Back to William Beveridge requires a commitment to true full employment

I have been digging back in time and re-reading Unemployment: a problem of industry by William Beveridge (published 1909). Beveridge is most known for his 1944 book – Full Employment in a Free Society and the related Social Insurance and Allied Services – (1942 aka the Beveridge Report). The point is that to understand the motivation for the Beveridge Report you also have to appreciate the earlier document and the role that it played in labour history in the UK (and elsewhere). Why am I considering this? The British Labour Party is appealing to the 1942 Report as a motivation to introduce radical reform to the British welfare system. They think that by attacking the most disadvantaged citizens in Britain at a time when unemployment is so high and poverty is rising that they will gain some traction with the electorate. The word despicable comes to mind. However, it is clear they are just remaining faithful to their earlier corrupt past.

The UK Guardian Op Ed (January 2, 2012) – A William Beveridge for this century’s welfare state – by British Labour MP Liam Byrne suggests that the modern Labour Party should become “radical reformers once again” citing the example set by William Beveridge in the 1940s when he chaired a 1941 committee “to rationalise Britain’s system of social insurance”.

Byrne is the shadow Work and Pensions Secretary. He is referring to the Social Insurance and Allied Services Report noted in the Introduction.

As the British National Archives notes:

The Beveridge Report was a dense and lengthy document, as can be seen from its contents page. Nevertheless, when it was published, in the middle of the Second World War, it caught the public’s imagination – it gave people hope of a better life after the war. The report was to provide the basis of the Labour government’s postwar welfare legislation.

You can also read a BBC Item on the Beveridge Report.

Byrne writes that in looking back to “Beveridge’s hugely popular first principles” the British Labour Party should “apply them anew to the challenges of 21st century Britain”.

He considers “work” first:

Beveridge’s system was built on the idea of full employment. For him, “idleness” was an evil every bit as insidious as disease or squalor. So he would have been horrified at the long-term unemployment breaking out all over Britain, with over a million young people without work, and appalled at the spiralling cost of benefits. He would scarcely have believed housing benefit alone is costing the UK over £20bn a year. That is simply too high.

Beveridge would have wanted determined action from government to get communities working once again, not least to bring down that benefits bill to help pay down the national debt. He wanted a responsible government taking determined action to create work, but a responsible workforce too. He would have wanted reform that was tough-minded, and asked everyone to work hard to find a job. He would have worried about the ways that his system had skewed social behaviour because he intended benefits to help people who had their earning power interrupted because of illness, industrial injury or the capriciousness of the trade cycle. He never foresaw unearned support as desirable.

The emphasis that Liam Byrne wants us to place on this is the notion that the provision of unemployment benefits should be (in Beveridge’s words) “conditional upon attendance at a work or training centre” or “something for something”.

He also claims that the Labour Party should provide “reward for those who are desperately trying to do the right thing, saving for the future and trying to build a stable, secure home. Right now, these families are offered too little reward and incentive – in social housing and long-term savings – for the kind of behaviour that is the bedrock of a decent society”.

So the unemployed and welfare recipients are not giving enough back and those that Byrne thinks are giving are not getting enough because they are “supporting” (in this neo-liberal style rhetoric) the welfare recipients.

He wants social security in Britain to change.

More explanation of his motivation was provided in the UK Guardian article (January 2, 2012) – Labour urges radical rethink on welfare.

That article reports that:

Labour is calling for a radical rethink of the welfare state, arguing that the benefits system has betrayed its founding principles and “skewed social behaviour” … that the ballooning of the system has provided support that is unearned, and mislaid the original ideal of providing help to those that contribute.

Labour apparently want to “recast the welfare state to meet the original intentions of its founder, William Beveridge” with the restoration of the “contributory principle … restored … so there is a clearer link between what people put in and what they receive”.

Apparently, Byrne believes that “most voters, including traditional Labour supporters, still want a tough line on welfare”. He also has been studying “schemes in Australia and the US, and is inclined toward requiring the unemployed to work after a fixed period”.

I would add that the labour market changes over the last 20 years in Australia have undermined the welfare system. A major OECD report came out in 2001 endorsing the Australian government’s supply-side approach – OECD (2001) Innovations in Labour Market Policies, The Australian Way, Organisation for Economic Co-operation and Development, Paris – which concluded that Australia has lead the way in introducing “market-type mechanisms into job-broking and related employment services” (Page 11).

