A continuación publicamos el artículo elaborado por miembros del ICEA para el número 53 (invierno de 2010) de la Anarcho-Syndicalist Review, la revista del sindicato revolucionario de EEUU, Industrial Workers of the World.
Para descargar el archivo original en pdf que incluye gráficos e ilustraciones, pulsar aquí.
El artículo es una traducción del que se publicó en el periódico CNT en noviembre y diciembre de 2008.
THE ECONOMIC CRISIS AND WORKER RESISTANCE: THE WORLD CRISIS AND ITS EFFECTS IN SPAIN
*E. Alabort, L. Buendía, G. Fuster, M. Obispo and LL. Rodríguez. Institute for Economic Sciences and Self-Management, Barcelona (ICEA)
Translation by Mike Hargis.
This article is a synopsis of number one of Cuadernos del ICEA: Economic Crisis and Workers Resistance: the World crisis and its effects in Spain. This publication can be obtained free of charge from http://iceautogestion.org (Publicaciones). While it deals primarily with the situation in Spain, the effects of the economic crisis are so global in their implications that the article may help to make sense of what is happening in our own neck of the woods. The article is reprinted from the November and December, 2008, issues of CNT.
This article addresses the economic crisis from the standpoint of anti-capitalist economic theory, studying its causes and its effects on our lives as workers.
The origins of the crisis.
The primal origins of the crisis can be found in the dynamics of the functioning of the capitalist system itself, that lay in the periodic crises that are a consequence of the cyclic mechanisms that flow from its development. What concerns us at this time is a fall in the profitability of productive capital (that is, non-financial capital) that causes capital to look for other fields of activity, in this case, financial activities, with the goal of regaining lost profitability.
The unleashing of the crisis in the United States can be found in the famous sub-prime mortgages, or “toxic mortgages.” These are mortgages granted to people who were in economic circumstances that made it difficult for them to repay the debt. But these mortgages were transformed into products derived to make them less risky. How? The banks that owned them combined them with other, less risky,1 products to create a new product (a derivative) that could later be sold on the international markets. In a context where profitability was lower in other markets, capital opted for these more risky types of products that offered greater benefits precisely because they were more risky. Although it was clear that this game could put the entire global economy at risk, their buying and selling -- made possible because of a legal vacuum that capital could take advantage of following the process of deregulation that had taken place all over the world -- was perfectly legal. It was not only legal; it was encouraged by some legislation, such as passage of the U.S.’s Glass-Steagal Act in 1999 during the Clinton Administration or similar laws passed during the reign of Bush the son (who some have called the “financial engineer”).
As a consequence of this process, there was a notable increase in the instability of the international economy, due to the propagation of high-risk products whose exact composition was difficult to discern in many cases. In augmenting the lack of transparency of the products in which to invest, uncertainty was also increased. When housing prices fell and interest rates increased, the people with little capacity to pay who had taken out the “toxic mortgages” were incapable of paying their debts, and the crisis began to develop. Between 1998 and 2007, uncontrollable debt in the U.S. increased from $211 billion to $920 billion, according to the Federal Reserve.
These defaults made the derivative products worthless, so that some banks and other financial institutions found themselves heading into bankruptcy. The rest of the banks, aware that derivatives permeated the entire economy (given that they themselves had benefited from them), were afraid to loan money to anyone, businesses or other banks, making it more difficult to obtain credit for everyone.
At the same time, within this incessant search for new profitable investments, somesegments of finance capital opted to look for new profitable fields of endeavor. As the real estate bubbles were beginning to explode (in the United States, but also in Great Britain and Spain), the moment arrived for assaulting the raw materials market. And it was then that the prices of petroleum and food began to rise all over the world, a process to which the approach of peak oil production and increase in demand on the part of other countries also contributed.
Consequently, prices rose in most countries. Given the dependence that most economies (including the United Status) have on oil to continue operations, these price increases radiated throughout the economy. And the increase in food prices could only aggravate the situation. The monetary authorities, for example, in Europe, decided to raise interest rates in order to fight this new inflation, as increasing the price of money in the economy would result in fewer transactions, since money is necessary in order to function. In this way, they hoped to keep prices from rising (since people would consume less), and, of course, more profits would go to the owners of money (banks and others), so that they would begin lending again. But as money is more expensive, another effect is that there is less investment and fewer jobs are created, besides raising the cost of mortgages, which generates new defaults and throws more fuel on the economic crisis.
Internal Causes.
The Spanish economy has traditionally been characterized by very low productivity. Low wages have made it possible for employers to use human labor instead of machinery in their economic activity. On the other hand, the real estate bubble made the construction sector much more profitable for capital than other sectors with higher productivity, like those using more advanced technology. In addition, as mentioned elsewhere,2 this benefited public authorities because it permitted governments at all levels and of all colors to make and keep populist promises of reducing taxes (on profits), while financing public activities with funds tied to the new construction. For this reason, not only did they not do anything against this productive model; they encouraged it with fiscal advantages or liberalizations.
The other big Spanish economic activity is tourism, characterized equally by low wages and precarious conditions, as well as being labor-intensive. This sector is tied to construction because apartments on the coast form part of the speculative wave.
The other big Spanish economic activity is tourism, characterized equally by low wages and precarious conditions, as well as being labor-intensive. This sector is tied to construction because apartments on the coast form part of the speculative wave.
