•-1

INTERNATIONAL

LABOUR

OFFICE

STUDIES AND REPORTS
Series C (Employment and Unemployment) No. 15

UNEMPLOYMENT
AND

PUBLIC WORKS

GENEVA
1931
Published in the United Kingdom
For

the

INTEBNÄTIONAL LABOUR OFFICE (LEAGUE OF NATIONS)

By P . S. KING & SON, Ltd.
OrchardJHouse, 14 Great Smith Street, Westminster, London S.W.!

ÍMPBtMEKIES BÉUNtES S. A . , LAUSAITOB

CONTENTS
PAGB

INTRODUCTION

1
PAET I

ADVANCE PLANNING
CHAPTEE I : The Efficacy of Advance Planning.
Cost. Effect
on Industry. Limits to the Operation of the Policy.
Importance of Planning in Advance. Do Public Works
Divert Money from Industry and Trade ? Summary . .
CHAPTEE II :
General Survey of Measures Adopted.
International Measures.
National Measures : France ;
Germany ; Finland ; Great Britain ; Sweden ; Norway ;
Switzerland ; Italy ; United States ; Australia ; Netherlands ; Irish Free State ; Denmark ; Austria. Summary
CHAPTEE I I I :
Administrative Problems.
Multiplicity of
Authorities. Recruitment of Labour. Effect on Contracts
of Postponing and Accelerating Works. When Should the
Public Works Be Put in Hand ? Summary . . . . . . .
CHAPTEE IV :
Financial Problems. Taxation.
Borrowing.
Advance Budgeting. Productive Unemployment Relief.
Summary

5

33

70
90

PAET II

ADVANCE EXECUTION
INTEODTJCTTON. Australia ; Austria ; Canada ; Czechoslovakia ;
Denmark ; Finland ; France ; Germany ; Great Britain ;
Italy ; Japan ; Poland ; Switzerland ; United States ;
Union of Socialist Soviet Republics
PAET

105

III

SUMMARY AND CONCLUSIONS

169

APPENDIX
Suggested Basis for the Supply of Information Drawn Up by the
Joint Committee on Economic Crises on 2 May 1927 . .

185

INTRODUCTION
T h e question dealt with in this study has been the subject
of consideration by the International Labour Organisation from
the very beginning of its existence. At the First Session of the
Conference held in Washington in 1919 a Recommendation on
Unemployment was adopted, of which Clause IV read as follows :
" The General Conference recommends that each Member of the
International Labour Organisation co-ordinate the execution of all
work undertaken under public authority, with a view to reserving such
work as far as practicable for periods of unemployment. . . ."
The matter was raised at various subsequent sessions and in
1926 the Eighth Session of the Conference adopted a Resolution
including the following passages :
" . . . The International Labour Conference . . . (1) Requests
the International Labour Office to increase to the utmost its efforts to
secure wider adoption of the measures proposed in the Recommendations
and Conventions on unemployment adopted at previous sessions of
the Conference, i.e. . . . (cl) the organisation of public works so
as to counteract the fluctuations of private business, . . .
(5) In
particular requests the International Labour Office . . .
to seek
the advice of the Joint Committee on the financial obstacles to the
putting into operation by public authorities of the Recommendation
referred to above concerning the organisation of public works. . . ."
The question was referred to the Joint Committee on Economic
Crises appointed by the Economic and Financial Committees of
the League of Nations and the International Labour Office. The
International Labour Office submitted a memorandum to t h a t
Committee, which on 2 May 1927 drew up a list of points it was
desirable to investigate 1. I t is on the basis of this plan t h a t
the Office pursued its research and has prepared this study.
The terms of the Recommendation adopted by the Washington
Conference of 1919 on the subject of utilising public works as a
remedy for unemployment are very wide in scope. The Recommendation suggests t h a t all work undertaken under public authority
should be co-ordinated by the Government of each State with a
view to reserving such work as far as practicable for periods of
unemployment.
The phrase " all • work undertaken by public
authority " includes not only work carried out directly or through
See Appendix.

— 2 —

contracts by the various departments of the central Government
and by the many local authorities, but also the work of private
or semi-private bodies operating public utilities (where these are
not publicly owned) such as railways, road transport, gas and
electricity supply, etc. Such public utilities are generally operated
under statutory control, and the public authority can exercise
a very considerable influence on the time at which they undertake
work of various kinds.
On the other hand, the Washington Recommendation tends
to be restrictive in t h a t it speaks not of the organisation of public
works generally as a remedy for unemployment when the crisis
comes but only of the special policy of co-ordinating the execution
of work undertaken under public authority with a view to reserving
such work as far as practicable for periods of unemployment.
This
is an entirely different thing from the institution of relief works the
main purpose of which is to give work to unemployed persons,
and it involves more than merely deciding to put public works
in hand after the crisis has already developed. The object of such
a policy is to provide a definite stimulus to the economic system
as a. whole in periods of depression by concentrating t h e economic
demand of public authorities as far as possible in such periods,
and thus providing employment for labour which would otherwise
be idle — providing it, be it noted, through ordinary economic
channels, not through relief organisations. The complement to
this is, of course, by reserving public work for periods of depression
to avoid heightening the preceding boom. If public authorities
follow the example of private businesses and place their orders
when demand is outstripping supply and prices are rising, they
will merely intensify the competition for labour, capital, and materials which are already adequately employed, heighten the boom,
and precipitate the consequent depression. By the advance planning
of public works, public authorities would deliberately adopt a
policy more or less the inverse of t h a t pursued by private business.
Such a plan is especially suitable for dealing with unemployment
brought about by the fluctuations of the business cycle, of which
the world-wide depression of 1929-1930 may be considered a n
examplç, but it is less useful in dealing with unemployment affecting
only a single industry or group of industries as a result of special
causes. Such unemployment takes place from time to time in
consequence of changing fashion, rationalisation or other* causes,
as, for instance, among textile workers in New England owing
to the fact t h a t the industry moved to the Southern States.

— 3 —
I t will be seen later on t h a t only certain public works can be
postponed or advanced in time ; others must necessarily be carried
out immediately. Consequently, there is a danger t h a t if public works
are put in hand every time a particular industry is depressed
because of a change in fashion, or for some other similar reason, no
works will be available when a widespread depression affecting most
industries arrives. Moreover, it would be very difficult to put
skilled workmen in certain industries, such as watchmakers, for
instance, on public works, without tending to make them less able
to resume their former employment when conditions improve.
But there are obviously cases in which the argument does not
apply. Thus, if a depression should occur in an industry which
normally does work for the public authorities it would be somewhat
foolish for the latter to say t h a t they would not increase their
orders because the depression was partial and not general. Examples
of such industries are the building, clothing and printing industries.
Moreover, as will be seen in the Introduction to P a r t I I 1 , in
connection with the cotton trade depression in Great Britain in
1863, public works may be a means of permanently transferring
workers from one trade to another.
Before the war there was a fairly regular succession of booms
and depressions, and the idea was then put forward t h a t when
unemployment was already going up but not yet very serious
public works which had been postponed during the boom should
be p u t in hand. Since the war, however, economic conditions
have been different. In the United States, it is true, there has
been a long period of prosperity accompanied by what looks like
a business cycle. At any rate there has been a succession of depressions of short duration, though this is not true of the depression
of 1930. In France there has also been sustained prosperity
disturbed by a break at the time the franc was revalued before
stabilisation. In most other industrial countries, however, there
has been prolonged and widespread unemployment due to a number of factors which it is unnecessary to analyse here. This has been
the case particularly in Germany and Great Britain, and consequently there could be little question in those countries of reserving public works and orders to a later period. On the contrary all
possible works t h a t could be advanced in time were carried out in
order to provide some employment for the unemployed. Reference
is also made to this aspect of the problem in later chapters.
1

Page 105.

_

4 —

I n addition t o t h e cyclical fluctuations taking place over a
period of years certain industries also suffer from seasonal fluctuations which take place each year. Thus, the building trade is
busy in summer and slack in winter, with the result that a number
of workmen are regularly thrown out of work a t t h a t season.
Many people think that a great deal more could be done by private
industry itself t o put an end t o seasonal unemployment by securing
advance orders, by trying t o alter consumers' habits and by
diversifying their production. The extent t o which winter building
work can be carried on is a technical problem which is outside
the scope of this report, b u t it is interesting to note t h a t much
progress has already been made in overcoming the difficulties. I t is
claimed that all-the-year-round construction work has economic
advantages, such as earlier returns on investments, reduction of
construction costs, increased profits for contractors ; it certainly
has social advantages in t h e more settled employment for the
workmen and consequent diminution, or even elimination, of
the seasonal unemployment in t h e building industry 1. Very
successful efforts have been made in recent years t o stabilise
employment by a more systematic organisation of work in
particular factories or industries. This is a task for private undertakings a n d not for public authorities, a n d is not considered in
this report.
Governments can do something in t h e matter of a suitable
distribution of their orders in t h e different seasons and reference
will therefore be made t o this subject in t h e following pages. I t
must be borne in mind, however, t h a t the two problems of cyclical
and seasonal unemployment are essentially different and t h a t
the greatest value of a carefully planned public works policy is
t o be found in its effect on t h e former.
To sum up, it may be said t h a t there are three kinds of unemployment in the post-war world, namely (1) unemployment of
a more or less permanent character ; (2) cyclical unemployment ;
and (3) seasonal unemployment. I t is with the second of these
forms of unemployment that we are mainly concerned in this
study.

1

See for instance the pamphlets on Cold Weather Construction issued by the

PORTLAND C E M E N T ASSOCIATION in t h e United

States.

PART I
ADVANCE PLANNING

CHAPTER I
THE EFFICACY OF ADVANCE PLANNING
It will be convenient in the first place to consider the economic
arguments t h a t can be brought forward for and against the advance
planning of public works and to make an effort to determine howfar such a policy can really achieve its object, namely, t o further
the régularisation of the demand for labour over a period of years.
One of the earliest advocates of this policy was Professor
Bowley, the eminent British statistician, who suggested it to the
Poor Law Commission in Great Britain in 1909. He explained
t h a t his policy differed from t h a t of relief works which had been
pursued a t different times during the nineteenth century.
A scheme of this kind would differ from a crude form of relief works
in four important ways :
(a) the work concerned would be started before unemployment
became acute, say, when the percentage unemployed index
reached 4 per cent. ;
(b) there would be no artificial demand made for labour but only
an adjustment in time of the ordinary demand ;
(c) the unemployed as a class would not be attracted, for the
demand would come from ordinary trade sources and before
there was any considerable dearth of employment ;
(d) the wages paid would be measured only by the work done,
being contracted out on the ordinary commercial basis.
Such a scheme need involve no expenditure save of thought and
of forethought ; it is in the nature of prevention rather than of cure,
and in proportion as the scale of its operation was sufficient would
remove the principal legitimate cause of dissatisfaction of the genuine
workman with industrial conditions 1.
1
The Public Organisation of the Labour Market : being Part II of the Minority
Report of the Poor Laic Commission, 1909. Edited, with introduction, by Sidney

and Beatrice W E B B .

— 6 —
The postponement of a certain amount of public construction
to periods of industrial stagnation would have two main results.
In the first place, the Government would be removed as a competitor of private business in the market for building materials and
labour during times when industry is already having difficulty
in securing sufficient material to meet the demands of its consumers.
Secondly, Government orders, coming at the psychological moment,
would have a tendency to stimulate business activity at times when
other orders are not available.
I t will be admitted by everybody that any policy which really
succeeds in diminishing unemployment and in improving the
situation of the labour market is worthy of very careful consideration. Even if the policy cost money, it would be worth while
paying something to have workmen employed steadily at their jobs
rather than to have them idle and dependent on relief or insurance
benefits. An unemployed man tends after a time to deteriorate
in character and to find it more difficult to take up work again.
Moreover, it must be remembered t h a t an unemployed man always
costs the community something. If there is an unemployment
insurance scheme in operation, the benefits payable have to be
raised by payments of workmen and employers, and also as a rule
by the general taxpayers. If there is no such scheme in operation,
the unemployed workman must either live on his savings — a
very bad thing, not only from the individual point of view, but
from the point of view of the community — or he becomes a charge
on private charity or on public relief funds. In each case, the
community is feeding and housing him and his dependants, and
he is producing nothing in return.
If there is an unemployment insurance scheme, this is obvious
to everyone ; if private charity has to step in, it is not obvious,
and people are liable to forget t h a t unemployment costs the community something in relief. In the United States, for instance, the
Family Welfare Association of America stated in March 1930
t h a t a tremendous strain on the financial resources and staffs
of charity and family welfare societies had accompanied the
unemployment prevailing at the end of 1929 and the beginning
of 1930. Statistics from agencies in 32 States reporting to the
Association showed an increase of 200 per cent, in the number
of families in which " unemployment due to lack of work "
was a factor in the families need of the help of a welfare society
during J a n u a r y 1930 as compared with January 1929. I n January

— 7 —
1930, the number of such families was 21,600 as compared with
7,300 in January 1929, and 17,000 in December 1929 1.
One or other method of relieving the unemployed workman
has to be applied, of course, especially in these days of severe
and often prolonged unemployment, but work is always better
than pecuniary relief if it can be provided, and t h a t is why some
countries such as Germany and Austria, for instance, have associated relief works (the so-called productive unemployment relief)
very closely with their unemployment insurance schemes. Something is said of these measures in P a r t I I . In the meantime
we may conclude t h a t employment is preferable to relief in any
of the above forms, even at some cost to the community.
COST

There has been some controversy on this question of cost.
Professor Bowley says there would be no expenditure save of
thought and of forethought. Mr. Otto T. Mallery, who presided
over the Committee of the President's Conference on Unemployment
in the United States which examined this question in 1921, goes
even farther, and says " t h a t the total cost of public works would
be less over a ten-year period containing both prosperous and depressed years " than it would if there were no advance planning.
Yet throughout the replies of the Governments to the request
for information sent out by the International Labour Office runs
the statement that public works which had been postponed or
advanced in time have cost more than they otherwise would have
done. This difference of opinion really seems to rest on a misunderstanding. What we are discussing here is advance planning over
a period of years,and if certain public works are carried out during
an economic depression rather t h a n during a period of prosperity,
the tendency will be for them to cost less. Prices are normally
lower during a depression t h a n during a boom. Rates of interest
are lower if the time be well chosen and wages may also be lower
(at any rate they will certainly not be higher). The Swedish Government refers more than once to the fact t h a t in periods of depression the cost of labour and materials is less. What the.other
Governments in their replies refer to is seasonal unemployment
1
Communication from the Family Welfare Association of America.
There
is now (Dec. 1930) a widespread system of " doles " of this kind in the United
States.

— 8 —

and the distribution of works and orders over each year so as to
improve t h a t particular situation. That is quite a different question. I t is clear t h a t if building work is carried out in the
winter in cold countries it will cost more. I t has been estimated
t h a t it may cost as much as 20 percent, more 1 . I t may, of course,
be worth while incurring the additional cost, for, as already stated,
there is bound to be some saving elsewhere ; indeed, it will be
clear from what is said later on t h a t many Governments and
local authorities think it is. Each case must be considered on
its merits.
So far as advance planning over a period of years is concerned,
Professor P . G. Dickinson, of the University of Illinois, made a
careful investigation into this question of cost. Examining the
figures for actual public works construction in the United States
in 1919 to 1925, and the effect of postponing or advancing such
construction according to the situation of the labour market with
the assistance of the construction cost index of the Engineering
News Record, he comes to the conclusion t h a t there would have
been a saving over the seven-year period 2. I t is, of course, possible
t h a t the construction cost index would have been changed by
the very fact of redistributing the public works in time ; there
would have been a certain increase in the cost. But there is no
evidence to show that t h a t increase would have eliminated the
saving noted above. Another possible source of increased cost
is the fact t h a t the rate of interest may be particularly high when
money is urgently needed for public works, that is to say, in a
year of high unemployment. But this would be very unlikely
to offset the saving already referred to and, as a matter of fact,
it is much more likely t h a t the rate of interest will be low at such
a time, and therefore contribute to lower costs. I t would depend
very much on the method of financing public works whether there
was any increased cost from this cause or not. This problem is
dealt with in Chapter IV.
E F F E C T ON INDUSTRY

We may wonder, however, whether a reservation of public
works and orders to periods of unemployment would really have
much effect on industry as a whole. A number of questions suggest
themselves. Eor instance, what do we mean by a depression, and
1
2

Bâtiment et Travaux
Cf. table on p. 13.

Publics,

Paris, 31 March 1927.

— 9 —
by how much does industry decline at such a time ? What proportion of industrial activity is represented by public works and
orders for supplies given by public authorities ? Here we are
largely in the land of conjecture. But there is much evidence
in favour of the view expressed by Mr. Henry N. Dennison, President of the Dennison Manufacturing Company (stationers'
supplies and paper), to the effect t h a t the psychological factor
in industrial fluctuations is an important one. Small things, he
said, such as additional building thrown in on top of a boom like
the industrial building of 1919 and 1920 in the United States,
caused reverberated effects, in t h a t case for evil ; in the case of
public works undertaken systematically at the beginning of a
depression, they would be for good. He pointed out that a 2 or
3 per cent, fluctuation in consumers' buying would be sufficient
to cause merchants to tighten up. This would lead to the purchasing agent cutting his purchases by 5 or 10 per cent. This would
affect the manufacturer, who would stop buying completely from
his main sources of raw material. Thus, a small fluctuation in the
retail store leads to a much larger fluctuation in the merchant's
business, and a still larger one in the manufacturer's business.
A very severe depression in business, he added, is seldom more
than 15 per cent, less than normal, as was the case in the United
States in 1921. A mild depression, which, nevertheless, affects
business materially, is about 5 per cent, less than normal 1 .
The inter-dependence of different industries was emphasised
by Mr. Otto T. Mallery in testimony before the Senate Committee
on Education and Labour. Who could guess, he asked, that the
fruit crop determines the demand for manicure sets ? But a wholesale hardware house made a fortune by finding this out.
A hundred travelling salesmen were required to report weekly on the
condition of the by-product fruit crop in grain territory. The house
had observed that when grain crop was profitable, the farmer bought
tools and machinery, but if the fruit crop was good, the proceeds were
the wife's perquisite ; she bought manicure sets and kitchen utensils.
and this house was ready with the goods in the neighbourhood store.
Industries lean on one another like the walls in a house of cards — to
hold one another up or to push one another prostrate 2.
1
Hearing before the Committee on Commerce, United States Senate, on 3. 2475,
April 1928. Cf. also Prof. Wesley Mitchell's estimate t h a t production in North
America in depression periods is about 15 to 20 per cent, less than in the best years
(see n e x t page).
2
Hearings be/ore the Committee on Education and Labour, United States Senate
on S. Res. 219, Dec. 1928, J a n . and Feb. 1929.

— 10 —
Dr. Werner Stephan, Ministerialrat in the German Ministry of
Labour, taking an estimate made b y the Federal Economic Council
t h a t the amount of the orders given annually by public authorities
in Germany is 6 y2 milliards of marks, considers that this may be as
much as 5 to 10 per cent, of the total industrial activity of the
country. He adds t h a t almost all industries benefit from these
orders, although, of course, in different proportions. Those which
are most closely concerned are those engaged in building, metal
work, t h e construction of machinery, and the electrical industry.
I t is clear t h a t the orders issued by public authorities play a very
important part in the industrial activity of the country, and t h a t
a suitable distribution of these orders over a period of time might
have a considerable influence on the labour market 1 .
Dr. Ernst Bernhard estimates 2 t h a t in 1927 the Federal and
State Governments in Germany, including the Post Office and the
Federal Railway Company, gave orders to the value of 3.4 milliard
marks ; including t h e local authorities the amount was 6 milliards.
If we take for the upward movement of the business cycle a period
of two years and consider postponement of only 10 per cent, of
the orders of public authorities, there would be 1.2 milliard marks
available for the depression period. According to Professor Wesley
Mitchell 3 production in North America in depression periods is
about 15-20 per cent, less than in the best years and about 8-12
per cent, less than in t h e moderately good years. On t h e basis of
the above figures, says Bernhard, it should be possible in Germany
to even out fluctuations of 4-5 per cent, by postponing 10 per cent.
of the orders of public authorities.
In the United States it is estimated by the Committee on
Recent Economic Changes of the President's Conference on Unemployment in their report on Planning and Control of Public
Works* t h a t about 3,500,000 dollars are expended each year on
public construction and t h a t about 900,000 men are directly
employed. These public expenditures on permanent improvements
in the United States are held t o represent from 35 t o 40 per cent.
of the total volume of expenditures for all private and public
construction. Because of the difficulty of making satisfactory
estimates of t h e total expense for repairs and maintenance which
1
2
3

Reichsarbeitsblatt (Unofficial Section), 5 Sept. 1929.
Soziale Praxis, 1928, No. 28.
NATIONAL B U R E A U OV ECONOMIC R E S E A R C H : Business Cycles and

Unemploy-

ment, p . 39.
4

Published by the

NATIONAL B U R E A U OF ECONOMIC R E S E A R C H in

1930.

—

I l -

are increasing from year to year and of the total outlay of towns
and townships it is thought probable t h a t these figures understate
the total outlay on public works in the United States.
The post-war situation in Great Britain is abnormal and is
not a fair test of the efficacy of the advance planning of public
works. As for what might be done in more normal circumstances,
Professor Bowley has compñed interesting figures showing the
sums expended on public works by the principal authorities before
the war. I n 1913 this expenditure was as follows :
TABLE I
In thousands
of £
Local authorities
Central Government, publie works and
buildings
Road Board
Port of London Authority
Development commissioners
Railway companies
Post office, telegraph and telephones . . .
Total

17,457
2,356
583
197
982
4,854
2,054
28,483

Professor Bowley and Mr. F. D. Stuart also compare the figures
of annual expenditure with the course of unemployment, as indicated by the trade union percentage, from 1906—1913, and show
how this expenditure should ideally have been distributed to
correspond with the volume of unemployment.
TABLE

Year

Expenditure
(millions sterling)

n
Unemployment

Actual

Relation
to average

Per
cent.

1906
1907
1908
1909
1910
1911
1912
1913

40.7
32.1
37.5
24.1
24.5
25.3
30.8
26.5l

+ 10.5
+
1.9
+
7.3
— 6.1
— *5.7
— 4.9
+ 0.6
— 3.7

3.8
3.8
7.9
7.7
4.7
3.0
3.2
3.1

Average

30.2

i

Relation
to 5.0 average
—
—
+
4—
—
—
—

1.2
1.2
2.9
2.7
0.3
2.0
1.8
1 .9

Expenditure
required
by policy
(million £)
22
22
63
61
31
14
16
15
30.5

1
There is a slight discrepancy between this figure and the one given above, but it
does not affect the argument in any way.

— 12 —
These figures, which of course require revision for the changed
values of post-war years, give an indication of what might be
accomplished in Great Britain in times more normal than the
present 1 .
Professor F . G. Dickinson, Ph. D. of the University of Illinois,
has made a careful study of the effect of shifting public construction
on factory employment, volume of construction and costs in the
United States in the years 1919-1925 2. He considers t h a t the
value of large contracts let for streets and roads and for educational
buildings represents as a rule about five-eighths of the total public
works programme, and both these items can be postponed for a
certain length of time. He assumes, therefore, t h a t about onehalf of the public works programme can, without great difficulty,
be postponed to periods of bad trade. Professor Dickinson tabulates
as exactly as possible the annual factory wages paid in the United
States, and puts these figures side by side with the factory employment index of the Federal Reserve Board. He finds t h a t in three
years during the period considered the employment index was
below the average. He estimates the required amount to which
factory wages would have t o be increased in those years in
order to bring the employment index up to 100. His next
operation is to consider the total value of public construction 3,
and he assumes t h a t wages account for 80 per cent, of this
amount *. Thus, he is able to determine the ideal allocation
of public construction from the point of view of smoothing
out variations in employment. As already stated, it is impracticable to postpone more than one-half of the normal construction
programme, and he shows how a new allocation of t h a t
proportion of the construction programme would work out. The
conclusions may be seen in the following table and chart,
which are reproduced from Professor Dickinson's study :

1
7s Unemployment Inevitable ? An Analysis and a Forecast. London, Macmillan, 1924.
2
The Annals of the American Academy of Political and Social Science, Sept. 1928.
3
The actual figure differs from t h a t given b y the Committee on Recent Economic Changes, but the discrepancy does not affect the argument.
4
BOWLEY and STOAIÎT also consider t h a t in public expenditure wages m a y
be taken to be 80 per cent, of the cost (cf. Is Unemployment Inevitable? p . 368);
see also MUND : " Prosperity Reserves of Public Works ", in Annals of the
American Academy of Political and Social Science, May 1930.

— 13 —

TABLE H I .

ESTIMATED EFFECTS OF SUGGESTED SHIFTS I N VOLUME

OF CONSTRUCTION UPON FACTORY EMPLOYMENT, VOLUME OF
CONSTRUCTION

A

Year

1919
1920
1921
1922
1923
1924
1925
Total

B

D

Factory
. Total
Required
employment
increase
factory
index,
in " A "
wages
1919-25
(millions)
(millions) (av. = 100)
8
10,461
12,153
8,202
8,759
11,009
10,109
10,409
71,102

H

S
105
108
86
94
108
99
100

—

J

Best
Effect of
allocation
shift on
Year employof " E "
if only y2
ment,
is shifted
1919-25
(av. = 100) (millions)
1919
1920
1921
1922
1923
1924
1925
Total

c

100
100
100
100
100
100
100

—

S
2703
341
891
128
409

2,039

A N D COSTS

1,335
559
94
1,988

K

E

Total
Construcpublic
tion wages
(80 %
construcof " D " )
tion
(millions) (millions)
8
674
852
859
1,034
1,022
1,111
1,283
6,835

F

G

Best
allocation
of " E "
(millions)

Best
allocation
of '• D "
(millions)

8

S

8
539
682

162
20
1,335
559
15
94

i
i

818
i
i

2,039

2,039

M

L

N

Best
Effect
Con«M»
allocation of y3 shift struction
upon emof " D "
X
index,
if only % ployment, cost
" D "
1919-25
is shifted
1919-25
(millions)
(millions) (av. = 100) (av. = 100)
S
338
426
1,972
1,194
511
1,111
1,283

103
104
95
95
104
99
100

6,835

—

95
120
97
84
102
103
99

—

20
25
2,527
1,732
19
1,229
1,283
6,835

O
" M "
X
" K "
(millions)

64,006
102,240
83,323
86,856
104,244
114,433
127,017

32,119
51,120
191,284
100,296
52,122
114,433
127,017

682,119

668,391

1
Prof. Dickinson considers only t h e good years for t h e purposes of this column, t h a t
is t o say, those years for which t h e index of employment (column B ) is m o r e t h a n 100,
and for which in consequence there was a surplus of wages paid.
8

Source of construction wages :
Million $

Million $

1919
1920
1921
1921
a

retains
retains
obtains
obtains

16 of t h e total for 1919.
20 of t h e t o t a l for 1920.
523 from 1919.
662 from 1920.

obtains 150 from 1923.
obtains 559 from 1923.
retains 15 of t h e t o t a l for 1923.
obtains 94 from 1923.

Source of construction wages :
Million $

1919
1920
1921
1921

1921
1922
1923
1924

retains
retains
obtains
obtains

270 of t h e t o t a l for 1919.
341 of t h e total for 1920.
269 from 1919.
341 from 1920.

Million $

1921 obtains 281 from 1923.
1922 obtains 128 from 1 9 2 3 .
1923 retains 409 of t h e t o t a l for 1923.

— 14 —
FIG. 1. — EFFECTS OF SHIFTS I N PUBLIC CONSTRUCTION
UPON FACTORY EMPLOYMENT (TABLE III)
1919-1925, av. =

100

I20

MO
• < \

oo

/ /

V

.^__

^V J^

\ s

90

/^B

IO

1919

)920

1921

1922

1923

1924

1925

A = Index after one-half of public construction is shifted.
B = Index of the Federal Reserve Board.
C =- Index after all of public construction is shifted.

Table I I I and fig. 1 show t h a t it is possible, by a systematic
distribution of one-half of the ordinary public works programmes,
to reduce the fluctuations in employment from a minimum
of 86 and a maximum of 108 to a minimum of 95 and a
maximum of 104. Moreover, the cost will be reduced in the
proportion of 682,119 to 668,391.
Mr. Otto T. Mallery told the Committee on Education and
Labour t h a t the income of the United States as a going concern
was about 90,000,000,000 dollars.
A 10 per cent, industrial depression would be a drop in our national
overturn of $9,000,000,000. All construction is about $7,000,000,000 ;
public works are about one-quarter to one-third of all construction.
If public works were doubled in a year of depression, the increase would

— 15 —
therefore fill one-fifth to one-fourth of the hole made by a 10 per cent.
industrial depression. So, even according to a purely mechanical
theory of the business cycle, now out of date, public works are an
important factor 1.
I t is clear t h a t arguments based on the total number of unemployed in all industries must be used with care. I t is one of
the most serious objections to the establishment of relief works,
as we shall see later on, that skilled workmen are likely to be
employed on unskilled work, and that, generally speaking, men
are transferred to work for which they are not at all fitted. This
danger is not entirely absent in the case of the advance planning
of ordinary public works. How great it is depends a good deal
upon the mobility of labour. If labour were entirely immobile,
the fact of making the demands of the public authorities less regular
as between one year and another would create unemployment
rather than alleviate it. Of course, labour is never entirely immobile, but it is very much more so in some places t h a n in others.
For instance, it is much more mobile in the United States than in
European countries, while, other things being equal, it is more
mobile in countries with a good system of employment exchanges
t h a n in countries which have no such system, and consequently
the success of a policy of public works planning may be said to
depend, at any rate to some extent, on the existence of a
network of exchanges.
The figures of actual public works put in hand in various
countries during the last ten years (see P a r t II), and of
the number of workmen to whom employment has been given in
t h a t way, show t h a t a big influence has been exerted on the labour
market. I t is true, of course, t h a t in many countries severe
unemployment has persisted in spite of the public works policy
as, for example, in Germany and Great Britain. But these
countries are suffering from abnormal conditions, and it will
hardly be disputed that, especially in the early days of the depression, unemployment would have been still worse if the public
works had not been put in hand earlier than they would have
been in more normal circumstances.
A further influence which may be exerted by the policy advocated lies outside the sphere of concrete results to be measured
in terms of employment and expenditure, but is none the less of
1
Hearings before the Committee on Education and Labour ; United States Senate,
pursuant to S. Res. 219 ; Dec. 1928, J a n . and Feb. 1929.

— 16 —
considerable importance. The postponement or advancement of
public works may act as a check or stimulus to the whole economic
system in somewhat the same way as a change in bank rate acts
as a warning or encouragement beyond its actual effect on the
price of money. At the beginning of a boom, when the market
becomes feverish, a stoppage in Government orders may prove a
salutary warning to private business. This was shown by the
action of the United States Government in 1923, when the sudden
reduction of Government enterprise, with the published explanation of its causes, was an important contributory factor in
checking a boom. Similarly in depression the lead given by
public authorities in expanding their capital expenditure may
encourage private business to follow suit, as is illustrated by the
programmes of capital extension initiated by the British railways
in 1923-1924 with very definite encouragement from the Government.
Moreover, when public works are instituted or orders for
supplies are given by public authorities, not only is employment
given to the men and women immediately concerned but also
to other persons engaged in making materials for the works
in question. How much additional employment is given in this
way is a matter of conjecture, but it is generally thought to be
about equal to the direct employment.
These are not the only indirect effects of putting public works
in hand. The men engaged on them will be in receipt of wages
which will certainly be considerably higher than any money they
could possibly receive as beneficiaries under an unemployment
insurance scheme or from the public assistance authorities or
from private charity. Their purchasing power will therefore be
increased and a stimulus thus given to trade as a whole.
On this point, Mr. Andrews, Secretary of the American Association for Labour Legislation, told the Senate Committee on
Commerce t h a t he considered the plan of a reserve fund would,
when applied, furnish immediate employment to a good many
thousand workers, and, what was equally important, it would,
because of the increased demand t h a t would be made upon materials from a t least twenty-seven different industries, result in the
employment of at least double that number of men. Moreover,
the stimulus that is given to these twenty-seven different industries
would give a purchasing power to many thousands of men employed
in them, and would thus stimulate a large number of other
industries.

— 17 —
As these men wear out gloves, for example, and clothing, it indirectly
stimulates.the textile industries and others in that way, and that . . . is
one of the things which we think ought to be most carefully considered,
one of the great values of this initial stimulus of the Federal Government
reaching out finally to the States and the city governments in their
plans, and at the same time reaching out to the private industries as
a stimulus to employment,' and then finally wider into the other industries which furnish materials for construction, materials used up by
the workers who are employed and give this new purchasing power 1.
When the public works policy in Great Britain was under
discussion in 1929, Messrs. J . M. Keynes [and H. D. Henderson 2
estimated t h a t 5,000 men would be employed directly and indirectly
per annum for every million pounds of total expenditure on roads.
This point had formed the subject of considerable controversy,
and the Minister of Transport in the Conservative Government,
replying to a question in the House of Commons, said that if
the works were undertaken permanently in urban areas on the
most economical terms, a figure of 2,000 men employed directly
on the work for a year for each million pounds expended would
probably be a reasonable estimate. In rural areas the figure might
be increased to 2,500. He added, however, t h a t it was commonly
assumed that for every man employed on the actual works, another
man would be indirectly employed in producing and transporting
materials, and in other ways.
Mr. Vernon Mund 3 tries to work out a velocity of money
technique in order to measure the effects of public work. He
says t h a t " the ultimate effect on the annual wage total of the
multiple spending of the construction payments will be determined
by the total amount of consumers' goods thereby called for.
This amount will in turn be determined by the number of times
t h a t the construction money is spent, and by the extent to which
it is spent for consumers' goods."
He accepts Professor Wesley Mitchell's 4 estimate t h a t the
average velocity of bank deposits in the United States varied
from 28.8 times a year in 1919 to 25.1 in 1925, and of coin and
paper money approximately 26. I t may therefore be assumed
t h a t the velocity of circulation of money as a whole in a year
of depression is about 25 times a year. An estimate has also
1
Hearing before the Committee on Commerce, United States Senate, on S. 2475,
April 192S.
2
Can Lloyd George Do It ?
3

4

M C N D , op.

cit.

Wesley MITCHELL : Business Cycles. National Bureau of Economic Research,
1928.

— 18 —
been made of the proportion of income received in the United
States which is spent in retail shops. This is the so-called NystromMann estimate which Professor Mitchell thinks is representative.
If it is accurate, the percentage was 54 per cent, in 1919, 58 per
cent, in 1920, 61 per cent, in 1921, 57 per cent, in 1922 and 50 per
cent, in 1923. I t may, therefore, be assumed t h a t 50 per cent.
of individual incomes is spent on consumers' goods in retail shops.
Mr. Mund adds t h a t " when money incomes of individuals
flow back through the retail shops, they generally flow from
the consumer to the retailer ; from the retailer to the wholesaler ;
from the wholesaler to the manufacturer ; from the manufacturer
to the producer of raw materials" ; and from the producer of raw
materials t o the consumers. On this basis, money has a turnover
of 5 in ripening one lot of consumers' goods. Inasmuch as money
normally has a turnover of 25 per year, it follows t h a t there will
be five batches of consumers' goods ripened " in a year, as a
result of the payments made for public works.
Mr. Mund concludes :
First, that the construction appropriation means income to the
recipients thereof ; second, that these recipients will spend 50 per cent.
of this income for consumers' goods in retail shops ; third, that 80 per
cent, of the value of a given batch of consumers' goods will be paid
out to labour in the form of wages ; fourth, that five batches of consumers' goods will be ripened in one year.
On the basis of these findings a general conclusion may be deduced.
The recipients of the construction appropriation will spend 50 per cent.
thereof for consumers' goods ; and 80 per cent, of the value of consumers'
goods goes to labour. Hence, 80 per cent, of 50 per cent, of the construction appropriation will equal the wages that, result from one batch of
consumers' goods. There are five batches of consumers' goods ripened
in one year ; hence, the total wages resulting from ripening consumers'
goods will be five times 80 per cent, of 50 per cent., or 200 per cent.
of the construction appropriation.
I t is true, as Mr. Mund himself points out, t h a t an allowance
must be made for the facts t h a t some purchases will simply
involve existing stocks and not necessitate any new output and
t h a t some of the money may be used to pay off indebtedness.
But he considers it probable t h a t the greater part of any
expenditure on construction will produce an annual wage increase
of about twice t h a t amount in the course of a year.
I n conclusion it may be said t h a t the facts and figures brought
forward in this section all point to the conclusion t h a t the advance
planning of public works can exert a considerable influence on
the situation of the labour market as affected by industrial fluctuations. There are differences in the estimates made as to the

— 19 —
amount of public works t h a t can be postponed or accelerated
and as to the extent to which the policy of advance planning
is influencing the unemployment situation, but these differences
affect the argument only slightly. Even if the influence were
a small one,- it would be worth while. I n reality, however, in
smaller depressions, at any rate, the influence would probably
be very great and in the larger depressions it would certainly
be quite appreciable.
LIMITS TO THE OPERATION OF THE P O I J C Y

I t can hardly be claimed t h a t the total expenditure of Governments, local authorities and public utility companies is so
inconsiderable t h a t its incidence in time has no effect on private
industry. The large sums spent annually by public authorities
constitute a huge demand for goods and services, and the transference of this demand, or a large part of it, from one year to
another could not fail to react on employment and industrial
activity.
I t must nevertheless be admitted t h a t the proposed policy
could operate only within certain limits, though these would not
necessarily render it ineffective. I n practice, not all public
expenditure can be postponed or advanced to correspond inversely
with the volume of industrial activity and employment.
All the regular administrative work of central and local authorities must be carried on continuously by permanent officials, and
this at once cuts out a large proportion of public expenditure
from the scope of the proposed policy. Again, the very considerable
demand of public authorities for consumption goods, such as
clothing, stationery and food, cannot be deferred or advanced
for any length of time owing to the perishable nature of such
goods, difficulties of storage or other causes. While this is no
doubt true, however, there may nevertheless be some scope even
here for compensating action over shorter periods. A suitable
distribution of orders each year would do much to diminish
seasonal unemployment in the trade concerned.
I t is further objected t h a t certain public work cannot be
postponed because it is urgently needed in the interests of public
health and safety. If a bridge is definitely unsafe for traffic it
must be strengthened or rebuilt at once. If a new centre of
population has grown up, the inhabitants cannot be left without'
drains, light, or roads because at the moment industry happens

— 20 —

to be prosperous and unemployment slight. There is no doubt
t h a t an actual emergency must be met as speedily as possible,
but the frequency of such sudden and urgent needs is less than
is sometimes thought. I n the first place urgency is always relative,
particularly where public expenditure is involved. New works,
extensions, and improvements are generally debated for some
time before they are actually carried out, and old works, such
as roads and buildings, in fact continue to be used for some time
after they are recognised as inadequate. A further and more
solid argument is that, although an emergency must be met
once it has arisen, it can often be foreseen and provided against.
Bridges do not as a rule suddenly become unsafe ; the increase
of traffic gradually increases the strain u p to the danger point.
New centres of population do not spring u p overnight. A policy
framed with a view to future as well as present needs would
take into account the probable growth of population, traffic,
etc., and if the present state of industry and employment calls
for an expansion of public work it should be possible to put
in hand work which will be required in a few years' time. I t
may be repeated that a long-period policy involves both anticipation and postponement.
These considerations are emphasised by Dr. Werner Stephan,
Ministerialrat in the German Ministry of Labour, who is, generally
speaking, in favour of the advance planning of public works 1.
His argument may be summarised as follows. He says t h a t in
certain cases as, for example, in connection with transport, it is
precisely in periods of great general activity that the needs increase,
while in the period of depression they diminish. So far as seasonal
fluctuations are concerned, the most important works to be
considered are building works. It has been suggested t h a t work
on public buildings should be carried out in the winter months
and reference is made in this connection to American experience.
But it is sometimes forgotten t h a t the climatic conditions in
Germany are not the same as in North America and they sometimes make such work impossible. On the other hand, something
can be done and it would certainly be very useful to know exactly
what has been done elsewhere. Difficulties arise when it is proposed
to postpone work which has already been begun. In the first
place, such half-finished works are liable to deteriorate and special
1

Beichsarbeitsblatt

(Unofficial Section), 5 Sept. 1929.

— 21 —
financial arrangements would have to be made for their
maintenance until the work is resumed. On the other hand
there would be a considerable loss of interest.
Another consideration has to be taken into account, says
Dr. Stephan. There are certain industries which are practically
entirely occupied in working for public authorities, such as those
engaged in building railway carriages, cloth for uniforms, and
the basalt industry (for road construction). Then there are
undoubtedly in other industries certain factories which for many
years have been similarly engaged. For these industries and
factories the proposal to advance or postpone the giving of
orders would be senseless. I t would indeed mean bringing these
factories to a standstill during a part of the year and at
other times giving them so much work t o do t h a t they would
hardly be able to do it. I t might be said that from the point
of view of industry as a whole this might not be a bad thing.
If these industries and factories received fewer orders during
periods of favourable economic conditions capital and labour
which would otherwise be utilised in these factories would have
no difficulty in finding employment elsewhere. On the other
hand during a period of depression these industries would
have no difficulty in drawing capital and labour from other
industries. This, however, overlooks the fact that such considerable movements of capital and labour are not so easily
carried out as might seem likely at first sight. So far as the labour
is concerned, moreover, such movements would not be desirable
from the social and demographic points of view. What public
authorities can do is to ensure as far as possible that these industries
are able to work more regularly throughout the year.
This point is also dealt with by Mr. Edgard Milhaud, of the
University of Geneva. He is quite favourable to the idea of
advance planning, but he asks :
Do we not thereby overlook another series of measures that might
possibly be of importance for the régularisation of economic life ?
An example will make our meaning clear. It relates to orders for
rolling stock and contrasts the opposite policies followed before the
war by the French railway companies and the railway administrations
of the German States. The first, influenced by the economic circumstances of the moment, gave now trifling and now enormous orders,
and accentuated thus any difficulties in the French industry of mechanical
construction, whilst the other, by the regularity of its orders, ensured
the normal development of these industries in Germany. What role
shall we assign in a policy of orders and public works aiming at the

— 22 —
régularisation of the general economic life, on the one hand, to the
method of constancy or of regular and continuous progression and,
on the other, to the method of compensatory fluctuations ? 1
I t has, indeed, been suggested t h a t a public works policy
should aim entirely at regularising the orders of public authorities,
thus setting a good example to private industry, and t h a t a policy
of postponing or advancing public works implies recognition
of the inevitable nature of industrial fluctuations, and will thus
tend to perpetuate them. This suggestion is based on a logical
misconception by creating a false antithesis between stabilisation
and compensation. The proposal discussed in this report is for
compensation of fluctuations in private industry by inverse
fluctuations in public work, thus giving a general stimulus or
check to the economic system as a whole. The public works
policy would be a force acting in the opposite direction to the
forces of the trade cycle and would vary with them. The less
private industry fluctuates, the less will the volume of public
work vary. One may look forward to a progressive flattening
out of industrial fluctuations, through the operation of many
factors besides the policy here discussed, and pari passu the
inverse fluctuations of public work will flatten out until ideally
the fluctuations in both will disappear. The two curves oscillating
about each other will eventually arrive at a straight line. There is
thus no real antithesis between the two policies, compensation
being merely a more vigorous method of stabilisation than mere
régularisation of public orders.
When every objection has been met, there remains a great
deal of building and construction work such as the erection of
new public buildings, schools, railways, post offices, and electrical
development, road work, slum clearance, land drainage, orders
for office and school equipment and so on, which can without
insuperable difficulty be planned over a period of years.
T H E IMPORTANCE OF PLANNING I N ADVANCE

I t is an essential feature of the policy that provision should
be made in advance, because otherwise it may take many
months after the need has arisen before the necessary work can
be started. Dr. Lubin referred to the testimony of a witness
before the Committee on Education and Labour of the United
States Senate to the effect t h a t in Massachusetts, during the
1

Annals of Collective Economy, Geneva, April-July 1927, pp. 105-106.

