I do not propose to deal with such branches of the problem of
unemployment as casual labour or seasonal fluctuations. I confine myself
to what we all, I suppose, feel to be the really big problem, to
unemployment which is not special to particular industries or districts,
but which is common to them all, to a general depression of almost every
form of business and industrial activity. General trade depressions are
no new phenomenon, though the present depression is, of course, far
worse than any we have experienced in modern times. They used to occur
so regularly that long before the war people had come to speak of
cyclical fluctuations, or to use a phrase which is now common, the trade
cycle. That is a useful phrase, and a useful conception. It is well that
we should realise, when we speak of those normal pre-war conditions, to
which we hope some day to revert, that in a sense trade conditions never
were normal; that, at any particular moment you care to take, we were
either in full tide of a trade boom, with employment active and prices
rising, and order books congested; or else right on the crest of the
boom, when prices were no longer rising generally, though they had not
yet commenced to fall, when employment was still good, but when new
orders were no longer coming in; or else in the early stages of a
depression, with prices falling, and every one trying to unload stocks
and failing to do so, and works beginning to close down; or else right
in the trough of the depression where we are to-day; that we were at one
or other of the innumerable stages of the trade cycle, without any
prospect of remaining there for very long, but always, as it were, in
motion, going round and round and round.
What are the root causes which bring every period of active trade to an
inevitable end? There are two which are almost invariably present
towards the end of every boom. First, the general level of prices and
wages has usually become too high; it is straining against the limits of
the available supplies of currency and credit, and, unless inflation is
to be permitted, a restriction of credit is inevitable which will bring
on a trade depression. In those circumstances, a reduction of the
general level of prices and wages is an essential condition of a trade
revival. A reduction of prices _and wages_. That point has a
significance to which I will return.
The second cause is the distorted balance which grows up in every boom
between different branches of industrial activity. When trade is good,
we invariably build ships, produce machinery, erect factories, make
every variety of what are termed "constructional goods" upon a scale
which is altogether disproportionate to the scale upon which we are
making "consumable goods" like food and clothes. And that condition of
things could not possibly endure for very long. If it were to continue
indefinitely, it would lead in the end to our having, say, half a dozen
ships for every ton of wheat or cotton which there was to carry. You
have there a maladjustment, which must be corrected somehow; and the
longer the readjustment is postponed, the bigger the readjustment that
will ultimately be inevitable. Now that means, first on the negative
side, that, when you are confronted with a trade depression, it is
hopeless to try to cure it by looking for some device by which you can
give a general stimulus to all forms of industry. Devices of that nature
may be very useful in the later stages of a trade depression, when the
necessary readjustments both of the price-level and of the relative
outputs of different classes of commodities have already been effected,
and when trade remains depressed only because people have not yet
plucked up the necessary confidence to start things going again. But in
the early stages of a depression, an indiscriminating stimulus to
industry in general will serve only to perpetuate the maladjustments
which are the root of the trouble. It will only put off the evil day,
and make it worse when it comes. The problem is not one of getting
everybody back to work on their former jobs. It is one of getting them
set to work on the _right_ jobs; and that is a far more difficult
matter.
On the positive side, what this really comes to is, that if you wish to
prevent depressions occurring you must prevent booms taking the form
they do. You must prevent prices rising so much, and so many
constructional goods being made during the period of active trade; and I
am not going to pretend that that is an easy thing to do. It's all very
well to say that the bankers, through their control of the credit
system, might endeavour to guide industry and keep it from straying out
of the proper channels. But the bankers would have to know much more
than they do about these matters, and, furthermore, the problem is not
merely a national one--it is a world-wide problem. It would be of little
use to prevent an excess of ships being built here, if that only meant
that still more ships were built, say, in the United States.
I do not say that even now the banks might not do something which would
help; still less do I wish to convey the impression that mankind must
always remain passive and submissive, impotent to control these forces
which so vitally affect his welfare. But I say that for any serious
attempt to master this problem, the necessary detailed knowledge has
still to be acquired, and the rudiments of organisation have still to be
built up; and the problem is not one at this stage for policies and
programmes. What you can do by means of policies and programmes lies, at
present, in the sphere of international politics. In that sphere,
though you cannot achieve all, you might achieve much. To reduce the
problem to its pre-war dimensions would be no small result; and that
represents a big enough objective, for the time being, for the
concentration of our hardest thinking and united efforts. But into that
sphere I am not going to enter. I pass to the problem of unemployment
relief.