This explains the specialization in a few productive activities, but also supposes a factor of vulnerability to dependence on continuous economic growth (and public financing), above all in the construction industry. However, tourism in Spain is not as buoyant as it used to be, because the cost of long-distance transportation, like air travel, has made other, cheaper destinations more attractive, such as Southeast Asia or the Caribbean. The conjunction of even lower wages and a weaker currency contributes to making tourism from developed countries more attractive.
With this productive pattern, the model of “Spain is doing well” that was characterized by the creation of (insecure) jobs, the freezing of wages while profits increased enormously (some 73% between 1999 and 2006, according to data from the OCDE3), and remarkable economic growth (in which those who benefited from one clearly benefited from the other). But at the same time, productivity, according to Eurostat, was reduced almost seven percent between 1997 and 2007, that is to say, before the real estate bubble.
This strategy of reduced wages complicated the functioning of the economy, if you want consumer spending to serve as the engine of the economy. In effect, consumer spending requires that wages be at a sufficient level to sustain it. Nevertheless, as we have said, the chosen strategy has been low wages, so consumption has depended on indebtedness. This was also influenced by the skyrocketing price of housing, which made it necessary for many people to take out mortgages in order to acquire them (see graph). The banks along with the big construction firms, were the big beneficiaries of this model, while the workers as a whole lost out.
With this productive pattern, the model of “Spain is doing well” that was characterized by the creation of (insecure) jobs, the freezing of wages while profits increased enormously (some 73% between 1999 and 2006, according to data from the OCDE3), and remarkable economic growth (in which those who benefited from one clearly benefited from the other). But at the same time, productivity, according to Eurostat, was reduced almost seven percent between 1997 and 2007, that is to say, before the real estate bubble.
This strategy of reduced wages complicated the functioning of the economy, if you want consumer spending to serve as the engine of the economy. In effect, consumer spending requires that wages be at a sufficient level to sustain it. Nevertheless, as we have said, the chosen strategy has been low wages, so consumption has depended on indebtedness. This was also influenced by the skyrocketing price of housing, which made it necessary for many people to take out mortgages in order to acquire them (see graph). The banks along with the big construction firms, were the big beneficiaries of this model, while the workers as a whole lost out.
The crisis spreads.
As has been mentioned, worsening conditions for getting credit affects the financing of new projects, including those in construction. At the same time, the Central Bank of Europe raised interest rates, making life more complicated for people in debt, of whom there are many. This has tended also to lead to reduced consumption, because many people are having more problems getting to the end of the month.
Given the high dependency on the construction industry in Spain, a rise in interest rates means that people will buy fewer homes (in addition to the fact that as the price of housing continues to grow, they will be forced into an unsustainable indebtedness in order to do so). Therefore, the economy’s main engine still needs fuel to feed itself. And the firms (like Martisa-Fadesa) that have fingers in many construction projects need new buyers in order to get the money with which to finance them, inevitably pushing many into bankruptcy. As the construction industry is the main source of new employment, these events also imply higher unemployment, thus further reducing consumption. Lower consumption has as a consequence that other companies become affected by the crisis.
Given the high dependency on the construction industry in Spain, a rise in interest rates means that people will buy fewer homes (in addition to the fact that as the price of housing continues to grow, they will be forced into an unsustainable indebtedness in order to do so). Therefore, the economy’s main engine still needs fuel to feed itself. And the firms (like Martisa-Fadesa) that have fingers in many construction projects need new buyers in order to get the money with which to finance them, inevitably pushing many into bankruptcy. As the construction industry is the main source of new employment, these events also imply higher unemployment, thus further reducing consumption. Lower consumption has as a consequence that other companies become affected by the crisis.
This is the way in which internal factors (like construction), as well as external ones (the toxic mortgage crisis), brought the crisis to the Spanish economy. Thus, the speculative bubble burst, and the landing was much rougher than Minister of the Economy Pedro Solbes predicted in January, 2008.
But there exists another factor that aggravates the situation: inflation. Prices, as we have shown, have risen due to the increase in the price of oil (in an economy so dependent on importing crude oil as the Spanish one) and food. To that we have to add the disgusting role played by the big Spanish companies, that have a lot of power in the market, which can raise prices almost at will, creating a situation of oligopoly, that is to say, the absence of competition. Indeed, this has been another factor that has supported the growth of profits in Spain in recent years.
But there exists another factor that aggravates the situation: inflation. Prices, as we have shown, have risen due to the increase in the price of oil (in an economy so dependent on importing crude oil as the Spanish one) and food. To that we have to add the disgusting role played by the big Spanish companies, that have a lot of power in the market, which can raise prices almost at will, creating a situation of oligopoly, that is to say, the absence of competition. Indeed, this has been another factor that has supported the growth of profits in Spain in recent years.
Economic forecasts.
In light of all this information, it is not difficult to make forecasts regarding the evolution of the economic crisis. In reality, all the economic institutions are more or less in agreement in their predictions for at least the next two years. For example, the secretary general of the OECD (Organization for Economic Cooperation and Development) affirms that the “normalization” of the Spanish economy will not be achieved until 2010, although the international financial turbulence that has centered in the construction sector has not finally resolved itself. On the other hand, Joaquin Almunia (European commissioner of Economic Subjects) announced some updated growth prognoses not very different from those that, for example, have been recently announced by the Central European Bank (BCE).
Prior to the economic crisis that Spain is going through, the International Monetary Fund (IMF) defined the situation as a “profound economic downturn,” but predicted that it would be brief and that in 2010, there would be growth of 3.1 percent.