— 23 —
depression of 1914, an attempt was made to drain one of the
swamp areas of the State in order t h a t employment might be
given to jobless men.
In this case, the absence of engineering reports and the need for the
formulation of plans made it impossible to do anything for a year and a
half. Without advance planning of this type, (anything) from six months
to a year is taken up before any work can be done 1.
Column D of the table reproduced on page 13 above gives an
estimate of the value of public construction in the United States
from 1919 to 1925. It shows t h a t during the crisis of 1920-1921
after the War the significant increase in public works in t h a t
country did not come until 1922.
This delay was inevitable. The cities had not been following a plan
of deferred or advance planning, and all of the preliminary work had
to be done after the decision had been made to expand the new construction work. The year 1921 was the year of severe depression
and unemployment, and to have been most helpful the expansion
of public work should have taken place in that year. Nevertheless,
the belated work probably shortened the depression and assisted in
bringing about the revival of business in 1922 2.
An even more striking statement on this subject is t h a t of
Mr. Otto T. Mallery before the Senate Committee on Education
and Labour. He asked :
Why is it that after ten years of effort, when in 1927 unemployment was almost half as great as in 1921, no special effort
can be reported by New York, Chicago, Philadelphia, Detroit,
Boston, San Francisco ? How is it that Wisconsin, though willing,
found itself without quickly available funds ? Why is it that California,
with an Emergency Public Works Commission, made no use of it ?
Professor F. G. Dickinson, of the University of Illinois, reports these
facts, and that in general in the first half of 1928, in spite of many
attempts to persuade public officials, there was no appreciable result.
Even in New York State, where an energetic and convinced
attempt was suddenly made, the net increase in public works
was only 8 per cent, or less than the average 10 per cent, increase
for the whole country for the same period, which cannot be
attributed to a policy of long-range planning of public works.
Planning in advance is necessary for another reason, namely
t h a t the efficacy of a public works policy on the lines discussed
in this report depends to a very large extent on correct " timing ".
The Committee on Recent Economic Changes of the President's
1

Hearings before the Committee on Education and Labour, United States Senate,
pursuant to S. Res. 219, Dec. 1928, Jan. and Feb. 1929.
2

MUKD, op.

eü.

— 24 —
Conference on Unemployment in the United States, in its recent
report 1 , considers t h e timing factor the most important of all :
The amount of public construction which it is possible to push
forward in order to influence employment and the trend of business
in a period of recession is less important than the timing of the acceleration. The psychological effect of advancing public construction
at the right time suggests that here is to be found an important factor
in the problem of maintaining a reasonable economic balance. If
properly timed as the pendulum of employment starts to swing in an
unfavourable direction, the influence of the prompt expedition of
public works is effective out of all proportion to its size. Timeliness
multiplies the effectiveness of each project accelerated.
Do PUBLIC W O R K S D I V E R T M O N E Y FROM INDUSTRY AND T R A D E ?

A serious objection has been raised by some people to a n y
policy of public works as a remedy for unemployment, namely,
t h a t it is economically unsound because it merely diverts money
from industry and trade to the public works and does not a d d
to the sum total of employment at all.
This argument has been used even in connection with a strict
policy of planning public works in advance in such a way as t o
provide employment during a depression. Yet in t h a t case it
would seem that the very object of the policy is to divert money
from Government purposes t o industry and trade during prosperity
and t o divert it back to Government purposes during the depression.
Professor Bowley, when he first proposed the advance planning
of public works to the British Poor Law Commission in 1909
received much support from Professor Pigou, who dealt with the
question in his Wealth and Welfare (published in 1912). Professor
Pigou returned to the subject after the war in a chapter on " Correctives of the Trade Cycle ", which appeared in a book entitled
Is Unemployment Inevitable. ? In this chapter he referred to the
argument that' reserved public works can only be carried out during
a depression at the cost of raising more money from the public
and so causing private expenditure to contract as much as public
expenditure is expanded. To this he has two replies :
(1) t h a t a proportion a t least of the funds required would
be provided by the reduction of unemployment relief ; and
(2) that, in so far as new funds are wanted, they can be
obtained by creating new bank credits or rather by
preventing the net volume of these credits from being
cut down so far as they would otherwise have been.
1

NATIONAL BUBEAU OF ECONOMIC R E S E A R C H : Planning

Works.

and Control of Public

— 25 —

This argument brought Mr. R. G. Hawtrey into the field 1.
Professor Pigou's first argument, he says, begs the question, for
it is not certain t h a t unemployment will be decreased at all, and if
it is not, no funds can be diverted from relief. The second argument
is sound, viz. t h a t expenditure on public works, if accompanied
by a creation of credit, will give employment. But then the
same reasoning shows t h a t a creation of credit, unaccompanied
by any expenditure on public works, would be equally effective
in giving employment. The public works are merely a piece of
ritual convenient to people who want to be able to say they are
doing something, but otherwise irrelevant.
But if unemployment continues for a long period the situation
becomes different. Sooner or later a point is reached at which
there are no more public works on the programmes of the authorities concerned. What is to be done then ? In several countries
during the post-war depression special works have been undertaken
which either would not have been undertaken at all in normal
circumstances or at any rate would only have been undertaken
at a very much later date year by year as resources became
available. At this point the question arises whether it is economically desirable to continue with the public works programme,
or whether such a programme interferes with the gradual improvement in the general economic situation of the country concerned.
I t is of course clear t h a t where, as in Great Britain and Germany
in the post-war period for instance, a prolonged depression occurs
due to deep causes, such as the loss of markets, the disproportion
between costs and prices, out-of-date equipment, shortage of
capital, the only real remedy is to re-establish the industry and
trade of the country and if there are certain industries, like the
great export industries in Great Britain, which remain nevertheless
depressed, steps must be taken to find alternative means of
employing the labour displaced. Public works cannot provide this
alternative employment permanently, but it is maintained t h a t
they can and should provide it temporarily while other measures
are being taken to deal with fundamental causes.
A big controversy has taken place on this question, especially
in Germany and Great Britain. Thus Professor Gustav Cassel,
writing on the situation in Germany, considers that in general,
money taken for the purpose of financing relief works (he gives
1
" Public Expenditure and the Demand for Labour. " First published in
Economica in 1925 and reprinted in his book Trade and Credit, published by
Longmans, Green and Co., 1928.

— 26 —
no definition of this term) is simply diverted from other purposes
equally beneficial from the point of view of the labour market,
and therefore it has no effect on the situation a t all. H e points
out, however, t h a t as some industries require more capital in
relation to the labour employed t h a n others, it may be possible
for the public authorities, by directing capital to those industries
requiring comparatively little capital, to increase the total demand
for labour. Work undertaken in this way should consist of the
production of consumption goods which can be sold and thus
money will be available for further works of a similar character 1.
I n Great Britain, some confusion was caused by a belief t h a t
an extensive programme of public works was being proposed as
the real remedy rather t h a n as a temporary palliative. I t seems
desirable to get this point quite clear — t h a t public works are not
a cure for deep-seated causes of unemployment, but are a desirable
means of providing employment for as large a number as
possible of the unemployed while other steps are being taken to
improve the economic situation, such as rationalisation, lowering
of costs, international trade agreements, tariff agreements and
so on. But if public works are not in themselves a cure for
economic depression they may help in bringing about a permanent
revival of industry by keeping in use money which is otherwise
lying idle or causing the central bank to create credit or to refrain
from curtailing credit.
I t is interesting to review briefly the principal arguments
brought forward in the course of the discussion in Great Britain
just before and after the general election of 1929.
A memorandum " prepared by the Treasury on the directions
of the Chancellor of the Exchequer ", which forms part of the
Conservative reply to the Liberal proposals 2 , criticises the financial
aspects of those proposals and maintains t h a t funds could only
be prevented from going abroad " by offering the inducement
of higher rates at home, and the harm t h a t such higher
rates would inflict on trade and employment would certainly
counterbalance any benefit they got from diverting funds
from foreign to home investment ". I t seems clear, in these
circumstances, adds the memorandum, t h a t " a very large proportion of any additional Government borrowings can only be
procured without inflation by diverting money which otherwise
1

Soziale Praxis, 21 Oct. 1926.
The Liberal P a r t y proposed the spending of £200,000,000 on special public
works during a period of two years (see p . 146).
3

— 27 —
would be taken soon by home industry. That being so, the prospecte
of adding largely, by the means suggested, to the existing volume
of employment, practically disappear. " If, however, it were
possible to secure for home development funds a t present going
abroad, t h a t would " stimulate internal consumption and tend
to raise the level of wages and prices, and it would encourage
imports and make things more difficult for the export trades, which
are most susceptible to the competition of .foreign goods ". Admittedly, adds the memorandum, " in the exceptional economic
circumstances of the present time, these arguments must not be
overstressed, but the reactions to which they draw attention should
not be overlooked " 1.
Mr. Keynes has since dealt with this point at some length
in a letter to The Times, published in the issue of 7 August 1929.
He said there were a number of different sources from which the
resources for a development programme of say £1,000,000 gross
outlay might be derived. They are as follows :
(1) An unemployed man probably spends about 50 per cent, of
what he would spend if employed. About half the wages bill would
be provided through that 50 per cent, no longer having to be obtained
from the insurance fund, etc.
(2) Part of the additional expenditure of the newly employed
will serve to increase employment in home industries which produce
consumption goods, and this additional home production wül be a
net addition to the national resources available to meet the additional
consumption of persons becoming directly or indirectly employed.
(3) Not the whole of the gross outlay on development schemes
eventuates in increased consumption. Part comes back to the Treasury
in additional receipts from taxation, part takes the form of contractors'
profits with which the latter can finance themselves, etc.
(4) The development schemes will involve some increase in the
importation of raw materials and food, most of which must be provided
either by a reduction in foreign lending, by export of gold, or by Great
Britain borrowing abroad as an offset to the gross amount of foreign
lending.
(5) In so far as the greater volume of employment and business
means that wage earners carry in their pockets increased purchasing
power in bank notes and that business men keep at their banks an
increased purchasing power in bank deposits, there can be an increased
volume of credit of an entirely innocent and non-inflationary description.
(6) Finally, there is the expedient of an increase of credit which
would have the effect of causing prices to rise or of preventing them
from falling. The former would mean bringing about a certain redistribution of consuming power in the community.
Mr. Keynes maintains t h a t no single one of these sources has
any clear tendency to divert employment from the previously
1

Cmd. 3331.

— 28 —

employed. Not even does the last expedient have this effect, for
although it diverts consumption it does not divert employment.
Diversion of employment would only occur if the banking system
refused to allow the expansion of credit under (5) which is in all
circumstances a sine qua non of increased industrial activity,
and the expansion under (6) necessary to make good the deficiency
of resources after allowing for what accrues under (1), (2), (3), (4)
and (5), plus additional voluntary savings. Mr. Keynes estimates
t h a t sources (1), (2), (3) and (5) would furnish not less than 75
per cent, of the gross outlay on development schemes of a type
which do not involve exceptionally large imports of raw material.
This would leave a balance of 25 per cent, to be obtained from
(4) and (6). The execution of these ideas does absolutely require
some moderate increase in the basis of credit. For without some
such increase the diversion of employment which many people
fear might quite possibly occur, at least to some extent. Moreover,
while an increase of credit unaccompanied by a development
programme might become dangerous by rendering the bank
rate ineffective, an increase of credit accompanied by borrowing
for development purposes, and only permitted to occur in so far
as it was required as an adjunct of such borrowing, need have no
such effect.
A reply to these views was made by Mr. Frank Morris, who
said t h a t an alternative method of obtaining the money required
for the public works was t h a t of taxation. All these methods,
however, simply meant t h a t while the unemployed were to be
given work the rest of the nation would suffer loss of purchasing
power. Mr. Keynes, he says, admits t h a t his scheme would involve
some increase in the importation of food ; he thinks t h a t this can
be financed by reduced foreign lending. Mr. Morris replies to
this that any reduction in foreign loans, the proceeds of which
are spent at home, involves reduced trade for the export industries.
Moreover, in paragraph (6) Mr. Keynes agrees that any increase
in credits, unless such increase is balanced by voluntary savings,
has the effect of causing prices to rise. Mr. Morris thinks that the
same result would be achieved by a policy of taxation and t h a t
t h a t method would be preferable, but he also considers t h a t any
assistance which development schemes may give to the production
resources of the community in the distant future can only be
given by an immediate reduction in the standard of living of
the community who have to provide the wherewithal directly
or indirectly for the financing of these schemes.

— 29 —
Mr. Keynes, in his reply to this, states t h a t there are only two
means open to Britain to get its national economy into better
equilibrium ; one is an all-round reduction of real efficiency wages,
the other is an increase of home investment. The former is impracticable for political and social reasons ; therefore the latter should
be tried. I t is true t h a t national development schemes will cause a
certain rise in prices, but their effect in this direction is likely to be
small and innocuous as compared with their effect on employment 1 .
Professor Henry Clay, although he does not share Mr. Keynes'
optimistic views as to the cumulative effects of public works on
trade activity, also thinks t h a t the Treasury objection does not
appear to be well-founded. If the ordinary methods of credit
expansion have been applied, he says, t h a t is to say " the effect
of a low bank rate reinforced by purchases of securities on the part
of the bank in the open market, and proved insufficient restoratives,
there would be a case for having recourse to Government borrowing ". As a matter of fact, he continues, Great Britain has a
superfluity of liquid resources, unlike certain other countries, such
as Germany, for instance, and this superfluity " is used to finance
speculative issues and to sustain an inflated level of industrial
security prices ". Moreover the ordinary inducements to credit
expansion cannot be used. " I t is impossible for the bank to lower
bank rate or supply the market with money by purchase of securities because the money so provided would simply be drawn away
to New York. " He therefore goes back t o the need for Government
borrowing and points out t h a t " the accumulation of bank deposits
suggests t h a t openings for investments are lagging behind savings.
If a series of Government development loans did divert some
savings from the type of speculative issue t h a t has found most
favour with investors in recent years, it would be a benefit to
the investors, who would be less likely to lose their investment,
and to the country, which would have something, even if only
roads and houses, to show for the expenditure of the savings. " 2
Mr. P . W. Martin, while pointing out t h a t public works will be
useful even if they do no more t h a n attract idle bank balances,
maintains t h a t they would be very much more effective if used to
being about an absolute increase in purchasing power.
1
The Times, 5, 7, 9, 15 and 16 Aug. 1929. The theoretical basis of Mr. Keynes'
argument t h a t public works m a y constitute not merely a palliative but a positive
remedy for trade depression is set out in detail in his Treatise on Money, which
appeared just as this- report was going t o press.
2
Henry C L A Y : The Post-War Unemployment Problem. Macmillan, 1929.

— 30 —
Supposing, however, that these difficulties were surmounted, the
influence of an extensive public works programme would still not
appear to be very great. Such works are ordinarily paid for out of
taxation or public loan. This means, in effect, that purchasing power
is taken from certain members of the community (the taxpayers and
the subscribers to loans) and handed over to other members of the
community, viz. the men employed on the works in question. There is,
therefore, no direct influx of new purchasing power and the deficiency
of purchasing power basic to the recession in business activity is
not offset. This is not to say that the situation remains totally
unchanged as a result of a large extension of public works. In a
variety of ways one of the factors influencing the relation between
purchasing power and goods for sale may be affected. For instance,
a Government loan for the purpose of enlarging xhe public works
programme, by attracting idle bank balanc%s, may have the effect of
reducing the volume of purchasing power held up in the community
and so bring into action one of the factors making for a superabundance of purchasing power and consequent revival of business
activity. . , .
But for all that an insufficiency of purchasing power is hardly likely
to be directly counteracted by such means as these, and even if it were
counteracted it would only be in part and, necessarily, late in the day.
What would appear to l)e wanted is some means of bringing about not
merely a transfer of purchasing power from one group of individuals
to another, but an absolute increase in purchasing power when such
increase is required. What we need, in fact, is : (a) the ability to increase
the total quantity of money in circulation, (b) some mechanism
for injecting this new money into circulation on the buying side of the
market, and (c) some means of knowing when and to what extent
purchasing power should be thus injected 1.
Finally, it is interesting to note what the experience of Governments has been in this matter. Generally speaking, this has been
t o the effect t h a t it has been possible t o raise money in the capital
market for public works without increasing the difficulties of
other enterprises in raising capital for their own purposes.
The British Government, however, informed the International
Labour Office in 1927 t h a t " while it is not possible to give any specific indications t h a t competition arose with other enterprises owing
to the raising by the State of moneys for the various State-assisted
unemployment projects, the decision taken b y the Government
at the end of 1925 to restrict grants for relief schemes was based
mainly on the view, that, the supply of capital in the country being
limited, it was undesirable t o divert any appreciable proportion
of this supply from normal trade channels ".
The Danish Government stated t h a t no doubt difficulties of
this kind had been met with in Denmark a t times, but hardly
to any great extent, for when special methods had been adopted
1
P. W. MABTTN : The Problem of Maintaining Purchasing Power, Chapter XV
(to be published shortly).

— 31 —
to raise loans, care had usually been taken to obtain funds not
only for unemployment works, but also for other works and purposes
for which loans were considered necessary.
I n South Australia " no special instances can be cited where
public works have been put in hand at a period earlier than was
originally anticipated, thus involving competition with other
enterprises in the money market. I t is known, of course, that
Government loan works must to some extent compete with private
enterprise for the supplies of money t h a t may be available from
time to time and in framing the Government loan programmes
regard is had to the effect which the prosecution of such programmes
might have in the direction of draining the local money market
of available supplies of money. "
SUMMARY

I t appears possible to draw certain conclusions from the facts
set forth in this chapter which explain the economic justification
for the policy of advance planning.
I n the first place, the policy is one of suitably distributing in
time the execution of the ordinary works and orders for supplies
required by public authorities and public utility undertakings.
I n connection with seasonal variations this policy may sometimes
be more costly, but in connection with cyclical fluctuations it
would almost certainly be more economical than would be the
case if no systematic planning took place.
The orders of public authorities are very considerable, and any
action taken with regard to them must have a decided effect on
the labour market. If, as has been estimated, production in a
depression is about 15 to 20 per cent, less t h a n in the best years,
and if the orders of public authorities are from 5 to 10 per cent.
of the total production, the result of shifting these orders from one
period to another must be appreciable.
There are, however, certain limits to the operation of the policy
for not all the orders of public authorities can be postponed or
advanced, but it has been shown t h a t sufficient can be done in
this way to make a real difference to the labour market. I t is
essential, however, t h a t the necessary steps should really be taken
in advance and not left until the crisis arrives, for by that time
it will be too late to have an effective influence on the labour
market.
There has been a great deal of controversy as to whether
public works do not merely divert money from private industry to

— 32 —

Government purposes without adding in any way to employment.
But if the public works are of such a kind that they would be carried
out in any case, this argument is inoperative, and if they are not,
they are merely relief works. Of course, in a long-continued depression there is a point beyond which doubts may be legitimately
expressed as to the desirability of continuing the execution of
public works which would not be put in hand for a long time in
the ordinary course of events. But as long as there is useful development work to be done, there does not appear to be any sound
economic reason for not doing it, and the benefit to the labour
market in that case depends more on the policy pursued by the
banking system than on anything else.

CHAPTER

n

GENERAL SURVEY OF MEASURES ADOPTED

The measures which have been adopted by the various Governments and other authorities are of two kinds :
(1) postponing public works in times of great activity with
a view to reserving them for a subsequent period of
slackened economic activity, and
(2) putting in hand during a period of unemployment public
works which would under ordinary circumstances have
been undertaken at some later time.
The former are by far the most important from the point of
view of the advance planning of public works. I t is fairly common
to find Governments during periods of unemployment putting in
hand public works which would normally have been undertaken
at some later time, but it is only if public authorities postpone
some of their works and orders for periods of unemployment
t h a t there is evidence of systematic planning.
In fact, comparatively little has been done on these lines so
far as planning over a period of years is concerned. On the other
hand, certain Governments and local authorities distribute their
orders over each year in such a way as to even out to some extent
seasonal fluctuations in unemployment. This may perhaps be
considered as an experiment and, if it proves successful, may be
the forerunner of a wider application of the policy to cover a
longer period.
A brief summary of the more important measures of this kind
which have been adopted is given below ; it is based for the most part
on information supplied by the Governments concerned. I t shows
t h a t there is a certain confusion in many people's minds between
the postponement and acceleration of ordinary public works and
the establishment of relief works. I t must therefore be emphasised
once more t h a t what we are mainly concerned with in this
report are public works in the strict sense of the term, and t h a t
relief works are an entirely different matter 1.
1

3

Cf. Part n .

— 34 —
The earliest example of national measures known to us is to
be found in France, where a systematic distribution of public
works was first made the subject of Government circulars dated
23 February 1897 and 26 November 1900. Moreover, in 1902 and
again in 1908 the Minister of Public Works invited the railway
companies to establish their programmes well in advance so as
to be able to distribute their orders more satisfactorily. Special
reference may be made to a Presidential Decree of 31 March 1908
issued on the initiative of M. René Viviani, then Minister of
Labour, setting up " a commission to enquire into the unemployment situation resulting from periodical economic crises and the
steps to be taken to improve it ". In the memorandum accompanying this Decree, it was stated t h a t the Commission " would above
all be entrusted with the task of examining the possibility of
distributing the work to be carried out by public administrations
or on their behalf in such a manner as to balance to a certain
extent the depression in the labour market occurring in times
of crisis. " I t was further stated t h a t there existed certain public
works " which might either be adjourned or advanced without
causing excessive inconvenience, and which could be carried out
much more easily and economically during periods of depression
t h a n during periods of great commercial and industrial activity."
Certain recommendations were made by this Commission
affecting more especially the financial aspects of the problem
and these are referred to elsewhere in this r e p o r t 1 .
Little beyond this seems to have been done until February
1927, when the National Economic Council, at the request of
the Government, drew up a programme especially designed for
the possibility of general unemployment, to which it attached a
plan of the works ready to be put in hand should the crisis, then
in its early stages, show signs of developing.
Towards the end of November 1929, a Bill for " the improvement of the national equipment " was presented by the Government for the purpose of authorising, in addition to the expenditure
provided by the Finance Acts, an expenditure of five thousand
million francs for various purposes in connection with agriculture,
public welfare, education, industry and commerce. According to
the memorandum accompanying the Bill, the greater part of the
expenditure provided for was to be used for the immediate
carrying out of a certain number of public works, some of which
1

See Chapter IV.

— 35 —
were already under way or under consideration, particularly in
seaports.
At the request of the Government, the National Economic
Council gave its opinion on the Bill at the beginning of January
1930. It stated that the Government programme had been drawn
up with the object of clearing off arrears of fifteen years in respect
of public works, and t h a t such a situation justified the application
of exceptional financial measures such as the use of Treasury
funds.
The Council further declared itself in favour of a programme
capable of being rapidly terminated. The cost of undertaking
an enterprise of this kind would be less in proportion to the time
occupied in its construction and the rapidity with which it could
be put into full working order.
The Council added, however,
It is none the less essential that in deciding the time in which the
works are to be carried out, the public authorities should bear in mind
the economic state of the market. The occurrence of economic crises
must not be lost sight of, and the possibility of diminishing the ill-effects
of such crises by putting in hand extensive public works should be
borne in mind.
The Council further emphasised the necessity for doing away
with " red tape " if full effect were to be given to the financial
effort of the Government, for urgent works should not be held up
by the complicated procedure usually followed 1.
Moreover, on 3 February 1930, a superior consultative
committee for fortifications was set up in the War Ministry by
an inter-Departmental Decree. The task of this committee is to
give advice with regard to the possible influence which the carrying
out of the programme of fortifications voted by Parliament might
have on the national economy, on the cost of works, material,
etc., as well as on the interests of organisations and individuals,
and on the possibility of recruiting and organising the necessary
labour. The committee includes, among other members, a representative of the Ministry of Labour and two representatives of the
National Economic Council.
According to a letter from the Mayor of Lyons, dated 24
October 1927, the municipal council of t h a t town approved, as
early as 1909, successive programmes of public works (construction
of municipal buildings, and various installations and improve1
Journal officiel, 19 Dec. 1929, Documents parlementaires, Chambre des Députés,
pp. 1 to 6, and Journal officiel, 5 J a n . 1930, pp. 195-200.

— 36 —
ments) of which the total cost reached 238,000,000 francs in 1927.
The necessary funds were raised by a series of loans. Moreover,
considerable other expenditure along these lines was paid for as
it arose out of the general budget funds. According to the same
letter :
Without losing sight of its chief objective, which is to improve as
rapidly as possible the standard of living of its population, the municipality of Lyons has always endeavoured as far as possible to exercise
a stabilising influence on the labour market. Thus, in times of depression,
the labour force employed on wc rk for the town is considerably increased.
Further, in order to increase the efficiency of these measures, works
which in other circumstances might have been postponed, have been
specially put in hand in order to absorb the unemployed. . . . There
remains much to be done along these lines, but it must be borne in mind
that many unemployed workers are not qualified to carry out the
work offered. The financial situation of the communes, too, has become
so difficult that for the most part they are not in a position to constitute
reserve funds for the purpose of meeting expenditure which might be
incurred in times of economic depression 1.
*

*

I n 1904 the Prussian Minister of Commerce issued a circular
concerning the organisation of the provision of employment,
which ran as follows :
We further request you to have the goodness to direct your attention
to those measures which are calculated to prevent the occurrence of
want of work on a wide scale or to mitigate its effects when it is unavoidable. Not only the State, but also the provinces, districts and communes, in their capacity as employers, are bound to do their utmost
to counteract the evil in question by paying general and methodical
attention to the suitable distribution and regulation of the works to
be carried out for their account. In almost every industrial establishment of importance there are tasks which do not absolutely need to
be performed at a fixed time ; just as in every State and communal
administration there are works for the allotment of which the time
may, within certain limits, be freely chosen according to circumstances.
If all public administrations, in making their arrangements, would
take timely care to choose for such works times in which want of employment is to be expected, and if, especially, works in which unemployed
people of all kinds, including, in particular, unskilled labourers, can be
made use of, were reserved for such times of threatening want of employment as have almost regularly recurred of late in winter in the larger
towns and industrial centres, the real occurrence of. widespread want
of employment could certainly be prevented in many cases and serious
distress warded off z .
1

Les Annales de VEconomie collective, Geneva, Jan.-April 1928, p p . 94-96.
Report on Agencies and Methods for Dealing with Unemployment in Foreign
Countries, p . 108. Quoted in P I G O U : Industrial Fluctuations, pp. 330-331.
2

— 37 —
j

I t was not until 1927 t h a t the question was again
systematically by an official body in Germany. I n
discussions took place in the Provisional Federal
Council, which, on 26 July, adopted the following
presented by its Economic Committee :

considered
t h a t year
Economic
resolution

The Economic Committee of the Provisional Economic Council
referring to its resolution of 24 March 1926 invites the Federal Government to get into touch with the administrations of the Federal railways,
Federal post office and all other Federal authorities which give important
orders to industry and also with the State Governments and the representatives of municipalities, with a view to finding ways and means
of rendering the distribution of orders by the authorities to industry
more systematic from a general economic point of view. In particular,
a serious effort should be made to prevent a too considerable piling
up of hasty orders and to ensure greater regularity in those branches
of German industry which are more especially concerned with the
orders of public authorities.
A special Sub-Committee of the Council
(Arbeitsausschuss)
was set up under the chairmanship of Dr. Reipert. I t drew u p
a questionnaire which was sent to the various ministries and
other public authorities concerned. Replies were received from
these bodies and evidence was also given by employers' and
workers' representatives. A report was prepared which was
unanimously adopted by the Provisional Economic Council on
23 April 1928.
The report was very favourable to the idea of the advance
planning of public works and made a number of practical recommendations to the Government, some of which have already been
carried out *.
I n consequence of the considerable improvement in t h e
economic position and in the situation of the labour market in the
spring and summer of 1927, the Federal Ministry of Labour
requested the most important Departments, both Federal and
provincial, which have orders to place for construction or supplies,
to postpone their orders as far as possible till the winter months.
A similar request was sent to the Federal Railway Company.
The Government also requested provincial and municipal authorities to interrupt, or at least to slow down, public relief works
as far as possible while employment was plentiful, and, on the
other hand, to prepare for extensive relief works during the
winter.
As a result, no doubt, of the recommendations of the Provi1

See below Chapter I I I .

— 38 —

sional Economic Council, the German Minister of Labour at the
beginning of 1930 requested the various Government Departments
to take account of seasonal and cyclical fluctuations in the placing
of contracts. I t is also interesting to note that in the Rhineland
the principal public authorities have entered into direct negotiations with the employers in the basalt industry with a view
to a suitable distribution of orders in time.
*

*

*

In Finland, the House of Representatives considered in 1908
a resolution for the better organisation of public works by the
State with a view to such works being undertaken during different
years and seasons so as not to increase unemployment, but on the
contrary to mitigate it. This question was studied by a commission
composed mainly of the chiefs of the Central Administration.
In a report presented in 1914 this Commission observed t h a t the
stabilising effect of public works on the labour market could not
be considered as very important in Finland in view of the fact
t h a t only a very small proportion of the workmen there, namely.
approximately 4 per cent., were engaged on public works. The
Commission proposed, however, certain measures with a view to
dealing with this question. Then the war broke out and the whole
matter was adjourned sine die.
As a result of the Washington Recommendation of 1919, the
question of introducing permanent regulations with regard to the
postponement or advancing of public works was considered. In
a communication presented to the House of Representatives on
26 January 1921, the Government stated that it had decided to
organise State works as far as possible in harmony with the methods
laid down in the Washington Recommendation. The necessary
measures which in the meantime were taken directly by the
central administrations concerned were confined as a rule to
organising in different places works which had already been
provided for in the budget or special reserve works which it had
been intended to carry out in times of unemployment.
I t was not, however, possible to establish in this way a special system for the reservation of public works to periods of
unemployment. Consequently the Council of Ministers decided
on 1 February 1927 to give the central administrations instructions to follow the lines of the Washington Recommendation in
the public works programmes which they presented at the time

— 39 —
of the annual budget, and, with this object in view, to present
two estimates for all public works to be carried out in case of
unemployment. These two estimates would show the cost of
carrying out the works a t a time of unemployment and at a more
suitable time from the point of view of the work itself respectively.
The result has been seen mainly in connection with seasonal
unemployment. Thus certain works which were carried out
by the railway administration were inscribed in the budget for
a sum necessary to enable the work to be done in winter.
On the other hand, in rural districts no public works have
been adjourned from one year to another, and not many examples
can be given of works postponed from one season to another.
The construction of bridges and the stone cutting necessary for
them are done during the winter. In Northern Ostrobothnia
and in Lapland the carting of gravel for the repair of main roads
is also carried out during the second half of the winter, when the
work in the forests is finished. The work of wood-cutting, which
is done by order of the Forestry Administration, and which is
fairly important from the point of view of the labour market
in the northern part of Finland, is mostly carried out during the
second half of the winter, when wood cutting by private individuals
and firms is already practically finished.
The more important urban communes also do their best to
carry out their work during the winter, especially the making
of roads and any other work which it is possible to do at t h a t
time of the year. There have also been occasions on which urban
communes have adjourned the execution of public works from
one budgetary period to another owing to the fact that anticipated
unemployment did not make its appearance.
*

*

*

In Great Britain, the Royal Commission on the Poor Law
of 1909 issued both a majority and a minority report and in
both of them recommendations on the subject were made. The
majority proposal was as follows :
So-far as it may be inevitable to employ occasionally other than
their own regular workers, or to place contracts, we think that it may
be desirable for public authorities to arrange such irregular work so
that, if possible, it comes upon the labour market at a time when
ordinary regular work is slack. This point has been well put by Professor
Chapman, who suggests that, so far as the public authorities' demand
for labour fluctuates, it is desirable to liberate such demand from the

— 40 —
influences of good and bad trade and seasonality, and then deliberately
to attempt to make it vary inversely with the demand in the open
market 1 .
The minority of the Commission on the Poor Law went much
further in their recommendations. They considered t h a t out
of the 150 millions sterling annually expended by the national
and local authorities on works and services, it would be possible
to earmark at least £4,000,000 per year to be expended " out
of loan, on a ten years' programme at unequal annual rates t o
the extent even of 10 or 15 millions in a single year at those periods
when the National Labour Exchange (recommended elsewhere
in the Report) reported t h a t the number of able-bodied applicants
for whom no places could be found anywhere in the United
Kingdom was rising above the normal level. . . . At the same
time the local authorities could be incited to undertake their
ordinary municipal undertakings of a capital nature, whether
tramways or waterworks, public baths or electric power stations,
artisans' dwellings or town halls, drainage works or street improvements, to a greater extent in the years of slackness t h a n
in the years of good trade. " 2
A policy on similar lines won the approval of the Royal
Commissioners on Afforestation. They were concerned to satisfy
themselves t h a t " t h a t part of sylvicultural work which requires
most labour, namely, the establishment of the forest, is of a
sufficiently flexible character t o be capable of being pushed on
when labour is abundant, and suspended when labour is scarce ",
and they advised that it should in fact be pushed on, and suspended,
on these principles 3.
Great Britain is one of the few countries which have placed
laws relating to advance planning on their statute books. Very
little use has, however, been made of the relevant clauses.
The Development and Road Fund Act, 1909, made provision
for the establishment of a Development Commission with power
not only to assist in the execution of public works, but also to
draw u p plans beforehand having regard to the general state of
employment. Section 1 of the Act lays down t h a t :
1
Report of the Royal Commission on the Poor Law, p. 41. Quoted in PIGOU :
Industrial Fluctuations, Chapter X I I .
2
The Public Organisation of the Labour Market : being Part Two of the Minority
Report of the Poor Law Commission, 1909.
3
Report of the Royal Commission on Coast Erosion and Afforestation, Vol. I I ,
p. 13. Quoted in PIGOU : Industrial Fluctuations, Chapter X I I .

— 41 —
The Treasury may, upon the recommendation of the Development
Commissioners appointed under this Act, make advances to a Government department, or through a Government department to a public
authority, university, college, school or institution, or an association of
persons or company not trading for profit, either by way of grant or
by way of loan . . . for any of the following purposes :
(a) Aiding and developing agriculture and rural industries . . . ;
(b) Forestry . . . ;
(c) The reclamation and drainage of land ;
(d) The general improvement of rural transport . . . ;
(e) The construction and improvement of harbours ;
(f) The construction and improvement of inland navigation ;
(g) The development and improvement of fisheries ; and for any
other purpose calculated to promote the economic development of
the United Kingdom.
The last clause, it will be noted, is extremely wide.
Further, section 4 (4) empowers the Commissioners to " frame
schemes with respect to any of t h e matters for which advances
may be made under this P a r t of this Act with a view t o their
adoption by a Government department or other body or persons
to whom an advance may be made ".
Section 18 adds an important proviso :
In approving, executing, or making advances in respect of the
execution of any work under this Act involving the employment of
labour on a considerable scale, regard shall be had so far as is reasonably
practicable to the general state and prospects of employment.
This provides the framework required for t h e full application
of a policy of advance planning of public works with a view to
counteracting fluctuations in employment. I t will be noted,
however, t h a t t h e Act is permissive only, and the Commission
is not compelled to take action. The practical effects of the Act
have in consequence been less far-reaching than might have
been expected.
Early in 1914 the Development Commission set aside a reserve
for use in depression years, and, when war broke out, drew
upon it for works in localities where unemployment prevailed.
Arrangements were perfected for £2,000,000 of additional road
work in case unemployment should require it, b u t this reserve
was not drawn upon because war activities soon changed the
situation 1.
The question of the advance planning of public works was
again examined by the British Government in 1919, but the
1

NATIONAL BUBBATJ O F ECONOMIC RESEARCH : Business

ment, p . 237.

Cycles and

Unemploy-

— 42 —
commencement of the post-war depression put an end to practical
considerations of this policy.
The Labour Party, then in opposition, introduced a Prevention
of Unemployment Bill into Parliament in 1925, the object of
which was to make provision for the fullest possible application
of the Washington Recommendation. The Bill proposed t h a t
the responsibility for studying causes of unemployment and
for devising schemes of relief should be centralised in a permanent
body to be called " the National Employment and Development
Board." One of the principal activities of the Board would be
that of preparing in advance schemes of national development
for application in times of depression. Clause 3, paragraph 1,
of the Bill was as follows :
3. (1) In order so far as may be practicable to maintain at an
approximately constant level the national aggregate demand for labour
by public departments, local authorities and private employers, the
Board shall pursue continuous investigations into the nature of and
remedies for unemployment, and acting in consultation with the several
departments competent to order works or services, shall prepare schemes
for the execution of works or services, to come into operation at such
times as the state of unemployment then prevailing may require, and
approve schemes made by local authorities under section 4 of this
Act for the like purpose.
In addition, the Board would be required to co-ordinate the
activities of local authorities to the same end, insisting on such
authorities preparing in advance schemes of development to be
put into effect during periods of depression.
As regards finance, an annual sum of £10,000,000 would be
placed at the disposal of the Board. Any unexpended portion
of this grant would be accumulated year by year, for use whenever
the state of employment should demand the introduction of
emergency works.
The Bill was, however, rejected, the Conservative Minister
of Labour opposing it on account of the administrative and
financial difficulties which would be involved. On the one hand,
it was feared t h a t there might be overlapping of functions between
the Board and the Cabinet or Parliament. On the other hand,
it was thought undesirable t h a t an autonomous fund should be
established as it would lead to a certain decentralisation of the
financial system 1 .
1

Industrial

and Labour Information,

Vol. XV, No. 2, p. 22.

— 43 —

In 1926 the Bill for the Prevention of Unemployment was
again introduced and again rejected 1.
The question of advance planning has been investigated by
a number of bodies in recent years. Thus, the Committee on
Industry and Trade (Balfour Committee), which was an official
Committee of investigation appointed by the British Government
in 1924, wrote in its final Report issued in 1929 as follows :
We do not doubt that the exercise of care and foresight on the part
of public authorities in arranging beforehand, and if possible over a
fairly long period, their programme of necessary public work may
sometimes enable them to postpone until a time of depression work
which in the ordinary course might have been undertaken in a period
of active trade. Alternatively (though within much narrower limits)
they may in times of depression be able to accelerate work which would
eventually be necessary, but which otherwise would have been deferred.
Subject to the qualifications mentioned below, some contribution may
be made by such methods towards diminishing the violence of trade
oscillations ; and where such possibilities exist and the inconvenience
and extra cost of retardation or acceleration are not excessive, the
arguments are all in favour of such a policy. Nevertheless, it would
be wrong to expect too great results from action of this kind. A large
part of the public work which is susceptible of postponement or acceleration is work of special kinds which could not provide employment
in their own trades for any considerable number of unemployed persons.
Moreover, the experience of the post-war depression, when considerable
inducement was held out by the Government year after year to local
authorities and others to expedite necessary work in order to provide
immediate employment, shows that in a long continued depression
the possibilities of bona fide anticipation become rapidly exhausted.
In these circumstances employment so provided may tend to lose
its economic character and to become hardly distinguishable from
ordinary relief work 2.
I t is also interesting to note t h a t the Conference of employers
and trade unionists on Industrial Reorganisation and Industrial
Relations (known generally as the Melchett-Turner Conference)
in its interim joint report on unemployment, adopted on 12 March
1929, proposed as one of a number of special measures for immediate
adoption the establishment of a development fund. Such a
development fund was started in Britain before the war " on
a small scale for the purpose of having a State reserve fund to
stimulate industry and to provide employment particularly during
times of depression. Such an idea has recently been proposed
in the United States of America and both there and here such
a fund would have some effect upon the operation of the trade
1
2

Ibid., Vol. X V I I I , No. 1, p. 25.
Final Report of the Committee on Industry

and Trade, Cmd. 3282, p . 136.

— 44 —
cycle. I n order to carry out this suggestion it is considered t h a t
the Government should create and maintain a fund large enough
to be used for financing important national schemes."
Recommendations have also been made on the subject by a
Special Committee of the Liberal Party, which, under the chairmanship of Sir W. T. Layton, made an enquiry into the industrial
situation in Great Britain. The Report, which was published in
1928 1 , in dealing with periodical unemployment due to cyclical
fluctuations, says :
If fluctuations cannot themselves be eliminated altogether, their
effects can to some extent be counteracted by the action of the State
and local authorities, in adjusting their expenditure and concentrating
it in those periods when private orders are slack. This proposal, which
dates from pre-war days, and has ample support from many quarters,
but has never seriously been put into practice, is the counterpart on
a small scale of the more comprehensive programme which we set out
in the next chapter (and which refers to the post-war depression).
*

*

*

In Sweden, as early as 1910 and 1911, the question of adapting
the execution of public works to conditions in the labour market
was discussed both in the communes and in the Riksdag, where
proposals for enquiries on the subject were put forward. I n 1912
in connection with a seven years' railway construction scheme
prepared by the Railway Board, the Riksdag adopted a recommendation inviting the Government to examine the possibility
of planning the carrying out of State and communal works in
such a way t h a t employment might be provided for the largest
possible number of workers at times when private enterprise
is reducing its commitments and unemployment is increasing.
The Memorandum which accompanied the recommendation
drew attention principally to two types of unemployment, viz.
seasonal unemployment and cyclical unemployment. With regard
to seasonal unemployment, the Memorandum thought it possible
to improve the situation considerably, particularly in the building
trades. The postponement of public works to the winter, it was
pointed out, is to some extent limited by climatic conditions,
but it is believed there should be no serious difficulty in carrying
out during the winter such works as demolition, levelling, rock
blasting, excavations, and pile driving. The systematic organisa1

Britain's Industrial Future : being the Report of the Liberal Industrial
London, Ernest Benn, Ltd., 1928.

Enquiry.

— 45 —
tion of winter work of this kind would, in the first place, counteract
unemployment among unskilled labourers in the seasonal trades.
With regard to cyclical unemployment, the Memorandum
of the Riksdag pointed out t h a t extraordinary measures had been
taken both in Sweden and elsewhere during periods of crisis, and
t h a t unemployment could, to some extent, be prevented if work
in those fields where State influence could be felt were planned
in advance. The industries most dependent on economic fluctuations were considered to be building in general, the construction
and equipment of railways, tramways and canals, the exploitation
of water power, etc. It was proposed to devote special attention
to the building and construction industries as it was believed
t h a t economic fluctuations originated there, and t h a t the effects
of depression in other branches of industry were, comparatively
speaking, secondary phenomena, which might be avoided if the
primary causes were removed.
The Riksdag considered therefore t h a t both Government and
communal authorities should prepare their schemes for their
more important undertakings in advance and for periods of some
length. Reference was made to the scheme for organising State
railway construction which was to extend over several years,
and it was held t h a t no serious difficulty should be experienced
in preparing similar schemes for other Government departments
and State business undertakings. As regards the communes,
the Government had no power to dictate terms, but it was expected
t h a t the Government's example, as well as the interests of the
communes themselves, would contribute to substantial results.
The above recommendation was circulated among the various
Government business undertakings and departments, and also
among the provincial committees through which the communal
authorities became acquainted with it. The discussion which
was provoked showed t h a t the authorities concerned were quite
ready to pay more attention to the situation of the labour market
in carrying out public works.
In 1920, the Riksdag again considered the matter, and proposed
a further enquiry to investigate whether, and if so how, legislative
and other measures might be adopted with a view to counteracting
as far as possible irregularity in the demand for labour with its
consequent unemployment. These enquiries did not lead to any
legislation, but the Swedish authorities have given careful consideration to the matter, and have applied a policy of advance
planning in a number of cases.

— 46 —
A scheme was drawn up by the Railway Board for the construction of State railways during the period 1912 to 1918. I t
was found necessary to prepare this scheme in order to obviate
the disadvantages resulting from alternations of speeding up and
practically closing down railway construction. An examination
of the sums allocated by the Riksdag for State railway construction
during the period 1877 to 1911 had shown considerable variation
from year to year. Such fluctuation must have an extremely
harmful effect on the employment situation of the workers concerned, particularly as the larger sums were available in times of
prosperity and not in times of economic depression. I t is pointed
out in the memorandum sent in by the Swedish Government
to the International Labour Office t h a t in periods when railway
construction was being speeded up, it was extremely difficult to
raise again the necessary staff of engineers, foremen and workers.
Fully competent men are more easily obtained if they can enjoy
some degree of certainty of employment over a number of years.
Moreover, if the construction is speeded up during a period of
general economic prosperity, the increase in the cost of labour
and materials would be such as to upset entirely the estimates
made for normal conditions. So far as the workers themselves
are concerned, if railway construction is cut down at times when,
owing to economic depression, there is a marked lack of employment,
by far the greater proportion of the dismissed staff would have
no other means of earning their livelihood. Moreover, as it would
be uncertain if and when there would'be a resumption of railway
construction on a larger scale, a considerable proportion of the
equipment which had been required when the work was at its
greatest would have to be disposed of for a comparatively small
amount.
The Railway Board maintained that all these disadvantages
which are an inevitable consequence of an unsystematic organisation
of work might be removed if construction of the State railways
were organised according to a plan prepared in advance and
extending over a period of years. They pointed out t h a t due
consideration must, of course, be given to the capacity of the
country to bear the cost of the new railway undertakings, and the
decisions as to such undertakings must to some extent be influenced by financial considerations. I t was evident, however, that
certain deviations from any plan drawn up would be necessary,
and that, in particular, adjustments would have to be made as
a result of the conditions in the labour market. Thus, it was

— 47 —

said t h a t the sums allocated would have to be somewhat reduced
in periods of increasing prosperity and increased in periods of approaching depression. I t is true, however, that the Board urged
at the same time the importance of deviating as little as possible
from the prepared scheme as regards the total sum estimated
for the construction during each of the seven years covered by
the scheme. This course was urged, not only in the event of the
new State railway enterprises being constructed by direct labour,
but also in the event of the construction being handed over to
general contractors to a greater extent than had hitherto been
the case.
Although the easiest course during periods of depression and
the accompanying reduction in State income might appear to be
t h a t of reducing the State expenditure, the Railway Board considered it more suitable t h a t precisely during such periods those
undertakings should be vigorously prosecuted and financed out
of loans. In addition to the fact t h a t during periods of depression
unemployment is on the increase and might be considerably
reduced by a more vigorous prosecution of public works, it was
pointed out that the cost of both labour and materials would
be comparatively low. I t was therefore urged that unemployment
due to economic depression might best be dealt with by deciding,
when there was reason to believe a period of depression was
setting in, to start construction of railway lines already proposed,
and when there was reason to believe t h a t conditions were improving, by avoiding decisions as to the carrying out of such new
work except in so far as was necessary to provide constant employment for the nucleus staff of engineers, foremen and workers.
In the opinion of the Board a variation of about 30 per cent, in
railway construction as a whole need not be feared, but in taking
a decision as to the construction of a railway, care should be taken
not to deviate very considerably from the scheme drawn up in
respect of annual allocations if the work is to be organised properly.
Although this seven years' scheme for the organisation of State
• railway construction prepared by the Railway Board was generally
recognised to be a step in the right direction towards the planning
of public works, it was for various reasons never carried out.
The outbreak of the world war and the conditions prevailing
during that period made it impossible to organise State railway
construction in accordance with a scheme prepared several years
in advance.

