January 23, 1943







From a Correspondent
(Attributed to Joan Robinson)

Full employment is an ambiguous concept. No one, at the most optimistic, expects a complete disappearance of unemployment, and no one desires the continuance in peace-time of the super-full employment which we are enduring now with all the social stresses it implies. Occasional and temporary unemployment, provided that social services are adequate, is not a grave evil, and we may suppose that the objective of the policies discussed in the preceding article is to reduce unemployment to a moderate amount. Supposing the policies are successful, fresh problems arise. Unemployment is not a mere accidental blemish in a private enterprise economy. On the contrary, it is part of the essential mechanism of the system, and has a definite function to fulfill.

The first function of unemployment (which has always existed in open or disguised forms) is that it maintains the authority of master over man. The master has normally been in a position to say: “If you don’t want the job, there are plenty of others who do.” When the man can say: “If you don’t want to employ me, there are plenty of others who will,” the situation is radically altered. One effect of such a change might be to remove a number of abuses to which the workers have been compelled to submit in the past, and this is a development which many employers would welcome. But the absence of fear of unemployment might go farther and have a disruptive effect upon factory discipline. Some troubles of this nature are being encountered to-day, but in war-time the overriding appeal of patriotism keeps them within bounds. In peace-time, with full employment, the worker would have no counterweight against feeling that he is employed merely to make profits for the firm, and that he is under no moral obligation to refrain from using his new-found freedom from fear to snatch every advantage that he can. Payment by results might overcome these difficulties to some extent, but would be unlikely to remove them altogether.


The change in the workers’ bargaining position which would follow from the abolition of unemployment would show itself in another and more subtle way. Unemployment in a private-enterprise economy has not only the function of preserving discipline in industry, but also indirectly the function of preserving the value of money. If free wage-bargaining, as we have known it hitherto, is continued in conditions of full employment, there would be a constant upward pressure upon money wage-rates. This phenomenon also exists at the present time, and is also kept within bounds by the appeal of patriotism. In peace-time the vicious spiral of wages and prices might become chronic. This would bring a variety of evils in its train. It would greatly complicate the problem of controlling international trade, since it would require off-setting movements in exchange rates. It would make hay of the social security program. It would bring about an arbitrary redistribution of real income within the country, rentiers, salary-earners, and ill-organized workers losing relatively to the members of the strong trade unions, who would secure the greatest wage advances, and to the industrialists, who could recoup themselves for rising costs by raising prices. Finally, if it moved too fast, it might precipitate a violent inflation.

Two solutions of the dilemma presented by full employment are offered to the modern world. Under Fascism, the trade unions are broken; direct terror, supplemented by a mystical propaganda appeal, is substituted as a means of discipline for the fear of unemployment, wages and prices are controlled, and full employment, mainly directed to building armaments, is thus made possible. Socialism presupposes the opposite solution. The long and bitter antagonism between capital and labour is to be brought to an end when capital becomes the property of the community as a whole. An appeal, similar to the appeal of patriotism which saves us in war-time from the perils attendant on full employment, is to cement disciple and make State wage-regulations acceptable.

Is there a third course? Sir William Beveridge has spoken of a “British revolution.” It was argued in the preceding article that to control employment is would be necessary to remove certain substantial spheres of activity from the hands of private enterprise. In the remaining sphere price control, limitation of profits, and full publicity in respect of costs (as advocated by the 120 industrialists in “A National Policy for Industry”), combined with a social security program at least as generous as that proposed by Sir William Beveridge, and with an extension of works councils which would give the workers a voice in the day-to-day affairs of the factory, might produce a situation in which the workers would be prepared to accept discipline to the necessary and reasonable extent, and to accept an over-all wage treaty which would prevent the vicious spiral from setting in.


A state of full employment would require a further modification of the status of the workers. No national plan, however skillfully devised, can guarantee everyone work in his own trade, and, even if it were possible, it would be highly undesirable to allow the distribution of labour which happened to exist at the outset of planning to exercise a permanent influence in distorting the pattern of production. If stability is to be combined with progress, obstruction from whatever source to the introduction of new techniques cannot be tolerated. And a high degree of flexibility, conflicting in many ways with rigid trade union rules, is a necessary condition for running industry at a continuous high level of activity.

Many practices which trade unionists themselves admit to be restrictive have their historical justification in the fear of unemployment. It is the right of a man to his trade which is defended by them, and the elaborate system of taboos which prevent one man doing another man’s job has its justification in reluctance to take the bread out of someone else’s mouth. Restrictive regulations upon employment are not confined to industrial trade unions. It is scarcely to be doubted that the difficulties placed in the way of women medical students have their roots in fear of increased competition in a limited market. National protectionism and monopoly restrictions of all kinds are based upon the same fear.

If a full employment policy were successfully carried out, the raison d’etre of trade union obstructions to flexibility would disappear, and machinery could be set up for solving the problems involved, in a reasonable manner and in consultation with the workers themselves. Sir William Beveridge advocates retraining on a maintenance allowance as part of his scheme of unemployment relief. Greater flexibility of hours of work could be used to deal with minor fluctuations in activity, in place of the present brutal system of standing men off when trade is slack. These problems can all be solved. But they can only be solved after the problem of unemployment has been dealt with, since fear of unemployment lies at the root of them all. It is of no use to demand flexibility first. The trade unions will not give up their hard-won defensive positions in exchange for a mere pious hope that unemployment will not recur.


The foregoing discussion has brought to the surface a disagreeable dilemma, which must be squarely met if intellectual confusion and economic and social disaster are not to ensue. The fact that unregulated private enterprise and continuous full employment are incompatible must be frankly faced, if we are not to drift blindly in the fog. The existing system is nowadays usually defended on two grounds. The first is that our existing Civil Service, so admirably adapted to laissez-faire, is often inept in handling industrial problems. This may well be true but it is irrelevant, since it is obvious that a wholly different type of organization would have to be created in order to carry through a positive economic policy. The second is that unregulated private enterprise has, over two centuries, brought about magnificent achievements of technical progress. This argument is also irrelevant: for whatever the past achievements of private enterprise regulation is now required to ensure further progress. Once it is clear that mass unemployment is the price that must be paid, probably at an increasing rate, for the unregulated economy of the past, further argument becomes unnecessary—even if there were no other reasons why unregulated private enterprise is inadequate to deal with the problems of modern industry.


The first article appeared yesterday.