MEETING PROBLEM OF UNEMPLOYMENT

Dominion, Volume 37, Issue 124, 21 February 1944, Page 4

MEETING PROBLEM OF UNEMPLOYMENT

Measures Suggested USE OF TWO-BUDGET SYSTEM “The Beveridge Report bases its plan for social security on certain assumptions without which no satisfactory scheme of social security can be devised, and the most important of these is the abolition of mass unemployment,” states the foreword of a paper .by Lever Brothers and Unilever Limited, lhe Problem of Unemployment.” The paper was published privately last year, but, as a result of the interest shown in it, it has been reprinted for wider distribution. “Freedom from want presupposes the productive capacity of the nation being used continuously, and without restrictions from either the side of manufacturers or that of labour,” states the paper. "It must provide those consumer .goods that are necessary to give everybody decent housing, decent food, decent clothing and those amenities of life that make up modern civilization. Side by side with this, productive capacity must provide for its own extension. “Directed and used in the right way. the productive capacity of the nation is amply sufficient to meet these requirements, but productive capacity is not being used rightly whenever there is mass unemployment. “The major irregularities in productive activity are the result of irregularities in the extension of industrial capital equipment. The problem of unemployment depends, therefore, on the problem of how' extensions of that equipment are to be kept regular. “A self-imposed discipline on the part of industry can help to the solution of the problem, but the main task in fostering regular capital investment, aud through it regular employment, lies with the Government. This does not mean the exercise by Government of direct control over production (apart from a period of acute shortage of materials after the war); it means the exercise by Government of the powerful means of indirect control it possesses. ...

“A system of two budgets should be introduced. An ‘ordinary’ budget, balanced annually, for meeting standing expenditure out of current revenue; an ‘extra-ordinary’ budget to meet normal capital expenditure and such emergency measures as should be taken in times of depression to fight unemployment or stimulate trade. The ‘extra-ordinary’ budget would be covered —or over-covered —only in times of prosperity. “The two budget system, provided it is used solely for the purpose of regularizing economic life—and without this proviso there is a danger it might be used for purposes which would undermine confidence, in the country’s monetary stability—is the most efficacious means of controlling the tradp cycle, and is the one that needs most study. This study should be undertaken now. not when the war is over.” To meet a boom the paper suggests:— Monetary Measures: The credit basis of the monetary system should be reduced—or, to begin with, its extension checked; the rate of interest should be allowed to rise; the use of credit for various purposes should be curtailed. Budgetary Measures: The “extraordinary” budget should be over-covered by raising taxation; the rate of depreciation allowed on new capital investment for taxation purposes should be reduced, if necessary to zero, or even such capital expenditure should be taxed. Government Investments: Capital expenditure by the Government (central or local), or controlled by the Government, should be slowed down or stopped. If, on the other hand, phenomena of economic life confirm that slump conditions of a general character are on the way. the Government, it states, should apply the following remedies, in suitable doses: —

Monetary Measures: The credit basis of the monetary system should be extended ; the rate of interest should be lowered; restrictions on the use of credit should be relaxed; cheap credits for encouraging investments should, if necessary, be made available by Government guarantees.

Budgetary Measures: There should be no attempt at covering the "extraordinary” budget; taxation should be lowered; the rate of depreciation allowed on new capital investment should be increased, if necessary to 100 per cent. Government Investments.: Capital expenditure by the Government (central or local), or controlled by the Government, should be hastened or increased; the execution of new public works should be speeded up. Special Measures: (1) Public works of a special kind (as distinguished from normal Government capital expenditure_) t should be started. (2) Special training of younger people who cannot find a job should be put in hand. (3) Re-training ‘of workpeople whose unemployment is due to structural, local or seasonal causes, should be organized. (4) Occupation in temporary work (afforestation, preparing uncultivated land for tillage or 'pasture) should be provided. .The paper also suggests measures that might be taken by industry itself to ease the double task of the Government.