A structured approach for progressive political ambitions – Part 2

This is the second part of a short series of briefing notes that arose out of discussions I had in London the week before last about how a progressive political party might want to break out of the shackles that the Labour Party has bound itself in with its obsession with fiscal rules and an adherence to the fiscal fictions of mainstream macroeconomics. In the first part, I suggested a way forward was to shift the focus of what can be done with fiscal policy away from financial matters towards an emphasis on real resource constraints – that is, what productive resources are available for public use. In this sense, the discussion becomes focused on how much nominal spending growth is possible without sparking inflationary pressures as a result of nominal spending growth outstripping the productive capacity of the economy. In Part 2, I will focus on aspects of the institutional structure that should be considered to support that shift in focus.

Introduction and context

As the peace came after WW2 ended, the Australian government published – The 1945 White Paper on Full Employment – which laid out a bold vision for the Government’s policy agenda as it shifted from a war footing to nation building.

The motivation was clear: “Full employment is a fundamental aim of the Commonwealth Government.”

It noted that before the onset of the War, there was high unemployment “Despite the need for more houses, food, equipment and every other type of product”.

And, significantly:

By contrast, during the war no financial or other obstacles have been allowed to prevent the need for extra production being satisfied to the limit of our resources …

To the limit of our resources …

Recognising the real resource limits and realising that if something can be done a currency-issuing government can always fund it is not a recent discovery.

Mass unemployment was always understood to be a political choice and it is only during these neoliberal years that we have been led to believe that it is somehow the result of lazy workers not searching hard enough for jobs or having their search aspirations distorted by the provision of unemployment benefits.

In the theme of today’s post, the White Paper also noted:

It must be recognized that once full employment has been achieved, a decision to devote additional resources to one objective of policy can be carried out only be diverting resources from other objectives. This need to choose between objectives cannot be averted by monetary or financial measures for it arises simply from the fact that the amount of resources of labour, land and materials available at any time. sets a definite upper limit to the volume of goods and services which can be produced.

A progressive political force must talk about the resource constraints when devising and disseminating its policy agenda.

The public should be encouraged to think in terms of ‘inflation constraints’ not constraints hinted at by the Pavlovian response ‘How will you pay for it?’ which is uttered whenever a new policy option is proposed.

The White Paper advocated the policy stance where the government would:

… maintain such a pressure of demand on resources that for the economy as a whole there will be a tendency towards a shortage of men instead of a shortage of jobs …

That is, pushing right up against the inflation barrier – a high pressure economy.

On the question of how much expenditure the government should provide, the White Paper said that in addition to public consumption expenditure on current services, which is “not well adapted to meeting fluctuations in private expenditure”, the government should always “take advantage of the opportunity to employ those resources in accelerating and expanding their own programmes for national works, housing, improvement of capital equipment and provision of facilities for social and cultural activities.”

And vice versa – so that public capital expenditure was seen as a counter-stabilising force to attenuate keep total spending within the inflation barrier in the face of fluctuations up and down in private spending.

It was also stated that to fulfill this offsetting function:

Careful and detailed advance preparation will be required if public capital expenditure is to play a significant part in our development, and particularly if it is to play a main part in stabilizing the level of total expenditure, so as to maintain employment and avoid inflation. Plans, equipment and materials must be kept at an advanced stage of preparedness if men and women threatened with unemployment are to continue m employment. Commonwealth and State Governments, through the National Works Council, have already made considerable progress in the preparation of these plans.

So, new institutional structures are required which would have a forward looking role in planning the future impacts on spending initiatives relative to projected resource availability.

A public employment service was considered to be an essential part of this institutional architecture – a point I will return to in more detail later.

But here, we just note that the White Paper said:

The Employment Service will be designed-

a) to bring to the notice of men and women seeking employment the full range of opportunities offering, and in particular to find employment offering scope for their abilities.

(b) to enable employers to draw upon suitable labour throughout the Commonwealth.

(c) to provide assistance where necessary to enable employees to move to where employment is available.

You might wonder how all these insights were lost.

