Here we point out another aspect of the neo-classical "blame the workers" argument, of which the diatribes against unions and workers' rights highlighted above is only a part. This is the argument that unemployment is not involuntary but is freely chosen by workers. As the left-wing economist Nicholas Kaldor put it, for "free market" economists involuntary employment "cannot exist because it is excluded by the assumptions." [Further Essays on Applied Economics, p. x] The neo-classical economists claim that unemployed workers calculate that their time is better spent searching for more highly paid employment (or living on welfare than working) and so desire to be jobless. That this argument is taken seriously says a lot about the state of modern capitalist economic theory, but as it is popular in many right-wing circles, we should discuss it.

Firstly, when unemployment rises it is because of layoffs, not voluntary quittings, are increasing. When a company fires a number of its workers, it can hardly be said that the sacked workers have calculated that their time is better spent looking for a new job. They have no option. Secondly, unemployed workers normally accept their first job offer. Neither of these facts fits well with the hypothesis that most unemployment is "voluntary."

Of course, there are numerous jobs advertised in the media. Does this not prove that capitalism always provides jobs for those who want them? Hardly, as the number of jobs advertised must have some correspondence to the number of unemployed. If 100 jobs are advertised in an areas reporting 1,000 unemployed, it can scarcely be claimed that capitalism tends to full employment.

In addition, it is worthwhile to note that the right-wing assumption that higher unemployment benefits and a healthy welfare state promote unemployment is not supported by the evidence. As a moderate member of the British Conservative Party notes, the "OECD studied seventeen industrial countries and found no connect between a country's unemployment rate and the level of its social-security payments." [Dancing with Dogma, p. 118] Moreover, the economists David Blanchflower and Andrew Oswald "Wage Curve" for many different countries is approximately the same for each of the fifteen countries they looked at. This also suggests that labour market unemployment is independent of social-security conditions as their "wage curve" can be considered as a measure of wage flexibility. Both of these facts suggest that unemployment is involuntary in nature and cutting social-security will not affect unemployment.

Another factor in considering the nature of unemployment is the effect of nearly 20 years of "reform" of the welfare state conducted in both the USA and UK. During the 1960s the welfare state was far more generous than it was in the 1990s and unemployment was lower. If unemployment was "voluntary" and due to social-security being high, we would expect a decrease in unemployment as welfare was cut (this was, after all, the rationale for cutting it in the first place). In fact, the reverse occurred, with unemployment rising as the welfare state was cut. Lower social-security payments did not lead to lower unemployment, quite the reverse in fact.

Faced with these facts, some may conclude that as unemployment is independent of social security payments then the welfare state can be cut. However, this is not the case as the size of the welfare state does affect the poverty rates and how long people remain in poverty. In the USA, the poverty rate was 11.7% in 1979 and rose to 13% in 1988, and continued to rise to 15.1% in 1993. The net effect of cutting the welfare state was to help increase poverty. Similarly, in the UK during the same period, to quote the ex-Thatcherite John Gray, there "was the growth of an underclass. The percentage of British (non-pensioner) households that are wholly workless - that is, none of whose members is active in the productive economy - increased from 6.5 per cent in 1975 to 16.4 per cent in 1985 and 19.1 per cent in 1994. . . Between 1992 and 1997 there was a 15 per cent increase in unemployed lone parents. . . This dramatic growth of an underclass occurred as a direct consequence of neo-liberal welfare reforms, particularly as they affected housing." [False Dawn, p. 30] This is the opposite of the predictions of right-wing theories and rhetoric. As John Gray correctly argues, the "message of the American [and other] New Right has always been that poverty and the under class are products of the disincentive effects of welfare, not the free market." He goes on to note that it "has never squared with the experience of the countries of continental Europe where levels of welfare provision are far more comprehensive than those of the United States have long co-existed with the absence of anything resembling an American-style underclass. It does not touch at virtually any point the experience of other Anglo-Saxon countries." [Op.Cit., p. 42] He goes on to note that:

"In New Zealand, the theories of the American New Right achieved a rare and curious feat - self-refutation by their practical application. Contrary to the New Right's claims, the abolition of nearly all universal social services and the stratification of income groups for the purpose of targeting welfare benefits selectively created a neo-liberal poverty trap." [Ibid.]

