 1993 to try 15 trade union leaders opposing the privatisation of the state telecommunications company. In the most extreme example, Peru's Alberto Fujimori dealt with a troublesome Congress by simply dissolving it . . . and seizing emergency powers." [Duncan Green, The Silent Revolution, p. 157]

This is unsurprising. People, when left alone, will create communities, organise together to collectively pursue their own happiness, protect their communities and environment. In other words, they will form associations and unions to influence the decisions that affect them. In order to create a "fully competitive" labour market, individuals must be atomised and unions, communities and associations weakened, if not destroyed, in order to fully privatise life. State power must be used to disempower the mass of the population, restrict their liberty, control popular organisations and social protest and so ensure that the free market can function without opposition to the human suffering, misery and pain it would cause. People, to use Rousseau's evil term, "must be forced to be free." And, unfortunately for neo-liberalism, the countries that tried to reform their labour market still suffered from high unemployment, plus increased social inequality and poverty and where still subject to the booms and slumps of the business cycle.

Ultimately, the only real solution to unemployment is to end wage labour and liberate humanity from the needs of capital.