Unemployed in September, 1937 1,271,000 January, 1938 1,828,000
BY DOUGLAS JERROLD
HY is it that our vast rearmament programme has not been accompanied by increased employ ment? This question has far reaching implications, because armaments do not differ in kind from other public
works designed to provide amenities such as health, education, or speed tracks—and not either consumable goods or capital goods in the proper sense of those terms. The whole conception of the " planned state " is bound up with this question, for it is of the essence of that ideal that modern machinery enables us to supply ourselves with all the consumable goods that we require with relatively little labour, and that the organisation of our reserves of man-power for the supply of amenities would be not only fruitful but actually necessary if progress is to be maintained.
Not in Terms of Money
To judge this question accurately we must first think of it not in terms of money but in terms of goods and services. What will happen if we absorb, through the process known as " dilution," the whole of the available unemployed into the armament industries? There will be at once from this quarter a greatly increased demand for consumable goods, but no reserve of labour available for their production. The possible consequences thus are three: (a) A rise in the prices of consumable goods, followed by a shortage; (b) An increased production of consumable goods by the same number of workers; and (e) A falling-off of the demand from other quarters equal or more than equal to the increased demand from munition workers, in which case things will remain as they were, or actually get worse.
The one thing which can never happen is that the cost of amenities is paid for otherwise than by a reduction in the consumption of other commodities unless those who produce the other commodities are willing to increase output without cost.
None of the above-mentioned consequences (and there are no other possible consequences) will immediately result. There are reserves of stocks to be consumed, and the dislocation and the expense caused by the change of employment of large bodies of workmen will absorb the increased purchasing power for some time.
Moreover, in the case of the ,re-employment of men long unemployed, there is the need to discharge prior obligations in the way of arrears of rem and other debts. Thirdly, if the production of armaments is financed out of taxation, the demand for consumable goods tends not merely to remain constant but actually to decrease, for it is characteristic of taxation that it does not and cannot put into consumption as much purchasing power as it takes out, owing to the cost of collection and the time-lag involved. Finally, and most relevantly, these possible consequences of the rearmament programme (or of any similar programme for expenditure or amenities) are not mutually exclusive. In theory, at any rate, the cost of munitions might be met as to one-third by an increase in the cost of consumable goods; as to one-third, by the longer hours worked by those who produce them; and as to the balance, by a contraction of employment in the productive industries.
Price Paid by the Public
A careful reader will have noted that 1 postulated the absorption of all the unemployed into the armament industries. 1 did this in order to illustrate the consequences most simply.
If half the unemployed are absorbed in the armament industries, there is a reserve of labour available for increasing the production of consumable goods. but this reserve will only he required in so far as the armament programme is financed out of loans. In that case, -the effect of the programme is directly inflationary, and it will be paid for by a general rise in the price level: i.e., by a reduction in the standard of living of all classes.
The difference between the first case, where all the unemployed are absorbed in the new programme, and the second, where only half of them are absorbed; is merely quantitative. There is -less inflation in the second case than in the first, because less money is being spent on unproductive works.
The only possible alternative to inflation as the consequence of rearmament financed by loans is a decreased demand for consumable goods accompanying the increased demand for unconsumable goods. This means, of course, increased unemployment. Economically, there is no reason to expect this, and every reason -to expect the contrary. Psychologically, we can see the process already at work. The reason is not hard to understand. During an actual war, the tendency is to consume more, not less. Let us cat, drink, and be merry : for tomorrow we die. During a period such as the present, the tendency is to consume' less, so as to build up a reserve against the day of trouble.
If We Would Work Harder
The tragedy of the position is a tragedy of ignorance and mistrust. We could pay for the whole of our armaments expansion without either a disastrous inflation or a renewal of economic depression, if we decided to work harder, and so to produce without extra cost the increased supplies of consumable goods necessary to maintain the workers in the armament factories at full efficiency.
Instead, what we shall do is to induce the armament workers themselves to make a sacrifice of leisure and to relax their regulations so as to absorb a maximum of unskilled labour, and we shall finance a colossal increase of expenditure partly out of loans, but mainly out of taxation. We shall thus have to face a period of rising prices and increasing unemployment, leading irresistibly to further inflation and a repetition of the oriels of 1931.
Any attempt to achieve the practical remedy — a general relaxation of trade union restrictions on hours and conditions —is politically impossible, owing to the distrust of the vast majority of men and women of all parties of the present working -of the capitalist system. This distrust is not by any means unjustified; the fact remains that it is an obstacle of the gravest kind to any effective national effort of the kind we are now making for national security, and of the kind which we hope to be making, in years to come, for improved social conditions.
Not the Socialist Answer
This argument, we shall be told, leads directly to approval for the socialist system, the nationalisation of industry. It does nothing of the kind. It leads, in fact, in the exactly opposite direction. The objection of the workers of all kinds and classes to increased effort is caused by the fact that they are not economically free, and do not own or control the instruments of production. The position of the State employee is in this respect not better but worse because he has no alternative employer and no hope of obtaining freedom. The proof of the pudding is in the eating. The State employees are the most insistent of all on a rigid restriction of working hours. They are part of a vast machine where promotion is inevitable a matter of routine. They have no feeling that they are their own masters, and no financial interest in the prosperity of -the organisation in which they work. Grave as are the defects of capitalist industry, they are grave only in so tar as they approximate to the conditions of government employment,
where the line of demarcation between an invisible and uncontrollable " employer " and an army of "employees" is rigid and
impassable. It is hardly necessary to mention that the State employee through his vote has the power of choosing and controlling his employer, for the elected government has, as we know, exactly the same power over private industry as over the government establishments. In so far as this kind of "choice" and "control" is psychologically satisfying, it satisfies the employees of the private firm equally with those of the State. We all know that it satisfies neither.
Failure to Understand
The real problem is not, I believe, that of -the control of industry or finance (through whatever machinery) but of the failure of the people of this country to understand.
If the people Were really satisfied that they would be better off if the present emergency were faced in a spirit of sacrifice, they would make that sacrifice willingly. The responsibility for the suffering which will follow if that sacrifice is not made lies with those politicians who deliberately foster economic ignorance, and who teach innocent and deluded people that there is a secret source of undistributed assets on which they can draw to provide them with every kind of amenity (including armaments) without themselves contributing anything whatever.
It is the urgent task of Catholic Action, in the interests alike of charity and justice, to combat this error. A sound economic system will never he built on ignorance. however great the goodwill.