— 48 —
Fluctuations in prices and financial difficulties were disturbing
influences. On the other hand, the growth of motor traffic after
the war has very largely altered the fundamental conditions of
railway policy. The extension of the general road system became
a more important matter than the continued operation of railway
construction. I n so far, however, as railway construction has
been planned and carried out during the last few years, the Government authorities in dealing with it have always taken the
labour market factor into account.
With regard to the number of workers employed by the Traffic
Department of the State railways, considerable seasonal variations
occur. I t is, however, pointed out t h a t most of the work of the
Traffic Department is of such a nature t h a t it has to be carried
out in a suitable season of the year, and, moreover, it is often
necessary t h a t such work should be completed as soon as possible,
so t h a t it does not seem as if measures could be taken t o create
steadier employment for the workers dependent on the Traffic
Department.
The Swedish authorities have also done a good deal on similar
lines in other fields. I t is stated t h a t in connection with Post
Office works the number of cases in which the supply of work can
be regulated in accordance with conditions on the labour market
is not very great. The conditions due to economic fluctuations
have been taken into account so far as the number of postal services
is concerned to the extent t h a t during periods of increasing
prosperity an attitude of some reserve has been adopted with
regard to the demands for extension. This is due partly to the
high cost of labour in boom periods, and partly to a wish not
to make binding arrangements during a temporary increase in
activity, as these may prove too great and costly for the traffic
in normal times. The State has, however, in this way refrained
from competing for labour which can well be employed by private
enterprise in periods of prosperity. The consequence has been,
on the other hand, t h a t in periods of depression, it has been
possible to limit the number of withdrawals and dismissals.
The Post Office also makes considerable purchases of fixtures
and consumption goods. I t is in the nature of things, says the
Swedish Government, t h a t with the kind of business run by the
Post Office, it is very difficult to adapt purchases to conditions
on the labour market. On the other hand, the Post Office has
from time to time to construct new premises for postal purposes,
but building undertakings of this kind have not been on such

— 49 —
a scale t h a t they could offer an opportunity for more detailed
study of the problems at present in question.
With regard to new installations made by the Telegraph and
Telephone Department, these seem mostly to be of such a nature
t h a t they have to follow the fluctuations in economic conditions
fairly closely and it would appear to be difficult to try to reduce
unemployment caused by depression in industry as a whole by
postponing to such periods the works undertaken by the Telegraph
Department. In the new construction work of the Department,
the cost of material plays a much greater part than t h a t of labour,
and this applies particularly to lines and cable work as compared
with pole work. For financial reasons work is sometimes postponed
or advanced and thus may incidentally assist the labour market.
With regard to maintenance work, it is possible when the employment situation is good to postpone work which is not too urgent, and
in this way to maintain a constant staff of workers from year to
year. With regard to seasonal unemployment, the Telegraph
and Telephone Department has for many years organised its
work in such a way as to keep as large a staff of workers as possible
employed throughout the year. Thus the greater part of the
work involved in the installation of new lines, as well as of telephone lines, where permanent workers are not employed, is carried
out in winter, while the summer is reserved for earth works, the
largest and most important of which is work with poles ; this
cannot be done in winter.
The activities of the Water Power Board may be divided into
two parts, viz. :
(1) the works for the esploitation of the waterfalls belonging
to the State, and
(2) the construction of canals, particularly in so far as this
is connected with the exploitation of water power.
Normally decisions as to power works must be taken when
these are found necessary owing to the increase in consumption
of power, t h a t is to say, during periods of prosperity ; and when
a period of prosperity is followed by one of serious depression,
a decision is sometimes taken to suspend the work which has
already been begun, and to await a period when there is a greater
demand for power. It may, however, be possible to continue or
resume fairly soon the work already started when the depression
begins provided there is a marked fall in the prices of material
and labour, or a capital subsidy is obtained from funds for which
4

— 50 —
the installation is not expected to yield a profit. During the
crisis which followed the end of the war the Water Power Board
found occasion to apply the above method at the Lilla Edet Power
Station. I t was not possible to continue the work there unless
funds were raised out of the proceeds of taxes owing to the reduced
consumption of power. But the Riksdag decided t h a t a credit
should be granted corresponding to about 25 per cent, of the
estimated total capital expenditure, and in this way work was
continued, with the result t h a t something was done to prevent
additional unemployment.
Moreover, this power station has
since been used to provide power for the electrified railway from
Stockholm to Gothenburg, and for various other purposes, so t h a t
its completion during a period of unemployment was found of
value when conditions improved. Generally speaking, however,
owing to the long period of preparation required for a power
station, such works cannot be suitably classified as undertakings
which the State can take in hand when unemployment increases.
On the other hand, with regard to canal construction, the question arises in quite a different way. The canals cannot count
on obtaining a large enough surplus in the form of canal dues
over the cost of working to pay full interest on the capital invested,
and consequently the carrying out of works of improvement
cannot be considered to be dependent on the economic conditions
prevailing at a particular moment. Work on the improvement
of the national canal system may therefore to some extent be
organised in such a way t h a t it is carried out in a period of unemployment on condition t h a t the plans of improvement are
prepared well in advance.
n
With regard to the work in the State forests, it is pointed
out t h a t this work consists mainly of tree felling, and it is impossible
to counteract unemployment to any great extent by concentrating
this work in time of unemployment. On the other hand, there
is a certain amount of road construction and ditching which are
normally of less importance than tree felling, but they are of such
a nature t h a t they can comparatively easily be extended or reduced,
and consequently are suitable for advance planning.
Road construction, as in most countries, occupies a prominent
place among the undertakings which are considered in connection
with the unemployment problem. The increased use made of
roads in Sweden during the last few years owing to the growth
of motor traffic has markedly increased the demand for road
construction and improvement, and there is a very large amount

— 51 —
of work to be done. When local authorities apply'for State grants
a report is in the first place made by the Provincial Committee,
which decides to carry out the works in a particular order. This
order is not altered by the Road and Bridge Construction Board
unless conditions subsequently arise which' require more rapid
completion of the work, such as, for instance, the existence of
serious unemployment, which may be largely relieved by such
work.
All the above remarks apply to State works. As a matter of
fact, however, the adoption of measures for dealing with unemployment is regarded as primarily a communal affair. The public
works of the communes are, however, based mainly on seasonal
fluctuations, and not on cyclical fluctuations. This may be partly
explained by the fact t h a t seasonal unemployment, being a local
and recurring problem, has a more direct influence on the communal
authorities and their obligations to relieve unemployed citizens,
whereas unemployment due to cyclical depression, which is both
more widespread and more prolonged, requires the intervention
of the State.
*
*
*
In Norway 1, during the temporary crisis at the outbreak of
the war, the Storting, on the proposal of the Government, voted
15,000,000 kroner for such extraordinary measures as might be
found to be required by the existing situation, including expenditure
for the prevention of unemployment, and measures were taken
for a considerable increase in the employment of labour on Government works.
At the beginning of 1920 the Storting increased the road
budget by a million kroner over and above the Government
proposals. This led to the resignation of the Government, which
considered t h a t the labour estimates should be kept down somewhat in favourable times in order to keep something in hand for
periods of depression. Towards the end of the same year the
Storting voted about 4,000,000 kroner to be used if unemployment
rendered it necessary. This amount, together with other sums
assigned for the same purpose, some of them at an earlier date,
constituted a total of 6,400,000 kroner which was available a t the
outbreak of the unemployment crisis at the end of 1920.
Another example may be referred to from the communal
1
Communication from the Inspectorate of Public Employment Exchanges
and Unemployment Insurance.

— 52 —
administration óf Oslo. This commune had in the periods 1917-1919
and 1920-1922 assigned considerable sums to a fund for the building
of dwellings and schools, alteration and repairing of streets, etc.,
and in the subsequent period of depression made substantial use
of this fund, which altogether amounted to considerably over
100,000,000 kroner. Other communes have possibly carried out
similar operations, but as to this no information is available.
The Government Unemployment Committee, which was
constituted in 1914, has on several occasions taken steps for the
introduction of measures for the regulation of the labour market
(in 1914, 1917, 1918, 1921, etc.). I t cannot be said, however, t h a t
this has led to the introduction of any systematic arrangement
applicable over a lengthy period.
An effort in this direction was made by the Committee for the
revision of unemployment legislation, which in its report for 1923
proposed the constitution of an Unemployment Fund and the
empowering of the Government Unemployment Committee and
the Communal Unemployment Committees, which were to be
established by law as permanent bodies, to take steps among other
things to promote stable conditions of employment, to investigate
the causes and extent of unemployment prevailing from time to
time, and to consider and put into operation the most effective
measures available for the temporary or permanent reduction of
unemployment. This idea was officially put forward in the Royal
proposal (Ct. Prp. No. 23) which was submitted on 26 February
1926. This stated t h a t the unemployment authorities should
regard it as their task, in times when the supply of labour was
deficient, to endeavour to secure the postponement of public
works until changed conditions made them more necessary. The
arguments for the establishment of an unemployment fund furnished
the background for these provisions. The proposal has since been
withdrawn, and there is accordingly a t present no Government
proposal on the subject.
*

*

I n Switzerland, although there no longer exists any legal provision by virtue of which the Confederation may take action with
regard to the postponement or acceleration of public works according to the state of the labour market, in practice the execution
of certain public works is reserved by the federal administration
for periods of unemployment. The same procedure is followed
by the cantons and the communes, and certain cantonal depart-

— 53 —
ments request the services under their control and the communal
authorities to take the state of the labour market into consideration
as far as possible when establishing their programme of public
works. In one canton, the Department of the Interior calls a
meeting each autumn of the directors of other departments and the
representatives of the communal authorities in order to discuss
the programme of works to be carried out during the winter.
In another canton, the Department of Public Economy makes
recommendations to the other departments and administrative
services from time to time, with regard t o the postponement or
acceleration of certain works. In the same canton, an Order of
1906 with regard to the submission of tenders lays down t h a t
works which can be carried out at any time should be tendered
for sufficiently far in advance t o permit of their being put into
execution during periods of .depression ; this Order also provides
t h a t contracts may be placed for relief works without being first
submitted for tender. Further, in the same canton, the cantonal
authorities subsidise relief works carried out during the winter,
thus exercising a certain influence with regard to the postponement
or acceleration of these works.
The Swiss Federation of Trade Unions proposed in September
1930 the adoption of certain measures by the Federal Council.
These include the holding of an enquiry in order to determine
what public orders are given out in Switzerland and how far it
would be possible to distribute these orders in accordance with
the economic situation. The essential point is to consider
the possibility of entrusting an office within the Federal Department of Industry, Arts and Crafts and Labour with the duty of
receiving periodical notice of proposed public works or works
due to official influence and of seeing t h a t these works are
distributed in such a way as to balance as far as possible seasonal
and cyclical fluctuations 1 .
*
*
*
There is no legislation in Italy which expressly stipulates t h a t
the authorities may reserve the execution of public works and the
placing of orders for material for periods of unemployment, but
the Minister of Public Works may, in virtue of Act No. 2359 of
25 June 1865 and Act No. 5198 of 18 December 1879 confirmed
by Royal Decree No. 2874 of 28 November 1928 2, divide the plans
1
2

La Sentinelle, 3 Sept. 1930.
Gazzetta Ufficiale, 29 Dec. 1928.

— 54 —
for public works submitted to him into three classes : those which
cannot be postponed, or even suspended ; those which are urgent,
i.e. the immediate need for which is slightly less than the former
class ; and finally, those which can be postponed, or which can
be started at any time, and suspended if necessary. This classification facilitates stability by making it possible to put works in
hand according to the situation of the labour market. Thus,
indispensable work may be performed in periods of normal unemployment, urgent work in periods of seasonal unemployment,
and other work in periods of crisis 1.
Dr. Ernesto Campese, Director of the Unemployment Office
in the National Fund for Social Insurance, gives strong support
to the desirability of planning public works in advance. He says
t h a t the programme of public works should be undertaken, not
as a remedy for unemployment, but at the same time not without
regard to t h a t problem. In reply, he says, to the question whether
a policy of public works is necessary to combat unemployment,
the Italian Government replies t h a t a wise policy of public works
is necessary in itself and t h a t this will of course involve considerable
advantages from the point of view of unemployment. There is
need for a careful organisation of any programme which may be
adopted and a rapid application of t h a t programme when the
situation of the labour market requires it. Such a programme
should lay down technical details, probable cost, number of workers
required, scales of wages, etc., so t h a t it is possible to proceed
at any given moment with the work to be performed 2.
*

*

*

I n the United States repeated efforts have been made since the
war to place on the Federal Statute Book legislation dealing with
the advance planning of public works. I n January 1921, Senator
Kenyon introduced a Bill to create a United States Emergency
Public Works Board to co-operate with Federal, State and municipal agencies in stimulating public work during the period of
demobilisation and industrial readjustment.
As a result of the National Unemployment Conference held in
1921 a t Washington, where the principle of advance planning
was discussed and strongly recommended, Mr. Kenyon introduced
in the Senate in December 1921 another Bill providing for the
1

Cf. CAMPBSE : L'Assicurazione contro la Disoccupazione in Italia. Rome, 1927.
CAMPESE : " Politica dei Lavori pubblici e disoccupazione " . TarsadaUmi
Politiìca, Jan.-Feb. 1930.
2

— 55 —
Federal Government to exercise a stabilising influence during
periods of industrial depression and over-expansion by undertaking
or postponing the execution of public works.
In February 1923 Mr. Zihlman submitted a Bill to the House
of Representatives proposing to set up a commission on unemployment to investigate the nation's needs for public works to be
carried on by Federal, State and municipal agencies in periods
of business depression and unemployment.
In December 1925 another Bill was introduced into the House
of Representatives, providing for an appropriation of 150 million
dollars for the construction of public buildings at the rate of 25
million dollars per year for the following six years ; the Bill had
as its object the incorporation in the public buildings policy of
the principle of advance planning of public works as an aid in
stabilising employment.
In February 1928 Senator Jones introduced a Bill stipulating
for the creation of a prosperity reserve to stabilise industry and
employment by the expansion of public works during periods of
unemployment and industrial depression. I n addition to funds
normally provided for public works, an appropriation of
$150,000,000 was to be provided for this purpose. The public
works which were to include rural post roads, river and harbour
improvements, flood control and public buildings, were to be
undertaken out of the prosperity reserve whenever the volume
of general construction based upon value had fallen 20 per cent.
over a three months' period below the average of the corresponding
three-month periods of 1926 and 1927.
The Senate Committee on Commerce modified this Bill so
as to make the fall in the volume of general construction based
upon value 10 per cent, instead of 20 per cent, over a three months'
period below the average of the corresponding periods of the preceding three years. The Bill was reported favourably to the
Senate, but it failed to pass into law.
On 12 April 1928 hearings were held before the Senate Committee on Commerce in connection with the Jones Bill 1 . On t h a t
occasion Mr. John B. Andrews, Secretary of the American Association for Labour Legislation, stated that there had been striking
agreement among those who had considered the matter on the
desirability of accepting the principle of the long-range planning
1
Hearing before the Committee on Commerce, United States Senate, on S. 2475,
April 1928.

— 56 —
of public works. I t had been widely endorsed by leading organisations such as, for example, the American Engineering Council, the
Associated General Contractors of America, the American Institute
of Architects, several Chambers of Commerce, and the American
Federation of Labour. The idea of the Jones Bill, he said, had
been worked out in the National Conference on Unemployment,
which met in Washington in 1921 on the initiative of the President,
by a special committee under the chairmanship of Mr. Otto T.
Mallery. The principle had, moreover, been endorsed by President
Coolidge, Mr. Mellon, as Secretary of the Treasury, and Mr. Hoover,
as Secretary of Commerce.
On 21 November 1928, Governor Brewster of the State of
Maine announced at the Governors' Conference t h a t Mr. Hoover,
who was then President-elect of the United States, had conceived
a far-reaching plan of stabilisation which would provide for the
creation of a national public works construction reserve of 3,000
million dollars to be released at times of over-production and unemployment.
I n the 1928-1929 Session of Congress, Mr. Macleod introduced
a resolution into the House of Representatives, to provide for
the appointment of a Commission to study thoroughly the problem
of maintaining sufficient aggregate income to consumers, to support
steady progressive production, equalise prosperity and prevent
unemployment as far as possible, and to advise Congress as to the
feasibility of creating a Government agency for these purposes.
He explained t h a t the resolution did not contemplate any interference with private business, but merely the establishment of a
Federal agency similar to the existing Federal Reserve Board,
through which the Federal Government could regulate intelligently
its own operations such as appropriation for public works, etc.,
so as to keep as nearly as possible a steady increase in the volume
of income flowing to consumers, and consequently to support
steady production and employment.
I n December 1928, and in January and February 1929, the
Senate Committee on Education and Labour held hearings on this
subject. The report of this Committee dated 25 February 1929,
contains a section relating to " the planning of public works with
regard to stabilisation ". I t states t h a t the Committee did not
devote a great deal of time to this topic because no one disagreed
with the suggestion t h a t the Government and all other public
agencies should so order their public works t h a t they would offer
a buffer in time of unemployment.

— 57 —
The evidence is very clear, the report continues, t h a t " the
Federal Government may set a valuable example to the States in
the adoption of a practical scheme for the planning of public
works. Of course, the States and the other divisions of Government
will have the greatest opportunity to provide this buffer because
the expenditures by the Federal Government for public works
are not large as compared with the expenditures by the States
and other civic divisions. There should be no delay on the part
of the various Governments, Federal, State, city, and other minor
subdivisions in the adoption of such plans. "*
On 23 April 1929, Senator Jones reintroduced his Bill, but it again
failed to pass.
I n the Session of 1929-1930, Senator Wagner introduced a
further Bill dealing with the subject. I t provided for the appointment of a Federal Employment Stabilisation Board whose duty
it would be to advise the President from time to time of the trend
of employment and business activity and of the existence or
approach of periods of business depression and unemployment in
the United States, or in any substantial portion thereof. Whenever
the President should find t h a t there exists or that there is likely
to exist a period of business depression and unemployment, he
is requested to transmit to Congress such supplementary estimates
as he deems advisable for emergency appropriations to be expended
upon public works in order to prevent unemployment and permit
the Government to avail itself of the opportunity for speedy,
efficient and economic construction during the depression period.
These emergency appropriations would be authorised for Federal
highways, the preservation and maintenance of existing river and
harbour works, the prosecution of flood control projects and t h e
application of the Public Buildings Act of 26 May 1926. Moreover,
the Secretary of War, the Secretary of the Treasury and the
Secretary of Agriculture would be directed to accelerate as far as
possible the prosecution of all public works within their control.
A particularly important clause was included in the Bill (section 10)
declaring the policy of Congress to be the arrangement of the
construction of public works so far as practicable in such manner
as will assist in the stabilisation of industry and employment
through the proper timing of such construction, and t h a t to further
this object there shall be advance planning and detailed preparation
1
Hearings before the Committee on Education and Labour,
pursuant to S. Res. 219, Dec. 1928, J a n . and F e b . 1929.

U.S.

Senate,

— 58 —
of public works to he accomplished " by means of preliminary
reports as to the desirability of the projects and of annual authorisations of projects, the total estimates for which are sufficiently
in excess of the annual appropriations made for the work thereon
to result in uncompleted projects being available for the expenditure of public works emergency appropriations when made. "
Finally, it was proposed to authorise the appropriation of such
sums as were necessary for the expenditure on public works to
prevent unemployment during any period of business depression
not in excess of 150 million dollars in any one fiscal year 1. This
Bill was passed by the Senate in April 1930 2.
I t also passed the House óf Representatives on 1 July, but in
a much modified form, and there the matter rests until the next
Session of Congress which commences in December 1930 3 .
I n spite of the absence of legislation, however, the Federal
Government has on some occasions acted on its own initiative on
the lines of the ill-fated Bills mentioned above.
A particularly
striking case occurred in 1923. I n the spring of t h a t year when a
want of labour was experienced in the building trades, President
Coolidge applied to Mr. Hoover, Secretary of the Department of
Commerce, for advice as to the time when it would be opportune
to put in hand Federal construction works. The answer of Mr.
Hoover was as follows :
DEAR MR. PRESIDENT :

I am in receipt of your letter of 3 March as follows :
" The Administration, in one way or another, has the direction
of Congress to carry on a very considerable volume of construction
work. I would be glad to have the advice of the Department of
Commerce as to the policy which ought to be pursued in view of
the present economic situation in the building industries, with a
view to determining how much to speed up on the construction
program to which we are committed."
In response thereto I directed that the Department should conduct
a survey of the situation in the construction trades, a summary of
which is attached hereto. I shall not trouble you with the vast amount
of detailed data, but these conclusions bring out several fundamental
facts :
1. The year 1922 was a year of very large employment and activity
in the construction trades and at the end of the year stocks of
construction materials were very much reduced. Since the
beginning of the present year there has been even more activity
1
Hearings before a Sub-Committee of the Committee on Commerce,
States Senate, on S. 3059, 18 and 21 March and 21 April 1930.
2
United States Daily, 17 April 1930.
3
Ibid., 2 J u l y 1930.

United

— 59 —
than in the same period last year and the contracts let in the
past few months are of larger volume than any hitherto entered
into in a similar period. Advance orders for construction
materials are upon a very large scale.
2. Labour in the construction trades and in the manufacture of
material is not only at full employment, but there is actually
a shortage in many directions.
3. Transportation facilities available for the building materials
are fully loaded and almost constant car shortages are complained
of with consequent interruption in production.
My conclusion from all this is that, at least for the "next several
months, the trades will be fully occupied in private construction, all
of which is generally needed by the country.
For the Government to enter into competition at the present moment
will give no additional employment to labour and no additionalproduction
of materials but must in the broad sense in the end displace that much
private construction. The Governments, nationally and locally, are
in a much better position to hold construction work in abeyance than
are private concerns, and are in a better position to speed up in times of
less demand as we did in the last depression as the result of the Unemployment Conference. We can by this means contribute something to
a more even flow of employment not only directly in construction work
but in the material trades.
I would recommend, therefore, that you direct the different divisions
of the Government to initiate no new work that is not eminently necessary
to carry on the immediate functions of the Government and that there
should be a slowing down of work in progress so much as comports
with real economy in construction, until after there is a relaxation in
private demands.
The effect of this letter, says Mr. Otto T. Mallery \ " was the
postponement of large amounts of private construction. The halt
in the rise in volume of municipal bond sales for public work
which occurred at the same time was probably not due to this
warning, for municipal authorities generally are not yet aware of
their responsibilities as part of the nation's economic defence
reserve. However, in this instance, private construction alone was
able to accomplish much. Private building operators who postponed
work until 1924, a year of business recession, first avoided adding
to the high peak of 1923, thus stabilising at both ends the building
industry, its twenty-seven tributary industries, and the general
economic situation." Another result of the letter of the Secretary
of Commerce was t h a t the Federal Government did not start its
building programme until 1926, and then on a very small scale.
The Senate Committee on Public Buildings, of which Senator
Furnald was Chairman, agreed to an amendment calling upon the
Secretary of the Treasury to take into consideration the relative
1
Hearings before the Committee on Education and Labour, United States Senate,
pursuant to S. Res. 219, Dec. 1928, J a n . and F e b . 1929.

— 60 —
activity of private construction and to be prepared to expand
public building work when private construction should fall off 1.
Legislation on the subject of advance planning has been adopted
in a small number of States. According to the Monthly Labour
Review of October 1929, the first Act of this kind was t h a t of Idaho
(Acts of 1915, Ch. 27), which authorised the Board of County
Commissioners to provide emergency employment for unemployed
United States citizens who had resided in the State uninterruptedly
for six months and in the county for ninety days, and who did
not possess property of a total value of more t h a n $1,000.
The
emergency employment was to consist of work on the public
highways " or such other work as they (the County Commissioners)
may determine ". The Act contained a clause to the effect t h a t
50 per cent, of the amount disbursed under its provisions should
be deducted by the State from the taxes levied by it upon the
counties. This clause resulted in the Act being held unconstitutional in 1916 on the ground t h a t it diverted State funds for
expenditure by the counties in violation of the State Constitution.
In 1917, the Pennsylvania Legislature passed an Act (No. 411)
" to provide increased opportunities for employment in useful
public works . . . during periods of extraordinary unemployment caused by industrial depression. For this purpose an Emergency Public Works Fund was established. The measure provided
for an Emergency Public Works Commission composed of the
Governor, State Auditor, State Treasurer, and State Commissioner
of Labour and Industry to administer the Act." I t was the duty
of the above-mentioned Commission to proceed to ascertain and
secure from the various Departments, bureaux, boards and commissions of Pennsylvania, tentative plans for such extension of the
public works of the State as were best adapted to supply increased
opportunities for advantageous public labour during periods of
temporary unemployment. It was the duty of the Industrial
Board of the Department of Labour and Industry to keep constantly
advised of industrial conditions throughout Pennsylvania affecting
the employment of labour ; and whenever it was represented to
the Board by the Governor of the State, or whenever the Board
had any other reason tó believe, t h a t a period of extraordinary
unemployment caused by industrial depression existed in Pennsylvania, it was the duty of the Board immediately to hold an
1
Proceedings of the Academy of Political Science in the City of New York, J u l y
1927. Article on " F e d e r a l Expenditures and the Construction I n d u s t r y " , by
the Hon. Wesley L. JONES, Chairman of the Senate Committee on Commerce.

— 61 —
enquiry into the facts. If it was found t h a t a period of extraordinary unemployment caused by industrial depression did in fact
exist in Pennsylvania, the Commission was authorised to make
such disposition and distribution of the said Emergency Public
Works Fund for the necessary extension of the public works
programme. The Bill, as passed by the legislature, provided a
sum of $50,000 to constitute the emergency fund, but this was
cut to §40,000 by the Governor, because of " insufficient State
revenue ".
I n March 1922 the appropriation was expended in an effort t o
alleviate the serious unemployment t h a t was then current, but
as the amount of money available was very small the results were
disappointing 1. The law was repealed in 1923 by Act No. 274,
which provided for the reorganisation of the executive departments
of the State, and which, by section 1710, gave the Department of
Labour and Industry the power to bring together employers and
unemployed workers " to report on the extent of unemployment,
the remedy therefor, and the means for the prevention thereof ",
and to aid in the " intelligent distribution of labour "
I n 1921 the California legislature passed a measure (Ch. 246)
almost identical with the 1917 Pennsylvania Act. In the California
law, however, the State Bureau of Labour Statistics is named as
the fact-finding body, and the State Board of Control given the
administration of the Act. As to the persons to be given employment under the Act, the measure provides t h a t preference shall
be given first to the citizens of the State, then to citizens of other
States, and finally to aliens.
In Louisiana a special Act (No. 15) was passed in the extra
session of 1921 for the purpose of relieving the unemployment
then existing by expanding public works. This Act directed the
State authorities to proceed at the earliest possible date with
all contemplated public work and improvements.
I n Wisconsin an Act practically identical with the California
measure of 1921 was passed in 1923 (Ch. 76). The State Industrial Commission was named as the fact-finding body under
the Act 2.
In Utah, Chapter 101 of the Laws of 1929 created a State
Building Commission consisting of five citizens appointed by
the Governor with the advice and consent of the Senate for
1

2

MtTND, op.

CÜ.

Monthly Labour Review, Oct. 1929.

— 62 —

four-year terms. The work of the Commission is to plan for new
buildings and other work for the State, to make contracts to
carry out the work, and to be responsible for the spending of
the money involved. The legislature limited the work of the
Commission to a trial period of two years, specifying a large
group of buildings which the Commission was authorised to
construct during the period at any time and in the order which
it should choose x.
In Massachusetts a Bill was introduced in 1924 providing for
an expansion of public works in periods of depression so as to
increase the possibilities of employment. The Bill was, however,
rejected. Another Bill was presented to the Senate of Massachusetts on 23 November 1928. Under the provisions of this Bill,
a State Reserve Fund was to be established, and cities and towns
were to be authorised to appropriate and borrow money for
reserve funds for providing employment on public works in times
of business depression. The State Fund would be controlled by
the State Treasurer, and would be set up through appropriations
by the legislature. The Governor and Council would be authorised
to spend the money when they deemed it advisable 2. This Bill
does not appear to have passed.
The problem of how to stabilise employment as far as possible
has also engaged the attention of a number of city authorities
and other bodies, and in practically every case the advance
planning of public works figures in the programmes put forward.
Thus, for example, the City Manager of Cincinnati towards the
end of 1929 appointed a Citizens' Committee, which recommended
t h a t a permanent committee on stabilising employment be set up.
I t was suggested t h a t the investigations of this Committee should
include the preparation of a public works programme. Moreover,
in Philadelphia about the same time the Industrial Relations
Committee of the Chamber of Commerce appointed a sub-committee to consider the matter, and this sub-committee recommended, among other things, t h a t the Department of Industrial
Research of the University of Pennsylvania should be requested
to study how best Philadelphia could plan its public works in
order to regularise and stabilise employment.
With regard to actual measures adopted by States and local
1
2

The American Labour Legislation Review, March 1930.
New York Times, 25 Nov. 1928.

— 63 —

authorities, valuable information is contained in a paper 1 presented
at the meeting of the Academy of Political Science in New York on
8 April 1927 by Mr. E. 0 . Griffenhagen. Mr. Griffenhagen had,
in March 1927, circularised each of the forty-eight United States
Governors, and also the mayors of the larger American cities,
asking for information as to what had been done to expand
construction at times of unemployment and business depression,
or to restrict it in boom times.
From the replies received Mr. Griffenhagen summarised the
practice in thirty-one States as follows :
Twenty-two do nothing.
Three have made attempts to adjust construction in a measure.
One says that more construction is naturally done in hard times
because bids are low.
Two have made it the policy, although there is no formal procedure
for it, and no reserve set up.
One of these States is Massachusetts and refers to statistics proving
that the volume of work has varied inversely as business prosperity has
varied. This, it should be noted, is a State that has a clean-cut functional
organisation of departments, a central financial agency (the Commission
on Administration and Finance), good budget habits, and wise executive
direction.
Three States, Pennsylvania, California and Wisconsin, have legislation
on the subject 2. But there seems to be a note of scepticism in the
comments of the officials in each case. Pennsylvania says that the
initial $40,000 appropriated in 1917 was spent in 1921 and " no other
effort has been made ". Wisconsin says " there has been a theoretical
effort to expand State construction during periods of unemployment . .
however, the construction work is carried on in specific projects authorised by the legislature biennially." Wisconsin, referring to its law, says
" there are those who think that a finance and construction programme
covering a period of years would have to be provided for before this law
would be effective."
In nineteen large cities the practice in this same connection is that :
Eight do nothing.
Two try to provide employment in winter.
Four expand construction in dull times but do not restrict it,
consciously, in boom time.
Five say they do conform to business conditions and cite examples
of their action during the recent depression to prove it.
*

*

1
" The Planning of Government Organisation and Expenditures to Promote
Business Stability, with Particular Reference to States and Cities ", by E . O.
GRIFFENHAGEN, in Proceedings of the Academy of Political Science in the City of
New York, J u l y 1927.
2
See above, pp. C0-G1.

— 64 —
In Australia, there does not appear to be any definite provision
made for the postponement of public works during periods of
economic activity with a view to reserving such works for periods
of slackness in employment. The general opinion of the heads of
departments approached for information is t h a t the reservation
of certain public works for periods of severe unemployment would
be most desirable, but the tendency in the past has been to proceed
with public works as the funds became available, so t h a t on
occasion Government works on a large scale are being carried on
during periods of economic activity, while on other occasions,
when trade and industry are depressed, public authorities have
been forced to economise, thereby aggravating the depression.
In South Australia it is stated t h a t the postponement of public
works for the purpose mentioned is exceedingly rare. In Tasmania, on the other hand, the Government seems to do the exact
opposite of the planning of public works in relation to unemployment, for it states t h a t in times of great economic activity there
is usually a greater demand for the execution of public works
than in normal times, and such works are generally carried out
as expeditiously as the labour market will permit. As another
example of the same tendency, it may be mentioned t h a t in
J a n u a r y 1930 the New South Wales Treasurer announced that
unless the financial situation improved there would have t o be a
further extensive curtailment of public works.
In 1928 the Development and Migration Commission investigated the problem of unemployment and business stability and
it recommended t h a t the Commonwealth and State Governments,
public undertakings and civic authorities, adopt as a common
policy the principles of planning programmes of public work
ahead over terms of years, of regulating expenditure on works
within yearly periods, and of placing ahead their orders for stores,
and t h a t they confer at regular intervals in order to apply their
policy as far as practicable. The Loan Council would have to
play a large part in the planning of public works, and it would
need to be informed upon the trend of business conditions in
order t h a t it might adjust its policy accordingly 1 . This recommendation does not appear to have been carried out so far, except
on the point mentioned below.
Something has been done in Australia t o deal with seasonal
1

COMMONWEALTH OF AUSTRALIA, DEVELOPMENT AND MIGRATION COMMISSION :

Report on Unemployment

and Business

Stability

in

Australia.

— 65 —

unemployment by varying Governmental orders in a suitable
way. Thus, the various Australian States, on the recommendation
of the Premier's Conference, set up, in the early p a r t of 1929,
Industrial Stability Committees, whose task is to bring industry,
labour and private organisations into closer touch with a view
to relieving unemployment. These committees are presumably
the outcome of the recommendation made by the Development
and Migration Commission in the report referred to above.
According t o t h a t recommendation, the purpose of these committees should be " to study the incidence of seasonal fluctuations
and to formulate plans for their correction ".
The Government of Western Australia states t h a t in a very
large measure public works of a Government nature, and, to a
lesser extent, those put in hand by municipalities are reserved
for periods of unemployment. In particular it makes provisions
for the reservation of a sum of money each year for certain works
which are put in hand during the period May-September, in
order to provide employment for men who are released from
their usual occupations in the country districts — t h a t is, the
period between the end of the work for one wheat season and
the beginning of t h a t for another. Thus, the State Government
has in its employ during this period a greater number of men
than during any other portion of the year.
In New South Wales the situation, as affected by seasonal
unemployment, has been met by the provision of employment
for increased numbers during the winter months, while to cope
with periods of acute unemployment relief works have been made
available as an emergency, measure.
I t is also understood t h a t it is the practice in Western Australia
to distribute expenditure on extensive works, such as railways,
roads, bridges, harbours, etc., as evenly as possible over the
financial year. This practice, however, does not appear to be in
operation in other States. The degree of urgency of public works
and the availability of departmental funds are the controlling
factors. At the beginning of each financial year the works to be
constructed are determined, the amount of funds required during
the year is allocated, and the works are then proceeded with
regularly, provision not being made for any deferment to meet
prospective unemployment.

5

— 66 —
The Netherlands Government stated that no steps had been
taken to reserve public works and orders for supplies to periods of
unemployment and they explained t h a t the reason for t h a t was to
be found, in the first place, in the fact that, as there was a surplus
of labour available, the authorities had been obliged to put in hand
a programme of public works without reference to what the situation
might be in the future. On the other hand, the conditions imposed
by the State on the grant of subsidies have militated against the
carrying out of any large programme of relief works.
The Minister of Labour stated in October 1927, in a
communication to the International Labour Office that the
Government was studying the question carefully and intended
to act on the lines laid down in the Suggested Basis for
the Supply of Information, unless t h a t should prove impossible.
He added t h a t it was not within the powers of the Netherlands
Government to give strict instructions to provincial or communal
authorities concerning the measures to be taken for the carrying
out of public works, their postponement to a later date, or
their organisation in any way whatever. I n addition, the
employers' organisations and the trade unions in the painting
industry try, with the support of the Government, to distribute
their work in a suitable way over the different seasons.
*
*
*
In the Irish Free State, the Committee on the Relief of Unemployment, 1927-1928, recommended a continuous programme
of house building spread over a period of about ten years, the
reconstruction or renewal of school buildings, the acceleration
and extension of the Government's programme of afforestation,
agricultural improvement works, the construction of roads, and
arterial drainage.
*
*
*
I n Denmark, the Government which came into power in consequence of the election of 24 April 1929 issued a programme which
included measures for dealing with unemployment and economic
depression, among these being, in particular, the organisation of
public works in relation to economic fluctuations.
On several occasions, both the Ministry of the Interior and its
Labour Committee have pointed out to other State authorities
and to the communes the desirability of postponing the organisation of works to periods of severe unemployment, and particularly

— 67 —
t o the winter half year. In particular, it often happens t h a t works
which are specially organised for counteracting unemployment are
interrupted in summer, and resumed in the autumn, when unemployment becomes more marked.
*
*
*
In Austria, according to a report of the Ministry of Commerce
early in 1930, steps have been taken to distribute the orders of
all public authorities in the country in a suitable manner throughout
the year. The object of this measure is to prevent certain industries
from being obliged to work overtime for some months owing to
the large number of public orders, while at other times they
become so slack that they have to discharge workpeople 1.
*
*
*
I n preparation for the Fourth International Congress of Towns
and Public Authorities which • met in Seville and Barcelona in
March 1929, a number of questionnaires were sent out to the
participating members in each country. One of these questionnaires, dealing with the extent of the economic activity of the
municipalities concerned, included the following questions :
Do
orders
labour
(a)

the municipalities follow a policy concerning public works and
for supplies aimed at exercising a stabilising influence on the
market ? If so :
Do they draw up for this purpose programmes of works covering
a long period (eight to ten years, for instance) ?
(b) Do they make it a rule to carry out these works with the
greatest possible regularity ?
(c) Or, on the contrary, do they follow the principle of' slowing
down their public works in a period of great economic activity,
so as by means of the reserves constituted in that way to intensify them during a period of unemployment ?
(d) What are the financial methods adopted (such as constitution
of autonomous funds for public works in order to make them
independent of fluctuations in budgetary receipts, use of credit,
etc.) ?
On these points please give information concerning the measures
adopted and the results obtained.
The replies to the above questions were both scanty in number
and very brief. With regard to the Netherlands and the City
of Zurich, the answer was a simple negative. In Belgium it was
said t h a t such a policy is not, as a rule, adopted, but during periods
of depression the municipalities carry out certain works for the
1

Arbeit und Wirtschaft, 1 May 1930.

— 68 —

special purpose of giving work to the unemployed. In England
and Wales also the local authorities do not, as a rule, apply such
a policy but during periods of depresión certain authorities are
in the habit of carrying out public works in excess of the needs
of the moment and, moreover, they have undertaken special
works owing to the existence of unemployment. On the other
hand, the reply adds t h a t the policy of local authorities depends
so much on local considerations t h a t any generalisation is liable
to give a false picture. In Italy the reply was to the effect t h a t
the municipalities do t r y to distribute their public works in time
in accordance with the state of the labour market.
The most detailed reply was t h a t given on behalf of the Central
Bureau of the Union of German Towns and Local Authorities. The
Government has consulted representatives of the Union of German
Towns on the possibility of adopting a policy of advance planning.
Already a number of towns try to place their contracts in such
a way as to take account of the economic conditions. I t is felt,
however, t h a t the effect of such purely local measures cannot
be very great. The first thing to do is to determine what public
works and orders can be postponed or advanced, for there are
obviously many t h a t must be carried out at once. Close contact
is maintained between central and local purchasing departments,
and it is hoped to establish closer relations between the local
authorities and the State and federal authorities in connection
with their more important contracts and orders. The local authorities do their best to distribute their orders suitably throughout
the year with a view to mitigating seasonal unemployment. The
usual procedure followed for this purpose is to anticipate an
expenditure to be included in the budget for the following year
and to transfer any surplus from one year to the other. Nothing
has been done to create reserve funds for this purpose on account
of the municipalities' unsatisfactory financial situation 1.
SUMMARY

In this section a brief account has been given of actual legislative
and administrative measures adopted in different countries for
planning public works programmes in advance. I t is noted in
the first place t h a t even before the war such measures were taken
in several countries. Since the war, the economic situation has
been abnormal and many countries have been unable to undertake
1

IVe

Congrès International

des Villes et pouvoirs locaux, 1929, Vol. I I .

— 69 —
advance planning either because they had so much leeway to make
up, or because they had so much unemployment, that they put
in hand all the works for which they could find money. Apart
from this, however, it is too often true that nothing is done, or,
what is still worse, that more orders are given during periods of
prosperity than during periods of depression. On the other hand,
considerable attention has been paid to the relation of public
works to employment conditions in a number of countries, and
in particular, the measures adopted in Sweden have been
set out in some detail as they show what kind of works can be
postponed, and give an idea as to the effect of such postponement
or advancement on the labour market.

CHAPTER III
ADMINISTRATIVE PROBLEMS

MULTIPLICITY OF AUTHORITIES

The advance planning of public works is rendered very difficult
owing to the multiplicity of authorities responsible for public
orders. Within the central Government, as a rule, some halfdozen different departments control public work on a large scale
and every department places orders at some time or other. Then
there are the scores of local authorities, from the council of a
large region or province to that of a small municipality. The
degree of financial autonomy varies, but all local authorities are
responsible for some public work, and in the agrgegate their
capital expenditure is very considerable. Then again there are
the public utility companies, numerous and unco-ordinated,
with their very considerable expenditure on new works, extensions,
renewals, and maintenance.
How, it may be asked, can any coherent policy be devised,
let alone a policy securing consistent variation in the volume
of public work in inverse relation to the volume of private
business ?
Several countries have made an effort to grapple with this question, but it will be seen from the following information that for
the most part the initiative in the matter of public works is still
in the hands of a number of separate authorities without any
co-ordinating body. Attention will, however, be drawn in the
first place to those countries in which some efforts at co-ordination
have been made. Some of these efforts relate rather to relief
works than to ordinary public works, but that is not a very
material point in this connection because the experiment which
has once been made in a limited field may point the way to the
application of a similar policy in a wider field.
In Austria decisions in connection with public works carried
out under the productive insurance scheme are taken by the
Minister of Social Administration in agreement with the Minister
of Finance and after the provincial government has declared in

— 71 —
favour of the works. The local authorities, however, have the
right to take part in thé procedure laid down in the Unemployment
Insurance Act with regard to obtaining financial assistance.
Authorities which intend to undertake works have to put in
a request to the Industrial District Commissions at least four
weeks before the work starts 1.
The Industrial District Commissions then submit a report
to the Minister of Social Administration with regard to the number
of unemployed to be absorbed, the approximate length of time
that the work will take, and the location of the work. On the basis
of this report the Minister takes his decision. As soon as the
financial assistance is approved, the Minister draws up a contract
laying down certain conditions. If the contractor agrees, he
informs the Minister accordingly, in writing 2.
The necessity for the simplification of this procedure soon
made itself felt, and an Act of 5 December 1924 (thirteenth amendment to the Unemployment Insurance Act) authorised the local
authorities to decide upon the execution of certain works without
applying to the central authorities for permission, as long as the
amount required by such works did not exceed the sum of 40,000,000
kr. (now 4,000 schilling).
In Canada the purchase of supplies for the Federal Government
is supervised by a Purchasing Commission. When unemployment
is slack in a particular industry, this Commission is advised of
the fact by the Director of the Employment Service, so that
orders may be placed where employment is most needed 3. No
information is available with regard to the work of this Commission.
The Canadian Congress Journal * states that under existing
conditions political pressure very often has considerable influence
in the allotting of money for public works. The Trades and
Labour Congress have therefore proposed that a lump sum,
earmarked for the construction of unspecified public works to be
1
These commissions are composed of an equal number of employers and
workers. They are nominated by the Minister of Social Administration, who
also appoints the president and vice-president. These nominations are made
on the recommendation of the occupational organisations concerned and of the
provincial Government. The commissions are instituted for the purpose of
supervising the various unemployment insurance organisations and particularly
the employment exchanges. I t is also their d u t y t o give all necessary explanations
and information t o the bodies concerned in public works schemes in order t h a t
the latter m a y submit plans which are in conformity with the law.
2
L E D E B E B and SUCHANEK : Arbeitsrecht und Arbeiterschutz.
Vienna, 1925.
3
Labour Qazette, J a n . 1921, p . 42.
4
Canadian Congress Journal, 1922, p. 231.

