Unemployment, Public Works, the Trade Unions  

The other sphere in which the government must give a decisive lead is in the organisation of public works on a great scale. In an island or even a continental economy overheating, with the result of inflation, can occur in a condition of full employment. On the other hand, to maintain a large pool of unemployment is inhuman and disastrous to the general morale. The answer to this dilemma of the present system is to avoid overheating and inflation by the restraints of credit policy, while taking up the consequent slack of unemployment in public works. No man should be unemployed, and work should be available to all on a reasonable standard of life in a large public works programme, but there should be sufficient differential to provide incentive to return as soon as possible to normal employment; re-training and re-deployment of labour schemes should always accompany a public works system.

Public works should now be in active preparation in all Western countries to replace in due time the distortions of the economy of the Western world, which are initially caused by the semi-wartime basis of America. When peace finally breaks out, we should be ready with the constructive works of peace to replace the destructive works of America’s small wars and the concomitant arms race.

The world inflationary movement, resting largely on America’s deficit financing of its wars and arms, can at any time come abruptly to an end, either through peace or the objections of other nations to this financial process. So far, armament race and minor wars have taken up the slack of unemployment which would normally represent the difference between modern industrial potential and effective market demand. This has only been done by distorting the economy and aggravating the eventual problem of peace. To maintain full employment in a real period of peace only two methods are available—inflation, or public works on a great scale. We have already seen the results of inflation in an overheated economy leading to over-full employment, and wages chasing prices in a vicious spiral whose end must be a crash.

The only alternative is a stable price level maintained by a strong credit policy, with the resultant unemployment taken up in public works. The economic effect of public works in dealing with unemployment can be the same as the armament boom, without the disastrous exaggeration of deficit financing. Yet the difference in national, or I hope continental, well-being can be vital. The public works of peace can be integrated in general economic policy and can serve it rather than distort it. State action can prepare the way in works too large for private enterprise, and can thus assist rather than impede it. Such public works of peace in terms of unemployment policy can replace abnormal armament demand, can build rather than damage the economy, can benefit the nation and reduce the menace to mankind.

In theory there is no insuperable difficulty confronting a massive transfer of production from the destructive purposes of war, or the distortions of near-war, to the constructive and beneficent purposes of peace. Indeed it is now emphasised in America that great social programmes, like the rebuilding of the slums which are largely responsible for their racial problem, only await the release of resources by the outbreak of peace. In practice, however, the present system and its operators find much more difficulty in doing things in a big way in peace than in war; money is more readily available for madness than for sanity. It remains to be seen whether the vast works necessary, either to take up the slack of production consequent on peace, or to meet the social problem, can be produced by the present system and its personnel. Is it possible without some change in the structure of government and prevailing statesmanship? Will the transfer begin and end with the substitution of a temporary euphoria on Wall Street for the previous slumps on ‘peace scares’?

The fundamental dilemma of the system is that any continuance of the arms race in all the spheres which science is now revealing will be too great a strain for any economy to withstand, while even the partial cessation of the race will create a need for public works on so great a scale that present political thinking and action will never face it. Certainly, intelligent expenditure on developing the scientific revolution for the further and beneficent purposes of humanity could at this stage rapidly replace the organised idiocy of the arms race. Will this be done by men who appear to be scarcely aware of what is happening? The early future can summon both new ways and new men.

These problems can be overcome, and with them will be banished the haunting fear of unemployment. There is no such waste of wealth and the human spirit as unemployment. It is avoidable, and in a continental economy easily avoidable; it is simply a question of the mechanics of economics which mind and will can master. When demand flags, the market falters and unemployment follows, but we should remember there is no ‘natural’ limit to demand; the only limitation is the failure of our intelligence and will.

