Keynes on Full Employment

I came across this quote by Keynes today here and thought I would share it. It’s from a pamphlet written to support Lloyd George in the 1929 general election. It’s message should still resonate today, and serves as a useful reminder that Liberals were not always supporters of junk economics. Their political descendants the Liberal Democrats should take note:

“The Conservative belief that there is some law of nature which prevents men from being employed, that it is “rash” to employ men, and that it is financially ‘sound’ to maintain a tenth of the population in idleness for an indefinite period, is crazily improbable – the sort of thing which no man could believe who had not had his head fuddled with nonsense for years and years… Our main task, therefore, will be to confirm the reader’s instinct that what seems sensible is sensible, and what seems nonsense is nonsense. We shall try to show him that the conclusion, that if new forms of employment are offered more men will be employed, is as obvious as it sounds and contains no hidden snags; that to set unemployed men to work on useful tasks does what it appears to do, namely, increases the national wealth; and that the notion, that we shall, for intricate reasons, ruin ourselves financially if we use this means to increase our well-being, is what it looks like – a bogy.”


4 thoughts on “Keynes on Full Employment

  1. In January 1943 an article in The Times entitled “Planning Full Employment”
    looked ahead to the possibility of a post-war economy being run in such a way that the mass unemployment of the inter-war period was eliminated. As befits The Times, the article was written from the point of view of the Establishment and candidly discussed the problems of such an approach by outlining the role of unemployment in a capitalist system :

    “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.”

    But could war-time full employment with an “overriding appeal of patriotism” successfully translate into peace-time full employment? The article sounded a warning:

    “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. “

    The article has been attributed to Keynesian economist Joan Robinson and its conclusion is consistent with Keynes` own pragmatic wish to save capitalism from itself:

    “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.”

    To a large extent, the vision of economists like Robinson came true and the period 1948-75 has become known as the “Golden Age of Capitalism”, where the UK and many other countries enjoyed high rates of economic growth combined with low unemployment. Unfortunately, in a capitalist system there is an inherent conflict between the classes, and what is good for the working people is bad for the capitalist. A counter-offensive was mounted which started to bear fruit during the 1970s.

    In 1974 the Times Economics Editor, Peter Jay wrote “Governments depending on consent cannot suspend the full employment commitment”. He has been proved wrong, very wrong!
    A huge propaganda effort was made to reintroduce mass unemployment – and normalise it. This necessitated blaming higher levels of unemployment on the unemployed, rather than on the government policies of high interest rates and public spending cuts, which were used to deliberately increase unemployment.
    I never cease to be amazed that the academic debate over welfare “reform”, and the demonisation of those in receipt of benefits, so rarely mentions the history of governments deliberately using unemployment to force down real wages.

    In addition to the unemployment caused by cuts, we have 35 years of unemployment caused by central banks pursuing a policy of controlling inflation through unemployment, based on the doctrine of the “Non-Accelerating Inflation Rate of Unemployment” or NAIRU for short. The Bank of England`s Monetary Policy Committee (MPC) publishes the minutes of its monthly meetings which are often very candid on unemployment and should be required reading for academics studying the effect of unemployment, underemployment and intermittent employment.
    The economists on the MPC not only want “enough” unemployment, they also want the “right type” of unemployment. Six months after Chancellor Gordon Brown created the MPC, in its December 1997 meeting the Committee asked itself “did short-term unemployment exert more downward pressure on earnings than long-term unemployment?”. They concluded that “short-term unemployment was more important”, on the grounds that “when the proportion of long-term jobless was high…..workers would probably realise that they could not be replaced so easily, and hence that their bargaining strength was higher”.
    In the 1990s “Full Employability” replaced “Full Employment” in the rhetoric of politicians and much misery ensued:

      1. Thanks for the links. Your blog about Keynes and unemployment chimed with my wish to expose the evidence of the intent of the ruling class to ensure there is always a large reserve army of labour.
        The material in my comment comes from my website “The truth about unemployment” which is not really a blog at the moment (although I used a WordPress template for convenience).
        The ruling class goes to a great deal of trouble to conceal the deliberate maintenance of a reserve army of labour. US economist Dean Baker has written about the lack of public awareness of the connection between central banks and unemployment. In “The Federal Reserve Board – What It Is, and Why It Matters” (November 3, 2005) (click here for the PowerPoint presentation)
        he writes:
        “The public is very poorly informed about what the Fed does and how it affects them.”
        and that
        “No one understands (NAIRU and its policy implications –) that an agency of the government (the Fed) would deliberately raise the unemployment rate”
        Of the effort to obscure the Federal Reserve`s agenda on unemployment he writes:
        “The financial sector is very scared of having public debates over Fed policy. They use euphemisms to avoid having a public discussion of the actual policy (e.g. raising interest rates to keep the economy from overheating).”
        Obviously it`s the same in the UK, see “Hiding the policy from the public (with the occasional glimpse of the truth)” at this webpage:
        It is my contention that much more needs to be done by the Left to expose what`s going on, we`ve had over 35 years of this despicable policy.
        The Australian sociologist Victor Quirk who guest blogs occasionally at Billy Blog has written a great paper entitled “The problem of a full employment economy” available here:

        Click to access 04-02.pdf

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