INTERNATIONAL LABOUR OFFICE
STUDIES AND REPORTS
Series C (Employment and Unemployment) No. 19
PUBLIC WORKS
POLICY
GENEVA
1935
Published in the United Kingdom
For
the
INTERNATIONAL LABOUR O F F I C E (LEAGUE OF NATIONS)
By P . S. KING & SON, Ltd.
Orchard House, 14 Great Smith Street Westminster, .London,
S.W.I
Printed in England by
Eyre and Spottiswoode
Limited,
His Majesty's
Printers,
East Harding Street, London, E.G.4
ru
CONTENTS
PAQB
INTRODUCTION
...
...
...
...
...
...
...
...
1
CHAPTER I : Recent Trends
...
...
...
...
...
...
§ 1.—Principles of Public Works Policy
...
§ 2.—Recent Schemes
...
...
...
...
§ 3.—The Development of Public Works
...
§ 4.—The Effect of Public Works on Employment
...
...
...
...
...
§5.—Cost of Schemes per Man-Year ...
...
5
5
7
28
57
68
CHAPTER I I : Financial Problems
...
...
...
...
... 72
§ 1.—General Principles ...
...
...
... 72
§2.—Methods Adopted
79
Taxation ...
...
...
...
... 79
Loans
...
...
...
...
... 86
Direct Borrowing from the Public ... 87
Loans from Governments or other
Public Bodies
89
The Redemption Period
...
... 98
Other Methods
101
Encouragement of Capital Expenditure
by Private Bodies and Individuals... 102
§3.—International Problems
...
...
... 106
CHAPTER I I I : Methods of Operation and Conditions of Employment
§ 1.—Methods of Obtaining the Labour Required
§2.—Wages
§ 3.—Hours of Work
119
120
123
128
CHAPTER IV : Co-ordination and Centralisation
§ 1.—National Co-ordination
§ 2.—International Co-ordination
134
136
148
CONCLUSIONS
155
APPENDIX I
160
APPENDIX I I
162
ADDENDUM
s
G 8344
166
A!
INTRODUCTION
The problem of the systematic organisation of public workB
which is the subject of this study is one that the International
Labour Organisation has constantly dealt with ever since it was
set up.
At its very first Session in 1919 the International Labour
Conference adopted a Recommendation, the fourth paragraph
of which stated that " the 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 question was referred to directly or indirectly at most of
the subsequent Sessions, and the Eighth Session in 1926 adopted
a resolution from which the following extract may be quoted :
" . . . 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. : . . .
" (d) The organisation of public works so as to counteract the fluctuations of private business ; . . .
" 5. In particular requests the International Labour Office t o seek
the advice of the Joint Committee [on Economic Crises] 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 problem was consequently brought before the Joint
Committee on Economic Crises which had just been set up by the
Economic and Financial Organisation of the League of Nations
and the International Labour Office. The Committee prepared
the outline of a study, the results of which were published by
the International Labour Office in 1931 under the title
Uitemployment and Public Works.1
The Unemployment Committee, a body set up by the Governing Body of the International Labour Office, pointed out in
January 1931 the value of public works as a means of mitigating
the existing depression, and drew attention to " the possibility
of Governments coming to an agreement through the appropriate
organs of the League of Nations with a view to joint execution of
extensive public works of an international character."
1
Studies and Reports, Series C, No. 15. Geneva, 1931. 186 pp.
2
ESTTBODtTCTIOÎÎ
After long discussions in the Commission of Enquiry for
European Union and its various branches (Unemployment
Committee, Committee on Credit Problems, Sub-Committee for
Co-ordination upon Eeonomic Questions^ and in the Council
and Assembly of the League of Nations, 1 this suggestion led in
October 1931 to the appointment of a Committee of Enquiry
on Public Works and National Technical Equipment.
This Committee, which was set up under the auspices of the
Communications and Transit Organisation of the League of
Nations, was instructed to proceed without delay to collect information as to the public works which had been planned in the
different countries but which were held up on account of financial
difficulties. It was instructed to work with the utmost rapidity.
The Committee, which consisted mainly of engineers and
technical experts together with three representatives of the
Governing Body of the International Labour Office, met four
times during the years 1931-1933 and examined, from the point
of view of their technical and economic value, a large number
of plans for public works. Its terms of reference were limited
and did not extend to the financial aspects of the proposed works.
Some twenty plans from Austria, Bulgaria, Estonia, Hungary,
Latvia, Poland, Rumania and Yugoslavia for the construction of
roads, harbours, bridges, railways, hydro-electric stations, etc.,
have so far been approved by the Committee and recommended
to the attention of the Council of the League of Nations, whose
task it is to submit them to another body for advice as to the
financial possibilities.
In this way the question came before the Monetary and
Economic Conference in London. The International Labour Conference of 1933 emphasised the importance of the problem by
submitting to the London Conference a resolution from which the
following is an extract :
" The Conference . . . draws the attention of the Monetary and
Economic Conference to the urgency of measures covering the whole of
the following points : . . .
" (5) The restoration to circulation of the capital now lying idle by
all appropriate means and notably by the adoption of a public works
policy, including the following lines of action :
" (a) To set on foot immediately large-scale public works, giving an
assured economic yield, particularly in those countries where
funds are at present remaining unused ;
" (b) To secure collaboration between creditor countries and countries
lacking capital, many of whom are debtors, in order to undertake in these latter countries large works likely to augment
1
Further details on this point will be found in Chapter IV of this study.
INTRODUCTION
3
the national income and thereby to increase their capacity to
meet external debts ;
" (c) To co-ordinate these measures on an international basis so as to
avoid the possibility, which might arise if individual action
were taken, of a disequilibrium in the balance of payments of
the various countries, detrimental to international monetary
stability."
This resolution was put before the Conference by Sir Atul
Chatterjee, Mr. Oersted and Mr. Jouhaux, representing the
Governing Body of the International Labour Office.
The above texts show that the International Labour Organisation has done everything in its power to further the immediate
application of an extensive plan of public works calculated to
provide a rapid remedy for the present depression. But it has
not on that account neglected the more permanent aspects of the
problem. At regular intervals the International Labour Conference has adopted resolutions repeating the terms of the Recommendation of 1919. In 1933 the following resolution was
adopted :
" In view of the Recommendation concerning unemployment adopted
at Washington in 1919,
" In view of the resolution concerning unemployment adopted at the
Eighth Session of the Conference in 1926,
" In view of the decisions taken by the Governing Body at its Fifty-first
and Fifty-second Sessions in 1931 on the report of its Unemployment
Committee,
" In view of the resolution concerning the economic crisis adopted
by the Conference at its Sixteenth Session in 1932,
" In view of the fact that all these acts dealt with the problem of the
organisation of public works in relation to unemployment,
" In view of the fact that during the present depression such action as
has been taken, both nationally and internationally, to spare large numbers
of workers the distress of unemployment, and communities the waste
that this unemployment entails, has been vitiated by lack of preliminary
organisation and agreement,
" The International Labour Conference decides to request the Governing
Body to consider the desirability of placing on the agenda of an early
Session of the Conference, by presenting a suitable report, the question of
the organisation and co-ordination of national and international public
works, with a view to combating unemployment and regularising the
volume of empioyment."
The Governing Body placed the question on the agenda of
the Eighteenth Session of the Conference, and the present Report
was prepared for that purpose. The Conference, on the proposal of M. Jouhaux, adopted the following resolution :
" Whereas at its First Session, held in 1919, the International Labour
Conference adopted a Recommendation which in Article IV invited the
States Members of the International Labour Organisation to co-ordinato
4
INTEODTTOTION
the execution of all work undertaken under public authority, and to reserve
such work as far as practicable for periods of unemployment ;
" Whereas, in 1926, the Eighth Session of the International Labour
Conference adopted a resolution by which it requested the International
Labour Office to increase to the utmost its efforts to secure the organisation
of public works so as to counteract the fluctuations of private business ;
" Whereas at its Session, held in 1933, the International Labour Conference drew the attention of the Monetary and Economic Conference to
the urgency of restoring to circulation the capital lying idle by setting on
foot immediately large-scale public works in those countries where funds
are remaining unused, by securing collaboration between these latter
countries and countries lacking capital for which the organisation of large
works would be likely to augment the capacity to meet external debts,
and by co-ordinating these measures on an international basis;
" Whereas also at the same Session the International Labour Conference decided to request the Governing Body to consider the desirability
of placing on the agenda of an early Session of the Conference, by presenting
a suitable report, the question of the organisation and co-ordination of
national and international public works with a view to combating unemployment and regularising the volume of employment ;
" Whereas by the various decisions aforesaid the International Labour
Conference intended to make it clear that, whilst laying stress upon the
necessity of the immediate organisation of large-scale works in order to
palliate the effects of the present depression, it attached equal importance
to the permanent aspects of a policy of public works ;
" The Conference requests the Governing Body of the International
Labour Office to ask for periodical reports from the Office on the measures
taken or proposed in different countries on the subject of public works.
" These reports will in particular give information concerning :
" (a) The programmes of large-scale works drawn up in the various
countries and the measures undertaken by the national authorities
to co-ordinate on a uniform basis the preparation of these works ;
" (6) Measures concerning the recruitment and the conditions of employment of the workers engaged in public works ;
" (c) The effect of public works on the situation of the labour market.
" On the basis of these reports, the Governing Body is requested to
investigate what steps can be taken to facilitate the application of the
Recommendation relating to public works adopted by the Conference
at its Session held at Washington.
" With regard to works of an international character, the Governing
Body will endeavour, in co-operation with the competent bodies of the
League of Nations, to facilitate the necessary collaboration between the
various countries concerned."
As a result of that resolution, the Governing Body decided
that this Report should be referred to its Unemployment Committee, whose task it will be to determine the best method of
ensuring the application of a systematic and co-ordinated policy
of national public works and of providing for the co-ordination of
these policies internationally.
CHAPTER
I
RECENT TRENDS
§ 1.—Principles oí Public Works Policy
It would seem to be agreed in most countries that an energetic
and far-sighted public works policy may help to stabilise the
demand for labour over a given period and to counteract economic
fluctuations to a very appreciable extent, but the measures for
applying such a policy are still a subject of controversy.
Two of the factors involved in such a policy may be considered at the outset, namely, the importance of postponing work
in periods of prosperity so that when a depression sets in there
will be a sufficient volume of work available to have an effective
influence on the situation, and the desirability of accumulating
the necessary financial reserves for carrying out such work during
periods of depression.
Of these two factors the latter would seem to cause the greatest
practical difficulties. It is extremely important that technical
plans for work to be carried out during periods of depression
should be prepared in advance, for on more than one occasion
in recent years the application of a policy of public works as a
means of aiding economic recovery has been retarded, although
the money was available, because the technical preparation of
the works had not been undertaken.
In connection with the financing of the works, there are
numerous obstacles to be overcome. In the case of work financed
out of revenue, a first difficulty arises in many countries from the
fact that appropriations are voted for one year only and sums not
expended cannot be used to form a reserve. In the second
place, there is a far from negligible psychological element in
the fact that it is very difficult to persuade the authorities to
postpone the execution of work when the necessary capital is
available and they believe that it may not be available to-morrow.
A third difficulty is the necessity, when it has proved possible to
accumulate funds, for keeping them in as liquid a form as possible ;
if this is not done, the realisation of these assets, when they are
required for various works in a period of depression, ia likely to
upset the money market.
The most important problem in this connection is the method
of raising the necessary resources. The real purpose of a public
works policy is to furnish during periods of depression a fresh
6
6
PUBLIC WORKS POLICY
?
supply of purchasing power which will make good the lack of
purchasing power in the general economic system. I t is obvious
t h a t the ordinary resources of the budget, even if they are held
in reserve, will not generally be sufficient for this purpose.
Consequently, those few countries that have so far tried a policy
of large-scale works have generally raised loans for the purpose.
This method of financing public works not only enables unused
capital to be rapidly mobilised, but it also has the advantage of
avoiding any immediate increase in taxation or rates and even,
through the effects of various taxes on the work undertaken,
provides additional receipts for the treasury, amounting in some
cases to 40 or 50 per cent, of the expenditure on the work. 1
Information will be found in the second section of this chapter
concerning the recent efforts of certain Governments to put into
operation extensive plans of public works calculated to lead to a
rapid increase in the volume of employment and of purchasing
power. Some of these plans have not yet passed the stage of
preliminary discussion or even of technical preparation; others
were not on a wide enough scale to produce the results expected ;
yet others are still held up by financial obstacles. I n a few
countries which have adopted a bold comprehensive policy,
however, positive results have already been achieved by a policy
of public works conceived on a sufficiently large scale and
financed in the most appropriate manner.
I t might be expected t h a t if Governments did not undertake
large schemes financed by means of special resources they would
at least endeavour during the years of depression to increase the
volume of ordinary public works financed out of normal revenue.
The extent to which this has been done is discussed in the third
section of this chapter, which contains a summary of the somewhat scanty information available on this head. I n spite of the
fragmentary nature of the information, 2 it can be concluded that
in many cases the volume of public works, far from increasing as
the depression developed, has decreased, often to a very considerable extent, with unfavourable results on the labour market.
I n the fourth section of this chapter an examination is made of
the effect of public works undertaken in different countries on
employment. I n the fifth section an effort has been made to
1
Cf. infra, Chapter I I , pp. 49-50.
Use has also been made of the information which the majority of Governments has sent in reply to an enquiry undertaken by the Secretariat of the League
of Nations (see Appendix I for the text of the questionnaire sent out). The
full text of these replies will shortly be published b y the Secretariat of the
League under the title : " Enquiry concerning National Public Works."
(Document C. 482. M. 209. 1934, V I I I .
1
RECENT TRENDS
7
determine the cost of the works per man-year for a certain
number of countries. The figures given are necessarily only
rough estimates.
§ 2.—Recent Schemes
Several Governments, not having a sufficient revenue available
for public works and yet desirous of increasing the volume of these
works so as to make them an effective measure for restoring
economic activity, have prepared more or less extensive plans for
the development of their national equipment to be financed by
loan. It is impossible to give a complete analysis of all these
plans here, but the main features of a few of them are summarised below.
In Argentina the Government adopted at the end of 1933
a plan of economic reconstruction which provided amongst
other things for an extensive programme of public works. The
Federal Government will provide the necessary amounts for
putting in hand over a period of two to three years works which in
ordinary circumstances would have occupied seven to eight years.
In an official communiqué it is pointed out that the depression
has now reached a deadlock. Private industrial undertakings
cannot absorb the unemployed, because in order to do so bhey
would have to produce more and would, therefore, run the risk of
exceeding market possibilities and finding themselves in still more
serious difficulties. It is clear, says the communiqué, that if all
industries increased production simultaneously the extra amounts
thus produced could be consumed as a result of the increased
purchasing power brought about by the return of the unemployed
to employment. Such a simultaneous movement cannot, however, be produced without some external stimulus. The most
. effective stimulus of this kind is work undertaken by the State.
Public works distribute fresh purchasing power to a considerable
number of workers, thus increasing the general demand for commodities and contributing to the re-absorption of the unemployed
by private industrial undertakings. Thanks to the abundant
financial resources obtained by special loans raised by the
Government in connection with arrangements for the transfer of
foreign exchange, the Government is now in a position to intensify
its programme of public works. It has also more than sufficient
plans which have already been passed by Congress. Some of
these plans are already being carried out. It can thus draw up a
really effective programme of public works on a national scale,
the various works being selected on the basis of criteria such as
8
PUBLIC WORKS POLICY
their revenue-producing character, the proportion of direct or
indirect employment they will produce and the amount of
national materials required. In view of the present level of
exports from Argentina, it is very necessary to prevent any
increase in imports as a result of the more intensive public works
programme. This can be prevented by the present system of
controlling imports.1
At the end of January 1934 the Argentine Government drew
up its programme of public works which are being carried out as
part of the above-mentioned plan of national reconstruction.
One section of the plan comprises irrigation work, harbour
work, public health measures, the construction of public buildings,
new railways, and some work under the Departments of Agriculture, War, and the Admiralty. The work in this group will cost
140 million pesos in 1934, which is 81 millions more than was
spent in 1933. Out of the total of 140 millions it is officially
estimated that the wages of the workers directly employed will
represent about 66 millions and materials obtained in the
country 42 millions. This in turn will mean an indirect
increase in employment. It should be added that public health
work costing 113 millions has been specially authorised for the
municipal district of Buenos Aires.
Another section of the plan provides for road development.
The National Roads Department has been empowered to spend
133 million pesos for this purpose from 1934 to 1936, whereas
the normal expenditure over that period would have been only
85 millions. To this sum must be added the federal subsidies
which will be granted to the provinces for their road development
work up to a total of 44 millions. These subsidies will lead to
further extensive expenditure by the provinces. The 177 million
pesos to be spent by the Federal Government on roads will be
allocated more or less as follows : wages, 118 millions; materials
obtained in the country, 16-5; foreign materials, 8; transport,
13; overhead expenses, 21-5.
In Belgium early in 1927 the Government prepared a programme of important works for improving the national equipment ;
the Act of 24 April 1928 set up two special bodies to deal with the
matter : the Public Works Fund and the Road Fund.
The Public Works Fund is an autonomous public body
responsible, in accordance with the provisions of the Act, for
carrying out the following public works on behalf of the State
under the supervision and responsibility of the Minister of Public
1
La Nación, 30 Nov. 1933.
9
RECENT TRBKDS
Works : the completion of the Charleroi-Brussels Canal, improvements to the Meuse and the Basse-Sambre, the Liége-Maestricht
Canal, the Maestricht-Bois-le-Duc Canal, the Meuse-Scheldt
Junction Canal, a direct canal between Liege and Antwerp, etc.
The programme of work of the Fund also included the construction of wharves, harbours, roads, railways, sidings, stations,
etc., and work for the prevention of flooding.
According to section 5 of the Act the State was to put at the
disposal of the Public Works Fund a sum of 1,800 million Belgian
francs, spread over the years 1928 to 1941 as follows :
1928
1929
1930
1931
...
...
...
...
1932
1933
1934
127 million francs
... 250
„
... 280
„
... 270
„
...
...
...
250 million francs
... H O
... 130
„
„
and 90, 80, 80, 70 and 11 millions respectively in the following
years.
As this sum proved inadequate, a later Act of 12 August 1933
increased the total appropriations for the Fund to 3,300 millions.1
From 1928 to 1933 the Fund actually received from the State a
total of 1,070 million francs, so that it still has at its disposal
2,223 millions, distributed as follows :
1933 and 1934 ...
1935
1936
1937 and 1938 ...
1939 and 1940 ...
1941
...
...
...
...
...
400 million francs each year
350
300
200
150
73
The other body set up by the Act of 24 April 1928 is the
Road Fund, the aim of which is to repair and bring up to date the
whole network of roads throughout the country. Originally this
Fund was granted 600 million francs under the extraordinary
budget for the years 1928-1933, but as this sum proved insufficient
a special appropriation of 42,750,000 francs was added in 1932.
The Act of 12 August 1933 set up a second special Road Fund,
which will receive a total of 800 million francs by the transfer of
special appropriations which will be made available to the Minister
of Public Works in the budget for the years 1933-1938. The
1933 budget contains an item of 125 millions for this Fund. The
total amounts provided under the extraordinary budget of 1933
for all public works exceed 800 million francs. Under the
ordinary budget for the same year the Ministry of Pubhc Works
was granted almost 260 million francs.
1
Exclusive of the expenditure provided for in the ordinary budget' and
which, in the case of hydraulic works, for example, amounted in the years 1929
to 1934 to between 100 and 150 million Belgian francs.
10
PUBLIC WORKS POLICY
I n Chile, the Government presented a Bill to Congress on
27 June 193a providing for a programme of public works including
the construction of roads, the canalisation of rivers and preventive
measures against floods. I n the message accompanying this Bill
the Government points out t h a t there is not a sufficient amount
of ordinary employment at the present time to absorb all the
unemployed, and a Bill of this kind is therefore necessary.
Hitherto the Government has for fiscal reasons carried out its
public works through contractors. This system, however, has the
disadvantage that it does not enable the authorities to speed up
or retard works, t h a t is to say, to increase or reduce, according
to circumstances, the number of workers engaged on the works.
I t is, therefore, desirable t h a t the new scheme of public works,
if it is to be successful as a means of reducing unemployment,
should fulfill certain conditions of which the most important is
that they should be carried out directly by the Government. I t
is also desirable, says the Message, t h a t they should have the
character of relief works and that the workers engaged on them
should receive simply an allowance and not a wage. ' On the
other hand, the works should be carried out simultaneously in
the different parts of the country, so as to prevent an influx of
labour to the capital, and the Government will try, in connection
with these works, to set up a scheme of vocational re-education.
Finally, the authorities are considering the possibility of
undertaking other works in addition to those provided for in the
above-mentioned Bill, using the reserves of certain welfare
institutions such as the National Savings Fund for this purpose.
In China the Government set up in 1931 a National Economic
Council, comprising the Ministers concerned and various representatives of intellectual and industrial circles, for the purpose of
working out a big scheme of national reconstruction in collaboration with the technical organisations of the League of Nations. 1
Under this scheme important hydraulic works requiring the
construction of 7,000 kilometres of dykes were undertaken on the
principal rivers, and it is estimated that at times nearly a million
workers were employed on the works. Wages were paid mainly
in kind out of a stock of 450,000 tons of wheat, lent to the Chinese
Government by the United States, and reckoning the price of one
ton of wheat at 74 Mexican dollars, the total sum paid out in
wages up to the end of 1933 amounted to some $20 million, other
1
LEAGUE OF NATIONS, Council Committee on Technical Co-operation between
he League of Nations and China : Report of the .Technical Agent of the Council
on his Mission in China from the Date of his Appointment until 1 April 1934.
Document C.157.M.66.1934.
RECENT TRENDS
11
costs having amounted only to some §2 million. Between 1931
and the end of 1933 the National Economic Council also arranged,
in conjunction with the Provincial Governments of seven Provinces, for the construction of 4,000 kilometres of new roads,
allowing the local authorities grants amounting to 40 per cent, of
building costs. Thanks to these new roads a network of communications has been created over nearly 14,000 kilometres, the
average cost per kilometre having barely exceeded $6,000.
Besides these roads financed by the National Economic Council,
the Provincial Governments themselves also built, between 1931
and the end of 1933, over 9,000 kilometres of miscellaneous roads,
which do not, however, always conform to the type adopted by the
Council, and for the most part are not suitable for motor traffic.
The National Economic Council's programme for 1934 provides
in particular for the building of 4,800 kilometres of modern motor
roads at a cost of $18 million, of which §6,800,000 will be borne
by the Council, the commencement in the North-Western
Provinces of hydraulic works, towards which the Council will
make a grant of §2,500,000, and the general reconstruction of
certain rural areas. The Council's total expenditure on the 1934
programme is estimated at §15 million in all, most of the works
being financed out of loans.
Side by side with the reconstruction works launched under
the supervision of the National Economic Council, the Chinese
Government has also pursued the ordinary public works schemes
organised by the various Ministries. According to a statement by
the Prime Minister, Mr. Wang Ching Wei, on 19 February 1934, the
Government executed important railway construction works during
1932 and 1933, which it hopes to continue with the aid of loans
offering every security to foreign capital. Works on a wide scale
have also been undertaken in connection with sea and river
transport, telegraphic and telephonic communication and aerial
navigation.
I n Czechoslovakia a so-called " labour loan " has been issued
and has been subscribed up to over 2,000 million crowns ; half of
t h a t amount had actually been used up to the end of 1933.
In Egypt, the Superior Labour Council decided on 20 J u n e
1933 to raise considerably the appropriations in the budget for
important public works. I n order to encourage private initiative,
the Council further proposed t h a t exemption from taxation for
fifteen years should be granted on all new dwelling-houses.
More recently a vast programme of new construction work
covering the whole country has been drawn up by the Minister
BECESTT TRENDS
11
costs having amounted only to some $2 million. Between 1931
and the end of 1933 the National Economic Council also arranged,
in conjunction with the Provincial Governments of seven Provinces, for the construction of 4,000 kilometres of new roads,
allowing the local authorities grants amounting to 40 per cent, of
building costs. Thanks to these new roads a network of communications has been created over nearly 14,000 kilometres, the
average cost per kilometre having barely exceeded §6,000.
Besides these roads financed by the National Economic Council,
the Provincial Governments themselves also built, between 1931
and the end of 1933, over 9,000 kilometres of miscellaneous roads,
which do not, however, always conform to the type adopted by the
Council, and for the most part are not suitable for motor traffic.
The National Economic Council's programme for 1934 provides
in particular for the building of 4,800 kilometres of modern motor
roads at a cost of $18 million, of which $6,800,000 will be borne
by the Council, the commencement in the North-Western
Provinces of hydraulic works, towards which the Council will
make a grant of $2,500,000, and the general reconstruction of
certain rural areas. The Council's total expenditure on the 1934
programme is estimated at $15 million in all, most of the works
being financed out of loans.
Side by side with the reconstruction works launched under
the supervision of the National Economic Council, the Chinese
Government has also pursued the ordinary public works schemes
organised by the various Ministries. According to a statement by
the Prime Minister, Mr. Wang Ching Wei, on 19 February 1934, the
Government executed important railway construction works during
1932 and 1933, which it hopes to continue with the aid of loans
offering every security to foreign capital. Works on a wide scale
have also been undertaken in connection with sea and river
transport, telegraphic and telephonic communication and aerial
navigation.
I n Czechoslovakia a so-called " labour loan " has been issued
and has been subscribed up to over 2,000 million crowns ; half of
t h a t amount had actually been used up to the end of 1933.
I n Egypt, the Superior Labour Council decided on 20 June
1933 to raise considerably the appropriations in the budget for
important public works. I n order to encourage private initiative,
the Council further proposed t h a t exemption from taxation for
fifteen years should be granted on all new dwelling-houses.
More recently a vast programme of new construction work
covering the whole country has been drawn up by the Minister
12
PUBLIC WOEKS POLICY
of Public Works and Finance. This plan, which will take ten
years to complete, embodies a general revision of all public
construction work. A special committee has been constituted to
co-ordinate the various work projects and to decide upon the
details of execution. 1
I n 1932 the Government of Finland appointed a committee
of experts to prepare an extensive plan of public works for the
specific purpose of combating unemployment. The committee
proposed t h a t an internal loan of 500 million marks should be
issued, with a view to providing employment for 20,000 or 25,000
workers. The Finance Act of 30 September 1932 authorised the
Government to issue such a loan up to a total of 350 million
marks, to be distributed over the various types of work as
follows :
Road-making
...
...
...
...
Railway construction ...
...
...
Dredging of rivers
...
...
...
Development of agriculture and forestry
Orders to industry and various works
44-7 million marks
41-5
„
„
20
„
„
145
„
„
100
„
„
This loan was subscribed a t the end of 1932 and early in
1933 by various credit institutions and insurance companies, and
the Government immediately gave orders for the work which had
been approved. At the end of 1933 the amount actually spent
reached a total of 23 million marks, and the amount available for
1934 was 95 million.
I n France Parliament has discussed a number of national
equipment programmes in recent years. Early in 1930 came the
Tardieu plan, which allotted 16,000 million French francs for
carrying out all the improvements considered essential for making
the chief public services adequate to meet modern requirements.
At the same time rival plans were also submitted to Parliament,
including those of Mr. Bedouce (50,000 millions over a period of
seven years), Mr. Palmade (35,000 millions), Mr. Chabrun (65,000
millions over a period of ten years), etc. None of these extensive
programmes was put into operation, only partial measures
having been taken up to now. In 1931 a preliminary sum of
670 millions was voted by Parliament, followed by a second sum of
3,476 millions in December of the same year. 2 Only one-third of
this latter amount was actually used for new work, more t h a n
2,000 millions having been required for work already begun or
completed.
A Bill, which also deals with the whole question of national
equipment, was presented in October 1933 by the Daladier
1
2
La Bourse Egyptienne,
See below, p . 36.
19 Oct. 1934.
RECENT TRENDS
13
Government in connection with the programme of financial
recovery. 1 This Bill, which was definitely intended as a means
of reducing unemployment, included special protective measures
relating to the recruiting of labour, hours of labour, the distribution of the works and the choice of materials. I t proposed for the
application of these measures the creation of a supervisory
committee whose duty it would be to co-ordinate the works, to
determine the order in which they should be carried out and to
supervise the actual carrying out of the works.