— 72 —

undertaken during periods of unemployment and in districts
most affected by it, should be voted and that this money
should only be expended upon the advice and recommendation
of the Employment Service Council of Canada, an advisory body
consisting of representatives of each of the provinces and of
several important non-political national organisations.
In France the memorandum accompanying the Bill presented
by the Government on 19 November 1927 for the purpose of
reorganising the National Economic Council states that the Council
is a council of enquiry set up to establish the principles of the
national economy, and composed of delegates of the various
national economic organisations. In 1928, the Council conducted an
enquiry with regard to the national equipment, which also covered
the means of financing the public works then under consideration.
At the end of 1926, when signs of an unemployment crisis began
to appear, the Government had already considered the measures
that might be taken to diminish its effects, and the National Economic Council was asked to draw up a programme of works which
could rapidly be put in hand, in order to occupy the unemployed
workers on tasks of direct utility to the national prosperity 1.
It is not generally admitted, however, that the Council
should itself determine the most suitable time for putting the
works in hand. Thus, according to a report presented to it in
February 1927 on the problem of navigable waterways, by Mr.
Pierre Richemond, President of the Union of Metallurgical and Mining Industries, the National Economic Council has to pronounce
upon the economic situation, and to consider what methods to
follow in order to meet the necessities of that situation. But the
details for the carrying out of such a plan, and the choice of the
favourable moment for the carrying out of certain works in the
place of certain others, should belong to the administration. The
administration calls together its chief engineers each year, and
weighs and compares the urgency of the various works, and the
more or less favourable conditions which exist in the various
districts ; and only the administration is capable of knowing, at a
given moment, the best use to be made, within the scope of the
plan drawn up for it, of the amounts placed to its credit by
Parliament in the national budget 2.
1
Journal officiel, 1927 ; Documenta Parlementaires, Chambre des Députés,
No. 5057.
8
Journal officiel, 24 March 1927 (Annex, p. 204).

— 73 —
In Germany, the administrative authorities which carry out
public works and give orders for supplies are the Ministry of
Finance, the Army, the Ministry of Transport, the Federal Railway
Company, the Postal Administration, the Administrations of
States, Provinces and Municipalities and Municipal Unions.
Moreover, within each department there are different sections
which give orders for public works and supplies. Until recently,
says Dr. Werner Stephan 1 , systematic co-operation of these
various authorities hardly existed at all. I n order, however, t h a t
public works and orders may be distributed as equally as possible
among the various provinces, so-called provincial offices dealing
with contracts (known as Landesauftragsstellen)
have been
established in the separate provinces. These offices are co-ordinated
by a central office (Ausgleichsstelle der Länder) which is attached
to the Federal Ministry for Economic Affairs.
The report adopted by the Provisional Economic Council on
23 April 1928 2 pointed out, among other things, t h a t the inadequate use of public works and orders for the evening out of cyclical
and seasonal fluctuations was due above all to the lack of cooperation among the authorities in the giving out of orders. Moreover, side by side with very strict centralisation in one authority,
there was far-reaching independence on the part of the local
branches in other authorities and any kind of co-operation of
the various organisations having orders of a similar character
to give was practically non-existent. The Committee which studied
the public works problem, considered whether it would be desirable
to centralise the giving of orders for public works or supplies on
the part of public authorities in one department or at least to
set u p some central body which would be able to make representations t o the various departments concerned. The representatives
of industry who gave evidence before the Committee were decidedly
opposed to such an idea. I t would, moreover, be difficult to carry
out within the limits of the present constitution of Germany.
Thé Federal Economic Council found itself, therefore, unable to
make any suggestion on this point, but it proposed t h a t there
should be a much closer co-operation between the various departments concerned and a stronger influence by some central Federal
office on the distribution of the orders given by the various departments. On the basis of this preliminary declaration the Federal
Reichsarbeitsblatt (unofficial section), 5 Sept. 1929.
See above, p . 37.

— 74 —

Economic Council made a series of recommendations to the
Government which may be summarised as follows :
That the Federal authorities shouldinf orm the Ministry for Economic
Affairs of all important orders which are given by them ;
to see that the various spending departments of the Federal Government and of the States, together with the Federal railway company,
the postal administration and the German union of towns should engage
in discussion with the representatives of the economic interests concerned
from time to time in order to prepare an economically desirable distribution of public works and orders ;
to do everything possible so that in the larger municipalities similar
discussions should take place between the town administrations and the
different Federal and State administrations, the Federal Railway
Company, the Post Office, and representatives of employment offices
and of industry.
Since 1 J a n u a r y 1929 the different branches of the Federal
Government, including the postal administration and the railway
company have informed the Federal Statistical Office monthly
of orders exceeding a value of 20,000 marks ; from 1 April 1929
the State administrations have done the same. Negotiations have
also taken place with the larger municipalities and groups of
municipalities. I t is recognised t h a t the limit of 20,000 marks is rather
high and only the most important particulars are given. I t is not yet
possible to know how far these orders can be adapted to the general
economic situation. I n addition, the Federal and State administrations have for some years regularly informed the Ministry for
Economic Affairs at the beginning of each budget year of the
orders they intend to issue for work and supplies.
For a number of years the Ministry of Labour and the Ministry
for Economic Affairs have consulted with the other spending
departments of the Federal Government and of the States with
some regularity, and in 1926 a special inter-Departmental Committee was set up for the purpose. Later on this Committee ceased
to exist, but it has now been revived. Its purpose is to consider the
above-mentioned statistical information and to make proposals to
the spending departments for a suitable distribution of their
orders. I t is hoped at a later date to arrange regular meetings with
non-official economic organisations for a similar purpose. Consultations in Berlin alone, however, are not sufficient, and on 23
October 1928 the Administrative Council (Verwaltungsrat) of the
Federal Institution for Employment Exchanges and Unemployment
Insurance expressed a desire to be associated with the consultations
of the Federal Government, and invited the latter to bring in
the State labour offices also. The Federal Ministries for Labour

— 75 —
and Economic Affairs agreed to this, and a.Decree on the subject
was issued on 28 June 1929. A Decree was issued by the President
of the Federal Institution on 20 July 1929 on the same subject.
The State labour offices have in fact got into touch with the
spending authorities. I n some cases the negotiations with the
latter, so far as purely local matters are concerned, have been left
in the hands of the local employment exchanges, on the grounds
first t h a t the small works are in the aggregate more important
than the large ones, and secondly, t h a t a satisfactory arrangement
is more likely to be arrived at locally, owing to the common interest
in relieving the labour market as far as possible. The spending
authorities, generally speaking, agree t h a t it is desirable to distribute
their orders in such a way as to take account of the situation of
the labour market, but at the same time they have pointed out
t h a t various difficulties of a technical, budgetary and industrial
nature arise.
A number of suggestions have been made in the course of these
negotiations in order to facilitate the distribution of orders in
accordance with the situation of the labour market, at any rate
from the point of view of seasonal unemployment. Thus, it is
proposed to determine the budget for two years at a time, so far
as the building programme is concerned, to empower authorities
to borrow and spend money which will only be available in the
following budget year, etc. As the postponing of public works
and orders for more t h a n a year is very difficult at present, the
State labour offices have practically confined their efforts, so far,
to bringing about an improvement in winter unemployment. This
has met with the difficulty t h a t building during the winter involves
an increase in cost estimated in certain cases to be as much as
20 to 40 per cent. Various proposals have been made to prevent
this increase in cost from taking place *.
One of the points dealt with by the Provisional Economic
Council on 23 April 1928 was the desirability of the authorities,
in giving orders, allowing as long a time as possible for delivery,
so t h a t the firms concerned might thus adapt the work to some
extent to their other jobs. I t is pointed out that this is rarely
the case a t present, and in many instances the time for delivery
is so short t h a t overtime has to be worked in order to get the work
done. This question has on several occasions been discussed by
the departments concerned. I t would naturally be of great assis1

Der öffentliche Arbeitsnachweis,

July 1930.

— 76 —

tance to the employers themselves if they could know beforehand
what orders are likely to be given during, a particular period 1.
In Great Britain the general decision to initiate State assisted
programmes of relief works was taken by the Government. The
Government policy was conveyed to local authorities, etc., by
means of circular letters from the grant-making departments.
It is the local authorities which for the most part have to undertake
the works and which apply to the Government for assistance. For
this purpose the Unemployment Grants Committee was appointed
to examine all applications for grants, and in 1929 a second committee was appointed to examine similar applications from public
utility undertakings working for profit. Only works in respect of
which the Government is asked to advance money come before
the committees.
It is of interest to note that the Unemployment Grants Committee expressed the opinion at the very beginning of its activity
" that provision should be made for a closer working relationship
between the central government and local bodies " 2.
Under the trades facilities guarantee schemes the Government
encouraged certain private enterprises to undertake work which
they would otherwise have been unable to do.
In the description of the public works schemes organised in
Italy since the war 3 frequent reference is made to the appointment
of inter-departmental committees or to special commissions in
certain cases to co-ordinate the work of the different departments
which have the power to decide to carry out public works or to
give orders for supplies.
In the United States the need for the centralisation of a public
works policy is indicated by Mr. Mallery's estimate that within
the Federal Government alone public works are carried out by
thirty-nine different departments and offices ; sixteen federal
agencies are authorised to build roads, nineteen to do hydraulic
construction, sixteen to work on rivers and twenty-two on
engineering and research.
A Federal purchasing board has been established with a view
to co-ordinating the purchase of supplies for the Federal departments
but has not yet itself a purchasing agency. In connection with the
encouragement of public works by the Federal Government during
1

See article by Rudolf SCHIBMER in Industrie und Handelszeitung, 29 Dec. 1929.
UNEMPLOYMENT GRANTS COMMITTEE : First Interim Report for the period
20 December 1920 to 2 March 1922, p. 20.
3
See P a r t I I .
2

— 77 —

the depression of 1929-1930, a new Division of Public Construction
was established in t h e Department of Commerce to aid in co-ordinating the efforts of Federal, State and local governments t o
expedite public works projects. I t may also be noted t h a t in the
Bill presented to Congress by Senator Wagner in the Session of 19291930, it was proposed to establish a Federal employment stabilisation board to be composed of the Secretary of the Treasury,
the Secretary of Commerce, the Secretary of Agriculture and the
Secretary of Labour.
The adoption of the policy of advance planning has been greatly
facilitated by the recent trend towards city and regional planning
in general. City planning commissions, bureaux of municipal
research and special committees appointed by the heads of local
governments, city, county and State, have contributed t o this
development 1 . I n all, eight States have laws permitting central
purchase of supplies but they are said t o lack the organisation t o
make these effective. Thus, in 1922, New York set u p a central
department for the purchase, control and distribution of all
supplies needed by t h e State. This organisation can be used t o
concentrate orders as far as possible in periods of depression.
I n California and Wisconsin, where laws providing for the advance
planning of public works are on the statute books, the decision
to put in hand public works lies with the respective State Boards
of Control.
For the most part, however, when a crisis develops, the Federal
and State Governments simply invite t h e local authorities and
other bodies t o undertake public works. Thus, in the early
months of 1928, the Governor of the State of New York invited
the mayors and governors of counties to undertake public works,
and in t h e crisis of 1929-1930, both the President and State
governors did t h e same thing.
In other countries no co-ordinating authority has been set
up, and the Government has therefore to rely on the force of
example, on grants of money and on loans for the purpose of
stimulating local authorities and public utility companies t o put
public works in hand.
Thus, in South Australia, when the Government desires local
bodies to adopt a policy similar t o its own, it communicates with
1

NATIONAL BUREAU OF ECONOMIC RESEARCH : Planning

and Control of

Public

Works : A Report of the Committee on Recent Economic Changes of the President's
Conference on Unemployment.

— 78 —

the local bodies concerned in writing and by conferences. In
New South Wales, local government authorities have been encouraged
to co-operate in a public works policy to the fullest extent possible ;
in some cases this has taken the form of a joint contribution
by the Government and local authorities to meet the cost of works
of local character and benefit which are at the same time calculated to relieve to some extent the general pressure of unemployment. I n Tasmania, assistance is sometimes given either to local
authorities or to private enterprises by the Government in the
form of a grant amounting to 50 per cent, of the total expenditure
on public works which are in the nature of public utilities.
I n the Irish Free State the responsibility for carrying out
public utility works for local requirements rests with the local
authorities, but where the works involve the exercise of borrowing
powers the plans, specifications and estimates of costs are submitted
for approval before sanction is accorded to the raising of loans.
The principal public utility services administered by local bodies
for which borrowing powers are required are the provision of
houses for the working classes, public water supplies, sewerage
schemes, and the provision of burial grounds. The county,
county borough and urban district councils are also charged with
the reconstruction and maintenance of public roads.
So far as local bodies are concerned they have full power
over their own funds and it rests with them to decide whether
the financial position of their district would permit of additional
expenditure on public services. Where improvements are desirable
in the interests of public health, local bodies are encouraged to
undertake them by the offer of long term loans repayable over
a period varying from twenty to thirty years, according to the
nature of the works undertaken. These loans are advanced by
the Central Government. As already stated, works of any considerable size are generally undertaken by. aid of loans and if any
policy of restriction of public works by local bodies be desirable,
control over the power of borrowing can be exercised by the
central authority.
The Polish Government states t h a t decisions with regard to
postponing or advancing communal works are taken by the local
authorities, district committees, etc. Decisions with regard to
Government works, with the exception of railway, mining and
military constructions, are taken by the Ministry of Public Works
and the Ministry of Finance.
As a result of the federal Constitution of Switzerland, which

— 79 —
leaves extensive powers in the hands of the cantons and communes,
all kinds of different authorities are empowered t o take decisions
with regard to postponement or acceleration of public works.
The communal or cantonal, authorities are competent to decide
with regard to communal or cantonal works. For work organised
by the Federal Government, such decisions are taken by the
administrative services for the works under their charge, and by
the Government or the Parliament for works of a wider scope.
Although the Confederation cannot force the local authorities
to take similar decisions to its own, it may encourage them to
do so by means of subsidies, statements with regard to results
obtained, discussion of appropriate measures to be taken, etc.
With regard to the intervention of the Government in semiofficial or private enterprises, it may be recalled t h a t subsidies
have been granted to the Federal Railways in order to accelerate
the electrification of certain portions of the line.
RECRUITMENT OF LABOUR

•

The best way of recruiting labour for public works is clearly
t o apply to the employment exchanges. If workmen are taken
on directly by the authorities or by the contractors the door is
open to all the evils of unorganised recruiting, namely, the tramp
for work from factory to factory or from workplace to workplace,
the presence of unemployed workmen in one town unaware of
an unfulfilled demand for workmen in another, the movement
of large numbers of workmen from districts where work is scarce
to those districts in which public works- have been started, thus
throwing great burdens on the districts concerned and causing
unnecessary hardship to the workmen, and the establishment of
special employment offices, either fee-charging or otherwise. I n
all countries which have a system of employment exchanges,
recruiting through the exchanges is now the normal method of
obtaining workmen for public works. In those which have not,
or which have an inadequate system, the evils referred to above
are inevitable. In Federal States particularly there is a danger
t h a t any State which undertakes a large public works programme
at a given moment may be invaded by large numbers of
unemployed from other States, and measures are generally taken
to guard against this. Thus, in New York State, Chapter 689 of
the Laws of 1930 requires the preference to be given in employment to citizens of the State in all public works construction.

— 80 —

The attention of all contractors is also called to the necessity
of keeping on file lists showing whether workers are citizens 1 .
A point of greater importance in this connection is that of
the criteria used in selecting the men. I t is clear t h a t workers
will in the first place be engaged primarily because of their fitness
for the job. As by hypothesis the recruiting will take place at
a time of unemployment, this should not be difficult u p to a point.
On the other hand, there are cases in which, owing to the
decay of a particular industry, it is desirable to transfer workers
from one kind of work to another with a view to their permanent
absorption in a new occupation. This was true of the cotton
workers during the British cotton trade crisis of 1863, and it is
true of certain depressed industries in Great Britain to-day.
Recruiting for this purpose is best done through the employment
exchanges, as in the more normal case of recruiting workers who
are already accustomed to the work required.
If workers are recruited for a new kind of work, it is important
t h a t they should be trained to some extent for it. Even for the
most unskilled labour some adaptation is needed, and in this
way the danger of increasing the cost through incompetent work
is very much reduced or may be eliminated altogether.
As will be seen below, the employment exchanges in Japan
have in some cases undertaken the actual supervision of the
public works. No other example of this kind is known.
In South Australia the majority of the men employed on public
works are engaged through the Government Labour Exchange.
I n France somewhat elaborate arrangements have been made
from time to time to ensure t h a t the need of labour for public
works put in hand at a time of unemployment should be communicated to the employment exchanges, although there was no
obligation to recruit labour in this way. At the request of the
Minister of Labour, the Minister of Public Works sent instructions,
on 31 October 1921, to all Prefects whose duty it is to invite tenders
for public works, to the effect t h a t three copies of any poster or
advertisement asking for tenders for works involving an expenditure
of 100,000 francs or more should be sent to the Ministry of Labour.
The Ministries of War, of the Navy and of the Interior and the
Postal and Telegraph Services were also requested to take similar
steps. As soon as the copies of the advertisements arrived at the
Ministry of Labour, the Central Employment Office despatched
1

Industrial

Bulletin,

Albany, N.Y., May 1930.

— 81 —
copies to the employment exchanges of the districts in question,
in order t h a t they might get into touch with contractors and offer
to obtain for them the necessary working force. Further, several
Government departments inserted in their specifications in 1921,
at the request of the Ministry of Labour, a clause to the effect
t h a t contractors must notify the local employment exchanges,
and more particularly the central divisional employment exchange
in the district where the work was to be carried out, of their labour
requirements. The contractor thus remained free to take on or
not, as he chose, the workers sent him by the employment exchanges,
but by this means the exchanges were enabled to put opportunities
in the way of the unemployed workers inscribed on their own
books or the books of other exchanges with whom they were in
constant touch.
At the end of 1926, in view of the fresh economic depression then
threatening, the Ministry of Labour reminded the various Government departments of the instructions which had been issued.
I n a circular dated 30 December 1926, the Minister requested his
colleagues to issue instructions to their sub-departments to the
effect t h a t not only should copies of the advertisements of tenders
involving an expenditure of 100,000 francs, or more be sent to
him, but also details of any contracts of similar importance placed
either as the result of agreement or of the submission of tenders,
and giving the names and addresses of the contractors. In another
circular dated 7 J a n u a r y 1927, the Minister requested the Prefects
to recommend the insertion in their specifications of a clause
binding contractors to notify the employment exchanges of their
labour requirements, it being understood that this practice should
be followed not only for works undertaken by Government departments, but also by district and communal authorities, in order
to absorb the unemployed.
According to information supplied by the German Ministry of
Labour, any fresh labour required for public works, undertaken at an
earlier period than was anticipated, is recruited through the public
employment exchanges. I n the negotiations which have recently
taken place between the State Labour Offices and local spending
authorities, the latter are always urged to make use of the public
employment exchanges, particularly with a view to preventing
the drift of labourers from the country to the towns. Many of
the authorities have agreed to this.
In Great Britain it has generally been made a condition of
the grant of assistance to local authorities and others undertaking
6

— 82 —

public works in the post-war depression t h a t labour should be
engaged through the public employment exchanges. The object
of this is to enable the grant-making departments to ensure t h a t
the maximum amount of employment is afforded to bona fide
unemployed men.
In the Irish Free State, all labour required for public works
is recruited through the employment exchanges, and in connection
with relief works preference has been given to ex-service men of
the National Army.
In Japan in enlisting labourers for the public works, priority
has been given to those who registered their names at the employment exchanges, to the exclusion of skilled workers. In this
way the labour markets in those places where public works were
started were protected from the danger of being swamped by
labourers from rural districts. As a matter of fact, the task of
the employment exchanges was not necessarily limited to the
registration and supply of labourers. The exchanges also took
the responsibility of supervising the works. At first doubt was
expressed as to whether they would be able to do this, but the
result proved to be very satisfactory and the works were very
economically carried on.
In Switzerland, in cases where public works have been advanced
in view of a threatened increase in unemployment, the employment
exchanges have been called upon to furnish workers for the
execution of such works.
E F F E C T ON CONTRACTS OF POSTPONING AND ACCELERATING WORKS

One of the points in the Suggested Basis for the Supply of
Information was the following :
In the case of postponement of public works previously decided on,
what are the difficulties experienced in connection with :
(a) interruption or slowing down of work in the hands of contractors,
and the legal recourse open to such contractors against the
Government on account of its annulling or modifying their
contracts ;
(b) the effects of the slowing down of contract work on the financial
situation of such contractors or firms supplying them ?
Very little information is available on this subject.
The German Government states t h a t no difficulties of the
kind referred to have been experienced in Germany. When there

— 83 —
are definite contracts with contractors the works or orders may
only be postponed upon agreement with the contractors.
In Poland private contractors who have undertaken construction work cannot be obliged to postpone or to anticipate the
carrying out of such work unless a special clause is inserted in
the contract.
The Swiss Government says that, generally speaking, works
which are placed out on contract are subject to the Code fédéral
des Obligations and no special legal provisions exist to regulate cases of postponement or slowing down of public works
— with the exception, of course, of derogations from the Federal
Code specifically mentioned in the contract. When the authorities
have decided in certain cases t h a t work has to be adjourned, this
action has not resulted in any consequences to the contractors,
as the postponement usually occurs before the work has got to
t h a t stage.
This paucity of information would seem to indicate that the
problem hardly exists at all ; and it will be noticed t h a t those
Governments which are quoted above agree in saying t h a t once
a contract is made it is adhered to. I t is true t h a t the German
Government suggests t h a t works can be postponed in agreement
with the contractors, but it is not assuming too much to suppose
t h a t the case very rarely arises.
How does this affect the policy of planning public works in
advance ? Hardly at all. This policy involves drawing up a
programme of public works which are not of immediate urgency,
and then putting them in hand to a smaller or greater extent
according to the state of the labour market. When unemployment
is rising, more roads, more schools, more public buildings are
started, and more repairs are undertaken. Even with careful
planning, such works cannot be put in hand over night, but they
can be started very rapidly. Some of these works will last only
for a few months ; there will be no need to stop them prematurely.
But others will continue for many months, perhaps for years.
Clearly it is possible that before these works are completed the
business cycle may again be on the upward grade ; but even
then it would not be necessary to stop works which have already
been started, for it should not be forgotten t h a t in normal times
certain new public works are put in hand every year, and t h a t
it is sufficient to refrain from giving fresh orders for works or
supplies for the moment.

— 84 —
Any policy which involved the stopping of works in a halffinished state would be fraught with serious difficulties. We
are not considering relief works which are set up solely for the
purpose of giving employment, and which might perhaps (though
by no means always) be stopped at very short notice ; we are
considering public works which are needed in any case, and which
are merely shifted a little forwards or backwards in time. If
such works as these are suddenly stopped, buildings or materials
for which the Government or municipality is waiting will not
be completed. Moreover, as Dr. Werner Stephan points out in
the article which has already been quoted, half-finished works
are liable to deterioration, and special financial arrangements
would have to be made for their maintenance until the work
is resumed. At the same time, there would be a considerable
loss of interest on the capital invested in the works. Thus, from
both a financial and a practical point of view, an abandonment
of half-finished works would be most undesirable. If it is found
t h a j industrial activity is increasing while an exceptional number
of men are engaged on public works, equilibrium can be re-established not by stopping those works but by putting less and less
work in hand.
In conclusion, it may be said t h a t the advance planning of
public works does not involve any interference with contracts or
any interference with works which are already in hand.
W H E N SHOULD THE P U B L I C W O R K S BE P U T IN H A N D ?

Assuming t h a t the State and local authorities have made
plans for putting in hand public works to prevent or, at any rate,
to mitigate unemployment, how are they going to decide at what
moment to do it % This question is one of great importance and
some difficulty.
I t seems natural to use an index of employment or unemployment for this purpose. Thus, when unemployment
reaches a certain level, a progressive expansion of public works
would be initiated and, as it falls again, there would be contraction.
This, of course, presupposes a reliable index of the intensity of
unemployment. Statistics of employment or unemployment are
now compiled in an increasing number of countries and their
quality is being steadily improved. The first essential step towards
preventive action on the lines suggested is thus being taken.

— 85 —
In point of fact, an index of employment or unemployment
is the one used in most countries, although it is indicated in the
information sent in to the International Labour Office by various
Governments t h a t general business conditions are often taken
into consideration as well.
Thus, in South Australia economic factors are taken into consideration but no particular index numbers are used.
In Germany, the decision to postpone or advance public works
depends upon the general state of the labour market and the
economic situation. The Government bases its decision partly
on statistics of the general economic situation and partly on
statistics of employment and unemployment, and more particularly on the numbers of unemployed in receipt of relief and of
applicants and vacancies on the books of the public employment
exchanges.
In Palestine, statistics of unemployment and of immigration
are considered.
In Poland, the responsible authorities base their public works
policy on the statistics of the public employment exchanges
concerning the situation of the labour market.
In Switzerland, the Government states t h a t the responsible
authorities take account of the economic situation and the labour
market.
In the United States, the Wagner Bill prescribes in the first
place " the volume based upon value of contracts awarded for
construction work in the United States, or in any substantial
portion thereof during the three months' period preceding action,
in comparison with the corresponding three-month periods of the
two previous years ". One of the arguments advanced in favour
of this index was t h a t it was a simple one and t h a t it was indispensable t h a t any index chosen should be simple 1.
The Wagner Bill adds t h a t account should also be taken of
the index of employment prepared by the Department of Labour
and any other available information concerning employment. I t
is not possible in the United States to take an index of unemployment, because no such index exists. Consequently, there is a choice
there, so far as the situation of the labour market is concerned,
between an index of employment and an index of payrolls. The
1
Cf. Hearing before the Committee on Commerce, United States Senate, on S.
2475, April 1928.

— 86 —
latter is the more sensitive because it takes account of short time,
whereas a man is counted as employed even though he has employm e n t for only a few hours or a day or two a week. As Mr. Vernon
A. Mund points out, " the most significant factor making for good
or for bad times is the income t h a t people receive. Therefore,
the index of payrolls presents itself as the better indicator of
the need of an addition to the income stream of society " 1 .
Mr. D. H. Sawyer, Secretary of the Associated General Contractors of America, states t h a t in his office the materials shipped
— t h a t is to say, under construction — are used for purposes
of statistical compilation. The disadvantage of this, from the
point of view of the advance planning of public works, is that the
materials shipped lag behind the contracts awarded by an uncertain
period.
Mr. Sawyer gave the following index numbers to show the
volume of construction by quarters in the years 1922 to 1927 :

TABLE IV
1922

1923

1924

1925

1926

1927

January . .
February . .
March . . .

69
72
80

108
121
113

132
118
128

120
107
116

137
117
119

129
121
135

Average

74

114

126

114

124

128

April . . .
May . . . .
June . . .

130
155
175

160
177
183

147
169
182

152
181
203

151
179
220

166
197
212

Average .

153

173

166

182

183

192

July . . . .
August . .
September

172
174
170

171
173
185

184
190
188

220
220
221

228
215
221

221
238
236

Average

172

176

187

220

221

232

October . .
November
December

148
148
131

168
179
149

187
176
155

209
203
156

200
210
162

222
216
162

Average

142

165

173

189

191

200

1

MüND, Op. CU.

— 87 —
He pointed out, moreover, t h a t in 1920 this index of materials
of construction shipped, based on 1913, was 95. The corresponding index for 1921 was 90.
In 1922, however, the index
rose to 135 \
The objections to these indices is t h a t they do not show the
turn of the business cycle soon enough. This is more especially
true of an index of employment or unemployment for if no steps
are taken to advance the putting in hand of public works until
unemployment has really made its appearance, the works can at
best only act as a cure for unemployment, and not as a means
of preventing it.
In spite of the most efficient planning it must inevitably
take some time before works which have been decided upon can
actually be started. In so far as the work is undertaken directly
by the public authority concerned, the delay need not be very
great, but in most cases the work will be given to contractors,
and in t h a t case tenders have to be asked for and examined, and
the contracts awarded to particular contractors. This can hardly
take less than a month and may even take longer.
Some people consider t h a t this delay is a good thing, because
it gives time to industry to eliminate the unhealthy elements
which occur in a boom period. Mr. Mund, for instance, says
t h a t during a period of prosperity labour becomes relatively
inefficient and administrators become " lax and careless in the
grand rush ". Thus costs rise and tend t o overtake the rise in
prices ; secondly there is a tendency to produce a surplus of
goods which cannot be sold at the current market prices ; and
thirdly a period of prosperity is marked by much speculative
activity in securities and commodities. Mr. Mund considers it
inevitable and beneficial t h a t readjustments should take place
at the close of a period of prosperity 2 .
On the other hand, it may be argued t h a t by the adoption
of certain measures, of which the advance planning of public
works is one, booms and depressions may become less marked
than hitherto, and industrial production more stabilised. In
t h a t case the need for such readjustments will diminish. They
will not, perhaps disappear, but it must be recalled that the policy
of advance planning of public works aims primarily at preventing
1
Hearing be/ore the Committee on Commerce, United States Senate, on S. 2475,
April 1928.
* M UND, op. cit.

—

88

—

unemployment and in order to have the maximum effect in this
direction it must be applied as early as possible in the depression,
the ideal being that public works should absorb workers, pari
passu with their discharge from private employment.
What is really needed, therefore, is a warning index that
will forecast the coming depression, and this brings us to the question
of economic barometers. It is clearly impossible to enter into
that big and important question here. It has already been considered by the Joint Committee on Economic Crises and a report
on the subject has been published by the International Labour
Office 1. There is clearly a need for further research on the
subject before a satisfactory index can be determined and
the importance of such an index for the advance planning of
public works is an additional reason for pushing forward with the
investigations as rapidly as possible.
It is desirable to have not merely a general index for industry
as a whole but also, if possible, an index for each industry and
perhaps even for each locality. While it has been pointed out
elsewhere in this report that the advance planning of public works
is mainly useful in connection with a general depression, there
are occasions, as was shown by the experience of the cotton crisis
in Great Britain during the American Civil War, on which it
can be applied successfully in a depression which hits one industry
particularly. It would in any case be interesting to have an
indication of the situation in each industry and locality, as well
as in industry as a whole, throughout each country, and even in
a general depression it might be useful to apply the public works
policy in such a way as to take account of those industries and
localities which are most severely affected.
SUMMARY

In this chapter a number of administrative problems have
been examined. It has been seen that great difficulties in the
way of advance planning arise from the large number of departments which undertake public works both in the central government
and in the various local authorities. The labour necessary for
public works which are speeded up is normally recruited through
the employment exchanges, and thus ensures the best possible
1
INTERNATIONAL LABOUR OFFICE. Economic B^romefrs.
Series N, No. 5. Geneva, 1924

Studies and Beporte,

— 89 —
situation in the labour market. The policy of advance
planning does not involve any interference with works already
started. All that is required is that in a period of prosperity
fewer contracts, and in times of depression more contracts, would
be entered into. It is necessary to have a reliable index to
indicate the best time to speed up or slow down public works,
as the case may be. An index of employment or unemployment, supplemented by an index of general business conditions,
is generally used.

CHAPTER IV
FINANCIAL PROBLEMS

One of the most important difficulties in applying a policy
of advance planning is t h a t of funds. How is successful expansion
and contraction of public works to be financed ? Most discussions
of public works programmes centre to a large extent round this
question.
TAXATION

Money may be raised for the purpose of public works either
by taxation or by borrowing. I t is always preferable to use the
method of taxation whenever t h a t is possible, but it is obviously
not possible beyond a certain point in connection with public
works. Many of these works are a form of capital expenditure
and should therefore be financed out of savings rather than out
of income, a sinking fund being, of course, provided for the
amortisation of the loan. I t remains true, however, t h a t taxation
can be used in a great many cases and this question will therefore
be considered first of all. An increase in taxation, whether central
or local, in order to finance public works during a depression, is
generally regarded as inopportune, if not impossible. When
industry is already depressed, unemployment rife, and purchasing
power deficient, it is said to be most undesirable to increase the
burdens of taxation. If what is spent on providing employment
and wages is merely taken out of the taxpayers' pockets at the
moment, the sole result, it is argued, would be to transfer purchasing
power from one body of consumers to another, with no net advantage.
The actual effects of increased taxation are by no means as
simple as this, however. If taxation is drawn from what would
otherwise be savings, and spent largely in wages for the workers
employed on public work, there is a definite change in the direction of spending. Private savings would probably be devoted to
investment, while wages are spent generally on consumption goods.
At the same time the investment of savings really means the
payment of wages (inter alia) to workers employed on producing
capital goods, and it may again be argued, therefore, t h a t taxation

— 91 —
to finance public works is merely an unnecessary diversion of
funds. I t should be remembered, however, that one of the
characteristic features of a boom is probably over-investment
in private industry, and t h a t during the depression the demand for
capital is slack, so t h a t savings will be lying temporarily
idle. Taxation to finance public works will therefore secure productive use of savings as well as employment of labour x.
From the political standpoint, however, a heavy increase in
taxation would be most inopportune, and probably suicidal to the
party in power. I t is this political difficulty which has frequently
led to a curtailment of public works during any depression of
long duration.
A practical objection to the use of simultaneous taxation to
finance public works is the delay involved. Plans may have been
drawn up before hand but if they cannot be carried out until taxation
has been voted the depression will have been in existence for some
time before any steps can be taken to counteract it.
Moreover, if Parliament or a local authority votes money for
particular public works and these works are later postponed
because the economic situation is particularly favourable, it may
very likely happen t h a t when the works are ultimately put in
hand the money is no longer available. Credits voted for any
purpose usually lapse at the end of the financial year, though
exceptions are sometimes provided for.
I n South Australia, if the provision for a loan work is not used
in any financial year, the provision lapses, and the amount would
have to be revoted in the ensuing financial year.
I n France the Commission appointed by Mr. Viviani in 1908
noted t h a t with regard to money budgeted for certain public
works Parliament had from time to time authorised the carrying
forward from year to year of any credit balance remaining. A
Decree of 12 July 1893 in fact expressly stipulates t h a t such
balances may be carried forward in the budgets of Departments.
With regard to the State, however, the principle of yearly budgets
may not be departed from and no funds may as a rule be carried
forward. An Act is however passed each year relating to the
carrying forward of credit balances and these balances are thus
at the disposal of various Government departments in addition
to the usual yearly credits for the purpose of meeting their liabilities
in regard to works and supphes.
1

Cf., on this point, Chapter I I .

— 92 —

A Bill was introduced into Parliament at the end of
1929 for the purpose of changing the date of the beginning
of the financial year and in this connection several speakers
emphasised the importance which attached to the date of voting
the yearly programme of public works. The Chairman of the
Senate Finance Committee stated on 27 December 1929 t h a t
when the financial year coincided exactly with the calendar year
it was possible for the Government departments, if the budget
was voted in time, to begin to prepare their programme of public
works as early as 1 January and thus have them ready for
putting in hand at the beginning of the summer. As the Government proposed to make the financial year begin on 1 April the
Committee requested t h a t measures should be taken t o enable
the Government departments to prepare their programmes at
the beginning of the calendar year, within the limits of the sums
standing to their credit in the current budget. The Minister of
Finance drew attention to the fact t h a t for public works extending
over several years Parliament was in the habit of voting credits
which extended over several financial years (Lois de Programme) or of voting amounts in each yearly budget permitting
contracts to be placed or subsidies to be granted several months
or even years before the works are put in hand. He further declared
t h a t towards the end of each calendar year the Government would
ask for credits to be voted by a simple Act to which would
be attached a plan containing a certain number of special authorisations within the limits of those laid down by Parliament in the
preceding budget 1 .
In Germany if public works are postponed beyond the end of
the financial year the credits originally provided generally lapse
and must be provided for again in the next year's budget. An
exception is made, however, in virtue of section 30 of the Budget
Order of 31 December 1922, in the case of credits for exceptional
and unusual expenditure and also for certain funds which, in
accordance with the Budget Act, may be carried over to the following financial year.
Dr. Werner Stephan draws attention to this point and says
that a postponement of orders is difficult because when it is desired
t o undertake them the necessary money may no longer be available.
I n countries with a less rigid financial administration and an
elastic capital market, these difficulties would probably not arise,
Journal officiel, 28 Dec. 1929 : Sénat, Débats parlementaires, pp. I3Ö0-57.

— 93 —
but in the majority of countries, including Germany at the present
time, such difficulties certainly would arise.
The Provisional Economic Council, in its report of 23 April
1928, recommended the Government to examine whether, by
the postponement of expenditure from one budget period to
another, or by allowing the use of moneys in one budget period
which would normally only be voted in a later budget period,
it would be possible to facilitate an economically more desirable
distribution of orders, and whether such changes are feasible.
The Federal Government has studied this problem. I t is
recognised to be a very delicate question, because the tendency
of the Reichstag is to keep an increasingly tight hold on all
expenditure. Negotiations have, however, taken place among the
different departments on this subject, and it was intended, in the
event of their being successful, to approach the State Governments
on the matter.
I n Great Britain the sums needed are voted each year by
Parliament. The public works undertaken since the war have
been paid for partly by loans and partly by rates and taxes, and
Government assistance, in cases where no provision has been
made for it in one financial year, is raised by means of supplementary credits granted by Parliament at the request of the
Government.
I n Switzerland, as a general rule, credits which have not been
employed during the financial year for which they were provided
are not carried over to the next year. I n certain cases, however,
they have been carried over. _ Moreover, the credits for certain
works have not been included in the ordinary budget, but have
been specially voted by Parliament. These credits do not, therefore, expire at the termination of the financial year. When public
works are advanced in time, the authorities request Parliament
to take immediate steps for the provision of the necessary funds.
On the other hand, in Italy, credits accorded for the execution
of public works which are not exhausted at the end of the financial
year may be carried forward to the following financial year.
I n Tasmania the necessary credits, once voted, are held by
the Treasury Department until required.
I n the United States it is said t h a t local authorities have in
many instances resorted to planned budgets of expenditures for
permanent improvements. For instance in Cincinnati, where
such a programme has been in operation for three years, expenditures are planned for a period of five years, and machinery thus

— 94 —
exists for exercising considerable control over the prevailing
volume of public works. The plan of budgeting over a period of
years in this way is rapidly being adopted throughout the United
States 1.
BORROWING

The obvious alternative to taxation is borrowing. There is
considerably more to be said for this, since during a depression
capital as well as labour tends to be unemployed and is therefore
comparatively cheap. From the purely financial standpoint
public authorities would do better to float their loans in times of
depression.
Professor Copland, Dean of t h e Faculty of Commerce, Melbourne University, in a special report which he prepared for the
Development and Migration Commission on the control of the
business cycle with special reference to Australia, said t h a t an
objection was sometimes made t h a t t h e advance planning of
public works would involve raising a loan on the money market
at a time when trade is depressed and credit conditions stringent.
He considers, however, that the difficulty is by no means
insuperable.. I n t h e first place, he says, there is a natural tendency
during a period of depression for certain funds t o flow into public
securities and the raising of a public loan would doubtless provide
an outlet for some funds which would not be placed in private
business when an element of uncertainty prevailed. Secondly,
Australia borrows heavily abroad and this borrowing should be
at a maximum in periods of local business depression. This would
have a beneficial effect in two directions. I t would increase the
volume of employment in Australia and, by raising funds abroad,
it would improve the exchange position and strengthen banking
reserves, thus leading to a better credit situation. From this
point of view Professor Copland considers t h a t advance planning
of public works has much to recommend it 2.
Dr. Bernhard, in the article already quoted, thinks t h a t if
public works are postponed they should not be undertaken a t the
very beginning of a depression but at a somewhat later stage.
The effect would then be much greater and there would be more
liquid capital available. This view is supported in two articles
written by Rudolf Schirmer, in Industrie und
Handelszeitung,
1

NATIONAL B U R E A U of ECONOMIC RESEARCH : Planning

and Control of Public

Works.
2

COMMONWEALTH OF AUSTRALIA, DEVELOPMENT AND MIGRATION COMMISSION :

Report on Unemployment

and Business

Stability

in

Australia.

— 95 —
28-29 December 1927, in which he says t h a t at the beginning
of a crisis the situation on the money and capital market is
so bad t h a t any withdrawal of capital for a public works programme would only tend to increase the difticulties of private
industry. Experience shows, however, t h a t the money and capital
market becomes more fluid immediately after the crisis so t h a t
the financing of public works, by means of which depression might
be mitigated by a fresh impulse given to industry generally, should
no longer be difficult. The public authorities would then have
the advantage of obtaining capital at a favourable rate of interest
and a t the same time of getting the work done at favourable prices.
I t may be objected t h a t the investing public will suffer from
the prevailing pessimism and be unwilling to subscribe to the
loans. But, on the other hand, public loans rank so high as securities
and the element of risk is so small t h a t there is little danger of
their not being taken up even during a severe depression.
Local authorities as a rule can either issue a public loan or
borrow from the Central Government. The latter may be the more
rapid and simple course for them but it simply transfers the financial problem from the local authority to the Central Government.
I n Italy, for instance, advances can be made promptly
through the Deposit and Loan Fund whenever the Government
has taken a decision with regard to special public works (Royal
Decree No. 1698 of 17 November 1918 and Royal Decree No. 1704
of 19 November 1921, which have been referred to above). Advances are also made, if necessary, by the National Social Insurance
Institute and the savings banks administered by the Banks of
Naples and Sicily (Act No. 1177 of 20 April 1921). Finally, the
Government decides in cases of urgent public works where it is
necessary for advances to be promptly made (Royal Decree
No. 1698 of 17 November 1918 and Royal Decree No. 1182 of
20 September 1928).
With borrowing, as with taxation, however, a practical difficulty arises, namely, the delay involved in securing authorisation
for the loan and raising the money. Between the time when it
is clear t h a t the state of employment requires an expansion of
public works and the time when such works can be put in hand
on the strength of a loan, there is an interval when unemployment
may increase unchecked. This difficulty is, however, by no
means so great as in the case of taxation, for loans are raised
more quickly than taxes.
In effect, however, financing by borrowing at the time of the

— 96 —
depression is " post-financing ", since the loans have to be repaid
later, presumably in periods of prosperity. I t may well be argued
t h a t it is better to provide for the evil day beforehand, rather
t h a n mortgage the always uncertain receipts of future prosperous
times. Advance financing, in fact, is almost as essential to an
effective public works policy as advance planning.
ADVANCE

BUDGETING

Mr. Otto T. Mallery, in the volume Business Cycles and Unemployment, published as a result of the President's Conference
on Unemployment of 1921 in the United States, makes a proposal
which, though it would not actually provide funds in advance,
provides the necessary machinery for securing them, and avoids
the delay noted in the preceding paragraphs. He suggests t h a t
the legislature should authorise " contingent bond issues ", i.e.
the Treasury would be authorised to issue bonds up to a certain
amount whenever a state of industrial depression rendered the
execution of public works necessary. Thus without waiting for
special sanction in each case the Government could raise funds
by the quickest method of borrowing. This system is not unlike
t h a t in current use by which the Treasury anticipates the receipts
of future taxation and meets a temporary deficiency by the sale
of Treasury Bills or other short-term Government paper without
requiring special authorisation in each case.
A similar suggestion is put forward by Dr. Benjamin M.
Anderson, the economist of the Chase National Bank of New
York. He considers t h a t :
It should not involve a wide departure from existing constitutional
procedure for the legislature to authorise construction and to make
appropriations out of the future proceeds of bond sales, leaving it to a
Board of the executive officers of the State to determine the precise
time when the bonds should be issued and the construction undertaken.
Such a Board should be required to justify this course by a subsequent
report to the legislature, in which it would present evidence based on
figures for unemployment, commodity prises, and other relevant indices
of prosperity or depression.
Dr. Anderson also suggests t h a t a policy of rapid amortisation
of State and municipal borrowings should be followed. Such
borrowings, he says,
. . . should be used not to increase the aggregate of State and
municipal expenditure, but rather to give flexibility to the financial
programme, and to permit concentrated expenditure at the most
appropriate times. . . . The principle of pay-as-you-go, rigorously
interpreted, involves a loss of flexibility in public expenditure.
If State expenditure for construction and other purposes is to be

— 97 —
concentrated in periods of depression, the State must spend more in
certain years than it collects in taxes in those years. I t must ordinarily
borrow for this purpose. If the borrowing follows the conventional line
with an amortisation period approximately as long as the life of the
improvements to be made, public debt will inevitably grow. If, however,
the amortisation period is brief, say, approximately, the length of an
average business cycle - six or seven years - then the effect of the
borrowing is primarily to give flexibility to public expenditure rather
than to increase public debt, and to increase the total of public expenditure. . . .
What is really called for is that the State should have an effective
fund of working capital, so that it can concentrate expenditure, otherwise spread through several years, into a period of one or two years.
It would be particularly desirable, of course, that it should concentrate
these expenditures in periods of depression when construction can be
done most cheaply and when public expenditure will benefit the general
business situation.
The desirable policy would be a policy of rapid amortisation and
reissue. The State should have a revolving fund of credit. It should
seek to maintain a reserve of bond issuing power. I t should use its
borrowing power not for the purpose of increasing its total expenditure
over a period of seven or eight years, but rather for the purpose of
concentrating parts of its expenditure in short periods when unusual
expenses are necessary in the interests of economy or when depressed
business conditions make such concentration of expenditure a helpful
stimulus to business.
Professor Bowley proposes an ingenious method of linking
public works finance to the redemption of the National Debt*.
A certain amount of money would be voted yearly for purposes
either of debt redemption or public works. When business was
good and unemployment slight, all or most of the vote would
go to debt redemption. As unemployment increased, a growing
proportion would be expended on public works, the proportion
falling again as business revived. The following hypothetical
figures illustrate the scheme for a ten-year trade cycle :
TABLE
Year of cycle

Percentage
of unemployment

1
2
3
4
5
6
7
8
9
10
1

Is Unemployment

7

2.5
3.5
4.5
5.5
6.5
7.5
6.5
5.5
4.5
3 5
Inevitable

v

Expenditure
on public works
(million pounds)
0
9
18
27
36
45
36
27
18
9

7, p p . 373-374.