The OECD concludes that in terms of labour market policies Australia “has been among the OECD countries complying best” (Page 14) with the OECD 1994 Jobs Strategy. It is tangential to this blog – but the evidence doesn’t support the OECD’s conclusion. Australia’s Work for the Dole scheme is poorly conceived and the Government has admitted is just a “compliance program” forcing workers to work for their miserable (below poverty-line) unemployment benefit.

The point of all this is that the Beveridge Report which defined the modern welfare state in Britain (Australia, New Zealand, Canada etc) was cast in a time when the prevailing macroeconomics paradigm was very different. It was also the result of a long struggle about the right to work (which I will come back to).

So if British Labour really wants to recast its welfare policy then it has to start by recasting its macroeconomic policy.

Beveridge was writing immediately after the Great Depression which only really ended when government spending associated with the prosecution of the Second World War accelerated.

The Great Depression taught us that, in the absence of government intervention, capitalist economies are prone to lengthy periods of unemployment, the Second World War experience proved that full employment could be maintained with appropriate use of budget deficits.

The employment growth following the Great Depression was in direct response to the spending needs that accompanied the onset of the War rather than the failed Neoclassical remedies that had been tried during the 1930s. The problem that had to be addressed by governments at War’s end was to find a way to translate the fully employed War economy with extensive civil controls and loss of liberty into a fully employed peacetime model.

That was the context that Beveridge was working within.

The Post World War 2 economic and social settlement in most Western countries was based on three main pillars. First, the Economic Pillar was defined by an unambiguous commitment to full employment.

Second, the Redistributive Pillar was designed to ameliorate market outcomes and defined much of the equity intervention by government. It recognised that the free market was amoral and intervention in the form of income support and wage setting norms was a necessary part of a sophisticated society.

Third, the Collective Pillar provided the philosophical underpinning for the Full Employment framework and was based on the intrinsic rights of citizenship. We accept that our depiction is a stylisation and that there were many individual nuances in particular countries over the period considered.

William Beveridge’s work in the 1940 (noted above) was entirely consistent with the emerging Keynesian orthodoxy of the time, which saw unemployment as a systemic failure in demand and moved the focus away from an emphasis on the ascriptive characteristics of the unemployed and the prevailing wage levels.

Beveridge (1944, 123-135) said that:

The ultimate responsibility for seeing that outlay as a whole … is sufficient to set up a demand for all the labour seeking employment, must be taken by the State.

Welfare support for the unemployed was conceived as short-term support rather than a permanent source of income support. It was taken for granted that the state would use its fiscal policy capacity to ensure there were enough jobs available.

Governments used a range of fiscal and monetary measures to stabilise the economy in the face of fluctuations in private sector spending and were typically in deficit.

However, while both private and public employment growth was relatively strong during the Post War period up until the mid 1970s, the major reason that the economy was able to sustain full employment was that it maintained a buffer of jobs that were always available, and which provided easy employment access to the least skilled workers in the labour force.

Some of these jobs, such as process work in factories, were available in the private sector. However, the public sector also offered many buffer jobs that sustained workers with a range of skills through hard times. In some cases, these jobs provided permanent work for the low skilled and otherwise disadvantaged workers.

Importantly, the economies that avoided the plunge into high unemployment in the 1970s maintained what Paul Ormerod in his 1994 book The Death of Economics described as (Page 203):

… sector of the economy which effectively functions as an employer of last resort, which absorbs the shocks which occur from time to time, and more generally makes employment available to the less skilled, the less qualified.

Paul Ormerod also said that employment of this type may not satisfy narrow Neoclassical efficiency benchmarks, but notes that societies with a high degree of social cohesion and a high valuation on collective will have been willing to broaden their concept of costs and benefits of resource usage to ensure everyone has access to paid employment opportunities.

He argued (page 203) that countries like Japan, Austria, Norway, and Switzerland were able to maintain this capacity because each exhibited:

… a high degree of shared social values, of what may be termed social cohesion, a characteristic of almost all societies in which unemployment has remained low for long periods of time.

This is why a central aspect of Modern Monetary Theory (MMT) suggests that the return to full employment and price stability requires the reintroduction of this buffer stock capacity (the Job Guarantee).

The full employment commitment (the Economic Pillar) was buttressed by the development of the Welfare State, which defined the state’s obligation to provide security to all citizens. Citizenship meant that society had a collective responsibility to ensure that the well-being of the population was a high priority.

That concept replaced the dichotomy that had been constructed previously between the deserving and undeserving poor. The Redistributive Pillar recognised that the mixed economy (with a large market-component) would deliver poor outcomes to some citizens, principally via unemployment.