The total estimated expenditure for the period 1934-1937
was about 13,500 million French francs, the money to be raised
by means of an issue of Treasury bonds. To this total must
be added the money still available in respect of previous programmes which amounted at the end of 1933 to nearly 11,000
million francs, namely, 4,500 million francs for the construction
of cheap houses, 4,000 million francs for the postal, telegraph and
telephone administration, 600 million francs for waterways, and
300 million francs for electrification works. Altogether the Bill
proposed an expenditure of 24,500 million francs during the years
1934-1937.
Finally, the question of national equipment was brought up
again at the beginning of April 1934 by the Doumergue Government, with the result t h a t a programme was adopted on the
proposal of M. Adrien Marquet, the Minister of Labour, to be
financed by means of the reserves of the social insurance funds
and of the General Guarantee Fund to an amount of 9-10,000
million francs. This sum is to be paid into a general fund administered by the Caisse des Dépôts et Consignations and spent over a
period of six years exclusively for public works under the
responsibility of the State, which will grant subsidies only in
respect of works guaranteed by departments, communes, big
railway systems, etc., or undertakings of recognised public
utility. The works will be carried out in different parts of the
country in proportion to the volume of unemployment, and
consequently large-scale works will be carried out in the Paris
area which includes more than half the total number of wholly
unemployed persons in receipt of assistance. I t is estimated
that the carrying out of this programme will reduce the number
of unemployed by 80,000 in the course of the winter of 1934-1935.
A Decree of 15 May 1934 set up a national committee for
large-scale works against unemployment whose principal duty
1
Cf. Chamber of Deputies, Document No. 2406, 17 Oct. 1933. Bill relating
to the social and economic equipment of the country (Projet de loi relatif
à Vequipment économique et social du pays).
x G 8344
B
14
PUBLIC WORKS POLICY
it will be to draw up the programme of works. Moreover, an
Act of 7 July 19341 laid down the amount of money to be contributed b y t h e State and the railway systems to the financing
of the works; the State's contribution must not exceed 2,897
million francs ; the main railway systems are authorised by the
Act to devote an amount of 2,725 million francs to their works
during the period 1934-1940, in addition to the sums provided
in their ordinary budgets.
The first works under this programme were inaugurated in
Paris on 3 October 1934. They are to cost 1,340 million francs
and will provide 12 million days of work in the building,
metallurgical and electrical industries.
A Decree of 26 July 19342 fixed the distribution of the State's
total contribution among the various Government departments
and provided that this contribution, amounting altogether to
2,897 million francs, would be paid in six instalments as follows :
350 million francs in 1934, 503 million francs in 1935, 516 million
francs in 1936, 467 million francs in 1937, 431 million francs in
1938, and 630 million francs in 1939-1940.
The total amount of 10,000 million francs which is to be
spent on the works by all the bodies concerned will be distributed
among the various authorities as shown below 3 : For later
information see " Addendum," p . 166.
Government department
or local authority concerned
Total cost
of works
State
contribution
(In millions of francs)
Local authorities (town planning, public health
and underground railways in Paris, electrical
works a n d work on the river port of Lyons,
touring facilities)
Large railway systems (electrification, signalling
installations, permanent way, stations)
Public Works Department (roads, ports, canals,
level crossings) ...
Agriculture (rural equipment) ...
Education (building of schools, etc., a n d fine
arts)
Public Health (cheap dwellings)
Ministry of the Interior (roads) ...
Air Ministry (air ports, etc.)
Total
2,995
Nil
2,625
Nil
1,515
1,160
1,001
925
1,070
400
808
(Payment of
interest)
140
23
200
35
10,000
2,897
1
Journal officiel, 8 July 1934, p. 6851; and 9-10 July 1934, pp. 6946-6947.
» Journal officiel, 27 July 1934, pp. 7697-7699.
3
Cf. MINISTÈRE DU TBAVATT,, Dispositions législatives et administratives du
Plan de Grands Travaux contre le Chômage, Paris, Sept. 1934, pp. 73.
15
RECENT TRENDS
Big programmes of national equipment covering all the means
of production are also under consideration or already in operation
in most of the French colonial territories. One of the most
important, which is given here merely as an example, is at present
being carried out in French West Africa at a cost of 1,715 million
francs, for the construction of harbours, railways, roads and
irrigation works in the Niger Basin. 1
The first plan of public works in Germany, known as the
" additional works programme," was drawn up by the Briining
Cabinet about t h e middle of 1930. That programme proposed the
expenditure of 272 million RM. for railways, 200 millions for the
postal service and 100 millions for encouraging the building of
houses. I t is difficult to determine whether or to what extent the
operation of this programme really created fresh opportunities of
employment on the labour market. I t may merely have made good
the decline in public works in preceding years. Further reference
will be made to this programme later.
A second plan for extending employment was prepared by
the von Papen Government in 1932. With regard to public works
(the plan also included measures for assisting private undertakings in the form of employment vouchers, bonuses to employers,
etc.) this programme proposed appropriations amounting to
750 million RM. No definite information is available as to the
nature of these appropriations b u t it would appear t h a t the total
was obtained by adding together certain appropriations already
included in the Federal budget for public works and other
amounts which it was hoped to obtain on the open capital market,
with the assistance of certain official financial institutions.
The third (Gereke) programme in J a n u a r y 1933 provided %
for 500 million RM. to be granted in the form of loans for the
encouragement of work undertaken by the Federal Government,
t h e municipalities, public corporations and undertakings of a
mixed character.
The fourth plan (the Reinhardt programme of June 1933)
proposed t h a t about 1,000 millions should be devoted to public
works under the following heads : restoration of administrative
buildings, dwelling-houses, bridges and other property belonging
t o the States, municipalities, municipal associations and public
corporations (200),2 suburban small holdings (100) ; agricultural
1
Cf. speech of Mr. Brévié, Governor-General of French West Africa, a t the
opening of the Session of the Government Council, Dec. 1933.
2
The figures in brackets represent million RM.
B 2
16
PUBLIC WORKS POLICY
settlement (50) ; land improvement and régularisation of water
courses (100) ; development of water, gas and electricity
supplies (100); repair work to private houses, sub-division of
houses into small flats, etc. (100, later increased to 500) ;
earthworks, etc. (120); and encouragement to builders of small
houses (20).
Yet another programme was drawn up in the Unemployment
Reduction Act of 21 September 1933, which authorised the
Minister of Finance to spend a further 500 million RM. in the form
of subsidies for work likely to increase employment in the building
industry.
To these five programmes may be added a further proposal
for the creation in the course of the next few years of a network of
motor roads, which it was estimated would cost between 1,400
and 2,000 million RM.
As the appropriations overlap from one financial year to
another, it is impossible by merely adding the sums voted under
each of the above programmes to arrive at the total amount
spent by the German Government on public works in recent
years. The Institut für Konjunkturforschung^- has reckoned that
the estimates and the amounts spent under the different
programmes adopted since 1932 were as follows in October
1933:
AMOUNT SPENT BY THE FEDERAL GOVERNMENT ON PUBLIC
WORKS (UP TO OCTOBER
1933)
(In millions of RM. )
Programme
Programme
Programme
Building of
Programme
Programme
Programme
of spring 1932...
of summer 1932
dwelling-houses
of J a n u a r y 1933
of J u n e 1933 ...
of September 1933
Total
Motor roads ...
Estimate
Amount
voted
165
182
120
600
1,000
500
165
182
118
535
650
300
2,567
1,400 to
2,000
1,950
80*
Amount
actually
paid
}
250
79
230
20
579
* According to a statement by Mr. Reinhardt, Under-Secretary oí State in the Ministry of
finance, the Government proposed to allocate a sum of more than 500 million RM. in 1934 to the
construction of motor roads. Cf. Kölnische Zeitung, 19 Feb. 1934.
1
Wochenbericht des Instituts für Konjunkturforschung,
p . 131.
No. 31, 1 Nov. 1933,
17
RECENT TRENDS
The estimated expenditure was allocated a t about the same
time to the following types of work :
DISTRIBUTION OF SPECIAL APPROPRIATIONS FOR PUBLIO
WORKS (UP TO SEPTEMBER
1933)1
(In millions of RM.)
Road-making
...
...
...
...
Navigable waterways
...
...
...
Régularisation of water courses
...
Other earthworks, etc. ...
...
...
Bridges
...
...
...
...
...
Development of water, gas and electricity
House-building ...
...
...
...
Suburban settlement
...
...
...
Agricultural settlement ...
...
...
Land improvement
...
...
...
Other measures ...
...
...
...
1
1
...
...
1,612
(1,400 for motor roads)
...
...
59
...
...
102
...
...
248
...
...
14
supplies ...
127
...
...
420
...
...
150
...
...
60
...
...
244
...
...
331
Total
3,367*
Vierteljahrehefte zur Konjunkturforschung, 1933, No. 2.
Since that date a further sum of 500 million RM. has been voted for building.
These tables show t h a t there is a considerable difference
between the estimated expenditure, the money voted, and the
amount actually paid to the contractors. A similar situation has
arisen in many countries. I t is explained in the case of Germany
by the Institut für Konjunkturforschung as being due on the one
hand to delays in voting the appropriations and on the other
hand to tardiness in carrying out the work, which is in most
cases navvies' work.
According to the most recent information available the total
estimated expenditure on the various programmes of public
works amounted in the middle of June 1934 to 5,448 million RM.
of which 2,400 million RM. had actually been spent at that time.
The works undertaken by the Government represented an
estimated expenditure of nearly 3,000 million RM., while those
carried out or proposed by other public authorities were
estimated to cost about 2,450 million RM. 1
I n Great Britain the Government appointed a special
Unemployment Giants Committee in 1920 to assist the local
authorities and eventually various public corporations and
private institutions in carrying out approved programmes of useful
work other t h a n road work and the building of houses. This
1
Viertelsjahrshefte zur Konjunkturforschung,
Ninth Year, No. 2, 18 J u l y 1934.
18
PUBLIC WORKS POLICY
Committee, "which ceased its activities in 1932, published its
final report in 1933.1
With regard to its general policy the Committee reports that
from 1921 to 1925 grants were gi^en chiefly for programmes
submitted by the authorities in districts where unemployment
was acute. From December 1925 to November 1928 the qualifying conditions were made so stringent that few schemes were
submitted and of these the majority could not be approved.
After November 1928 the scheme was opened on special terms to
local authorities willing to employ unemployed workers from
distressed areas. The conditions were relaxed in July 1929 and
again in July 1930, grants being made available to all local
authorities under uniform conditions. After the National
Government came into power in September 1931 grants were
offered on a much reduced scale and since January 1932 no new
schemes have been approved.
The works for which the Committee provided financial
assistance included all works of public utility normally undertaken by eligible authorities, with the exception of work grantaided from the Exchequer through other sources. They consisted
chiefly in seweiage schemes, water supply, extension and improvement of docks and harbours, electricity supply, the widening and
reconstruction of unclassified roads, etc. A number of other
useful plans were also approved, including sea and river defence
wprks, land reclamation and flood prevention, the levelling,
draining and laying-out of land for aerodromes, parks, and
recreation grounds, etc. During the twelve years of the Committee's work, the number of schemes approved for grant was
17,640, the total cost being estimated at approximately £191
millions.
In Hungary the Ministry of Finance has introduced a Bill
authorising the issue of Treasury bonds up to an amount of
approximately 10 million gold pengö to cover the expense of
certain definite public works projects. The capital and interest
of this loan are exempt from all taxation and from existing or
future stamp or other duties.
Moreover, the Ministry of Commerce is authorised to carry
out the construction of roads up to a cost not exceeding
10,500,000 gold pengö. The Ministry of Finance and the Ministry
of Commerce must keep Parliament informed of the amount of
bonds issued and the utilisation of the money.
1
MnsriSTBY OF LABOTJK : Final Report of the unemployment Grants Committee
20 December 1920 to 31 August 1932. Cmd. 4354. London, 1933. 35 p p .
BECENT TRENDS
19
In Italy the extensive public works undertaken on the basis
of a comprehensive plan drawn up in 1922 are one of the most
important features of the efforts made by the Government to
restore the economic situation of the country and reduce
unemployment. Since December 1922 the Italian Government
has had full powers to reform the system of public works. Its
first reform in 1923 was to concentrate under the Ministry of
Public Works the various services scattered over other Ministries
and to amalgamate the supervisory bodies into a single central
service with three sections, one for north Italy, one for the centre
and one for the south. The next step was to set up seven
inspectorates for public works with extensive administrative and
financial powers (Provveditorati alle opere pubbliche). In order
to supplement these measures and completely unify the organisation and execution of public works the Government set up in
1928 an independent Road Board (Azienda autonoma statale della
Strada) attached to the Ministry of Public Works. In 1929 it
amalgamated into a single department (Sotto-Segretariato della
bonifica integrale) the various services dealing with land improvement which were previously attached to the Ministries of Public
Works and National Economy.
The third section of this chapter gives fuller information on the
nature of the work undertaken by the Italian Government in this
field, but the following figures will give some idea of the extent of
its activities. Prom October 1922 to October 1932 the Italian
Government spent on various types of public works, including
land improvement, a total of 24,709 million lire.1 This figure
represents only the actual expenditure during the period in
question. In order to have a complete picture it would be
necessary to add the sums voted in the budgets which represent
the commitments accepted by the State during that period in
respect of work completed or in course of completion, for which
payment will not become due until some future date. If these
figures are taken into account it will be found that the three most
important departments concerned with public works have committed themselves to an expenditure of 36,990 million lire, of
which 28,441 millions is being spent by the Ministry of Public
Works, 3,357 millions by the independent Road Board, and
5,192 millions by the Department for Land Improvement.2
1
The total amount spent by the State on public works during the 60 years
prior to 1922 has been estimated a t about 21,500 million lire. (Cf. D E
STEFANI : L'Azione dello stato italiano per le opere pubbliche dal 1862 al 1923-1924.)
1
MrmsTEBO D E I LAVORI PUBBLICI : Opere pubbliche, 1922-1932. Rome, 1933.
20
PUBLIC WOBKS POLICY
With regard to land improvement, the Mussolini Act of
24 December 1928 marks the most important stage in the efforts
made b y Italy t o develop rural activities to the maximum. The
purpose of t h a t Act was to co-ordinate all the activities of rural
development by providing the necessary financial resources for
giving effect to jiumerous earlier laws on the subject. By t h a t
Act the idea of rural development was given concrete form in a
scheme comprising drainage, irrigation, t h e building of villages and
agricultural buildings, aqueducts and railways. At a later date
the Royal Decree of 13 February 1933 not only co-ordinated all
the existing provisions concerning land improvement but also
added some further regulations and ensured more systematic
organisation of the work. 1
The report recently presented by the Under-Secretary of
State for Land Improvement to the Head of the Government
contains some interesting facts on the development of this work
during the year 1932-1933. The work of land improvement which
has already been completed or is in course of completion affects
an area of 4,276,000 hectares 2 (almost 14 per cent, ofthe total area
of Italy). Part o f t h e work, covering 1,491,000 hectares, aims at
ensuring the continued existence and development of the more
or less intensive forms of cultivation already in existence. The
work in almost double t h a t area (2,785,000 hectares) consists in
making the land fit for intensive cultivation and a denser population, where primitive and uneconomic methods of cultivation have
hitherto prevailed.
The work undertaken by the State was completed at the
end of 1933 or practically completed in an area of 2,091,000
hectares.
I n Japan the policy of currency inflation pursued since
December 1931 has been accompanied by a large-scale policy of
public works, financed in 1932 and 1933 u p to a total of
400 million yen by Government loans from the National Bank.
The total expenditure on public works, which was 244 million yen
in 1932 and 443 million yen in 1933, is provisionally estimated at
205 million yen for 1934. These figures apply to all the works
undertaken on Japanese soil and are not comparable with those
given on page 44, which relate exclusively to certain works
1
Cf. ABRIGO SERPIERI, Under-Secretary of State for Land Reclamation.
Integral Land Reclamation. London, Ernest Benn, Ltd. New York, The
Macmillan
Company.
2
1 hectare=2-471 aerea.
RECENT TRENDS
21
undertaken by the local authorities under the supervision and
with the financial assistance of the Minister of the Interior.
In Lithuania an Act of 22 December 1933 1 set up a special
fund amounting to 2 million litas per annum to finance schemes
to provide work for the unemployed.
In the Netherlands Parliament adopted a Bill on 28 June
1934 providing for the inclusion in the budget of a fresh credit
of 60 million florins to finance public works.
The preamble to this Bill states that the Government proposes
to devote the credit to the execution of works providing occupation for as many of the unemployed as possible. The Government
will be guided by the same principle in fixing the wages of the
workers so employed, and will also seek to adapt the cost of
executing the works to present economic conditions. The credit
will be administered by a committee under the chairmanship of
the President of the Council, comprising the chiefs of all the
Ministries concerned, and the Government also proposes to
consult the employers' and workers' organisations in each
specified case. The scheme of works comprises the construction
of a navigable waterway from Amsterdam to the Rhine and
from Groningen to the Zuyder Zee, the correcting of the course
of the Maas, and the improvement of means of communication,
particularly around Amsterdam and Rotterdam, where unemployment is specially severe. It is stated that the present credit
is only a first instalment, the Government intending to ask for
further appropriations should the public works scheme prove to
be of value.
In Poland, the first step towards co-ordinating the planning
and financing of the public works undertaken by the State was
the creation of the Employment Fund, the detailed organisation
and working of which will be studied later.2
Early in 1934 the Government took a further important step
in this direction by drawing up a programme for all the capital
expenditure provided for in the State budget, the State monopolies
budget and the budgets of various independent funds (Employment Fund, Investment Fund, Military Cantonments Fund, Land
Reform Fund, Housing Fund). This programme covers the
financial year 1934-1935 and is intended as a basis for future
programmes extending over several years.
1
Vyriausybès Zinios, 22 Dec. 1933.
• See p. 85.
22
PUBLIC WOEKS POLICY
The appropriations for 1934-1935 are allocated as follows
over the different types of works :
Appropriations
(millions of zloty)
Construction of Government buildings...
54-3
Eoads
46-0
Navigable waterways
...
...
...
10-1
Railways
72-3
Miscellaneous capital expenditure (urban
development, land improvement and
electrification)
105-5
Building of houses
32-5
Total
320-7
Probable number of
workers employed
28,300
21,500
6,300
32,500
55,000
70,000
213,600
I n Portugal, under Decrees issued on 19 September 1932,1 the
Government substituted for the unemployment relief scheme a
series of measures intended to provide the unemployed with
employment on public works. To this end it set up a Commissariat of Unemployment under the Ministry of Public Works
and Communications, which has attached to it an Advisory
Committee including representatives of employers and workers.
The principal duties of this Commissariat, which has an Unemployment Fund a t its disposal, are to inform the proper authorities
as to the districts where public works should preferably be
undertaken and to receive applications for labour.
I n order to ensure close collaboration between the State and
the local authorities in carrying out public works directly affecting
the rural population, the Government has set up a special service
responsible, in particular, for the development of municipal and
local roads, the rectification of river courses, land levelling, water
storage and supply, and re-afforestation schemes, etc. This
service, which is a branch of the Autonomous Road Board, has
made great progress since the coming into force of a Decree of
20 November 1933,2 allotting a grant of 100 million escudos in
annual instalments of 10 million each for rural improvement
schemes to be carried out between the financial years 1933-1934
and 1942-1943. The State is to bear 50 per cent, of the labour
costs entailed by these works, the remaining expenditure being
met by the public corporations and local authorities. A further
sum of 1,000 million escudos, in annual instalments of 100 million
over the same period, has been allotted for the construction and
upkeep of national roads over a total length of 16,000 kilometres.
The scheme drafted by the Autonomous Road Board for
1934-1935 includes the construction of 445 kilometres and the
repair of 1,192 kilometres of national roads. The cost of this
1
2
Diario do Govèrno, First Series, No. 230, 30 Sept. 1932.
Diario do Govèrno, First Series, No. 265, 20 Nov. 1933.
KECBNT TRENDS
23
scheme, including a certain amount of bridge building and
repairing, will amount to 132 million escudos.
I n addition to its rural improvement schemes, the Government has extended its policy of collaborating with the local
authorities in the development of villages, small towns and cities.
The costs incurred for planning, technical assistance, and labour
are shared between the State and the authorities concerned; all
other expenditure, in particular on the acquisition of land, the
supply and transport of materials, etc., is as a rule borne b y the
local authorities.
I n execution of the public works scheme planned on the lines
described above, the State financed 2,913 public works, either by
special grants or by appropriations out of the Unemployment
Fund. The total cost of these schemes, which were carried out
between October 1932 and February 1934, amounted to over
209 million escudos, the State share of this sum being 78,500,000
escudos.
I n addition to the works already enumerated, mention must
be made of the construction with the aid of special loans of
various ports, hospitals, and higher schools, and of the building
of 1,700 cheap dwellings at Oporto, and the completion of a
workers' settlement in Lisbon. As regards sanitation works, the
Government, in conjunction with the local authorities, has taken
the necessary steps to extend the water supply system, to install
and repair the drainage system in several large towns, etc. I n
this connection, special reference may be made to the scheme of
works planned by the town of Oporto for the next two years,
under which drainage is to be installed in some 20,000 houses at a
cost of about 100 million escudos. To finance this scheme the
municipality of Oporto has been authorised by the Government
to issue bearer bonds up to a total of 50 million escudos with a
nominal value of 100 escudos each, and secured by mortgage on
the buildings affected by the scheme.
I n Spain an Act was adopted on 7 July 1934 providing for a
scheme of public works likely to increase employment. The funds
necessary for this scheme were t o be obtained by means of a loan
of 50 million pesetas.
The Government of Sweden decided to undertake a policy of
public works associated with a suitable banking policy with a
view to checking the spread of unemployment, which was very
considerable in the autumn of 1932. I t therefore set up a Commission to prepare a list of the works which might be included in
the programme. The report of the Commission, dated 3 December
24
PUBLIC WORKS POLICY
1932, proposed two types of work : those which could be undertaken immediately and others which could be spread over a
number of years. In all, the Commission recommended 3,300
schemes involving an expenditure of 195 million crowns for
immediate work and 320 millions for work to be performed later.
Of these proposals, 690 costing 85 million crowns would be
undertaken by the State, 1,600 costing 304 millions would be
carried out with a State subsidy, 730 costing 89 millions by the
local authorities without a subsidy, and 320 costing 35 millions
would be considered as private work of public utility.
For the year ending June 1934 the Government authorised a
loan of 150 million crowns for the purpose of putting in hand the
first instalment of this work. This sum, most of which will be
paid off in five years, has been used among other things for the
so-called reserve works, construction of public buildings, reafforestation and drainage, the building of private houses,
bridges, harbours, etc. I n a supplementary budget the Government asked for a further sum of 30 million crowns to be obtained
by borrowing. The budget for 1934-1935 includes a further sum
of 125 million crowns which the Government would also be
authorised to obtain by borrowing.
Total loan expenditure during the year ending June 1934
amounted to 250 • 6 million crowns, representing about 25 per cent.
of the total budget. The estimates for 1934-1935 include a loan
expenditure of about 220 million crowns.
I n Switzerland the question of organising large-scale public
works as a means of reducing unemployment was considered
during the crisis of 1921, when the Confederation included about
115 million Swiss francs in the extraordinary budget for the
purpose of subsidising relief works and encouraging the building
of houses, and 66 million francs for Government construction and
various supplies.
The question was again considered on a larger scale during
the present depression and resulted in the adoption by Parliament
of several motions urging the carrying out of a big programme of
public works throughout Switzerland. As a result of these
proposals the responsible Government departments have investigated a certain number of still larger programmes with the aid
of experts. One of these 1 provides for the setting up of a Crisis
F u n d with a capital of 500 million francs which would be expended
1
Ferdinand ROTHPLETZ and Robert GRIMM : Krisenbekämpfung
und
Arbeitsbeschaffung, Gutachten erstattet dem eidgen. Volkswirtschaftsdepartement, Verlag A. Francke, A.G., Berne, 1934, 132 p p .
RECENT TRENDS
25
over a period of years at the rate of about 50 millions a year ;
26 millions for railways, 3 • 3 millions for the telegraph and telephone administration, 6-7 millions for the rebuilding of old
houses, 10 millions for relief works, 2-5 rnillions for the construction of grain elevators, etc.
Another programme 1 provides for an expenditure of 700 million
francs in 1935-1942 devoted to road construction, hydraulic
work, etc.
As a result of these proposals and programmes the Federal
Council submitted to Parliament on 9 October 1934, with a
Message, a draft Order " concerning the creation of employment
openings and the struggle against the depression " 2 which
provides in particular for a supplementary expenditure of
40 million francs for the carrying out in 1935 and 1936 of various
railway and fortification works and for the encouragement of
relief works and a certain number of other measures to alleviate
unemployment. Previously, the Federal Council had created a
special office 3 called the " Central Office for the creation of
employment openings " whose task is to co-ordinate all public
works and, if possible, private undertakings throughout the
Confederation, so as to distribute them suitably in time and
determine where they shall be carried out, and to encourage by
grants the creation of new possibilities of employment.
Apart from these exceptional measures, the Confederation,
the cantons and the communes have, during the last few years,
carried out a considerable volume of work falling within their
normal programmes and on which information is given elsewhere
in this report. 4
I n the United States the Roosevelt Administration, which came
into power on 4 March 1933, decided to include among its recovery
measures a scheme of public works conceived on a large scale and
financed by loan, The underlying principles of this scheme were
explained by Senator Wagner when he presented the original Bill
to the Senate Committee on Finance. He said :
" T h e u n d e r l y i n g principles of t h e public w o r k s p r o p o s a l are, in m y
j u d g m e n t , t o o clear for d i s p u t e :
" (1) A v a s t n u m b e r of m e n are w i t h o u t w o r k .
They must be and
a r e b e i n g m a i n t a i n e d a t public expense. I s u b m i t t h a t it is
1
Report by Mr. KAKCH, Engineer in the Federal Military Department,
analysed in the Message of the Federal Council to the Federal Assembly relating
to the creation of employment openings and other methods of combating the
crisis. Feuille fédérale, 17 Oct. 1934, p p . 447 et seq.
2
Cf. Feuille fédérale, 17 Oct. 1934, pp. 401 et seq.
3
See below, page 142.
1
Cf. page 53.
26
PUBLIC WORKS POLICY
s o u n d e r business, b e t t e r g o v e r n m e n t , a n d a m o r e h u m a n e
policy t o p a y these m e n for useful w o r k t h a n t o k e e p t h e m in
idleness.
" (2) W e c a n n o t emerge from t h e depression u n t i l t h e r e is a s u s t a i n e d
r e s u m p t i o n of e n t e r p r i s e . T h a t c a n n o t occur t h r o u g h p r i v a t e
initiative alone u n t i l business m e n see a p r o s p e c t of profit.
G o v e r n m e n t construction, however, is n o t u n d e r t a k e n for
profit a n d can, therefore, be i n i t i a t e d w i t h o u t w a i t i n g for a n
u p t u r n of business.
" (3) P u b l i c c o n s t r u c t i o n d i s t r i b u t e s p u r c h a s i n g p o w e r w i t h o u t a t t h e
s a m e t i m e a d d i n g t o t h e s u p p l y of c o m p e t i t i v e goods i n s e a r c h
of a c u s t o m e r . I t is therefore ideally s u i t e d t o serve a s a m e a n s
of p r i m i n g t h e p u m p of b u s i n e s s . " 1
The public works programme formed the second part of the
National Industrial Recovery Act which was approved on
16 June 1933. I t provided for a total loan expenditure of
3,300 million dollars on Federal and non-Federal public works
and works by certain private corporations. I n June 1934 an
additional $400 million was made available by Congress for the
same purpose, making a total of $3,700 million.
Of this sum $1,189 million was actually spent by 30 June 1934.
I n addition, $184 million was spent from regular departmental
appropriations. I n the previous fiscal year ending 30 June 1933
the total amount spent by the Federal Government on public
works was $481-9 million.
Of the $1,189 million spent in 1933-1934, $1,008 million was
spent on Federal projects; $87 million on works b y States and
local authorities and $94 million on works by private bodies
(railways, etc.).
B y 14 August 1934 the whole amount of $3,700 million was
allocated, with the exception of $36 million. The allocations
were made for the following purposes :
$ million
Federal projects (construction)
Non-federal projects (construction)
Kelief highways
...
...
Tennessee Valley Authority ...
Emergency Housing Corporation
Non-construction projects
...
Total
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
...
1,578
970
7
50
128
932
3,665
Included in the above allocations are $100 million for the
Farm Credit Administration, $400 million for the Civil Works
Administration and $323 million for the Civilian Conservation
Corps. A good deal of the work of the Civil Works Administration
1
Hearings before the Senate Committee on Finance, 22 May to 1 J u n e 1933,
p p . 8 and 9.
