Not one party is presenting a policy to design any new institutions – not on an impressive scale, anyway.
No wonder people are uninspired by politics. It’s as though moving into the future is out of the question and the only choice is over various points in the past in which to mire ourselves, like a dinosaur choosing which stratigraphic layer in which to be fossilized.
If you want to know what sort of new institution people could propose building, you really only need to look at the origins of the NHS. It was only ever meant to be part of a broader scheme, attacking just one of what Beveridge called the ‘Giants’ that stalk modern society: Want, Disease, Ignorance, Squalor, and Idleness. Another of these giants – Want – was somewhat fended off by the institution of National Insurance. But Beveridge always made it clear that the one weapon the giants had really to fear was Full Employment.
This is because Full Employment, as Beveridge imagined it, meant action by the government to make sure that nobody was ever involuntarily unemployed who could instead be offered a job doing something to combat the giants. The day that homeless shelters, food banks, hospitals, care homes, daycare centres, libraries, community centres, playgrounds, museums, and schools suffer no shortages of primary, temporary, or maintenance staff – the day that local councils have no trouble finding skilled workers to repair infrastructure and BUILD MORE HOMES – the day that the trains never run late, because there are enough systems analysts, engineers, repair workers, cleaners, and safety officers to keep them running perfectly – the day that student evaluations at universities all mark ‘strongly agree’ for questions like ‘I felt that there was sufficient time to meet with my supervisor/lecturer/tutor’ – THAT is the day when it might make sense for anybody to want a full-time job and yet not be able to find one – the day, in other words, when all the giants are dead.
Full Employment was meant to be the soul of the great policy revolution that Beveridge, Bevan, and others like them sought to bring about after the Second World War. The soul never came to inhabit the body, and British politics has staggered around like a zombie ever since. It is little wonder that the NHS needs saving. It is the only limb that managed to grow on a body that never came to life; only galvanic tricks have kept it animate for this long.
Full Employment is still the policy that the British public – at least ordinary people – want more than anything else. They just don’t all realize it. Take any popular concern and notice how it would be addressed by a Full Employment policy. Immigrants coming over and taking your jobs? Only a problem because there are fewer vacancies than applicants. Long waiting times in clinics? Poor discipline and very little attention per child in schools? More staff would solve those problems. High housing costs and insufficient infrastructure in the big cities? Shortage of regional jobs drives people to crowd into the cities looking for work, and, again, local governments need to be able to hire and train workers to build houses and expand infrastructure. Rising inequality? Well of course workers have been consistently screwed over decades where unemployment has remained high enough to deprive them of all bargaining power. Climate change? Well the private sector has done bugger all about decarbonising the economy, so who does that leave? All of this is helped by a Full Employment policy: a genuine undertaking by the government to spend as much as is necessary to hire every willing worker to perform every needed social task – transferring the needed funds to local governments as necessary.
The problem in Beveridge’s time was that there was no obvious instititution to build for maintaining Full Employment – nothing akin the the NHS or National Insurance. The best Beveridge could come up with was a policy: the government should commit to using ‘demand management’ to keep unemployment no higher than 3%, and also, importantly, to ensure that ‘unemployment in the individual case need not last for a lenth of time exceeding that which can be covered by unemployment insurance without risk of demoralisation’ (p.11). But policies are inferior to institutions. They don’t inspire people. They’re slippery and easy to quietly drop without anyone noticing. And they’re difficult to promote to people with limited comprehension: what exactly is ‘demand management’, and can the government really use it to maintain Full Employment?
This no longer needs to be a problem. The required institution for maintaining Full Employment has been around as an idea at least since the 1960s, when Hyman Minsky realized that President Johnson’s Great Society reforms would fail to significantly reduce poverty in the US. The problem, Minsky perceived, was that they focused too little on jobs. He thus developed his own alternative solution. Minsky has gotten some attention recently as a theorist of financial instability, as in Terry Jones’ new documentary Boom Bust Boom. I wish he got more attention as the economist who designed precisely the institution Beveridge was looking for and failed to find: an institution for ensuring Full Employment. Check out this book.