Debt redemption
(million pounds)
100
91
82
73
64
55
64
73
82
91

— 98 —
In this way funds would be devoted to debt redemption at
the most favourable time, when business was good, and would
be available for public works when most needed.
One aspect of the problem has already been examined in Chapter I I , namely whether raising money for public works on a large
scale interferes with the financing of industry and retards industrial
revival. The conclusion was reached that while it might do so
in a long continued depression like that from which Great Britain
has been suffering since the war, and even then only if there
were undue restriction of credit on the part of the banking
system, it would not do so in a comparatively short-lived
depression due to fluctuations of the business cycle.
If it is desired actually to secure the funds beforehand it would
be necessary to establish a permanent fund for financing public
works. This fund would be fed by taxation year by year by a
regular annual amount, or, what would even be better, by larger
sums in good years than in bad. One difficulty here is t h a t adversity
always seems remote when times are good and parliamentary or
local bodies might be unwilling to vote adequate means for a
future and as yet unrealised contingency.
The Commission appointed by Mr. Viviani in France in 1908
devoted special attention to the creation of a " fonds de concours ".
This is a fund subject to a special system of budgeting which was
set up by ministerial decision of 6 June 1863. I t is subscribed
to in agreed proportions by the State and by individuals or corporations such as municipalities, communes, public utility enterprises, Chambers of Commerce, etc., directly interested in carrying
out a particular programme of public works. The amount expended
under this head each year between 1901 and 1910 varied from
8% million francs to 2 1 % million francs, and the credits carried
forward from year to year varied from 3 % million francs to 9 million francs. The amounts corresponding to these credits were
duly paid into the treasury, but it was not possible to utilise them
for public works purposes. The Commission, after considering
cases in which the parties were not obliged to pay their contribution
to the fonds de concours in advance (in connection, for instance,
with maritime ports and canals), expressed the opinion t h a t the
Government might draw on this fund to a larger extent. In
times of prosperity the State would bear the cost out of the budget.
On the other hand, in periods of depression when it becomes
necessary to give more opportunity for employment, the State

— 99 —
would be able, in the absence of funds under the ordinary budget,
to obtain from the other subscribing parties cash payments in
advance.
In Great Britain another method has been adopted, namely,
the creation of a road improvement fund derived from the proceeds
of motor taxation. This has the advantage t h a t receipts are
likely to be larger in good years than in bad ones.
A modification of the public works fund idea is proposed by
Mr. Mallery, who suggests the creation of large reserve funds.
When money is voted for public works over a period of years
a clause should be added to the Appropriation Bill reserving a
certain proportion of the annual appropriation (say 10 per cent.) to
be expended only in times of depression. Or the total appropriation
for say a five-year period would be voted in a lump sum and the
distribution of expenditure over each of the five years be determined by the executive in the light of general business conditions.
In very few cases does anything on these lines appear to have
been done.
In France the Commission of 1908 noted t h a t attempts had
been made in connection with the management of monopoly
and other industrial enterprises undertaken by the State to
constitute reserve funds in order to permit of greater elasticity
in the placing of orders and the distribution of work. Subsequently the Finance Act of 1911 provided for the constitution
by means of a bond issue of certain reserve funds for the State
railways to enable them to purchase rolling stock and to carry
out work. This Act expressly stipulated t h a t the balance for
certain items might be carried forward from year to year provided
t h a t it were not expended upon items other than those for which
it had originally been budgeted.
The Bill concerning the improvement of the national equipment,
which was presented to Parliament at the end of November 1929,
proposed to create a special fund into which the credit balances
outstanding on account of public works from year to year should
be paid and which should also receive the treasury grants. The
works to be carried out and the payments to be made were to be
spread over a five-year period in order to avoid any difficulties which
might arise in the way of monetary circulation or a rise in prices x .
1
Journal officiel, 19 Dec. 1929; Documents parlementaires, Chambre des Députés,
pp. 1-6.

— 100 —
In Switzerland in 1917 a special unemployment fund was
constituted by the Federal Government and a certain proportion
of the war profits tax paid into it. During the post-war period
this fund, together with the credits voted by Federal Decrees,
was used to cover expenditure for unemployment relief. It still
exists for the same purpose. Special funds have been constituted
in certain cantons and communes, destined to serve a double
purpose. They are used firstly to supplement the moneys voted
as subsidies to the unemployment insurance funds, and secondly
t o finance measures taken to remedy intense unemployment
when it arises. No uniform regulations exist for the administration
of these funds. In many cases they are incorporated with the
communal funds and administered with them.
The suggestion has also been made t h a t at least part of the
money for public works should be obtained by means of a loan
from the banks, thus leading to an increase in the amount of
money in circulation and an increase in the volume of purchasing
power, rather than a mere transfer of purchasing power from one
set of persons to another 1.
PRODUCTIVE UNEMPLOYMENT R E L I E F

In certain European countries the funds available for unemployment insurance or relief have been used for the purpose of
financing productive enterprise. This is the case, for instance,
in Austria, Denmark, Germany and Italy.
The so-called productive insurance in Austria aims at providing
the necessary financial assistance for the execution of public
works, and although this assistance does not actually constitute
a reserve fund, it is designed for the same purpose, for, according
to section 29 of the Unemployment Insurance Act, the Ministry
of Social Administration may make advances in the form of
grants or loans where it is possible to absorb a certain number
of unemployed in the execution of public works which could not
otherwise be undertaken.
This financial assistance comes under the heading of unemployment relief, and may not exceed the total amount t h a t would
otherwise have been distributed in the form of unemployment
relief to the workers employed. The amount of the financial assis1
This point has already been referred to on pp. 29 and 30. Cf. P . W. MARTIN :
The Problem of Maintaining Purchasing Power. See also FOSTBB and CATCHINGS :
The Road to Plenty.

— 101 —
tance may not exceed one quarter of the total expenditure on
unemployment insurance.
Such advances are subject to the condition t h a t the unemployed
absorbed shall be guaranteed the same number of working days
as t h a t represented by the grants or loans. The advances are
based on the average of the benefits due to unemployed workers
with dependants and those due to those classes of the unemployed
who are recruited in the greatest numbers. The reason for this
is t h a t in Austria the benefits vary in accordance with the wages
usually earned by the unemployed workmen. The amount of
the financial assistance was fixed in practice at 2 schilling per
day per unemployed worker ; this rate was raised to 3 schilling
by the Decree of 19 May 1927 in order to encourage further
development of productive insurance.
Financial assistance may be accorded in the form of loans
or grants. Loans may be granted up to a maximum of 300 per
cent, of the amount of relief payments saved ; grants may attain
5 per cent, of t h a t amount. Loans are repayable as soon as
possible, but they may not remain outstanding more than two
years, and they must be repaid immediately if the conditions
laid down by the law are not fulfilled. Interest is charged at
5 per cent.
Finally, it may be noted t h a t failure to repay loans either at
the end of the period of two years or in cases in which the conditions
to which they were subject are not fulfilled entails a legal right
of seizure on the buildings in respect of which the advances were
made. These liabilities take precedence of all other civil liabilities,
and, if legal action is taken to recover, are dealt with in the same
way as taxes on real estate or public taxes (section 120, subsection 1,
section 124, subsection 2, section 216, subsection 2, section 217,
subsection 1, of the Act concerning seizure ; section 29, subsection 4,
of the Unemployment Insurance Act).
I n Denmark by an Act of 1 December 1925, the Treasury
was empowered to grant loans through the medium of the unemployment fund to a total amount of 8 million kroner for works
started before 1 June 1926 by communes or private institutions
in receipt of public support, with a view t o counteracting unemployment. Of this sum 2 million kroner might be used for
works other than relief works properly so called if they were of
such a nature t h a t they could not suitably be organised in accordance with the rules applying to relief works. The Act also
provided t h a t in addition to the ordinary subsidies for relief

— 102 —
works a special grant of not more than 20 per cent, of the costs
of materials for such works might be made on condition t h a t
the materials were of Danish origin or manufacture and their
provision thus gave employment to Danish industrial workers.
I n Germany, the original Decree of 26 January 1920 authorised
the Minister of Labour to replace pecuniary assistance by grants
or loans and to organise relief workshops or other works. I n
most cases, the assistance was given in the form of loans which.
in the early days, were made at a rate of interest of 5 % or 6
per cent, according to whether the undertaking in question was
public or private. The total amount of the assistance to be given
was not fixed, each case being considered on its merits. On the
other hand, each grant or loan was determined in accordance
with the number of unemployed workmen to whom employment
was given. They were not, as a rule, to exceed a sum varying
from 30.50 marks to 41 marks per workman and per day, according
to the commune concerned, the differences representing differences
in the cost of living. They might, in exceptional cases, be 25 per
cent, higher. The above-mentioned sums represented the unemployment benefits payable on 1 August 1921 to unemployed
workmen with two dependants. I n the particular case of building
works, the amount of the grant or loan was calculated according
to the number of cubic metres constructed, being from 40 to 56
marks per cubic metre according to the commune concerned.
For the relief workshops the basis taken was the number of
unemployed workmen to whom employment was given, provided
t h a t the sum did not exceed half the total expenses per day and
per workman. The cost of the grants or loans was borne to the
extent of one-half by the Federal Government, one-third by the
State and one-sixth by the commune.
I n 1927, this system was reorganised and it now forms part
of the unemployment insurance scheme in accordance with the
Act of 16 July 1927 concerning employment exchanges and
unemployment insurance. Assistance may still take the form of
loans or grants. Loans must be repaid, both principal and interest,
by quarterly payments within a period not exceeding fifteen years
from the completion of the work.
The total amount of the grants is determined by the savings
represented for the insurance or relief institution by the employment
of unemployed workmen at an average rate of 3 marks per day
per person thus employed. In the case of unemployed persons
in receipt of normal insurance benefit, the grant is to be charged

— 103 —
against the insurance funds. In the case of those receiving emergency allowances (KriaenunterstHtzung) four-fifths of the cost is
borne by the federal authorities and one-fifth by the local authorities
concerned. I n the case of persons in receipt of public relief, the
public relief funds bear the cost x.
In Italy, the law with regard to unemployment insurance (Royal
Decree No. 3158 of 30 December 1923), provides t h a t in order to
combat, relieve and prevent unemployment, advances may be
made from the unemployment insurance funds for the execution
of public works up to one-fifth of the total funds available.
The Regulations issued under the law provide, in particular,
t h a t public works subsidised shall be designated for this purpose
by the Minister of National Economy, in agreement with the
Minister of Public Works, preference being given to such works
as will absorb the greatest number of workers, to works of general
or local interest, and to works of an urgent nature.
SUMMARY

In conclusion it may be said t h a t there seem to be various
methods of providing for the effective financing of advance planning.
To a limited extent taxation is adequate if steps are taken to carry
forward credits from one financial year to another and to give
the public authorities some discretion as to the time a t which the
money is to be used. More important works are, however, financed
by means of loans. Difficulties may arise because the necessary
funds are not available soon enough and various suggestions have
therefore been made for the creation of special public works
funds or other reserve funds, the rapid amortisation of loans,
the raising of a loan from the banks A few examples are
given in which more or less satisfactory solutions of the problem
appear to have been found.

1

See also p . 128.

PART II
ADVANCE EXECUTION

INTRODUCTION

The severe and prolonged depression which overwhelmed a
number of industrial countries after the war, and the difficult
financial conditions which have for the most part prevailed in the
money markets of the world, have rendered impossible the carrying
out in those countries of any systematic advance planning of
public works. On the other hand, these countries have tried to
mitigate the worst effects of the economic crisis on the labour
market by carrying out necessary public works earlier than would
otherwise have been the case. This is generally the first measure
which Governments adopt when unemployment becomes severe,
on the ground t h a t it is better to give work to the unemployed
than to give pecuniary relief. The cry of Labour has always been
for " work, not doles ", and, moreover, it is obviously a cause
of moral and physical deterioration for a man to be out of work
for a long period, with nothing whatever to do but to search for
employment, which in too many cases simply does not exist.
The policy of putting in hand public works at a time when
unemployment is already apparent is psychologically and politically much easier to carry out than the advance planning of
public works. The latter needs foresight at a time when prosperity
reigns, and is a measure of prevention rather than cure ; the
former is merely the application of a remedy when the disease
has appeared.
But is the usual public works policy pursued under such
circumstances an effective remedy for unemployment ? On this
point opinion is divided. No doubt it depends very much on the
purpose for which the public works are undertaken and on the
way in which they are carried out. In the early days of the postwar depression, little criticism was heard of the principle of a
public works policy. But, as time passed and unemployment
continued, criticism became louder and louder, and ultimately

— 106 —
a big controversy raged round the question whether public works
are efficacious or whether they are not rather positively harmful,
by hindering the normal development and recovery of industry.
Some of the arguments used in this controversy have already
been given above 1.
The reasons are indeed pretty clear. In the first place, immediately after the war there obviously were a considerable number
of works t h a t required to be done, and which had been neglected
during the war years. Then it was believed that the crisis would
be of short duration — and, indeed, t h a t it was no more than one
of the ordinary cyclical fluctuations with which we had become
familiar before the war. Thirdly, a Government gains a certain
amount of political kudos in engaging in a big public works
programme, because people feel t h a t it is doing something, and
it is of course true that such a policy is one of the most obvious
things t h a t a Government can do to deal with unemployment.
Public works which are put in hand earlier than they would
otherwise have been are, however, at the best a mortgage on the
future. In the case of a short depression, that is just their special
value, but in a long-continued depression, the cause of which
must be sought in more permanent factors than those causing
the business cycle, the desirability of mortgaging the future
becomes less and less, and it is suggested that such a policy may
perhaps in time become positively harmful. For what is spent
to-day cannot be spent to-morrow, and if to-morrow the depression
still continues, what then ?
On the other side it is pointed out t h a t the application of a
public works policy should not exclude the search for more fundamental remedies in the field of rationalisation or elsewhere,
but that it does provide employment for a number of persons
who would otherwise be unemployed and stimulate an industrial
revival. Money is at a time of depression lying idle in the banks.
The wages earned represent increased purchasing power in the
hands of those who receive them and the public works require
equipment and machinery which has to be made by other industries. Moreover, from the social point of view, every man and
woman who is given employment is being helped to avoid the
moral deterioration inseparable from prolonged unemployment.
I t must not be forgotten t h a t the public works we
are discussing in this report include special development works
1

Cf. pp. 24 et seq.

— 107 —
designed t o improve t h e national equipment, such as those which
have been carried out in Great Britain, Italy and other countries
since the war. Such works are the easiest of all t o postpone or
advance according to the situation of the labour market, because
they do not as a rule require t o be p u t in hand a t a particular
moment but, on t h e contrary, lend themselves to advance planning
over a period of years.
I t is important t o draw a distinction between public works
and mere relief works. I t is sometimes said t h a t all undertakings
put in hand b y public authorities for the express purpose of
creating employment are relief works 1 ; but t h a t would rule
out a large number of undoubtedly useful public works which
are undertaken during a period of unemployment because t h a t
is the most convenient time from the financial and social points
of view. The real distinction between the two depends on t h e
way in which t h e works are carried out. During t h e nineteenth
century a number of schemes of so-called relief works were undertaken a t different times with varying success. One of the most
successful of these schemes was t h a t adopted in Great Britain
in 1863 a t t h e time of the cotton famine consequent on t h e American Civil War. I t was a comparatively small scheme, for during
the three years of its existence never more than 8,000 workers
were provided with employment at wages, b u t it owed its success
mainly to t h e fact t h a t the work was done on ordinary commercial
principles. This meant t h a t t h e men were chosen not because
they were unemployed but because they were fit for the job,
and in many cases were specially trained for it ; they were paid
the customary wages ; and they were reasonably efficient because
otherwise they would have been discharged. I t often happens
that these conditions are not complied with, and then we have
pure relief works which are quite different from normal public
works with which this report is primarily concerned.
Thus we find t h a t men are chosen for the work not because
they are fitted for t h e job but because they happen t o be unemployed a t t h e moment, and it is especially bad t h a t skilled
workmen should be put on to unskilled work with the risk t h a t
they may lose their skill unless employment in their own trade
comes along fairly quickly. Thus, the Finnish Government, in
their communication to the International Labour Office, refer
to t h e comparative costliness of relief works and t o t h e unsuita1

Cf. DAVISON : The Unemployed, p. 23.

— 108 —
bility of many of the workers. On the other hand, the German
Government has laid down the principle t h a t as far as possible
unemployed persons should be given work at their own jobs.
I t is not of course certain t h a t it has always been possible to do
this.
Another feature of many relief works is the institution of a
relay system. Men are engaged for a short time and are then
turned off, irrespective of their efficiency, in favour of other men,
so as to give as many of the unemployed as possible a chance of
employment. This relay system is a feature of the productive
unemployment relief in Germany, for instance, and it has also
formed part of some of the public works undertaken in Great
Britain since the war. The result of the system is t h a t the men
have no interest in the work they are doing except to make the
job last as long as they can so t h a t when their turn comes round
again there may still be work for them to do.
I n the Irish Free State the Committee on the Relief of Unemployment appointed by the Government, which made its
final report on 13 February 1928, came to the following conclusion
on the subject of relief works :
The evidence which we have taken from various witnesses goes
to show that relief works are generally demoralising and excessively
costly. By relief works we mean works of a public nature undertaken
for the immediate relief of distress and unemployment. These works
have been carried out in past years for the most part by the local
authorities, generally with the aid of relief grants made available for
the purpose by a vote of the Dáil. In order to spread the relief over
as large a number of the unemployed as possible, local authorities have
found it necessary to adopt a system of employing workers without
any attempt at selection for short periods of a half-week, a week or
a fortnight at a time, replacing them at the end of such periods by other
workers in need of employment. The inevitable result of such a system
is that the output of work is exceedingly poor. When it is borne in
mind that a great number of the men employed on relief works are
persons who have been idle for a considerable time, many of them in
a state of semi-starvation or otherwise in poor physical condition, it
will, we think, be agreed that employment for short terms on relief
work can have nothing but unsatisfactory results.
A variation of the above system is to consider the relief works
themselves as of so little intrinsic importance t h a t they are
abandoned as soon as there is alternative employment available
for those employed on them. This is the case in Czechoslovakia
and Finland for example.
The remuneration of workmen engaged on relief works is often
regarded as a form of relief, and not as wages, and is therefore less

— 109 —

than t h a t customarily paid for the same kind of work, a system
to which there are obvious objections. In the first place, if the
work would be done in any case, and has merely been advanced
in time, it is unfair competition with men who might have been
engaged in the ordinary way at normal wages : in the second
place, it is a cause of inefficiency, and the work will either be
badly done or will take longer to do than it should have done,
thus costing more in the long run. This system was applied in
Germany in the earlier stages of the productive unemployment
relief scheme, but was later abandoned.
A variation of this system is the payment of wages at a rate
lower t h a n t h a t customary in the district for the same kind of
work. This was done in Great Britain for certain kinds of work.
Thus it was laid down in the Regulations of 1923 t h a t where the
local authority undertook the work by direct labour, the rate
of wages for unskilled labourers must for a probationary period
of six months not exceed 75 per cent, of the local authority's
lowest rate for unskilled labour for the particular class of work
undertaken, or 87% per cent, of such rate if the men were employed for an average of not more than three days per week.
This system was abolished in 1924.
In New Zealand the Industrial Conciliation and Arbitration
Act, 1925, contains a clause (1556) to the effect t h a t the provisions
of any award or industrial agreement, or any agreement entered
into under the Labour Disputes Investigation Act, 1913, shall
not apply to or affect any local authority or public body in respect
of any relief work carried out by special resolution of such local
authority or public body. This means t h a t the wages paid on
relief works may be less than those customarily paid. It appears,
in fact, t h a t this provision has been applied in certain "cases,
particularly by the Wellington City Council in connection with
the building of the approaches to the Victoria tunnel in 19281929 1.
Finally, reference should be made to the fact that relief works
carried out under conditions such as those mentioned above are
more costly than public works carried out under ordinary commercial conditions of employment. This is noted by.the Danish
and Finnish Governments in their communications to the International Labour Office. The Danish Government states, for instance,
that recourse to relief works has not been very widespread, and
1

New Zealand Worker, 22 Jan. 1930.

— 110 —
the reason given is t h a t the special conditions applying to these
works may hamper their organisation by making them more
expensive than if they were carried out under ordinary conditions.
In addition, the 15 per cent, deduction from wages which has
to be paid into the Unemployment Fund makes the workers
disinclined to engage in such work. Many communes which
have wished to place works in hand to counteract unemployment
have therefore preferred to organise them without subsidies and
under the ordinary conditions, but in this case no general survey
of the works in question is available.
Increased cost is also caused by the fact t h a t relief works
are frequently required in the winter, and in many countries
winter construction work is more expensive than the same work
would be if done in summer. On this point the Finnish Government writes t h a t the increased cost of relief works was due partly
to the winter season,
the earth being frozen in this northern climate to a very
considerable depth, and partly to the fact that the workers employed
were not skilled in the kind of work they were called upon to perform.
The work undertaken on the railways was carried out at normal cost,
as skilled workers were available, but in one case, where preparatory
work for the enlargement of a railway station was undertaken, the cost
was as much as 50 per cent, above what it would have been in the normal
season. Further, winter work on canals, harbours and bridges was
found to be considerably more costly than would have been the case
in summer. Quarrying and stone-breaking for building purposes is
work usually carried out during the winter, but the extra cost involved
where unskilled workers were employed was approximately 20 per
cent. Work on the roads in winter instead of summer cost 10 to 20 per
cent, more in South Finland, and 25 per cent, more iu the interior.
In the north, work on the foundations of buildings was found to cost
48 per cent, more than if the work had been postponed for two or three
months. Where canal digging had to be done by machinery, it was
found that when unskilled workers were employed costs increased as
much as 100 per cent. On the whole, the Ministry of Public Works
was of the opinion that where work usually performed in summer had
to be performed in winter by workers such as factory workers, unused
to working in the open and to the kind of work involved, costs were
increased by 30 to 50 per cent.
Generally speaking, it would appear possible to say t h a t relief
works as described above are undesirable and have more disadvantages than advantages.
There still remain, however, public works of undoubted utility
which would be undertaken in any case and which are merely
advanced in time owing to the prevalence of unemployment,
including special measures the main object of which is the general

— Ill —
development of the country concerned, and which are put in
hand at a particular moment because of unemployment. Such
works can be undertaken by labour recruited in the ordinary
way through the employment exchanges, receiving wages at the
customary rate and enjoying security of tenure for the duration
of the job except in the case of inefficiency. Workmen engaged
under these conditions can no longer be considered as unemployed
workmen, and their names are therefore removed from the registers
of the employment exchanges.
To wait until the situation develops into a crisis before taking
steps to elaborate a programme of public works is not of course
advance planning. As a rule in such cases the plans are not ready,
the money has to be voted by Parliament or some other elected
body, and there are so many delays of one kind or another that
it is almost impossible to put the public works in hand at all at
the time when they are most needed. But if the depression is
rather long-lived, a policy of this kind is undoubtedly a valuable
means of providing employment for a number of men and women
who would otherwise be unemployed, and of helping materially
an industrial revival. Such measures have been adopted in many
countries both before and since the war and some of the latter
are described in the following pages. I t is, of course, impossible
to make such a record complete, and the particulars contained in
the following pages must be taken merely as examples of what
has been accomplished. Practically nothing is said of the numerous
measures adopted in the latter part of 1930, because the information arrived too late. Details of these measures can be found
in various issues of Industrial and Labour Information 1.
AUSTRALIA
In Australia in order to provide employment during periods of acute
unemployment, an endeavour is generally made by the State Governments to expedite the putting in hand of public works by providing
special votes to be expended on relief works. The necessity for such
action is generally brought to the notice of the Governments by
deputations representing the unemployed.
In addition to providing employment on special relief works, the
Governments urge such local bodies as road boards, water and sewerage
boards, and local authorities generally to endeavour to relieve distress
by putting in hand any available work. Municipal councils and other
local authorities frequently proceed with road construction and other
1

and 6.

See, for instance, Vol. X X X V , Nos. 2 and 6, and Vol. X X X V I , Nos. 2

— 112 —
important work, the cost of which is paid for in co-operation with the
Government on a £1 for £1 basis, that is, for every £1 expended by
the local authority, the Government advance £1. The adoption of
this plan for providing funds has enabled large numbers of men to be
given temporary employment on works which otherwise would have
been deferred 1.
In New South Wales the public works policy is conditioned by
the development needs and financial resources of the State during any
year rather than by considerations of counl eracting fluctuations of
private business. I t is, however, applied through a programme designed
to absorb as many as possible of the unemployed. The public works
which have been undertaken in times of severe unemployment have
included the construction of railways, tramways, roads, bridges, harbour
works, electrical works, sewerage and storm water channels, water
supplies, irrigation, the levelling of Crown lands for building sites,
scrub clearing, etc.
In South Australia public works have been undertaken during
periods of unemployment at different times by the Government of
the day. They have consisted of the construction of railways, roads,
embankments, reservoirs, water reticulation, irrigation and reclamation
works, and renovation of buildings.
In Tasmania, the expenditure of such moneys as are available
within a reasonable distance of the localities in which unemployment
is severe is expedited. A number of road works have thus been undertaken.
In Queensland, the Government has endeavoured at times of excessive unemployment to relieve the position by creating employment
opportunities which in other circumstances might have remained in
abeyance or been deferred. The works put in hand have been mainly
railway construction and maintenance, main road work.
In Parliamentary debates which took place in South Australia,
Western Australia, and Victoria early in 1929, expression was given
to a general desire to provide work for the unemployed by means of
relief works and development schemes. The main suggestions put
forward so far as public works are concerned related to railway development, especially in South Australia, land settlement by the improvement of transport, cultivation and irrigation, the building of roads as
feeders to existing railways, and the development of hydro-electric
power in harbour works in Adelaide and Brisbane. Partly influenced,
no doubt, by the clearly expressed opinion of the British Economic
Mission to Australia that the Australian Governments should proceed
very cautiously in the mattei of the initiation of new schemes involving
expenditure of borrowed money and should submit them to the most
rigorous scrutiny with a view to their being self-supporting at a reasonably early stage, the Parliaments hesitated to vote supplies for several
of the works suggested. The Opposition in some States urged that
relief works provided no solution for unemployment, and in other
1

COMMONWEALTH BUREAU

1928, No. 19.

OF CENSUS AND STATISTICS :

Labour Report,

— 113 —
States urged the Government to increase public works beyond the
programme they had suggested 1.
The Federal Government seems during the severe unemployment
crisis of 1929-1930 to have decided against a policy of relief works,
but in favour of pushing on with useful public works. I t was announced
in the press of 26 November 1929 that the Federal Government had
decided not to start any unnecessary public works as it was believed
that they did not improve the position permanently, but tended to
accentuate it eventually. On the other hand, there would be no wholesale dismissals from the Government departments, and where useful
work could be found in those departments, it would be authorised, but
it must be of real value to the country. I t was understood that extensions
of telegraph, telephone, and postal facilities generally were among the
works which the Government had in mind a.
AUSTRIA
In Austria no legislative measures have been adopted either to
postpone works to a period of unemployment or to accelerate works
which would normally have been put in hand at a later date. In this
connection it should be remembered that Austria has suffered from
severe unemployment ever since the end of the war, so that a systematic
planning of public works has not been possible. The Government has
had to face considerable economic and administrative difficulties, but
it has made every effort to carry out a programme of public works by
making the necessary funds available, taking particularly into account
the fact that unemployment is most severe during the winter months.
There is a lack of statistical data concerning public works other than
those undertaken in connection with the unemployment insurance
scheme, which will be dealt with later, and this is to be regretted because
the amounts advanced by the Federal Government for the carrying
out of such works are considerably greater than those provided for by
" productive insurance ".
The amounts spent by the State in such public works during the last
few years have been as follows :
Schilling

1926
1927
1928

157,696,510
179,786,150
181,107,985

These works consisted principally of dredging and the maintenance
and construction of roads and railways.
Apart from the works just referred to, public works in Austria are
closely bound up with the unemployment insurance scheme, and for
the most part consist of the so-called " productive insurance " .
1
Parliamentary Debates, South Australia, Fourth Session, Nos. 5, 6, 8 ; Victoria,
Second Session, Nos. 1, 2, 3 and 4 ; Western Australia, Fifth Session, No. 1.
2
Melbourne Age, 26 Nov. 1929.

8

— 114 —
The original Act of 24 June 1920 concerning unemployment insurance
did not contain any provisions with regard to " productive unemployment insurance " ; these provisions were added by the Fifth Amendment
dated 29 July 1922 1, and subsequently modified and supplemented
by the sixth, eleventh and thirteenth amendments. According to
section 29 of this Act :
If a financial subsidy would make it possible to take in hand works of public
Utility which would otherwise not be undertaken and which would supply fresh
opportunities for work for the unemployed who would otherwise be in receipt
of benefits under this Act, the Federal Ministry of Social Administration in agreem e n t with the Federal Ministry of Finance, may make loans or grants for this
purpose (productive provision for the unemployed) on the proposal of the appropriate Industrial District Commission a t the place of work. The sums used for
loans and grants less the sums repaid shall be included in the total expenditure of
unemployment benefit.

According to this system a certain proportion of the funds set aside
for unemployment insurance is reserved for the execution of public
works instead of being distributed to the unemployed in the form of
benefit. Its object is to provide fresh opportunities for unemployment
by means of relief works. Thus the necessary financial aid is only
granted on condition that unemployed workers who would otherwise
be a charge on the unemployment insurance fund are absorbed.
There are certain restrictions in the application of the system 2.
The employment of workers who do not come under the provisions
of the Unemployment Insurance Act is permitted only in exceptional
cases. Further, the work must be of public utility, and grants are only
made in cases where the work would not otherwise be carried out.
Moreover, grants are not made unless the work planned will absorb
at least twenty unemployed workers, or if the time the work will take
cannot be calculated in advance, or will take too long to be financed
otherwise. Where, however, importation of raw materials, particularly
coal, is involved, these latter restrictions are less strictly applied.
There are also restrictions concerning the amount of the grant
which must not as a rule exceed the amount saved on account of
unemployment insurance benefit ; grants of a larger amount may
however be made up to a quarter of the total expenditure on unemployment insurance. In fact, grants and loans were fixed in practice on a
basis of 2 schilling per day per worker. This was raised to 3 schilling
per day by the Decree of 19 May 1927 3.
Finally it should be noted that according to section 29 of the
Unemployment Insurance Act mentioned above, grants may as a
general rule only be accorded to provinces, districts or communes 4,
as the funds at the disposal of unemployment relief would hardly be
1

Legislative Series, 1922, Austria 7.
See Regulations dated 12 May 1924 issued by the Ministry of Social Administration with regard to the allocation of grants provided for by section 29 of
the Unemployment Insurance Act as analysed by Dr. Max L E D E R E R and Dr.
Viktor SUCHANEK in Arbeitsrecht und Arbeiterschutz, Vienna, 1925.
3
Arbeit und Wirtschaß, 1 J u l y 1927.
4
Amtliche Nachrichten, May and Dec. 1923.
2

— 115 —
sufficient for the demands which might be made upon them by a large
number of private contractors, and employers might not always
be in a position to give the necessary guarantees for the employment
of a sufficient number of unemployed workers. This constitutes an
important restriction on the development of the policy of public
works.
Section 30 of the Unemployment Insurance Act provides for
grants to private enterprises, but these grants do not apply to public
works.
By Order of, 24 February 1930 the Federal Ministry of Social
Administration decided in agreement with the other Ministries concerned
that unemployed workers should be employed on all works carried
out on behalf of the Government or in receipt of Government subsidies.
The Industrial District Commissions and employment offices are
instructed to pay special attention to this matter and to take steps
to establish the necessary relations with contractors and to prevent
the employment of agricultural labourers. The contractor is obliged
to take 50 per cent, of his workmen for the works in question from
among the unemployed, and these' workers are to be obtained through
the employment offices. The other 50 per cent, he can recruit as he
likes, but it is intended that these workers shall be mainly skilled
workers. The Industrial District Commissions are now able to insist
that in the cases mentioned unemployed workers shall be employed
almost exclusively. The works with Government subsidy referred to
in the Order include all those carried out either by the Federal Government or by other public bodies, whether undertaken by direct labour
or through a contractor (roads, bridges, railways, surveying, laying of
cables, waterways, afforestation, etc.). Only these works which receive
a subsidy of less than 5 per cent, are excluded from the provisions of
the Order 1.
The policy of public works in connection with productive insurance
has not permitted the application of the principle to such an extent
as to prevent unemployment altogether, but the adoption of the
scheme has almost certainly prevented an even greater depression in
the labour market than that which actually took place.
Productive insurance which was introduced in 1922 did not give
satisfactory results until 1925. Although the amount available was
equal to one-quarter of the total expenditure on unemployment
insurance, the claims made seldom exceeded a hundredth part of that
expenditure, its development being hampered by the restrictions
mentioned above 2. Public works in Austria are normally carried out
by the provincial, municipal and communal authorities, but during the
first few years after the introduction of productive insurance, the
financial situation of these bodies did not enable them to contract
loans for any considerable amount 3. Moreover, owing to the compli1

Arbeit und Wirtschaft, 1 April 1930.
Fritz E A G E R : " Die Bedeutung der Produktiven Arbeitslosenfürsorge ", in
Arbeit und Wirtschaft, 15 Feb. 1925.
3
Amtliche Nachrichten, May and Dec. 1923.
2

— 116 —
cated procedure necessary to obtain loans, it was impossible to take
decisions promptly for the rapid putting in hand of work. The procedure
was therefore simplified by a new law adopted in 1924 1.
TABLE VI. — N U M B E R OS WORKERS EMPLOYED ON PUBLIC WORKS U N D E R
THE PRODUCTIVE INSURANCE SCHEME EXPRESSED AS A PERCENTAGE
OF THE NUMBER OF WORKERS I N RECEIPT OF B E N E F I T

Month

1923

1924

1925

1926

1927

Average

Januar 7
Februa ry
March
April
May.
June
July.
August
Septem be r
Octobe
Novem » r
Deceml >ei

0.7
0.8
4.0
0.6
0.3
3.2
7.3
0.3
0.8
1.9
1.1
0.3

0.6
0.1
0.1
0.3
1.0
1.1
0.9
0.1
0.5
0.8
0.4
3.8

0.3
1.2
2.5
1.5
1.7
1.6
7.3
0.3
0.6
0.5
1.2
0.1

0.3
0.6
1.9
0.7
1.3
1.1
0.7
0.7
0.7
1.0
0.6
0.7

0.2
0.5
0.8
1.8
0.8
0.9
0.6
1.1
1.2
1.3
0.7
0.2

0.4
0.6
1.9
1.0
1.0
1.6
3.4
0.5
0.8
1.1
0.8
1.0

Averag

1.7

0.9

1.6

0.8

0.8

1.2

The table given above shows the development of productive insurance as compared with fluctuations in the labour market. The ratio
of the number of workmen engaged on public works to the number
in receipt of benefit varies considerably ; in other words, a far larger
proportion of the unemployed are engaged on public works at certain
times of the year than at others, and this fact may be explained by
the influence of seasonal fluctuations on the labour market and on
the method of application of the public works policy. In the summer,
diminished unemployment coincides with increased activity with
regard to public works, whereas in winter, on the contrary, the period
of severe unemployment is accompanied by a total or partial suspension
of the public works programme.
The seasonal factor is particularly important in Austria because
it is the object of productive insurance to absorb the greatest number
of unemployed and every effort is therefore made to avoid the use
of the available funds on works which call for. the expenditure of
considerable sums on material or for other overhead charges. The
works, however, which are the most economic from this point of view
are road-making and repairing, dredging, etc., which it is difficult to
carry out in winter owing to weather conditions.

1

Act).

Act of 5 Dec. 1924 (thirteenth amendment to the Unemployment Insurance

— 117 —
TABLE VU.

ACTIVITY OF PRODUCTIVE INSURANCE

FROM

OCTOBEE

1922 TO DECEMBER 1927
Number
of unemployed
engaged

Number of days
of work

7

1,499

122,942

.
.
.
.

41
68
55
56

8,849
4,109
7,248
2,747

621,688
304,354
492,104
300,239%

6,613,336
3,262,562
5,592,976
4,128,315

. . . .

220

22,953

1,718,3851/,

19,597,189

.
.
.
.

^39
66
44
71

991
1,709
1,089
7,118

. . . .

220

10,907

74,504
223,594
140,502
1,912,099
2,350,699

1,007,940
5,127,120
4,073,236
21,988,565
32,196,861

148
158
92
114
512

7,550
6,547
9,774
3,061
26,932

820,946
615,836
2,566,525
286,615
4,289,922

(Schilling)
2,407,187.60
1,848,292.60
2,831,642.65
701,660.00
7,788,782.85

.
.
.
.

140
131
116
135

5,881
5,025
3,415
4,141

. . . .

522

.
.
.
.

. . . .

Number
of works

Period

1922 :
4th quarter . .
1923 :
1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

Total
1924 :
1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

Total
1925 :
1st
2nd
3rd
4th

quarter
quarter
quarter
quarter

Total

1927 :
1st quarter
2nd quarter
3rd quarter
4th quarter
Total

.
.
.
.

.
.
.
.

.
.
.
.

. . . .

1926:
1st quarter
2nd quarter
3rd quarter
4th quarter
Total

.
.
.
.

.
.
.
.

.
.
.
.

Amount of
expenditure
(million kr.)

1,465.5

1,424,475.50
1,253,950.00
1,069,526.40
2,463,336.00

18,462

718,279
653,533
495,564
1,869,601 %
3,736,977 %

141
194
189
195

3,741
6,094
3,969
3,472

899,388
568,167%
514,477%
565,965

1,819,702.00
1,352,693.00
1,194,209.00
1,487,563.00

719

17,276

2,547,998

6,211,287.90

5,854,167.00

Table VII shows the general development of productive insurance,
from which it will be seen that this reached its height in 1925 and that
since then, although the number of works undertaken has increased,
the number of workers employed on the works has decreased and the
total amount of loans granted has been far below the maximum allowed
by the law.
The above figures may be compared with the total number of
unemployed in receipt of benefit during the same period.

— 118 —
TABLE V i l i .

N U M B E R OF U N E M P L O Y E D I N R E C E I P T O F B E N E F I T

JANUARY 1923 TO DECEMBER 1927
Month

1923

1924

1925

1926

1927

January. . .
February
March. .
April . .
May . .
June . .
July . .
August .
September
October .
November
December . .

161,227
167,417
152,828
132,226
107,965
92,789
87,155
83,890
79,289
75,810
79,290
98,050

119,766
125,783
106,914
82,525
68,969
63,556
66,457
74,191
77,550
89,016
113,484
154,491

187,101
189,919
176,441
148,434
130,786
118,366
117,183
116,365
119,004
130,021
159,250
207,834

231,361
228,763
202,394
173,115
154,821
150,981
152,495
151,054
148,111
151,183
168,757
205,350

235,464
244,257
208,346
181,175
158,332
145,136
136,909
135,938
129,948
127,352
159,783
207,120

The period under consideration is perhaps too short to permit of
precise conclusions being drawn. Nevertheless, it may be said that
the development of the policy of public works has not followed the
development of the labour market very closely.
Table I X shows the works undertaken under the system of productive insurance classified into categories. I t will be seen that the
greater part of the public works carried out consists of road maintenance
and dredging.
Besides the initiative taken by the Federal Government several
towns have put building work in hand with a view to diminishing
unemployment, but this activity has not been very satisfactory owing
to unfavourable economic and financial conditions.
CANADA
In Canada, on 7 October 1921, when unemployment was severe,
an Order-in-Council was issued (P. C. 3831) providing for the Federal
Government's participation in the case of work specially undertaken
by municipalities during the winter season to relieve unemployment,
the Federal Government undertaking to bear one-third of the actual
disbursement of the municipalities in excess of the estimated cost of
the undertaking during the normal working season, the Federal
grant being made conditional on the provinces participating on an
equal basis. The Order-in-Council laid down certain principles as a
basis for the Federal grant : (1) that unemployment relief is primarily
a municipal responsibility ; (2) that owing to the situation in 1921
being due to causes beyond the power of local or even national control,
the provincial and Federal Governments should co-operate with the
municipal authorities in helping to create and provide employment
and aiding in the provision of food and shelter for unemployed workers
and their dependants ; and (3) that Federal funds used for unemployment relief or for relief work must be disbursed only through responsible
municipal authorities.

TABLE IX.

Period

Roads and gravel Works carried out
quarrying :
owing to floods :
Percentage of
Percentage of
workers
employed

1922 (4th
quarter)
1923

. .

WORKS CARRIED OUT UNDER THE PRODUCTIVE INS

expen- workers
diture employed

Building
works :
Percentage of

expen- workers
diture employed

8.3

10.1

13.3

14.3

14.0

11.0

24.9
18.2

Hydraulic
works :
Percentage of

expen- workers
diture employed

Work
railw
Percent

expen- workers
diture employed

2.0

1.7

74.8

73.8

32.5

7.9

5.7

7.4

11.7

13.7

18.1

7.8

1.3

1924

. .

12.1

10.2

15.9

5.7

1925

. .

31.3

26.7

14.5

14.7

13.4

15.1

5.7

8.2

4.6

1926

. .

47.5

33.1

25.8

26.6

12.2

7.2

5.4

5.4

4.8

1927

. .

