Involuntary Employment

My theory:

• is moderately conservative
• indicates the vital importance of establishing central controls in matters which nowadays are left to individual initiative

The State will have to guide the propensity to consume:

• partly through its scheme of taxation
• partly by fixing the interest rate
• partly in other ways.

The influence of banking policy on the interest rate can by itself to determine an optimum rate of investment.

A comprehensive socialisation of investment is the only way to secure full employment.

• This need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative.

But beyond this, no obvious case is made out for a system of State Socialism which would embrace most of the economic life of the community.

It is not the ownership of the instruments of production which it is important for the State to assume.*

If the State is able to determine the aggregate amount of resources devoted to augmenting the instruments and the basic rate of reward to those who own them, it will have accomplished all that is necessary.

Moreover, the necessary measures of socialisation can be introduced gradually and without a break in the general traditions of society.

Our criticism of the classical theory is in pointing out that its tacit assumptions are seldom or never satisfied.

• This makes it unable to solve actual economic problems*.

But if our central controls can establish full employment, then classical theory comes into its own again from this point onwards.

If output is determined by forces outside the classical scheme of thought, then the classical analysis of how private self-interest will determine:

• how and what is produced
• in what proportions the factors of production will be combined to produce it
• how the value of the final product will be distributed between them.

If we have dealt otherwise with the problem of thrift, there is no objection to be raised against the modern classical theory as to the consilience between private and public advantage within perfect and imperfect competition respectively.

Central controls are necessary to adjust the propensity to consume and the inducement to invest.

• Besides this, we do not need to socialise economic life more than before.

The existing system does not seriously misemploy the factors of production in use.

There are errors of foresight.

But these would not be avoided by centralising decisions.

When 9 million out of 10 million men, willing and able, are employed, there is no evidence that the labour of these 9 million is misdirected.

The complaint against the present system is not that these 9 million should be employed on different tasks, but that tasks should be available for the remaining 1 million.

It is in determining the volume, not the direction, of actual employment that the existing system has broken down.

I agree with Gesell that the result of filling in the gaps in the classical theory is not to dispose of the ‘Manchester System’.

Instead, it is to indicate the nature of the environment which the free play of economic forces requires if it is to realise the full potentialities of production.

The central controls necessary to ensure full employment will involve a large extension of the traditional functions of government.

The modern classical theory called attention to various conditions where the free play of economic forces may need to be curbed or guided.

But there will still remain a wide field for the exercise of private initiative and responsibility.

Within this field, the traditional advantages of individualism will still hold good:

• efficiency
• decentralisation
• the play of self-interest.

The advantage to efficiency of the decentralisation of decisions and of individual responsibility is even greater, perhaps, than the 19th century supposed.

The reaction against the appeal to self-interest may have gone too far.

But, above all, an individualism that is purged of its defects and its abuses, is the best safeguard of personal liberty.

• That system most widens the field for the exercise of personal choice.*

The variety of life emerges from this extended field of personal choice.

The greatest loss of the homogeneous or totalitarian state is the loss of the variety of life.

This variety:

• preserves the traditions which embody the most secure and successful choices of former generations.
• colours the present with the diversification of its fancy
• is the most powerful instrument to better the future.