Karl Marx wrote that communism would solve the unemployment problem created by capitalism. Evidence from China shows he had it backwards.
In 1847 Marx wrote:
“Big industry constantly requires a reserve army of unemployed workers for times of overproduction. The main purpose of the bourgeois in relation to the worker is, of course, to have the commodity labour as cheaply as possible, which is only possible when the supply of this commodity is as large as possible in relation to the demand for it, i.e., when the overpopulation is the greatest.”
But does his critique of capitalism hold?
China provides a natural experiment. Were Marx correct that socialism solves the unemployment problem then we’d expect to see little or no unemployment in China.
China is the world largest communist regime. The Chinese Communist Party has been in power for 74 years. Surely they must have gotten it right by now.
Well, not so much.
The figure below contains the unemployment rate for young Chinese (between 16 and 24). Their reported unemployment rate is almost 20 percent. And since the Chinese government often fudges its figures, the actual youth unemployment rate may well be far higher.
Compare that to the United States. Youth unemployment in the United States never got above 20 percent.
This comparison show that socialism, even when practiced in its most extreme form (communism), doesn’t solve the unemployment problem. In fact, it makes it worse.
The figure below from my forthcoming book contains average unemployment rates among young people between the ages of 20 and 34 for the advanced countries of the world (OECD member countries) over the past ten years.
The chart clearly shows that unemployment rates are lower in countries with economies that are closer to the capitalist economic model (more economic freedom) than those with larger public sectors and more regulation (less economic freedom).
Bottom line: socialism fails young people wherever its been tried. And that’s a fact.