April 7, 2004

Jobless Recovery

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In this modern world of hyper-competition, instantaneous communication, mobile capital and large faceless corporations, nothing so underlines the problems facing governments as an economic recovery without the jobs. The American economy is motoring ahead but is not creating jobs. Where have the jobs gone? Mexico, China or India maybe? Now politicians are talking about protection and argue that America’s jobs problem, evidenced again on Friday, is a function of too much competition and too many large companies with no loyalty to flag or country simply taking advantage of lower labour costs. Well they are right. But it has ever been this way and when all the political showboating is over, capital will seek out the lowest costs and migrate towards that area to the detriment of workers in the home country whether that is the USA or Ireland.  


History suggests that the political status quo will be changed profoundly by the emergence of cheap labour. Nowhere is this more evident than during the golden age of international trade that also coincided with the dark ages of slavery. It is extreme to compare the emergence of dirt-cheap labour in China and India with slavery, but its economic impact on us will be similar.


Officially, slavery ended at the close of the 19th century but the money that built Merrion Square, Farmleigh House and the Bank of Ireland on College Green came indirectly from the proceeds of slavery. It was only in 1873 when, under huge pressure at home from Christian campaigners and influenced by Darwin’s scientific discoveries which changed the tone of humanist debate in England, that the British government persuaded the Sultan of Zanzibar (the home of slavery) to abandon slavery. Just in case the Sultan was not impressed by moral argument, seven British warships anchored themselves off the island.


In the event, gunboat philanthropy worked to the extent that slavery was only driven underground.  Because slavery is so profitable, it continues to exist – whether in the fields of Africa and India or the brothels of Europe. Indeed, for a long period, slavery was the cornerstone of a trading arrangement called the Atlantic system, which financed fine buildings in Liverpool, Bristol, Dublin and London. The Atlantic system emerged from discoveries in the New World which resulted in an explosion in the trade of new goods, foods and medicines. Goods flowed north and people south. Initially the Caribbean was seen as ideal for settlers emigrating from Europe for religious and economic reasons. In 1640 (a decade after the first settlers arrived) the population of Barbados was 30,000 — much greater than Cork at the time.


But the Caribbean islands proved to be a hellhole of insects and mosquitoes. Their tobacco and cotton plantations fell foul of tropical weather and many settlers returned home or headed for the more favourable climate of Georgia and Mississippi. Sugar was one crop that could grow in the Caribbean but no free man would endure the hardship of harvesting it.


The demand for sugar exploded in tandem with the addiction to the new drinks – tea and coffee. These bitter drinks had to be sweetened for European tastes and sugar did the trick. Unfortunately, sugar was difficult. It was labour-intensive to harvest and the machinery in plantations was expensive to install. But the climate of the Caribbean was perfect for cultivation and as long as there were enough workers, sugar could be processed profitably.


By the late 17th century the native people of the Caribbean had either been killed off by the Spaniards or had died as a result of coming into contact with European diseases. There was no way that even the most destitute European would emigrate to a sugar plantation, so landowners had to look elsewhere for labour.


This is where Africa came in.  African slave traders helped to round up people from the African hinterland and sell them to the British, Dutch, Portuguese and French traders at selected African ports. Possibly as many as 10 million souls were transported.


Because the Caribbean was the first port of call to both North and South America, slaves were usually disembarked in Havana, Kingston and Port-au-Prince. The townsfolk of these ports always knew when a slave ship was in port because of the smell and many ports barred slave ships from docking directly, compelling them to moor in the bay and transport slaves in small boats for the final part of their journey. To lose one slave in every six en route was considered normal.


The Atlantic system was a triangle: its three points were the Caribbean, England and Africa. The slaves toiled in the plantations of the Caribbean producing sugar that generated extraordinary profits. Because the plantations had grown to cover most of the arable land of the islands, some of the sugar was exported to Mississippi and the Carolinas in exchange for food.


Most of the sugar and rum (along with tobacco and cotton) was exported to England, where it was either processed or sold. Goods such as nails, copper pots and cheap fabric were re-exported to the Caribbean. Cash, guns and gunpowder were sent to Africa.