RECENT TRENDS
27
and the Civilian Conservation Corps was really construction
work.
The value of construction contracts awarded for public works
and public utilities, which was only $18-9 million in July 1933
rose rapidly to $92-7 million in October.
This is the first
month for which the figures rose above those of the corresponding
period of 1932. For the period January to July 1934 the monthly
average was §69 million as compared with $21-9 million in the
corresponding period of 1933. 1
B y a separate Act of 18 May 1933, a special corporation known
as the Tennessee Valley Authority was set up to maintain and
operate the Government's properties at Muscle Shoals, Alabama,
and to promote agricultural and industrial development there.
For this purpose the Authority was authorised to issue bonds
to an amount not exceeding 50 million dollars.
The money made available under the Roosevelt Administration for public works has caused an increase in practically
every category of Federal construction. Special reference may be
made to the building of dams and reclamation projects, partly
to control flood waters and improve navigation and partly to
develop hydro-electric power. The Public Works Emergency
Housing Corporation and the Subsistence Homesteads Corporation
were established to improve housing conditions and to make
available a better sort of life for people of low income. There has
also been a development of forest work through the Civilian
Conservation Corps. Reference may also be made to the Civil
Works Administration, the primary object of which was t o p u t 4
million unemployed men back to work between 8 November, when
it was set up, and 15 December 1933. I n fact, by the end of
the year over 4 million men and 150,000 women were in employment on civil works projects. The Civil Works Administration
provided a more rapid procedure t h a n t h a t of the Public Works
Administration. I t was financed in the first place by an allotment of §400 million from the Public Works Administration,
to which must be added §100 million from the Federal Emergency
Relief Administration and §200 million which it was expected
the States and local authorities would contribute. Subsequently,
a further sum of §450 million was allotted from money voted by
Congress, to enable these works to be continued until April 1934,
when they came to an end.
1
Survey of Current Business, Sept. 1934, p . 10.
28
PUBLIC WORKS POLICY
§ 3.—The Development of Public Works
The preceding section shows t h a t the desire to improve the
economic equipment of the country and at the same time to
reduce unemployment has led a number of Governments to set up
special bodies and prepare extensive plans of public works.
Some of these plans have not yet been put in hand and may not
be for a long time, while others are spread over such a long
period t h a t they will do little to increase the volume of employment in any particular year. Yet others really involve little
more than a transfer of amounts in the budget, the sums usually
devoted to public works under different sections of the
budget being added together and shown as one.
Can it then be said t h a t these plans really provide more money
for public works and fresh employment or even t h a t they make
good the decrease which can be noted practically everywhere in
the ordinary public works estimates of the public authorities ?
An attempt will be made to answer t h a t question in the hght of
the somewhat scanty information available.
An analysis of the annual budgets of States gives some idea
of the proportion expended on public works, but the value of
these figures is often very doubtful. In the first place it is not
always possible to determine in any given item what sum represents capital expenditure and what proportion goes to
administrative and staff expenses in the various departments.
The figures must therefore be analysed from this point of view,
which is by no means an easy task. On the other hand, the
public works budget is very often far from including all the sums
devoted to works or orders on behalf of the State. I n most
countries, for example, items which cannot easily be analysed
are shown in the budget of Ministries for National Defence;
these represent shipbuilding or fortification work and are therefore very important items in public works. Again, it may often
happen t h a t only the estimates and not the actual sums voted
are available, because the final accounts are drawn up after some
considerable delay. This may cause an appreciable discrepancy
in one direction or the other. When it is remembered further
t h a t there are frequent variations in the methods of showing
public expenditure, so that it is often impossible to follow the
development of one item in the budget from one year to another,
it will be realised t h a t the information given in the following
pages is very fragmentary and only approximate.
29
RECENT TRENDS
No statistics are available for Australia, showing the total
expenditure on public works by the Commonwealth Government
and the Governments of the various States. Some idea of the
volume of public works undertaken can, however, be obtained
from the statistics of loans :
AMOUNT OF LOANS FOR PUBLIC WORKS 1
(In thousands of i A)
Year
1925-1926
1926-1927
1927-1928
1928-1929
1929-1930
1930-1931
1931-1932
Commonwealth
AU States
Total
9,281
9,405
8,662
8,244
5,294
1,991
34,137
33,501
35,025
31,777
24,542
13,159
8,000
43,418
42,906
43,687
40,021
29,836
15,150
8,000
—
The Loan Council, at a meeting held on 21 June 1934, approved
net loan programmes of the Commonwealth and State Governments for 1934-1935 amounting to £A22,643,000, and it was
specifically stated t h a t there would be an appreciable increase
over the previous year in the amount available. 2
I n addition, considerable sums have been raised by taxation
for public works and for special relief works. This expenditure is
mainly incurred by the States.
Thus, for example, in Victoria total expenditure from the
Unemployment Relief Fund was as follows :
Year
1930-1931
1931-1932
1932-1933
Amount
£A
1,334,248
1,669,406
2,536,820
Most of this money was used for relief works, but part of it was
used for sustenance payments. I n the three months ending 31 .
December 1933 sustenance payments accounted for about 25 per
cent, of the expenditure.
In New South Wales, during the year 1932-1933, a total
sum of £A5,557,795 was made available by the Unemployment
Relief Council for public works. This money was allocated to
the big spending departments, primarily the Department of
1
From Dr. E . R. W A L K E R : Australia in the World Depression.
P . S. King & Sons, 1933. The figures are taken from the Finance
The figure for 1931-1932 is taken from the Wallace-Bruce Report.
2
The Age, Melbourne, 22 J u n e 1934.
x
G 8344
London,
Bulletin.
C
30
PUBLIC WORKS POLICY
Public Works, the Metropolitan Water, Sewerage and Drainage
Board, the Education Department and the Department of
Public Health.
I n Austria, according to a statement made by the Secretary
of State for the Development of Employment and of Tourist
Traffic, 68-5 million schillings were devoted by the State to
financing public works in 1933, thus providing employment
during the greater part of the year for more than fifty thousand
unemployed workers. The programme of public works for
1934 was estimated to cost about 200 millions and to provide
employment for about one hundred thousand persons.
The following table gives some information on the nature
and the cost of certain works 1 undertaken during the period 19291934:
Kind of works
1929
1930
1931
1932
1933
1934
23,100
34,100
3,500
43,20o 1
40,000 s
(In millions oí schillings)
Post, telegraph and telephone ...
Railways
Hydraulic work 2
1
45,069
127,000
51,500
45,734
94,900
57,300
26,703
75,600
48,600
19,960
28,500
26,900
Including 6-4 million schillings for works which are on the point of being carried out.
the contributions of the provincial and communal administrations.
Estimate.
3•Including
On the other hand, in the course of the period 1929-1933,
a total sum of 51-4 million schillings was devoted to the
construction of public buildings and 13-25 millions to the
construction of road bridges.
With regard to Belgium, reference has already been made to
the Public Works Fund, with a credit of 3,300 million francs
spread over a period of fourteen years, and the Road Fund, with a
sum of 1,400 millions at its disposal. This latter fund spent 642
millions on the remaking of 2,400 kilometres of road from 1928
to 1932.
The Ministry of Public Works also obtained an appropriation
of 451 millions for current road maintenance work (not including
the wages of roadmen), 9 millions for sewerage work, and
173 millions for extraordinary expenditure. On the other hand,
in the course of the period 1929-1934, 779 million francs have
been spent on hydraulic work, exclusive of the sums derived from
the Public Works Fund. The tables given below show the
development over the last few years of the expenditure onfpublic
1
Exclusive of road construction, for which detailed information is~not
available.
31
BECENT TRENDS
works in the ordinary and the extraordinary budget, and the
ratio of that expenditure to the total budget :
ORDINARY EXPENDITURE 1
Year
1929
1930
1931
1932
1933 2
1
Total budget for all
purposes
Ministry of Public
Works
Percentage
of total
Francs
11,546,156,36601
11,860,842,815-46
11,976,545,922-27
11,180,425,996-70
10,684,553,198-82
Francs
252,466,080-20
595,365,159-55
495,153,697-10
325,752,175-00
259,991,124-50
2-2
50
41
2-9
2-4
CHAMBEE DES EEPRÉSENTANTS, SESSION DE 1932-1933 :
pour l'exercice 1933. Exposé général.
' Budget estimates.
Budget des recettes et des dépenses
EXTRAORDINARY EXPENDITURE
1928
1929
1930
1931
19321
1933 1
Total budget for
all purposes
Ministry of Public
Works
Percentage
of total
411,130,179
681,045,760
596,101,125
685,980,000
310,291,000
818,184,169
296,910,646
447,486,000
354,775,000
342,410,000
229,910,000
662,280,000
72-2
65-7
59-5
49-9
74-1
80-9
Budget estimates.
The sums expended on the extension or improvement of
national equipment from 1929 to 1931 were entirely covered by
ordinaryrevenue without recourse to loans. In 1932, however, the
Government floated a loan to cover its extraordinary expenditure.
Taking the ordinary and extraordinary expenditure together, we
get the following result :
ORDINARY AND EXTRAORDINARY EXPENDITURE
1929
1930
1931
1932 1
1933 1
Budget estimates.
Total
Ministry of Public
Works
Percentage
of total
12,227,202,126-01
12,456,943,940-46
12,662,525,922-27
11,490,716,996-70
11,502,737,367-42
699,952,080-20
950,140,159-55
837,153,697-10
555,662,175-00
922,271,124-50
5-7
7-6
6-6
4-8
80
32
PUBLIC WORKS POLICY
In Bulgaria, the Ministry of Communications undertook,
during the years 1929-1934, the construction and repair of roads
for a total sum of 201 million levas, 1 of which 111-5 million levas
represent the cost of labour. During the same period, hydraulic
works (water pipes, etc.) cost 875 million levas, of which about
277 millions are represented by wages. Construction work was
undertaken by the above-mentioned Ministry during the same
period on 173 buildings, including schools, hospitals, administrative buildings, etc. The cost was 468 million levas, of which
100 millions constituted wages. The programme of construction
which is either proposed or in course of execution is estimated to
cost altogether 745 million levas.
I n Canada the capital expenditure of the Dominion Government during the years 1929-1934 is shown in the following table :
CAPITAL
EXPENDITURE
(000's omitted)
1929-1930 1930-1931 1931-1932 1932-1933
S
9,324
6,663
6,574
S
9,842
6,371
12,009
3,299
6,242
7,439
S
3,027
1,503
4,018
S
S
1,987 27,479
767 21,546
3,816 33,856
22,561
28,222
16,980
8,548
6,570
Canals
Railways ...
Public works
Total capital expenditure
Total
1929
to
1934
Estimated
1933-1934
82,881
To the above amounts must be added certain special expenditures on public works undertaken by the Dominion Government
in connection with unemployment relief under various Relief
Acts. These cover public buildings, harbour and river improvements, eümination of grade crossings, national parks, railways
and canals, etc., and include grants to the Department of
National Defence under the supervision of which unemployment
relief camps are operated. Expenditures of this type are as
follows :
SPECIAL EXPENDITURE BY DOMINION GOVERNMENT UNDER
RELIEF ACTS ON PUBLIC WORKS
Under
„
„
„
„
1930 Relief Act
1931
1932
1933
1934
Total
1
100 levas = about 3.70 Swiss francs.
.
.
.
537,000
5,170,000
1,086,000
7,619,000
408,000
.814,820,000
33
BECENT TRENDS
In addition to the above direct expenditure the Dominion
Government under various Relief Acts from September 1930
to April 1934 has made direct grants for public works carried
out by provinces and municipalities amounting to about
§40,000,000. These direct grants for public works have been
supplemented by loans to certain provinces for the same purpose
which by 31 March 1934 amounted to about §10,000,000. This
expenditure has been devoted chiefly to improvements on
highways, the construction of public buildings, sewers, water
works, and various other projects.
On 30 June 1934 the Dominion Government passed the Public
Works Construction Act which provides for expenditure up to
§40,000,000. This is to be distributed as follows :
Roads and bridges...
Railway lines, tramways ...
Canals and other inland waterways
Drinking-water supplies, sewage disposal
Work on sea and river (and lake) ports ...
Building and construction work ...
Telegraph and telephone ...
Other work ...
Total
..
..
..
..
..
1,276,000
75,000
1,273,200
16,500
11,298,100
22,993,750
57,500
2,700,000
839,690,050
The following table summarises Dominion expenditure on
public works from 1929 to 1934 :
SUMMARY OF NATIONAL PUBLIC WORKS EXPENDITURE
MARCH 1929 TO JUNE 1934
S
I Regular capital expenditure
...
...
...
82,881,000
I I Direct Dominion expenditure on public works
under Relief Acts
14,820,000
I I I Grants to provinces and municipalities...
...
40,000,000
I V Loans to provinces for public works ...
...
10,000,000
V Public Works Construction Act, 1934
39,690,050
Total
$187,391,050
In Czechoslovakia the public authorities spent 12,090 million
crowns during the period from 1918 to 1933 on public works.
Of this sum, 2,308 millions went to the Road Fund ; 1,061 millions
for land improvement; 1,062 millions for the construction and
maintenance of military buildings ; 740 millions for the régularisation of water-courses ; 723 millions for water supplies, etc.
The following table gives more detailed information on the
works carried out during the period 1929-1934, and on those
which are at present being carried out; the figures include
34
PUBLIC WOEKS POLICY
expenditure by the local authorities, and in certain cases by
public utility syndicates.
(In millions of crowns)
Kind of work
Works commenced in
1929, already
completed
Roads and bridges 1
Railways and tramways 2 ...
Land improvement.
Water pipes...
Canals, dykes, river p o r t s . . .
Hydro-electrical installation
Air ports
Electrification
Construction work (schools, administrative
buildings, houses) 3
Gasworks ...
Postal, telegraph and telephone administration
2,688
2,762
497
680
270
20
—
1,400
972
136
711
Works now
being carried
out
449
406-5
126
128
380
180
110
110
378
—
69
1
Including departmental roads and bridges.
* Exclusive of the public railways under the control of autonomous syndicates.
* Including building undertaken by the autonomous syndicates.
The works now being carried out are expected, on the basis
of estimates which have already been sent in, to cost 3,079 milhon
crowns.
In Estonia, a systematic organisation of public works was
decided upon by a Ministerial Committee set up in November
1924. This scheme constitutes the principal method of reducing
unemployment. During the period 1929-1934, works of this
kind cost 31,938,000 crowns, 1 of which 3-8 millions was for roads,
12-6 millions for railways, 1 • 5 million for land improvement, 3 • 5
millions for electrical installations, etc. On the other hand,
works costing a total amount of 6,319,000 crowns are at present
under way, while other works which have been proposed are
estimated to cost 64-9 million crowns.
I n Finland, relief works intended for the specific purpose
of giving work to the unemployed have been organised jointly
by the Government and the communes. During the years
1930-1933, these works cost respectively 50 million marks, 64
million marks, 105-8 million marks, and 70 million marks, of
which from 40 to 50 per cent, were spent in each year on roads
and bridges.
In France, as in most other countries, there are no general
statistics of public works undertaken by the different Government
departments. But, according to the general budget reports, the
1
One Estonian crown = about 0 • 92 Swiss franc.
35
BECENT TRENDS
appropriations voted to the Ministry of Public Works during
recent years were as follows :
1929
,
1930
1931-1932 (fifteen months)
1932 (nine months)
1933
1,772,692,000 francs
2,156,886,000
„
2,412,763,000
„
2,035,480,000
„
2,725,984,000
„
These figures can be taken only as revealing the general trend.
In order to arrive at the actual amounts devoted t o public works
one would have to deduct from these estimates the staff expenses
of the central administration, which may be estimated at
about 250 or 300 million francs a year during the period in
question.
. .
On the other hand, the public works budget is far from
covering all the sums voted for public works or Government
orders. Account should be taken, for example, of practically all
the sums voted for the restoration of the devastated areas, which
amounted to about 163 million francs in 1931-32, 100 millions
in 1932 (nine months), and about 108 millions in 1933. The
Department of Agriculture also obtained a sum of 190 millions for
1932, and 184 millions in 1933, for water works, rural engineering
and rural electricity supplies. The Public Health Department
was granted 150 millions in 1933 for the building of cheap houses
and the Department of Fine Arts obtained 75 millions in 1932
and 66 millions in 1933 for the preservation and repair of historic
monuments and palaces owned by the nation.
If one adds to these sums the further amounts which cannot
be definitely determined, but which are used by the Ministry of
W a r and the Admiralty, and if allowance is also made for the
expenditure of the Departments and municipalities, it may be
estimated that the budget of the Ministry of Public Works
represents little more than 35 or 40 per cent, of the total amount
spent annually in France on public works.
A study of the expenditure on roads provides some details as
to the actual increase in the amounts spent on public works and
the proportion of t h a t expenditure which appears in the budget
of the Ministry of Public Works as compared with t h a t in other
budgets.
36
PUBLIC WORKS POLICY
APPROPRIATIONS FOR ROADS
(In millions of francs)
Year
1929
1930
1931-1932
1932 1
1933
Nine months.
Appropriations in the
Public Works Budget
698
904
1,147
1,414
1,263
Appropriations in the
Budget of the Ministry
of the Interior
135
185
225
171
155
In 1930, when an appropriation of 1,089 million francs was
voted to the Department of Public Works and the Ministry of the
Interior for the maintenance and development of roads, the
Departments and municipalities spent over 2,000 million francs
for the same purpose.
Apart from the money derived from the ordinary budget,
considerable exceptional sums have been voted by Parliament
at various times in order to promote the immediate carrying out
of public works likely to provide employment for the unemployed.
Thus, an Act of 28 December 1931, which created a credit fund
for the departmental and communal authorities for the improvement of the national equipment, provided a sum of 3,476 million
francs for various works included in this programme, including
1,165 million francs for works under the control of the Ministry
of Public Works, 708 million francs for the Ministry of Agriculture,
701 million francs for the Ministry of Public Instruction and
Fine Arts, 400 million francs for the Ministry of Health and
Social Assistance, etc.
Moreover, the Ministry of Labour has urged the other Government departments to speed up the carrying out of works or the
conclusion of contracts for supplies, the cost of which might be
covered by the ordinary budgetary resources. All the abovementioned works are normal works carried out under normal
conditions. In addition, certain works have been undertaken
by the departmental and communal authorities for the sole
purpose of giving work to the unemployed. In respect of these
works, the authorities in question have either received subsidies
(Decree of 10 March 1931) or, where they have raised a loan,
grants towards the payment of interest (Act of 23 April 1932).
Finally, reference should be made to certain works undertaken
by public undertakings such as the public offices for the
provision of cheap houses, and which cost in 1932 and 1933 more
than 3,500 million francs. These works provided more than
20,000,000 days of work.
37
EECENT TRENDS
I t was mentioned above t h a t the total sums voted for public
works in Germany, as a result of a number of programmes p u t
forward in 1932 and 1933, amounted in June 1934 to about
5,448 million RM. As no definite data are available concerning
the ordinary estimates for public works, it has not been possible
to determine whether the various programmes in question really
involve new expenditure or whether they are simply transfers
from items in the ordinary estimates. Below will be found
certain data as to the expenditure of public authorities in
Germany during recent years :
TOTAL EXPENDITURE OF THE FEDERAL GOVERNMENT,
STATES AND MUNICIPALITIES
(In millions of RM.)
Financial year
1925-1926
1926-1927
1927-1928
1928-1929
1
Provisional figure.
• Estimate.
13,900
16,400
18,700
19,600
Financial year
1929-1930
1930-1931
1931-1932»
1932-19332
19,900
19,300
16,400
13,800
There was thus a decline of 17 per cent, from the year 1929-1930
to the year 1931-1932 and a decline of 31 per cent, to the year
1932-1933.
I n a study recently published by the Institut für
Konjunkturforschung concerning public finance in the national economic
system, the expenditure of the public authorities (Federal Government, States and municipalities) is subdivided into five groups :
(a) expenditure contributing to individual income : salaries,
wages and pensions ; (6) expenditure relating to the debt service
and accumulation of funds ; (c) expenditure on social insurance ;
(d) reparations ; (e) expenditure on economic production. This
last item includes expenditure on the purchase of materials,
building, loans for the building or purchase of houses, and
subsidies.
From 1928-1929 to 1931-1932 expenditure on economic
production decreased from 7,200 million RM., or 35-6 per cent.
of the total, to 4,500 millions, or 29-6 per cent, (the total
expenditure fell from 20,200 millions to 15,200 millions ; it will
be noted t h a t these figures do not coincide exactly with those in
the above table).
38
PUBLIC WORKS POLICY
The following figures, which show the money value of production in the building industry in recent years, also illustrate the
decline in public works.
Year
1927
1928
1929
1930
1931
1932
1933
(In millions of RM.)
Dwelling houses
2,900
3,200
3,500
3,000
1,700
600
'600-700
Industrial buildings
2,530
2,990
2,700
2,400 •
1,300
600
600
I t may also be noted t h a t the index number of industrial
production for a certain number of important industries
fell as follows: 1928: 100, 1930: 90-1, 1 9 3 1 : 73-6, 1932:
61-2, 1933: 69.
I n Great Britain, as elsewhere, it is impossible to obtain
complete and systematically compiled statistics of public works
as a whole during the period covered by the present report. The
following information is therefore quite fragmentary and throws
light on the general trend rather than on the amount of work
p u t in hand.
Total Government expenditure for all purposes chargeable
to revenue rose from £818 million in 1928-1929 to £881 million in
1930-1931 and then fell to about 779 million in 1933-1934. I n
1934-1935, the estimated expenditure is £792-5 million. Of
these sums Consolidated F u n d Services (interest payments,
etc.) declined from £413 million in 1928-1929 to £342 million
in 1932-1933 and Supply Services (Army, Navy and Air Force
and all Civil Services, including the Post Office) rose from £405
million in 1928-1929 to £518 million in 1932-1933. This represents
an increase of £113 million (28 per cent.).
The following table shows total expenditure in the national
budget on a variety of schemes for unemployment relief and
economic development. These expenditures relate to road
construction, exchequer contributions to local revenues, subsidies
to agriculture (mainly beet sugar cultivation), unemployment
grants and loans, coal mining subsidies, scientific services, oversea
settlement, export credits, trade facilities, Empire marketing,
the training of unemployed workers, and housing. All this
expenditure was financed by taxation.
39
RECENT TRENDS
GOVERNMENT EXPENDITURE FROM THE PROCEEDS OF TAXATION
ON SCHEMES OF UNEMPLOYMENT RELIEF AND ECONOMIC
DEVELOPMENT 1
(In £ millions)
1921-1922
1922-1923
1923-1924
1924-1925
1925-1926
1926-1927
1927-1928
1928-1929
1929-1930
1930-1931
Total
...
...
...
...
...
...
...
...
...
...
60-62
32-87
40-88
41-20
64-04
56-09
53-76
52-75
73-92
99-60
575-73
I t is the local authorities, however, which are responsible
for most of the public works carried out. The total expenditure
of local authorities in England and Wales, other than out of loans
for capital works, was £406 million in 1928-1929 and £433 million
in 1930-1931. I t is impossible to determine the exact proportion
of this expenditure devoted to public works, b u t a few examples
can be cited. Of the expenditure for the two budgetary periods
mentioned, sewers and sewage disposal accounted for £9-7
million and £10-5 million respectively, housing a n d town planning
for £32-6 million and £38 million, highways and bridges for
£47-6 million and £52-4 million, and electricity supply undertakings for £26 million and £30-4 million. All these sums relaté
to expenditure financed by rates (local taxes).
With regard to the capital expenditure of local authorities in
England and Wales, it is impossible to get a complete table with
exactly comparable figures for the whole period from 1920-1921
t o the present time. I t is clear, however, from such figures as
exist, t h a t expenditure of local authorities on capital development has varied enormously in the last thirteen years. The
expenditure out of loans for capital works rose from £94-4
million in 1920-1921 to £128-7 million in 1921-1922, then fell to
£50 million in 1923-1924, then rose steadily to £120 million iii
1927-1928, falling again to £90-5 million in 1928-1929. From
t h a t year a new series of figures commences showing a small
increase from £102-8 million in 1928-1929 to £110-9 million in
1930-1931. 2
The following table shows the expenditure on certain forms
of capital development in the years 1929-1930 to 1932-1933 (first
half), b u t again on a different basis. I t is moreover incomplete
1
Cf. SYKES : British Public Expenditure, p p . 33 and 68.
" BOABD OP T B A D B : Statistical Abstract for the United Kingdom,
p . 194. Cmd. 4233.
1933,
40
PUBLIC WORKS POLICY
because it excludes the expenditures of certain semi-public organisations, such as the Port of London Authority, the British Broadcasting Corporation and the Metropolitan Water Board. Section I
of the table shows the capital expenditure of the local authorities
in England and Wales and of the Central Electricity Board out of
borrowing sanctioned by Government departments. In all cases
the figures represent money raised by the authorities themselves
irrespective of Government grants. The item entitled " Other
Expenditure " includes borrowing for poor law, public health,
police, hospitals, small holdings and municipal trading. Section I I
shows the amount of Government grants in aid of specific schemes.
Only the Road Fund contribution has been included, for the
reason that in this case only does the Government contribute
directly to the capital cost of the undertaking. Section III
shows borrowing sanctioned by Act of Parliament. It will be
seen that the total expenditure fell considerably in 1931-1932
and again in the first half of 1932-1933, due in large measure to
the economy policy of the Government.
STATE CONTROLLED CAPITAL EXPENDITURE 1
1 April1 Oct.
1932
1929-1930 1930-1931 1931-1932
I. Borrowing b y local authorities,
etc., sanctioned by Government
Departments and Electricity
Commissioners :
Education
Housing
Roads...
Electricity
Other expenditure by local authorities
Central Electricity Board
8-8
36-0
8-8
17-8
13-0
32-3
11-6
160
7-8
22-7
6-4
14-2
1-6
11-1
2-0«
8-1
17-5
4-0
22-7
8-1
20-1
6-8
6-7
5-0
Totali
II. Central Government grants, Road
F u n d contribution to Class I and
Class I I roads ...
92-9
Total I and I I
Borrowing b y statutory powers,
etc. :
Post Office and Telegraph ...
L.C.C, borrowing
Borrowing b y Metropolitan
Borough Councils
Other borrowing
96-5
Total I, I I and I I I
...
Percentage change from previous year
121-4
III.
103-7
3-6
61
109-8
1-2
4-3
35-7
82-3
10-5
4-9
11-0
9-5
9-7
6-8
1-3
8-2
1-8
14-7
1-8
8-2
+
34-5
78-0
4-5 2
l
7-5 a
47-7
108-8
146-8
20-9% - 2 5 - 9 % - 1 2 - 3 %
1
Cf. ROYAL INSTITUTE OF INTEBNATION AL AFFAIRS : Bulletin of International Newt, Economic
Supplement, No. 1, March 1933.
- Estimates.
RECEXT TRENDS
41
I n 1933 the Government called upon local authorities to
prepare schemes for clearing away all slum areas within 5 years.
I t is anticipated t h a t these schemes will involve an expenditure
of about £95 million. Programmes approved up to the beginning
of October 1934 provided for clearing about 280,000 houses by
September 1938. About 25,000 houses had actually been built
and about 17,500 were under construction. Financial assistance
is also to be given by the Government to local authorities to
enable them to reduce overcrowding by building the necessary
alternative accommodation.
I n Greece, among the more important works undertaken by the
Government, reference may be made to the construction of a
network of roads of a total length of 1,700 kilometres, the cost of
which is estimated at 2,300 million drachmas, hydraulic works in
the Plain of Salonika, which are expected to cost 19 million
dollars, 1 and will be completed in April 1935, drainage works in
the Plain of the Struma and of Drama and in the marshes of
Philippi, the cost of which will reach 15 million dollars, 1 etc.
Among the works which are still under consideration, reference
may be made to the extension of the Port of Salonika, the cost of
which is estimated at 150 million drachmas, and also a big road
programme for which the Bank of Greece has undertaken to
advance 600 million drachmas to the Government by an agreement
signed on 27 August 1934. The Government estimates that, on
the average, 70 per cent, of the expenditure incurred on these
works represents wages, while about 30 per cent, represents the
cost of equipment and materials.