Extensive transfer payments programs were designed to provide income support to disadvantaged individuals and groups. But this support was – as noted – considered to be ephemeral given the commitment to full employment.

Underpinning the Welfare State and the economic commitment to full employment was a sophisticated concept of citizenship (the Collective Pillar). The rights of citizenship meant that individuals had access to the distribution system (via transfer payments) independent of market outcomes. Furthermore, a professional public sector provided standardised services at an equivalent level to all citizens as a right of citizenship. These included the public sector employment services, public health and education systems, legal aid and a range of other services.

So if Mr Liam Byrne wants to radically alter the current welfare system in Britain in the spirit of William Beveridge then he better study history some more and persuade his party that it has to radically rethink its economic position – including cutting deficits when unemployment is high and private demand is so low.

To really understand Beveridge though it is useful to take a little step back in time to see where all this sits.

In 1906, the “radical liberal” Winston Churchill stated that the State should become an employer of last resort. In a speech – Liberalism and Socialism – delivered by Churchill on October 11, 1906 (at the St. Andrew’s Hall, Glasgow) we read:

No view of society can possibly be complete which does not comprise within its scope both collective organisation and individual incentive. The whole tendency of civilisation is, however, towards the multiplication of the collective functions of society. The ever-growing complications of civilisation create for us new services which have to be undertaken by the State, and create for us an expansion of the existing services. There is a growing feeling, which I entirely share, against allowing those services which are in the nature of monopolies to pass into private hands. There is a pretty steady determination, which I am convinced will become effective in the present Parliament, to intercept all future unearned increment which may arise from the increase in the speculative value of the land. There will be an ever-widening area of municipal enterprise. I go farther; I should like to see the State embark on various novel and adventurous experiments … I am of opinion that the State should increasingly assume the position of the reserve employer of labour. I am very sorry we have not got the railways of this country in our hands. We may do something better with the canals, and we are all agreed, every one in this hall who belongs to the Progressive Party, that the State must increasingly and earnestly concern itself with the care of the sick and the aged, and, above all, of the children.

I look forward to the universal establishment of minimum standards of life and labour, and their progressive elevation as the increasing energies of production may permit. I do not think that Liberalism in any circumstances can cut itself off from this fertile field of social effort, and I would recommend you not to be scared in discussing any of these proposals, just because some old woman comes along and tells you they are Socialistic. If you take my advice, you will judge each case on its merits. Where you find that State enterprise is likely to be ineffective, then utilise private enterprises, and do not grudge them their profits.

So a very clear statement that a liberal politics should include novel and adventurous state experiments (he used afforestation as an example) and that the state (the Government) should ensure that they provide enough jobs for all.

That is, Winston Churchill was an early supporter of a Job Guarantee, which if you are familiar with the great debates in liberalism should disabuse you of the notion that the concept of employer buffer stocks is an idea dominated by “left-leaning, socialist” types.

The neo-liberals of today are nothing like the liberals of yesteryear.

Interestingly, a Cambridge University historian found that Churchill borrowed some of his biggest ideas from HG Wells.

Evidently, the liberal-leaning (rather than socialist-leaning) H.G. Wells’ A Modern Utopia provided many phrases that were borrowed by Churchill, who was considered in his younger years to be a radical liberal. For example:

Wells wrote: “The State will stand at the back of the economic struggle as the reserve employer of Labour.” Churchill said: “The State should increasingly assume the position of the reserve employer of labour.

That is an interesting strand of research that is lateral to today’s topic.

It is clear that within a few years, Churchill was being persuaded to abandon his ideas about state reserve employer functions.

By 1909, William Beveridge’s liberal statement – Unemployment: a problem of industry – was not supportive of such a state function. You can download the Full Version (pdf) which is 18 mgs.

If it wasn’t a holiday period I would have asked Victor Quirk to write this given his recently completed PhD covered some of this material and he has an almost encylopeadic memory of all this stuff.

But in his 1909 book, William Beveridge denies that unemployment arises from a failure of aggregate demand (that is, a systemic failure). Rather:

The positive conclusion is that there are specific imperfections of adjustment between the demand for labour and the supply of labour, and that these give rise to a real and considerable problem of unemployment … A rising demand for labour will be no cure for unemployment.

So he was claiming that mass unemployment was a structural problem.