Prior to the economic crisis that Spain is going through, the International Monetary Fund (IMF) defined the situation as a “profound economic downturn,” but predicted that it would be brief and that in 2010, there would be growth of 3.1 percent.
According to Ministry of Economics forecasts, the growth in GDP for 2008 was 1.6%, and is projected to be six-tenths of a percentage point lower in 2009, at 1%. Employment will fall by .5% next year, while the level of unemployment shows levels of variation in annual growth for 2008 of 10.4%, and for 2009 of 12.5%.
Economics Vice President Pedro Solbes agrees that the Spanish state is going through a difficult adjustment, and that the economy will continue to weaken in the year to come, with unemployment growing, but with inflation decreasing, but says he is convinced that in 2010 the Spanish economy will enter into a new period of strong sustainable (?) growth that will benefit from our structural changes.
On the other hand, the latest forecasts for the Spanish economy in the period 2008-1010, announced by the Fundacion de las Cajas de Ahorros (Funcas), revised the forecasts relative to growth in GDP downward by -0.5% in 2009. The recovery, according to the Foundation, will not noticably begin until 2010. This is a result of the factors that caused the strong deterioration in economic conditions since the middle of 2007 continuing in the next trimester. The adjustment in the construction industry will continue during subsequent trimesters and consumption stay weak, due to unemployment, the loss of buying power, elevated indebtedness, high interest rates, the restriction of credit, and an increase in the propensity to save out of caution. As to employment, it will not recede as much in 2010 as in 2009, while the level of official unemployment will continue to grow in the next two years, reaching a level of 16 percent in 2010, according to the same forecasts.
Economics Vice President Pedro Solbes agrees that the Spanish state is going through a difficult adjustment, and that the economy will continue to weaken in the year to come, with unemployment growing, but with inflation decreasing, but says he is convinced that in 2010 the Spanish economy will enter into a new period of strong sustainable (?) growth that will benefit from our structural changes.
On the other hand, the latest forecasts for the Spanish economy in the period 2008-1010, announced by the Fundacion de las Cajas de Ahorros (Funcas), revised the forecasts relative to growth in GDP downward by -0.5% in 2009. The recovery, according to the Foundation, will not noticably begin until 2010. This is a result of the factors that caused the strong deterioration in economic conditions since the middle of 2007 continuing in the next trimester. The adjustment in the construction industry will continue during subsequent trimesters and consumption stay weak, due to unemployment, the loss of buying power, elevated indebtedness, high interest rates, the restriction of credit, and an increase in the propensity to save out of caution. As to employment, it will not recede as much in 2010 as in 2009, while the level of official unemployment will continue to grow in the next two years, reaching a level of 16 percent in 2010, according to the same forecasts.
As we have been saying, the crisis has been used by capitalists to restructure the economy as a method of class struggle, thanks to the generalized social fatigue, resolving it in a way still more favorable to themselves. As El Roto said in one of its vignets, “If we win nothing when they were covered, why do we still have to still when they stick it?” This leads us to ask what measures to adopt in the face of these forecasts.
Official Responses: PSOE, UGT and CCOO on the crisis.
Prime Minister Jose Luis Rodriguez Zapatero declared at an event organized by the UGT in Riodezmo (Leon) that he will dedicate resources “to supporting the citizens” and “not to saving companies that have made big profits” in recent years.4 (The UGT is one of the official union centers, loosely affiliated to the ruling Socialist Party [PSOE].) After the speech, he announced the granting of 3,000 million euros to Spanish companies; to date there has been no response from the UGT.
This leads us to the struggles being conducted by the major unions in the face of this economic crisis. Complacency with respect to the party in government and empty rhetoric are the only actions foreseen from a unionism from which we have been suffering in our country for more than 30 years. At a more concrete level, the UGT is pressuring for the state budget for 2009 to be directed toward the reactivation of the economy and the creation of employment, creating and promoting a new productive model and reallocating the unemployed to these sectors.5 In parallel, the CCOO (Workers’ Commissions, an official union affiliated to the Communist Party) is calling on the government to protect the unemployed and strengthen productive activity6.
This leads us to the struggles being conducted by the major unions in the face of this economic crisis. Complacency with respect to the party in government and empty rhetoric are the only actions foreseen from a unionism from which we have been suffering in our country for more than 30 years. At a more concrete level, the UGT is pressuring for the state budget for 2009 to be directed toward the reactivation of the economy and the creation of employment, creating and promoting a new productive model and reallocating the unemployed to these sectors.5 In parallel, the CCOO (Workers’ Commissions, an official union affiliated to the Communist Party) is calling on the government to protect the unemployed and strengthen productive activity6.
The big unions don’t talk of increased state intervention in the economy, nor of more fiscal pressure on companies; at the same time, they create doubt as to whether they want to strengthen productive activity financed with public money to these companies -- something that a union center would not want to have to defend. In this way, and instead of jumping on the neck of the companies for the crisis that they created but for which we are all paying, the official unions of this country have as their sole initiative the convocation of a partial work stoppage on October 7, 2008, in defense of “a decent job” 7. Meanwhile the numbers of unemployed and defaults keep growing.
Towards New Pacts of Moncloa?