Reference has already been made to the extent to which the
Italian Government has developed its policy of public works. The
following figures will supply some details on the point. During
the period from 1922-1923 to 1931-1932, the expenditure on public
works was 15,057,679,815 lire on the budget of the Ministry of
Public Works and 9,650,910,677 lire on the budgets of other
ministries. 2
During the five years from 1928-1929 to 1932-1933, the sums
expended by the Ministry of Public Works, the Road Board and
the Department for Land Improvement were allocated to the
following types of works, as shown in the table. 3
1
These figures are given in dollars as they are to be carried out by American
contractors.
2
MINISTERO D E I LAVORI PUBBLICI : Opere Pubbliche, 1922-1932. Rome,
1933.
3
Information supplied by the Ministry of Corporations.
42
PUBLIC WORKS POLICY
EXPENDITURE BY THE MINISTRY OF PUBLIC WORKS AND BY THE ROAD
BOARD ON D I F F E R E N T TYPES OF WORK AND SERVICES FROM
1 9 2 8 - 1 9 2 9 ONWARDS
{Provisional figures, in thousands of lire)
Categories of work
Roads:
(a) New roads (Ministry of
Public Works)
(6) Roads (under the Road
Board)
Waterworks
Inland navigation 1
Utilisation of public water
supplies
Maritime work ...
Public buildings (civil and military)
School buildings2
Cheap houses
State railways (new lines)2
Aqueducts and health work ...
Reconstruction after earth quakes
...
Reconstruction after the war...
Prevention of landslides and
repair of damage by flooding
Administrative expenditure ...
1928-1929
1929-1930
1930-1931
1931-1932
1932-1933
Total
218,361
181,164
128,924
120,973
177,847
827,269
279,114
179,287
30,345
540,855
151,440
23,703
441,982
138,211
28,234
404,592
150,592
37,085
369,923 2,036,466
214,523 834,053
60,058
179,425
48,423
206,427
46,847
186,173
62,897
153,269
93,480
135,660
123,460
174,377
375,107
857,006
112,996
3,621
98,695
217,891
66,009
71,639
4,174
90,776
186,769
76,893
56,684
5,404
79,245
124,384
103,271
64,856
20,649
87,013
252,425
54,646
100,320
25,398
88,415
104,578
163,764
406,495
59,246
444,144
886,047
464,583
174,660
37,456
95,331
20,167
175,690
20,108
115,205
15,557
109,337
13,000
670,223
106,288
47,032
132,150
46,215
127,998
48,767
117,634
58,637
114,868
90,465
130,704
291,116
623,354
1,852,467 1,850,144 1,684,704 1,726,238 1,946,169 9,060,822
Land improvement (included in
the budget of the Ministry of
Agriculture and Forestry
since 1929-1930)3
1
2
s
195,535
183,244
164,251
211,487
273,585 1,028,102
Mostly subsidies for one year only.
As a general rule, loans contracted by the Departments responsible for the work,
Mostly annual contributions from the State.
The following information concerning the work undertaken by
the central authorities and by the local authorities and pubhc
corporations (with the help of State subsidies) covers the same
period 1928-1932.
43
RECENT TRENDS
VALTJE AND EXTENT OF PUBLIC WORKS UNDERTAKEN BY THE
STATE,1 THE LOCAL AUTHORITIES AND PRIVATE INDIVIDUALS
SUBSIDISED 2 BY THE STATE FROM 1928 TO 1 9 3 2 3
Year
1928
1929
1930
1931
1932
1
3*
Work undertaken by the
State
Work undertaken by the
local authorities
Number
of
schemes
Value In
thousands of
lire
Number
of
schemes
Value in
thousands of
lire
3,237
3,072
2,579
2,445
3,299
4,123,405
4,682,136
5,006,126
4,707,394
4,630,417
2,244
2,293
12,157
33,637
33,608
508,993
650,103
901,107
978,375
1,242,998
: Koad Board ; Department for Land Improvement.
From the budget of the Ministry of Public Works.
Information supplied by the Ministry of Corporations.
MINISTRY OÏ PUBLIO WOKKS
I t is not possible within t h e limits of t h e present Report t o go
into details of all the work carried out during t h e ten years for
which statistics are available. The following details concern
merely the work of land improvement during the years 19291932.
EXPENDITURE ON LAND IMPROVEMENT FROM 1 9 2 9 TO 1 9 3 2 1
(In mittione of lire)
Expenditure
authorised
Hydraulic work, etc.
1,733-6
Transformation of land in the public interest
89-3
Roads for the transformation of land
151
Reclaiming mountainous regions...
151-6
1,989-6
Actual
expenditure
1,565-9
10-4
11
112-2
1,689-6
1
A. SEKPKRI : La Legge tutta Bonifica integrale nel terzo anno di applicazione. Home ; Istituto
Poligraflo dello Stato, 1933-XI. Ci. also by the same author : Integral Land Reclamation.
I n Japan public works were first undertaken in 1919 as a
remedy for seasonal unemployment, and it was only in 1925 t h a t
this measure was applied on an extensive scale. I n accordance
with the regulations issued at t h a t time, the Government agreed
to subsidise public works undertaken by the six principal cities
of the country, paying 50 per cent, of the labour costs. This
subsidy was limited to work in which t h e labour costs represented
more than 30 per cent, of the total cost. The work was intended
chiefly to reduce winter unemployment and was therefore usually
begun in December and continued until t h e end of March. I n
1929, the authorities decided to subsidise public works throughout
44
PUBLIC WORKS POLICY
the whole country. I n December 1931, when the monetary
policy of the country changed, the Government prepared a
general plan involving an expenditure of 356 million yen over a
period of five years.
The following table gives a summary of the expenditure of
the Japanese Government on public works from 1925 to 1931.
EXPENDITURE ON PUBLIC WORKS BY LOCAL AUTHORITIES, 1 9 2 5 - 1 9 3 1
(In thousands of yen)
Year
Total
expenditure
Amount of
subsidies granted
to local authorities
Labour
costs
5,776
3,432
3,522
2,758
12,068
23,970
37,508
893
648
721
569
1,104
4,242
9,615
1,786
1,324
1,501
1,149
2,401
9,321
14,212
1925...
1926...
1927...
1928...
1929...
1930...
1931...
I n Latvia the increased unemployment led in 1931 to the
creation of a special fund which derives its resources from a tax
on wages, an equal amount paid by the employers, and various
other taxes, the main object of which is to finance a public works
programme. The total amount spent on public works during the
period 1929-1934, including those paid for out of the ordinary
State budget, can be seen in the following table 1 :
Year
1929-1930
1930-1931
1931-1932
1932-1933
1933-1934
Governmental
bodies
1,681,950
1,769,806
4,617,957
7,180,112
7,506,187
Municipalities
(In lats)
355,700
557,000
1,226,800
1,551,000
922,950
Private
organisations
Total
2,210
2,036
42,835
2,039,860
2,328,842
5,887,592
8,731,112
8,435,497
6,360
I n Lithuania, where the organisation of public works is the
principal method adopted for reducing unemployment, these
works, which are carried out in the form of relief works, have
involved during the years 1931-1933 an expenditure of about
3,600,000 litas; of which one-third is paid by the State and the
remainder by the municipalities. During the first five months
1
Communication from the Latvian Government.
45
BECENT TRENDS
of 1934, the expenditure on public works amounted to about
1,000,000 Utas.
I n the Grand-Duchy of Luxemburg, the public works carried
out during the years 1929-1934 cost 163-5 million francs, including
68,000,000 francs for road work, 38,000,000 francs for sewerage,
etc. The works now being carried out are estimated to cost
121,000,000 francs. The authorities consider t h a t about onequarter to one-third of the total expenditure goes in wages, this
proportion varying according to the kind of work.
In the Netherlands, no precise information is available with
regard to the expenditure on public works in recent years. The
Government, however, estimates this expenditure at several
hundred million florins per annum. With regard to works intended
specially for the purpose of giving employment to the unemployed,
it is estimated t h a t such works have given employment to an
average of 50,000 workers during each of the last four years.
With regard to New Zealand the folloAving table shows the
total expenditure of the Government and local authorities on
public works during the years 1927-1928 to 1931-1932, except t h a t
the figure for the expenditure of the local authorities in the last
year mentioned is not yet available.
EXPENDITURE ON PUBLIC WORKS,
Central
Year ending 31 March
authorities
1927-1928
1928-1929
1929-1930
1930-1931
1931-1932
..
..
..
..
..
6,925,000
7,648,000
7,505,000
8,221,000
4,634,000
.
1928-19321
Local
authorities
£
15,200,000
13,298,000
14,486,000
14,402,000
I n Nicaragua, reference may be made, among the principal
works undertaken during recent years, to the construction of 600
kilometres of roads, 155 kilometres of railway, and a considerable
number of public buildings, to replace those destroyed by the
earthquake.
I n Norway, the following works have either been carried
out in recent years or are actually being carried out : the construction of 700 kilometres of railway, costing altogether
300,000,000 crowns; 2,000 kilometres of roads which have
cost, since 1929, 70,000,000 crowns, of which 20,000,000 are
paid by the communes; canals (6,000,000 crowns since 1929),
etc. I n addition, various road works have been undertaken by
1
New Zealand Official Year-Book,
1933, p p . 425-426 and 479.
Wellington,
1932.
x
Q 8344
D
46
PUBLIC WORKS POLICY
the communes without the assistance of the State, with a view
to giving employment to the unemployed.
The budget estimates for public works in Poland1 in the five
years from 1929-1930 to 1933-1934 are shown in the following
table :
ORDINARY PUBLIC WORKS
(In thousands of zloty)
1929-1930 1930-1931 1931-1932 1932-1933 1933-1934
Building (including the extraordinary military budget)
State railways 1
Port of Gdynia
Publio works :
Waterworks
Eoads and bridges
Government buildings ...
Reconstruction after the
war
Military undertakings
Postal, telegraph and telephone service 1 ...
State health resorts, industrial undertakings, etc.
Total
Total, exclusive of railways
and postal service
70,030
276,000
23,000
77,300
210,000
24,500
61,250
180,000
5,300
27,140
40,870
9,600
13,750
8,400
25,000
5,500
8,620
22,400
5,100
9,100
30,000
6,950
2,500
100
750
2,180
2,460
10,000
19,500
10,000
17,500
4,900
11,450
10
7,350
6,300
i
i
i
i
40,000
32,450
24,500
11,800
11,150
12,040
7,240
1,900
489,230
419,020
345,490
54,690
67,460
173,230
176,570
140,990
54,690
67,460
1
From 1932-1933 onwards, the State budget shows only the n»t surplus receipts of the State
railways and postal, telegraph and telephone service, so that it is impossible to determine the
amount paid by these two Departments for public works ; these sums are probably considerable.
During the same five years the total estimated State expenditure for all purposes was as follows :
TOTAL BUDGET ESTIMATES AND PUBLIC WORKS
ESTIMATES
(In thousands of zloty)
1929-1930
1930-1931
1931-1932
1932-1933
1933-1934
Total estimates (excluding State monopolies) 2,787,790 2,940,930 2,865,880 2,451,920 2,457,980
Total estimates for ordinary public works
489,230
419,020
345,490
—
—
Ordinary public works
as percentage of total
estimates
17-5
14-2
12-1
All the figures relating to Poland are budget estimates.
BECENT
47
TRENDS
These tables show that the estimated State expenditure on
ordinary public works has tended to decline in recent years not
only in absolute figures but also as a percentage of the total
estimates.
The next table shows the decrease in the total estimated
expenditure of the Government and the estimated expenditure
on public works during the period in question, as compared with
1929, which is taken as a basis. In order to be able to include
the last two budgetary periods, it has been necessary in reckoning
the expenditure on public works to deduct the capital expenditure
of the State railways and the postal, telegraph and telephone
service, for which no figures are available for 1932-1933 or 19331934. It is believed that the rate of variation in that expenditure
has been the same as for pubHc works in general so that the
exclusion of these two groups does not seriously affect the
comparison.
INDEX
NUMBERS
OF
ESTIMATED TOTAL E X P E N D I T U R E
WORKS E X P E N D I T U R E
AND
PUBLIC
(1929-1930=100)
1929-1930 1930-1931 1931-1932 1932-1933 1933-1934
Expenditure on public works
(excluding railways and
postal service)
Total Government expenditure
Current expenditure (total
expenditure less expenditure on public works)
100
101-9
81-5
31-6
38-9
100
105-5
102-8
87-6
88-2
100
109-6
109-7
~~
It will be seen that the expenditure on public works has fallen
much more than the total Government expenditure. From
1929-1930 to 1932-1933 the general estimates fell by less than
13 per cent., while the estimates for public works fell by almost
70 per cent.
Certain figures are also available concerning the capital
expenditure of local authorities. These figures are taken from a
study published by the Central Statistical Office on " Statistics
of Local Authorities " (Warsaw, 1933), which contains a summary
of the final accounts of twelve important cities (of over 100,000
inhabitants each) and of certain district or departmental authorities. The expenditure of the departmental authorities on public
works is so insignificant that it can be left out of account.
D 2
48
PUBLIC WORKS POLICY
ESTIMATED EXPENDITURE OF CERTAIN CITIES ON PUBLIC WORKS
(In thousands of zloty)
Building of various kinds
Roads and streets
Drainage, water supplies, etc. ...
Capital expenditure of municipal undertakings
Total
1929-1930
1930-1931
10,600
20,180
23,600
43,800
6,600
20,000
8,900
15,710
98,180
51,210
The total expenditure of these cities and the expenditure on
public works during the two years in question are shown below.
TOTAL
ESTIMATED
EXPENDITURE
OF
TWELVE
CITIES
AND
EXPENDITURE ON PUBLIC WORKS
Year
1929-1930
1930-1931
(In thousands of zloty)
Total
Expenditure on
expenditure
public works
(1)
(2)
388,870
98,180
370,920
51,210
Column (2) as
percentage of col. (1)
(3)
25-2
13-8
The corresponding figures for district authorities and towns of
between 20,000 and 100,000 inhabitants are given below.
ESTIMATED EXPENDITURE ON
AUTHORITIES AND TOWNS
INHABITANTS
PUBLIC WORKS OF DISTRICT
OF FROM 2 0 , 0 0 0 TO 1 0 0 , 0 0 0
(In thousands of zloty)
Building
Drainage and water supplies, etc.
...
...
Roads a n d streets
Capital expenditure of municipal undertakings
Total
1929-1930
13,660
6,700
47,700
17,900
85,960
1930-1931
7,780
4,230
38,710
17,510
68,230
TOTAL ESTIMATED EXPENDITURE OF DISTRICT AUTHORITIES AND
TOWNS OF 2 0 , 0 0 0 - 1 0 0 , 0 0 0 INHABITANTS AND EXPENDITURE
ON PUBLIC WORKS
Year
1929-1930
1930-1931
(In thousands of zloty)
Total
Expenditure on
expenditure
public works
(1)
(2)
350,800
85,960
340,870
68,230
Col. (2) as percentage
of col. (1)
(3)
24-5
20-0
I t would be possible to reckon the total expenditure of the
public authorities, both central and local, on ordinary public
works by adding the various sums contained in the preceding
tables. In view, however, of the variety of sources from which
the data have been taken (estimates and closed accounts) and
the possibility of reckoning the same expenditure twice (e.g., in
RECENT TRENDS
49
the case of State subsidies to local authorities for the performance
of certain work, the subsidies being shown in the State estimates
and those of the local authorities concerned), it has been thought
preferable not t o make this calculation. I t may, however, be
useful to summarise the results in a final table.
ESTIMATED
EXPENDITURE OF THE PUBLIC AUTHORITIES
PUBLIC WORKS AND TOTAL EXPENDITURE
ON
(In thousands of zloty)
Total
expenditure
Expenditure on
public works
(1)
(2)
Col. (2) as a
percentage
of col. (1)
(3)
\ Local authorities .
2,787,790
739,670
489,230
184,140
17-5
24-9
\ Local authorities .
2,940,930
711,790
419,020
119,440
14-2
16-8
1931-1932 / S t a t e
...
.
\_ Local authorities .
2,865,880
345,490
12-1
\ Local authorities .
2,451,920
1933-1934 | L o c a l authorities .
2,457,980
I t must be remembered t h a t the above table does not include
information concerning small towns (under 20,000 inhabitants),
rural communes or departmental authorities. The figures relating
to the departmental authorities have been left out of account as
being of little practical importance; with regard to the other
two groups no statistics are available.
Prom all this information as to the volume of ordinary public
works in Poland (leaving out of account the activities of the
Employment Fund, which will be dealt with below), it may be
concluded t h a t the activities of the public authorities in this
direction have shown a marked decrease during the depression.
The expenditure on ordinary public works has proved much more
elastic in a downward direction than the general current expenditure of the Government and the local authorities. Current expenditure increased by 9-7 per cent, from 1929-1930 to 1931-1932,
while the expenditure on public works fell by 30 per cent. I t
is true that since that date (up to 1933-1934) current expenditure
has also fallen considerably, but the rate of reduction in the expenditure on public works has been still greater.
50
PUBLIC WORKS POLICY
The fall in public expenditure and particularly in the expenditure on ordinary public works is significant of the results of the
economic depression in Poland. Certain indices of the decline in
economic activity of the country may be given for purposes of
comparison.
DECLINE IN ECONOMIC ACTIVITY IN POLAND
Date
1930
1931
1932
1933
Index of
production
Capital
issues
Employment
index
Index of the
building
industry
100
84-1
65-6
67-8
100
36-4
62-0
16-0
100
85-1
72-9
72-6
100
58-1
31-9
26-9
I n addition to ordinary public works (capital expenditure in
the strict sense) the State has voted certain amounts for relief
work for the unemployed. Up to the end of 1933 most of this
work (90 per cent.) was undertaken by the local authorities
with the help of subsidies or advances from the State. Since
1 April 1933 the Employment Fund has been engaged in
centralising all the work of the public authorities in finding
employment for the unemployed. The work financed by the
Employment Fund still aims chiefly at providing employment,
but it is not quite the same as the earlier relief work, since
financial assistance is given only for work which will show a
profit or which is of direct economic value, so t h a t it closely
resembles capital expenditure.
The following table shows the amounts spent by the Ministry
of Labour and Social Welfare in subsidies to local authorities for
relief work from 1930 to 1933 1 :
Types of work
1930
Roads...
BuUdings
...
Railways
Land improvement ...
Miscellaneous
6,000
2,000
600
700
3,500
Total
12,800
1931
(In thousarids
8,000
3,000
500
400
4,500
16,400
1932
1933*
(9 months)
of zloty)
6,500
1,000
700
300
3,000
6,000
500
500
200
2,500
11,500
9,700
* Since the fourth quarter of 1933 the Ministry ol Social Welfare lias ceased to pay direct subsidies
for relief works.
x
BEONISLAW OKTJLICZ : " Roboty publiczne w swietle dzialalnosci Ministerstwa
Opieki Spolecznej," in Praca i Opielca Spoleczna, No. 3 of 1933, p p . 215 et seq.
RECENT TRENDS
51
I t will be seen t h a t the sums devoted to relief works for the
unemployed have fallen somewhat since 1931. I n 1933, however,
one must add to the sums expended by the Ministry of Social
Welfare those paid by the Emplo3'ment Fund.
During its first year (1 April 1933 t o 31 March 1934) this
Fund spent a total amount of 49- 9 million zlotys. The following
table shows the different kinds of work carried out, and also the
programmes of the Employment Fund and the Investment Fund
for the financial year 1934-19351 :
COST OF SCHEMES FINANCED BY THE EMPLOYMENT
FUND AND
THE INVESTMENT FUND
(In thousands of zloty)
Employment Fund
Kind of works
Road making
River correction ...
Railway work
Land improvement
D i s t r i b u t i o n of e l e c t r i c i t y a n d g a s
Housebuilding
U r b a n development (water pipes, drains,
t r a m l i n e s , cold s t o r a g e , s l a u g h t e r houses, m a r k e t s , public p a r k s , etc.) ...
Public buildings
...
Miscellaneous
Assistance t o peasant proprietors
Total
Investment
Fund
1 April 1933 1 April 1934 1 April 1934
to 31 March to 31 March to 31 March
1934 (actual
1935
1935
expenditure) (estimates)
(estimates)
15,400
2,325
3,631
4,771
1,649
2,613
22,000
6,000
1,000
7,000
10,975
4,940
3,587
9,000
6,000
4,000
—
5,000
—
—
49,891
60,000
3,100
—
3,665
170
3,150
2,565
3,930
—
785
2,635
20,000
On the whole, then, there was a considerable increase in t h e
volume of public works specially undertaken to give employment
to the unemployed in 1933. The work carried out with the aid of
the Employment Fund in 1933 included the régularisation of about
146km. of water courses and the building of 39 km. of dykes, 37 km.
of embankments and 66 km. of new roads. The local authorities
used the sums granted thenr for the construction of 292 km. of
roads and streets. The work of land improvement included
32 km. of drain pipes ; 67 km. of water pipes and sewers were
laid, 14-2 km. of tramway lines, 49 km. of electric cables and
70 km. of gas piping. The advances made b y the Employment
* The organUation of the Investment F u n d is described on p . 96.
52
PUBLIC WORKS POLICY
F u n d were also used for the building of fifty-three elementary
schools with accommodation for 36,500 pupils, three hospitals
with a total of 210 beds, a physical training institute and a
clinic.
I n the Union of South Africa the ordinary expenditure of the
Government and the provinces on public works over a period of
six years ending 31 March 1932 is shown in the following table :
Year ending
31 March
1927
1928
1929
1930
1931
1932
Government
£
813,000
921,000
988,000
1,083,000
1,074,000
829,000
Provincial
administrations
£
1,275,000
1,326,000
1,493,000
1,638,000
1,623,000
1,696,000
The second column of the above table represents expenditure
by the Government on new works and buildings, maintenance
work, telegraphs and telephones, rent, rates, insurance, etc., and
administrative expenses. The third column represents expenditure by the provincial administrations on works, roads and
bridges and also includes administrative expenses. 1
The next table shows the number of men employed on
certain public works in the years 1931-1932, 1932-1933 and
1933-1934.
Employing body
1931-1932
Irrigation Department
Forestry Department
Provincial administrations, municipalities,
divisional councils and other Government Departments
S.A. Railways and Harbours
1,288
1,046
1,736
2,011
1,802
2,322
4,169
11,899
628
21,552
4,544
6,503
16,274
30,220
Total
1932-1933
1933-1934
I n addition to the works included in this table, the Department of Public Works spent the following amounts during the
same period :
Year
1931-1932
1932-1933
1933-1934
.*
Amount
£
629,151*
472,250
522,500
£1,623,901
• This figure is derived from a different source from that used in the first table above. It is
presumed that the £829,000 given in the first table refers to all the works covered by the two
following tables.
1
Official Year-Book of the Union of South Africa, 1930-1931, No. 13, p . 731,
and 1931-1932, No. 14, pp. 726-757.
53
RECENT TRENDS
For the financial year 1934-1935 provision has been made
for the following additional expenditure :
£
160,000
150,000
Anti-soil erosion
Bywoner rehabilitation scheme
Total
£310,000
Both these schemes will absorb large numbers of unemployed
men.
It is estimated that the various works outlined above will
absorb the large majority of physically fit unemployed, leaving
a balance of semi-fit, unfit and elderly men who are assisted by
charitable institutions, many of which are State-aided.1
The total expenditure of the Union for all purposes, so far as
it is financed by loan, is shown below. These figures include a
certain amount of expenditure by the provincial administrations.2
Year ending
31 March
1927
1928
1929
1930
1931
1932
1933
1934
1935
£
12,920,000
11,251,000
11,183,000
10,154,000
10,816,000
10,093,000
8,614,000
14,003,000
... (estimate) 14,026,000
In Switzerland there is some difficulty in drawing up a list of
public works, because they are carried out partly by the Confederation, partly by the cantons, and partly by the communes.
Some information is given below with regard, on the one hand,
to works carried out and financed from the ordinary budget, and
which as a rule have no direct relationship to the crisis, and
measures which have been taken to reduce unemployment, and,
on the other hand, to relief works undertaken during the crisis,
the principal object of which is to provide work for the unemployed.
With regard to the first of the above classes of work, it should
be pointed out that the Confederation does only a limited amount
of work on its own account, but, on the other hand, it participates
indirectly in works carried out in the cantons and communes for
which it grants subsidies. These works are for the most part
concerned with altering the courses of rivers and torrents, with
land improvement and re-afforestation, with the construction of
roads for rural and forest land development, etc.
The relief works are for the most part financed by the
cantons and the communes, the Confederation having confined
1
Communication from the South African Government.
» Official Year-Book, 1932-1933, No. 15, p . 802.
54
PUBLIC WORKS POLICY
itself hitherto to encouraging these works by paying subsidies on
account of the wages of unemployed persons who are as a rule
normally engaged in some other kind of work. These works
consist for the most part of road improvement, sewerage, playgrounds, sports grounds, improvement of agricultural land,
rearrangement of lots, re-afforestation, etc.
Finally, apart from these works, reference may be made to
the construction of dams for hydro-electrical generating stations.
For works of this kind, semi-official bodies have often been
created, composed of representatives of public authorities, b u t
organised in the form of limited liability companies.
The following tables give a certain amount of information on
the expenditure incurred for these works during the years 19301934.
CONSTRUCTION WORK OF THE CONFEDERATION, GOVERNMENT UNDERTAKINGS AND THE SWISS FEDERAL RAILWAYS
(In thousands of francs)
1934
Kind of work
1930
1931
1932
1933
Installation of cables
Construction work carried out
by the Confederation
Federal railways 1 :
Construction of lines and
fixed installations
Electrification
Renewal and upkeep of the
permanent way
19,778
23,050
19,433
16,795
14,650
14,706
17,732
13,699
11,512
14,252
36,562
6,118
42,182
2,237
34,771
6,699
22,077
5,742
23,661
8,430
39,782
38,675
34,794
33,323
31,425
116,946
123,876
109,396
89,449
92,418
Total
(Estimate)
1
Not including the renewal and upkeep of the rolling-stock, for which an expenditure of about
57-4 million francs was incurred in 1932 and 48-5 million francs in 1933.
The second table shows the expenditure of cantons and
communes on the works undertaken by them.
EXPENDITURE OF THE CANTONS AND COMMUNES ON
CONSTRUCTION WORK
(In thousands of francs)
Annual cantonal accounts
Including roads...
Communes (estimate)
Industrial undertakings of the
cantons and the communes
(estimate)
...
Total
1
No figures available.
1930
1931
1932
1933
109,857
78,914
131,874
91,801
137,266
96,578
121,000
135,324
94,866
i
i
i
i
—
—
80,000
338,266
i
i
385,000
BECENT
55
TRENDS
The above figures also include the ordinary and exceptional
subsidies (relief works) which the cantons and communes receive
from the Federal authority. The ordinary subsidies in 1929-1933
were as follows :
ORDINARY S U B S I D I E S P A I D B Y THE CONFEDERATION TO T H E CANTONS,
COMMUNES AND LAND IMPROVEMENT
UNDERTAKINGS1
(In thousands of francs)
Kind of work
Land improvement :
Estimated expenditure ...
Including subsidies of the
Confederation ...
Forest roads :
. Estimated expenditure ...
Including subsidies of the
Confederation ...
Correction of rivers and
torrents :
Estimated expenditure ...
Including subsidies of the
Confederation ...
Construction of roads :
Estimated expenditure ...
Including subsidies of the
Confederation ...
1929
1930
1931
1932
26,482
19,149
24,199
17,711
17,166.
9,142
5,671
7,247
4,715
4,265
1,748
3,764
1,917
4,465
3,006
502
1,141
605
1,399
891
12,700
8,700
21,300
15,800
15,300
5,600
3,600
9,110
5,700
5,100
2,590
1,360
8,000
3,123
1,295
544
2,800
1,041
t
1933
i
1
The figures represent the estimated expenditure and the subsidies for works which were
proposed
during the years in question.
1
Nofiguresavailable.
The relief works undertaken by the cantons and communes
and subsidised by the Confederation in virtue of Decrees of
23 December 1931, 13 April, 22 June and 14 October 1933, were
estimated to cost 194-3 million francs for the period 1 January
1932 to the end of August 1934. A Federal subsidy of about
16,000,000 francs was paid in respect of these works.
Altogether, if account be taken of the expenditure for the
renewal of the rolling-stock of the Federal Railways, the Confederation, cantons and communes devoted a sum of 538,000,000
francs to public works during the year 1933. These works were
financed by means of taxes or loans. For 1934 it is estimated
that the Confederation will spend 230,000,000 francs, including
expenditure on State undertakings. If to these sums be added
the amounts spent on public works by the cantons, communes,
and certain semi-official organisations such as the companies for
the development of hydraulic power, a total expenditure is
reached for 1934 of 1,000 million francs, of which 60 per cent.
represents wages paid either directly or indirectly.1
1
Cf. message of the Federal Council to the Federal Assembly relating to the
creation of employment openings a n d other methods of combating the crisis.