47.3

47.6

21.8

21.8

22.7

17.5

8.0

5.4

30.6

25.7

21.1

21.9

14.9

12.3

6.4

7.7

Average
1923-27

2.1

— 120 —
A further Order-in-Council of 25 January 1922 (P. C. 191) continued
the above system with certain modifications. For instance, in the case
of relief work undertaken by a municipality, the Federal proportion
of the excess cost was increased to 50 per cent., payment of the Federal
grant being conditional on the province assuming the responsibility
for only one-sixth of the excess expenditure. It was further stated
in this Order-in-Council that municipal undertakings in the nature
of public works were important factors in meeting unemployment
conditions, but that such undertakings could not be proceeded with
during the winter months save at a considerably increased cost,
which was in many cases beyond the financial resources of the municipalities.
On 2 March 1926, an Order-in-Council was issued (P. C. 315) providing for Federal assistance to the extent of one-third of the excess
cost of work undertaken by municipalities to provide employment,
effective from 1 January 1926 to 31 March 1926, on the following basis :
(a) municipalities to bear the normal cost, that is to say, the cost of
carrying on the said work in the normal working season ; (b) estimate
of normal cost to be approved by the Federal Government's engineers
in the Department of Public Works ; and (c) that municipal, provincial
and Federal grants bear equally and jointly the actual cost over the
estimated normal cost, thereby encouraging the creation of employment
where possible 1.
In the Province of Quebec, steps have been taken at various times
to lessen winter unemployment among lumber workers by allowing
a temporary reduction of the timber dues levied by the Provincial
Government on the exploitation of timber on Crown lands. In this
way it was possible, for example, in the winters of 1921 and 1922, to
encourage the cutting of timber during the winter months, and thus
ensure the provision of work for numbers of lumbermen who would
otherwise have been unemployed 2.
In May 1919, Mr. W. Clifford Clark, of Queen's University, sent
a questionnaire to fifty Canadian cities, and from thirty-six replies
learned that at least eight of these cities construct sewers or water-mains
during the winter months as a definite policy. Thirteen of the other
cities had adopted this plan on occasion to relieve unemployment.
The kinds of work pronounced highly or fairly successful in winter
were sewer work in rock, tunnelling, deep excavating, heavy cuts and
fills in grading work, concrete construction in large bulk (such as
heavy bridge abutments), and construction work in swamp sections
where sub-surface water prevails. The degree of success is often dependent on preparation made before the ground is frozen, especially in
some construction work where shafts should be sunk before the extreme
cold weather 3 .
1

Labour Gazette, May 1928.
Labour Gazette, Canada, Sept. 1922 quoted in Industrial and Labour Information, Vol. IV, No. 22, 8 Dec. 1922.
3
ANDREWS, J o h n B. : " Reducing Unemployment by Planning Public
Works." National Municipal Review, Vol. X , No. 4, April 1921.
2

— 121 —
CZECHOSLOVAKIA
In Czechoslovakia public works have been organised as 'a part of
the unemployment relief scheme. Works of public utility carried out
in accordance with the Act of 17 October 1919 (No. 569 of the Collection
of Laws and Orders) and with a decision of the Permanent Committee
of the National Assembly of 1 December 1920 (No. 519 of the Collection
of Laws and Orders) were intended to provide an opportunity of employment for unemployed workmen during the serious unemployment crisis
prevailing at that time.
Under the Act of 17 October 1919, public works of considerable
importance were undertaken, and the employment made available
in that way was of fairly long duration. The workmen on these works
received wages, and the State made a grant to the contractor for each
workman who would otherwise have been entitled to unemployment
benefit ; this grant equalled two-thirds of the customary local wage.
On the other hand, the works carried out as a result of the decision
of 1 September 1920 were confined to matters of small importance —
as, for instance, clearing away snow, the unloading of firewood for the
public offices, the cleaning of roads, etc. These works only afforded
a relatively small amount of employment for the unemployed. Every
unemployed workman who was entitled to relief from the State was
obliged to carry out any of .the above-mentioned works to which he
was assigned without having the right to any additional payment.
The measures referred to above came to an end on 1 April 1925,
when the Act of 19 July 1921 (No. 267 of the Collection of Laws and
Orders) concerning the payment of unemployment benefit by occupational organisations came into force.
Tables X and X I show the kind of work carried out.
TABLE X . — SUMMARY O F T H E P U B L I C W O R K S C A R R I E D OUT
I N ACCORDANCE W I T H T H E D E C I S I O N OE T H E P E R M A N E N T COMMITTEE
O F T H E NATIONAL ASSEMBLY ON 1 S E P T E M B E R 1 9 2 0

1921

1922

Quarter
i-i

Year

II
III
IV
I
II

ni

1923

IV
i
ii

in

1924

IV
i
II

m
IV
1925

i

Average
daily number oí
unemployed engaged
on the works
2,464
9,104
9,523
5.299
5,635
5,476
4,002
8,382
14,348
8,450
4,324
4,440
6,832
2,991
959
1,291
1,662

Number of days of
work performed by the
unemployed workmen
during the quarter
15
5
5
7
12
19
27
19
15%
22
19
15
i i y,
19
25
22%
12%

— 122 —
TABLE XI. —• WORKS OF PUBLIC UTILITY UNDERTAKEN IN ACCORDANCE
WITH THE ACT OF 17 OCTOBER 1919
Number of works
of public utility

Average
daily number
of unemployed
engaged
on the works

Total amount
of State subsidy

Year

Quarter

1920

I
II
III
IV
I
II
III
IV
I
II
III
IV
I
II
III
IV
I
II
III
IV

186

3,000

1,576,657.45

150
175
136
140
150
215
210
241
380
691
749
771
665
999
945
880

1

915

3,964
5,681
3,400
4,227
4,100
7,116
8,441
10,979
14,525
23,156
24,551
25,193
23,873
26,284
24,265
21,916
22,889

1,994,779.00
1,475,381.00
1,685,222.00
1,916,025.00
1,885,612.48
3,076,491.00
4,290,902.00
5,294,455.00
6,488,479.00
11,295,294.00
13,919,496.00
13,314,690.00
10,670,784.98
13,596,505.54
16,356,634.85
15,769,330.58
11,671,593.25

1921

1922

1923

1924

1925

1,545,013.46

DENMARK
In Denmark the positive measures taken by the authorities for the
promotion of public, and to some extent also private, works in periods
of unemployment have found expression in the following Acts and
administrative regulations :
(a) Act of 12 March 1915 on the creation of a provisional loan fund for communes which, in accordance with section 1, aimed at providing loans for communes,
among other things, for " works intended mainly to relieve u n e m p l o y m e n t " .
(b) Appointment in 1917 of the " 1917 Labour Committee of the Ministry of
the Interior ", whose d u t y it was " to promote the organisation of works to counteract unemployment, by the State authorities and communes, and also private
persons ".
(c) Act No. 48 of 5 February 1918, Act No. 562 of 1 November 1918, Act
No. 685 of 21 December 1918, and Act No. 362 of 30 June 1919 on State subsidies
for communal works, etc.
(d) Act No. 694 of 22 December 1920 on State support for the organisation
of works.
(e) Act No. 529 of 22 December 1921 on Employment Exchanges and
Unemployment Insurance, etc. Section 32 of this Act contains provisions on
relief works. Cf. Act No. 47 of 4 March 1924, section 32, and Act No. 151 of 1 J u l y
1927 on Employment Exchanges and Unemployment Insurance, etc., section 30.
(f) Notification No. 31 of 1 February 1922 on relief works. Cf. Notification
No. 122 of 31 March 1924, and Notification No. 242 of 19 September 1927.
(g) Act No. 295 of 1 December 1925 on measures for counteracting unemployment.
(h) Act No. 101 of 31 March 1926 on measures for maintaining employment
in undertakings affected by the crisis.

— 123 —
The measures taken by the State in periods of unemployment to
advance the organisation of works which normally would not have
been placed in hand until later have consisted mainly in the provision
of loans and the grant of State subsidies for carrying out the works
in question.
By virtue of the Act of 12 March 1915, a loan fund was accumulated
to the total amount of about 20 million kroner which was to be used
for loans to the communes at 5 per cent, per annum, the redemption
period being fixed at five years, and later being extended to eight
years. Under the Act of 5 February 1918, this sum was increased to
about 50 million kroner. By far the greater part of the fund was used to
place in hand communal works, of which many were advanced for the
special purpose of counteracting unemployment. The afore-mentioned
Act of 1918 also empowered the communes to obtain a State siibsidj
towards the payment of 1% per cent, interest a year on the amount
of the loan. This subsidy could be granted not only in respect of the
loans obtained from the State fund, but also of loans obtained in other
ways. On the other hand, it could be granted only in respect of loans
to be used for works which were deemed suitable for the relief of unemployment. The Acts of 1 November 1918, 21 December 1918, and
30 June 1919, prolonged the right to grant such subsidies and increased
the amount of the subsidy to 2 per cent., 2 per cent., and 3 per cent.,
respectively, of the amount of the loan, such an increase having been
made necessary by the rise in the rate of interest. If the work consisted
in the construction of buildings with dwellings for the use of the less
well-to-do sections of the population, even the first of these Acts empowered the granting of subsidies up to 2% per cent, and 3 per cent.,
besides which the subsidies could be granted not only to communes
but also to building societies, and, under certain conditions, to piivate
house builders.
The Act of 22 December 1920 finally increased the subsidy for communal works to 4 per cent, a year for ten years, and, in addition, empowered the State to guarantee a large communal loan of about 70 million
kroner to be used for unemployment works. On the other hand, this
Act did not deal with house building, which since then has been made
the subject of special legislation.
The incentive to organise works contained in these Acts was of
great importance in the fight against the severe unemployment of
1918 to 1922, but on the other hand, owing to the nature of these works
their direct use in the first place was only that of helping to reduce unemployment in building trades, among navvies, etc., and they were
not of great importance in other industrial occupations. These works
consisted of public buildings (schools, hospitals, administrative offices,
gas works, electrical generating stations, almshouses, etc.), dwellings
for the poorer section of the population, and especially the laying of
streets, sewers, roads and other constructional work and drainage.
In addition there was special relief work consisting almost entirely
of road and other constructions, stone-crushing works, etc. The Government states that all these works benefited industry only to a slight
extent.

— 124 —
Under the various laws already referred to State subsidies amounting
in all to about 12 million kroner a year have been granted during
eight to ten years for works entailing an aggregate expenditure of several
million kroner.
Complete statistics of the extent of the works are not available,
but it may be stated that from 1 September 1925 to 30 June 1926,
373 relief works were approved with something over 634,000 working
days, and from 1 July 1926 to 31 March 1927 93 works with 70,000
working days were approved.
Relief works have also been undertaken in connection with the
unemployment insurance scheme 1 . When the Unemployment Insurance
Act came up for revision in 1920-1921 the idea of relief works was
introduced as a permanent feature and provision was made for the
unemployment fund to be used under certain conditions for the granting
of a subsidy towards the organisation of such works. Among the
conditions it was provided that either lower hourly wages than those
current in the locality concerned were to be paid, or the hours of work
were to be reduced below the normal working period. Moreover, the
employer was instructed to deduct 15 per cent, of the wages due on
each pay-day and to send this sum to the Central Unemployment Fund.
As the above regulations did not prove a sufficient incentive for the
organisation of works, an Act of 1 December 1925 gave the treasury
power to grant loans through the medium of the unemployment fund.
The expenditure in 1926 and 1927 under this Act was about 4,640,000
kroner for loans for relief works, and about 1,985,000 kroner for loans
for other undertakings, about 675,000 kroner for grants towards the
cost of materials for relief works and about 475,000 kroner for other
undertakings.
FINLAND
In Finland, the attention of Government departments, more particularly of the Office of Roads and Bridges and the Railway Board, was
drawn by the Government early in 1927 to the desirability of carrying
out their construction programmes so as to reserve the major part of
the work for periods of unemployment. They were in fact instructed,
in preparing their budgets, to submit to the Government two kinds
of estimates : estimates of the cost of public works to be undertaken
in times of depression, with a view to relieving unemployment, and
estimates of the cost if the same works were carried out when the conditions on the labour market are favourable.
In practice cases have arisen where it has been considered necessary
to anticipate the carrying out of certain work such as road improvements,
the building of new roads, stone bridges and canals (undertaken by the
Office of Roads and Bridges) quarrying and stone-breaking for building
purposes, repairs to docks and harbours and the laying of foundations
for buildings. On the railways preparatory work for the construction
of new lines, which is, as a rule, done in the fine weather, has also
See p. 101 above.

— 125 —
been deferred until the winter, advance orders have been placed for
railway material and works put in hand which were not at the moment
of immediate necessity. The work on roads, etc., has been mainly
of an intermittent character being carried on over periods of a few months
at a time and as long as credits were available, and the workers have
usually been able to find other and better paid work, even before the
termination of the work in hand. Operations have then been suspended
until unemployment again occurred and the credits still being available
have been used at a later date. In the case of more serious unemployment additional credits have in some cases been voted from unemployment relief funds to other departments for work already in the course
of execution in order to permit of the employment of additional workers.
It is difficult to estimate the number and categories of workers thus
employed as no record is kept. Those engaged on work in connection
with roads and bridges are usually given unskilled work ; with regard
to skilled workers such as stone workers and others there has been
no unemployment in their trades for the last few years. With regard
to emergency relief work undertaken by the railways, about 150 stone
workers and others have been employed for approximately three months
during the winter ; in 1925 376 workers were employed for six months
on the construction of a new line, approximately 600 workers for four
months on wood cutting, and about thirty workers for four months
on the manufacture of nuts, bolts, etc.
The organisation of public works with reference to the labour
market is governed by rules set forth by the Government. These
rules have been modified from time to time. Those at present in force,
supplemented by detailed instructions from the Ministry of Communications and Public Works, date from 25 July 1930, and provide for
three kinds of public works :
(a) State relief works, which are paid for entirely by means of the
unemployment credits, or works for which a sum has been
allocated in the budget for the year in question and which
would normally be carried out in summer, but which can also
be carried out in winter provided the additional cost involved
is met out of the unemployment credits ;
(b) relief works organised by local authorities for which State
subsidies may be granted up to half the total wages bill ;
(c) local works organised in co-operation with private bodies and
subsidised by the State.
According to the regulations, State relief works should consist preferably of road construction, railway construction and drainage work.
They should, moreover, satisfy a number of conditions. In the first
place they must be compatible with the public welfare and unimpeachable
from the economic and agricultural standpoint. Thus, they should
preferably not be such as are likely to be carried out in the near future
by recourse to the open market. In other words, relief work must not
interfere with the demand for labour in the ordinary labour market.
In the second place they must be of such a nature that wages form a
comparatively large proportion of the total cost. Works in which

— 126 —
the cost of material forms a large proportion of the t o t a l are therefore
unsuitable for relief works. Thirdly, they must be such t h a t their
performance does not require a n y high degree of skill and of such a
nature t h a t they can be carried out during periods of unemployment.
Finally, in planning relief works preference must be given t o those
which can be extended or restricted according to fluctuations in the
volume of unemployment and which can even be closed down.
Relief works organised b y local authorities which apply for a subsidy
out of the unemployment credits must satisfy the same conditions as
State relief works. For this reason a subsidy is usually not granted for
such work as the laying and repairing of sewers and water mains or
for road work unless it is shown t h a t the work is intended solely to
relieve unemployment in t h e locality. Moreover, a local authority
which wishes to obtain State assistance is required to have already
taken all the measures for the relief of unemployment t h a t m a y reasonably be expected of it in view of its economic situation, and to appoint
a n Unemployment Board which must keep a card index of unemployed
workers in need of assistance.
The rate of wages paid on all relief works must be 20 per cent, below
the wage rate usually paid in t h e locality to unskilled workers, b u t m a y
be increased or reduced b y 10 per cent, according to local conditions
a n d the degree of skill of the worker in question. This, however, does
not apply t o skilled workers whose number is fixed b y the central
administrative d e p a r t m e n t in respect of each project. The work must
be done b y contract whenever possible so t h a t the work is given out t o
sub-contractors t o be done b y small gangs.
Among the conditions the workers must satisfy before being entered
on the unemployed register are : t h a t t h e y are able a n d willing t o work,
t h a t their economic position is so unfavourable t h a t it makes it indispensable t h a t the community should come to their assistance to ensure
their livelihood, and t h a t t h e y are in need of assistance owing to
unemployment for which t h e y are not themselves responsible and
which has lasted for at least 6 days. An unemployed worker who has
become unemployed owing t o a strike or lock-out may not be entered
on the unemployed register.
FRANCE
I n France, a t the end of 1926, the Minister of Labour undertook, in
co-operation with other public authorities, a sort of inventory of public
works which might be speeded u p in order to absorb the unemployed
as quickly as possible. Thus, a circular dated 30 December 1926 requested
t h e other Government departments to inform the Ministry of Labour
of any important orders for work or material which might be placed
immediately or in the course of a few months, and emphasised the
importance of issuing instructions to the departments concerned in
order to speed u p the formalities and enquiries necessary before placing
such orders. The Government departments were also requested to
inform the Minister of Labour whether it was necessary to carry out
these works or place these orders in a n y particular region, so t h a t if
possible the Minister of Labour might designate, according t o t h e

— 127 —
labour situation, the district in which it would be preferable to have
them carried out.
The Minister of Public Works issued two circulars, dated 4 and
5 January 1927, addressed to the Administration of Navigable Waterways and to the Maritime Services respectively, drawing their attention
to the programme of maintenance and other works laid down for 1927,
which, as they did not call for skilled or specialised labour, might be
of use in absorbing the unemployed. With regard to works in connection
with the maintenance of navigable waterways which might be carried
out by unemployed workers (repairs to towing paths, locks and river
ports, canal cuttings, hedges, plantations, dredging of ditches, etc.) and
which are usually carried out by auxiliary helpers, the only works to be
undertaken were those which, though necessary, had been postponed
or slowed down owing to lack of funds. Further, the maritime services
were invited to put in hand immediately maintenance and other works,
particularly works on large-scale repairs, provided for in the 1927 programme, and to develop these works as much as possible in order to
absorb a greater labour force than would be required in the usual way.
Steps were also to be taken to induce contractors to put works in hand
without delay, and to speed them up as much as possible.
With regard to works duly authorised and already under way on
navigable waterways, the circular of 4 January 1927 provided that the
Administration should endeavour to persuade contractors to employ
as large a labour force as possible. With regard to works of which the
plans were already approved, these were to be placed out on contract
as soon as possible, particularly those works which would employ a large
number of workers. The Administration was also urged to pursue
actively the preparation of plans for works which did not require to be
certified as public utility works, and which would employ a large unskilled
labour force, and to pay special attention to clauses in the specifications
with regard to the employment of unemployed workers. Finally, works
were to be split up, in order that as much work as possible should be put
in hand at once to absorb the unemployed 1 .
The information available is insufficient to give a precise idea of
the results of the Government's public works policy. The official
statistics concerning the state of the labour market during the two
periods of depression (1921 and 1927), howevar, furnish an index to
the development of unemployment, which in both cases came to an
end very shortly. Moreover, a report presented to the National Employment Council at the end of 1927 by îlr. François Fagnot, Chief of the
Central Employment Office, contains interesting indications relating
to the extent of public works effected and the number of unemployed
absorbed during 1927. Information furnished to the Ministry of Labour
shows that a sum of 1,351,000,000 francs was expended on works and
orders provided for in the 1927 budget the execution of which was
speeded up by the various State administrations in accordance with
the measures prescribed by the Government at the end of 1926. Of
1
Bulletin
pp. 90-102.

du Ministère

du Travail

et de VHygiène,

April-May-June 1928,

— 128 —
this amount 457,000,000 francs were spent by the Ministry of Public
Works, 400,000,000 francs by the Ministry of War (Engineers and
Ordnance), 242,000,000 francs by the Post Office, 100,000,000 by the
Ministry of Agriculture, etc.
Each time that a contract was placed, the Central Employment
Office informed the local employment exchanges, which immediately
got into touch with the prospective employers.
The orders placed by the various State services contributed, especially during the first six months of the year 1927, to give employment
to numerous industrial establishments, particularly in the metal,
wood, textile and clothing industries. Further, the orders placed by
the principal railway companies considerably stimulated the activity
of undertakings engaged in the manufacture of rolling stock, permitting
them not only to occupy their own workers fully, but to take on
unemployed workers as well.
Local and district authorities, further, exercised a similar activity
to that of the Government. A certain number of municipal and general
councils, especially in the great industrial centres, provided in their
budgets for amounts to be set aside for the carrying out of public works,
or other constructional or maintenance works. In February 1927,
when the period of depression had reached its lowest point, 10,000
workmen were thus employed. In October 1927 only 538 were employed.
In January 1927 the Prefecture of the Seine, in agreement with the
Ministry of Public Works, decided to put in hand three months earlier
than usual the annually recurring works of construction and maintenance (roads, water supply, etc.). The programme for 1927 provided
for an expenditure on these works of 175,000,000 francs in excess of
the usual yearly expenditure, and it was estimated that of this amount,
works to the value of 50,000,000 francs could be put in hand at once 1.
GERMANY
In Germany, a Decree of 26 January 1920 concerning assistance to
the unemployed authorised the Minister of Labour to take suitable
measures for the purpose of replacing pecuniary assistance by grants
or loans for the organisation of relief workshops or of other works.
This was the beginning of the system known as productive unemployment relief (Produktive Erwerbslosenfürsorge). Its purpose was to
provide creative work for the unemployed. Money, instead of being
paid directly to the unemployed, was paid to undertakings able to
employ them or to technical instruction courses which might facilitate
their employment later on. In other cases unemployed workers were
helped by the payment of their travelling expenses to obtain
employment at a distance from their homes.
This system was to apply to works of public utility which could
not otherwise be carried out for financial reasons, such as the construction of roads, canals and railways, agricultural improvements, etc., and
the money was to be given primarily to local authorities and public
utility institutions, but it might also be given sometimes to semi1

Le Temps,

12 J a n . 1927.

— 129 —
private undertakings, and even, in exceptional cases, to undertakings
working for profit. Grants were also to be given to special relief workshops. Stress was laid on the fact that the. relief measures were not
to result in competition with existing undertakings working with their
own resources, and no assistance was to be given to undertakings
which could quite well be carried on without it.
The work done was to have an economic value and to provide
employment for at least five workmen during at least one month.
Otherwise there was great variety in the kind of work for which
assistance was given. It was desired to facilitate the employment of
as many men as possible at their own jobs, it being pointed out that
there were serious economic and moral disadvantages in employing
skilled workmen, for instance, on unskilled work.
Assistance having been given in the construction of roads, canals
and railways, it was then given to building operations, paiticulaily
for the construction of houses in the country districts. Here it had
the advantage of facilitating a transfer of labour from the large centres
to small towns and to agricultural districts 1 .
Various changes were made in this system. In particular an Order
of 15 October 1923 reduced the rate of pay for relief work, and provided
that such pay should not be considered as wages, but as relief. A further
Order of 30 April 1925 provided that work under the productive unemployment relief scheme was still to be considered as a form of relief,
thus precluding, for instance, the establishment of works councils in
connection with such work, but on the other hand the workmen were
to be considered as wage earners, and as such were insured against
sickness, invalidity and industrial accidents. The rate of wages was
to be that payable to workmen of the same category in the locality
concerned, and was calculated according to the work actually done.
I n order to avoid attracting workmen already employed, the State
central employment offices were empowered to fix a maximum rate
of pay. The maximum period during which the unemployed person
might be employed in productive unemployment relief work was three
months per annum, or in exceptional cases six months.
On 16 July 1927 the Act concerning employment exchanges and
unemployment insurance was passed. This Act provided for the continuation of the above methods in a modified for munder the name of
Wertschaffende Erwerbslosenfürsorge. The nearest English equivalent
of this would still seem to be "productive unemployment relief". The
guiding principles of this relief were laid down by the Administrative
Council of the Federal Institution for Employment Exchanges and
Unemployment Insurance. I t was provided that the works must be of
public utility. In granting subsidies, preference was to be given to such
works as might help to increase the possibilities of employment, or to
lead to a better distribution of labour throughout industry. The works
must employ a large amount of labour and a small amount of material.
Assistance was to be given only to work which could not otherwise be
carried out, and only to public institutions or mixed or private under
1

9

The financial nature of this scheme has already been explained (see p . 102).

— 130 —
takings recognised as being of public utility. Private undertakings
conducted for profit were excluded.
Assistance might take, the form of loans which were repayable or
of grants which were not repayable. Loans must be repaid, both
principal and interest, by quarterly payments within a period not
exceeding 15 years from the completion of the work.
The assistance given depends on the number of days worked by
persons who would otherwise be in receipt of unemployment insurance
benefits, the maximum contribution of the Federal Institution being
3 marks per workman per day. For larger works, which constitute
about two-thirds of the total and for which Federal and State subsidies
have to be provided, these combined subsidies may not as a rule exceed
four times, or in exceptional cases five times, the amount saved by
the Federal Institution. The whole contribution from all governmental
sources must not exceed 80 per cent, of the entire cost of the work ;
generally it does not, in fact, exceed 50 per cent.
In the case of unemployed persons in receipt of normal insurance
benefit, the grant is be charged against the insurance funds. In the
case of those receiving emergency allowances (Krisenunterstützung),
four-fifths of the cost is borne by the Federal authorities, and onefifth by the local authorities concerned. In the case of persons in receipt
of public relief, the public relief funds bear the cost.
As a rule, public bodies were not to carry out the subsidised works
directly, but in the agreement with contractors they were to ensure
that the various conditions laid down by the guiding principles of
the Federal Institution were observed.
On 23 March 1928 the Ministry of Labour issued an Order intended to
increase the assistance given to the works mentioned above by means
of resources derived from the Federal and State budgets. Such support
was not to be granted except in areas where the number of unemployed in receipt of benefit was at least 1 per cent, of the population,
and did not seem likely to fall below this level within a reasonable peiiod.
On 1 August 1930 a limited company was formed on the initiative
of the German Government for the promotion of public works under
State control, the special purpose of the company being to obtain
German or foreign capital to be used for productive unemployment
relief. As a matter of fact, as a result of the difficult financial position
of the Federal Government, the sums earmarked in the budget for
productive relief have had to be progressively reduced during the last
few years. From 1926 to 1928 these sums amounted to an average
of 100,000,000 marks ; in the 1929 budget to only 77 millions ; and in
the 1930 budget to only 45 millions. I t is therefore desired to obtain
money from other sources.
The works undertaken are of two kinds, namely, emergency works
(Notstandsarbeiten) and other works which aim not at temporary
employment of the unemployed but at permanent employment. The
great majority of the works are of the former kind. They consist
mainly of agricultural improvements, flood protection works, power
works (particularly water power works, pipes for conveying gas, etc.),
road construction and other underground work.

— 131 —
It is possible to get an idea of the number of workmen employed
on emergency works since the beginning of 1925 from the following
table, which shows monthly averages in each of the years 1925 to 1929.
TABLE XTI. — WORKMEN ENGAGED IN EMERGENCY WORK
Unemployment relief or insurance
Period

Number of
workmen in
receipt of
benefit

Number of
workmen on
emergency
work

1

2

3

1925
1926
1927
3 928
1929
1

446,624
1,678,095
880,254
890,051
1,275,184!

51,919
128,974
93,286
49,467
45,457 1

Emergency

benefit

Per
cent.

Number of
workmen
in receipt
of relief

Number of
workmen on
emergency
work

4

5

6

11.6
7.7
10.6
5.6
3.6

175,649
139,643
175,953

24,347
13,227
8,224

Per
cent.
7

13.9
9.5
4.7

Including special benefits (Sonderfürsorge).

It will be seen that an average of about 83,000 have been employed
during the period covered. On the other hand, after a certain time
has elapsed (generally three months, but occasionally six months), the
workmen have to be changed and others taken on, so that in reality
about 250,000 workmen found employment per annum for shorter or
longer periods on emergency works. In justification of these frequent
changes it may be noted that one of the main advantages of the whole
scheme, according to the annual report of the Ministry of Labour for
1929, lies in its effect on the individual workman. Employment, even
for a short time, helps to prevent the moral deterioration and material
loss inseparable from enforced idleness, gives the workman once more
the will to work, as well as the opportunity, and revives his confidence
in his own strength and ability.
A number of conditions are prescribed for the emergency works.
First, those workmen are taken who are, for personal reasons, most in
need of the " breathing space " represented by a job ; secondly, an
effort is made to make the works available for as many different occupations as possible ; and thirdly, special attention is paid to districts
with particularly heavy unemployment. The workmen are chosen,
in the first place, from among those who have been unemployed for the
longest time and especially those who are in receipt of emergency benefits
after having exceeded their right to ordinary benefits. Married men
with families are preferred to single men except where a transfer to
another district is involved.
The number of workmen employed on works under the scheme from
October 1927 to December 1928 may be seen from the following table,
which shows the total number of workmen engaged as a result of
contributions (a) from the regular unemployment insurance fund and
(b) from the emergency benefit fund (Krisenunterstützung), while in
each case those engaged on works for which assistance had to be obtained
from the Federal and State Governments are distinguished from the
remainder.

— 132 —
TABLE X I I I .

NUMBER OF WORKMEN ENGAGED ON PRODUCTIVE
UNEMPLOYMENT RELIEF I N GERMANY

From the Unemployment
Insurance Fund
Date

1927
15
15
15

:
October . . .
November . .
December . .

1928:
15 January . . .
15 February

15 March .
15
15
15
15
15
15
15
15
15

April .
May
June .
July .
August
September
October .
November
December

From the Emergency
Benefit Fund

Total

Number on
works supported by Federal and State
Governments

Total

Number on
works supported by Federal
and State
Governments

52,855
44,152
32,871

43,422
35,777
27,542

21,782
18,607
12,710

17,381
14,776
10,119

22,515
43,632
53,795
67,349
70,358
65,434
58,368
52,860
51,819
45,721
41,270
34,260

17,833
30,578
35,446
44,014
46,480
42,973
39,477
36,755
37,089
32,324
29,704
24,688

8,513
14,630
17,008
20,383
21,515
18,313
15,420
12,716
11,784
9,068
7,889
6,037

7,174
10,579
12,044
14,837
16,191
13,384
11,129
9,712
8,843
6.826
6,212
4,864

For 1929 the figures are as follows, classified a little differently from
the above. They do not show the works supported by the regular
unemployment insurance fund and the emergency benefit fund separately
TABLE

XIV

Of these
Date

(1)
1929:
15 January . . .
15 February
15 March .
15 April
15 May
15 June
15 July .
15 August
15 September
15 October .
15 November
15 December . .

Number
of workmen
engaged

(2)

On works
supported by
Federal and
State
Governments
(3)

On works
supported
only by the
Federal
Institution
(4)

18,366
4,636
8,768
66,973
104,003
103,375
85,201
69,632
58,318
48,404
40,611
31,410

12,896
2,771
6,473
46,911
70,834
72,866
61,155
51,412
40,795
33,078
25,449
16,306

5,470
1,865
2,295
20,062
33,169
30,509
24,046
18,220
17,523
15,326
15,162
15,104

Column (4)
as a percentage of
column (2)
(5)
29.8
40.2
26.2
30.0
31.9
29.5
28.2
26.2
30.0
31.7
37.3
48.1

— 133 —
It will be seen that in both years, 1928 and 1929, and particularly
in the latter, the number of workmen employed on these works was
greatest in summer and fell off in the autumn. On this the Federal
Institution for Employment Exchanges and Unemployment Insurance
comments as follows. It is recognised as regrettable from a labour
market point of view that this autumnal decrease should have taken
place, for that is just the period of the year when unemployment tends
to increase owing to seasonal factors. Moreover, the weather conditions
were favourable for the carrying on of outdoor work. The reason for
the decrease was that the Reichstag curtailed the amount of money
available for the subsidies to the unemployment insurance funds. This
was done at a time when plans had already been made and could not
be changed. They had simply to be abandoned and it was even necessary
to stop work on certain undertakings which had already been started.
The second category of works under the productive unemployment
relief, namely, those which aim at permanent rather than temporary
relief of the labour market, consists mainly of housing schemes in
agricultural districts, which, it is hoped, will do something to stop the
drift from the land to the cities. Such schemes receive financial assistance
from the Federal Government and the States but not from the Federal
Institution for Employment Exchanges and Unemployment Insurance.
The assistance is given in the form of loans without interest and these
loans amount to an average of 6,000 to 7,000 marks for single homes
(Eigenheime) and 4,000 to 5,000 marks for collective homes (Werkwohnungen). From 1921 to the end of 1929, 24,624 collective homes
and 31,635 single homes were built with the assistance of subsidies from
the Federal and State Governments.
Houses are also built on similar conditions in industrial districts in
order to facilitate the transfer of workmen to places where work is
available. Since 1926 about 2,670 such houses have been built 1 .
In June 1926 a special programme of public works (independent of the
productive unemployment relief scheme) which would in the ordinary
course have been undertaken at a later date was initiated by the Federal
Government. The bulk of the work comprised in the scheme consisted
in the placing of large orders by the postal and railway administrations
and the construction of navigable waterways and houses, especially in
agricultural districts.
A memorandum was submitted in 1927 by the Minister of Labour to
the Reichstag showing the situation with regard to this programme.
In order to ensure its rapid execution, a special Inter-Departmental
Committee for the Development of Employment was set up by the
Government, under the chairmanship of Dr. Weigert, of the Ministry
of Labour. One of the sessions of this committee was devoted to the
problem of how to obtain the best social and economic results from
the programme in hand. I t was decided to lay down as a condition
1
Cf. Erster Bericht der Reichsanstalt für Arbeitsvermittlung und Arbeitslosenversicherung für die Zeit vom 1. Oktober 1927 bis zum 31. Dezember 1928 ; Zweiter
Berieht der Reichsanstalt für Arbeitslosenversicherung für die Zeit vom 1. Januar
1929 bis zum 31. Dezember 1929 ; and Bericht über die Tätigkeit des Reichsarbeitsministeriums im Rechnungsjahr 1929.

— 134 —
for the execution of work undertaken in connection with the Government
programme that overtime should in no case be resorted to, and that
workmen should be engaged through the medium of the public employment exchanges. Part of the work outlined in the programme was
postponed for performance during the winter months, when unemployment is usually at its height.
Much difficulty was encountered in putting into effect the principle
of placing contracts as far as possible in those areas where the greatest
percentage of unemployment existed. The Inter-Departmental
Committee, however, in planning the regional distribution of the works
endeavoured as far as possible to take account of the various aspects
of unemployment.
So far as the railway administration was concerned, the measures
adopted produced a marked improvement in the situation, particularly
in the metal and engineering industries. Moreover, by 15 October 1926
the greater part of the work undertaken under the Post Office scheme
had been carried out ; this called for the expenditure of altogether
300 million marks, half of which had been raised by a loan. The
measures taken by the Government with regard to the development
of the building industry were also successful. The figures given below
show that unemployment among workers in the building industry
decreased in most districts :
TABLE

Month

xv
N u m b e r of workers seeking
employment
Skilled

Unskilled

1926 :
August

89,492
84,961
75,211
82,054

107,222
102,658
96,744
96,667

Out of the 200 million marks voted for housing schemes by the
Act of 26 March 1926, the following amounts were drawn upon by the
States :
For 2nd mortgages in Prussia
For 1st mortgages in all States (excluding Lübeck)

Marks
60,000,000
45,558,910

From the fund of 50 million marks (advances on account of house
rates (Hauszinssteuer) the States had drawn 27,966,000 marks, and
required a total of 49,674,000 marks (inclusive of the 27,966,000 marks
already drawn).
A sum of 60 million marks was available for housing schemes for
agricultural workers.
Further, with regard to road development, those States and provinces
which were considered as necessitous areas within the meaning of the
Act of 14 August 1926 might receive a grant towards the payment of
interest on their road fund of 4 per cent, in the first year, and 3 per cent.

— 135 —
in the two following years. This grant was later extended to areas
which, though themselves not necessitous, procured their road-making
material from areas which were necessitous. Full advantage was taken
of these facilities, and road-making activities to the amount of 80 million
marks were under way in 1927.
The German Government established an undertaking for the improvement of land cultivation called " Deutsche Bodenkultur A.-G. " and
35 million marks were placed at its disposal out of the surplus left over
from the Government Grain Office. By means of loans made by this
organisation to land improvement companies, approximate^ 200,000
hectares 1 were developed, and approximately 7 million man-days
worked. In the same year, moreover, the German Ministry of Labour
granted loans and advances for land development to the amount of
40 million marks.
Fifty million marks were allotted for colonisation schemes in 1926,
and a further 15 million marks remained available for this purpose
from the Government Grain Office surplus.
For the financial year 1926 the German Government had to budget
altogether for the sum of 630 million marks for the financing of
employment development schemes.
The Government programme also included measures for the development of the export trade, including Government guarantees covering
the possibility of deficit in the case of trade with Russia, and a scheme
for export credit insurance 2.
The number of unemployed fell between 1 July and 1 November
1926 :
TABLE

Date

1926
26
31
28
25
30
27

:
June
. .
July
. .
August ,
September
October .
November

.
.
.
.
,
.

.
.
.
.
.
.

XVI

Number of
unemployed

Percentage of
trade union
members
unemployed

627,287
599,917
567,541
513,364
476,952
484,978

18.1
17.7
16.7
14.2
14.2
14.2

workers on
short time

Percentage of
trade union
members on
short time

596,793
563,823
511,685
343,380
343,303
284,774

17.2
16.6
15.0
10.2
10.2
8.3

^JllTTlhpi*

fit

This table shows very clearly the particularly heavy decrease in
the number of workers on short time. I t cannot, of course, be said
that the improvement in the situation which is brought out by this
table was due entirely, or even mainly, to the public works programme
outlined above, but the Government claims that that programme did
a good deal to help industry over a very difficult time, and contributed
appreciably to the revival which took place.
1

1 hectare = 2.471 acres.
E x t r a c t from Denkschrift über die Arbeitsbeschaffungsmassnahmen
regierung, 1926.
2

der Reichs-

— 136 —
In 1930 further measures were adopted for the purpose of hastening
the carrying out of public works programmes. They are estimated to
cost 1,000 million marks, of which 350 millions are for the railways,
200 millions for the post office, 250 millions for housing, 100 millions
for roads and 250 millions for emergency works (Notstandsarbeiten).
The Federal Government did not itself provide the money, but was
indirectly of assistance in raising it. It is hoped that the measures
in question will lead to a fall in prices, though how this is to be achieved
is not clear. I t is prescribed that firms receiving orders under the
scheme must as far as possible use German materials.
The details of the scheme are as follows. The Federal Railway
Company has agreed to spend 80 million marks on the reconstruction
of the permanent way, 20 millions on rails, 80 millions on rolling-stock,
10 millions on bridge-building, 2 millions on safety measures, 50 millions
on new constructions and 30 millions on the workshops, etc. Of the
total sum of 350 million marks, 272 millions are to be spent in the
financial year 1930. The works will be financed in the first place by
means of Treasury Bills to the extent of 150 million marks, and from
resources which would normally become available only in the following
year.
The Post Office works will consist of low tension electrical works
(132 millions), machinery (23 millions), buildings (20 millions) and
various improvements (25 millions).
The housing programme is to consist of the building of small houses
32 to 45 square metres 1 in area, and the money will be made available
through mortgages by banks and insurance institutions.
By an Order of 26 July 1930 the Federal Government is empowered
in the period 1 July 1930 to 31 March 1936 to guarantee loans to the
Deutsche Bau- und Bodenbank A.-O. and the Reichskredit A.-O., provided
that the total amount of the loans does not exceed a present value
of 100 million marks. With this assistance the above-mentioned
institutions will provide 100 million marks for the building of roads.
The emergency works will be carried out through the productive
unemployment relief scheme with the assistance of the limited company
referred to above (Deutsche Gesellschaft für öffentliche Arbeiten A.-O.).
GREAT BRITAIN
Great Britain has, since the war, had a big unemployment problem
to deal with, and during the whole period from 1920 to the present
time the Government of the day has pursued a policy of encouraging
and aiding local authorities in carrying out public works earlier than
they would otherwise have been undertaken and in some cases works
which would not have been undertaken for a long time to come. The
prolonged unemployment which has prevailed in Great Britain since
1920 cannot, of course, be considered as an ordinary trade depression.
It is clearly due to special causes which affect mainly the coal-mining,
engineering, iron and steel, shipbuilding and textile industries, and
1

1 square metre = approximately 10.80 square feet.

— 137 —
does not yield to treatment which would be suitable in more normal
circumstances.
The measures which have been taken since 1920 with Government
assistance to provide work for the relief of unemployment may be
grouped as follows :
(i) schemes assisted through the Unemployment Grants Committee ;
(ii) schemes assisted through the Development (Public Utility)
Advisory Committee ;
(iii) schemes under the Development and Road Fund Act, 1909,
and the Roads Act, 1920 ;
(iv) trade facilities schemes ;
(v) schemes under the Colonial Development Act, 1929 ;
(vi) miscellaneous schemes.
In 1930 an Act (the Public Works Facilities Act) was passed to
introduce a simpler procedure for obtaining parliamentary sanction
for works, when that is necessary, to enable land to be acquired
compulsorily by means of an Order confirmed by the appropriate
Minister and to give similar powers to highway authorities in certain
cases in connection with easements for bridges.
(i) Schemes Assisted through the Unemployment Grants Committee
The work of the Unemployment Grants Committee during the
post-war depression has been by far the most important part of the
whole emergency programme for the relief of unemployment. This
Committee, which is composed largely of business men and is presided
over by Lord St. Davids, was originally appointed on 20 September
1920 with an initial grant of £3,000,000 " for the purpose of assisting
local authorities in the United Kingdom in carrying out approved
schemes of useful work other than work on roads and on housing
schemes ". For the guidance of the Committee it was laid down that
works were to be approved for assistance only in areas where unemployment was severe and not otherwise provided for ; and that the works
must be approved by the proper Government Department as suitable
works of public utility. The grant that was to be made in each case
was not to exceed a certain percentage of the wages bill of additional
men taken on for work 1.
Various changes were made from time to time in the conditions
applicable to different schemes and in 1923 grants might be given
only for works which would not be proceeded with at that time apart
from the pressing need for relieving unemployment and which were
approved by the appropriate Government Department as being of
public utility. Moreover, they were only to be given in areas where
the existence of serious unemployment not otherwise provided for
was certified by the Minister of Labour. Not less than 75 per cent.
of the unemployed men taken on for the work were to be ex-service
men and the labour was to be recruited through the employment
1
UNEMPLOYMENT GBANTS COMMITTEE : First (Interim)
20 December 1920 to 2 March 1922.

