Unemployment in the Twenty-First Century

The mass elimination of jobs is one of the most traumatizing effects of a financial depression. It touches both individuals and their families, in different ways, but also the society as a whole.

Work is not only a way to ensure material existence—it is a crucial basis for our sense of who we are, helping us mentally situate ourselves in the world. In the 1880s, Karl Marx’s son-in-law (of whom Marx was less than fond), Paul Lafargue, mockingly noted: “A strange delusion possesses the working classes of the nations where capitalism holds its sway. […] This delusion is the love of work, the furious passion for work, pushed even to the exhaustion of the vital force of the individual and his progeny”.² Later sociological studies suggest that this remark remains relevant.

Small wonder, then, that unemployment is tied to mental strain—which, after 2007, reversed the decline in European suicides.³

In 2013, unemployment hit 27.5 per cent in Greece,⁴ and 27 per cent in Spain.⁵ In the latter, half of the younger population remained without a livelihood.⁶ Although these are quite sobering statistics in Europe, Joseph Stiglitz notes that even in a “so-called star performer like Germany,” working hours decreased by four per cent per employee in 2007–14.⁷

It would be risky, however, to adopt an extremely individualistic perspective and say that unemployment is a problem for the unemployed. For all of society, a lack of income of a large portion of the population generates less demand for goods in many industries, which can ultimately lead to deflation, which hits all credit-holders.

Yet the 2008 crisis called many economists’ attention to the problem of “hysteresis.”⁸ Thus, despite what the GDP charts tell us at a first glance, getting over a crash does not involve merely “rebounding,” the rubber ball hitting the ground and returning to where it was. Extended inactivity makes unemployed workers “forget” the skills they once had, however odd this may sound. Young workers have no chance to be trained, and machines fall into disrepair. As a result, the potential productivity of an economy shrinks.

Of course, it is worth remembering that a depression is not just a force of irrational destruction—there is at least a grain of truth in the classical economists’ notion of economic collapse as a cleansing agent, sweeping poorly functioning businesses from the market. Spain was so severely affected by the crash partly because its building sector was based on a speculative bubble. International economists are quick to blame the entry to the euro zone, which allowed the Spaniards (and Greeks) to take advantage of extremely affordable credit, and it was a shame not to use it.⁹ Yet Spanish scholars point out that the European Union and Germany cannot be blamed for everything, and that they should rather stress what Spaniards did wrong—the politicians, for instance, invested in large infrastructural projects to gain votes, not really to serve economic development.¹⁰ The crisis also exposed the long-term danger of the Mediterranean countries’ dependency on the tourist sector. Another question is whether the “showing of cards” in 2008 could eventually result in something positive…