Feuille Fédérale, 17 Oct. 1934, p . 443.
56
PrjBLIC WORKS POLICY
For the United States reference has already been made above
to the special schemes inaugurated by the Roosevelt Administration in 1933. For the previous years complete statistics are
lacking and only a few indications can be given of the volume of
public works carried out.
Total Government expenditure for all purposes under the
Federal Budget rose from $3,994 million in 1929-1930 to $7,105
million in 1933-1934; the estimated expenditure for 1934-1935
is $4,639 million.
Outlays of the Federal Government on public works were
estimated in 1929 to be about 10 per cent, of all public works.
More than one half of the federal expenditure was on roads and
shipbuilding. The leading expenditures of State Governments
are on road building, public buildings and the elimination of
level-crossings, and of municipal authorities on improving the
facilities of transportation, public buildings, mainly schools and
hospitals, etc. 1
Total construction, both public and private, in the United
States increased from a value of $3,380 million in 1920 to $10,580
million in 1928. In 1929 it was only $10,377 million, in 1930,
$8,058 million, in 1931, $5,930 million, and in 1932, $2,839
million.
In these totals, public works represented :
gl,470 millions in 1926
3,480
„
„
1928
3,263
„
„
1929
3,363
„
„
1930
3,098
„
„
1931
1,918
„
„
19322
U p to 1928 total public works represented about one third of
all construction. Since then, they have constituted an increasing
proportion, which amounted to 67 per cent, in 1932.
While, as shown above, total expenditure on public works
has declined during the depression, Federal expenditure has
increased. In the year 1929-1930 expenditure by the Federal
Government on Federal projects amounted to $271 million, rising
to $520 million in 1931-1932, and then falling to $482 million in
1932-1933. The corresponding expenditure in 1933-1934 was
$1,192 million.
For Yugoslavia, the tables on pages 57 and 58 show, for the
period 1929-1933 : (a) the total amount expended on public works
by the State (Ministry of Public Works) and by the local authorities ;
1
Cf. L E O WOLMAN : Planning and Control of Public
National Bureau of Economic Research.
2
Engineering News Record, 18 May 1933, p . 630.
Works,
p p . 2-3.
57
RECENT TRENDS
(6) the classification of this expenditure according to the type
of work.
I.—TOTAL EXPENDITURE ON PUBLIC WORKS BY THE STATE
(MINISTRY OP PUBLIC WORKS) AND BY LOCAL AUTHORITIES,
1929-1933. 1
Un thousands of dinars)
Year
1929
1930
1931
1932
1933
State
546,359
449,358
227,797
143,987
156,687
(92-97%)
(77-96%)
(46-80%)
(35-96%)
(51-24%)
Local authorities
Total
41,359 (7-03%)
127,042 (22-04%)
258,945(53-20%)
256,395 (64-04%)
149,093 (48-76%)
587,718
576,400
486,742
400,382
305,777
To these figures, which only include expenditure by the
Ministry of Public Works or under the control of this Ministry,
must be added the expenditure of other Ministries, in particular
t h a t of the Ministry of Transport, the Ministry of Mines and
Forests, and the Ministry of Agriculture.
The Ministry of Transport has carried out the following
railway construction work : u p to 1927, 582 kilometres of permanent way costing 665-3 million dinars; from 1927 to 1930,
342 kilometres costing 898 millions; in 1931 and 1932, 253
kilometres costing 755 millions. The Ministry is at the moment
planning the construction of 324 kilometres of new lines at án
estimated cost of 888 million dinars.
From 1929 to 1933 the Ministry of Mines expended 13-3
million dinars on the construction of roads and railways for the
development of Crown forest land, and 13-6 million for the
régularisation of watercourses.
Finally, during the same period, the Ministry of Agriculture
has carried out the following works :
Agricultural land improvement
Settlement schemes
Construction of irrigation canals
Millions of dinars
297-5
71-7
4-4
§ 4.—The Effect o£ Public Works on Employment
A public works policy is an effective weapon against unemployment only in so far as it produces a large amount of additional
purchasing power which will stimulate demand, and consequently
According to statistics of the Ministry of Public Works.
I I . — E X P E N D I T U R E B Y T H E STATE (MINISTRY O F P U B L I C WORKS) ON D I F F E R E N
(In thousands of dinars')
Type of work
Roads
302,052 (51-39%)
Bridges, culverts and dams
Buildings
Installations
1930
1929
49,739
(8-47%)
184,282 (31-36%)
10,286
(1-75%)
Hydro-electrical works
—
Railway construction
—
1931
91,041 (15-80%)
81,716
(16
49,884
(8-66%)
42,931
(8-
61,118 (10-60%)
73,459
(15
10,510
(1-82%)
20,405
(4
15,169
(2-63%)
9,287
(1
—
221,636 (38-45%)
I I I . — E X P E N D I T U R E BY LOCAL A U T H O R I T I E S ON D I F F E R E N T T Y P E S O
(In thousands of dinars)
Type of work
Roads
Bridges, culverts and dams
Buildings
Installations
Hydro -electrical works
1930
1929
1931
11,267
(1-92%)
51,952
(9-01%)
97,738
(20
4,241
(0-72%)
12,629
(2-19%)
42,023
(8
25,421
(4-32%)
40,669
(7-06%)
72,638
(14
430
(0-07%)
611
(0-10%)
20,351
(4
21,182
(3-68%)
26,196
(5
—
BECENT TRENDS
59
lead to a revival of activity and an increase in the volume of
employment.
Chapter I I contains some indications as t o the various economic
consequences which have resulted from the application of public
works schemes in different countries according to the method
of financing the schemes. The present section deals more particularly with the direct and indirect effects of public works on
employment in so far as they can be gauged on the basis of
the very scanty material available.
There are many ways in which works can effect the employment
of workers : some provide work for a considerable number of
persons on the job itself; others require extensive supplies from
other industries, thus indirectly providing employment for the
workers in these industries.
Public works therefore decrease unemployment not only
directly, b u t also indirectly; the economic activity to which
they give rise by orders for tools and materials, and by
increasing the purchasing power of the worker, tends to help
many other industries. 1 Again, it is a special characteristic
of the goods created by public works t h a t they do not circulate
and do not cause a glut on the market. A road, a bridge or a
canal becomes part of its natural surroundings; its function
is to help in the circulation of goods. If the view is accepted
t h a t periods of depression are partly due to a temporary loss
of equilibrium between consumption and production, then it
can be said t h a t public works bring relief by creating a demand
for a number of products, materials and machines.
One reason for the importance of public works as a means
of dealing with unemployment is t h a t the building industry,
which is primarily concerned, is practically always one of the
branches of industry employing the largest number of workers,
and is at the same time a key industry. I n France, for example,
statistics show t h a t the building and public works industry
takes first place in importance. A table drawn up by the Ministry
of Labour in 1932, and referring only to undertakings employing
more than 100 workers, shows t h a t t h a t industry employed over
700,000 workers—a figure which would be raised to 950,000
if account were taken of smaller undertakings. At the same date
the turnover of the building and public works industry was
estimated at about 19,000,000,000 French francs a year.
1
Cf. MITNITZKY : " The Effects of a Public Works Policy on Business Activity
a n d Employment." International Labour Review, October 1934.
60
PUBLIC WORKS POLICY
I n Great Britain in J a n u a r y 1934, of the 884,000 insured
workers in the building trade, 26-2 per cent, were unemployed,
and of the 278,000 insured workers in the public works industry,
48-4 per cent, were unemployed.
I n the United States, according to the census of 1930, the
construction industry employed 3 • 3 million persons, or about 6 per
cent, of the total gainfully employed population of the country.
These 3 • 3 million persons included 227,000 engaged in furnishing
professional services, 1,430,000 as skilled workers, and 1,490,000
as unskilled labourers. 1
A further advantage of public works is t h a t wages generally
account for a relatively high proportion of the total costs. I t is
generally estimated that on the average about 50 per cent, of the
total cost goes in wages for those actually employed on the job,
administrative expenses represent 10 per cent., and supplies
40 per cent., but about a third of this last item again represents
labour costs, and a considerable fraction of the administrative
expenses also goes in wages. I t may further be noted t h a t a t
least 80 per cent, of these wages are spent immediately on consumers' goods, and this in turn helps considerably to restore
economic activity in general. A few estimates are given below of
the possibilities of employment created by public works.
The Government of New South Wales {Australia) states t h a t
the number of registered unemployed in the State declined from
200,000 to 80,000 in the two years ending in May 1934; of the
120,000 who have found employment, about 85,000 have been
absorbed in industry, and the improvement in the general situation
which is shown by this fact is attributed in part to the active
policy of public works construction and unemployment relief
works. 2
I n Germany, the Institut für Konjunkturforschung has estimated
that the subsidies of 1,000,000,000 RM. for which provision was
made in the public works estimates of J u n e 1933 would be spent
to the extent of 600,000,000 RM. in wages and 400,000,000 RM.
in the purchase of material. The 600,000,000 RM. of wages
would, a t the existing wage rates, and allowing for the
special rates for certain types of work, provide employment
for 500,000 or 600,000 workers for a year. The supply of
materials worth 400,000,000 marks would also provide employment for about 200,000 workers. A detailed calculation has
also been made by the German Government Statistical Office.
1
2
Engineering News Record, 18 March 1933, p p . 630-637.
Communication from New South Wales Government.
61
BECENT TRENDS
They estimate that an expenditure of 100 million RM. for road
construction and similar work will give direct employment to
600,000 workers for a month, but if the indirect employment
be also taken into account this number would be increased to
1,000,000. This calculation is subject to three conditions :
(1) that the increased orders require the employment of additional
workmen; (2) that all the goods and materials required are
produced in Germany ; and (3) that there is no increase in wages
and profits. In reality, these conditions are not fulfilled, especially
during a depression. If allowance be made for this fact, the German
Statistical Office considers that an expenditure of 100 million RM.
would give employment to about 750,000 workmen altogether for
a month. 1
In Great Britain, Mr. J. M. Keynes argues that if allowance is
made for indirect employment, the capital expenditure per man
year of additional employment is £200, at any rate in the case of
building operations. But account must also be taken of the
additional purchasing power created, for this leads to increased
demand for consumption goods. He arrives at the estimate that
loan expenditure per man year of employment is not more than
£100, or at most £150.2
On this basis, a capital expenditure of £1,000,000 would give
employment to about 6,700 men for a year. It has already been
shown above (page 40) that State-controlled capital expenditure
amounted in 1931-1932 to about £109 million, This would
therefore appear to have provided 730,000 men with employment
for a year, either directly or indirectly. To this must be added a
substantial figure for works financed out of current revenue, say
365,000, giving a total of about 1,100,000.
An enquiry made in the United States in 1929 into the classified
expenditure of 3,500 public works contractors showed that about
28 per cent, of the total expenditure went on wages, 6-3 per cent.
on salaries, 38-5 per cent, on the purchase of materials, and the
remainder on rent, interest, insurance, etc.
The above considerations are largely of a theoretical character.
As a rule the available statistics are too vague and too incomplete
to give any definite information as to the amount of employment
created by any given piece of work. Below will be found such
information as it has been possible to collect with regard to the
1
GERMAN STATISTICAL O F F I C E :
Auswirkungen
der unmittelbaren
Arbeits-
beschaffung. Sonderbeilage zu Wirtschaft und Statistik, 13. Jahrg., 1933, No. 21.
* J . M. K E Y N E S : The Means to Prosperity, p p . 9 e t seq.
X O 8344
E
/
62
PUBLIC WORKS POLICY
different countries. I t is far from covering all the plans and programmes referred to above, and the necessary distinction is not
always made between employment on relief work and employment on normal work. Such as they are, however, the figures give
some indication of the part played by public works on the
labour market.
I n Belgium, it is estimated t h a t on hydraulic works 25-30
per cent, of the total expenditure goes in the form of wages
to the labour actually employed on the works and 50 per cent.
to the labour indirectly employed, t h a t is to say, 80 per cent.
altogether of the total expenditure.
With regard to Estonia, the following table gives information
on the number of days of employment, the total cost and the
distribution of the expenditure between wages and material in
respect of the works carried out from 1929-1934, the works
now being carried out and the works to be carried out in the
future.
COST
OF PUBLIC
AND
WORKS,
EXPENDITURE
NUMBER
ON
Cost oí works
(in millions1
of crowns)
1. Works carried out from
1929-1934
2. Works now being carried
out
3. Works proposed ...
1
OF DAYS
MATERIALS
OF
AND
EMPLOYMENT
LABOUR
Distribution of
expenditure
Material? 1 Labour
(in millions of crowns)
Number of
days of
employment
31-9
6-4
9-3
5,500,000
6-3
64-9
0-45
1-8
2-6
7-5
1,290,000
13,952,000
One Estonian crown=about 0'92 Swiss franc.
I t will be seen that, while between 1929 and 1934 the expenditure on materials represented about two-thirds of the expenditure
on labour, the corresponding fraction is one-sixth for the works
now being carried out and one-quarter for the works to be carried
out in the future. This seems to show t h a t in the choice of
schemes the public authorities are taking special account of the
extent to which various works will give employment.
63
RECENT TRENDS
In Germany the loan expenditure of the last two years has
helped to stimulate the domestic market. Thus the index of
production, which was 61-2 in 1932 (1928 = 100) rose to 85-5 in
the first seven months of 1934, and the number of persons in
employment, as recorded in the sickness insurance statistics, rose
from 13-4 million in July 1933 to 15-5 million in July 1934.1
Information is also available for revenue-producing relief
work, the voluntary labour service and the work on subsidised
housing.
GRANTS AND LOANS (IN MILLIONS OF RM.) AND NUMBER OF DAYS
OF WORK
Federal
German
Institu- Federal
Public
tion for Govern- States Works
Days of
Total employment
Employ- ment
Comment
pany
Exchanges
1
1
1
1
1
1
1
Oct. 1927-30 Sept. 1928...
J a n . 1929-31 Dec. 1929...
J a n . 1930-31 Dec. 1930...
J a n . 1931-31 March 1932
April 1932-31 March 1933
51
35
38
30
36
i
i
i
106
37
39
9
74
74
2
37-4
157
146
151
2
16,997,514
14,771,928
11,623,775
7,241,563
7,322,426
No grants or loans were made by the Public Works Company during this period.
Information not available.
The following comments may be made on the above table.
With regard to the cost of the work, the table shows only the
amount of the subsidies. As, however, it is specified in the
legislation that the total subsidies may not exceed 80 per cent.
of the cost of the work, the total expenditure on the work in
question must have been at least 25 per cent, higher than the
figures shown in the table. With regard to the indirect effect of
the work on unemployment, the German Public Works Company
estimates that the number of workers employed in providing
supplies was at least equal to the number of workers employed
on relief work.
In Great Britain, the Unemployment Grants Committee found
on investigation that for every £1,000,000 spent on works for
which they made grants, 3,200 man years of direct employment
were furnished on sewerage schemes, 2,400 on roads, 2,400 on
docks and harbours, 2,600 on water supply, 1,200 on electricity
supply, 3,800 on recreation grounds, 1,600 on municipal offices,
1
LEAGTXE o r N A T I O N S : Monthly Bulletin
International Labour Review, Oct. 1934.
of Statistics,
Oct. 1934;
E 2
and
64
PUBLIC WORKS POLICY
2,700 on sea defences, and 1,900 on various miscellaneous schemes.
The average of the schemes which they sanctioned during the
whole period of their activity worked out at about 2,500 man
years per million pounds expenditure, or, to put it in another
way, an expenditure of £400 per annum gave employment to one
man for a year. These figures refer to men actually employed
on the jobs.
With regard to indirect employment, this necessarily varies
according to the type of scheme. For instance, on land levelling
schemes, practically the whole cost is in the form of wages of
men employed on the site. On the other hand, electricity supply
schemes give a comparatively low return by way of direct employment, and a high return of indirect employment in the manufacture
of materials. The Unemployment Grants Committee would not
commit themselves beyond saying that indirect employment
arising out of the various schemes they approved was clearly
substantial.1
The Committee add that in selecting the works for which
subsidies should be granted they were always guided by the
potential employment which they would create.
In Italy the volume of employment created by some of the
work described in the first part of this chapter is shown in the
following two tables. The first gives some information as to the
number of days of pay represented by the work carried out from
1928-1929 to 1932-1933 by the Ministry of Public Works, the
Road Board and the Department of Land Improvement.2
Millions of days
of pay
26-0
32-4
38-7
35-5
421
1928
1929
1930
1931
1932
The following statistics show the amount of employment
provided by all public works during the same period, including
work undertaken by the local authorities.
1
UNEMPLOYMENT
GRANTS COMMITTEE :
Final
Report,
1933, p p . 23-25.
Cmd. 4354.
8
Information supplied by t h e Ministry of Corporations. Cf. also
A. D I CBOIÌLALANZA : " Gli aspetti sociali della politica dei lavori pubblici,"
in Le Assicurazioni Sociali, Voi. I X , No. 5, Sept-Oct. 1933. This article is also
published in French in Les Assurances Sociales, Sept.-Oct. 1933, which is issued
as a supplement of t h e above review.
65
BECENT TRENDS
EMPLOYMENT OF LABOUR ON PUBLIC WORKS 1
Year and month
Work
Work
undertaken
Work
done by
directly
done by
local
by the
contractors authorities
State
All
public
works
Index
number of
employment
(monthly
average,
1926 = 100)
2,690
1,595
2,614
2,485
3,544
3,128
3,636
3,103
3,312
2,860
3,001
3,600
3,669
3,800
3,492
3,666
4,069
3,822
3,558
3,285
148
88
144
137
195
172
200
171
182
157
165
198
202
209
192
202
224
210
196
181
Thousands of man-days
1928 June ...
December
1929 J u n e ...
December
1930 J u n e ...
December
1931 J u n e ...
December
1932 J a n u a r y
February
March.
April
May
June
July
August
September
October
November
December
1,950
1,014
1,700
1,831
2,542
2,080
2,238
2,203
2,280
1,913
1,915
2,314
2,189
2,285
1,976
2,281
2,425
2,305
2,301
2,100
606
505
809
526
794
774
999
656
800
731
844
1,014
1,117
1,061
1,027
1,076
1,209
1,088
936
877
134
76
105
128
208
274
399
244
232
216
242
272
363
454
489
309
435
429
321
308
I n Poland there are no statistics showing the amount of
employment created by ordinary public works. I t should be
noted, however, that when the programme of public capital
expenditure for 1934-1935, which was mentioned in §2 of this
chapter, is put into operation it is expected to provide employment for over 200,000 workers, thus reducing by half the number
of registered unemployed a t the beginning of 1934 (400,000), quite
apart from the indirect increase in the volume of employment
brought about by the resulting orders to industry. The Statistical
Office periodically publishes statistics of workers employed on
relief works. The following table shows the figures from 1928 t o
1933.
1
This does not include labour employed on railway construction work
carried out by private undertakings, which has been in the hands of the Ministry
of Communications since J u l y 1927. From July 1928 onwards the above figures
include t h e labour employed b y the Road Board, and from October 1929 t h e
labour employed on public works under the Department for Land Improvement
of the Ministry of Agriculture and Forestry, such work being carried out and
supervised by the civil engineering offices. Annuario Statistico Italiano, 1933—
X I , p . 191.
66
PUBLIC WORKS POLICY
.NUMBER OF WORKERS EMPLOYED ON PUBLIC RELIEF WORKS
(In
1928
1929
1930
1931
1932
1933
thousands)
March
June
September
December
20-8
10-7
15-1
11-3
13-3
31-2
41-5
36-9
51-2
39-0
34-3
58-8
46-5
41-7
47-1
40-7
27-7
85-4
17-5
16-6
11-1
13-9
17-5
36-0
The increase in the number of workers employed on public
relief works in 1933 is very marked. This is due to the new
unemployment policy adopted by the Polish Government early
in 1933, when it created its Employment Fund. 1
The next table shows the number of workers engaged on
public relief works under the various authorities :
WORKERS EMPLOYED ON PUBLIC RELIEF WORKS
(In
thousands)
Total
199o
/March...
^ \ September
j o o q i March...
1JZJ
\September
19„0/March...
1J,iu
\September
1931 < March...
\ September
, no,/March...
l a á w
\ September
.
.
.
20-8
46-5
10-7
41-7
15-1
47-1
11-3
40-7
13-2
27-7
Ministry
of Public
Works
local
authorities
Miscellaneous
5-9
12-3
28-9
2-6
3-6
0-7
3-4
0-3
2-9
0-3
1-4
1-4
2-1
14-1
3-8
6-2
12-7
25-6
6-3
8-5
13-8
30-4
3-1
7-5
0-9
2-9
31-8
11-0
22-7
7-9
In Sweden also, statistics of employment are kept only for
relief work.2 What is known as " reserve work " has been put in
hand since the 1920-1921 depression, and the following table
gives some idea of the cost of these works undertaken by the
central authorities and the amount of employment which they
provided.
1
Cf. p . 85.
According to a recent declaration of the Minister of Social Affairs, ordinary
public works gave employment in J u n e 1934 to 30,000 workmen, who did between
t h e m 606,500 days' work.
2
67
RECENT TRENDS
Number of jobs In
course of completion
1921...
1922...
1923...
1924...
1925...
19261
1926-1927
1927-1928
1928-1929
1929-1930
1930-1931
193P
1932...
1933...
1934s
.
.
.
.
.
Minimum
Maximum
20
331
67
5
20
24
28
45
29
25
24
92
446
663
329
59
40
46
56
66
73
67
57
126
—
—
—
—
389
Number of workers
employed
Minimum
Gross cost
Crowns
Maximum
550
21,000
13,500
31,100
1,400
14,700
240
2,900
1,685
3,576
1,600
4,400
1,772
4,497
2,085
4,410
1,040
4,877
847
3,878
1,395
3,471
6,805
9,256
12,099
16,254
16,253
23,707
23,029
27,782,088
45,919,120
27,023,886
3,616,787
3,470,398
2,452,034
4,232,727
5,614,267
4,505,503
3,890,296
7,094,717
7,683,478
—
—
1
1 January-30 June.
' 1 July-31 December.
' 31 May.
The big loan expenditure incurred during the financial year
1933-1934 appears to have met with success, since production is
greater than in 1928 and unemployment is less than at any time
since the early months of 1932. The index of production
(1928 = 100) was 99 in January 1934 and rose to 107-7 in June,
falling, however, in July to 102 • 9 ; the increased production was
mainly in consumers' goods (110-8 in July), the index for
producers' goods being 99 in July. 1 The number of applicants for
work at the employment exchanges fell from 102,208 in July
1933 to 63,541 in July 1934.2 This is partly due to a revival in
the export trade. The monthly average of exports in 1933 was
90-27 million crowns as compared with 78-95 million crowns in
1932 and 131-22 million crowns in 1928, and in the first seven
months of 1934 they amounted to an average of 96-86 million
crowns as compared with 76-19 million crowns in the corresponding period of 1933. If account be taken of the fall in prices, these
exports undoubtedly represent a larger volume than in 1928.
But there can be little doubt that part of the improvement is
due to the increased loan expenditure of the Government to
which reference has already been made.
For the United States no statistics of the number of workers
employed on public works are available until 1933. It has,
however, been shown that 38-5 per cent, of the expenditure on
1
1
LEAGTJE OF NATIONS : Monthly Bulletin of Statistics, Sept. 1934.
International Labour Review, Sept. 1934.
68
PUBLIC WORKS POLICY
public works is spent on materials. Of the materials used by
public works contractors in 1929, 30-1 per cent, consisted in sand
and gravel, 22 • 6 per cent, in cement, 8 • 2 per cent, in structural
steel, 6-5 per cent, in bituminous paving material, etc. The
volume of railway freight traffic involved in 1929 in transportation
of construction material and machinery totalled seven million car
loads and yielded a revenue of 631 million dollars.
In connection with the public works scheme of 1933-1934, the
Bureau of Labour Statistics is charged with the duty of showing
each month the number of wage earners employed on works
financed from the $3,700 million fund. Information is regularly
obtained from the contractors or, in the case of works carried out
by direct labour, from the authorities concerned. In the month
ending 15 June 1934, 582,672 men were directly employed on
public works projects. By September the number is estimated
to have risen to 700,000. The total pay-roll for workers engaged
on public works projects between 15 May and 15 June totalled
$31,947,000, the number of man-hours worked was 57,825,000,
the average earnings per hour were 55 • 3 cents. There was an
expenditure of 57' 6 million dollars for material. Altogether, from
August 1933 to June 1934 inclusive, the number of man-hours
worked was 295-5 million, the total pay-roll was $159-2 million
and the value of material orders placed $364 • 6 million.
§ 5.—Cost of Schemes per Man-year
Is it possible, on the basis of the data in the preceding
section, to determine the cost of public works schemes per
man-year, or in other words the average capital expenditure
required on public works to provide employment for one worker
for a year ? Owing to the lack of adequate statistics, the great
diversity of the works to which the available data apply (relief
works or ordinary public works), and the varying length of the
working day or year, only a very rough estimate can be given.
The figures given below nevertheless furnish some indication
as to the average total cost (wage bills, administrative expenses,
cost of materials, etc.) of providing employment on public
works for one worker for a year. The data collected relate only
to the direct employment furnished by a specified expenditure
and take no account of its indirect effects in increasing employment in the industries supplying materials, nor do they allow for
the general effects on the labour market of the mobilisation of
idle purchasing power to which the execution of a public works
scheme of comparatively wide extent must necessarily lead.
RECENT TRENDS
69
I t should also be noted that these figures represent an
average, and in actual practice may prove either higher or lower
according as the schemes require a high proportion of supplies
and materials, or on the contrary small expenditure on materials
and the employment of unskilled labour.
In Estonia, where the public works carried out in 1929-1934
involved an expenditure of 31*9 million crowns, they provided
about 5,500,000 days' work. This represents for a man-year of
300 days an expenditure of 1,740 Estonian crowns (about 1,560
Swiss francs). Of this amount wages represent about 550
crowns, or one-third.
As regards Germany, the calculations of the Institut für
Konjunkturforschung agree with those of the Federal Statistical
Office in estimating the cost of employing one worker for a year
on public works at an average of 2,000 RM., of which 1,000 to
1,200 RM. represent wages.
In Great Britain, according to the estimates of the Unemployment Grants Committee, the cost per man-year of schemes
approved by them was about £400 for all schemes on an average,
but was not more than some £260 for land levelling schemes,
while for electricity schemes, for instance, it amounted to as
much as £835 or twice the average. As regards employment
indirectly provided by the demand for materials, Mr. Keynes
estimates that this amounts to 100 per cent, of direct employment
—that is, for every workman employed for a year on a public
works scheme another will be employed for the same period in
the industries providing materials. Moreover, if account is also
taken of the additional purchasing power created by the execution
of public works, it may be estimated, again according to
Mr. Keynes, that every £400 spent on public works actually
provides employment for three persons.
In the case of Italy a very rough calculation (dividing the total
expenditure on all kinds of public works schemes during
1932-1933 by the number of days' wages paid over the same
period) gives the cost of a man-year at something like 15,000 lire.
In Japan provisional figures indicate that a sum of
58,500,000 yen spent on public works executed under the
authority of the Ministry of the Interior in 1933 provided a total
of 12,600,000 man-days, representing an average cost of 4-6 yen
per man-day or 1,380 yen per man-year of 300 working days,
wages representing slightly more than one-third of this sum.
70
PUBLIC WORKS POLICY
I n Poland the Minister of Social Welfare stated in the
Senate on 28 February 1934 t h a t the cost of each man-day on
public works schemes amounted in 1933 to 3-09 zloty, making
a total of about 930 zloty for a man-year of 300 working days,
this figure relating only to labour costs and t o relief schemes.
Assuming t h a t in Poland as in other countries labour costs
represent an average of one-third of the total cost of public
works, expenditure per man-year may be estimated at about
2,800 zloty.
I n Switzerland, according to a statement of Mr. Schulthess,
Head of the Department of National Economy, a sum of
100 million francs provides employment for 20,000 to 25,000
workers for a year, making the average cost per man-year
between 4,000 and 5,000 francs. The share of labour costs in the
whole was stated to be from 2,000 to 2,400 francs per year.
