White Paper on Full Employment in Australia
Encyclopedia
The White Paper
Full Employment in Australia was the defining document of economic policy in Australia
for the 30 years between 1945 and 1975. For the first time, the Australian government accepted an obligation to guarantee full employment and to intervene as necessary to implement that guarantee. The preparation of the paper was ordered by The Australian Labor Party
Prime Minister
John Curtin
and his Employment Minister John Dedman
and undertaken by a group of economists headed by H.C. Coombs.
The contrasting experiences of the Great Depression
and the Second World War convinced the Labor Party that governments could and must intervene to ensure the achievement of full employment. The introduction to the White Paper summed this up:
The basic ideas behind the White Paper were those set out by John Maynard Keynes
in his 1936 work, The General Theory of Employment, Interest and Money. Keynes’ neoclassical contemporaries, argued that the economy was naturally self-correcting. Unless real wages were held above their market level by union action or government regulation, unemployment could only be a short run phenomenon. The neoclassical economists drew the same conclusion as that of the fundamentalists today — that government action to reduce unemployment could only make matters worse in the long run. Keynes’ first, and perhaps most important, contribution was to show that the economy could remain at high levels of unemployment for indefinite periods in the absence of government action.
As well as demonstrating the possibility of unemployment in equilibrium, Keynes provided an analysis of the causes of periodic unemployment and the basis for a policy response. Keynes argued that recessions and depressions occurred because the economy was destabilised by fluctuations in private demand, and particularly in levels of investment. To simplify, the remedy he advocated was that governments should increase their own demand in periods of depression, particularly through public works. The increase in income generated by public works would then be fed into demand for other goods and services, yielding a stimulus to the private sector.
The White Paper also stressed the importance of what is now called the social wage.
Following the end of the postwar economic boom in the 1970s, the ideas of the White Paper were gradually displaced by alternative policies in which commitment to full employment was abandoned.
White paper
A white paper is an authoritative report or guide that helps solve a problem. White papers are used to educate readers and help people make decisions, and are often requested and used in politics, policy, business, and technical fields. In commercial use, the term has also come to refer to...
Full Employment in Australia was the defining document of economic policy in Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
for the 30 years between 1945 and 1975. For the first time, the Australian government accepted an obligation to guarantee full employment and to intervene as necessary to implement that guarantee. The preparation of the paper was ordered by The Australian Labor Party
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...
Prime Minister
Prime Minister of Australia
The Prime Minister of the Commonwealth of Australia is the highest minister of the Crown, leader of the Cabinet and Head of Her Majesty's Australian Government, holding office on commission from the Governor-General of Australia. The office of Prime Minister is, in practice, the most powerful...
John Curtin
John Curtin
John Joseph Curtin , Australian politician, served as the 14th Prime Minister of Australia. Labor under Curtin formed a minority government in 1941 after the crossbench consisting of two independent MPs crossed the floor in the House of Representatives, bringing down the Coalition minority...
and his Employment Minister John Dedman
John Dedman
John Dedman was a Minister in the Australian Labor Party governments led by John Curtin and Ben Chifley. He was responsible for organising production during World War II, establishing the Australian National University, reorganising the Commonwealth Scientific and Industrial Research Organisation ...
and undertaken by a group of economists headed by H.C. Coombs.
The contrasting experiences of the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
and the Second World War convinced the Labor Party that governments could and must intervene to ensure the achievement of full employment. The introduction to the White Paper summed this up:
- Despite the need for more houses, food, equipment and every other type of product, before the war not all those available for work were able to find employment or to feel a sense of security in their future. On the average during the twenty years between 1919 and 1939 more than one-tenth of the men and women desiring work were unemployed. In the worst period of the depression well over 25 per cent were left in unproductive idleness. 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.
The basic ideas behind the White Paper were those set out by John Maynard Keynes
John Maynard Keynes
John Maynard Keynes, Baron Keynes of Tilton, CB FBA , was a British economist whose ideas have profoundly affected the theory and practice of modern macroeconomics, as well as the economic policies of governments...
in his 1936 work, The General Theory of Employment, Interest and Money. Keynes’ neoclassical contemporaries, argued that the economy was naturally self-correcting. Unless real wages were held above their market level by union action or government regulation, unemployment could only be a short run phenomenon. The neoclassical economists drew the same conclusion as that of the fundamentalists today — that government action to reduce unemployment could only make matters worse in the long run. Keynes’ first, and perhaps most important, contribution was to show that the economy could remain at high levels of unemployment for indefinite periods in the absence of government action.
As well as demonstrating the possibility of unemployment in equilibrium, Keynes provided an analysis of the causes of periodic unemployment and the basis for a policy response. Keynes argued that recessions and depressions occurred because the economy was destabilised by fluctuations in private demand, and particularly in levels of investment. To simplify, the remedy he advocated was that governments should increase their own demand in periods of depression, particularly through public works. The increase in income generated by public works would then be fed into demand for other goods and services, yielding a stimulus to the private sector.
The White Paper also stressed the importance of what is now called the social wage.
- In Australia, a significant contribution to living standards has been made in the past, and will continue to be made, by a high level of social services. Some of these are in the form of direct money payments, such as invalid and old-age pensions, child endowment and widows' pensions. Others are services provided directly by governments authorities, including education, health and medical services, kindergartens and libraries. (p12)
Following the end of the postwar economic boom in the 1970s, the ideas of the White Paper were gradually displaced by alternative policies in which commitment to full employment was abandoned.