This was used to pay for more slaves, who were then shipped to the Caribbean, completing the triangle. The demand for slaves remained almost insatiable, not because the demand for sugar, cotton, coffee or tobacco rose but because the appalling records show that Caribbean slaves died faster than they reproduced. The system lasted for over two centuries before anyone in enlightened Europe began to question the morality of slavery.


Fast-forward to today and we see a similar system of international trade based on a triangle: cheap labour in Asia will attract capital from the USA and the goods will be sold in Europe. (Obviously, we are talking here about a metaphorical triangle but the system is the same.) The cheapness of labour forces technological change to make the more expensive workers in the home country more productive and this always has victims. And, from time to time, those badly affected by the innovation will rebel. The ultimate historic example is the Luddittes. The Luddittes led by Ned Ludd captured the imagination in 1812, leading Byron to write “down with all Kings but King Ludd”. The Luddites were skilled weavers who smashed hundreds of weaving machines that were threatening the livelihood of the skilled weaver artisan class.

Modernity regards the Luddittes as the ultimately symbol of futility. But this is because history is only seeing one side of the equation. Far from being atavistic, anti progressive protectionists, the Luddites were logical, rational people who saw financial ruin staring them down the barrel. And today all over the world the demand for cheap and even free labour is still phenomenal.


It will ever be thus. The golden rule of commerce is: if a country can get cheap labour, land or capital, it will flourish. This rule has kept the US motoring for years and it was an extreme form of this commercial principle that drove the slave trade. So I laugh when I hear John Kerry complaining about American jobs disappearing to Asia. I can understand what he means but you have to ask Mr Kerry about his relatives, the Cabots of Boston and the Heinz family both of whom finance his Presidential campaign.  What made them rich?  It was old fashioned slavery and the unemployment of today’s Luddites.

  1. Paul Rux, Ph.D.

    David, the dislocation you describe is very real here in
    the Heartland of America (State of Wisconsin to the north
    of Chicago, Illinois. The sad part is the current
    political propaganda seeks to cover this dislocation.

    More ominously, the debt loads, which you described in an
    excellent article a little while ago, are building. As a
    result, the cost of gasoline, or petrol, is rising. It is
    an indicator of the coming slowdown overall of the economy
    that you have predicted recently.

    I enjoy your writing and commentary immensely. You are
    one of the few writers whose analyses are worth my time.

    Sincerely, Paul Rux, Ph.D., http://www.paulrux.net

    PS I studied at Trinity College in Dublin, 1964-65, in
    the Honours School of History and Political Science. I
    have a special love for Ireland, although my ancestors are
    German and Belgian.

  2. John Hayes

    I know this is off the topic of a jobless recovery but the
    irony of the African slave trade is that it was only
    possible because of the population explosion in tropical
    and subtropical West Africa due to the introduction of food
    plants from South America.

    There was also an internal slave triangle in Africa where
    the tribes that supplied the slaves inland sold them, cash
    crops such as plant oils and ivory to tribes near the
    coast. These tribes traded slaves for guns to catch more
    slaves becoming rich and powerful in the process and this
    disrupted the balance of power in sudanic kingdoms right
    across sub-Saharan Africa (since the Portuguese were
    trading with slavers in the Arabian gulf).
    As is usually the case when the old order crumbles there
    was no shortage of blood spilled.
    So my point is that to view Africa, or even black Africa,
    as a unit in this historical context is to portray an
    incorrect picture of who benefited and who the victims were.

  3. Anthony Geoghegan

    You said:
    But the Caribbean islands proved to be a hellhole of
    insects and mosquitoes

    Mosquitoes are insects David.