The Spanish employers are pressuring ever more successfully to obtain what they could not obtain in its entirety during all the years of economic bonanza. Businesses are demanding and promoting a labor law reform that, using the excuse of unemployment, seeks to increase the flexibility of the labor market. This is the battle-horse of Spanish bossdom.8 In order to achieve this, they are pushing forward on several dimensions, like making it easier to lay off workers, equalizing conditions with surrounding countries (we imagine, more like Morroco than France). The streamlining of collective bargaining, allowing union leaders more executive authority to make decisions and accelerate the “necessary” reforms would be another of the axes to “negotiate.”
Finally, and in relation to the flexibilization of the market, in consonance with the temporary labor firms, we can see, on the one hand, the possibility of increasing the types of temporary work contracts, simultaneous with an increased role for the ETT’s [temporary employment agencies] in the reallocation of the unemployed to the detriment of public organs like INEM.
Finally, and in relation to the flexibilization of the market, in consonance with the temporary labor firms, we can see, on the one hand, the possibility of increasing the types of temporary work contracts, simultaneous with an increased role for the ETT’s [temporary employment agencies] in the reallocation of the unemployed to the detriment of public organs like INEM.
But they are not only talking about the flexibilization of the labor market. The unemployment policy is on the table, too, with the diminution of the so-called “passive policies” of unemployment that intend to lower already feeble unemployment pay by policies of active formation of the unemployed. This poses a problem for the worker by reducing the social wage (e.g., unemployment compensation) and making it harder to get. Another option would be to oblige the unemployed worker to accept any job, regardless of the working conditions on said job.
Wage hikes are another battle objective of the Spanish employers. A fundamental question that has been talked about for many years is being talked about again, taking advantage of the crisis situation. If it is already the case that any wage increases that are granted are ridiculously small, it is now being urged that wage increases be tied to worker and company productivity. This supposes, for example, that jobs would be seriously affected in the service sector, where productivity is already low, since that sector depends to a great extent on human labor, the probability of increasing which on the part of the worker is nul,. As a consequence of the wage-productivity linkage, the wage would remain constant over the years while the level of prices would continue to rise, given present tendencies. In conclusion, we are witnessing a drastic lowering of workers’ buying power in sectors where there is less productivity. This productivity would have to stimulate itself, as we have seen before, through companies investing in equipment and technology. But we have already seen that capital seeks more profitable alternatives. How it is possible to maintain, then, that workers are responsible for the crisis, shouldering them with the responsibility of “resolving it”?
Wage hikes are another battle objective of the Spanish employers. A fundamental question that has been talked about for many years is being talked about again, taking advantage of the crisis situation. If it is already the case that any wage increases that are granted are ridiculously small, it is now being urged that wage increases be tied to worker and company productivity. This supposes, for example, that jobs would be seriously affected in the service sector, where productivity is already low, since that sector depends to a great extent on human labor, the probability of increasing which on the part of the worker is nul,. As a consequence of the wage-productivity linkage, the wage would remain constant over the years while the level of prices would continue to rise, given present tendencies. In conclusion, we are witnessing a drastic lowering of workers’ buying power in sectors where there is less productivity. This productivity would have to stimulate itself, as we have seen before, through companies investing in equipment and technology. But we have already seen that capital seeks more profitable alternatives. How it is possible to maintain, then, that workers are responsible for the crisis, shouldering them with the responsibility of “resolving it”?
The General State Budget for 2009.
Vice-President Solbes affirmed that the budget would be austere and rigorous, although it will result in a deficit (1.5% of GDP). According to the first rough draft, and in public declarations by the government, it would prioritize economic recovery and protection of the weakest. In relation to the funds dedicated to “economic recovery,” we can point out those destined for infrastructure, which increases by some 4.5%, amounting to 22,120 million euros. Funds for research, development and innovation increases a not insignificant 6.7%, to 8.192 million euros. Among the funds for infrastructure, there is a noteworthy investment in railways, including money budgeted for lines and maintainance of AVE [high speed rail], with such sad consequence for the different towns and landscapes of Iberia. To all this can be added the construction of highways and roads valued at 3.451 million euros (15.7% more). In the majority of cases, these funds represent massive transfers of public capital to big companies like Ferrovial, FCC or ACSA, and so the state treasury, scarce and necessary in times of crisis, is destined to pay for projects that are against the interests of workers, as would be an increase in public use of social services, for example.
The Spanish government’s other big budget priority is to “protect the weakest” through increased funds for the unemployed, for pensions and dependendents. If they now increase the mínimum pension by 6% and the mínimum wage by between 2% and 3% for the year to come (lower than their own electoral promises)9, no adequate government protection appears to exist for the most disadvantaged social classes. Let us remember that the SMI (minimum industrial wage) is a ridiculous 600 euros monthly, at the same time that minimum pensions for the year to come will be around 9,709 euros per year. In addition, with respect to these parts of the funds, it should be emphasized that some of them increase simply with the worsening of the economic situation, as is the case, for example, for those dedicated to unemployment, which increase at the same rate as increases in the number of unemployed. We cannot let ourselves be fooled by announcements of an increase in unemployment to 24.4%; in fact, as we have seen before, the Economy Ministry itself foresees a higher rate of unemployment for 2009, which makes us think at once of new restrictions that will make it harder to get unemployment compensation.
The first symptoms of the economic crisis have already been noted: return of the workers to their countries of origin, increased defaults on payments on mortgages and rents, increased unemployment, labor desperation, etc. -- nothing new under the dictatorial sun of an economy that favors an elite and that is detrimental to the interests of the large social mass in this country. In the next section, we will analyze the consequences that all this has for the working class, and we will make our own proposals for a way out of the crisis that does not harm us.