In Chapter IX – “PRINCIPLES OF FUTURE POLICY”, Beveridge outlined his response to a growing call in Britain for a “Right to Work” act which would embody in legislation the capacity that the state should provide enough work to ensure there was only frictional unemployment. That is, consistent with even the liberal view held by Churchill in 1906 that the state should be the “reserve employer”.

He reasserted his view that “Unemployment is a question not of the scale of industry but of its organisation, not of the volume of the demand for labour but of its changes and fluctuations”.

He then considered the proposed “Right to Work Bill” proposed by the Independent Labour Party (ILP).

The ILP emerged out of 1889 London dock workers strike and the resulting surge in trade union membership which allowed the latter to support the development of a working class political movement. The trade unions sponsored several members of parliament (paid their wages). The ILP was formed in 1892 and its first leader was James Keir Hardie.

It was a mixture of disenchanted liberals, pro-worker members and some socialists.

Under Hardie, the ILP championed the right to work as a response to the problems that persistent unemployment created. There was a lot of political agitation in the next decade in support of this view.

Here is a 1904 statement by Keir Hardie – The unemployed problem with some suggestions for solving it – that outlines his commitment to public sector job creation.

The conservatives (liberals) – fearing that the working class was becoming to powerful – introduced the Unemployed Workman’s Act 1905, which allowed for some public works to be provided in local areas where unemployment was high. Churchill’s comments above are consistent with this development.

The liberals regained office in the landslide 1906 election in part because of the work done by Liberal Herbert Gladstone to shore up a collaboration with the Labour group. He was a vocal supporter of public works as a solution to unemployment. Once elected the Liberal Government voted to deploy local government rate revenue to fund expanded public works.

Some of the Liberals were uncomfortable with this development and wanting to distance themselves from the socialists (that had helped them gain office). Their minister for local government (the ministry charged with implementing the public works program) undermined the expansion – all sorts of ruses were used to buy time.

The Labour parliamentarians insisted that the Government should implement the policies set out in the 1905 Act. Finally in 1907, the annual conference of the ILP proposed their own “Right to Work Bill” which would establish a “central unemployment committee” engaged with the responsibility for planning major public works designed to eliminate unemployment.

The Bill amounted to a commitment to a Job Guarantee. The proposed Bill divided the Liberals – with Winston Churchill and Lloyd George prominent supporters of it. They saw it not only in economic efficiency terms but also political terms – it would undermine the growing socialist threat.

The Liberals leader – Herbert Asquith – opposed it but realised that the Government had to come up with some alternative that would assuage the growing demands for a solution to the unemployment problem. Unemployment was around 9 per cent in Britain at this time.

Enter William Beveridge and his 1909 study noted above. In response to the “Right to Work Bill” this is what Beveridge said:

The paradox has to be faced that the creation or provision of work is the one thing that is no remedy for unemployment. It may palliate immediate distress. It may increase general prosperity. It may cause unemployment for a while to be forgotten. It does not banish disorganisation from the State.

It may, however, be said that if the problem is that of maintaining reserves of labour to meet fluctuations, then the simplest and surest solution is to be found just through one of the proposals now ruled out as irrelevant. Let new industries (afforestation, land reclamation and many more be created, not indeed for their own sakes but as reservoirs of labour, as the sources of an elastic demand able to expand and contract instantaneously as the demand in the rest of the labour market contracts and expands. Let there stand ready, for every workman to turn to in moments of idleness, some useful work to be done for the community, some employment by which he may live till he can return to his usual avocation once more. This or something like it appears to be the aim of the Unemployed Workmen Bill of 1908 the “Right to Work” Bill of the Labour Party. Might not this or something like it be reached by increasing the powers and making inexhaustible the resources of the authorities already established by the Unemployed Workmen Act of 1905?

He claimed there were three main criticisms of this approach. I won’t discuss them today because they are germane to the aim of the blog. But you can be assured that they are the standard points made by conservatives against such schemes. When I do come back to them (another day) I will show why the claims are invalid and mainly ideological in nature.

The point is that once you claim that unemployment cannot be solved by providing jobs – or that such provision will undermine the capacity of the private sector to make adjustments (changing industry composition etc) then the only policy response was to improve the efficiency of the “matching process” as new jobs emerge.

So Beveridge claimed that the Government should not support any “Right to Work” bill but should take a two-prong approach to unemployment.

1. Reduce the misery of the unemployment by introducing a system of contributory unemployment insurance.

2. Create labour exchanges (“employment services”) which would help employers who were creating work to find employees.

Both proposals explicitly headed off the debate about the right to work.

