THE INDUSTRIAL CHOICE
By PROFESSOR A. C. PIGOU OPULAR interest in post-war conditions in Great Britain seems to be concentrated on the problem of how to prevent . recurrence of mass unemployment.* This problem is assuredly very important one. But it should not be allowed to divert [tendon from other, and in a sense more fundamental, issues Ouch the average citizen, no less than Ministers and officials, needs o grasp. These have to do with the general pattern of our post- ar industrial structure—the proportions in which our employed sources, irrespective of how large these are in the aggregate, are voted to various occupations. When the war ends these resources, ibour-power, managerial power and equipment, will necessarily aye to be allocated in ways quite other than are appropriate now. hus, to take a specially clear case, the number of persons engaged the construction of aeroplanes is bound to be enormously reduced. ut, while this is obvious, when we enquire in positive tennis what e post-war allocation of our resources ought to be, difficulties and oncealed divergences of view are encountered. It may be of service point out some of these in such a way that the choice before can be clearly seen, though, as will be argued presently, it cannot t be made.
* The common use of the term "full employment" in this 'lesion is misleading. Full employment in a literal sense is not ttained even now, and cannot be attained so long as any wage-earners e moving about from one job to another. Under the pressure of war, farmers have been led to plough up a great dell of land, and to adjust themselves to a much in- creased output of cereals and potatoes. Naturally they hope to con- tinue these activities after the war on a larger scale than in 1939. The same thing is true of the iron and steel and the shipbuilding industries. At the same time, certain other industries, notably those primarily devoted to making goods for export, have been obliged, in the interest of the war effort, to undergo some contraction.
Naturally those engaged in them hope that, when peace returns, these industries will once more resume their pre-war importance. Such natural desires and expectations have received encouragement from Government pronouncements. Agriculture, the export in- dustries and the mercantile marine have all, for example, been assured in one way or another by Government spokesmen that their interests will be looked after and fostered by the State. Up to a point this is well enough. But such an attitude of universal kind)i-r ness buries away from sight a simple but vital fact of arithmetic, namely, that if the proportion of our resources devoted to one sort of employment is to be larger after the war than it was before, the proportion devoted to some other sort must be smaller ; the proportion devoted to all sorts together cannot possibly be larger.
If, for example, we decide to grow ourselves all the food that we need; this must entail. our engaging a smaller share of our labour and capital in other sorts of production. Further, it may be re- marked in passing, since exports and the services of our mer- cantile marine constitute the payment that we make for imports, these, prima facie, are the other sorts of production specially likely to be reduced. No doubt, the fact that during the war we have disposed of a large part of our foreign securities, and so will have afterwards less claim than before to imports in payment of interest on them, renders this prima fade inference doubtful. But the broad proposition that policies directed towards self-sufficiency in food are unfavourable to the export industries, and to the mainten- ance of a large mercantile marine cannot be gainsaid. Moreover, in any event, even should we succeed, by stimulating foreign invest- ment or in other ways, in maintaining or enlarging the proportion of our resources engaged in agriculture, the export industries and the mercantile marine at one and the same time, none the less the simple arithmetical fact remains that, to offset that, some of our industries must suffer a proportionate contraction.
It, therefore, the allocation of our productive resources after the war depends on a choice among alternatives, we have to consider by what principles the choice shall be guided. Three principles are available, which we may call, if we will, the consumers' interest principle, the vested interest principle, and the preparedness-for-war principle. The first of these would allow our resources to allocate themselves after the war in accordance with the policy of market demand, subject to a' number of qualifications which it is not practicable to discuss here. The second would entail in some measure Government defence and support of war-expanded industries such as agriculture and iron and steel. At the close of a great war strong pressure is always exerted in this sense ; the treatment of agriculture after the Napoleonic wars is a good example. The third principle would entail the maintenance, regardless of cost, of whatever allocation of resources is required to keep the country fully equipped for the outbreak of new wars. Thus the Government would foster a number of key industries, do its best for iron and steel, secure the growing of cereals and sugar at home, even though they could be purchased from abroad at much smaller real cost, sustain a large mercantile marine, forbid the scrapping of redundant slips and wharves for building ships, and so on. Which of these principles should be followed? More realistically, what sort of compromise among them ought to be adopted ; what relative weight ought to be assigned respectively to the satisfaction of consumers' wants, to the conservation of industries that have ex- panded and by their expansion have done good service during the present war, and to preparedness for new wars in the future?
It is important to ask or, at all events, to envisage these questions. But, unfortunately, it is impossible as yet to answer them. For the answer depends on the way in which the present war ends, and the degree of mutual confidence and co-operation which the Allied
Nations succeed in establishing among themselves. To different conditions of international politics different arrangements of national economies are appropriate. Allocation of resources designed in the expectation of a third world war would be quite other than that designed to satisfy abundantly the wants of consumers in normal times. If a third world war is probable, to insure against it even at heavy cost may be wise. But if international collaboration can be so developed that resort to large-scale war is rendered highly improbable, this insurance will not be necessary. The peace-time interest of consumers--which, clearly in the long run ought not to be sacrificed to any vested interest—may then rightly be allowed to dominate economic policy.
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