Social classes and the working class.
Throughout the history of capitalism, the class structure has remained more or less unaltered, with around 5% of the population belonging to the ruling classes (between 10% and 20% of them making up the hegemonic groups in society, that is, between 0.5% and 1% of the active population), between 15% and 20% forming the “middle classes,” and between 75% and 80% the dominated classes. It is important to point this out because the transformations in the class structure of capitalism have occurred within the social classes themselves. Among the 80% of the dominated classes, the basic changes and its fragmentation can include three large blocks. The first would be the “traditional” working class, which reached its peak in the years 1950-1960 and later began to shrink, although maintaining its basic nucleus. The “traditional” working class is in regression and consists of those involved in manual labor, industrial, construction, mines and some services, (rail, urban transportation, public administration), employed in large companies, and with fixed contracts. In most countries, the block represents around 30% of the active population, but is diminishing. In Spain today, it is less, between 11.5% and 14.5% of the active population. Nevertheless, this group (one in seven wage workers) continues to be the reference point and base of action of the unions of the class. The second block comprises wage earners that have been growing in recent years, those who are highly skilled, and among them so-called intellectual workers, who can amount to 20% of the waged. The model of the independent liberal professional also plays an important role. Lastly, in the third block, we find those wage-earners who are in precarious/marginal situations, who represent 50% of wage workers and who have increased spectacularly in recent years.
The operative changes within the structure of the working class have resulted in the increase in precariousness and marginalization of a majority of workers. This can easily be seen in labor segmentation (the division of workers into segments of the labor market). The workers, divided and disorganized, can put up less resistance to successive offensives that make living and working conditions more uncertain. This does not stop the working class continuing to retain some common defining characteristic, such as dependence on wage labor and dispossession of the means of production, the inability to manage uncertainty or the absence of real power to make things different (unless there is a strong union behind them).
The Trade Union Model.
The deterioration in working conditions are not being resisted with actions by the working class or with affiliation and organization of workers in the trade unions. In the latter aspect, it must be realized that, in the majority of cases, the unions have not responsed to the workers’ expectations. Total union membership in Spain is less than 15% of wage workers. As has been said before, the workers affiliated to the unions are those that belong to the “traditional” working class, the majority of whom can be found in the better paid labor sectors (metal, health, education, banks…) or with greater job security for union activity (public sector). It is, then, in these terms of workers’ organizational weakness that we can evaluate the impact of this economic crisis on the them and their possible responses.
Those most affected by the economic crisis are unskilled workers, the youth, women and immigrants, as they have the least negotiating power in the labor market as a whole (if they aren’t unionized). In this crisis, the situation is that there is creeping unemployment of a multitude of workers who would make up the more-and-more non-existent “middle class.”
Those most affected by the economic crisis are unskilled workers, the youth, women and immigrants, as they have the least negotiating power in the labor market as a whole (if they aren’t unionized). In this crisis, the situation is that there is creeping unemployment of a multitude of workers who would make up the more-and-more non-existent “middle class.”
Economic decline and unemployment.
The direct consequence of the economic crisis is the downturn in the economy, resulting in increased unemployment. When unemployment increases, conditions tend to worsen (workers cannot buy as much) and labor costs are lowered. The global effect of the increase of unemployment on the hoped-for rate of profit will depend on which of two effects is greater: the negative effect for the industrialists of theworkers’ demands, or the positive effect (for them) of reduced costs.
From the strictly empresarial point of view, it is interesting to note that the economic crisis strengthens some companies, those having greater liquidity, absorbing part of the market of other companies, and on occasion their competition. Moreover, in contexts of economic crisis, many companies take advantage of the psychological impact in order to impose workforce adjustments that help to improve their short-term profits. According to data from the Ministry of Labor and Immigration, the number of layoffs agreements approved by the authorities between January and September of 2008 is 3,059 (8% more than the same period in 2007). The workers affected by these layoffs (EREs) are 45,295 in the first nine months of the year. To these would have to be added those laid-off in big auto plants like Nissan (1,680 workers affected). Almost 50,000 people were affected, of whom some 95% were terminated in agreements between companies and unions, according to the Ministry of Labor. That is to say, unions like CCOO and UGT accepted massive layoffs, in the majority of cases negotiating and obtaining less unfavorable economic conditions for those fired, the process simultaneously discouraging the realization of any type of union action (conflict, strike or occupation). But in spite of the revealing notoriety of government-approved layoffs (EREs), the majority of those fired are individuals, in the form of non-renewal of temporary contracts, or the termination of temporary contracts. Consequently, the total number of registered unemployed between January and October of 2008 went from 2,048,600 to 2,818,000, with an unemployment rate in the third trimester of the year of 11.33%, reaching 12.28% at the end of October. In order to manage the unemployment rate, which is being done in recent years by governments of various colors, there exist statistical mechanisms, like the proposals that pre-pension retirees not be included in the unemployment rates. This proposal, that casually appeared when unemployment was increasing in an exaggerated form, was one of those made by the Minister of Labor and Immigration Celestino Corbacho in Sabadell (Barcelona).10
Services and construction are the sectors where unemployement has grown enormously in the last three months11 that is, those sectors that have been the center of the Spanish economy in recent years. But in addition, remember that unemployment data have repercussions at the personal and social level, much more significant than the immediate numbers. If we speak of the 3,000,000 unemployed, we really have to double the number of people affected (families of two to three members); that is to say, the effect of unemployment is multiplied among the working population. There are 638,000 families (5% of the total) today in which all the members of working age are unemployed.12
Consequences of unemployment.