I n the United States wages per man-year for employment on
public works schemes financed under the Roosevelt programme,
reckoned on the basis of an hourly rate of 64 cents and a working
month of 95 hours, amounted at the end of 1933 to some $730.
Assuming, in accordance with enquiries conducted on this
subject in the United States, 1 t h a t wages represent about onethird of the total cost of public works schemes, the cost of
providing employment for one worker for a year is about
$2,200. I t should be pointed out, however, t h a t these calculations relate to employment on very short hours, the hours
worked being only 95 in the month or less than four on each
working day.
To sum up, while making every allowance for the necessary
reservations in regard to the foregoing particulars, it would
appear t h a t on ordinary public works schemes not exclusively
designed to relieve unemployment the cost per man-year of
direct employment varies according to the country and the
nature of the work between 2,500 and 6,000 Swiss francs, with
an average of some 4,000 Swiss francs, while for each worker
directly employed on public works another is provided with six
to twelve months' work in the industries supplying materials.
*
#
*
The first conclusion t h a t can be drawn from the above survey
is that, while the public authorities in certain countries have
deliberately drawn up and applied a systematic plan of public
1
See pp. 61 and 67-68.
RECENT TRENDS
71
works as a means of overcoming the depression and at the same
time improving the national equipment, public works in other
countries have not been increased, but have, on the contrary,
declined to a more or less marked extent in recent years. This
may be accounted for in a variety of ways : countries have
different ideas as to what a public works policy should be ; some
have been disappointed in the lack of results with plans which
were perhaps not organised with sufficient care or were applied to
inappropriate types of work ; others again have met with special
financial difficulties.
The most striking conclusion from the facts as they appear
above, from their fragmentary character—or, one might almost
say, their incoherence—would seem to be t h a t in the national,
and still more in the international, field there is a great lack of
centralised co-ordination and advance planning. The result is
t h a t the various works undertaken, no matter how carefully
carried out by the administrative departments responsible,
remain isolated efforts instead of being parts of an ordered whole.
Only the existence of a single central authority, which is by no
means incompatible with extensive decentralisation in matters of
detail, can lead to national public works being so planned as to
constitute a governor for the economic machine.
If public works were thus co-ordinated, they would provide so
much employment t h a t the mere existence of the plan to p u t the
work in hand immediately would, it is thought, have a very
favourable psychological influence on the market, even before
it actually came into force. There can be no doubt t h a t in a
system where orders and public works were highly centralised,
uniformity in methods would go far to increase efficiency, and
thereby correspondingly reduce costs.
CHAPTER II
FINANCIAL
PROBLEMS
§ 1.—General Principles
Public works may be financed either b y taxation, by borrowing or by inflation, or by a combination of these methods. I n
considering the relative advantages of taxation and borrowing
a distinction must be drawn between periods of prosperity and
periods of depression, it being understood, of course, t h a t these
terms are relative and t h a t no precise definition of them can
be given.
During a period of relative prosperity it is preferable to
use the method of taxation wherever possible. This has the
advantage of enabling the bodies engaged in carrying out the
works to pay for them out of current revenue and in t h a t way
no burden is thrown on the budgets of future years. This is
a form of community saving and investment.
On the other
hand, there are certain works which are regarded more particularly
as a form of capital expenditure and which would involve too
great a burden on the taxpayers. They are therefore financed
by way of loan.
I n a period of depression the situation is very different.
Such periods are characterised by a fall in the national income.
Thus it is estimated that between 1929 and 1933 the national
income fell in Germany from 76,100 million RM. to 47,500 million
EM., in the United Kingdom from £3,996 million to £3,380 million
(1932), and in the United States from $85,200 million to $39,800
million (1933).
I n agricultural countries the fall has been particularly severe,
as, for example, in Rumania, where the national income declined
from 191,400 million lei in 1928 to 90,000 million lei in 1932. 1
Such a situation clearly makes all tax burdens more severe
since it is impossible to reduce public expenditure in anything
like the same proportion as the fall in the national income, and,
moreover, any such reduction would be liable to have other
repercussions of an unfavourable character on the employment
situation. A relief of taxation balanced by an equal reduction
of Government expenditure " represents a re-distribution not
a net increase of national spending power." 2
1
LEAGUE o r NATIONS :
1933-1934, p. 158.
s
K E Y N E S , op. cit., p.
World Economic Survey,
15.
72
1932-1933, p. 100, and
FINANCIAL PROBLEMS
73
Whatever view may be taken of the above problem it will
be agreed by all that it would be both difficult and inadvisable
to increase taxation during a depression if that can be avoided.
The political difficulties of such an increase are obvious. From
the economic point of view the reduction in the national income
leads to a decrease in personal savings and consequently increased
taxation is likely to be paid at the expense of a more or less
corresponding decline in the demand for consumption goods
on.the part of the taxpayer. If, says Mr. R. F. Kahn, " t h e
Government were to raise the funds required . . . by means of
taxation, it is obvious that unfavourable reactions would be
probable. Of these the most important would be the ' secondary
unemployment ' that would result if the increased taxation
were to reduce the taxpayers' expenditure on consumption goods.
The amount of this ' secondary unemployment ' would depend
on the extent to which increased taxes are paid at the expense
of consumption rather than of saving." 1
The same point is put by Mr. Vladimir Woytinsky when he
says that " every tax means depriving individual citizens of
part of their purchasing power for the benefit of the State.
This reduction in purchasing power necessarily leads to a fall
in the demand for some commodity or other, to a decline in its
production and to dismissal of workers in that branch." 2
The German Statistical Office in its report on the direct
and indirect effects of public works, which has already been
referred to in Chapter I, 3 goes so far as to say that, if the financial
policy of public authorities is based in times of depression " on
repayment of debts or the non-contracting of new debts (decrease
of expenditure in the event of a decrease in receipts or stabilisation of expenditure in the event of increasing receipts), the sums
available for the purchase of goods resulting from the circulation
of money will decline and men and machines will be unemployed.
On the other hand, the more expenditure exceeds income and
is covered by loan the more will the amount of money available
for this purpose rise and employment increase." When the
depression is past the loans can be repaid.4
Professor Bertil Ohlin, in a report published by the Swedish
Unemployment Committee, draws attention to the fact that an
1
K A H N : " Home Investment and Unemployment," in The Economic
Journal, J u n e 1931, p . 174.
2
WoYTEtrSRY : " International Measures to create Employment—A Remedy
for the Depression," in International Labour Review, J a n . 1932, p . 11.
» See p p . 60-61.
* GEBMAN STATISTICAL O F F I C E , op.
cit.
74
PUBLIC WOBKS POLICY
increase in taxation may have unfavourable psychological effects
on business enterprise. 1
On the other hand there is another feature of every major
depression which is of particular importance in this connection,
namely, a decline in home investment which in the years 19291933 attained considerable proportions.
Thus, capital issues
(monthly average) in Prance reached their highest point in 1930
(1,823 million francs), and then declined to 511 million francs
in 1932 and 300 million francs in 1933, in Germany they declined
from 110 million RM. in 1928 t o 12-3 million RM. in 1932 and
7-3 million RM. in 1933, in Italy from 607 million lire in 1929 to
304 million lire in 1932 and 279 million lire in 1933, in the
United Kingdom from £30-2 million in 1928 to £9-4 milhon in
1932, with a slight rise to £11-1 million in 1933, in the u n i t e d
States from $849 million in 1929 to $99 milhon in 1932 and $60
milhon in 1933. 2
At the same time there is a considerable amount of money
representing the savings or reserves of institutions and individuals
which is seeking openings for investments without being able
t o find them. Such money is left on deposit or even on current
account in the banks or invested in short-term paper until such
time as a possibility of more permanent investment offers itself.
I t is not being used for productive purposes or for the purchase
of consumption goods, and it is therefore t o all intents and
purposes lying idle. If some of this money is borrowed with the
object of financing public works, that will lead to a net addition
to investment and consequently to a net addition to purchasing
power. This is the idea which is largely a t the back of the public
works programme which is being applied in the United States
under the National Recovery Act, 1933. Senator Wagner, Chairman of the National Labor Board, said t h a t " we cannot emerge
from the depression untü there is a sustained resumption of
enterprise. That cannot occur through private initiative alone
until business men see a prospect of profit. Government construction, however, is not undertaken for profit and can therefore
be initiated without waiting for an upturn of business." 3 The
German and Swedish schemes also had this object in view.
1
Oinnsr : Penningpolitik,
Offentliga Arbeten, Subventioner och Titilar som
Medel mot Arbetslàshet. Arbetslöshetsutredningens Betänkande I I , bilaga 7,
Stockholm, 1934, p . 111.
2
LEAGUE OP NATIONS : Monthly Bulletin of Statistics, Vol. XV, No. 13,
March 1933.
3
Hearings before the Senate Committee on Finance, 22 May-1 J u n e 1933,
pp. 8 and 9.
FINANCIAL PROBLEMS
75
There is some opposition to the opinion expressed above.
Thus, Mr. 0 . M. W. Sprague, who was for a time economic adviser
to the United States Treasury in the early days of the Roosevelt
Administration, says that " an increase in consumer purchasing
power that arises from an increase in governmental expenditure
runs the risk of creating a situation in which either this expenditure
must go on indefinitely or, when it ceases, involve the same
problem of readjustment t h a t presents itself when Government
expenditure is reduced at the close of a war." 1
Professor Keilhau, of the University of Oslo, suggests that in
a period of depression the sums normally used for the amortisation
of the State debt should be used for the financing of public works. 2
From a budgetary point of view borrowing is also preferable
in a period of depression. The situation in this respect is exactly
the opposite at such a time from t h a t existing in a period of
prosperity. I n the latter, as has been said above, it is desirable
to finance public works as far as possible by means of taxation
in order not to impose a burden on the budgets of future years ;
in a period of depression, however, it is desirable to spread the
charges over a number of years so t h a t part of the payment may
be made when prosperity returns.
An increase in home investment will, however, have other
beneficial effects on the budget. There will be a saving on the
amount of unemployment benefit or public assistance for which
the community is liable. The size of the saving will, of course,
depend on the provision made for the payment of benefit to
unemployed persons.
The amount has been estimated for
Germany by the Statistical Office a t 37-6 million RM. for every
100 million RM. spent. 3 For Great Britain Mr. J. M. Keynes
says : " For purposes of broad calculation the average cost of
a man on the dole is usually taken, I think, at £50 a year.
Since on the basis of the above calculation 4 a loan expenditure
of three million pounds will employ at least 20,000 men for a
year directly or indirectly, it follows t h a t it will save the dole
one million pounds. Here is one-third of the expenditure already
accounted for." 5
A further benefit accrues to the budget in consequence of
the fact t h a t the new capital expenditure will increase the
national income. Thus, Professor Gunnar Myrdal says, in a
1
SPBAGUB : Recovery and Common Sense, p. 7G.
» Cf. Dagbladet, 25 April 1934.
8
1
6
GERMAN STATISTICAL OFFICK, op.
See above, p . 61.
K E Y N E S , op. cit.,
p.
12.
cit.
76
PUBLIC WORKS POLICY
report prepared by him for the Swedish Government and
published by them as an appendix to the budget for 1933-1934,
that " the national finances depend ultimately on the taxable
income which in turn is determined by the actual income of
private citizens. If State expenditure causes an increase in
production and capital construction, because means of production
which would otherwise be unused are employed for the purpose,
such expenditure considered from the point of view of a deeper
financial analysis strengthens the finances of the State however
it may be met." 1
Professor Bertil Ohlin, who also studies this aspect of the
question in the report referred to above, considers that " if
productive factors which would otherwise be idle are brought
into use (i.e. by public works financed by loan) in such a way
that production is not decreased in any other direction, then
the public works represent a net increase in national income.
They do not ' cost ' the country anything. For the cost of any
commodity is represented by those things from which the country
has to abstain in order that the commodity in question may be
produced."
If an allowance be made for the full effect of State expenditure
on spending power through the wages paid to men employed
directly and indirectly on the works and also through the
repercussions of the spending of these wages on the demand
for consumption goods, it is clear that a new loan expenditure
of, say, three million pounds will increase the national income
by more than that amount. Mr. Keynës estimates this increase
at £4,500,000. This additional national income will lead to
an increased yield of existing taxes. Even if the proportion
of the national income paid in taxes be no more than 10 per cent.,
and it is frequently more than that, fresh loan expenditure of
three million pounds would yield additional taxes amounting
to £450,000. Altogether, therefore, taking into account both
the savings on unemployment benefit and the increased yield
of taxes, the budget will benefit to the extent of one and a half
million pounds for every three million pounds of new loan
expenditure, that is to say, 50 per cent.2
In Germany the Statistical Office estimates that for every
100 million RM. spent the contributions to unemployment
insurance would increase by 8-3 million RM., and the yield
1
See MYBDAL : Konjunktur och offentlig hushdllning.
holm, Kooperativ» förbundets bokförlag, 1933, p . 72.
2
Cf.
K E Y N E S , op. cit.,
p p . 12 and
13.
En untreding. Stock-
77
FINANCIAL PROBLEMS
of taxes by 11-1 million RM. If these figures be added t o the
37-6 million RM. saved on unemployment relief, a total of
57 million RM. is arrived at, that is to say, 57 per cent, of the
outlay. I n addition, the Statistical Office estimates that new
capital would be constituted through increased receipts of social
insurance funds (other t h a n unemployment insurance), savings
by the wage earners, and savings and debt repayments by the
undertakings concerned, to the extent of 42 million RM. 1
A calculation has also been made for France by Mr. André
Borie. He estimates that, out of a loan of 10,000 million francs,
cost of administration would represent 10 per cent., wages and
salaries 45 per cent., material 36 per cent., and profit 9 per cent.
Taxes would be payable in respect of each of these items of
expenditure, and would probably amount, directly and indirectly,
t o about 3,000 million francs, or 30 per cent, of the expenditure. 2
I t is true, of course, t h a t there is a time lag and that the
benefit to the budget will not be felt in the same year as the
expenditure.
Against these advantages must, of course, be set the taxation
necessary to pay interest on the loan and to constitute a sinking
fund for the repayment of the loan. The amount involved
in any one year is, however, small in comparison with the new
expenditure incurred, and as the public works will increase the
yield of existing taxes, no increase in the rate of taxation
is involved. On the other hand, this particular disadvantage
does not exist in the case of loan expenditure by public
undertakings or private companies engaged in revenue-producing
work such aa railways, gas, water and electricity supply undertakings, etc. In these cases the interest and sinking fund payments
can be made without great difficulty from the revenue received.
Reference must be made here to another problem which
is of outstanding importance, namely, the need for co-ordination
of the public works policy with a suitable banking policy.
Unless new money is issued for the purpose, the only condition
on which the public works policy can succeed is t h a t it shall
cause the investment of money not otherwise being used for
productive purposes or the purchase of consumption goods.
If a loan is raised and if it causes private investors to refrain
from investing a corresponding amount in private business, no
beneficial effect will be produced on the economic system. I t
was this argument which so greatly impressed the British
1
1
GERMAN STATISTICAL O F F I C E , op.
L'information
x
O 8344
cit.
sociale, 18 J u n e 1931.
F
78
PUBLIC WOE.KS POLICY
Government in 1927 t h a t they restricted grants for public works
schemes mainly on the ground that, as the supply of capital
was limited, it was undesirable t o divert any appreciable
proportion of this supply from normal trade channels. 1
I t is clear, however, t h a t t h a t argument " cannot have a
universal application. For it is always within the power of
the banking system to advance to the Government the cost of
the roads 2 without in any way affecting the flow of investment
along the normal channels." 3 The author of the above quotation
adds t h a t no such hypothesis is really necessary because, "pari
passu with the building of roads, funds are released from various
sources at precisely the rate that is required to pay the cost
of the roads." Moreover, apart from this, there is during a
depression, as has already been pointed out, money lying idle
for want of employment for which public works will provide
an opening.
Whatever the circumstances, it is essential that the banking
system should co-operate with the Government in the public
works policy by means of cheap money and possibly also b y
open market operations, thereby setting free the credit needed
for the financing of the public works. What is called an
expansionist monetary policy is an indispensable condition for
the success of public works schemes as a means of stimulating
the economic system.
The importance of co-ordinating financial, economic and
social policy is stressed in the following summary of developments in Germany in 1933. " The one-sided concentration of
financial policy on the mere avoidance of further deficits is
giving way to an attempt, b y means of an active economic
policy, to remove the causes of the financial difficulties, and thus
to solve at one and the same time t h e two problems of finance
and the cyclical depression. Formerly the authorities confined
themselves to protecting the economic system against an
extension of the crisis b y means of subsidies, but this had
the effect of aggravating the crisis, because the raising of the
necessary resources lessened the power of resistance of the
undertakings which had so far withstood the crisis. Similarly,
unemployment was attacked b y social measures involving the
withdrawing of money for relief purposes from the capital
resources of undertakings or the incomes of those who were
1
Cf. INTERNATIONAL LABOUR OFFICE :
Unemployment
p . 30. Studies and Reports, Series C, No. 15.
s
Or any other public works.
» K A H N , op. cit., p . 174.
and Public
Works,
79
FINANCIAL PROBLEMS
still in employment. This policy and the desire to lower
budgetary expenditure had strong deflationary consequences.
The maintenance of financial, economic and social policy during
the crisis in watertight compartments, leading frequently to
one set of policies neutralising the effects of another set of
policies, has now been abandoned, through unification of the
three policies. Instead of isolated or only defensive measures,
the public authorities have now undertaken the ' steering '
of the whole economic system, with the object of getting rid of
unemployment and of putting the broken economic mechanism
once more in order." 1
Similarly, in Sweden Professor Myrdal says t h a t " by
restricting instead of expanding public enterprise in periods
of depression they (i.e. the public authorities) have not only
accentuated the depression with regard to private enterprise
during the crisis, but in the long run have unnecessarily increased
the cost of State enterprise and this in turn has unnecessarily
added to the burden of taxation. A restriction of State
building and construction during a period of depression is
therefore even on purely financial grounds a misguided economy
as it counteracts its own object." 2
I t is essential t h a t not only should bank credit be cheap
and plentiful, b u t t h a t the long-term rate of interest for sound
borrowers should be low. I t may be, as Mr. Keynes has pointed
out, t h a t in order t o reduce the long-term rate of interest a
temporary reduction in loan expenditure 3 may be necessary
for psychological reasons, thus creating the right " atmosphere "
for conversion schemes, but this reduction should be made as
temporary as possible. 4
§ 2.—Methods Adopted
TAXATION
A considerable proportion of the public works put in hand
have, in fact, even during the depression, been financed by
taxation. I t is extremely difficult to know exactly how much.
Complete figures of expenditure by the central Governments
1
Vierteljahrshefte zur Konjunkturforschung,
" Die Wirtschaftslage im Herbst 1933," p. 117.
s
M Y E D A L , op. cit.,
p.
8. Jahrgang, Heft 2, Teil A :
71.
* This expression is used throughout this Report to mean expenditure financed
by loan.
4
K E Y N E S , op. cit., p . 21. Examples of the importance of a low long-term
rate of interest may be found in the success of the loan expenditure undertaken
by Sweden (see p . 67) and the difficulties encountered by Germany in financing
her public works (see pp. 90-93).
F 2
80
PUBLIC WOEKS POLICY
and local authorities are not readily available in all cases, and
even if they are it is almost impossible to determine what
proportion of the taxation expenditure is really new expenditure
and how much is for interest and sinking fund payments. Thus,
Government grants, for instance, which figure in the national
budget, are frequently made in the form of a contribution to
the loan charges of the bodies actually carrying out the works,
thus relieving those bodies of some of the burden of their debts.
I t is necessary to make a distinction between national taxation
and rates (local taxation). The economic effects of these two
forms of taxation are b y no means identical. National taxation
is normally raised mainly by taxes on consumption goods, imported
produce and income. I t does not as a rule add directly to the cost
of production but falls primarily on income. I t affects taxpayers'
spending power, but public works have the effect of transferring
t h a t spending power to the employers, workmen and, in some cases,
shareholders, who are in some way or another concerned in the
carrying out of the works. Local taxation, on the other hand,
falls partly and in some countries largely on the value of
buildings, including factories and workshops. Such taxation
does constitute a cost of production and is therefore to some
extent a hindrance to economic activity. The most serious
aspect of local taxation, however, is the fact t h a t it varies from
place to place and thus puts the more heavily taxed areas at a
disadvantage as compared with others. I t is, however, precisely
in the industrial areas where local taxes are relatively high that
development works are most needed.
I n Czechoslovakia the maintenance and construction of roads
for which the State is directly responsible and other roads of
importance for long-distance traffic are financed by a Road Fund
set up by Act No. 116 of 14 July 1927. The resources of this
F u n d are derived from various taxes (on automobiles, a proportion
of the taxes, fees, and customs duties on petrol and tyres, etc.).
The F u n d is authorised to raise loans, as will be seen in the
following section. 1
I n France the public works programme established in the
spring of 1934 is to be financed largely by loan, as explained
elsewhere. Most of the works, however, which are carried out by
local authorities, are entitled to a Government grant, the amount
of which depends on the kind of work undertaken. The Government's contribution to this capital expenditure may not exceed
1
A similar fund exists in a number of countries, b u t no special reference is
made to such funds in this Report.
FINANCIAL PROBLEMS
81
a total of 2,897 million French francs and will be paid in the
form of annual grants equal to the interest and sinking fund
charges on t h a t portion of the loan incurred which the Government
is required to pay on the basis of existing legislation.
Germany in the first place developed public works as a rehef
measure in close association with the unemployment rehef fund.
This measure was known as productive unemployment relief,
and in 1926 there were a number of factors favourable to the
adoption of such a policy. " The public authorities had as a
result of economical and prudent administration a budget surplus
in 1924-1925 and 1925-1926, both years of relative prosperity.
These surpluses were available for use on productive unemployment rehef. Moreover, t h e communes had been obligad t o
retard investment during the war and the inflation period, so t h a t
the need for fresh investments coincided with the need for the
rehef of the growing army of the unemployed. The total amount
spent for this purpose b y the Federal Government, the unemployment rehef or insurance institution, the Federal railways, the
Federal States, and the communes, amounted to 500 t o 600
million RM. in the two years 1926-1927 and 1927-1928." Threesevenths of the expenditure on rehef was in this form. I n the
following years of good trade from 1927 to 1929, the authorities
failed t o accumulate reserves as they had done in 1924 and 1925.
Consequently, when in 1929 a cyclical crisis arose, the raising of
the necessary funds for productive unemployment rehef became
more and more difficult, and cash rehef, which costs less, became
more and more the rule. I n 1931-1932, while 3,000 million RM.
were spent on cash rehef, only 100 million RM. were spent on
productive unemployment rehef. " I t became more and more
clear t h a t the prospects of an automatic economic recovery, and
thus of a decrease of unemployment, were small. Hence the need
for again having recourse to productive unemployment rehef in
a new form and on a larger scale." 1 These new programmes
have been only partly financed by means of taxation.
The railway administration p u t in hand in 1931 additional
work to the extent of 100 million RM. of which 60 million were
provided from the Federal budget.
Prior to 1933 certain works were carried out under the
productive rehef scheme or the voluntary labour service. They
included land development and river improvements, the development of water, gas and electricity supply, and the levelling of
land, tunnelling, etc. Long-term loans were made to the bodies
1
Cf. Vierteljahrshefte zur Konjunkturforschung,
op. cit., p. 121.
82
PUBLIC WORKS POLICY
responsible for these works, financed by Federal taxation.
Grants were also made by the Institution for Employment
Exchanges and Unemployment Insurance; this Institution
derived its funds partly from the contributions of employers and
workers, and partly from the Federal budget through deficiency
payments. These grants amounted to 3 RM. per day for every
unemployed person engaged on relief works, and 2> 14 RM. per
day for every worker engaged in the voluntary labour service.
By a recent decision of the Ministry of Labour this grant is now
made not only in respect of unemployed persons who have been
in receipt of unemployment benefit, but also of those who have
been in receipt of public assistance. Previously the local
authorities had made a grant in respect of the latter class.
A Legislative Decree of 4 September 1932 laid down a
programme of public works (the von Papen programme) amounting
altogether to 750 million RM. This programme was to be
financed largely by loan, but it appears to have included certain
works for which money had already been included in the Federal
Budget.
The programme of January 1933 provided for loans totalling
500 million RM. and the programme of 1 June 1933 provided
for loans totalling about 1,000 million RM. but many of these
works were carried out under the productive relief scheme or
the voluntary labour service. This applies to all the different
kinds of works mentioned above, which are therefore
still entitled to grants from the Institution for Employment
Exchanges and Unemployment Insurance, but not to any further
grants from the budget. This programme also includes two new
items, namely, afforestation work and the construction of
provisional accommodation and huts. These works are also
entitled to grants from the Institution for Employment Exchanges
and Unemployment Insurance under the productive relief scheme
and the voluntary labour service. 1 In addition, a considerable
amount will have to be included in the budget to repay the money
which has been temporarily advanced by various financial bodies.
Up to the end of June 1934 works had been authorised to a
value of 5,400 million RM., but only 2,400 million RM. had actually
been spent.
No information is available as to the local taxation raised by
local authorities for the purpose of public works. I t must, of
course, be considerable.
1
In J u l y 1934, these grants were reduced from 3 RM. per person employed
per day on relief works to 2-50 RM.
FINANCIAL PROBLEMS
83
The general idea of the three most recent programmes of
public works (the programmes of 4 September 1932, January 1933
and 1 June 1933) is t h a t the Government limits itself to subsidising the works, while the bodies or individuals responsible for
carrying out the works must themselves obtain the capital required.
The same idea is to be found in the financing of relief works and
voluntary labour service works which have been in force for a
number of years.
I n Great Britain total national expenditure from the proceeds
of taxation on a variety of purposes relating to economic development and unemployment relief, and including roads, exchequer
contributions to local revenues, agriculture, unemployment
grants and loans, coal-mining subsidies, scientific services,
oversea settlement, export credits, trade facilities, Empire
marketing, etc., and the training of unemployed workers, increased
from £24-82 million in 1922-1923 to £61-12 million in 1929-1930
and £85-95 million in 1930-1931. These figures, however,
exclude housing, on which £8-05 million were spent in 1922-1923,
£12-80 million in 1929-1930, and £13-65 million in 1930-1931.
That makes altogether £32-87 million in 1922-1923; £73-92
million in 1929-1930; and £99-60 million in 1930-1931. Total
local expenditure financed by rates (local taxes) for all purposes
amounted to £392-06 million in 1922-1923, £481-85 million in
1929-1930, the last year for which local figures are available.
The above figures exclude all expenditure in connection with
State trading services and only net expenditure on municipal
trading services, and they also exclude the building of schools,
etc., which it is difficult to disentangle from the general expenditure
on education. The two most important items included in the
above figures are road-making and agriculture. Expenditure on
roads was financed in 1928-1929 to the extent of £17-48 million
out of national taxation, and £37 • 17 million out of local taxation ;
in 1929-1930 the corresponding figures were £20-30 million
and £38 • 35 million respectively. Public expenditure on agriculture (mainly subsidies to beet sugar and land development)
Avas £8-26 million in 1928-1929, and £9-78 million in 1929-1930
out of national taxation, and £740,000 in 1928-1929 and
£630,000 in 1929-1930 out of local taxation. 1 I t may be noted t h a t of the special works for the relief of
unemployment in respect of which the Government paid a grant,
about £172 million represented loan expenditure and only £19
1
Cf.
S Y K E S , op.
cit.
84
PUBLIC WORKS POLICY
million represented expenditure which was met as incurred out
of revenue.
The Government makes a variety of grants which are usually
spread over a long period of years and are in the form of a contribution to the loan charges of local authorities or public utility
undertakings. The subsidy on housing, for example, though it
amounts to as much as 47-5 per cent, of the capital expended, is
payable over forty years, and represents only 2-4 per cent, of
expenditure in any one year. The erection of schools receives
educational grants in a similar way, though on a smaller scale. 1
I n 1929-1930, total Government grants for all purposes
(including social services) other t h a n those in compensation for
loss of rates (£13 million) totalled £94 million.
The grants made in aid of works t o relieve unemployment
were in a variety of forms, which were frequently changed during
the operation of the scheme. At the end of the scheme in 1932
they were being made as follows :
(1) Loan schemes :
(a) Revenue producing works : 25 per cent, of the interest
charges for thirty years or 50 per cent, for one-third of the loan
period not exceeding ten years ; in the case of rural water supply
schemes, the grant amounted to 50 per cent, of the interest charges
for five years and 25 per cent, for a further period of twenty-five
years.