It is no surprise that the Monetarists and, in political terms, neoliberals, had to shift the focus onto alleged government financial constraints as a way of promoting their new agenda that required governments abandon the full employment agenda (and all the elements that went with it – redistribution, fair wages, public schools, hospitals, transport, utilities, etc) and replace it with a so-called ‘free market’ approach.

Except as we know, it was no such thing (free market) but was rather a reconfiguration of the government spending and tax policies to shift national income and power towards capital at the expense of the living standards of labour.

The economists knew damn well that the problem was not government financial capacity, which was understood to be unlimited in dollar terms (infinity minus one cent).

But by promoting the household budget analogy they had a powerful vehicle to elicit political support for the widescale retrenchment of the institutional structures that had emerged in the immediate period after WW2.

Institutional economic machinery of a progressive society

One of the basic insights that emerged out of the White Paper was that the then ‘Department of Labour and National Service’ was seen as being a crucial element in delivering the progressive agenda, particularly to ensure that government spending was contained within the inflation ceiling.

It was recognised that sectoral growth was unlikely to be even across the entire industry structure and so labour mobility between declining and expanding sectors would be necessary to achieve an efficient allocation of productive resources.

The response was to introduce what was then called ‘Manpower Planning’ or in more contemporary terms Workforce Planning.

There were multiple objectives of this structure:

1. To avoid mass unemployment from developing.

2. To detect when a fully employed economy transits into over-full employment.

3. To provide the means to reallocate workers from sectors where they are in surplus (and hence unemployed) to sectors where there are labour deficits.

The Australian government created a National Works Council, which in the words of a famous Australian economist (Joe Isaac) in his 1960 International Labour Review article – Manpower planning in Australia – would have:

… the object of establishing a reserve of capital works which could be put into operation quickly and efficiently as the occasion arose to maintain full employment.

In other words, planners looked ahead at the sort of infrastructure that was required as the nation expanded and designed ready-to-go capital projects that could be scaled in their investment requirements to the macroeconomic needs of the cycle – that is, when private spending growth fell and mass unemployment was threatened, the government could broaden its capital works program fairly quickly because the project design and approvals etc were already in place.

A similar body would be required in the modern context to help with the scaling at the macroeconomic level of the investment in each period but also to determine national priorities in the face of competing local interests.

Quite clearly, local areas will create ‘wish lists’ of capital works that they would desire but a coordinating body is required to make sure:

(a) the resources are available at the local level; and

(b) the overall investment outlays at the macro levels do not violate the inflation constraint.

This body could ensure (in Isaac’s words from 1960) that:

The Council, whilst retaining the fundamental basis of the national works reserve as a programme of works planned for use as a reserve against an economic recession, extends the purpose of the reserve to function as an aid to the consideration of long-range plans for national development when such works reach the stage of more precise design necessary for construction.

In terms of the labour market, the first step is to create a national employment service.

In Australia, for example, the Commonwealth Employment Service (CES) was created in 1945 as an essential part of the infrastructure supporting the full employment commitment.

In the neoliberal era, the CES was privatised and a ridiculous and ineffective private market for labour services was created.

It has been an unmitigated disaster for workers – operating really as a new industry to coerce the unemployed into various training and other programs that do little to enhance their mobility in the labour market.

But from the perspective of shifting the responsibility of maintaining full employment from the national government they have been very successful.

The narrative now focuses on the inadequacies of the unemployed as individuals rather than the lack of jobs that are available.

A neat shift from systemic failure to an alleged individual failure – which then forms part of the ‘divide and conquer’ strategy to break down working class solidarity.

In Britain, the same evolution has occurred.

There the neoliberals use terms such as ‘marketisation of employment services’ or ‘contractualism’ to describe the evisceration of the state-run employment service and its replacement with a host of for-profit private firms in the area of job placement, training etc.

The state-run employment service in Britain comprised a number of important and interdependent institutions.

For example, the Job Exchanges (or Employment Exchanges) were created to manage the demobilisation of workers after WW2.

Then in the peacetime they served to allocate workers to areas where shortages were encountered in the key sectors such as construction, transport, the NHS.

