President Roosevelt said “We have nothing to fear but fear itself”. With these words ringing in his ear, Rishi Sunak should be bold.
Am I the only one to have wandered through towns and cities looking helplessly for house numbers that don’t exist and street signs which aren’t there? People out of work could be employed to affix numbers to buildings and present streets with visual proofs of their existence. This is just one example of the many useful things which could be done to improve civic amenities as and when people become available to do them and local authorities get the money to pay them.
It is highly likely that this is about to happen. It is estimated that unemployment in the UK will rise to about 10 per over the next twelve months (and that is excluding a “second wave” and further lockdowns). This means that there will be many more claimants for Universal Credit and other welfare benefits. In the economist’s jargon, there will be a big increase in “idle capacity”. But this is exactly the point: why should it stay “idle?” If there are things to do and people available to do them, why not pay them to do them rather than pay them for doing nothing? The evidence is overwhelming that most unemployed people would much prefer to be working than living on “the dole”.
There will be no V-shaped recovery. It is only an economist who can believe that the way to economic recovery is to stop people from spending. – Robert Skidelsky
To this, your average economist will give two answers. First he will tell you that their idleness will be temporary only – a matter of two or three months at most, far too short a time to organise schemes of public works. This is based on the idea that we will have a “V shaped” recovery. As soon as lockdown ends, say these economists, businesses will reopen and start re-hiring the people they sacked.
This is pie in the sky.
Many businesses will have gone bankrupt and can’t simply reopen; and what with masking, social distancing, and disruption of supply chains, it will take much longer for the pre-virus volume of business to pick up. But there is a more fundamental theoretical difficulty. As unemployment grows, the economy will shrink. This is because there will be less spending, as current furlough pay is replaced by more meagre welfare benefits.
So in the absence of further help for consumption, there will be no V-shaped recovery. It is only an economist who can believe that the way to economic recovery is to stop people from spending. On the contrary, giving people work at decent wages, is the best way to get consumption, and the economy, growing again.
It shows a poverty of imagination to believe that public works programmes are bound to be “make work” programmes. – Robert Skidelsky
At which point the second objection kicks in: work at what? Pay people twice what they would get on “the dole” for picking up leaves? To this, the classic answer was given by the economist John Maynard Keynes. If, he wrote, the Treasury were to fill up old bottles with bank notes, bury them at suitable depths in disused coal mines, which are then filled up with town rubbish, and get the unemployed to dig the notes up, “there need be no more unemployment and, with the help of the repercussions, the real income of the community …would become a good deal greater than it actually is”. The reason is that the successful diggers would have more money to spend and this extra spending would itself stimulate economic activity, irrespective of whether they were doing anything of value.
Keynes was quick to add “it would, indeed, be more sensible to build houses and the like”, which would add value. But it shows a poverty of imagination to believe that public works programmes are bound to be “make work” programmes. An example of a genuinely useful programme from the past is Roosevelt’s Civilian Conservation Corps which, in the Great Depression, provided one million young unemployed men with work on projects that included “the prevention of forest fires, floods, and soil erosion, plant pest and disease control, the construction, maintenance or repair of paths, trails and fire-lanes in the national parks and national forests, and such other work … as the President may determine to be desirable.” There should be no difficulty in thinking of equivalents all round this country.
In his inaugural in 1933, President Roosevelt said “We have nothing to fear but fear itself”. With these words ringing in his ear, Rishi Sunak should be bold and in his autumn budget give local authorities the money to do the jobs in their areas which need doing.
Lord Skidelsky is emeritus professor of Political Economy at Warwick University; and author of a prize-winning biography of the economist John Maynard Keynes.
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