Social Welfare in Britain

1. Social Welfare in Britain No Alternative? The Return to Mass Unemployment

2. Additional Sources Keynesian Economics: http://en.wikipedia.org/wiki/Keynesian ONS Detailed guide to state of labour market www.statistics.gov.uk/pdfdir/lmsuk1208.pdf The proposed UK Green New Deal: www.neweconomics.org/gen/greennewdealneededforuk210708.aspx Obama’s Green New Deal (details emerging): www.nytimes.com/2008/12/07/us/politics/07radio.html?_r=1

3. Aims of today’s session to: • Consider the return to mass unemployment from the mid 1970s to mid 1990s • Examine competing explanations • Assess the impact of unemployment on individuals and groups • Evaluate the decline in unemployment from the early 1990s • Consider more recent trends in work and employment • Examine the current financial and employment ‘downturn’

4. The Keynesian ‘Orthodoxy’ • ‘The government accept as one of their primary aims and responsibilities the maintenance of a high and stable level of employment after the war’ (Full Employment White Paper, 1944)

5. International Context – US leads • No return to mass unemployment of 1930s – protectionism and fascism • Bretton Woods 1944 – International Monetary Fund (IMF) and World Bank to provide help to countries • General Agreement on Trades and Tariffs (GATT) 1948, plus Dollar Standard – promote world trade • US aid - Marshall Plan to rebuild Europe • Ensured sustained growth – but Dollar standard collapsed in oil crisis of 1970s • Reagan 1980s neoliberal orthodoxy – IMF & WB • Obama 2009?

6. The Guarantee of Full Employment • First task of governments to ensure enough demand in economy to ensure full (male) Employment • Deflation rather than inflation the enemy • Low interest rates and Hire Purchase to encourage spending • Public investment in infrastructure and services • Social security benefits to unemployed ensure that demand is maintained • Tripartite planning gov’t, unions and employers – e.g. prices and incomes policies • Unemployment and inflation 1970s (stagflation) • Incomes policies collapsed Winter of Discontent 1978-9

7. A Vindication of Keynes? • ‘Jobs for all’ and the ‘golden age’ of capitalism • Low unemployment (e.g. 2.5% in 1950s) – frictional, though higher in North, Scotland, N. Ireland • Strong employment growth: • rebuilding of manufacturing; sheltered national markets • public sector expansion • Full (male) employment (peak late 1960s) • Keynesianism relatively weak influence in UK – ‘hydraulic’ not full-scale planning leading to stop-go (Glynn 1991, 1999) • Keynesianism politically significant – gov’t claimed credit for full employment

8. The end of full employment • ‘Stop-go’ of 1960s, followed by rising unemployment • Three sharp global recessions: 1973-75, 1979-81 and 1990-92 • Each recession involved sharp increases in unemployment

9. A sorry tale

10. Damned Lies and Statistics • Between 1975 and 2001, unemployment never fell below 1 million • Peaked 3+ million (1986 and 1993) • These figures based on Claimant Count, those claiming benefits • Widespread manipulation of statistics: • Changes to eligibility rules • Redefining certain groups (e.g. males 60+) • Discounting (e.g. govt. training schemes) • ‘Preferred’ measure now International Labour Organisation (ILO) definition: ‘available for and actively seeking work’, but excludes ‘economically inactive’

11. Unevenly Distributed – class, gender and ‘race’ • As in 1930s large numbers untouched by Ut – structural not just frictional and cyclical • Decimated families, communities, regions – esp declining manufacturing areas, but also prosperous South East, particularly: • Unskilled/semi-skilled workers, and unqualified • Ethnic minorities (x2 or x3 average rate) • Inner city residents and outlying estates • People with mental and physical disabilities • Lone parents • The young (under 25) and older (50+) • The long-term unemployed (6+ months) – high number in UK • These groups also gained least from up-turn 1995-2008

12. Why return of Mass Unemployment 1980s? • As 2009, Cyclical and Structural pressures combined • Vulnerability of British capitalism in a world recession • Primacy of ‘City’ and finance over productive investment – short termism (Gamble 1986) • Acceleration of long-term decline of staples (coal, steel, shipbuilding etc.) and manufacturing (closures, technology, relocation abroad) • Relative decline in international competitiveness (Glynn 1999) • Weak investment and productivity (training, plant, R&D) • Competition increasingly on basis of cost (i.e. low wages) not quality