Report for the period

— 138 —
exchanges or from boards of guardians. The rate of wages was for a
probationary period of six months to be less than the customary rate
in certain cases.
In 1924 the conditions were made somewhat easier. Grants were
no longer to be limited to areas with serious unemployment. Moreover,
the obligation to pay a rate of wages lower than the customary rate
in certain cases was abolished. In direct labour schemes payment
had to be made at the local authorities' rate for their own workmen
for similar work or the recognised district rate if that was lower.
Prom 1925 to 1928 the conditions for grants were again made more
severe. Grants were given only where unemployment was exceptional
and for work which would not otherwise be undertaken for a considerable
period (ordinarily more than five years). On the other hand, on
9 November 1928, revised conditions for grants were issued to local
authorities prepared to recruit 50 per cent, of the workers from among
unemployed men transferred from the depressed areas.
During the whole period 1920-1929, the Government gave assistance
in the carrying out of public works by administrative decision and no
legislation on the subject existed. In 1929, however, the Labour
Government decided to place this work on a statutory basis and at
the same time to enlarge the scope of the public works policy. On
26 July 1929 two measures were adopted by Parliament, having as
their main object the relief of unemployment, namely, the Development (Loan Guarantees and Grants) Act and the Colonial Development
Act.
The first of these Acts provides, among other things, that the
Minister of Labour, with the approval of the Treasury, and on the
recommendation of a committee appointed by the Minister (the Unemployment Grants Committee), may make grants to local authorities
and such statutory bodies as carry on undertakings under statutory
powers otherwise than for profit, towards any expenditure incurred
for the purpose of carrying out works of public utility calculated to
promote employment in the United Kingdom.
New regulations for the Unemployment Grants Committee were
issued under this Act to local authorities on 26 July 1929. The Government decided that modifications in the conditions were desirable with
a view to : (1) enabling a larger number of local authorities to qualify
for grants, including authorities which had hitherto been debarred by
reason of the fact that the level of unemployment in their area, though
high, was not exceptional in the sense of the committee's circular letter
of 15 December 1925, and (2) furthering the policy of transferring
unemployed men from the depressed areas to other areas. The Government further desired that the Committee should take into consideration
the extent to which the proposed schemes of work were calculated to
promote economic development.
After a year's experience in the working of these regulations the
Government convened a conference representing local authorities
throughout Great Britain, to consider what further measures could be
taken in co-operation between the Government and the local authorities
to deal with the problem of unemployment. As a result of this conference

— 139 —
new regulations were again issued by the Unemployment Grants
Committee in circular U.G.C. 26 J u l y 1930. They are as follows.
T h e work m u s t be of public utility. I n approving a n y scheme t h e
Committee will take into consideration the extent to which it is calculated
t o promote economic development in the United Kingdom, and will
n o t recommend a grant unless they are satisfied t h a t there is substantial
acceleration. All men m u s t be engaged through t h e employment
exchanges, with certain small exceptions ; and the workmen taken on
remain on t h e registers of the employment exchange, a n d are regarded
as available for suitable employment if such employment can be offered
to them b y the exchange. The local authority or its contractor is a t
liberty to employ for controlling and supervisory purposes a number of
permanent employees not exceeding 10 per cent, of the total number
of men engaged on the work. All materials used must as far as practicable be of United Kingdom origin. The recognised district rate of
wages m u s t be paid.
The following rates of grant are available :
(1)

Schemes Financed

by Way of Loan

(a)
Non-revenue-producing
schemes. — Seventy-five per cent, of
the interest and sinking fund charges on any loan raised t o meet approved
expenditure for the first half (up t o fifteen years) of the loan period, and
3 7 % per cent, of the interest and sinking fund charges for the remainder
(up t o fifteen years) of the loan period.
(b) Revenue-producing
schemes. — Fifty per cent, of the interest
on any loan raised to meet approved expenditure for fifteen years or
for the period of the loan, whichever is the shorter.
Special grants m a y also be given for schemes of a substantial character
a n d high economic value, a n d for the construction of a rural water
supply, public baths and municipal wash-houses.
(2) Schemes Financed Otherwise than by Way of Loan
The grant will be :
(a) in areas where the average monthly rate of unemployment
among adult males during the twelve months ending 16 J u n e
1930 exceeded 15 per cent., 90 per cent, of t h e wages of t h e
unemployed men taken on for the work ;
(b) in other areas, 75 per cent, of the wages of the unemployed men
taken on for the work.
There are certain special necessitous areas where it is out of t h e .
question for the local authority to undertake further capital commitments even for essential services. To meet this situation the Governm e n t asked Parliament t o vote a limited sum for schemes t o be p u t in
h a n d during the winter 1930-1931. A grant will be made to the local
authority concerned equal t o the closely estimated cost of approved
works, the execution of which is left t o the local authority.
Schemes dealt with b y the Unemployment Grants Committee
include work in connection with roads and footpaths, sewers and sewage
disposal, docks, electricity, water, tramways, parks and recreation

— 140 —
grounds, gas, public institutions, sea defence, tennis courts, bowling
greens, land development, cemeteries, sanitation, conveniences, etc.
During the period October 1921 to 30 June 1928, " loan schemes ",
approved by the Unemployment Grants Committee for grants in assistance involved the raising of loans to an amount of approximately
£78,500,000, of which 27.3 per cent, was to be spent on roads and footpaths, 21.1 per cent, on sewers and sewage disposal, and 13.5 per cent.
on docks. Approximately £31,500,000 of these loans was to be spent
on revenue-producing works (including 33.9 per cent, on docks, 22 per
cent, on electricity undertakings, 17.1 per cent, on water undertakings,
12.1 per cent, on tramways, and 6.8 per cent, on gasworks, etc.).
In addition, grants approved on the basis of a percentage of the
wages bill amounted during the period December 1920 to 30 June 1928
to approximately £5,000,000 (28.6 per cent, for roads, 25.9 per cent, for
parks, recreation grounds and cemeteries, 17.1 per cent, for gas, water,
sewers and sewage disposal).
The Eighth (Interim) Report of the Unemployment Grants Committee, which deals with the year 1928-1929, states that the total
estimated cost of the schemes approved by the Committee for grants
since its formation in December 1920 up to 30 June 1929 amounts to
approximately £113,000,000 and the estimated cost of the schemes
approved between that date and 31 July 1930 is £41,700,000, making a
total of £154,000,000.
The number of man-months of direct labour provided by schemes
assisted by the Unemployment Grants Committee during the period
December 1920 to June 1929 is estimated at approximately 4,500,000.
The Committee stated in its report for 1926-1927 that approximately
the same number of man-months of labour is provided in the preparation
of materials as is provided in the form of direct labour.
(ii) Schemes Assisted through the Development (Public Utility) Advisory
Committee
The Development (Loan Guarantees and Grants) Act, 1929, also
gives power to the Treasury to guarantee loans, or to make grants
towards meeting interest charges on loans, raised by a public utility
undertaking (other than local authorities and statutory bodies not
working for profit) in Great Britain for purposes of development, reconstruction or re-equipment, providing that the aggregate capital amount
of the loans shall not exceed an amount sufficient to raise the sum of
£25,000,000.
A second Committee, known as the Development (Public Utility)
Advisory Committee, was set up for this purpose. The assistance may
take the form of a guarantee of payment of the principal of, or the
interest on, any loan to be raised and applied for the purpose of meeting
capital expenditure on the scheme. Alternatively a grant may be made
to assist in defraying the interest payable on such loan in whole or in
part during a period not exceeding 15 years from the raising of the loan.
In considering applications regard is to be paid to (a) the extent to
which the capital expenditure in question is calculated to promote
employment in the United Kingdom, and (b) the probability or not

— 141 —
of the scheme not being proceeded with in the near future if assistance
is not given.
The power of giving guarantees or of making grants is exercisable
only within a period of three years from 31 August 1929 1.
Schemes were approved for grant on the recommendation of the
Development (Public Utility) Advisory Committee up to 29 November
1929 amounting to £7,645,000. The undertakings receiving the grants
were railway, gas, and water supply companies.
(iii) Schemes under the Development and Road Fund Act, 1909, and
the Roads Act, 1920
The Development and Road Fund Act 1909 2 instituted a Road
Improvement Fund under a Road Board which was empowered to
construct and maintain roads or advance money to highway authorities
for the same purposes. The execution of such road works is also governed
by section 18 of the 1909 Act requiring consideration of the general state
of employment. In 1919 the functions of the Road Board were transferred to the new Ministry of Transport and the Roads Act of 1920
placed the Road Improvement Fund on a new basis. Thenceforth it
was constituted by the proceeds of taxes on motor vehicles which
rapidly reached very large amounts.
The various unemployment programmes carried out by the Ministry
of Transport by means of grants from the Road Fund have involved the
construction of trunk and arterial roads and the widening and reconstruction of existing roads and bridges.
The expenditure of the Road Fund (Ministry of Transport) since
the War has been very large and represents a great volume of work and
of employment, especially as grants from the Road Fund are frequently
additional to expendituie by local authorities. The severity of unemployment in Great Britain since the war has been taken into account
and a great deal of work has been pushed forward, with a view to relieving
unemployment.
The total Ministry of Transport road and bridge programmes, which
were initiated in 1920-1925 for the relief of unemployment, involved an
expenditure of about £57,000,000, and of this the payments to be made
from Government funds (including Road Fund and Exchequer contributions) amount to approximately £37,000,000. No further programmes
were initiated up to 31 March 1928. In the 13 months ending 31 July
1930, a trunk road programme amounting to £13,000,000 and other
programmes of road development amounting to £31,400,000 were
approved. As from 31 March 1926, the Unemployment Grants
Committee have made no further grants towards the cost of road and
bridge works, and all outstanding liabilities incurred by the Committee
in connection with road and bridge works have been assumed by the
Road Fund. Payments made during the year ending 31 March 1928
on account of these liabilities amounted to £998,729.
Under the 1909 Act a Development Commission was appointed but
its work has been distinctly limited in extent. Its activities have been
1
!

Labour Bulletin, Oct. 1929.
An outline of the provisions of this Act is given above on p. 40.

— 142 —
confined to the purposes specifically enumerated in the Act (forestry was
subsequently withdrawn) and few steps have been taken towards " any
other purpose calculated to promote the economic development of the
United Kingdom ".
Consequently, the influence of the Commission on the public works
programme has been small. Not much use has been made of the Development Fund and no attempt seems to have been made to use it as a
means of relieving unemployment.
(iv) Trade Facilities Schemes
The trade facilities schemes were of two kinds (1) export credits and
(2) guarantees under the Trade Facilities Acts of 1921 and 1922.
Under the export credits scheme, which was intended to facilitate
the resumption after the war of the ordinary means whereby traders can
obtain facilities from their bankers to enable them to finance export
trade, the Government guaranteed loans against shipments of goods
exported from Great Britain to approved countries abroad.
Under the scheme in operation from 1919 to 1922 advances
were made to the extent of about £1,750,000. Under the scheme
in operation from 1919 to 1923 and under the Guarantee Scheme in
operation from July 1921 to June 1926, advances were guaranteed to the
extent of approximately £6,200,000. In accordance with the provisions
of the new guarantee scheme operative from 1 July 1926, bills were
guaranteed up to the end of October 1927, to the sum of about £550,000.
Under the Trade Facilities Acts, 1921 and 1922, the Treasury was
empowered on the advice of an Advisory Committee to guarantee
payment of either interest or principal on loans raised in connection with
capital undertakings, provided the loans were expended in such a way
as to relieve unemployment in Great Britain. These Acts expired on
31 March 1927.
Under the trade facilities schemes the Treasury agreed to give guarantees to the extent of about £74,250,000.
(v) Schemes under the Colonial Development Act, 1929
The Colonial Development Act, 1929, authorises the Treasury, on
the recommendation of a committee appointed by the Secretary of
State, to make advances either by way of grant or of loan to the Governments of certain colonies, protectorates and mandated territories for
the purpose of aiding and developing agriculture and. industry in those
colonies or territories, and thereby promoting commerce with ov industry
in the United Kingdom. The money resolution in connection with
this Act, which was adopted by the House of Commons, authorises the
payment of sums not exceeding one million pounds in any one year and
of any expenses incurred in connection with the Committee.
(vi) Miscellaneous Schemes
Miscellaneous schemes have included land drainage, water supply
and reclamation schemes, afforestation schemes, light railway schemes
and acceleration of Government contracts. The approximate amount
of expenditure in connection with these miscellaneous schemes which
have now ceased to operate is given in the following table :

— 143 —
TABLE

XVII

Total expenditure 1921-1926
Schemes

£
877,649
50,595
17,318
430,000
160,774
176,480

£
380,280
117,606

1,712,816

804,018

(a) Land Drainage
(b) W a t e r Supply
(c) Wash Reclamation
(f)

Other Sources

Exchequer

Scottish Schemes
Totals

166,894
139,238

In connection with the acceleration of Government contracts during
the winter of 1923-1924 about £2,000,000 was expended.

Such statistics as are available as to the number of men employed
on all the principal State-assisted programmes from 1924 to 1927 are
given in the table below. These figures a,.'e obtained from returns
made by local authorities and other bodies carrying out the works.
In the case of Unemployment Grants Committee and Ministry of
Transport schemes the figures relate to the number of men employed
on the site of the works and take no account of the indirect relief to
unemployment afforded by the manufacture and transport of materials,
etc. The figures as to Trade Facilities Acts schemes indicate men
employed on the work itself and include part only of the men employed
in the manufacture of the materials used. They do not take account
of the labour involved in winning, transporting, etc., raw materials
TABLE X V I I I . —

NUMBER OF MEN

EMPLOYED

ON P U B L I C

WORKS

PUT

I N HAND F O R T H E R E L I E F OF U N E M P L O Y M E N T W I T H STATE ASSISTANCE

Average number ol men employed
Works assisted by
1924
Ministry of Transport :
Roed and Bridge Schemes . .
Unemployment Grants Commit-

I

1925

1926

1927

13,358

18,129

17,932

13,381

35,752

37,471

24,602

13,248

35,054

43,153

44,839

41,820

84,164

98,753

87,373

68,449

Guarantees under the Trade FaAverage total

The duration of the various State-assisted schemes has varied
considerably, and detailed information as to the average duration of
the work is not available. Many of the schemes were specifically

— 144 —
intended to relieve unemployment during the winter months and their
duration was limited to short periods. In other schemes, the work
extended to periods as long as four or even five years.
* * *
The policy of putting in hand during a period of unemployment
public works which would under ordinary circumstances have been
undertaken at some later time has formed the subject of enquiry by
numerous bodies in Great Britain, and it will be of interest to give a
brief summary of the principal conclusions reached.
The official Committeeon Industry and Trade of 1924-1928, generally
known as the Balfour Committee, was of opinion that in a long-continued
depression the possibilities of bona fide anticipation become rapidly
exhausted and works put in hand then tend to lose their economic
character and to become hardly distinguishable from ordinary relief
works.
On the other hand, the report of the Sub-Committee of the Liberal
Party, generally known as the Liberal Industrial Enquiry 1 , stated
that for the abnormal unemployment of a quasi-permanent character
which has prevailed in Great Britain since 1920
. . . we need an enlightened, energetic and statesmanlike policy of development
and reconstruction in other fields, proceeding side by side with the improvement
in our industrial efficiency.. . We put, therefore, in the forefront of our proposals
a vigorous policy of national reconstruction, embracing within its scope inter alia
the rehabilitation of agriculture, still the lergest of our national industries, a n
intensive programme of highway development, afforestation, reclamation and
drainage, electrification, slum clearance and town planning, and the development
of canals, docks and harbours.

The report claims that there is an ample supply of capital for this
purpose provided that it is rightly guided ; the nation, it says, is
creating new capital at the rate of £500,000,000 a year and " it is sheer
waste to avoid using a part of this capital for the purpose of utilising
our labour resources in the improvement of our national equipment ".
Since a large programme of national development " would impinge
upon several departments of State, it should be placed under the control
of a committee of the Privy Council directly responsible to the Prime
Minister. A Board of National Investment,, which is proposed elsewhere
in the report, should organise the means of financing this policy ".
The official Labour Party policy which was approved by the annual
conference in October 1928 2, and formed the basis of its election
programme, contains proposals on somewhat similar lines. The report
suggests the carrying out of development schemes, including a national
drainage scheme, measures against coast erosion, afforestation, electrical
development, slum clearance, housing, the building of new " satellite
towns ", and the building of roads and bridges. To carry out this policy
it was proposed to set up : (1) a National Economic Committee acting
1
Britain's Industrial Future : being the Report of the Liberal Industrial
London, Ernest Benn, Ltd., 1928.
2
LABOUR PAKTY : Labour and the Nation. Revised Edition.

Enquiry.

— 145 —
under the directions of the Prime Minister to keep both him and the
country informed as to the economic situation and its tendencies ; and
(2) an Employment and Development Board which would have at its
disposal each year a Treasury grant to be drawn upon as required ;
it would be the duty of the Board to bring development schemes to
the point of execution in readiness for the time when they should be
pushed ahead in the interest of employment and trade.
The Liberal pamphlet We Can Conquer Unemployment which
repeated in a more popular form the principal items concerning public
works contained in the Liberal Industrial Enquiry, and which proposed
spending over £200,000,000 in two years on these public works, brought
replies both from the Labour and Conservative Parties. The Labour
Party stated t h a t 1 at the end of two years the situation would be
exactly the same as it was at the beginning, unless other steps were
taken at the same time to bring about a revival in industry. They
did not dispute that public works were necessary, and they acknowledged
that the Liberal proposals were sound in certain cases. They stated,
however, that the Liberal proposals put too much emphasis upon road
development, and that other public works, such as housing, the building
of schools, etc., were equally important. Moreover, the Liberal proposals
would be very costly.
The Conservative Government, which was in office at the time,
replied in the form of a series of memoranda by the heads of the various
departments concerned 2. In the first of these memoranda the Minister
of Labour stated his objections to the Liberal scherno as follows :
(1) Of 1,144,400 registered unemployed in Great Britain on 22 April 1929,
only 250,000 to 300,000 could be regarded as available for direct employment
in State-aided schemes of road work, land drainage and other public works involving
manual labour in the open under commercial conditions of employment and rates
of wages. In particular, if the different parts of the programme were to be carried
through simultaneously, " the force of unemployed labour available, t h a t is,
willing to take the work, and reasonably capable of executing it, is quite inadequate
to meet the demands for the roads and land drainage ".
(2) A big programme of State-aided public works would have a disturbing
effect on the general industrial position. " If it is a long programme, with continuity
of work promised to the personnel, it draws off labour which would otherwise
have found employment, though perhaps with less regularity, in normal industry,
without being able to ensure r e p l a c e m e n t . . . I t is liable to produce lazy work, or
a disregard on the p a r t of the contractors of the need for economy.. . I t thus
tends to degenerate into ' relief works '. "
(3) A big programme of public works " is justifiable only on one of three
grounds : (a) t h a t the works are urgently required ; (b) t h a t they will so
improve productive efficiency t h a t their cost will be repaid by a corresponding
revenue : or (c) t h a t they are wanted to keep from demoralisation a valuable
labour force temporarily out of work, but confident of reabsorption in its own
industry within a short period ". This last point is considered as fundamental.
The objections to any programme of public works are less strong, said the Minister
of Labour, if it can be shown t h a t it will result in a transference of men from the
distressed areas to more prosperous areas.
(4) The programme would simply create 8 problem of demobilisation a t the
end of the period.
1

How to Conquer Unemployment,

MACDONALD,
2

10

Memoranda

with a preface by the R t . Hon. J . Ramsay

M.P.

on Certain Proposala relating to Unemployment.

Cmd. 3331.

— 146 —
Mr. Davison 1, whose book had nothing to do with the general
election, is very critical of the whole policy of public works carried out
by successive Governments since the end of 1920. He considers that
this policy did more to relieve the rates in certain necessitous areas
than to relieve the unemployed. Certain hard-pressed boards of guardians, he says, " received extra loans from the Government after their
claims had been examined and approved by a Committee under Sir
Harry Goschen, but early in 1926 another Goschen Committee reported
that they were unable to find any sound method by which such subventions to local rates could be distributed, and indeed that the whole
principle of such assistance was open to question ". Through the
" relief works ", however, the Government did in fact assist local rates
Mr. Davison adds :
I t is clearly difficult, if n o t impracticable, for the State to raise the level of
employment or t o stem abnormal unemployment by inventing or expediting
public works for t h e needy unemployed. Nothing less t h a n the stimulation of
ordinary industry and business is of a n y real good. If, under a non-Socialist
economy, this can be done a t all, it would be by t h e expansion of credits through
the agency of the central bank. Capital could thus be made t o flow into the main
channels of industry, employing more m e n and women in their own trades, instead
of being diverted from them and injected into specialised undertakings which
are temporary and mainly of an unproductive character. Or if, as is inevitable in
these days, a dose of Socialism is n o t t o be ruled out, it is always open to the State
t o accelerate or guide t h e industrial evolution of t h e country b y the judicious
application, under State control, of a portion of the nation's savings in fruitful
schemes of internal development.
But relief work, as usually conducted, has been proved over and over again
to be unhelpful t o the State and actually lowering in its effects on the unemployed.
So far as the treatment of t h e latter is concerned, the problem is to keep them
fit for some potential wage-earning employment, not to make them work for
work's sake. Industry consists of specific kinds of work, each kind demanding
some specific fitness whether mental (technical), physical, or moral in the workers.
Any relief t h a t is worthy of the name should take the form of providing the potential
worker with t h a t " fitness " if he has n o t got it, and of maintaining it in him if
he has.

Finally, a further pamphlet was issued entitled Can Lloyd George
Do It ? by J. M. Keynes and H. D. Henderson, two members of the
Committee which carried out the Liberal Industrial Enquiry. These
authors claim that the works proposed in the Liberal programme were
undoubtedly useful and would prove very advantageous to the industry
and trade of the country. They add that there would be as much
indirect employment as direct employment given and that the workmen
employed would find their purchasing power increased, thus adding
to the demand for services and goods in the community. These points
have already been dealt with at some length in a previous section of
this study 2 .
ITALY
In Italy, public works have hitherto been determined more by the need
for carrying out general development works than by considerations
of labour market policy 3 . While measures have been taken for the
1

DAVISON :

2

See p p . 24 et seq.
F o r the new policy adopted in 1930, see p . 153.

3

The

Unemployed.

— 147 —
immediate execution of certain work, it cannot be said that the Government has deliberately put forward work which it had originally been
intended to carry out at a later date. Certain sums have, however,
been made available for the immediate execution of public works,
and inter-departmental committees and special commissions have
been set up in order to further the execution of economically useful
work.
A Decree, No. 1698, of 17 November 1918 1, authorised an expenditure of 3,300 million lire for work and material of public utility. It
also authorised the Loan and Deposit Fund to advance money for public
works to provincial and communal authorities and other bodies up to
an amount of 500,000,000 lire at 3 per cent, interest. The same Decree
set up an inter-departmental committee in order to co-ordinate the
work of the different departments.
These provisions did not have the effect hoped for by the Government, owing to the unfavourable financial situation of the local
authorities, which were not in a position to contract loans of
any kind, even long-term loans, and even at such a low rate of
interest. Only 42,000,000 lire of the 500,000,000 lire available were
advanced.
The above Decree was framed principally with a view to the
execution of works of economic utility, rather than with a view to
diminishing unemployment, but the situation of the labour market
was more explicitly dealt with by Decree No. 2405 of 28 November
1919, which provided that the provinces, communes and consortia
should be exempted from the payment of interest on such loans ;
that the sums to be advanced should be immediately available ; and that
the technical and administrative formalities in connection with the
loans should be reduced to a minimum. It also set up another special
inter-departmental committee authorised to decide upon the work to
be carried out and the grants to be accorded, preference being'given
to work which would absorb the greatest number of workers, which
was calculated to add to the national resources, and which could be
carried out in a fairly short space of time. The Committee decided upon
the execution of various works, and a considerable number of unemployed were absorbed as a result of the consequent increased demand
for labour. Over a period of nine months 3,500 grants were accorded,
amounting to a total of 468,866,739 lire 2.
A new inter-departmental committee, assisted by a technical committee, was set up by the Decree of 20 April 1921, No. 1177 for the
purpose of co-ordinating the programme of public works and administering the expenditure under this and other Decrees providing for
the improvement of conditions in various parts of Italy. This expenditure included a sum of 500,000,000 lire to be advanced by the National
Unemployment Insurance Fund, by the National Insurance Institute
and by the Savings Banks administered by the Bank of Naples and
the Bank of Sicily.
1

Cf. E. CAMPESE : II Fascismo contro la disoccupazione.

2

E. CAMPESE, op.

cit.

— 148 —
The resources placed at the disposal of the committee were considerable, and would have stimulated the development of public works
and brought about a diminution in unemployment figures. But the
advances which should have been made during the winter when
unemployment was at its height, were delayed, a lengthy procedure
being necessary before the money could be made available. Requests
for grants had to be made in the first place to a special financial committee representing the Funds mentioned above, and the special financial
committee could only make grants on the proposal of the technical
committee. Only when the decision of this financial committee was
made could the inter-departmental committee decide upon the carrying
out of the work.
The inter-departmental committee continued to function until
February 1923, when it was abolished by the Royal Decree No. 254
of 4 February 1923 1, and its functions transferred to the Ministry of
Public Works.
Other provisions with regard to public works include the Royal
Decree No. 1704 of 19 November 1921 which authorised grants up
to a total of 800,000,000 lire to be made from the Loan and Deposit
Fund to local organisations for the construction of schools, water-pipes,
etc. In exceptional cases loans were also authorised to be made from
the State budget, but rather on the ground of the urgency of the work
to be accomplished than on that of diminishing unemployment ; the
Royal Decree No. 1182 of 20 September 1928, for instance, authorised
an expenditure of 237,750,000 lire for the execution of such work
throughout all the provinces.
In all these cases the decisions taken by the Government only
concerned the financing of certain urgent or specially productive work
from other funds at a time when the amount necessary could not be
obtained from the State budget.
During the last few years, particularly, the Italian Government has
given much assistance and encouragement to private enterprise. The
Government's activity in this respect has consisted of : (1) the encouragement of agriculture and other works which can offer employment
to the greatest number of workers ; and (2) the transfer of the necessary
labour to the places wher3 it is required. Thus the Government has
given considerable assistance during the last few years to both private
persons and companies for the execution of productive work, and a
number of legislative measures have been passed dealing with the
improvement of agriculture and the stimulation of work on uncultivated land.
A Decree No. 3256 of 30 December 1923 dealt with the reclamation
of marsh land ; a Decree No. 753 of 18 May 1924 authorised the State
to assist in the development of land which had become depopulated
owing to economic and geological conditions ; a circular was issued by
the Ministry of Public Works on 19 November 1925 for the purpose
of encouraging the construction of buildings for the housing of,
(1) workers employed on public works, and (2) agricultural workers ;
E.

CAMPESE, op.

cit.

— 149 —
a Decree No. 1154 of 20 March 1926 encourages the formation
of undertakings for irrigation work, and a Decree No. 1042 of
16 January 1927 authorised the State to participate in the cost of
land improvement, building and road-making ; finally, a Decree
dated 29 July 1927 dealt with the reorganisation of the system of
agricultural credit.
The principal stimulus to land improvement, however, has been
the general development scheme (bonificazione integrale). I t has been
instrumental in the development of approximately two and a half
million hectares which, owing to unhealthy situation or the condition
of the soil, were uncultivated and deserted. The expenditure on this
scheme has been estimated at 7,000,000,000 lire distributed over a
period of thirty years. The Associazione Nazionale fra i Consorzi
di Bonifica e di Immigrazione was set up to deal with the financial
administration of the work.
The Decree concerning the general development scheme only came
into force on 1 July 1929, as a long period of administrative and technical
preparation was necessary. The participation of the State in the
expenditure involved was laid down as follows : for irrigation work
35-50 per cent. ; for the construction of water-pipes in rural districts
75 per cent. ; for the construction of agricultural villages, 10-30 per
cent. ; for the construction of temporary housing accommodation,
10-30 per cent. ;. for the construction and improvement of roads in
rural districts, 40 per cent. ; for the provisión of drinking water, 40 per
cent. The contribution of the State towards expenditure for the supply
of electricity varies according to the length of cable necessary and the
voltage. Further, it was decided that the State and the provinces should
contribute from 68 to 87.50 per cent, of the total expenses for the
development of water-power and 87.50 per cent, for road construction
in Southern Italy and the islands.
A Decree-Law No. 416 of 18 March 1929 set up a National Labour
Bank for the purpose of developing the economic resources of the country
and of advancing money to organisations which are of economic and
social value to producers and workers. A special autonomous section
of this bank deals with mortgage loans on housing schemes, and advances
to co-operative associations, agricultural associations and universities,
irrigation undertakings, and other schemes for agricultural development. This section of the bank will have a separate reserve fund
constituted by the Treasury, the National Social Insurance Fand, the
National Insurance Institute, the Ex-Service Men's Organisation, the
Mont de Piété at Rome, and the Federal Institute and Savings Bank
of Venice l . Moreover, a special section has been set up in the Ministry
of Forestry and Agriculture (formerly the Ministry of National Economy)
to deal with the co-ordination and execution of the general development
scheme.
I t may be mentioned that from 1 November 1928 to the end of
February 1929, 854,000 hectares of land had been improved at a
total cost of 1,094,226,000 lire.
1

MINISTERO DEL LAVORO : Bollettino del Lavoro, July-Aug. 1919.

— 150 —
With regard to State action dealing more directly with the unemployment problem, a great stimulus to public works and agricultural
organisation has been given by the Decree No. 2874 of 28 November
1928, which favours those able to employ the largest number of
workers. In addition to the faculty of declaring certain work to be
" urgent ", of which mention has been made above 1, the Decree
provides that, in order to facilitate the temporary employment of
workers, part of their travelling and housing expenses may be met
out of funds allotted for the work. The Ministry of Public Works is
further authorised to contribute to expenditure on " agricultural
villages ".
Among the duties of the inter-departmental committees already
referred to is the encouragement of welfare and aid associations by
means of the allocation of contributions to their funds. Further,
contributions may be allocated to settlement schemes amounting to
from one-sixth to one-third of the total cost. Moreover, small farmers
who employ immigrant labour and who have made certain improvements on their land may also receive subsidies up to one-third of their
expenditure.
The Ministry of Public Works is also authorised to take over for
a maximum period of thirty years up to 4 per cent, of the interest
incurred on loans contracted for land improvement 2.
The various public works are divided into four categories, as
follows :
(1) Work carried out directly by the State ;
(2) Concessions carried out by other bodies for the State ;
(3) Work carried out by local authorities or private undertakings
to which the State contributes by means of subsidies or
loans ;
(4) Administrative concessions, such as the supply of water, which
are handed over in the public interest to institutions specially
constituted for the purpose.
The last category has not been included in the statistics of the
present report, as it comprises very few undertakings.
In addition to the above categories must be mentioned work carried
out by the Azienda autonoma statale della strada created about the
middle of 1928 with a view to dealing with the upkeep and repair of
the Italian roads.
In January 1926, when unemployment reached a very high peak,
the number of workers employed on public works was small. The
same thing happened at the beginning of 1927 and 1928. On the other
hand, about the middle of each year when unemployment diminishes
public works absorb a larger number of workers.
An important cause of these fluctuations is to be found in the
seasonal character both of unemployment and of public works.
Unemployment increases in winter on account of the weather, and it
1
a

See p . 53.
Gazzetta Ufficiale, 29 Dec. 1928.

TABLE XIX ».

NUMBER AND PEBOENTAGE OF EMPLOYED ON PUB
OUT BY THE STATE OR ON ITS BEHALF
(Average for each

half-year)
1927

1926
Class of work

1st half-year

2nd half-year

1st half-year

2nd hal

Workers
PerWorkers
Workers
PerWorkers
Peremployed centage employed centage employed centage employed
Roads

18,728

26.5

23,612

29.6

24,107

27.0

27,125

. . . .

11,653

16.5

11,133

13.9

17,677

19.7

16,884

Agricultural improvements

Hydraulic works

13,610

19.3

12,454

15.6

13,440

15.0

17,389

Maritime works

6,264

8.9

7,047

8.8

7,427

8.3

8,026

Building work

2,619

3.7

3,258

4.1

2,944

3.3

3,080

11,130

15.7

11,959

15.0

14,338

16.0

12,025

3,314

4.7

5,361

6.7

6,176

5.8

6,202

Railways
Earthquakes
War
Various
Total

257

0.4

482

0.6

237

0.2

183

3,022

4.3

4,582

5.7

4,179

4.7

6,721

70.597

100.0

79,888

100.0

89,524

100.0

96,635

' Bolle.lino Statistico del Ministero dei Lavori Pubblici.

— 152 —
is precisely at that time that, for the same reason, public works are
partially suspended. The exact opposite occurs in summer. There
would seem to be room for a better distribution of public works throughout the year.
Table X I X shows the fluctuations in average employment during
each half-year, and the kind of work done.
It will be seen that for certain categories of workers the period of
fullest employment occurs during the first half-year, and for others
during thé second half-year. Work which offers the greatest possibilities
of employment during the first half-year is chiefly maritime work,
hydraulic work and work on the railways. Work on the roads, and
buildings, and agricultural work, etc., are carried out during the second
half-year.
However, both the divergence between the fluctuations of the
labour market and the fluctuations in the number of workers employed
on public works, and the failure to co-ordinate the period of greatest
unemployment with that of increased activity on public works cannot
be entirely attributed to seasonal causes.
Since the middle of 1927 the predominant factor has been the monetary policy of the Government. The policy of deflation, begun in 1927,
was accompanied by a fall in prices and a decrease in the general activity
of the country, and its effects were soon felt in the labour market. The
fall in prices during 1927 and the beginning of 1928 was accompanied
by an increase in unemployment. In April 1927 the unemployed figure
stood at 215,315 and the wholesale price index at 521. During the
remainder of the year prices continued to fall and unemployment to
increase. In January 1928 unemployment reached a high figure and
the wholesale price index was 463 1 . Towards the middle of 1928
unemployment tended to decrease, and prices to be stabilised at
their new level.
I t was not, however, possible for the authorities to develop a programme of public works in order to diminish the intensity of the unemployment crisis, as the deflation policy of the Government tended to
tighten credit ; thus the number of workers employed on public works
was much less, owing to the slowing down of general economic activity.
The number of workers thus employed fell from 102,323 in April 1927 to
77,547 in January 1928, and only when business began to pick up
towards the middle of 1928 was it possible for public works to increase
and absorb a greater number of unemployed workers.
The fact that the value of bonds invested in public works in the
course of execution was 3,929,875,000 lire at the end of June 1927,
dropped to 3,749,320,000 lire at the end of December, and was still only
3,871,063,000 lire at the end of June 1928 2 illustrates the influence of
monetary policy on the programme of the Government and local authorities.
The Deposit and Loan Fund, following the policy of the Government,
restricted loans and grants for public works. In 1925 grants accorded
1
2

Bachi'a Index. (Cf. LEAGUE OF NATIONS : Monthly Bulletin
Bollettino Statistico del Ministero dei Lavori
Pubblici.

of

Statistics.)

— 153 —
by this fund amounted to 518,140,488 lire, in 1926 to 226,144,966 lire
and in 1927 to 212,064,762 lire. This policy of restriction is still more
evident with regard to loans, which amounted to 68,832,186 lire in
1925, to 7,957,169 lire in 1926 and to 3,109,825 lire in 1927.
Altogether during the ten years 1920-1930 the National Social
Insurance Fund has set aside a sum of 3,770 million lire for public
works undertaken as a remedy for unemployment x .
It was announced during the summer of 1930 that certain public
works were being reserved for the winter, as it was anticipated that
unemployment would increase considerably at that time. I t was estimated that these works would give employment to about 200,000 unemployed. The total amount necessary for these works was estimated at
250 million lire. Part of this sum was obtained from the budgets of the
different government departments (public works, communications,
agriculture, war, navy) ; another part was provided for by laws which
had previously been adopted, such as the Act concerning the general
development scheme ; a third part was derived from the tax on sales
which the Government recently increased. It is intended in future
regularly to pursue a policy of reserving public works for the winter
season 2.
Some figures relating to the number of works carried out, the percentage of expenditure on the various kinds of work, the number of
workers employed at different times and the total expenditure of the
State on public works will be found in the following tables.
Table XX shows the number of works carried out during 1927 and
1928 3.
Table X X I shows the percentage of funds expended on each class
of work 3 . In comparing these figures, it should be borne in mind that a
great difference exists in the cost of the various classes of work. The cost
of work on roads, for instance, is less than work on railways. Thus, the
greatest number of workers are absorbed by work on roads, agricultural
improvements and hydraulic works.
Table X X I I shows the approximate cost of various classes of
public works 3. From this data it is possible to form an idea of the
amounts expended for this purpose.
Table X X I I I shows State expenditure on public works. It will be
seen that the programme of public works took on a considerable
extension during the post-war period.

1
2
3

Informazioni Corporative, 10 J u n e 1930.
Corriere della Sera, 3, 10.. 17, 19 Aug. 1930.
Bo lettino Statistico del Ministero dei Lavori Pubblici.

— 154 —

TABLE XX.

Date

NUMBER OF PUBLIC WORKS UNDERTAKEN AND NUMBER
OF UNEMPLOYED DURING 1927 AND 1928
Works
undertaken
directly by
the State

Works
Works by
Works
undertaken undertaken
other
bodies on by local
by
the
organibehalf of
sations A. A. S. S. »
the State

Total

Number of
unemployed

1927
January
February
March .
April
May . .
June
July . .
August
Septembei
October
November
December

3,354
3,457
3,532
3,547
3,545
3,134
2,998
2,001
2,961
2,869
2,817
2,814

122
126

2,159
2,168

5,635
5,751

131
135
84
86
89
89
93
92
94

2,212
2,228
2,279
2,304
2,333
2,362
2,386
2,372
2,381

5,890
5,908
5,497
5,388
5,423
5,472
5,348
5,281
5,289

225,346
259,059
227,947
215,316
216,441
214,603
263,091
291,821
305,930
332,240
375,734
414,283

2,907
3,030
3,084
3,097
3,149
2,425
2,343
2,372
2,354
2,277
2,278
2,306

100
100
101
101
103
116
115
127
127
138
140
147

2,336
2,293
2,285
2,292
2,285
2,240
2,251
2,301
2,303
2,259
2,276
2,244

5,343
5,423
5,470
5,490
5,537
5,083
5,343
5,517
5,558
5,492
5,472
5,481

439,211
413,383
411,785
356,795
306,629
247,021
234,212
248,100
268,883
282,379
321,123
363,551

1928
January
February
March .
April
May . .
June
July . .
August
Se'ptembei
October
November
December
1

Azienda Autonoma Statale delta Strada.

302
634
717
774
818
778
784

TABLE XXI. — PERCENTAGE OF PUBLIC FUNDS EXPENDED
CLASSES OF PUBLIC WORKS
Works by other
bodies on behalf
of the State (yearly
percentages)

Works undertaken directly by the State
(half-yearly percentages)
Class of work

1925

1926

1927

1928

1st 2nd 1st 2nd 1st 2nd 1st 2nd 1925 1926 1927 1s
half- half- half- half- half- half- half- halfha
year year year year year year year year
ye
Railways

36.5 34.8 30.2 24.5 22.6 19.7 19.3 10.6

Roads

21.0 20.5 19.4 22.2 22.0 23.7 19.3 19.6

Maritime works

12.0 11.4 17.0 18.7

Hydraulic works

8.5

9.2

8.2

7.0

4.6

8.9 10.8 11.0

9.9

8.- 24

0

10.0 10.4

8.9

6.6

7.3

9.7

Building work

5.4

6.8

5.8

6.2

6.3

6.2

6.2

6.7

Agricultural improvements

5.0

4.8

4.5

4.2

4.4

4.0

4.5

4.5 75.3 64.8 61.0

0

Works consequent upon war

1.1

0.7

0.6

0.4

0.3

0.2

0.2

0.2

6

Various

2.4

3.3

3.9

4.0

4.6

4.5

4.9

5.5

Works consequent
earthquakes

. . . .

17.4 19.5 22.8 29.2

12.7 21.8 56

8.0

upon
H.3 13.2 14.2

13.9 12.9

4

5.5

5.6

4.6

8

Number

— 156 —
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— 157 —
TABLE

XXm.

STATE EXPENDITTTBE ON P U B L I C W O B K S D U B I N G

THE

POST-WAB PEBIOD

Financial
year

1918-1919
1919-1920
1920-1921
1921-1922
1922-1923
1923-1924
1924-1925
1925-1926
1926-1927
1927-1928
1928-1929
Total . . .
Annual average . . .
1

Gold lire »
(thousands)

Index No.
Paper lire
(1918-19
= 100)

Index No.
Gold lire
(1918-19
= 100)

239,933
461,147
837,308
1,315,952
1,459,829
1,374,235
1,208,968
1,274,319
2,068,528
1,976,613
2,082,000

175,121
179,988
214,623
325,594
349,133
310,800
262,671
258,425
433,853
548,709
565,116

100
192
349
548
608
573
504
531
862
823
868

100
103
123
186
199
177
150
147
259
313
323

14,298,832

3,644,033

1,299,894

331,276

Paper lire 1
(thousands)

Corriere della Sera, 30 Aug. 1929 (Agenda

di

—

Roma).

JAPAN
In Japan as early as April 1919, the Minister of Home Affairs issued
instructions to the prefectural governors to attempt to remedy seasonal
unemployment by regulating the undertaking of public works, and
further instructions of a similar kind were sent out at a later date. I t
was not, however, until 1925 that the Government took more active
steps. In view of the acute unemployment prevailing at that time,
the Government formulated a scheme in August 1925, to encourage the
organisation of public works for the purpose of giving direct relief to
unemployed persons. According to this scheme the central Government
made grants from the national Treasury equivalent to half the labour
costs of public works carried out during the winter in six cities, namely,
Tokyo, Osaka, Kyoto, Yokohama, Nagoya, and Kobe, and the neighbouring districts. Further, the Government provided means for
facilitating the floating of loans to raise the necessary funds for these
works. In particular the Deposit Department of the Government, which
controls the postal savings funds, assisted by accepting low rates of
interest. In succeeding years similar schemes were adopted.
The principal object of these works was to give immediate relief
to unskilled manual labourers who were out of work. Only such public
works as required a large amount of unskilled labour were put in hand
and the State grants were limited to those undertakings in which the
cost of unskilled labour exceeded 30 per cent, of the total cost of the
works and in which the wages bill of technical and skilled labour was
less than 15 per cent, of the total labour cost. This last figure was
raised to 20 per cent in 1927.
The works were started in December of each year and were continued
until the end of March in the following year, that is to say, the end

— 158 —
of the fiscal year. If the works were not finished within a given fiscal
year on account of bad weather or other reasons and if the continuation
of the works was desirable in view of the unemployment situation, State
aids were carried forward to the following fiscal year when the works
were completed. The termination of the works was carefully planned
and the number of workmen employed was gradually reduced so that
no new problem of unemployment should arise.
In 1929 the Japanese Government made some important changes
in this policy. Firstly, it was decided by the Government that financial
aid for public works undertaken to relieve unemployment would be
extended to other parts of the country besides the six large cities and
their vicinities wherever the question of unemployment became serious
enough. Secondly, the inauguration of public works for the relief of
widespread unemployment among intellectual workers was encouraged
by the Government ; for instance, such workers were able to assist in
the classification of material collected in the course of special investigations made by the Government, indexing, etc. Lastly, the Government
set up central and local Industrial Regulation Boards the functions
of which are to investigate industrial conditions and to regulate governmental and municipal expenditure so as to improve the employment
situation in the country 1.
The following table shows the total expenditure on public works in
various cities, from 1925 to 1928, the amount of State aid granted in
each year and labour costs.
TABLE X X I V . — TOTAL E X P E N D I T U R E ON P U B L I C W O R K S F O R R E L I E V I N G
UNEMPLOYMENT,

T H E AMOUNT

O F STATE

LABOUR

Year

1925
1926
1927
1928

COSTS

AID GRANTED

AND THE

2

Expenditure for
public works

Amount of
State grant

Labour costs

Yen
5,770,071
3,431,737
3,522,021
2,757,832

Yen
892,842
648,470
721,241
569,415

Yen
1,785,684
1,367,297
1,500,929
1,148,570

The kinds of work carried out were as follows : (1) construction of
roads and bridges ; (2) dredging and improvement of rivers and other
waterways ; (3) sewage work ; and (4) reclamation works.
POLAND
In Poland the Government and the local authorities have, as a result
of unemployment, accelerated the execution of certain public works.
This was first done in 1919, but this early experiment was accomplished
1
These functions have been taken over b y a newly established Commission
for the Prevention of Unemployment.
2

INDUSTRIAL REGULATION BOARD : Shitsugyo

Unemployment

Relief

Works),

p . 3. Tokyo, 1930.

Kyuaaijigyo

Qaiyo (Outline of

— 159 —
hurriedly, under the pressure of the unemployed, who were demanding
work. The executive organs consisted of local committees working
under the Office of Public Works. Owing to the absence of any definite
scheme, it is almost impossible to state what results were achieved at
that time. It is only since 1926 when the Minister of Labour and Social
Welfare took the matter in hand that public works have been carried
out in a systematic way.
With a view to facilitating the execution of large-scale public works,
the Bank of National Economy is authorised to grant long-term loans
at 8 per cent, to the local authorities in the form of communal bonds.
In addition to this, however, the Council of Ministers decided early in
1926, when unemployment was severe, to set up an Inter-Departmental
Committee of seven ministers to deal with the question under the chairmanship of the Minister of Labour and Social Welfare. On the proposal
of this Committee the Government decided to stimulate the carrying
out of public works by the Government and the communes, and to
grant the latter to that end three-year loans at a very low rate of interest
with the faculty of renewing them, if necessary. The Committee was
later transformed into a permanent body in order to supervise the
application of this policy in co-operation with the Minister of Public
Works.
By an Order of 1 April 1928 the Ministry of Labour provided a special
system of loans in order to assist the communes to absorb the unemployed.
The Order prescribed that loans might be granted to communes, to
public and private undertakings for the construction of houses,
improvement works, etc., and to undertakings employing not less than
seventy-five workers in order to enable them to increase their staff by
at least 25 per cent. The loans were granted for a period of six years
at 6 per cent., and must be used for no other purpose than the payment
of wages to the workers concerned. If any other use is made of them
the authorities may require immediate repayment. The workers
employed as a result of such loans must be selected from among
the unemployed persons registered at the public employment
exchanges.
The immediate supervision of the work is undertaken by the local
public works departments, while the Bank of National Economy supervises the spending of all money borrowed from it.
In 1926 the Union of Polish Towns took the initiative in organising
public works and representations on this subject were made to the
various authorities concerned.
Works carried out by the State comprised the construction of bridges
and roads, river harbours, school buildings, railway and military buildings ; those undertaken by the communes with the assistance of grants
included road repairing and paving, construction of bridges, docks,
canals, waterpipes, houses, schools, barracks, hospitals and industrial
establishments, the laying out of parks, levelling of land, etc.
The long-term 8 per cent, loans granted by the Bank of National
Economy to the local authorities in the form of communal bonds amounted
to 117,003,696 gold zlotys in 1925 and 1926 ; 41,237,520 in 1927 ;
43,724,320 in the first half of 1928 ; total up to that time, 201,965,536

— 160 —
gold zlotys. The total value of bonds outstanding on 30 J u n e 1928
was 118,000,000 gold zlotys.
I n connection with the three-year loans granted b y the Government
to t h e communes for speeding u p public works the necessary funds were
furnished b y the Ministry of Labour a n d Social Welfare which placed
a t t h e disposal of the I n t e r - D e p a r t m e n t a l Committee set u p to supervise
the application of the Government's policy a certain proportion of the
funds included in the budget for unemployment insurance. A sum of
23,783,000 zlotys was lent in this way u p t o the end of 1926. F r o m
1927 onwards the necessary resources were drawn from the funds of the
Ministry of Finance and b y the end of J u n e 1927, 9,040,000 zlotys
h a d been advanced. The Committee t h e n decided to transfer these
transactions to the Bank of National Economy a n d from 1 J u l y 1927
long t e r m loans a t 8 per cent, were granted to the communes b y the
Bank. B y the end of November 1927 loans granted under this system
amounted t o 9,580,000 zlotys. Certain facilities were granted b y t h e
Government to the communes in order t o encourage t h e m t o t a k e
advantage of these loans.
I n addition t o the above, supplementary taxes were imposed on
railway tickets a n d stamps in order t o cover the expenditure on certain
public works. B y this means 16,090,000 zlotys were raised in 1926
and 12,210,000 zlotys during t h e first eleven months of 1927. W o r k
was carried on under this system until the spring of 1928 when a
considerable number of unemployed were absorbed b y the commencement of the building season. The a m o u n t advanced on these
works from November 1927 t o March 1928 was 3,080,000 zlotys.
Thus loans for the prevention of unemployment drawn from public
funds amounted in all t o 64,203,000 zlotys in 1926, 1927 a n d 1928 of
which half is due to be reimbursed b y t h e communes before 1 May 1931.
No statistical d a t a are available to show the exact amount of money
spent b y the municipalities themselves for public works. The only
figures are those referring t o loans raised by towns for building work a n d
repairs. T h e y are as follows :
TABLE XXV. — LOANS RAISED BY TOWNS FOR BUILDING
WORK AND REPAIRS
Year
1923
1924
1925
1926
1927-1928

Amount of the loans
(in thousands of zlotys)
2,587
6,414
89,596
53,971
212,738

The approximate daily number of workers employed on public
works in Poland during the years 1925-1928 was as follows 1.