So while the level of unemployment benefits and the welfare state may have little impact on the level of unemployment (which is to be expected if the nature of unemployment is essentially involuntary), it does have an effect on the nature, length and persistency of poverty. Cutting the welfare state increases poverty and the time spent in poverty (and by cutting redistribution, it would also increase inequality).

If we look at the relative size of a nation's social security transfers as a percentage of Gross Domestic Product and its relative poverty rate we find a correlation. Those nations with a high level of spending have lower rates of poverty. In addition, there is a correlation between the spending level and the number of persistent poor. Those nations with high spending levels have more of their citizens escape poverty. For example, Sweden has a single-year poverty rate of 3% and a poverty escape rate of 45% and Germany has figures of 8% and 24% (and a persistent poverty rate of 2%). In contrast, the USA has figures of 20% and 15% (and a persistent poverty rate of 42%) [Greg J. Duncan of the University of Michigan Institute for Social Research, 1994].

Given that a strong welfare state acts as a kind of floor under the wage and working conditions of labour, it is easy to see why capitalists and the supporters of "free market" capitalism seek to undermine it. By undermining the welfare state, by making labour "flexible," profits and power can be protected from working people standing up for their rights and interests. Little wonder the claimed benefits of "flexibility" have proved to be so elusive for the vast majority while inequality has exploded. The welfare state, in other words, reduces the attempts of the capitalist system to commodify labour and increases the options available to working class people. While it did not reduce the need to get a job, the welfare state did undermine dependence on any particular employee and so increased workers' independence and power. It is no coincidence that the attacks on unions and the welfare state was and is framed in the rhetoric of protecting the "right of management to manage" and of driving people back into wage slavery. In other words, an attempt to increase the commodification of labour by making work so insecure that workers will not stand up for their rights.

The human costs of unemployment are well documented. There is a stable correlation between rates of unemployment and the rates of mental-hospital admissions. There is a connection between unemployment and juvenile and young-adult crime. The effects on an individual's self-respect and the wider implications for their community and society are massive. As David Schweickart concludes:

"The costs of unemployment, whether measured in terms of the cold cash of lost production and lost taxes or in the hotter unions of alienation, violence, and despair, are likely to be large under Laissez Faire" [Against Capitalism, p. 109]

Of course, it could be argued that the unemployed should look for work and leave their families, home towns, and communities in order to find it. However, this argument merely states that people should change their whole lives as required by "market forces" (and the wishes — "animal spirits," to use Keynes' term — of those who own capital). In other words, it just acknowledges that capitalism results in people losing their ability to plan ahead and organise their lives (and that, in addition, it can deprive them of their sense of identity, dignity and self-respect as well), portraying this as somehow a requirement of life (or even, in some cases, noble).

It seems that capitalism is logically committed to viciously contravening the very values upon which it claims it be built, namely the respect for the innate worth and separateness of individuals. This is hardly surprising, as capitalism is based on reducing individuals to the level of another commodity (called "labour"). To requote Karl Polanyi:

"In human terms such a postulate [of a labour market] implied for the worker extreme instability of earnings, utter absence of professional standards, abject readiness to be shoved and pushed about indiscriminately, complete dependence on the whims of the market. [Ludwig Von] Mises justly argued that if workers 'did not act as trade unionists, but reduced their demands and changed their locations and occupations according to the labour market, they would eventually find work.' This sums up the position under a system based on the postulate of the commodity character of labour. It is not for the commodity to decide where it should be offered for sale, to what purpose it should be used, at what price it should be allowed to change hands, and in what manner it should be consumed or destroyed." [The Great Transformation, p. 176]

However, people are not commodities but living, thinking, feeling individuals. The "labour market" is more a social institution than an economic one and people and work more than mere commodities. If we reject the neo-liberals' assumptions for the nonsense they are, their case fails. Capitalism, ultimately, cannot provide full employment simply because labour is not a commodity (and as we discussed in section C.7, this revolt against commodification is a key part of understanding the business cycle and so unemployment).