It sounded fantastic long ago in the House of Commons when a wise Labour leader of clear mind and calm character, J. R. Clynes, said there is no limit to real demand until every street in our cities looks like the front of the Doge’s Palace at Venice; and not even then. He was quite right, there is no limit to demand, only to our power to produce, and then to organise distribution. Certainly, there is no limit to demand while the slums disgrace our main cities and young married couples have to live with their parents for lack of accommodation.

For years I have urged a national housing programme like an operation of war; the phrase was picked up and used long after as what is called a gimmick in contemporary politics; yet nothing was done about it. I meant it, and it can be done. It entails cutting right through the whole rigmarole of present local authority procedure and building houses by the same methods as shells, airplanes and mulberry harbours were produced, in time of war. The restrictions of the present system and the timidity of politicians alone impede it; these inhibitions must be overcome.

It will be apparent to the reader that many of the policies I have so long advocated clash with present thinking and with vested interest. Particularly the direct intervention of government in questions of wages and prices is resisted in the mistaken belief that it threatens the position of the trade unions. When eleven years after my initial suggestion one of the ablest intellects in a Labour Government began to see ‘new patterns’ of economic policy in the possible intervention of government in wages and prices, a precipitate retreat followed in face of trade union opposition; the present hesitant application of any such policy is entirely negative; never positive in a readjustment of all rewards.

Trade union traditions in bitter memory of the past tend to slow the pace of the fast to that of the slow; dark shadows of unemployment and the unprotected worker still haunt the bright prospects of a scientific age. Not only my advocacy for the past eleven years of economic leadership by government through the wage-price mechanism, but also my still longer insistence on payment by results in all spheres and ranks of industry and my new proposals for the provision of incentive through the fiscal system, are liable to collide at present not with reason but with industrial atavism.

Reduction of government expenditure

Yet I am no enemy of trade unionism, never have been and never will be. On the contrary, I can see an even bigger part for it in the modern world; for instance in securing a better method of administration. Reduction of wasteful expenditure is essential if our economy is not to founder in a sea of all-engulfing taxation. Present bureaucracy in the necessary and desirable welfare state should be largely replaced by the administration of trade unions and employers’ federations, and much of the operation of the welfare state should be made genuinely contributory. People should no longer be mulcted to pay for benefits they do not want, but only charged for the benefits they desire. Such a system would immediately bring to an end the blatant scandal of present practices. Large economies in this sphere can be added to the considerable saving effected by cutting down unnecessary external commitments through policies already described. Further general economies can be secured either by the attachment to each department of a watchdog responsible to higher authority, or by the rationing of departments. Taxation must be drastically reduced by the cutting of expenditure as well as transferred from the direct to the indirect method.

Nothing is more important to our present situation than the strenuous reduction of inflated expenditure and the elimination of waste. There is no doubt that swollen government expenditure coupled with a lax credit policy is the prime cause of inflation. Trade unions are blamed because wages are continually chasing a rise of price caused by government policy. Their members do not suffer so much as people with fixed incomes, or as many highly skilled people who have no trade union to look after them. Yet all workers, and the whole nation, suffer in some degree from inflation and the continual rise of prices. Government expenditure must be severely reduced until greater production for the larger market of Europe will enable us to pay for many desirable things we cannot now afford. The present burden will eventually be lifted by the larger turnover available for taxation through this increase of production and of real wealth. It will be easier to secure agreement for the policies of expansion than for those of contraction. Trade unionism can then play not a lesser but a larger part in the developments which greater policies make possible.

A world of many new possibilities presents trade unionism with an invitation and a challenge to move from the present to the future. There is no limit to trade union activity except taking over the government of the country; yet when they forbid government to intervene in questions of wages and prices this is precisely what they are doing. The function of government in the modern world must be chiefly economic, and the main question in modern economics is the matter of wages and prices. If government cannot enter this sphere of wages and prices it ceases to be a government. If trade unionism stops a government doing the job which the people have elected it to do, a showdown in the end is inevitable and will have to be faced. The will to face such a sad situation should always be present, though I hope and believe it can be avoided, with the aid of clear thought and good will.

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