These figures are obtained from the Statistyka

Pracy (Labour Statistics).

— 161 —
TABLE XXVI.

APPBOXTMATE DAILY NUMBER OF WOBKEBS
EMPLOYED ON PUBLIC WORKS

1925
Total

Months

Ministry of
Municipalities
Public Works

3,992
7,242
8,564
11,726
17,682
21,239
23,066
21,050
21,500
18,501
13,789
6,691

January
February
March .
April

May . .
June . .
July . .
August .
September
October
November
December

1,534
1,923
1,752
2,288
4,382
4,540
4,413
3,980
4,337
3,262
2,365
1,284

1,824
4,679
6,334
8,505
12,040*
15,221
16,665
16,007
15,351
13,861
9,770
5,078

Other
institutions
634
640
483
933

1,260
1,478
1,988
1.063
1,812
1,378
1,654
329

1926
Total

Months
January
February .
March . .
April . .
May . . .
June . . .
July . . .
August . .
September
October
November
December

Ministry of
Municipalities
Public Works
1,704
1,030
2,482
6,576
8,305
5,919
7,283
8,058
8,562
8,752
8,738
4,252

7,538
13,614
20,195
32,316
39,256
44,274
43,596
44,798
44,641
44,091
37,568
24,121

5,232
11,538
15,404
23,162
28,428
32,645
30,319
33,181
32,603
30,623
25,137
15,280

Other
institutions
602

1,064
2,309
2,578
2,523
5,710
5,994
3,559
3,476
4,716
3,693
4,589

1927
Months
January
February
March .
April
May . .
June . .
July . August .
September
October .
November
December

Total

. . . .

20,978
20,735
29,233
35,888
45,949
49,255
43,197
41,562
40,546
40,026
26,622
16,168

Ministry of
Municipalities
Public Works
3,719
3,041
6,934
7,095
6,788
13,252
8,896
7.075
9,490
9,201
4,250
2,092

12,396
12,325
17,116
22,526
32,477
30,446
29,610
30,648
27,940
26,879
18,026
10,834

Other
institutions
4,863
5,369
5,183
6,267
6,684
5,557
4,691
3,839
3,116
3,946
4,346
3,242

— 162 —
1928
Months
January
February
March .
April
May . .
June . .
July . .
August .
September
October .
November
December . .

Total
15,426
16,953
20,819
29,280
37,750
41,544
47,531
45,788
46,516
42,067
33,526
17,336

Ministry of Municipalities
Public Works
2,471
2,559
5,875
6,899
8,432
11,010
14,381
14,630
14,026
12,628
11,715
4,492

10,665
12,026
12,343
19,233
25,136
28,200
30,539
28,138
28,919
24,627
18,196
11,692

Other
institutions
2,290
2,368
2,601
3,148
4,182
2,334
2,611
3,020
3,571
. 4,812
3,615
1,152

SWITZERLAND
A great deal has been done in Switzerland to provide work for the
unemployed by the acceleration of public works and the Confederation
has granted subsidies to the Cantons for this purpose. In addition,
the Confederation itself has undertaken certain relief works on its
own account 1 .
The subsidies granted and the orders given by the Confederation
related to works some of which had been postponed on account of
high prices, while others might in normal circumstances not have been
undertaken at all, or at any rate would only have been undertaken
in the somewhat distant future.
All the exceptional measures which were taken in order to deal
with unemployment have gradually disappeared as the economic
situation and the situation of the labour market improved, and since
1924 no such measures have been taken by the Confederation at all.
The most important feature of the public works programme has
been the acceleration of the electrification of a considerable part of
the railway system. As this was done to a large extent on account
of unemployment, the Confederation gave subsidies amounting to
60,000,000 francs. Other works which have been undertaken included
the laying of telegraph wires, the manufacture and construction of
material for the Post Office administration, the straightening of water
courses, construction of bridges and roads, canalisation, the cutting of
roads through forests, repairs to buildings, etc.
1
Cf. in particular, Decree oí the Federal Council concerning measures for
dealing with unemployment by t h e carrying out of certain works, in particular
so-called relief works, 23 May 1919 ; Decree of the Federal Council for the encouragement of building, 15 J u l y 1919 ; Decree of the Federal Council to mitigate
the shortage of houses by encouraging building, 11 May 1920 ; Decree of the
Federal Council concerning measures for dealing with unemployment, 19 F e b .
1921 ; Decree of the Federal Council concerning measures for dealing with unemployment, 20 Sept. 1921 ; Decree of the Federal Council concerning measures
for dealing with unemployment, 14 Nov. 1922 : Decree of the Federal Council
bringing to an end the measures taken by the Confederation to deal with unemployment, 4 March 1924.

— 163 —
Certain services of the Federal administration, such as the Post
Office, continue to place their orders for material each year sufficiently
early, and with sufficiently elastic delivery terms, for the orders to be
carried out in winter, when seasonal unemployment increases. The
Federal railways do the same for some of their work.
A great deal was done by the Swiss authorities during the post-war
crisis to institute relief works of all kinds, both public and private,
in order to alleviate unemployment. The Federal Labour Office
estimates at approximately 100,000,000 francs the grants made by
the Confederation for relief works undertaken by the various cantons,
while the cantons spent about the same amount themselves. The
works in question were not exclusively public works but also included
works of a non-official character capable of giving employment to
unemployed workmen.
The following table shows the kind of works undertaken, cost of
the works and the amount of the Federal subsidy :
TABLE X X V n

—

SUBSIDIES

ENCOURAGEMENT

OF THE FEDEBAL GOVEBNMENT FOE THE

OF WORKS TO MITIGATE UNEMPLOYMENT A N D THE

HOUSING SHOBTAGE FBOM 1 9 1 9 TO

1926

A. — Classification according to Kind of Work

Kind of Work
Residential buildings
Public buildings
Repairs
Industrial and commercial buildings

. •

Agricultural buildings
Bridges, roads, etc
Buildings for railway and shipping purposes
Water supply

.

Canalisation and river corrections

. . .

Land drainage, agricultural improvements,
etc
Shooting stands
Miscellaneous
Totals

Total
amount spent

Amount of the
Federal subsidy

Fra.

Frs.

424,977,080
(45.1 %)
124,869,210
(13.2 %)
16,018,790
(1-7%)
19,803,510
(2.1 %)
8,817,600
(0.9%)
165,628,340
(17.6 %)
23,405,770
(2-5 %)
61,852,900
(6.6 %)
52,392,230
(5.6 %)

32,563,650
(33.1 %)
15,341,030
(15.6 %)
1,401,410
(1-4%)
1,652,550
(1-7%)
921,870
(0.9 %)
25,405,120
(25.8 %)
2,979,160
(3.0%)
6,544,940
(6.6%)
6,297,940
(6.4 %)

23,841,140
(2.5%)
5,555,340
(0.6 %)
15,475,010
(1-6%)
942,636,920
(100.0 %)

2,140,510
(2.2 %)
557,190
(0.6 %)
2,630,540
(2.7 %)
98,435,910
(100.0%)

— 164 —
B. — Classification

according to Those who Received

Subsidy Paid t o

Co-operative societies

Totals

Subsidies

Total
amount spent

Amount of the
Federal subsidy

Frs.

Frs.

220,318,900
(23.4 %)
295,091,880
(31.3 %)
283,451,710
(30.1 %)
138,316,210
(14.6 %)
5,458,220
(0.6 %)

13,676,210
(13.9 %)
28,252,230
(28.7 %)
33,951,200
(34.5 %)
20,938,740
(21.3%)
1,617,530
(1-6%)

942,636,920
(100.0 %)

98,435,910
(100.0 %)

In addition, 11,000,000 francs were advanced by the Confederation
on mortgage for the purpose of encouraging the building of houses.
Moreover, between May 1919 and March 1924, 110,000,000 francs were
expended on relief works undertaken directly by the Confederation.
It has not been possible to estimate the approximate number of
workers employed daily on such work, nor the length of time they
were employed. All categories of wage earners have been included.
Unemployment in industry is now much less than it was shortly after
the war, but it is still found during the off season in the building trade.
Building workers are therefore those who are above all employed on
relief works.
By a decision of 19 September 1930 the Federal Council instructed
the Federal Department of Public Economy to inform the different
departments of the Federal and Cantonal Administrations that in view
of the present conditions, which have again become less favourable as
a result of the world crisis, it was desirable that the execution of public
works should be hastened as much as possible. In the circular which
the Federal Department of Public Economy addressed to the cantonal
authorities on this subject, the latter were in particular invited to
choose those works which would employ the largest number of workmen.
As a matter of fact a certain number of cantons haVe already on their
own account distributed their public works and orders for supplies in
such a way as to take account of industrial fluctuations and considerable
credits have recently been voted for this purpose.
UNITED STATES
In Part I particulars have been given of the extent to which public
works have been systematically distributed over a period of years and
some details have also been given of the public works actually put in
hand without advance planning during successive economic depressions.
Very little additional information is available.

— 165 —
According to an important study of the facts relating to public
works in the United States carried out by Mr. Leo Wolman 1 , such
works constitute between 35 and 40 per cent, of all construction,
both public and private, in that country, and in 1928-1929 amounted
to roughly 3,500 million dollars a year ; about 900,000 men are
directly employed on these works. The largest single category of
public construction is road building, which in 1928 accounted for an
expenditure of more than 1,500 million dollars. Outlays by the Federal
Government on public works are less than 10 per cent, of the total.
It is very difficult to know what emergency works have been undertaken in times of depression. During the slump in 1921 the Federal
Government made grants to the States in aid of road building, Congress
voting 75 million dollars for this purpose. These grants required the
voting of an equal amount by the States concerned. The result was
that 6,261 miles of roads were constructed by about 30 States at a cost
of approximately 40,000 dollars a mile, or 250 million dollars altogether.
It is estimated that this expenditure furnished employment for about
200,000 workers during the year 1922. In addition, the States and
principal cities undertook a large volume of public works locally.
With the reappearance of unemployment at the beginning of 1928
the Federal Government speeded up the execution of its naval construction programme, flood control projects and other public works such as
building and road construction. Certain States likewise hastened the
execution of public works with a view to alleviating unemployment.
Thus, the Governor of the State of New York speeded up the putting in
hand of public works to the value of 37 million dollars for the construction
of bridges, roads, avenues, etc., and at the same time he invited mayors
and county governors to follow his example.
At the end of 1929 when the depression occurred, President Hoover
took steps to induce local authorities and industrialists to put in hand
such work as was possible in order to mitigate unemployment. He held
a series of conferences with representatives of finance, trade, industry,
agriculture and labour in November 1929 for this purpose.
According to a statement made by the Acting Chief of the Division
of Public Construction of the United States Department of Commerce
on 12 June 1930, the Federal Government had made the following
contribution to the public works programme in view of the unemployment crisis of 1929-1930 :
(1) Congress increased the amount of Federal aid to the States for
highway construction from 75 million to 125 million dollars a
year for three years, and liberalised the terms for its use.
(2) The Federal building programme for post offices and other
structures in cities and towns throughout the country was
increased by 230 million dollars.
(3) The river and harbour improvement work carried out by the
War Department was so expanded on account of the unemployment situation that a deficiency appropriation of 12 million
1

NATIONAL B U R E A U

Public

Works.

OF ECONOMIC

R E S E A R C H : Planning

and

Control of

— 166 —
dollars was granted by Congress in order to sustain active
operations.
(4) A 15 million dollar Veterans' Bureau hospital building programme
was provided by Congress and put under way immediately on
passage of the Act.
Highway construction contracts amounted to 197 million dollars
in thirty-seven eastern States during the first four months of 1930
showing an increase of 38 per cent, over the same period in 1929.
Moreover, the railways and other public utilities had provided for
an expenditure of 3,500,000 dollars on new construction and other
capital improvement.
The Postmaster-General certified to the United States Shipping Board
thirteen new ocean mail routes the successful bidder for which would
be required to build within the next ten years forty vessels aggregating
460,000 tons gross at an estimated öost of about 2,500 million dollars.
I t was stipulated that work should begin on seventeen of these vessels
within the following six months.
Public works were also expedited in a large number of States and
in the more important cities. Thus, for instance, contracts awarded
in thirty-seven States during the four months January-April 1930 for
the construction of public works and public utilities were estimated at
453 millions dollars, as compared with 348 million dollars in the corresponding period of 1929 1.
The report of the National Bureau of Economic Research states that
in the business cycle 1919-1921 :
. . . contracts of public works and public utilities turned down a t recession and
continued to decline all the way through the revival of the next cycle. But of the
other groups, residential, commercial and industrial building, only industrial
contracts showed the same type of behaviour, although they ceased declining during
the last period of business contraction. Again, in the cycle 1921-1924, public
works and utilities began to decline early and continued to decline through the
first phase of the next revival. In this cycle both commercial and residential
building revived earlier. During the cycle 1924-1927, however, when there had
been a large and persistent increase in the volume of public works, the revival of
public works and utilities preceded the revival of general business.

It would appear from this that a good deal still remains to be done
to adapt public works programmes to the labour market.
UNION OF SOCIALIST SOVIET REPUBLICS
In the Union of Socialist Soviet Republics (U.S.S.R.) the organisation of public works in connection with unemployment was first
undertaken after the Revolution in 1918. Up to 1922 this organisation existed locally and only when required. The funds were
obtained from local sources and no general system was applied.
Only since the fiscal year 1922-1923 have public works been systematically organised by the State, and Government funds made available for such works. The credits allocated for that purpose are set
forth in the following table :
1

Ibid., and United States Daily, 19 Feb. and 30 April 1930.

— 167 —
TABLE XXVin.

SUMS GRANTED FOB ASSISTANCE BY PUBLIC WORKS
(In Chervonetz Roubles)
Of which

Year

Total amount
granted for
assistance by
public works

1922-23
1923-24
1924-25
1925-26
1926-27

735,000 '
4,350,628
16,633,200
19,127,000
25,401,400

Central
administration
for social
insurance

On the
State
budget

On
local
budgets

3,349,334
7,963,000
6,000,000
8,100,000

1,001,294
1,444,500
4,095,000
8,383,400

Other
sums

1,570,000
5,853,000
6,000,000

2,655,700
3,179,000
2,918,000

1
Taken from the funds of the Central Committee for the struggle against the consequences of the famine of 1921.

a

The column representing " other sums " in the above table includes
money obtained from the sale of materials as, for example, when houses
are demolished (at Moscow this amounts to about 300,000 roubles per
year), from so-called monthly collections, from philanthropic sources,
etc. In the Ukraine, these sums also include those coming from the
repayment of long-term loans which have been granted on the basis
of budgetary resources. These loans are granted to the local economic
organisations by the local labour sections.
In the fiscal years 1922-1923 and 1923-1924 funds for unemployment
relief through the provision of work were provided only for public
works, but from the fiscal year 1924-1925 onwards an important part
of the credits was spent for other forms of assistance (productive associations of unemployed ', the constitution of night refugees and houses
for young persons, and the employment of young persons in undertakings above the normal number).
Of the above resources the following sums were spent for public
works :
TABLE XXIX
Year

1922-23
1923-24
1924-25
1925-26
1926-27

Amounts spent
(in chervonetz
roubles)

Man-days
of work
carried out

Number of
unemployed
assisted

735,000
4,350,628
10,459,000
11,358,600
13,000,000

1,418,455
2,438,257
5,513,027
4,212,000
6,000,000

30,000
48,000
114,000
90,000
100,000

By dividing the total amount of the expenses for wages by the
total number of man-days of work the actual average wages paid for
1
For information concerning these associations, see " The Provision of
Work for the Unemployed in the U.S.S.R." in the International Labour Review,
Vol. X X I I , No. 1, July 1930.

— 168
public works can be determined. Thus the average for the whole of
the U.S.S.R. in 1924-1925 amounted to 1.5 roubles and in 1925-1926
to 1.77 roubles per day.
Up to 1925-1926 public works in the U.S.S.R. were mainly in towns
and were carried out by the municipal economic departments (communal
sections of the local councils of workmen's deputies). Since 1925-1926
the public works have been extended, including in particular the
construction of roads and work done by the economic services of the
sanitary departments and the departments. of public instruction.
The following table shows certain particulars of the public works
carried out during the months of January to August 1926, at Moscow
and Leningrad :
TABLE

Kind of public works

Gardens and parks
Régularisation of watercourses and
cleaning of ponds
Levelling of ground
Roads
Demolition of buildings, etc. . .
Drainage
Stonecutting

xxx
Amount of
expense
for wages
in roubles

Man-days
of work
carried out

Average
wage in
roubles

752,225

369,924

2.04

455,078
220,175
188,751
163,115
108,116
107

156,905
197,182
87,970
86,318
44,266
101

9
23
14
09
2.44
1.06

Since 1926-1927, the public works on instructions from the Commissariat of the People for Labour have included industrial constructions.
Thus various auxiliary works have been carried out, such as, for
example, the levelling of ground for the construction of factories, the
construction of dykes, etc.
The labour utilised on public works is mostly unskilled (approximately 90 per cent.). Women constitute up to 30 per cent, of it and
young persons about 5 per cent. The workmen are provided with
gloves, aprons and, in case of need, other special clothes.

PART III
SUMMARY AND CONCLUSIONS

I t will perhaps be useful a t the outset of this Part to recapitulate the principal points which have been dealt with in this
study.
The present report owes its existence to an Article in the
Washington Recommendation on Unemployment, to a Resolution
of the International Labour Conference in 1926 and to the desire
expressed by the Joint Committee on Economic Crises t h a t more
information on the subject should be obtained. The essential
feature of the policy recommended at Washington in 1919 and
at Geneva in 1926 is the co-ordination of works undertaken under
public authority " with a view to reserving such work as far as
practicable for periods of unemployment ", or, as the 1926 Resolution put it, " the organisation of public works so as to counteract
the fluctuations of private business ". Part I of the study has
therefore been devoted mainly to this aspect of the question.
Since 1919, however, while economic fluctuations have continued
to prevail, a number of industrial countries, principally in Europe,
have suffered from a long-continued economic disequilibrium
involving more or less severe unemployment. There has been
no period of boom in which those countries could postpone their
public works for a later depression period and they have been
obliged to p u t in hand after the crisis had already arrived extensive
public works which would not ordinarily have been undertaken
until a later period. Part I I of the study is devoted to works
of this kind.
With regard to advance planning, we have seen t h a t a distinction must be drawn between measures to deal with seasonal
unemployment and measures to deal with cyclical unemployment.
I t is with the latter t h a t we are mainly concerned at the present
moment. There has been controversy as to the cost of public
works postponed or advanced but it appears t h a t the cost would
not be increased but might even be reduced by a suitable redistribution of works. The total value of public works forms a

— 170 —
considerable proportion of the total industrial activity of a country
and consequently any redistribution would have an appreciable
direct effect on the labour market. There are also indirect effects,
as, for example, t h a t additional employment in one industry gives
additional employment in other industries, and t h a t increased
activity exercises a stimulating influence on industry as a whole.
On the other hand, only certain public works can be postponed
or advanced while others must be put in hand immediately. I t
is sometimes suggested t h a t a public works policy should aim
not at compensating industrial fluctuations but a t regularising
the orders of public authorities from year to year, in the hope
t h a t private industry will follow this example. In many countries
where public works and orders for supplies have hitherto followed
a parallel course to the fluctuations of private industry, and have
consequently aggravated those fluctuations, the situation would
be considerably improved if the orders of public authorities came on
to the market in a steady stream. On the other hand, a policy
of advance planning would go much further in the direction of
regularising the general industrial fluctuations. As private
industry makes its own production more and more regular, the
orders of public authorities will also become more and more regular.
I t is clear t h a t Governments cannot refrain from giving employment on public works to some of the unemployed during periods
of depression, and for t h a t purpose it is essential t h a t the public
works should be planned in advance, because otherwise they
would be put in hand too late to exercise their full influence on
the employment situation.
I t is often asked whether public works undertaken at a time
of depression do not merely have the effect of diverting money
from private industry without adding to the volume of employment
in any way. This is a very important question. While the main
purpose of advance planning is precisely to use less capital for Government purposes and to leave more for private industry in periods
of prosperity and vice-versa when private industry is at a low
state of activity, in a long-period depression there are prima facie
reasons for thinking that a continued expenditure of Government
money on public works may fail to expand industrial employment.
On the other hand, various considerations are put forward in
favour of the opposite view and the conclusion is reached t h a t
public works do in effect increase the volume of employment.
During a depression money is lying idle in the banks and this
is accompanied by a decrease in the quantity of money in circu-

— 171 —
lation, and a restriction of credit. I n so far as this is a deliberate
policy pursued by the central bank it may of course neutralise
the good effects of a public works policy. What ought to be done
is the exact opposite of this, and the suggestion has been made
t h a t the money to finance the works should be provided by
means of loans from the banks. The works would enable this money
to reinforce purchasing power.
I n Chapter 2 of Part I there is a general survey of the measures
of advance planning actually adopted, from which it is evident
that a certain number of Governments do t r y to distribute their
orders in accordance with the labour market situation. A great
many countries, however, do not appear to apply a policy of this
kind, and even in those which do a great deal still remains to be
done. I n particular, there is practically no evidence at all t h a t
local authorities pay attention to the labour market situation
in giving out their orders. The paucity of the information obtained
by the organisers of the Fourth International Congress of Towns
and Public Authorities from their affiliated organisations speaks
volumes on this subject.
The policy of advance planning raises a number of administrative problems which are considered in Chapter 3. At present there
is usually a multiplicity of authorities responsible for public works.
A co-ordinating body of some kind is required in order to ensure
the application of a unified policy. Labour for public works
must be recruited through the employment exchanges. Relations with contractors are not disturbed by the policy of
advance planning since once the contract is concluded it must
be carried out unless there is agreement between the authority and the contractor, and the policy of advance planning
can be applied by withholding or hastening new contracts rather
than by annulling existing contracts. I t is difficult to know exactly
at what moment to start hastening or postponing public works.
Most countries which apply such a policy use the unemployment
index or some other index of economic conditions. I t is important
to continue the search for a more sensitive economic barometer
which might be used for this purpose among others.
The real crux of the problem is the financial side. The money
can be raised by taxation or loans. Taxation, however, besides
involving considerable delay in obtaining the money, can only
be used to a limited extent. The authorities can borrow the money
they require and thus spread the payment for it over a number
of years, b u t this is also rather a slow method. Various suggestions

— 172 —
have been made with the object of giving the authority concerned
power to raise the necessary loan a t short notice or of creating
reserve funds of one kind or another. Some such device seems
indeed to be indispensable if the policy of advance planning is to
be effectively applied, but we must recognise t h a t little has been
done on these lines so far.
I n Part I I , it is explained t h a t a clear distinction between
public works and orders for supplies on the one hand and relief
works on the other must be drawn, the latter being defined as
works subject to special conditions, such as the employment of
men because they are unemployed rather than because they are
fitted for the job, the adoption of a relay system so as to employ
as many men as possible, and the payment of wages at a rate
lower t h a n the customary rate. A survey is given of a large
number of works which have been put in hand during the last
ten years, on account of unemployment, earlier than would
normally have been the case. It is very difficult to determine
precisely what effect these works have had on the labour market
because so many influences are at work. Unless, however, we
accept the view that public works involve a mere transfer of
capital from private industry to the State, without adding to the
volume of employment in any way, we can affirm with certainty
t h a t the public works have contributed to the relief of the labour
market and have provided the various local and national communities and public utility enterprises concerned with valuable
capital resources, making for increased efficiency and reduced
cost. There are also social advantages, such as the prevention of
moral deterioration, which should not be forgotten. Reference has
been made in this survey to the productive unemployment relief
schemes in Austria, Germany and other countries. In reality,
however, these are schemes for pure relief works and not for
public works as we have defined them.
I t remains now to be seen what conclusions can be drawn from
the facts set out in the preceding chapters, and in doing so it will
be convenient to follow the order set out in the Suggested Basis
for the Supply of Information drafted by the Joint Committee on
Economic Crises and consider each point mentioned there.
I. — Legislative or other provisions in force requiring more
or less explicitly the reservation, to some extent, to periods of unemployment of public works and orders for supplies given by public
authorities.

— 173 —
There are very few provisions in force requiring the reservation
to periods of unemployment of public works and orders for supplies
given by public authorities. There are occasional laws like the
Development and Road Fund Act of 1909 in Great Britain, the
Italian Acts of 1867 and 1879, which were confirmed in 1928,
and a few State laws in the United States, but t h a t is all. Bills
have been presented on the subject in Great Britain and the United
States, but have failed to pass. On the other hand, the Federal
Economic Council in Germany passed an important resolution
on 26 July 1927 which has led to a number of administrative
measures in t h a t country.
The importance of advance planning has been shown in the
earlier pages of this report, and it seems to be very desirable t h a t
Governments should take an early opportunity of passing legislation
dealing with works undertaken by the Government departments
themselves and works which are subject to governmental influence
of one kind or another, including those carried out by public
utility undertakings. The essential provisions which ought to
be inserted in such legislation will be dealt with point by point
in the following pages.
I I . — Details as to measures which have been taken :
(a) in times of great economic activity to postpone public works,
with a view to reserving them for a subsequent period of
slackened economic activity ;
(b) during a period of unemployment to place in hand public
works which would under ordinary circumstances have been
undertaken at some later time.
III.

— Information

as to :

(i) the nature of the public works so postponed or advanced ;
(ii) the approximate amount of expenditure so postponed or
advanced ;
(iii) in each of the cases I I (a) and I I (b) above, the approximate
daily number of workers which would have been or were
employed, classified if possible according to occupations ;
(iv) the duration of the works.
A great part of the present study is devoted to the details of
measures which have actually been adopted either to postpone
or to advance public works. I t has been shown in the first place
t h a t the idea of advance planning is not so new as is sometimes
thought and t h a t attention has been paid to this question in a

— 174 —
number of different countries, but our information as to works
really postponed is very meagre. Far too often, as Professor
Aftalion points out :
. . . it is during periods of prosperity that the public administrations
or railway companies are tempted to expand, because they have the
means at their disposal in the shape of increased receipts, because of
the fiscal situation, and because of the pressure of necessity. Such
expansion in times of depression, when resources are at their lowest,
and when the need is not pressing, requires not only real courage, but
a confidence in the regularity of the economic rhythm which may risk
being qualified as ridiculous theorising 1 .
The particulars available, however, show t h a t postponement
of certain works with a view to reserving them for periods of
slackened economic activity is quite feasible and has had good
effects. Examples of such a policy are to be found in Austria,
Finland, France, Germany, Italy, Norway, Sweden, Switzerland
and the United States. In Sweden, particularly, advance planning
has been carefully studied, and the communication of the Swedish
authorities which is summarised above is of great interest. No
doubt similar examples could be found in other countries. From
the Swedish communication it is evident t h a t large-scale works
such as railway construction can be adapted to the situation
of the labour market, and it is a matter of indifference in this
connection whether the railways belong to the State or to private
companies. I n the latter case the company is a public utility
undertaking, and is just as much in a position to apply a system
of advance planning as a public authority. Other works which
have been treated in a similar way are those connected with the
postal administration, the extension of telegraph and telephone
equipment, hydro-electric installations and electrical equipment
generally, canal construction and maintenance, and road and
bridge construction. Most of the above works are in the majority
of countries either under the direct control of the State or are
subsidised by the State. To them must be added the numerous
works for which local authorities (councils of counties, districts,
communes, towns, etc.) are responsible. I n the United States
the most notable case of postponement of public works was t h a t
of 1923, when the Federal Government refrained from initiating
any new construction work t h a t could possibly be put off ; and
they did not expand their building programme again until 1926.
The decision of the Government in 1923 had a direct influence
1

Le Capital,

17 April 1929.

— 175 —
in slowing down private construction also. There is a certain
amount of conscious adaptation t o labour market conditions
in a few of t h e States and larger cities in t h a t country.
When we turn t o works which have not been held over during
a previoua period of prosperity, b u t which are p u t in hand in
anticipation of strict economic needs when t h e crisis arrives,
the situation is quite different. There are few countries which
have n o t done something on these lines in recent years, a n d in
some of them the amounts spent and the number of men employed
during t h e last t e n years have been considerable. I t is obvious,
of course, t h a t unemployment has continued, and in some cases
increased, in spite of the public works. But t h a t is no argument
against a policy of this kind. Unemployment is a symptom of
an economic disequilibrium for which there is no single remedy.
But a suitable programme of public works can mitigate some
of the worst consequences of unemployment and can a t t h e same
time contribute t o t h e revival of industry.
I t is not, of course, contested by a n y one that such a policy
is feasible ; t h e opposition to it is based on the argument t h a t
the use of capital for public works is merely t o transfer it from
one purpose to another and not in any way to increase employment
possibilities. We shall return t o this point in a moment.
In the meantime it may be noted that there is no lack of suitable
work available. As Mr. Leo Wolman says, " the testimony is
overwhelming t h a t nearly all local and State Governments (in t h e
United States) are always far behind in their programmes of
permanent improvements " \ and the same thing could certainly
be said of all other countries. The preceding pages give evidence
of various kinds of work being undertaken by public authorities
and public utility undertakings, such as the construction of roads,
bridges, wharves, schools, hospitals, prisons, post offices, water
supply and sewage systems, hydro-electrical installations, electricity stations and railways, drainage, the reclamation and improvement of land for agricultural purposes, etc.
I t is certainly possible t o conclude that there is work to be done
and, as a rule, workmen t o do it. The difficulties in the application
of a public works policy are considerable, but they do not lie here.
I t is important, if the work is t o be done on a sound economic
basis, that it should be carried out in accordance with t h e rules
1

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normally governing public works contracting, and should not
develop into mere relief works with lower rates of wages, relay
systems and other special conditions.
One other thing emerges clearly from the preceding pages.
There is far too little systematic adjustment of public works
to the labour market situation. A crisis is allowed to develop.
Public works are advanced in time, but with a considerable delay,
and the effect of such works is far less than would be the case if the
works had been put in hand more promptly. As the Committee
on Recent Economic Changes in the United States says, the timing
of public works is even more important than the volume of the
works undertaken 1. That, of course, brings us back to the need
for advance planning, and we can now take up the consideration
of the administrative and financial problems which constitute the
real difficulty to be overcome.
IV. — Method of subsequently utilising labour set free owing to
postponement of works ; method of recruiting labour more rapidly in
the case of work which is speeded up.
No problem arises in connection with labour set free owing to
postponement of works. By hypothesis, private industry is active
at such a time and offers openings to any unemployed labour
available.
On the other hand, it is the practically universal practice of
public authorities to recruit labour for public works through the
employment exchanges, and thus the evils of unorganised recruiting
are avoided. If workers are recruited for a kind of work other than
that to which they have been accustomed, they should be given
some training for it, otherwise inefficiency and increased cost will
result, and, moreover, it is unreasonable to expect a man or woman
to take up at a moment's notice a job for which he or she may not
be fitted.
V. — In the case of works which have been postponed beyond
the end of the financial year, what has been done with the credits
originally provided for them.
On this point the practice in different countries is not uniform.
As a rule money voted by Parliament in any financial year and
not used in t h a t financial year is not carried over to the following
year. There are, however, exceptions in certain cases in France,
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cil.

— 177 —
Germany and Switzerland. On the other hand, in Italy and
Tasmania, the money is held by the Treasury until required. I t
has been suggested t h a t budgets for public works should be established for a period of two years, but a longer period would be
necessary if any effect on cyclical unemployment is desired.
I n Sweden plans for railway construction were drawn up on a
seven-year period, but the money for this purpose would presumably
be voted year by year as required. This has been the practice
followed in Great Britain in connection with the post-war public
works programmes.
The problem discussed here is mainly important in respect of
money raised by taxation. I t would be useful if the system practised in Italy and Tasmania were extended so t h a t the Treasury
could keep money in h a n d for public works purposes. This does
not mean t h a t the Treasury should decide when the public works
should actually be put in hand. That point will be considered
later. But it means t h a t the Treasury would in prosperous years
have certain sums in hand, which could be placed in a bank
invested in easily realisable securities, or possibly held in the form
of bank notes and would thus be available when a period of
depression occurred.
VI. — In the case of works which have been put in hand at a
period earlier than was originally anticipated, and for which no
provision had been made in the current financial year, how the necessary money has been obtained.
This raises the important question as to how far public works
should be financed by taxation, how far by borrowing, and how
far by an uninvested balance held by the Treasury. The arguments have been set out in earlier pages. I t is clear t h a t for the
purchase of consumption goods the money will be derived from
taxes, but where capital expenditure is involved borrowing must
be resorted to. In either case some money will have to be raised
by taxation, since interest has to be paid on the loans.
Hardly any information has been obtained by the International Labour Office as to the method employed in raising such
money. Attempts have been made in France, Germany, the
United States and elsewhere to budget for several years at a time
in connection with public construction, or to borrow for one year
a t the expense of resources anticipated in the following year.
Budgeting for several years at a time is certainly to be recommended,
and will certainly facilitate the planning of public works.
12

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VII. — In the case of postponement of public works previously
decided on, the difficulties experienced in connection with :
(a) interruption or slowing down of work in the hands of contractors, and the legal recourse open to such contractors against
the Government on account of its annulling or modifying
their contracts.
(b) the effects of the slowing down of contract work on the financial
situation of such contractors or firms supplying them.
This point does not seem to give rise to any difficulty. I t is
not as a rule practicable to interfere with contracts already made,
and it is not at all essential to the policy of advance planning.
New works are put in hand every year, and it is these which may
be varied from year to year in accordance with the labour market
situation.
V I I I . — Any indications that, where money for public works
which have been put in hand at a period earlier than was originally
anticipated has been raised by taxation or borrowing, this procedure
may have involved competition with other enterprises in the capital
market which, being likely to increase their difficulties, is undesirable
at such a time.
This is, perhaps, the most important question of all in connection
with the policy of public works, for it involves not only the possible
technical difficulties of raising money on the capital market in
competition with private industry, but also the whole problem
as to how far the capital raised by public authorities is merely a
diversion of resources from private industry to the public authorities, without adding to the amount of employment.
These points have been discussed at some length in this study.
So far as the first is concerned, there is generally during a depression
a superabundance of money seeking investment, and the rate of
interest fidls. This is therefore a particularly favourable moment
for raising money for public works purposes. Not only is it
cheaper, but the fact t h a t private industry is unable to make use
of it is a very good reason for public authorities to do so. There
can then be no suggestion t h a t the latter are merely transferring
spending power from private to public bodies. On the contrary,
the public bodies would be using capital which would otherwise
not be used for industrial purposes. This must inevitably lead
to increased employment both directly and indirectly, and t o
the extent to which the depression is due to psychological causes
must lead t o a general revival.

— 179 —

The moment at which the capital is borrowed must of course
be carefully chosen. Dr. Bernhard points out, for instance, that
at the very beginning of a depression there is not so much liquid
capital available as is the case at a later stage. This is quite true,
of course. On the other hand, the beginning of a depression is
just the time for increasing the volume of public works, but these
may be financed by means of a reserve fund, and no new capital
need be raised until a later date.
Of course, if the central bank believes that a restriction of
credit is necessary the benefits anticipated from a public works
policy may be seriously compromised. There can be no doubt,
as Mr. J. M. Keynes says, that an active public works policy
involves an increase in credit facilities, or at any rate an absence
of restrictions, and the efficacy of a public works policy depends,
therefore, very largely on the monetary policy pursued by the
central bank.
IX. — Any arrangements which have enabled the accumulation
by the authorities, during periods of prosperity, of reserve funds for
financing public works the execution of tvhich is left to a time of
depression.
The way in which the funds held in reserve have been invested
while awaiting utilisation.
This is also a question of the greatest importance in the organisation of public works. Advance planning is quite impossible
without a reserve fund. A perusal of the chapter devoted to
financial problems shows that several proposals have been made
for the rapid provision of funds, and that one or two measures
of a tentative character have actually been adopted. Thus, it is
suggested in France that a " fonds de concours " be created for the
purpose ; in Great Britain that money which would normally
go to the reduction of the national debt should in depression
years be used for public works ; and in the United States that the
Treasury or a special Board should be authorised to issue bonds
when necessary, that a revolving fund should be obtained by rapid
amortisation of the loans, and that a percentage of the annual
public works budget should be kept in reserve and expended in
depression years. This latter suggestion has also been made in
France. Actual measures adopted include a reserve fund for the
State Railways in France, the Road Fund in Great Britain, fed
by the proceeds of motor taxation, and reserve funds which have
been constituted both in the Confederation and in certain cantons

— 180 —

and communes in Switzerland. The particular method most
suitable in each case must be decided by the authorities in the
country concerned. The differences in the financial organisation
of the various countries are too great for any uniform rule to be
laid down. But if the advance planning of public works is really
to be applied it is quite certain that some kind of reserve fund
must be created so that money may be available at short notice
when required.
X. — The economic effects of the utilisation of the reserves referred
to in the preceding Article.
The Governments which have communicated information
to the International Labour Office on their public works organisation have said very little about this matter. There does not in
point of fact appear to be any economic reason for not constituting
a reserve fund. Money accumulated in this way would probably
be invested in gilt-edged securities or deposited in a bank and
might therefore be used to finance private industry by a roundabout method. From an economic point of view, therefore, the
money would still be at the disposal of private industry during the
period of prosperity and would only be fully at the disposal of the
authorities when they actually used their reserves. On the other
hand, as already pointed out, the authorities would be able to
obtain the money at very short notice.
It is sometimes suggested that the reserve should not be invested,
but should be held in the form of banknotes. This would have the
effect of withdrawing money from circulation during the boom
and releasing it during the depression, and would therefore seem
likely to help in bringing about the stabilisation of industry. A
similar result, from an economic point of view, might be attained
if the public works were financed by means of loans from the
banks instead of from private individuals.
XI. — Information as to whom belongs the initiative in making
decisions to postpone or advance the construction of public works
or the placing of orders by public authorities :
Local authorities ;
The Government ;
The several ministerial Departments which place orders for
construction or supplies ; or,
Some central administrative or consultative co-ordinating authority.

— 181 —
X I I . — Methods employed by the Government requiring or
encouraging local bodies to adopt, when such is considered desirable,
a policy similar to that of the Government.
X I I I . — Any similar steps which may have been taken with
regard to private or semi-public bodies operating public utilities
under statutory control, or with regard to private enterprises.
These three points are grouped together because no co-ordination can be satisfactory which does not embrace at the same time
the central Government, the local authorities and non-official
public utility undertakings. In both the central Government
and the local authorities several different departments have
as a rule public works to carry out so t h a t there is a multiplicity
of authorities whose action requires to be co-ordinated. Surprisingly little of a practical character seems to have been done to
remedy this state of affairs. So far as our information goes, the
most advanced country in this respect is Germany where, during
the last few years, serious negotiations have been conducted with
a view to a co-ordinated public works policy. In the United States
there is a new Division of Public Construction which partially
fills the gap, but there is very little else.
The usual method employed by a central Government to
induce local authorities and public utility undertakings to follow
the same policy as themselves is to make grants or loans on condition
that the public works are put in hand at the time desired by the
Government. This is quite satisfactory up to a point, but a system
of this kind cannot be used to induce such bodies to postpone
works. I t is mainly of service in persuading them to advance
their works.
I t is of great importance t h a t in each country a Public Works
Committee or Board should be established. This body should
be informed of all public works which it is intended to carry out
in any particular year and should recommend t h a t certain specified
public works be held over for a later date, or, in different circumstances, that the execution of works should be accelerated. A
similar Committee should be set up by the more important local
authorities and work in harmony with the Committee of the central
Government. Any recommendations made by these bodies would
carry great weight not only with the affiliated authorities but also
with public utility undertakings and even with private enterprises
to some extent. Such recommendations would, moreover, be
backed by an appropriate policy of loans and grants so t h a t it

— 182 —
would be in the financial interest of the local authorities and
other bodies to follow the lead of the Central Public Works
Committee.
There is one difficulty which even a Public Works Committee
might not be able to overcome. This is the fact t h a t a Government
or local authority, when framing its policies for public works as
for anything else, may be too much influenced by electoral
considerations, and may hesitate to draw up a scientific policy
allowing of contraction or expansion to meet the needs of industry
when in a year or two another party coming into power may reverse
these decisions and entirely change the policy. This factor is
perhaps of special weight in local government, since the influence
of electoral opinion is more direct and the costs and effects of a
policy more immediately felt.
The most hopeful way out of this difficulty would be to arrange
that the Public Works Committee should be a permanent and
non-political body. It might be more difficult to arrange this in
connection with local authorities t h a n in connection with t h e
central Government, but the administrative difficulties are not
insurmountable and anything done on these lines would represent
a great step forward towards a more adequate co-ordination of
public works and orders for supplies from the point of view of the
labour market situation.
XIV. •— Index numbers or other economic indicators employed
by the authorities responsible for making decisions to postpone or
advance public works.
The ideal index number would probably be one snowing general
business activity. I t is doubtful, however, whether by itself such
an index number is sufficiently reliable and sensitive at t h e
present time to justify Governments and other bodies basing their
public works policies entirely upon it. If an index of business
activity is used, it must be checked by reference to an employment
or unemployment index. Unemployment statistics are, under
the influence of unemployment insurance, becoming more and
more accurate and we naturally turn to such statistics in connection
with a public works policy since we are seeking a remedy for
unemployment. We cannot always be sure, however, t h a t when
unemployment is rising it will continue to rise ; such a movement
may be purely seasonal or, on the other hand, a seasonal movement
may hide a more long-lived cyclical movement which it is difficult
to see until it is too late. Employment or pay-roll figures are even

— 183 —
less reliable indices, but if no unemployment statistics are in
existence they are the next best thing.
I t seems desirable, therefore, that, in the first place, an index
of unemployment, or in default of that an index of employment,
be used, supplemented by an index of general business activity
and any other available information, and t h a t in the second place
the search for a better business barometer be continued with
redoubled vigour.

APPENDIX
Suggested Basis for-the Supply of Information on the Organisation
of Public Works in connection with Unemployment, Drawn
Up by the Committee on Economic Crises on 2 May 1927
I. — Legislative or other provisions in force requiring more or less
explicitly the reservation, to some extent, to periods of unemployment
of public works and orders for supplies given by public authorities.
II. — Details as to measures which have been taken :
(a) in times of great economic activity to postpone public works,
with a view to reserving them for a subsequent period of slackened
economic activity;
(b) during a period of unemployment to place in hand public
works which would under ordinary circumstances have been
undertaken at some later time.
III. — Information as to :
(i) the nature of the public works so postponed or advanced ;
(ii) the approximate amount of expenditure so postponed or
advanced ;
(iii) in each of the cases II (a) and II (b) above, the approximate
daily number of workers which would have been or were
employed, classified if possible according to occupations ;
(iv) the duration of the works.
IV. — Method of subsequently utilising labour set free owing to
postponement of works ; method of recruiting labour more rapidly in
the case of work which is speeded up.
V. — In the case of works which have been postponed beyond the
end of the financial year, what has been done with the credits originally
provided for them.
VI. — In the case of works which have been put in hand at a period
earlier than was originally anticipated, and for which no provision had
been made in the current financial year, how the necessary money has
been obtained.
VII. — In the case of postponement of public works previously
decided on, the difficulties experienced in connection with :
(a) interruption or slowing down of work in the hands of contractors,
and the legal recourse open to such contractors against the
Government on account of its annulling or modifying their
contracts ;
(b) the effects of the slowing down of contract work on the financial
situation of such contractors or firms supplying them.

— 186 —
V i l i . — A n y indications t h a t , where money for public works which
have been p u t in hand a t a period earlier t h a n was originally anticipated
has been raised b y taxation or borrowing, this procedure may have
involved competition with other enterprises in the capital market which,
being likely to increase their difficulties, is undesirable a t such a time.
I X . — A n y arrangements which have enabled the accumulation b y
the authorities, during periods of prosperity, of reserve funds for financing
public works the execution of which is left t o a time of depression.
The way in which the funds held in reserve have been invested
while awaiting utilisation.
X. — The economic effects of the utilisation of the reserves referred
to in the preceding Article.
X I . — Information as t o whom belongs the initiative in making
decisions to postpone or advance the construction of public works or
the placing of orders b y public authorities :
Local authorities ;
The Government ;
The several ministerial D e p a r t m e n t s which place orders for construction or supplies ; or,
Some central administrative or consultative co-ordinating authority.
X I I . — Methods employed b y the Government requiring or encouraging local bodies t o adopt, when such is considered desirable, a policy
similar to t h a t of the Government.
X I I I . — Any similar steps which m a y have been t a k e n with regard
t o private or semi-public bodies operating public utilities under statutory
control, or with regard to private enterprises.
X I V . — I n d e x numbers or other economic indicators employed
b y the authorities responsible for making decisions t o postpone or
advance public works.