Unemployment
Unemployment Problems in the United States. By H. B. Butler. (P. S. King. 2s. 6d.)
As everyone knows, economists, when it comes to giving practical advice, seldom agree. If we ask them how to end the depression or our unemployment, they deafen us with a din of contradictory counsels ; except a few who sit back comfortably in their professorial armchairs and admonish us to await quietly " the inevitable upturn of a normal business cycle." If we ask one of them what it was that brought about our present condition he will mention, more or less perfunctorily, the multitude of contributory causes of our economic ill-health, but as soon as we suggest the possibility of doing' something about it, he will produce a bottle of his favourite cure-all. (It will probably be Epsom salts, for at the moment " reducing " is the fashion.) Professor Knoop, in his book on Britain's chronic post-War unemployment, avoids this error. Each contributory factor is carefully discussed and given due weight in the analysis. The whole treatment, while brief, is essentially profound. In contrast to those who talk rather glibly about the necessity of reducing wages and relieving industry of the burden of taxation, he is careful, whatever his final conclusions, to examine all • aspects of this very complicated problem. He is sufficiently a realist not to sit back and generalize about a theoretical economic system which, like some complicated automatic machine, would be capable of working through a series of blind but self-adjusting movements and presenting us, " in the long run," with a maximum of material welfare. (Of what use would such an economic machine be, if it had let us die or had disrupted the social and political machinery in the meantime ?) Professor Knoop gives due consideration to those short-run effects of our actions and inaction which are not only more immediately important, but often actually more permanently significant, than the so-called long-run effects. He points out, for example, that one of the difficulties which would arise under a managed currency is that, when prices begin to fall, the fall, far from stimulating demand, temporarily discourages buying ; so that a slight contraction of the currency, desighed -to check over-expansion, might well precipitate a slump. But when he comes to examine the remedies which have been proposed for unemployment, Professor Knoop does not altogether escape the charge of forgetting the arguments he has himself advanced in his diagnosis. This is the least satisfactory part of an otherwise excellent book, which is recommended to every intelligent reader.
While most economists pay lip-service to the multiplicity of causes which bring about unemployment, and some, like Professor Knoop, subject them to a serious analysis, Mr. Butler, of the International Labour Office, goes one better. In his brilliant study of unemployment problems in the United States he not only gives a balanced account of the many factors which contribute to unemployment ; he does something much more valuable, by presenting them in such a way as to bring out the interactions of these factors. He shows us not merely a multiplicity of independent causes, but an integrated complex of tendencies, no one of which can be profitably considered except in relation to the others. It follows that the steps which should be taken to reduce unemployment and hasten the end of the slump must be a definite programme of logically connected remedies, and not merely a number of ad hoc attempts to deal with isolated aspects.
If one cause of unemployment may be regarded as more fundamental than the others, it is the fact that the world has failed to make the necessary adjustments to the enormous increase in productivity achieved, in the United States especially, by mechanization and the technique of management. It is the failure to make these adjustments which has produced the present concurrence of poverty and plenty. The scale on which the machine has replaced human labour in the U.S.A. during the last six or eight years is probably quite inadequately realized in Great Britain : machines have reduced the number of men required in various industrial processes in such proportions (cited at random) as 128 to 2, 40 to 1,14 to 2, and 44 to 8, while in agriculture the " combine harvester does with two men what previously employed six or seven men and as many of the now old-fashioned " binders.' While wage rates in the States have been comparatively high, they have by no means kept pace with the production of those commodities which rank as " necessities," and the American industrial system was able to dispose of its output only by practically giving it away to foreign countries by means of investment abroad. It is the attempt to recall this " investment " which has contributed to the recent financial instability of certain European countries.
" The success of mass production depends upon the distri- bution of the national income being such as to permit mass consumption." But during the revolutionary increase in production which took place in the United States after the War, the relative share of the working classes in the product actually diminished, and it is, of course, among the working classes that the mass production of necessities has to seek its principal outlet. The pace of technical progress was too fast for the more slowly adaptive processes of the wage structure. This had inevitably a bad effect upon employment. In the twenty years of more measured progress up to about 1920, such adjustments had taken place as enabled employ- ment to increase with comparable rapidity ; but since then, with output per head increasing about seventeen times as fast as in the earlier period, employment, even before the slump in 1929, actually diminished.
Before such a force for change the industrial system as it exists at present is almost powerless to make the necessary adjustments. Wage reductions on a scale drastic enough to prevent the introduction of these labour-saving devices are quite out of the question. As Mr. Butler suggests, mechanical efficiency appears to have reached, in America, an uneconomic point. The pace of progress has been too fast. Mass production without mass consumption is futile, and the need for a redistribution of purchasing power, so as to enable consumers to carry off the bounty of the machine, and at the same time, by diminishing saving, to slow down investment in productive equipment, cries aloud from the pages of Mr. Butler's study. At the same time we may ask ourselves if mankind could not well sacrifice some of this embarrassing plethora of material wealth and turn a greater part of its thought and activity to culture, recreation and " living." Even more than high wages, we should introduce shorter hours. The Smilesean virtues, developed by nature to overcome the niggardliness of nature, are no longer appropriate in our world of want and glut. In the U.S.A., at least, they have become almost harmful.
The question as to what is the moral of all this for Great Britain comes inevitably into the English reader's mind. Unless we adopt methods of industrial efficiency similar to the American, we obviously cannot compete with them in any market on equal terms. If we allow them to set up efficient factories in this country our workers will find employ- ment, but our industrialists, unless they imitate them, will not be able to compete with them even in a protected home market. And whether we mechanize and rationalize ourselves, or allow the Americans to do it for us, we shall only add to the flood of " unconsumable " commodities.
What is the way out ? Must we embark upon a " little England " economic policy ? Whether we do or not, it is obviously our duty and interest to support, with all our prestige and power, the international organization at Geneva in its efforts to grade up the standard of life of the world's workers and reduce their hours of work. Mr. Butler's book, and Mr. Loveday's Britain and World Trade, are sufficient in themselves to demonstrate that Geneva sees the economic world more realistically than most of the national experts, and the world would be ill-advised to spurn its guidance.
FREDERICK BROWN.
Previous page