My preferred name for this institution is the name L. Randall Wray has given it: the ‘Employer of Last Resort’ (ELR). Some people call it a ‘Job Guarantee’, but that name is unfortunate. People confuse it with workfare (indeed the UK Labour party used the name ‘Job Guarantee’ to refer to what turned out to be a workfare arrangement). Also, ‘ELR’ as a name highlights the most important feature of this institution: it is an institution for fighting inflation as well as for generating Full Employment: ‘ELR’, after all, makes people think of ‘Lender of Last Resort’, i.e. the central bank, and the ELR is an anti-inflationary institution just like the central bank.
The principle behind it is beautifully simple, as with any institution worth having. The ELR – either centrally or (my preference) divided into autonomous regional units – hires every currently unemployed or underemployed person willing to work in a public sector job. No more involuntary unemployment, no more shortage of public services. The giants down with a single blow.
The ELR programme could have its own job centres which, like current job centres, would help to match workers up with the right positions for their skills, available hours, location, etc. as well as providing advice on training opportunities as necessary. The difference would be that these job centres would be connecting people with jobs that actually exist. Of course they would be in constant consultation with charities, local councils, the NHS, the school boards, the utility companies, etc. to make sure they knew where human resources were most needed within the public and charity sectors.
The workers would be paid a living wage, set and periodically adjusted by an appointed panel of industry leaders, trade union representatives, etc. – as with ‘the Accord’ in Australia, which has worked pretty well. In this way the ELR would work as an inflation-control. If wages began to rise in the private sector, workers would move out of the ELR and into the private sector labour market, checking the rise in wages by increasing the supply of labour. If wages began to fall, workers would move out of the private sector and into the ELR. The ELR’s living wage would become the wage-anchor for the private sector.
The ELR would pay its workers by running a direct overdraft at zero interest with the Bank of England (here the connection between lender of last resort and employer of last resort). If the Treasury or the Bank of England were worried about new bank reserves driving down interest rates, either could sell gilts to offset the operating factors. This would mean that the government deficit would increase when the private sector laid off workers, since these workers would then move into the ELR. But this happens anyway, since laid off workers claim unemployment insurance, visit food banks, switch from private to public health care, etc.
On the other hand, you could just not issue gilts and let the rate run to zero (some discussion here).
There are various objections people have to the ELR programme. Randall Wray has addressed most of them here. Follow the link and you’ll find the following concerns addressed (though from a US perspective – most Europeans won’t be asking number 9):
1. Some commentators have wondered what happens if one country tries to go it alone; others objected that a large country like the US might be able to run an ELR program, but small countries like Canada or Mexico could not because it would place them at a tremendous disadvantage.
2. It will be impossible to administer the program.
3. ELR employment will consist of nothing but “make-work” jobs.
4. States are already implementing “welfare to work” programs; why is ELR needed?
5. What can be done with belligerent/anti-social/lazy ELR workers?
6. What effect will ELR have on unions?
7. Won’t participation in ELR lead to stigmatization, like welfare does?
8. What if the Fed [/central bank] or financial markets react negatively?
9. Why worry now, when unemployment is lower than it has been for a generation?
Really, the last thing that politics should be is boring. Are you happy with the way things are? Things could be so much better. We just need to design the necessary institutions. That’s what Beveridge tried to do, but the project was abandoned before it had even really begun. And yet all the ideas are there. All that is needed is the courage to put them into practice. The soul floats around in the Realm of Ideas; it merely awaits embodiment.
Reflect for a minute on the vision, the optimism, and the courage of the women and men who built the institutions of which the British people are justifiably proud (and about whose future they are justifiably worried). Compare them to politicians today, whose most original idea is either to destroy what exists or to preserve what exists. Comparing that time to ours feels like standing on the lifeless moon and looking back at the Earth. It’s easy to feel alienated. But we’re not. We’re all still here, together, having ideas and caring about things.
In the lead-up to the UK election, this is what I have to say to the British people, who built some of the greatest institutions in the modern world: You’ve been on smoko since 1945 or so. Time to get back to work.