The historical record shows that the Labour Party (under the leadership of Ramsay Macdonald) abandoned the Right to Work Bill proposal and supported the Beveridge options that the Liberals had adopted.

Why would they have done that? In 1909, there was a significant House of Lords ruling – The Osborne Judgment 1909 – which stated that it was illegal for “trade unions to collect a levy for political purposes, specifically, to fund the infant Labour Party’s organisational and electoral efforts”.

The judgement was in response to a petition by a Liberal Party supporting trade unionist who was avowedly anti-socialist. He wanted to stop the growing socialist influence in the ILP and which were the main proponents of the “Right to Work Bill”.

The reality was that without the trade union support of their wages, the Labour MPs were unable to serve (lack of income).

Meanwhile, the Osborne Judgement of December 1909 provoked outrage in Parliament and in the country, until it was reversed by the Trade Union Act 1913. But for the purposes of our discussion it was very damaging to the right to work movement.

The Labour Party MPS at the time the Bill was put were bought off by the Liberal Party who promised to introduce legislation requiring the state pay MP salaries. The Labour Party thus sold out to the conservatives in return for personal gain.

Conclusion

There is more in this long history regarding the right to work but time has run out today.

The point is that by the end of the Great Depression, Beveridge had changed his tune somewhat and while he still proposed contributory unemployment insurance schemes as a palliative to unemployment he also realised that the Keynesian onslaught had rendered much of the points raised in the earlier “right to work” debates invalid.

The concerns about how the government could afford such public works schemes were allayed as economists embraced the work of Keynes and started to appreciate the positive role that fiscal policy could play in maintaining full employment.

While there might be fluctuations from full employment which would require some income support schemes to act as a safety net, the deviations from full employment would always be short-lived and so the “cost” problem was downplayed.

If British Labour is now serious about returning to the immediate Post Second War period then it has to do it wholeheartedly.

Its neo-liberal macroeconomic policy does not sit with the welfare policies proposed by Beveridge in the early 1940s.

That is enough for today!

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27 Responses to Back to William Beveridge requires a commitment to true full employment

  1. Jim says:

    What you don’t seem to understand is this – many of the households (in the UK at least) that are on benefits, if offered a full time job, paying the average (not median) UK wage, would refuse it because their benefits (housing and income) when grossed up are greater than the average wage. They would be working full time and getting less money in their pocket than they do now for doing nothing. Thats the perverse incentives of the system we have in place.

    So all this talk of providing ‘an employer of last resort’ is pure hot air unless you address issues like this (and that’s completely ignoring the fact that the majority of people on benefits are totally unskilled and pretty much unemployable).

  2. gastro george says:

    The five most depressing words in the dictionary are “Labour get tough on welfare”.

    Jim: Your argument is framed in a similar way to that attacking public sector pensions because the private sector offers such miserable pensions. That people with reasonable employment conditions should get their conditions cut because “it’s not fair” on those with already-bad conditions.

    Presumably benefits are set at some kind of minimum liveable income (you might argue with this). Surely what you are describing being offered to these claimants is employment that falls below a minimum standard. The solution is to offer better paid jobs, not to cut benefits. And to devise a tax and benefit regime that does not have such high marginal rates of tax.

    I get tired of explaining to very-well-paid people complaining of their too-high tax rates that they should try compare their situation with somebody with a marginal tax rate of 90+% on 20% of their salary.

  3. Awesome post Bill! The Churchill speech is pure gold when it comes to support the JG against die hard neo-liberals!
    I look forward to read your response to the objections/criticisms made by some MMT bloggers about the feasability and real applicability of the JG.

  4. Andy says:

    “The five most depressing words in the dictionary are “Labour get tough on welfare”.”

    “the majority of people on benefits are totally unskilled and pretty much unemployable”
    is just as bad in my book.

    Come on Jim. I’m sure if we work at it we can turn them into model citizens

  5. “ignoring the fact that the majority of people on benefits are totally unskilled and pretty much unemployable”

    Jim, how many time do you think is needed to leart how to plant a tree, or to clean a street or to watch for fires, or to take a walk with an elderly? Just to name a few…

  6. Benedict@Large says:

    Jim –

    Regarding “unemployable” people, that’s nonsense. For many years, I worked labor pools where hundreds of homeless gathered daily for a chance to make a wage that wasn’t enough to put a roof over their heads. These jobs were more often than not brutal, dirty, and even occasionally degrading. These were the hardest workers I ever knew. I would be surprised if you could finish a single shift working next to one of them, but you and others with your attitude recieve daily and without acknowledgment or apparent appreciation the benefits of the labors of people just like them.