The consequences are evident, although it is interesting to delve a little deeper into its effects on workers. The best-known effect of unemployment is loss of income, although in capitalist societies in which the majority of citizens live directly or indirectly on wages received for work done, the loss of employment supposes the interruption of this income. The social magnitude of the loss depends on the time it takes to find another job and on the degree of coverage and duration of unemployment insurance.
Along with this effect, which frequently occurs in situations of poverty and social marginality, many others are produced that should also be taken into account, like those that affect the loss of the individual and social identity of the unemployed, the change in their social status, the reduction in well-being, the disqualification of those expelled from further union activity, the radical changes in life-style, in the place of residence or in education plans, the perspective of the workers’ careers and their family and friends, and often a loss of confidence in themselves. When unemployment increases, for example, the number of suicides also increase, as well mistreatment of children, family disagreements, family problems and mental illness or the number of strokes and heart attacks. In addition, the number of people who commit crimes, such as muggings, in order to obtain basic necessities also increases, as well as the number people who end up in jail. In this sense the unemployed are feeling irritated and frustrated by living in an ostentatious society, with social classes that have everything, while they have lost everything.
Another very important consequence of unemployment is that it serves as an instrument for disciplining workers and weakening their natural organizations, which are the unions. For the worker, the possibility of not finding work and, in the end, not being able to feed him/herself and his/her family is a double blow.
Not only do they have to put up with personal and psychological costs, but as a consequence of those they find themselves in a weakened negotiating position. The negative effect that unemployment produces in the negotiating position is immediate. If the level of unemployment is high, but there are possibilities of it coming down soon, it is less likely that the workers will give in to the employers than if it is likely to last longer. High levels of unemployment are likely to influence labor struggle, the reduction of group layoffs, etc. When the workers fear losing their jobs, there is less likelihood of them confronting the bosses’ attempts to speed up work, lower wages, reduce safety standards and increase the level of effort by other methods.
Not only do they have to put up with personal and psychological costs, but as a consequence of those they find themselves in a weakened negotiating position. The negative effect that unemployment produces in the negotiating position is immediate. If the level of unemployment is high, but there are possibilities of it coming down soon, it is less likely that the workers will give in to the employers than if it is likely to last longer. High levels of unemployment are likely to influence labor struggle, the reduction of group layoffs, etc. When the workers fear losing their jobs, there is less likelihood of them confronting the bosses’ attempts to speed up work, lower wages, reduce safety standards and increase the level of effort by other methods.
Inflation and wealth redistribution.
Since August of 2007, inflation has been increasing, passing the IPC from an anual 2.2% in August of 2007 to 5.3% in July of 2008. In addition, it is necessary to take into account the progressive stagnation of the economy, with forecasts of an increase in the Gross National Product (GNP) of less than 1%. This stagnation, combined with growing inflation, puts us in a situation of stagflation, that is, of widespread price increases with lower economic growth. Inflation affects income in several ways. The group most directly affected is people with fixed incomes or those who lack the capacity to increase their income proportionately with inflation. Here are found those groups of pensioners and wage workers without the ability to include a cost of living clause in their contracts, although the latter seem to be a minority among workers. In Catalonia, for example, the percentage of wage workers with cost of living clauses was more than 80% in June of 200813. But although inflation may increase at a given rate or percentage, the different products producing it through increased prices do not necessarily coincide with the annual rate of the IPC. An example is provided in Figure 1, where the evolution of the IPC and several of its elements is shown, beginning in 2006. We can observe that the increase in the IPC is reflected most notably in food products, housing14 and transportation (with increases between 7% and 10% in July of 2008), whereas in clothing and footwear, leisure, culture and communications, the increase has been smaller or even negative.
The issue is that the increases for these products affects the lowest incomes and the mass of wage workers in a direct way, this is, the working class who spend most of their income on daily consumer products, while those social classes with higher incomes are affected less. In addition, given the present situation of stagflation and the progressive increase in unemployment, it is going to be very difficult to compensate for these increases in prices with increased wages. Faced with this possibility, the Central European Bank, the Bank of Spain, as well as various employer associations, are demanding that wages do not rise to make up for the lowering of the purchasing power of wages, in order to be able to avoid a major rise in inflation. What they are not explaining are the fundamental reasons for the current inflationary process, attempting to lay responsibility on the workers via their so-called wage restraint, to which certain unions have already agreed. But there exists a direct tie between an oligopolistic empresarial structure, such as the Spanish, and the price increases.
This presents a poor outlook if we take into account the situation from which we are starting. During the last eight years, there has been an increase in the GDP, the average between 2003 and 2007 being 2.88% -- above the European average. During this period, according to several studies by the OCDE and other international organisms15, wages have been losing buying power, making the real wage in 2007 at the same level as ten years ago. Therefore, one can understand now what we said of the important increase of 73% in profits between 1999 and 2006.
This presents a poor outlook if we take into account the situation from which we are starting. During the last eight years, there has been an increase in the GDP, the average between 2003 and 2007 being 2.88% -- above the European average. During this period, according to several studies by the OCDE and other international organisms15, wages have been losing buying power, making the real wage in 2007 at the same level as ten years ago. Therefore, one can understand now what we said of the important increase of 73% in profits between 1999 and 2006.