  4. Tony Wong

    I do not think that the high unemployment in the United
    States and Europe is a problem, I think that it is just
    poor mentality or laziness. The truth is that
    globalization is good for developing countries (South East
    Asia) and China as it creates the prospect of employment
    and progress for those countries. I can see huge
    development, improvement in the standard of living in my
    own country (Malaysia) due to the shift of investments by
    foreign multi-national companies to a lower cost base. In
    fact most Asians work from 8.30 am to 7.30pm for white
    collar workers and they work in Saturday and somtimes on
    Sunday (they do not have over-time pay) and they really
    are very loyal to the company that they work for as it is
    their rice bowl. Most Asian white collar workers clock in
    a 66 hour week and they are happy to serve their companies
    without any complain unlike most other developed nations
    which are lazy and keep on asking for benefits like
    medical and leave and other such nonsense.

    It is only natural that in a lazy society that is
    unwilling to work and asking for high wages that
    unemployment would rise. Most graduates with degrees in
    Malaysia only get paid US$315 per month and it is enough
    for them. They do not get medical benefits and they do
    not complain as much as workers in developed nations.
    Factory workers get paid less as such white collar workers
    ranging from engineers to computer programmers are
    grateful for their jobs and high pay.


    The jobless situation in Malaysia actually started way back
    during the privatization days of public enterprises under
    the Tun Mahathir’s regime. The economic aspects of the
    development were good as the returns in terms of the
    Bumiputra gains in the bigger share of the country’s
    wealth. However, it was slowly went off tangent as the rich
    became richer and they just continue to monopolise the
    businesses and enterprises throught capitalization of free
    markets UNTIL George Sorrows hit the big sting!

    In terms of remedies, the current public enterprises plus
    the privatized government bodies should start trimming
    their workforce especially getting rid of those laggards in
    the public sector that easily accounts about 30% in the
    workforce that numbers about 900,000 personnel. With the
    voluntary separation packages if they are bold enough to
    offer plus the fund to be set aside, the issue of placing
    the 80,000 jobless graduates can be resolved immediately.


  6. Zainal Akhiruddin Datuk Hj. Zainal Alam

    Malaysia’s expeditious swift development since early 1980
    has created many job opportunities and the foundation of
    varied business dimensions elevating the economy and its
    population. Presently, there are even more job prospects
    resulting from the brilliant maestro governance of Tun
    Mahathir who has made it achievable for all, not only the
    Bumiputras, but every amicable Malaysians with a strong
    sense of vision adn mission in attaining the “Original
    Innovational Excellence”. Success and richness are the
    garner of hard-wearing determination and disciplined work
    culture so much so that the ‘Free Markets’ are monopolized
    by the ‘Realistic Ones’. George Sorrow’s spinelessness
    bushwhack, however distress it can be, has in a roundabout
    way, made the final motivational resolution for the public
    and private sectors to continue advancing in Nation Building.

    In today’s mega challenges of advanced climacteric human
    vibrations and highly developed human and customer
    relations, ‘Academic Scroll’ is not good enough for
    job-seekers to enhance their job chances. Excellent Work
    Culture, Charismatic Personality, Presentation Skills,
    Tactfulness, Firm, Bold and Brave, are the elements that
    make the preferred candidate into holding accountabilities
    in the organization. It is that special effect(s) which
    employers look for. It’s like a guarantee sort that such
    people have what it takes to vigorously drive projects and
    task effectively in present day fast-paced development.

    There is a set of symptoms for ‘Unemployment’. Job-seekers
    must accept the fact that it warrant ultimate
    self-discipline, virtuous moral, intellectual creativity,
    and the ability to innovate with first-rate originality; not
    a copycat, to be the excellent person for the job. Job
    induction programs or pre-employment courses are to be
    outstandingly conducted as a form of antidote to Job Recovery.

    The idea to drastically lay-off existing ‘Laggards’ will
    only affect the social environment and political mileage of
    the National Front but setting a bad precedent; a clear cut
    boorish way of managing a crisis. It is also a ‘Wicked’ act
    to adopt ‘Trade-In’ strategy for the approximately 80,000
    jobless graduates at the expense of putting other families
    in cold hunger. Think ‘Training’, and that’s a ‘Corrective’
    action nowadays, NOT ‘Punishment’, it’s an Appalling Advice
    by Mr. Disable. Both the ‘Laggards’ and the ‘Jobless’ should
    be guided the right way to attain successes. Be nice.

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