13. There is No Alternative (TINA)? • ‘Full employment is not in the gift of governments. It should not be promised and cannot be promised’ (Sir Keith Joseph, 1978) • ‘Rising unemployment and the recession have been the price we have to pay for getting inflation down. That price is well worth paying’ (Norman Lamont, Chancellor, 1991)

14. The Right ‘Solution’: Supply Side Economics 1 • Diagnosis – High unemployment symptom of failure of Keynesianism • Labour too powerful – pricing itself out of jobs • Benefits too generous and unconditional • Public expenditure too high – crowding out productive investment • Employers too restricted in who can hire and fire • Government printing too much money fuelling inflation

15. Supply Side Economics 2: Prescription Redistribute power and resources from labour to capital, reversing trend to WW2 (see Harvey) • Abolish Wage Councils protecting low paid, Local Authority ‘Fair Wages Resolution’ • Curb Union power by law – and stand up to the miners • Promote worker ‘flexibility’ e.g. more casualisation, assert right to high and fire • Education to prepare pupils for work more, employers control over training • Less generous benefits (up-rate in line with inflation not wages) and more conditions (Job Seekers Allowance) • Remove restrictions on business as much as possible to enable to create wealth in new financial sectors • In hindsight, despite subsequent boom, did it lay the basis for the current crisis?

16. Back to Work in 1990s • Started before but continued under New Labour • Post 1993 (almost) month on month decline in unemployment to 2008 • By 2004 unemployment returns to levels 30 years earlier • End 2007: 1.5 m (ILO count); 850,000 (5% on claimant count) • Rising levels of economic activity: fall in men, increase in women • Record levels of employment (jobs growth): 28 million in work by 2006

17. Giving Primacy to Work • ‘New Labour’ inherits growing economy and improving labour market • No return to ‘old Labour’ commitment to full employment through tax and spend (Powell & Driver 1998) • Primacy of inflation (e.g. BofE independence) over need for work • Significant increases public expenditure 2000 onwards play big role in overall jobs growth

18. New Labour: enhancing ‘employability’ • No fundamental changefrom monetarism, economy left to determine level of employment • Pursue low inflation as central goal not full employment as such • ‘Supply-side socialism’ or a ‘progressive’ neo-liberalism? (Thomson 1996) • but stronger supply side intervention – sticks and carrots • Emphasis on skills and compelling people into work (New Deals, welfare reform) • Regulation through minimum wages – encourage employers to make workers productive • Tax Credits incentive to enter labour market, help with child care • More conditionality of benefits • Higher investment in primary and higher (but not secondary) education • What they didn’t do: restore trade union power, regulate finance sector Intervene to prevent overheating of housing market • After 2001 big boost from public sector spending boom e.g. NHS • Strong globalization – favoured finance capital, London and South East – where marginal constituencies were • Manufacturing industry continued to decline rapidly

19. Assessment • From 1993 large and sustained decline in unemployment, accompanied by continuing increases in employment • Return to high employment, but job polarisation (Goos & Manning 2003: • More MacJobs (high wages/rewards, security, training and opportunities) • More McJobs (low wages, part-time insecure, temporary, casual): largely female, ethnic minority or immigrant labour • Continuing unemployment: the young, ethnic minorities, plus ‘in-work’ poor • Rise inactivity prime age male workers Increased incapacity and sickness (2.6 million long-term sick and disabled) (Faggio and Nickell 2003) • Growth of inequality, decline in social mobility (Taylor) • Hutton, Larry Elliot and others calls for regulated, corporatist reform addressing structural economic weakness ignored – opportunity missed?

20. What happened next… • US economy goes bust: debt, finance, mortgages – UK follows suit • Employment rate falls, Ut rises to 6%, 1.86m by10/08 • Banks almost nationalised, massive interest rate cuts etc • Elliot, Cable (who predicted this) not sure gov’t action will work but must try- • Government ditches monetarist textbooks • ‘U’, ‘W’ or ‘L’ shaped recession, nobody knows • Longer term implications: more regulation, sharing, public investment • Climate change: shift from consumerism? • Obama – will he make a difference with ‘Green New Deal’? Should we have one our own?