They played a similar role to the CES in Australia in this regard.

They also help manage the integration of migrants into the skilled workforce.

They undertook planning tasks to ensure apprenticeship opportunities matched the forecasted skills requirements..

Also, the state-run Reemploy, which was closed in 2013 after 67 years of service provided sheltered work for the disabled.

That infrastructure was abandoned and the so-called Jobcentre Plus replaced it – which is just a contract brokering body within the state, to oversee the privatised arrangements for job services.

This marketisation also happened in Australia to the detriment of the nation and characterised the shift from full employment (where the government took repsonsibility to ensure there were enough jobs) to full employability (where the government would oppress the supply of labour just in case private demand was strong enough to create jobs).

The CES was a highly layered service.

It acted as a “clearing-house arrangement for the interchange of data on a nation-wide basis between the different employment offices on vacancies and persons seeking employment. The use of detailed analyses and descriptions of jobs in conjunction with a full occupational history of applicants facilitates placement.”

It was not a passive institution but actively sought out vacancies from employers and discussed future skill needs.

This was particularly the case in its work helping the disabled workers and it interacted with other government agencies such as the Department of Social Services, the Repatriation Department and Mental Health authorities.

That sort of integration and ‘whole of government service’ is now not possible under the privatised, decentralised model of employment service delivery.

The CES also played a central role in facilitating effective school to work movements through its vocational guidance and placement functions.

It would also broker seasonal work requirements – shearing, fruit picking, the sugar industry etc – through interactions with the relevant growers associations so that prospective workers could be knowledgeable of where the vacancies were and the conditions etc.

Its central role was to operate as a comprehensive planning agency:

At its creation, the department’s functions were general labour policy, manpower priorities, investigations of labour supply and labour demand, the effective placement of labour, technical training, industrial relations and industrial welfare, and planning for post-war rehabilitation and development.

The Department used to employ young economists to make projections of skill requirements into the future and they would then assess the current skill base against those projections to inform the national apprenticeship program.

Much of that capacity was abandoned under neoliberalism as the Department morphed into a contract manager of the privatised services delivery.

The Department also coordinated the apprenticeship scheme, which was operationalised at the state level and informed the immigration program.

There were criticisms of this system but it was far better than what exists today (for reasons that go beyond this post).

Supporting the change in focus to real resources

The point of all this is that to support the change in focus to real resource planning, it is essential that the neoliberal labour market structures that act to ‘discipline’ workers who find themselves out of work, largely because of the macroeconomic austerity that is inflicted on nations, are abandoned and new institutional machinery being created that can allow the government to manage the competing demands for productive resources and anticipate shortages etc.

In addition to creating structures like a national employment service, the government must ensure there is (in Joe Isaac’s words) “a high degree of economic intelligence based on extensive, reliable and up-to-date information on many aspects of the economy. This involves collection, analysis and interpretation of data.”

The national employment service not only acts as a placement service but also would provide a wealth of information to the employers and workers on trends in the labour market.

The Department of Labour in Australia ran a monthly survey of employers, which provided “an appraisal of the over-all employment situation in terms of the number registered for employment … of the over-all demand situation in terms of unfilled vacancies ; and occupational, industrial and regional analyses.”

It is much more efficient to create these information flows through a central institution working with decentralised offices of the same organisation, rather than trying to coordinate a plethora of corporations etc who do not share a common goal (other than their own profit).

Conclusion

The institutional structures I have been discussing here were not abandoned because they did not work.

Quite the contrary.

They were abandoned exactly because they did work and provided the basis for government planning initiatives to maintain full employment without accelerating inflation.

They were abandoned because the neoliberals wanted governments to shift from a commitment to full employment to a new objective of full employability (a supply concept that has been the basis of all the nonsensical ‘activation’ programs that just shuffle workers in the unemployment and underemployment queue).

In Part 3, we will consider the so-called – Socialist calculation debate – for its contemporary relevance.

The question we will explore is whether economic planning can work in a modern economy.

That is enough for today!

(c) Copyright 2026 William Mitchell. All Rights Reserved.