(6) Non-revenue producing works : 25 per cent, of the interest
and sinking fund charges for a period not exceeding thirty years.
(2) Wages schemes : 50 per cent, of the wages of unemployed
men taken on, provided that the grant does not exceed 25 per
cent, of the whole cost of the scheme excluding land.
These grants are included in the ordinary budget of the State
and the liability of the State in respect of them will reach a
maximum of £4,463,000 in 1934-1935. I t will not be finally
discharged until 1963-1964.
In Italy the Government has for many years included a
considerable sum of money in the annual budget amounting to
about one-eighth of the total budget for works of general utility
such as ports, main railway lines, flood control, the building of
canals, public buildings, etc. I n ten years about 24,000 million
lire have been spent in this way. Similarly, the provincial and
communal authorities spend several hundred million lire each
year on public works financed by local taxes.
1
ROYAL INSTITUTE or
INTERNATIONAL A F F A I R S , op.
cit.
ITNAÎiCIAL PROBLEMS
85
I n Latvia an Act was passed in 1931 setting up a special
Unemployment Fund. The resources of this Fund are derived
from (1) a tax on wages of State and municipal employees and
of members of sickness insurance funds (1 per cent, on wages
not exceeding 200 lats per month and 2 per cent, on wages above
that amount) ; (2) a payment of 1 to 4 per cent, of the income
of persons engaged in the liberal professions; (3) payments
made by the owners of buildings ; and (4) payments by employers
equal to the payments made by their workers.
The Fund had at its disposal about 431,000 lats from 1 January
to 1 April 1932, 3,991,000 lats from 1 April 1932 to 1 April 1933,
and 6,639,000 lats from 1 April 1933 to 1 April 1934.
I n addition to the amounts collected by the Unemployment
Fund, money is also derived from the State budget for the same
purpose.
I n Lithuania an Act of 22 December 1933 1 set up a special
fund to finance schemes to provide work for the unemployed.
The administrative regulations under this Act provide t h a t the
fund shall be fed by contributions from the employers, from works
contractors and from the national and local authorities. Employers employing workers liable to sickness insurance are
required to pay into the fund amounts equal to one-third of
the sickness insurance contributions. Works contractors and
local authorities executing official works must contribute to the
fund an amount equal to 1 per cent, of the value of the works,
provided that it exceeds 5,000 litas, the contributions of the
State and local authorities being the same as those of the
employers. Subsidies granted out of the fond must be sufficient
to cover the labour costs of the works, all other expenses being
met by the local authorities or the contractors, as the case may be.
I n Poland public works undertaken by the State or the local
authorities are normally financed by taxation.
An Act passed on 16 March 1933 created an Employment
F u n d which is to be used for the financing of economically
important works. The purpose of this Fund is to act as a working
capital fund centralising and distributing public money for all
capital works undertaken by the State and the local authorities.
I t is constituted in the first place by means of a special t a x
on all wages amounting to 1 per cent., on employers amounting
to 1 per cent, of the payroll, on the income of professional men
and women amounting to 1 per cent, of the income, on the
payments made to members of the Diet and the Senate amounting
1
Fyriausybès Zinios, 22 Dec. 1933.
86
PUBLIC WORKS POLICY
to 1 per cent, of income, and on the fees received by company
directors, etc., amounting to 2 per cent, of the amount. A second
source of revenue consists of special taxes on theatre tickets,
sporting performances, etc., on the sale of certain foodstuffs and
other goods, on the consumption of gas and on rents. Moreover,
the district and departmental authorities have to pay each year an
amount corresponding to 1 per cent, of their ordinary budget.
Finally, the Fund may accept as compensation for certain taxes in
arrear payments in kind in the form of building materials, means of
transport, days of work, agricultural produce, foodstuffs, fuel,
textiles, etc.
This Fund, which, as has just been seen, is derived in the
first place entirely from taxes, makes loans to the State, local
authorities or even private companies and individuals under
certain conditions for the carrying out of work. As a general
rule, the loans are to cover only the cost of the labour employed,
the body or person responsible for the work being liable for the
rest of the expense.
The receipts of the Employment F u n d were estimated during
the budgetary year 1933 to amount to 100 million zloty. The
administration of the Fund, however, has granted loans not
exceeding 42 million zloty, reserving the remainder of the
receipts for unforeseen expenses and for direct relief to the
unemployed.
The Employment Fund has also been placed in charge of
an Investment Fund set up by Decree of 27 October 1933. Particulars of this are given on p. 86.
Relief works in the strict sense of the word are financed in
the first place b y the local authorities, but the Government
makes grants towards the cost of the works.
I n Portugal, the public works schemes established under
the Act of 19 September 1932 are financed by an Unemployment
Fund, into which are paid contributions from undertakings
amounting to 1 per cent, of the wages or salaries paid (agricultural
undertakings being exempt), a levy of 2 per cent, on the earnings
of every person working for someone else, except agricultural
workers, an increase of 2 per cent, in the tax on built-on real
estate, and contributions from the local authorities.
LOANS
The authorities or public utility undertakings which have
works to carry out, and which intend to finance these works
b y means of a loan, may raise the money in two ways, namely
FINANCIAL PROBLEMS
87
by borrowing (1) directly from the public, or (2) from t h e
Government or some other public body.
Direct Borrowing from the Public
The most usual way is to obtain the money direct from the
public by the issue of stock (fixed interest-bearing securities).
In Australia, in order to avoid undue competition and clashing
in the raising of loans, an Australian Loan Council has been
created, consisting of the Treasurers of the Commonwealth and
the States. That Council considers proposals for loan expenditure, and if it decides t h a t the total amount cannot be borrowed
a t reasonable rates and conditions it decides the amount t h a t
can be borrowed and allocates the amount between the Commonwealth and the States. 1
I n Czechoslovakia, the Road F u n d is authorised t o raise
long-term loans on the security of the tax revenues mentioned
in the previous section. I n each of the years 1929 and 1930 the
loans raised amounted to 140 million crowns; in 1931 they
jumped to 400 million crowns, falling again in 1932 to 201 million
crowns and in the first six months of 1933 to 155 million crowns.
Moreover, in May 1933, an internal loan of more than
2,000 million crowns was raised for the financing of public works.
I n Germany the additional programmes of railway work p u t
in hand in the winters of 1931-1932, 1932-1933 and 1933-1934
were financed by such loans. I n 1932-1933 the total amount
provided for was 500 million RM., and for the winter of 19331934 the corresponding amount was 550 million RM.
I n Great Britain, local authorities and other bodies carrying
out works can raise loans with the authorisation of a Government
Department or a special Act of Parliament, and no loan can be
raised by any local authority without such authorisation. The
total loan expenditure of local authorities, which was £84-4 million
in 1922-1923, rose to £123-96 rnillion in 1929-1930. Included
in these figures is loan expenditure on roads, which was about
£10 million per annum on the average in the years 1922-1923
to 1927-1928, fell to £8-83 million in the year 1928-1929, and
then rose suddenly to £18-38 miUion in 1929-1930; similarly,
on subsidies to agriculture, the expenditure was £1-38 million
in 1922-1923, £460,000 in 1928-1929, and £860,000 in 1929-1930;
on housing it was £35-64 million in 1922-1923, £45-69 million in
1928-1929, and£48-19 million in 1929-1930. Some of these loans
were obtained from the Public Works Loan Commissioners (see
below).
1
Official Year-Book of the Commonwealth oj Australia,
No. 25, 1932, p . 23-
88
PUBLIC WORKS POLICY
In Japan, at a special session of the Diet held in June 1932,
it was decided (1) to authorise an expansion of the fiduciary
issue 1 from 120 million yen to 1,000 million yen; (2) to provide
a large amount of money for Government assistance to agriculture,
fisheries and small trades, for assistance to certain local authorities, and for public works; and (3) to authorise the Minister
of Finance to control all transactions in foreign currencies.
The large public expenditure, which included the sums required
for the campaign in Shanghai and Manchuria, raised the total
budget to 1,940 million yen, the highest figure ever reached in
Japan. No increased taxation was imposed, the deficit of 705
million yen being financed by loan. Of this loan expenditure,
about 300 million yen was used for the operations in Shanghai
and Manchuria and the remainder for public works and other
purposes designed to stimulate economic recovery. The budget
for 1933-1934 was even larger than t h a t of the preceding year
and amounted to 2,309 million yen. This sum includes 209
million yen for improvement of military equipment, 190 million
yen for expenditure in Manchuria, and 223 million yen for the
relief of the unemployed and assistance to agriculture. The
deficit of 900 million yen was financed by loan.
I n Poland certain loans have been raised b y direct borrowing
from the public—as, for example, the construction loan of
100 million zlotys issued by the Polish Government in 1929
for the purpose of financing the construction of dwelling houses. 2
I n Sweden the programmes of public works of the years 19331934 and 1934-1935 are being financed by short-term loans.
As already stated above, total loan expenditure amounted
to 250-6 million crowns in 1933-1934 and is estimated to amount
to about 220 million crowns in 1934-1935. To a certain extent
this loan expenditure represents a breach with Swedish financial
tradition, that such expenditure should be productive in the
sense of directly covering its own interest charges. For t h a t
reason such works as road construction have always been financed
out of revenue. In the years referred to, however, works of this
kind were financed by loan.
I n the United States the total State and local public debt for
all purposes increased from $4,900 million in 1914 to about
$19,500 million at the present time. Although a great deal of
money has been borrowed in recent years for relief purposes,
1
i.e. notes issued against Government securities or commercial bills as
distinct from notes issued against an equivalent value of gold or silver.
2
See also p . 96, where reference is made to the issue of Treasury bonds for
the Investment Fund.
FINANCIAL PROBLEMS
89
it is probable that most of this increase represents financing of
capital outlays. Under the National Industrial Recovery Act,
1933, the Secretary of the Treasury is authorised to borrow such
amounts as may be necessary t o meet the expenditures authorised
by the Act and to issue therefor bonds, notes, certificates of
indebtedness, or Treasury Bills of the United States. The total
amount authorised was §3,300 million, subsequently increased to
§3,700 million. Most of this money has been allotted for
projects to be carried out by Federal authorities. Part of it is
being re-lent by the United States Treasury to local bodies
engaged in works. This aspect of the question is dealt with in
the next section.
Loans from Governments or Other Public Bodies
The system of loans made by a Government or other public
authority to the body undertaking the works differs from the
above in several respects. The Government will probably enjoy
better credit on the capital market, and therefore be able to
borrow at a lower rate of interest. Even if allowance is made for
the expenditure involved in borrowing and re-lending the money,
the loan can frequently be made to t h e local authority at a lower
rate than the latter can obtain for itself. Moreover, the Government can use the money at its disposal to encourage the local
authorities either to speed up works during periods of severe
unemployment or to retard certain works when ordinary business
is in full swing, and this encouragement will be all the more
effective if the Government lends the money at a rate of interest
less than t h a t which it is itself paying for the money. Finally,
the procedure is almost certainly much more speedy in the case
of a loan from a Government than in the case of a loan from the
public.
Under a system of Government loans, it is important, of
course, to distinguish between loans made from funds raised by
taxation and loans made from funds which themselves are raised
by loan. The former are merely a disguised form of financing by
taxation, and have already been dealt with under t h a t head.
It is the latter form of financing alone which strictly represents
loan expenditure.
Another point to bear in mind is t h a t it may be easier for a
Government than for a local authority to create a reserve fund
during time of prosperity for use in time of depression.
Usually the Government sets up a special organisation or
appoints an existing organisation t o make the loans. If the
financing body is a bank, the situation may be the same as direct
90
PUBLIC WORKS POLICY
financing by the Government, but on the other hand, it may be
quite different. A loan from a bank is more likely than a loan
from pi'ivate investors to lead to an inflation of credit. Such
an inflation of credit is, of course, necessary if the public works
are to represent net new investment, and in times when there
are plenty of idle funds it is easy to bring about such an inflation
of credit by borrowing from the public. A bank loan, however,
is a more direct method.
In France it may be noted t h a t the Finance Act of 1911
provided for the constitution of a reserve fund for the State
railways, to enable them t o purchase rolling stock and to carry
out maintenance and construction work.
Twenty years later
Mr. Bedouce, in his report on the Public Works Budget for
1931-1932, proposed the creation of a National Equipment Fund
which would borrow the money needed for the capital expenditure
of public authorities and of other bodies. Such a system, he said,
would have the advantage of obtaining the best conditions from
the lenders, because the centraUsation of borrowing operations
would prevent competition. The F u n d has not, however, been
set up.
The public works programme which was decided upon in
the spring of 1934 is to be financed partly by loans from the
social insurance funds to the public authorities. A Decree of
15 May 1934 provides that 75 per cent, of the available resources
of the old-age and old-age-invalidity funds and the General
Guarantee Fund must be collected from 1 June 1934 to 31
December 1940 in a common account to be administered by the
Deposit and Loan Fund and invested by it primarily in loans
for public works to reduce unemployment. Such loans are to
be made only to local authorities, the large railway systems,
public undertakings, colonies, specially approved bodies holding
concessions for public works, and other regularly constituted
bodies which can obtain a guarantee from a departmental or
other local authority. The loans are to be based on contracts
of a standard type concluded between the bodies concerned and
the Deposit and Loan Fund.
In Germany the Legislative Decree of 4 September 1932
first introduced into the public works administration of t h a t
country the system of providing for loans to be made by financial
institutions.
This so-called " indirect financing," which has
since become the rule, is regarded merely as a temporary device,
" for public credit is only to serve as a means of tiding over a
difficult period, t h a t is to say, it is t o be used only to the extent
FINANCIAL PROBLEMS
91
t h a t in future years of improved trade an increased yield of
taxes or a saving of relief payments may be anticipated." 1 The
programme of January 1933, which made provision for loans
amounting to 500 million RM. for various public works to be
carried out by the Government, local authorities and public
utility undertakings, included a clause to the effect that, when
the works had been approved by the Commissioner for the
Development of Employment, the German Public Works
Company and the German Credit Company (Deutsche Rentenbank
Kreditanstalt) would be responsible for obtaining the funds from
the banks and for lending the money required. The Government
undertook to repay the loans incurred to the banks within a
comparatively short period (five years, for instance). I n certain
cases the Minister of Finance was authorised to hand to the
Reichsbank as security tax certificates which had been issued
under a previous law. 2
The programme of 1 June 1933 provides for the financing
of works by a number of different institutions. Maintenance
and improvements in connection with administrative buildings,
dwelling houses, bridges, and other buildings belonging t o the
States, local authorities, and public utility undertakings, were
to be financed by the German Public Works Company, no
interest being paid on the loans by the ultimate borrowers.
This company was created in 1930 to finance relief works by
raising money on the security of outstanding loans due by local
authorities to the Government. The development of water, gas and
electricity supply, and the levelling of land and tunnelling, were
also to be financed by this company. Land settlement and small
holdings were to be financed by the German Land Settlement Bank
(Deutsche Siedlungsbank).
Land improvements, river work, and
afforestation were to be financed by the German Credit Company.
Finally, the construction of temporary housing accommodation
and huts was also to be financed by the German Credit Company.
The financing of these different projects is accomplished in
the following way. When the financing body has decided to
make an advance or a grant, the body undertaking the works
draws a bill on it. The latter discounts these bills with a
private bank or a group of banks, and the latter may, if they
wish, re-discount them at the Reichsbank.
The Act of 1 June 1933 authorised the Minister of Finance
to issue up to 1,000 million RM. of Treasury Bills, which are
1
Viertéljàhrsliejte zur Konjunkturforschung,
* See below, p. 103.
op. cit.
92
PUBLIC WORKS POLICY
to be paid by the Federal Government within five years by
means of annuities of one-fifth of the total amount per year.
The Minister of Finance hands these Treasury Bills to the
Reichsbank, and they serve as security for the loans made.
I n view of the fact that the long-term rate of interest remains
comparatively high, the financing of the public works programmes
has given rise to certain difficulties.1 The bonds of public authorities and the debentures of private companies after rising in
value during the second half of 1933, fell subsequently, and at
the end of June 1934 were quoted at about 90 per cent, of their
nominal value. Thus, 6 per cent, bonds actually yielded about
6-7 per cent. This is an unfavourable situation in which to
launch a big programme of loan expenditure, and it is probable
t h a t it was aggravated by the fact t h a t such loan expenditure
was in fact undertaken.
The public works programmes of 1933 and 1934 have been
financed by bills drawn by the bodies undertaking the works on
certain financial institutions, which in turn discount these bills
with the ordinary banks, and the latter are able to rediscount
the bills with the Reichsbank. The loans are guaranteed by the
Government, and repayable by annuities over a period of five
years. One of the principal reasons for the adoption of this
method of financing was the fact that the long-term rate of interest
was so high t h a t local authorities found it impossible to borrow
the money they required in the open market. This short-term
financing has, however, upset the capital market to some extent.
The so-called employment development bills constitute such a
favourable short-term investment for banks, savings banks,
and insurance institutions and companies t h a t the supply of
capital for long-term investment has been diminished. This
is not due solely to the existence of the employment development
bills, but also to the general economic situation in Germany.
I t is a serious matter that capital issues for public services
fell from 207 million RM. in 1928 to 5 million RM. in 1933, and
for private business from 294 million RM. in 1928 to 2 million RM.
in 1933. Mortgage loans also declined heavily, and of 800
million RM. invested in 1933 in building construction, 200
million RM. were furnished by the Government, 150 million RM.
by the savings banks and the remainder by the owners of buildings
or private trustees.
I n reality the money for the public works has hitherto been
furnished mainly by the Reichsbank itself, which had up to the
1
Cf. Mr. K E Y N E S ' observation quoted on p . 79.
FINANCIAI, PROBLEMS
93
end of June 1934 rediscounted employment development bills to
the value of 1,200 million RM. out of a total of 2,200 million RM.
in circulation.
In view of the above difficulties, the Institut für Konjunkturforschung proposed in June 1934 that the short-term loans
should be replaced by a long-term loan. Although in June
1934 only about 2,400 million RM. out of the 5,400 million RM.
authorised had actually been spent, Herr Schwerin-Krosigk,
the Minister of Finance, referring to the importance of lowering
the long-term rate of interest, said that in the meantime no
new public works programmes would be launched. The only
works that would be continued were certain special works such
as the construction of motor roads and works relating to land
settlement.1
In Great Britain under the Local Loans Act of 1887 a Local
Loans Fund has been established. Money is raised for it by
the issue of stock bearing interest at 3 per cent, either to the
public or to the National Debt Commissioners as an investment
for the sums received by them from time to time from the
Post Office and other public departments.
The primary security for the stock is the assets of the Local
Loans Fund, and those assets consist ultimately of the rates
due to the local authorities, to whom advances have been
made, or, in some cases, special property belonging to a local
authority such as a dock, a harbour or a pier. In addition,
the Government guarantees the interest on the stock, but since
the Fund has in practice been self-supporting the Exchequer
has never been called upon for a contribution. If it is found
that the capital of any loan cannot be recovered and has to
be written off the assets of the Fund, Parliament has to make
good the loss. As a rule, the interest received from the local
authorities is greater than the interest paid to holders of Local
Loans Stock, including expenses, so that the Fund is run at a
profit.
The Fund is managed by the National Debt Commissioners
but they do not themselves make the loans directly to the
local authorities. For this purpose a special body, known as
the Public Works Loan Board, has been established. The
amount which may be advanced by the National Debt
Commissioners to the Public Works Loan Board in any year is
1
Vierteljahrshefte zur Konjunkturforschung, 9. Jahrgang Heft 1, pp. 11-20;
Wochenbericht des Instituts für Konjunkturforschung, No. 25, 27 June 1934,
pp. 121-124.
x
Q 8344
O
94
PUBLIC WORKS POLICY
controlled by an annual Act of Parliament known as the Public
Works Loans Act.
I t is only for the smaller authorities t h a t money is provided
in this way. Big local authorities such as the councils of large
cities and counties do not require t o have their credit backed
by a Government guarantee in order t o borrow money cheaply. 1
A proposal has been made by Mr. Alfred Hoare, a banker
and Treasurer of the Royal Economic Society, t h a t all
incomings of the Public Works Loan Board should in present
circumstances be applied in purchase and cancellation of part
of the National Debt and t h a t the requirements of the Board
should be supplied by inflation as long as considered desirable.
He also suggests that the rate of interest charged on loans
should be reduced to a low figure, such as 2 or 3 per cent. 2
I n Greece an agreement was signed on 27 August 1934 between
the Government and the Bank of Greece providing for an advance
of 600 million drachmas by the Bank for road construction.
Security is provided b y certain special Government accounts
kept by the Bank. As money flows in to these accounts, the Bank
will retain it in a special guarantee fund. The Bank is to receive
a payment of 3 million drachmas as compensation for its services,
paid in four annual instalments. The Bank undertakes to pay
out the money, which is to be used to finance certain specific
road schemes (175 million drachmas in 1934-1935, 300 millions
in 1935-1936 and 125 millions in 1936-1937), b u t only t o the
extent t h a t the payments are covered b y the amount of the
guarantee fund supplemented b y such repayments of the advance
as the Government may have made. The advance is to be
redeemed b y means of annual payments of 75 million drachmas.
I n Italy many works undertaken b y provincial and municipal
authorities, official bodies having a certain autonomy, and private
companies and individuals, have been financed by the Social
Insurance Funds in the first place, t h e money being ultimately
obtained from the Government b y means of annual payments
from the budget. This system is tantamount t o a loan from
the Social Insurance Funds t o the State, and is mentioned
here because in t h a t way loan expenditure is effectively incurred.
This system of financing has been applied t o t h e reconstruction
of about 10,000 kilometres of main roads (part of the 20,000
kilometres which are under the direct control of the Government),
the development and irrigation of several hundred thousand
1
Cf. H I L T O N YOTWO and N . E . YOUNG : The System of National
second edition, 1924, p p . 252 e t seq.
* A L F R E D H O A E B : Unemployment
and
Inflation.
Finance,
95
FINANCIAL PBOBLEMS
hectares of land, and the construction of working-class houses
in almost all thè towns in the country. These various works
have amounted to about 8,000 million lire in a period of five
years. Other sums have been advanced in a similar way by
land mortgage banks or by special institutions authorised to
borrow money on the capital market. The State railways
have recently been authorised to issue two loans for the
development of electrification.
In addition, a number of financing institutions have been
created to facilitate the financing of works of various kinds.
The most important of these from the point of view of the
present report is the Credit Consortium for Public Works founded
in 1919 with a capital of 100 million lire to make loans to
provinces, communes and public works consortia against the
issue of debentures. In 1926 it was empowered to extend its
operations to foreign markets and to borrow money abroad.
At the end of 1932 it had outstanding debentures for 2,400
million lire, of which 191 million were represented by dollar
loans, and 127 million by sterling loans.
The National Labour Bank which was founded in 1913
was authorised in 1929 to extend its operations to the lending
of money to local government bodies, land reclamation and
irrigation consortia, and companies and persons engaged in
productive activities of public interest.
The Credit Institute for Public Utilities makes loans to
private concerns carrying out work, erecting plants or making
alterations needed for utilising concessions recognised as of public
interest. Its services have been largely used for financing the
hydro-electric and telephone industries by loans made against
debentures.
The capital of these financing institutions is provided by
the Banks of Naples and Sicily, the St. Paul's Institute, the
Government and other banks and corporations.1
In Poland loans are granted to local authorities either by
the Government or by the State banks, and particularly by
the Bank of National Economy. Early in 1926 the Government
authorised that bank to grant long-term loans at 8 per cent.
to local authorities on the basis of communal bonds. The
following table shows the origin of all loans contracted by the
district and departmental authorities.
1
Cf. " Business and Financial Report of the Association of Italian Corporations," 1 Nov. 1933, quoted in Essential News, 18 Nov. 1933.
a 2
96
PUBLIC WORKS POLICY
LOANS CONTRACTED BY DISTRICT AND DEPARTMENTAL AUTHORITIES
IN 1930-1931
Origin of loan
I.—State
A. Government departments ...
B. State credit institutions
II.—Communal organisations
A. District and departmental authorities
B. Communal credit institutions
III.—Social insurance funds
UV.—Internal loans by the issue of stock
V.—External loans
VI.—Private banks
...
VII.—Individuals and private banks
VIII.—Miscellaneous
Total
Amount of loan In
thousands of aslotyi
34,168
2,067
32,101
19,470
1,764
17,706
8,640
17,378
12,815
675
5,076
53
98,275
By a Decree of 27 October 1933 the President of the
Republic established an Investment Fund for the purpose of
financing investments which are considered useful for the State.
The management of the Fund is entrusted to the Employment
Fund, to which reference has already been made. The economic
and financial plans and proposed loans must be approved by
the Minister of Finance. The Fund obtains its money by means
of an issue by the Treasury of bonds having no fixed date of
redemption and bearing no interest. The Treasury must
exchange these bonds at any time for currency. They are to
be issued in series and must not exceed a total amount of
100 million zlotys (40,000 bonds of 25 zlotys each). Every
week a certain number of bonds are drawn by lot and purchased
by the Government at a premium. This will represent an
annual charge on the budget of about 4 per cent. The money
obtained in this way will be placed at the disposal of the
Investment Fund in the form of advances or grants. It will
supplement the money which the Employment Fund already
has at its disposal from other sources and will enable that Fund
to make loans not only for the payment of wages but also for
the purchase of materials. The first issue for the Investment
Fund was for 10 million zlotys. This sum, together with the
money at the disposal of the Employment Fund, will bring the
expenditure on public works in 1934-1935 to about 80 million
zlotys.
In the United States the Federal Government was authorised
by the Emergency Relief and Construction Act of July 1932
to give Federal assistance to States, municipalities, and to some
extent to private corporations, through a body known as the
FINANCIAL PROBLEMS
97
Reconstruction Finance Corporation. A sum of $300,000,000
was set aside for the direct relief of destitution, and $1,500
million for loans to States and public bodies for public works
and housing. In addition, a sum of $322 million was set aside
for Federal construction purposes. With regard to direct
relief, the Reconstruction Finance Corporation made advances
totalling $299 million up to 30 June 1933, and in some States
a good deal of this money was in fact used for road construction.
Of the amount of $1,500 million mentioned above, only $30 million
were in fact advanced up to the date mentioned. The Reconstruction Finance Corporation was authorised to borrow money
for this and other purposes, and the borrowing was carried out
by means of an issue of debentures. The loans made by the
Reconstruction Finance Corporation were limited to selfliquidating projects, that is to say projects which were selfsupporting and financially solvent, and the construction cost
of which would be returned within a reasonable period by means
of tolls, fees, rents, or other means other than taxation.
Under the National Recovery Act, 1933, the President is
empowered to make loans to the bodies carrying out public
works. The policy of the Administrator of Public Works is
to make the interest rate for advances to public bodies
approximately equal to the expenses of the Federal Government
in obtaining the money. In fact, the money is advanced at
4 per cent. It is laid down that the money shall be lent on
reasonable security, and the Administrator has decided that
this security may be the earnings of the project, supplemented,
if necessary, by taxes. If the project is not one which has
earnings, the Administrator considers whether the ordinary
current expenses of the public body concerned are within its
broadly estimated revenues. If they are not, the Administrator
then considers whether this lack of balance is due to expenditures
for the relief of unemployment or for other extraordinary
expenditures due to the depression, and in that case he assumes
that the depression is being relieved, and that the revenues
of applicant authorities will, after two or three years, be
equivalent to those of normal years. 1 The President is authorised
to acquire by purchase, or by exercise of the power of eminent
domain, any property in connection with the public works.
The President is also authorised under the National Recovery
Act, 1933, to make grants to public bodies provided that they
1
Statement by H . T. H U N T , General Counsel for t h e Federal Emergency
Public Works Administration, in the New York Times, 14 Sept. 1S33.
98
PUBLIC WORKS POLICY
do not exceed 30 per cent, of the cost of material and labour
used on the project in question. Such grants are to be made
mainly for waterworks, sewers and sewage disposal, and certain
other works which tend to stimulate further projects.
I n Yugoslavia the Central Workers' Insurance Institution
has decided to lend practically the whole of its available resources
to local authorities for public works. Hitherto these resources
have been deposited in banks (70 million dinars), or invested in
securities (9 million) or buildings (207 millions). For this purpose
it will set aside each year 35 per cent, of the contributions paid
in respect of accident insurance and old-age insurance. The
money will be advanced to local authorities, and is to be used
exclusively for certain specific kinds of work, such as water
supply, sewerage, electrification, construction of hospitals and
sanatoria, etc. The security for the repayment of the advances
will be the ordinary budgetary resources of the authority
concerned. I t is anticipated t h a t the total sum available will be
about 120 million dinars per annum.
