ASPECTS OF INDIA’S ECONOMY

Unemployment is not merely a human problem, a difficulty faced by the unemployed. It is an expression of the inability of the existing social system to draw on all the resources available to it to increase production. Indeed, unlike the other two factors of production, land and capital, which are passive, labor is able to create capital. If society is to maximize production, it cannot afford to waste any of the factors of production: these factors of production, including labor, must be put to socially efficient and complete use.
Until the Great Depression of 1929, capitalist economists were not much concerned with the question of unemployment. Their theoretical frame assumed that the only reason for there being excess supply of any commodity was that its price was not being allowed to sink to its market-clearing level, the price at which all of that commodity would be bought up. Thus unemployment was said to be the result of wages not sinking low enough; this in turn was because of trade unions. Were wages allowed to sink low enough, capitalists would find it profitable to hire more workers, and would spontaneously do so till full employment was reached.1
Unemployment was the central question addressed by J.M. Keynes, although he addressed it from a limited frame of a capitalist society. Keynes pointed out that capitalists would not hire workers as long as demand was inadequate. Indeed not only labor, but even capital and land may remain idle for lack of demand in the economy. Under such conditions, he argued, it was necessary for the State to stimulate demand by carrying out investment. While Keynes was very much an establishment economist, whose concern was the survival and stabilization of the capitalist system, his contribution was to dispel the illusion that the economic system was stable, or that it would spontaneously bring about full employment.
In the last three decades, however, the pre-Keynes theoretical frame has regained ascendancy among academicians in the pay of the ruling establishment. It is being promoted as gospel truth worldwide by the rulers. It is being implemented not only in industrialized countries, but even in countries like India, where vast unemployment/under-employment reigns. Under these conditions, in the absence of social protection and workers' organization, the "market-clearing" price of labor power can sink well below the level needed for subsistence.