    P.S. In the 1980s, Ronald Reagan used to term “welfare queens” to refer to people like you describe. It was a good sales pitch. It was also a lie. They didn’t exist.

  7. Aidan says:

    Bill -

    If British Labour is now serious about returning to the immediate Post Second War period then it has to do it wholeheartedly.

    You might want to rephrase that, unless you’re advocating nationalizing practically everything regardless of whether there’s an economic benefit from doing so.

  8. gastro george says:

    @Aidan: “You might want to rephrase that, unless you’re advocating nationalizing practically everything regardless of whether there’s an economic benefit from doing so.”

    That’s nonsense … post-war the major utilities were nationalised (electricity, gas, rail, coal) largely for entirely practical reasons and/or private company failure – but little else.

  9. Andy says:

    FT Alhphaville ““In simple terms the monetary multiplier is dead”
    Didn’t I hear that somewhere else ?

  10. stone says:

    If a citizens’ dividend was paid out to everyone irrespective of whatever they earned on top, then that would avoid the problem of people losing benefits when they started working. I think a lot of people would create new enterprises for themselves if they had the financial freedom that a citizens’ dividend would give. If you doubt that people are able to come up with their own jobs in that way, then you could always offer the JG tasks (reforestation or whatever) but as voluntary programs. I don’t get your viewpoint that citizen’s need to be herded about into doing what JG commissioners deem to be “improving” activities. Let’s remember that in the Chinese cultural revolution people such as Bill would have been forced to spend all of their time on menial, pointless tasks (mowing lawns with scissors etc). Isn’t the JG just the same except being applied by Bill on others?

  11. Jim says:

    “how many time do you think is needed to leart how to plant a tree, or to clean a street or to watch for fires, or to take a walk with an elderly”

    Very little skills are required to do all those things of course.

    However what is required is the self discipline to turn up to work on time, every day, week in week out. The self control to do what the boss tells you without punching his lights out because he was ‘dissing’ you. The ability to turn up for work not drunk or high. Find anyone who employs people in basic ‘non skill’ type jobs (manual work in factories, farms, warehouses, care homes, hotels, restaurants etc etc) and ask them why 1.5 million Eastern Europeans were able to come to UK from 2004 onwards and 99% of them find paid employment, many taking 2 or more jobs. They will tell you that the reason was that they ticked the boxes I outlined above. They will tell you that the native job applicants they get sent by the Job Centres are 90% unemployable. They lack the basic skills of simple reading writing and arithmetic, and worse, have the attitude that work is beneath them. Employers quickly learnt that a Pole turns up, does his or her work diligently, and causes no trouble. The feral underclass of the UK can do none of those.

    We are not in a 1940s style situation any more. We have people who are 3rd generation benefits claimants. That is their entire raison d’etre. The concepts of self improvement and deferred gratification are alien to them. I know many people who have lost their jobs in this recession, and most of them have found new employment, because they have the right attitude. The ones that haven’t frankly don’t REALLY want to work. Sitting at home playing Xbox is easier than getting up everyday to catch a bus to work. I also know people who are longterm benefits claimants and they are entirely unemployable.

    I don’t know what the solution is, but pretending you can give everyone a ‘job’ and it will all be sweetness and light is naivety in the extreme. We are not in 1950 any more. Jack Warner isn’t standing under the Blue Lamp saying ‘Evening all’ to passers by , and cuffing teenagers round the head for not having lights on their bicycles. That world has gone.

  12. Neil Wilson says:

    “. The feral underclass of the UK can do none of those.”

    No they can’t. And that problem will need extra money spending on it.

    But why focus on that issue rather than the 95%+ that can turn up for work on time and would like to do so, but can’t because of a structural lack of jobs in the economy?

    Why not simply announce that the government will obtain the necessary money from the Bank of England and will pay a standard hourly wage to any new person engaged by the public sector, voluntary or charity sector or any other non-profit social enterprise without any outstanding debt in their published accounts.

    Sort the low hanging fruit out first. We can deal with the difficult stuff later as necessary.

  13. gastro george says:

    Absolutely, Neil. For example we can start with the extra 1 million unemployed since the start of the crisis and the jobless graduates …

  14. MamMoTh says:

    However what is required is the self discipline to turn up to work on time, every day, week in week out. The self control to do what the boss tells you without punching his lights out because he was ‘dissing’ you.