A reflection of this is seen in the functional distribution of income (see Figure 2). The functional distribution of income is shaped by the way in which material resources resulting from economic activity are distributed, in this case, between labor and capital. The upper part of the graph corresponds to the portion of income that goes to capital, and the lower part that which goes to labor. It can be seen that although GNP has increased considerably in the last few decades, the distribution has constantly been worsening for the working class.
Several factors underlie this tendency. As can be seen in Figure 2, beginning with the end of the Franco era and the transition, the tendency for a lower portion of income to goes into the hands of the working class takes effect, although the distribution of income between the years 1990-1993 was favorable to labor. One of the reasons for the worsening of the distribution were the Moncloa Pacts of 1977, under which negative methods were established for the workers (wage restraint, reflected in a certain way of linking wage increases to past inflation and not to predicted inflation). These agreements were one of the ways through which the economic adjustment on wages in Spain materialized.
Beginning in 1994, the proportion going to workers has been in constant decline. One of the factors that have accelerated the process of wealth distribution in favor of capital has been the process of European integration, for that has involved the introduction of certain unfavorable policies for the workers (the famous Maastricht Accords). To this would have to be added the effect of the appearance of the Euro in the 21st century, because since then, real inflation has increased in a way greater than is reflected in statistics: although inflation has generally been relatively low, the rise in prices of basic consumer goods has been greater, affecting those with lower incomes in a major way, since the general index is used as a reference for wage increases.
Several factors underlie this tendency. As can be seen in Figure 2, beginning with the end of the Franco era and the transition, the tendency for a lower portion of income to goes into the hands of the working class takes effect, although the distribution of income between the years 1990-1993 was favorable to labor. One of the reasons for the worsening of the distribution were the Moncloa Pacts of 1977, under which negative methods were established for the workers (wage restraint, reflected in a certain way of linking wage increases to past inflation and not to predicted inflation). These agreements were one of the ways through which the economic adjustment on wages in Spain materialized.
Beginning in 1994, the proportion going to workers has been in constant decline. One of the factors that have accelerated the process of wealth distribution in favor of capital has been the process of European integration, for that has involved the introduction of certain unfavorable policies for the workers (the famous Maastricht Accords). To this would have to be added the effect of the appearance of the Euro in the 21st century, because since then, real inflation has increased in a way greater than is reflected in statistics: although inflation has generally been relatively low, the rise in prices of basic consumer goods has been greater, affecting those with lower incomes in a major way, since the general index is used as a reference for wage increases.
To all this it is also necessary to add the interest rate increases that are being imposed by the Central Bank of Europe, in order to be able to put a brake on inflation16. Increasing interest rates reduces the income of those sectors of the population that pay mortgages and increases that of the bank. Along with these problems is that of rising unemployment, due to the increased profits of investments because of the increased cost of borrowing money. Unemployment, along with job insecurity (produced by various labor reforms), thus becomes a weapon for controlling the working class in the hands of the bosses, who can prevent wage increases or keep them below the rate of inflation, thus harming the working class.
In conclusion, inflation affects the working class more severely, because besides being felt in basic products, one has to add the context of crisis and the progressive increase in unemployment, which prevents wage increases to compensate for widespread price increases. Thus, one can conclude that, due to inflation in the current context, less wealthy social sectors are going to suffer the effects of inflation to a greater extent, given a relatively greater drop in their wealth than that in wealthiest social groups.
In conclusion, inflation affects the working class more severely, because besides being felt in basic products, one has to add the context of crisis and the progressive increase in unemployment, which prevents wage increases to compensate for widespread price increases. Thus, one can conclude that, due to inflation in the current context, less wealthy social sectors are going to suffer the effects of inflation to a greater extent, given a relatively greater drop in their wealth than that in wealthiest social groups.
So, what can we do?
We cannot let ourselves be fooled by the messages given to us; we have to spread the idea that the effects of the crisis have to fall on those who have benefitted during the period of growth. In this sense, it is necessary to evaluate our position well and organize ourselves, and a good organizing tool is the National Confederation of Labor (CNT).
It is the time to propose that those responsible for the crisis, the capitalists, be the ones to pay for it. To this end, we have formulated some proposals whose express purpose is to avoid the crisis affecting workers.17 These proposals are of three types: reformist, progressive, and progressive-revolutionary. Reformist measures try to make the class character of the State explicit, making it clear that their purpose is the defense of the bosses. Progressive measures attempt to increase the power of the revolutionary unions in concrete areas. And the progressive-revolutionary measures are aimed at substituting economic and social control in the hands of capitalists and the State with control by workers and society. Because we understand clearly that the only way of ending exploitation, social classes and the economic crisis, is to end capitalism, replacing it with an economic system based on worker and social self-management.
It is the time to propose that those responsible for the crisis, the capitalists, be the ones to pay for it. To this end, we have formulated some proposals whose express purpose is to avoid the crisis affecting workers.17 These proposals are of three types: reformist, progressive, and progressive-revolutionary. Reformist measures try to make the class character of the State explicit, making it clear that their purpose is the defense of the bosses. Progressive measures attempt to increase the power of the revolutionary unions in concrete areas. And the progressive-revolutionary measures are aimed at substituting economic and social control in the hands of capitalists and the State with control by workers and society. Because we understand clearly that the only way of ending exploitation, social classes and the economic crisis, is to end capitalism, replacing it with an economic system based on worker and social self-management.