    Those are the basic skills the JG can help preserve or build.

    We have people who are 3rd generation benefits claimants. That is their entire raison d’etre.

    And that’s one of the reasons the JG is proposed as a much better alternative to unemployment benefits.

    Believe, I have plenty of concerns about the JG on a practical or logistical level, but it’s certainly superior to the current situation leading to long term unemployment benefits and its tendency to become a hereditary problem. Once you accept there is a vicious circle it’s hard to argue a JG wouldn’t help.

    Maybe JG advocates should give up insisting on how useful the JG jobs would be and focus more on its comparative advantages with unearned unemployment benefits. Personally, I think the best combination is short term (3months) unemployment benefits that support those able to find another job within the private sector, followed by a JG program.

  15. bill says:

    Dear Aitor Calero Garcia (at 2012/01/03 at 23:27)

    Thanks for the suggestion – but I have already responded to the criticisms that these so-called MMTers make about employment guarantees in several blogs in the past. In fact, in our academic work we have written several papers itemising the points that are usually raised.

    For those who are unsure of our position they can start by reading the blogs (starting with the earliest) in the category – http://bilbo.economicoutlook.net/blog/?cat=23

    In this blog especially – http://bilbo.economicoutlook.net/blog/?p=1644 – I itemise some of these issues.

    best wishes
    bill

  16. bill says:

    Dear Andy (at 2012/01/04 at 4:17)

    Maybe you are referring to these blogs (for example) – Money multiplier and other myths (April 2009) and Money multiplier – missing feared dead (July 2010).

    The world is discovering that the economy runs along the lines specified in Modern Monetary Theory (MMT). The only question is “why has it taken so long”?

    best wishes
    bill

  17. stone says:

    Jim, I think far more valuable than being willing to do as you are told is the skill of being able to think for yourself and act on it. Human ingenuity is a far more valuable resource than human labour. If you look at say the Dahravi slumb in Mumbai, you can see the enormous resourcefulness and ingenuity of so called \”feral underclass\” people. Imagine if that same ingenuity were able to florish from mass financial freedom in a developed country (such as from a citizens\’ dividend). The JG (or unemployment benefit) stamps on human ingenuity (the most valuable of all resources) leaving behind a worthless box tick for the employment statistics.

  18. Amileoj says:

    Jim said: I know many people who have lost their jobs in this recession, and most of them have found new employment, because they have the right attitude. The ones that haven’t frankly don’t REALLY want to work.

    Strange then that so many of them were employed before the recession hit. Is it your notion that the experience of getting laid off woke them up to how little they really cared for work?

    I suppose one can imagine this in isolated cases: people who spend years hard at it and then, suddenly thrown out of work for one reason or another, discover that they have a heretofor-unrealized passion for leisure–one more powerful, in fact, than all the material and intangible rewards of returning to their former working lives. But it’s a curious thing to posit about millions of people, as opposed to a few eccentrics, is it not?

    A little historical perspective might help here as well. Long term unemployment in the Great Depression affected a much greater proportion of the workforce, for much longer, than has been the case so far, at least in the richer countries. And yet nearly all those idle workers (and millions more who were never in the workforce to begin with) were hired, and in very short order too, once World War II created significant labor shortages.

    You will claim that today’s idle workers are different (lazy, coddled) and could not be gotten off their butts, even if jobs were made similarly abundant today. But the same was said about the millions who were ‘on the dole’ during the Great Depression. They were regarded by many as ‘unemployable’–just as our long-term unemployed are now.

    Then suddenly all the hobos and bread-line dwellers and dole-drawers disappeared. Where did they go? The answer is clear: they were suddenly quite busy either building, or else personally constituting, the Arsenal of Democracy. All their deeply-ingrained aversion to REALLY wanting to work, melted like ice in summertime.

    The sudden reversal surprised those who assumed that a generation of idlers would remain just that, forever. I see no reason to suspect that today’s conventional wisdom would be caught any less flat-footed by a similar surge in effective demand.

    Find anyone who employs people in basic ‘non skill’ type jobs… and ask them why 1.5 million Eastern Europeans were able to come to UK from 2004 onwards and 99% of them find paid employment.

    I’m sure you are correct as to what many employers of such workers would say, when asked. We get the same sort of answers from those who employ, for such ‘unskilled labor’, illegal immigrants in the U.S.–most of whom come from places quite a bit more economically desperate than, say, Poland.