Our proposals, in the forms of an action plan, are aimed, then, at solving six issues that we consider fundamental: 1) Union freedom; 2) Unemployment; 3) Inflation; 4) Redistribution of wealth; 5) Economic recovery; 6) Public spending and taxes. For the first case, we include such measures as the disappearance of company committees and their replacement by union sections, increase in the power of union delegates to inspect the workplace, and increase in the resources for Labor Inspection, among other things. With respect to unemployment, we propose job-sharing, the prohibition of loaning out of labor (ETTs) and passing control of labor hiring to the unions, or the elimination of all forms of contracting that are not permanent, in addition to other similar methods.
In order to combat inflation, we suggest price control and auditing on the part of unions to ensure that products meet conditions of quality and labor rights. We also advocate intervention in the way income is distributed via wage increases and minimum pensions, reducing wage differentials by agreement, and the elimination of interest on mortgages. For economic recovery, we suggest increasing spending on public services, financed by higher taxes on profits and the rich, the control of investment, so that it be more balanced across sectors, or the creation of a tax on the movement of capital, among other measures. Finally, with respect to public spending, we believe that, among other things, it is necessary to reduce military and police spending, doing away with tax evasion and criminalizing the murky capital investment societies.
In order to combat inflation, we suggest price control and auditing on the part of unions to ensure that products meet conditions of quality and labor rights. We also advocate intervention in the way income is distributed via wage increases and minimum pensions, reducing wage differentials by agreement, and the elimination of interest on mortgages. For economic recovery, we suggest increasing spending on public services, financed by higher taxes on profits and the rich, the control of investment, so that it be more balanced across sectors, or the creation of a tax on the movement of capital, among other measures. Finally, with respect to public spending, we believe that, among other things, it is necessary to reduce military and police spending, doing away with tax evasion and criminalizing the murky capital investment societies.
Conclusions.
We in the ICEA understand that an economic crisis produced by the capitalists, by the capitalist system, has to be paid for by them. It is intolerable that we workers have to accept the consequences of the crisis, grave consequences that we have tried to explain (unemployment, inflation, marginalization, poverty, etc.) and that signify an absolutely disastrous experience for the majority of the population of this country. It is necessary to organize, it is necessary to confront the crisis, the unemployment, the bosses’ abuse, with adequate measures, those that we propose or any other method that can return a little justice and dignity to workers. It is necessary to denounce the outrage that permits the State to donate our tax money to the bank, money that is not going to subsidize unemployment benefits, saying that it does not exist in the public coffers and that it is necessary to cut spending.
Only through organization in class unions, with the recovery of class consciousness, of the class exploited by capital, only with the unity of the workers independently of the union to which they belong, can the objective be achieved of stopping the capitalist offensive that intends to make us pay for the crisis, that intends to subjugate us ever further. As the old saying goes, more necessary than ever: union, action, self-management.
Only through organization in class unions, with the recovery of class consciousness, of the class exploited by capital, only with the unity of the workers independently of the union to which they belong, can the objective be achieved of stopping the capitalist offensive that intends to make us pay for the crisis, that intends to subjugate us ever further. As the old saying goes, more necessary than ever: union, action, self-management.
Notes:
1. The financiers sometimes dispensed with the dilution of risk, figuring that if one mixed enough pieces of enough bad loans together, some of the loans were bound to be paid off (or, at least, their value recovered through foreclosure), an assumption that may well have made sense in an era of ever-rising real estate prices. (ASR Note)
2. See “Gente sin casa, casas sin gente. ¿Cómo se entiende? (II),” en CNT # 332, March 2007.
3. El país, 24 June 2007.
4. See the PSOE website at www.psoe.es/ambito/saladeprensa/news/index.do?action=View&id=216887
5. See the UGT website at www.ugt.es/actualidad/2008/octubre/d02102008.html
6. See the CCOO website at www.ccoo.es/csccoo/menu.do?Inicio:36058
7. See the CCOO website at www.ccoo.es/csccoo/menu.do?Inicio:36060
8. Cited in Actualidad Económica, núm. 2603, pág. 22-25.
9. See the notice published by Europa Press on 6 September 2008: www.europapress.es/economia/noticia-trabajo-no-descarta-atenaur-2009-subida-pensiones-minimas-smi-crisis-20080906113642.html. Curiously, the promises of fiscal advantages for those who most need them remain intact, as we have pointed out.
10. See the daily Expansion of 17 November 2008: www.expansion.com/2008/11/17/economia-politica/1226943061.html
11. See El Pais of 4 November 2008: www.elpais.com/articulo/internacional/recesion/economica/provoca/octubre/mayor/subida/paro/historia/elpepuint/20081104elpepuint_8/Tes
12. Actualidad Económica # 2629, October 31-November 6, 2008.
13. See La Vanguardia of 15 June 2008, p. 28.
14. Included here is rent, water distribution, trash collection, sewage system, and other services, electricity, gas and other fuels, but NOT their exchange.
15. Growing Unequal? Income Distribution and Poverty in OECD Countries. OECD, 2008; Estudio General de Remuneraciones, Watson Wyatt, 2008.
16. The principal function of this organism is the struggle against inflation, which denotes its class character, just as the principal objective of political economy for workers is the struggle against unemployment.
17. We present here only a small portion of the proposals that we have formulated. The rest appear in a more systematic form in Cuaderno del ICEA # 1.