    There is even, let’s concede, a grain of truth in apologias of this kind: It stands to reason that immigrant workers from poorer lands (especially those without documents) are going to display higher average diligence at unattractive, low wage work, than will native-born workers in rich societies, who find they are in competition with those immigrants. I’d be surprised indeed if that were not the case.

    The native workers facing such competition are often either those who have been laid off from better-paying, more respectable jobs than those they must now compete for, or else are part of a class that has long been considered economically superfluous, and so were never accustomed to steady employment to begin with. These are, to be sure, two very different groups, with quite different sources of motivation, but neither is likely to relish competing with immigrant labor for the most disagreeable and least well-paid jobs in society.

    But do you really want to claim, on the basis of that grain of truth, that the ability to hire immigrant workers for a fraction of the going wage expected by native workers, forms no part of their employers’ actual (as opposed to their avowed) motivation in hiring them, in preference to their native-born counterparts?

    I would be astonished if you are really that naive.

  19. Bill, thank you for the links. I’m preparing an article in Spanish trying to expose the basics of the JG, and I need this information to cover all topics.

    To Jim: “However what is required is the self discipline to turn up to work on time, every day, week in week out. The self control to do what the boss tells you without punching his lights out because he was ‘dissing’ you”

    In my country, just two years ago, we had 8% unemployement, now 20%. Do you think that in two years, these workers have became lazy? Moreover, right now, we have very high youth unemployment and lots of them have higher degrees (IT, medicine, engeneering, etc…). Do you really think that these job seekers do not have the willingness to “wake up early”, “to work hard”, every day? Why is then that many of them are looking for jobs in Germany, England, Sweeden?

    Really, it’s a tragedy for our country, and no we are not lazy mediterranean people!

  20. Sean Fernyhough says:

    So unemployment has increased because of a sudden epidemic of self-discipline erosion?

    I don’t think so.

  21. Aidan says:

    @gastro george

    That’s nonsense … post-war the major utilities were nationalised (electricity, gas, rail, coal) largely for entirely practical reasons and/or private company failure – but little else.

    What about steel and road haulage?

    BTW what do you think the reason for coal nationalization was?

  22. Chris says:

    Bill your quote
    “The Labour Party MPS at the time the Bill was put were bought off by the Liberal Party who promised to introduce legislation requiring the state pay MP salaries. The Labour Party thus sold out to the conservatives in return for personal gain.”
    Still the same today with England’s New Labour! Labour MPs still claiming 1st class rail fares, Blair’s fees for US lecture tours etc.
    Unfortunately in UK we are bedevilled with professional politicians with their snouts in the public trough- little thought or care for the electorate until elections loom then all PR & spin – kissing babies whilst stealing their sweets!

  23. Andy says:

    Have we got enough MMT-ers in the UK yet to fill a conference hall or at least a pub?

  24. Neil Wilson says:

    “Unfortunately in UK we are bedevilled with professional politicians with their snouts in the public trough”

    I’ve been imagining the scene at the Oxford PPE graduation day where they bring out the dusty magical sorting hat that determines which of the political parties the newly engowned will join.

    It’s the only explanation.

  25. gastro george says:

    @aidan

    Steel was briefly nationalised then denationalised, before being nationalised again the late 60s. But my list was not meant to be comprehensive. If it were, it still wouldn’t be “practically everything”, that’s pure hyperbole.

    “BTW what do you think the reason for coal nationalization was?”

    Your point is?

  26. Bryan says:

    Thanks Bill for the continually helpful perspective to aid in informing. Jim-I fully appreciate your sentiment with respect to benefits and employability but think the JG actually helps to break the cycle and corrects the social stigma associated with benefits by requiring a social contribution. However, many of your misgivings are potential benefits for future employers for example knowing that someone is not on drugs(because drug testing is a requirement), making it to work regularly, building their skills so they look more capable to a private employer.

    My understanding and appreciation for the JG is as a subsitute for benefits ie if your unemployed your enrolled and don’t get paid if you don’t participate, allowing for disability, etc. The public gets the added benefit of the public goods that are provided clean streets, public works projects or whatever is decided. Also, private sector employees get an established floor for wages and employment. Once the issue of excess labor is no longer leverage held over employees heads they can demand better private sector wage growth helping to bridge the issue of income inequality.

    All social, economic, military and political issues really center around employment and public goods. If we can spread the MMT argument and help to provide the perspective argued here I think we will make progress toward that end and be better off for it.

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