The Redemption
Period
The length of time during which a loan continues and repayment has to be made is clearly of great importance. I t must
depend a good deal on the kind of work undertaken. I t is clearly
easier to pay the interest and sinking fund charges on a loan
received for revenue-producing works than for others. On the
other hand, some works are likely to be much more durable t h a n
others. Land drainage, for instance, may be carried out once
and for all and new buildings also last for a very long time.
As a general principle, it may be affirmed t h a t a loan should
be repaid within a reasonably short period. Short-term bank
credit, however, is not adequate, because in t h a t case the period
would be too short. I t must be borne in mind t h a t the shorter
the period is the heavier the burden on the revenue of the
borrower, and in the case of public authorities t h a t usually means
on the rates and taxes, so t h a t from a budgetary point of view
the borrowing authority will want as long a period as possible in
which t o p a y off the loan.
There is another important consideration. This report is
dealing with public works in relation to unemployment, and it
is of special interest in this respect t h a t loan expenditure should
be increased during a depression. If t h a t is to be done; it is
essential t h a t there should be decreased loan expenditure during
prosperity. I t is therefore reasonable to expect t h a t larger
FINANCIAL PBOBLEMS
99
interest and sinking fund payments might be made during
prosperity than during depression. It is also important that as
much as possible of the loan money raised shall be paid off
during the period of prosperity.
On the other hand, the wishes of the ultimate lender must
be considered. Banks which desire to keep their funds as liquid
as possible will prefer a short-term loan. The preferences of the
public, however, will probably depend upon whether the general
tendency of interest rates is upwards or downwards. If it is
downwards, there is little doubt that they will subscribe more
readily to a long-term loan than to a short-term loan.
A great deal must depend also on the character of the works
for which the loan is raised. Much public loan expenditure is
undertaken for equipment in connection with trading services
or housing projects which are remunerative and bring in an
income other than taxation income, from which the interest and
sinking fund payments can be met. In such cases it is much
easier to pay off the amounts required than it is in the case of
non-revenue-producing schemes. It is above all important,
taking a long view of the situation, that when a depression comes
and it is desired to expand loan expenditure, the existing
indebtedness of the authority shall not be so great as to make
the raising of new loans difficult. It is this fact which has caused
particular difficulty in the launching of the public works
programme in the United States under the National Recovery
Act, 1933, and also in Germany, because local authorities have
been either unwilling or even unable to add to their existing
indebtedness.
In Germany, under the " indirect financing " scheme, the
loans are raised from the banks in the first place, the Government
undertaking to repay the banks by means of five annual payments,
from budgetary resources. It is said to be no longer possible to
raise the money from taxes immediately, and consequently the
funds for public works are raised in the first place, and temporarily,
on the capital market. The difiîculties to which this short-term
financing has given rise in the capital market have been explained
above, but there remains the question of the annual payments
by the Government. " For the payment of the five-year Treasury
bills, the Federal Government can use the repayments of previous
loans for public works made by it, the money obtained from the
special collection for winter relief, and from repayments of loans
to persons who marry. These measures involve a burden on the
budgets of future years which can only be met if there is a strong
100
PUBLIC WORKS POLICY
and persistent improvement in trade. For the payments on
account of the tax certificates and the Treasury bills, and the
lower receipts from certain taxes which have been reduced (the
house rent tax and the motor car tax) will require an additional
amount of 600 to 700 million RM., rising to 1,200 million RM.
in 1938."1 Herr Schwerin-Krosigk announced, in his speech of
14 June 1934 (see p. 93), that, in order to make these payments,
the Government would be obliged to avoid any increased
expenditure in other directions, even for works considered by
many people as indispensable.
The money for the January 1933 programme was to be lent
to the works authorities with a repayment period of twenty
years.
For the programme of 1 June 1933 a variety of systems was
provided for. The financing of administrative buildings, dwelling
houses, bridges and other buildings belonging to the States, local
authorities and public utility corporations was to be ensured by
a loan from the German Public Works Company without interest,
repayable in five years. The development of water, gas and
electricity supply, the levelling of land and tunnelling, were to
receive long-term loans from the same source. Land improvement, river work, and afforestation, were to be financed by the
German Land Settlement Bank by means of long-term loans.
With regard to afforestation, the German Credit Company was
to grant to public authorities, and also to private owners of
forests, loans repayable in thirty-one years at most, and carrying
interest at 3 per cent. The temporary housing accommodation
and huts were to be financed by loans repayable in ten years.
In Great Britain loans made by the Public Works Loan Commissioners vary considerably from the point of view of their
redemption period, but most of them appear to be for long
periods (as much as fifty years in some cases).
In Greece, the advance from the Bank of Greece for road
construction, referred to on p. 94 above, is to be repaid in eight
years by the Government.
In Italy the sums advanced by the Social Insurance Fund and
other institutions are repaid by the Government over a period
of thirty years.
In Poland the loans granted by the Bank of National Economy
are long-term loans. Those which the newly created Employment
Fund is authorised to grant are to be repaid within a period not
1
Vierteljahrshefte zur Konjunkturforschung, op. cit., p. 122.
FINANCIAL PBOBLEMS
101
exceeding fifteen years. They may be repaid in kind. In order
to ensure the repayment of the loans, the Fund is instructed to
finance mainly revenue-producing works.
In Sweden the programme of public works adopted by Parliament in June 1933 was to be financed largely by short-term
loans repayable in a period of four to five years. For the purposes
of repayment, the death duties were increased.
In the United States the money advanced under the National
Recovery Act is to be repaid in various periods, according to the
life of the project in question, up to a maximum of thirty years,
except in the case of such projects as obviously have a longer life.
In no case is the repayment period to exceed fifty years.
OTHER METHODS
Among a number of plans for the financing of public works
which were submitted to the International Labour Office in
connection with its proposals for the development of pubhc
works was one by Mr. Hermann Scheibler, of the Index Number
Institute, Inc., based largely on the theories of Sylvio Gesell.
According to this plan, all payments by Governments and
banks would be made for a period of three or six months by
means of certificates depreciating by 1 per cent, per week. The
Government would compensate the banks for any losses incurred
as a result of the depreciation and would oblige the banks
to accept the certificates at their face value. The Government
would, moreover, deposit bank notes with the Central Bank
equal in value to the certificates issued. As an alternative,
Mr. Scheibler suggested that there should be a more rapid rate of
depreciation and no possibility of escaping losses through
depreciation. I t is claimed that either of these plans would
tend to increase the velocity of circulation of money and thus
increase effective demand for goods.
A modification of this system was actually applied in Austria
in the little town of Worgl, where the Mayor issued special
" Labour Bonds " in July 1932, which depreciated to the extent
of 1 per cent, per month. The whole issue of 32,000 schillings
was covered by a deposit at the Municipal Savings Bank and the
bonds were exchangeable for ordinary currency subject to a
discount of 2 per cent. The bonds were issued partly for the
financing of a pubhc works programme, including the construction of roads, canals and bridges, electrification, etc., amounting
to 100,000 schillings. I t is claimed that the experiment met with
great success, but the issue of the bonds has since been forbidden.
102
PUBLIC WOKKS POLICY
The Canadian Government introduced a Bill into the House
of Commons on 19 June 1934 authorising the Government to
increase the note issue for which 25 per cent, gold cover is required
from $50 million to $120 million. Hitherto all notes issued in
excess of $50 million required 100 per cent, gold cover. The
Prime Minister, in introducing the Bill, indicated that the
increased note issue would be used for financing a public works
programme.
ENCOURAGEMENT OF CAPITAL EXPENDITURE BY PRIVATE BODIES
AND INDIVIDUALS
Pveference has so far been made to public works carried out
by public authorities or by undertakings of a public character.
But the State may also encourage capital expenditure on the part
of private companies or individuals by a suitable system of grants
in aid. This policy has been pursued in a number of countries,
and some examples are given below.
The actual methods adopted resemble those used in connection with public works in the narrower sense of the term.
There is one important feature, however, to which attention may
be drawn. The loan charges no longer fall on a public authority
except to the extent of any grant in aid that may be made. They
fall either on the private profit-making company or on an
individual. Moreover, in so far as the work in question is
remunerative—and that is generally the case for all work undertaken by private companies—the loan charges can be met out
of the income received.
The object of Government assistance of this kind is to hasten
the expenditure of money on capital works which might otherwise
be postponed until a much later date. So far as the financing is
concerned, it must be examined in the light of the same criteria
as those used for public works in the narrower sense. Above
all, it is important to know to what extent the expenditure is
loan expenditure and not taxation expenditure.
On the other hand, encouragement to private companies is
subject to many difficulties of a different character, and has been
very severely criticised in consequence. Thus it is not at all
easy to be sure that the Government assistance will really
provoke new expenditure and will not merely be used to lighten
a burden that would have been undertaken in any case. It is
impossible to do more than mention this aspect of the problem
here, which however, from the point of view of Government
FINANCIAL PROBLEMS
103
policy and Government finance, is a matter of the first
importance.
Moreover, all measures for the encouragement of private
enterprise are somewhat uncertain in their effects. However
much the State may decide to give in the way of assistance, the
ultimate decision as to the spending of the money rests in the
hands of the company or individual concerned, and this decision
depends upon a great many other factors besides the Government
grant or loan. It is for that reason that several measures of this
kind have been unsuccessful.
In Germany a considerable number of schemes of this
character have been tried.
The programme elaborated in September 1932 for the development of employment included a number of measures for the
encouragement of private enterprise. One of these provided for
the creation of tax certificates which were issued to taxpayers,
and could be used by the latter in the payment of certain taxes.
The Reichsbank agreed to accept these certificates as security
for loans to be used for productive purposes. It appears,
however, that comparatively little use has been made of these
facilities.
A second measure provided for the payment of a bonus in
the form of tax certificates to employers who agreed to take on
additional workers or salaried employees. This led, according
to a statement made by the Minister of Finance, to the employment of 62,500 additional persons by the middle of December 1932.
The measure, however, did not fulfil expectations and on 7 April
1933 it was repealed.
The programme of June 1933 includes a number of measures
of the kind now under consideration. The general procedure for
the financing of these measures is similar to that described above
for the works of public authorities. Thus a credit of 100,000,000
RM. was provided for suburban small holdings. This is a continuation of a scheme which was originated in October 1931. Up to
the end of 1932 75 million RM. had been allocated for this purpose
in the Federal budget. The Federal Government made a longterm loan amounting to 2,250 RM. to unemployed persons through
the intermediary of the Federal States, for the acquisition and
preparation of a small holding with a small dwelling house, the
total value of which was not to exceed 3,000 RM. In February
1933 a fresh credit of 50 million RM. was allocated for this purpose,
but only 10 millions were to be obtained from resources arising out
of the budget. The remaining 40 millions were to be raised by
104
PUBLIC WORKS POLICY
loan. The total amount of 125 million RM. enabled 46,100 small
holdings with small dwelling houses to be created. The June
1933 programme provides a total amount of 100 million RM.
which applicants can obtain in the form of a long-term loan
from the German Real Property Bank (Deutsche Bau- und
Bodenbank), through the intermediary of the Federal States.
The same programme included a credit of 100 million RM. for
the encouragement of repairs to private dwelling houses, the
subdivision of such houses into small flats, and the repair of
agricultural buildings. This form of assistance was originally
started as a result of a Legislative Decree of 14 June 1932 under
which 5 million RM. were included in the Federal budget for
the purpose of making grants to house owners who would carry
out the kind of work intended. The grant made by the Federal
Government covered the interest which the house owners would
have to pay on loans raised by them for the purpose. By
the Legislative Decree of 4 September 1932 a fresh amount
of 50 million RM. was included in the Federal budget. Under
this Decree the grant made by the Federal Government was no
longer only to cover the interest of the loans contracted by the
house owners. It was to cover from 20 to 50 per cent, of the
total cost of the work. In January 1933 an additional 50 million
RM. were provided for the same purpose, in June 1933 a further
100 million RM. and in September 1933 still another sum of 500
million RM. was added. The Government grants under these programmes are made on the same conditions as those just mentioned
except that the money is advanced in the first place by the
Real Property Bank. Moreover, 4 per cent, of the capital raised
by the house owner is deducted from the tax on rents payable
by him. The method of financing adopted was the same as
that already described above. For the programme of September
1933 the system is similar to that in force for the programme
of June 1933.
It is claimed1 that this measure has proved a particularly
effective one. The Government grant cannot exceed one-fifth
of the total cost of house repairs or one-half in the case of subdivision into flats. It therefore has the effect of increasing total
investment by five times the amount of the grant. Previous
efforts in the same direction had consisted in the reduction of the
rent tax, grants in aid of interest on loans, etc. They are said
to have been less successful than the measure whioh is now being
described. The money provided for the purpose of the Govern1
Frankfurier Zeitung, 22 Sept. 1933.
FINANCIAL PROBLEMS
105
ment grant has been applied for very rapidly. The Institut für
Konjunkturforschung has estimated that in 1932, as a result of the
grant in aid of the transformation of houses, 25,000 new dwellings
were constructed, that is to say, 37 per cent, more than in 1931.
In the first seven months of 1933 16,000 new dwellings were
constructed in large and medium-sized towns, as compared with
6,600 in the corresponding period of the previous year. It was
moreover estimated that if the 500 million RM. provided for by the
State in September 1933 were wholly used, this would imply the
investment of 2,000 million RM. altogether, thus giving employment to one million workmen. In practice the financing of
this housing programme has been accomplished partly by the
use of funds belonging to the houseowner himself and partly
with credit granted by handicraftsmen and tradespeople, and
partly with bank credit.
Subsequently an additional 20 million RM. were set aside by
the Government for the purpose of encouraging the building of
new houses. In this connection it may be mentioned that an
original credit of 20 million RM. was included in the Federal
budget in November 1932. In March 1933 the Governing Body
of the Institution for Employment Exchanges and Unemployment
Insurance decided to make a grant of 5 million RM. from its own
funds. As these amounts have been practically exhausted, the
further sum of 20 million RM. mentioned above was included in
the September 1933 programme. In this programme it is specified
that long-term loans carrying interest at 4 per cent, are made to
persons who undertake to construct small dwelling houses for
their own use. The amount of the loan may amount to 25 per
cent, of the total cost of the building, including land up to a
maximum of 500 RM.
In Great Britain various payments have been made for
purposes such as those now under consideration. While they
have been derived from taxation they have in many cases
encouraged the investment of capital by the recipients of the
subsidies. Thus, in respect of agriculture (subsidy to beet sugar,
land settlement, etc.) the amounts in 1928-1929, 1929-1930 and
1930-1931 were £5-58 million, £8-26 million and £9-78 million
respectively, and in respect of export credits, trade facilities,
Empire marketing, etc., the corresponding figures were £760,000,
£730,000 and £1,000,000 respectively.
In Italy, certain financing institutions have been created for
the purpose of giving facilities to undertakings and private
persons. Thus for instance, the National Foundation for Small
106
PUBLIC WORKS POLICY
Industries has a credit section which helps handicrafts and home
and village industries by means of loans, and the National
Consortium for Agricultural Improvement has played an
important part in the task of funding farm indebtedness and of
directly financing farm improvements. Finally, reference may
be made to the Italian Credit Institute and the Institute for
Industrial Reconstruction which provide medium and long-term
credit to business enterprises.1
In the United States, in April 1934, the Home Owners' Loan
Act of 1932 was amended. The original Act provided for the
establishment of permanent machinery to assist in the financing
of mortgage loans to home owners. Under this Act a Home
Owners' Loan Corporation was set up to help home owners
unable to meet their existing mortgages, and the United States
Government guaranteed the interest on the bonds of the Corporation. Under the new Act the Government guarantees the
principal as well and the Corporation is authorised to advance
$200 million for repairs and modernisation of the properties on
which it makes loans.
In June 1934, a National Housing Act was passed with the
object of increasing employment in the building trades and
indirectly in the heavy industries, improving housing, and
stimulating the release of private credit. It provides for
(1) Government backing in the financing of modernisation and
repair of existing buildings, (2) mortgage insurance, (3) incorporation of companies under national charters to deal in mortgages, and (4) insurance of building and loan accounts. For
these purposes a Federal Housing Administration has been
created.
It is hoped that these measures will encourage the investment
of $1,500 million in the renovation of old and the construction of
new houses.
§ 3.—International Problems
Reference has been made so far to public works considered as
a national problem, and as such there would appear at first sight
to be no reason why such works should not be put in hand in any
one country irrespective of what is done elsewhere. In reality,
however, the matter is not quite so simple as that. If it is the
intention of the authorities of a country to put in hand a
programme of public works sufficiently large to stimulate
1
Cf. Business and Financial Report of the Association of Italian
1 Nov. 1933.
Corporations,
FINANCIAL PROBLEMS
107
economic activity, the absence of any international co-ordination
is likely to have unfavourable repercussions.
One effect of public works combined with a suitable banking
policy will be a rise in prices and an increase in money incomes,
provided, of course, that nothing is done to neutralise the policy.
There will also be an increased demand for imported goods for the
public works themselves, and to meet the larger consumers'
demand on the part of the workers. The following table shows
the effect of building operations in general on the foreign trade
of Great Britain. It will be seen that in June 1932 and June
1933 the value of the imports of building materials was very
much smaller than the monthly average of 1929, with the
exception of one or two items, such as bricks, for example, the
imports of which have fluctuated particularly violently.
IMPORTS OF BUILDING MATERIALS IN GREAT BRITAIN 1
(In thousands of £)
Bricks...
Cement
Timber (unmanufactured)
Timber (manufactured)
Granite (crude)
Granite (manufactured)
Marble (in the rough)
Marble (manufactured)
Sanitary ware
Tiles
Steel girders, beams, joists
Iron and steel tubes, pipes
..
»m. FU
icuo
and
pillars
and fit
fittings
tings
Monthly
average 1929
42-7
42-0
.. 3,820
807-0
38-2
38-7
11-2
62-8
8-02
62-6
75-8
..
151-6
June 1932
8-6
11-3
3,396
417-9
22-9
20-3
13-5
58-9
2-84
14-5
21-5
27-3
June 193S
43-7
11-5
2,579
376-6
22-1
28-5
10-6
35-2
3-66
20-7
35-9
34-8
The rise in prices will also cause exports to fall off. This
seems to have been the case in 1933 and 1934 in Germany. The
index of wholesale prices, which stood at 96 • 5 in 1932 (1913 =
100),
fell to 93-3 in 1933 and then rose again in 1934, while exports
fell from a monthly average of 473 million RM. in 1932 to 406
million RM. in 1933 and 343 million RM. in January-August 1934.
These factors will alter the balance of trade in an unfavourable
direction and may affect the balance of payments and the rate of
exchange as well. This may, in its turn, lead to an increase in
interest rates in order to prevent an outflow of gold, assuming,
of course, that the country concerned is on the gold standard;
but this policy would be likely to discourage borrowing by
private investors and thus tend to counteract the beneficial
effects of a public works policy. " Thus, in this case," says
Mr. Meade, " the expense of public works would be great since
1
July BUILDING
1933. INDUSTRIES NATIONAL COUNCIL :
Bulletin
of
Information,
108
PUBLIC WORKS POLICY
the rate of interest would be high and to some extent such
expenditure would take the place of capital development by
private business. Moreover, the policy might become semipermanent since in these circumstances the banks could not
stimulate private business again by low interest rates." 1
" Quite possibly," adds Mr. Meade, " Great Britain was in
this position between 1925 and 1931."
Professor Myrdal also deals with this problem. He points
out t h a t there is all the more scope for a development of a public
works policy if it is directed towards increasing the demand for
home products. I n many cases in which Governments give
special assistance for the carrying out of public works a condition
is imposed t h a t as far as possible materials of the country concerned
must be used.
He adds that the works can be developed still further if there
is a simultaneous adoption of other measures " which, although
they are in themselves likely to intensify the depression, can still
be defended if they form part of a sufficiently extensive programme
of public works laid down for economic and social purposes.
They include all kinds of measures which keep down the demand
for consumption goods : taxes, wage reductions, economies on
the ordinary budget, etc. I n other words, the extension of State
capital expenditure can be carried all the further if it is combined
with economies in one or more of the above-mentioned respects." 2
The extent to which such measures are desirable depends,
according to Professor Myrdal, on the size of the public works
programme and the probable effects of the programme on the
balance of trade and payments. " If the present tendency
of the Swedish balance of trade in a positive direction continues,"
he says, " and if, in addition, the balance of payments continues
to improve in consequence of certain capital transactions, the.
reasons for these measures naturally become weaker."
I t may, moreover, be pointed out t h a t there is a time lag
between the extension of State expenditure and the effects
produced on the balance of payments. Consequently, " an
extension of public works can be decided upon and p u t into
effect, and afterwards its possible effects on the gold and foreign
reserves of the Central Bank can be studied, and if they occur
and are found to be dangerous, suitable measures can then
be adopted to counteract them." 3
1
MEADE : Public Works in their International Aspect, p . 18.
problem is discussed a t some length in this pamphlet.
» MYRDAL, op. cit., p . 73.
* MYRDAL, op. cit., p . 74.
The whole
FINANCIAL PBOBLEMS
109
All these difficulties would be removed if public works
policies were adopted simultaneously in a number of countries,
because in t h a t case the rise in prices and the rise in money
incomes would occur in all the countries concerned and the
repercussions on the balance of payments and the exchange
rates of any one of them would be greatly diminished, if not
eliminated. I t is to this policy of the international co-ordination
of public works policies t h a t attention will now be directed.
The first problem which would face Governments in embarking
on an international policy is t h a t the situation in creditor
countries is by no means identical with that in debtor countries.
I n a depression, as has been shown very clearly during the last
five years, debtor countries are more severely hit than creditor
countries. Owing to the fall in prices, their debts have increased
greatly in real value, and, moreover, these countries are almost
always producers of agricultural produce or raw materials, the
prices of which usually fall further than those of other commodities. The value of their exports falls further than the value
of then* imports, and their balance of payments is liable to be completely upset. This situation calls for a lowering of tariffs in the
creditor countries, a policy which it may be difficult to pursue.
The only alternative is for the creditor countries, in co-operation
with one another, to apply a simultaneous policy of public
works which will have the effect of maintaining stable exchange
rates among themselves and will nevertheless increase imports
from those countries which owe them money. These debts
can of course only be paid in goods or services, or, to a limited
extent, in gold, provided t h a t gold is available in the debtor
countries. This point is put by Mr. Meade in the following
words : " The creditor countries should themselves indulge in
a vigorous policy of public works, together with an expansionist
monetary policy. For such a policy will, as we have seen,
cause them to spend more on imported goods of every kind.
This would immediately relieve the strain on the exchanges of
debtor countries, and would enable them to pay their debts.
I t would lead t o the removal of exchange restrictions and
remove the main incentive to raise tariffs. Or if that is not
enough, the creditor countries must be willing at the same time
to lower their tariffs, and so allow the debtor countries to
develop a favourable balance of trade." 1
The above argument does not mean that debtor countries
should refrain from expanding their public works. I t means
1
M E A D E , op. cit.,
x 0 8341
p.
23.
H
no
PUBLIC WORKS POLICY
t h a t their policy in this respect must depend to a considerable
extent on the policy of the creditor countries. As soon as the
latter, by an expansion of public works, have eased the strain
on the exchange position and have created an increased demand
for the exports of the debtor countries, these countries can
follow suit and do the same. At t h a t stage the question of
financing assumes great importance, because it may be impossible
for such countrieg to finance an expanding programme of public
works without borrowing the money abroad. Hence the
important thing is t o time the public works policies carefully,
and this can only be done by international agreement.
Of course an increase in loan expenditure, which is the
main object in view, can be obtained by any direct foreign
loans, whether for public works or for private undertakings.
This has been the traditional policy followed by countries having
a favourable balance of trade or comparatively large reserves
of gold. During a depression, however, such lending stops,
and it is precisely one of the arguments in favour of a public
works policy that this may enable such lending to be resumed.
International financing for public works is by no means
without precedent. Vast public works have, for instance, been
carried out in South American countries, in Australia and in certain
parts of Europe with the aid of loans raised in foreign countries.
I n New Zealand most of the public works undertaken since
the war by the Government as distinct from those undertaken
by the local authorities have been financed by loans raised in
London.
I n Poland the President of the Republic authorised the
State Railway Administration on 27 September 1933 to undertake
the electrification of the Warsaw railways, and he authorised
the Minister of Communications to approve an agreement
concluded by the Railway Administration with two British
electrical undertakings, providing for a long-term credit up to
a maximum of £2,000,000. This electrification plan is one of
those which was submitted by the Polish Government to the
Committee of Enquiry on questions relating to public works
and national technical equipment, and approved by t h a t
Committee.
There are several difficulties in the way of increasing foreign
lending on public works during a crisis. First, as has been
pointed out already, the absence of confidence in the financial
solvency of the borrowers ; secondly, central banks are nervous
of their gold reserves or of the exchange rate of the currency,
111
FINANCIAL PROBLEMS
and any policy which increases public works at the expense of
an increase in the bank rate, leading to a decrease in private
spending, would be doomed to failure. I t is certain, therefore,
that whatever is done must be done by international agreement.
I t may be recalled that the question of the international
financing of public works was discussed, on the initiative of the
International Labour Office, by the Commission of Enquiry
for European Union, and in August 1931 the Credit Problems
Committee of that Commission proposed that before the
Financial Committee could be asked to consider the purely
financial aspects of any schemes put forward, there should be
an examination of such schemes from the point of view
particularly of the economic necessity of the works in question
and their co-ordination with other schemes, both from a national
and from a European point of view. Attention was also to be
directed to their revenue-producing capacity at an early date.
An examination of certain schemes put forward by a certain
number of European countries has since been made by the
Committee of Enquiry on Public Works and National Technical
Equipment, which submitted a report to the Monetary and
Economic Conference in London. I t was agreed that the
Bureau of t h a t Conference should appoint a Sub-Committee
on Public Works to consider the matter further, but t h a t has
not yet been done. 1
Numerous plans have been proposed during recent years
for the international financing of public works. I t is impossible
to mention them all, or to deal with them in any detail, but
some reference to them is made in the following paragraphs.
Two of the plans aimed at raising money at a time when
there was a lack of public confidence in international loans.
One of these was proposed by Mr. Montagu Norman,
Governor of the Bank of England, and Sir Robert Kindersley,
in the spring of 1931. The financial crisis, which ultimately broke
out later in the year, was already threatening, and it was hoped
to avert it by means of loans for the financing of any normal
currents of trade which were temporarily suspended for lack
of funds. The plan nevertheless merits attention as a possible
means of organising the international financing of public works.
The objects of the scheme were :
(1) to obtain money for potential borrowers, who, if they
did not obtain it, would be in a fair prospect of the
utmost embarrassment, or worse ;
1
See p p . 148 et seq.
H 2
112
PUBLIC WORKS POLICY
(2) to put at the disposal of the lenders the compietesi
guarantees of the probable solvency of the borrowers ;
(3) to plan the transference of the money from lenders
to borrowers so t h a t the quickest and surest results in
the way of renewed economic activity and employment
might be secured.
I t was proposed t h a t a number of important commercial
undertakings should combine to subscribe the ordinary capital
of an international company. Subsequently the public would
be invited to put up £100,000,000 against debentures. This
international company would then make an investigation in
order to see what normal currents of trade were temporarily
suspended for lack of funds, and would make suitable loans in
order to restore those currents. 1
A plan was proposed by Mr. Henri Clerc providing t h a t
those central banks which had gold reserves should place at
the disposal of the Bank for International Settlements a small
part of their surplus gold. On the basis of this gold, notes
might be issued at the rate of twice the value of the gold, and
they could be discounted by the Central Bank of the country in
which the money was to be used. 2
A certain number of schemes aimed primarily at setting up a
special organisation for centralising the international lending of
money for public works, and possibly other purposes.
One of these, proposed by Mr. Francqui, Delegate of Belgium
to the Commission of Enquiry for European Union, was examined
by the Sub-Committee of Economic Experts of t h a t Commission.
He suggested that it would be well to set up an international
financial institution to support, supplement, co-ordinate and
canalise the export of medium term capital by the establishments
recently set up in France, Germany, the Netherlands, Switzerland
and elsewhere, and those to be set up in the near future. Such an
institution would do for the private banks in matters of medium
term credit and international trade what the issue bank of a
country does for its commercial banks as regards the short-term
credits needed for home trade.
I n other words, the proposed
international institution would act as a reservoir on which,
through the rediscounting of their medium term paper, the
banks specialising in the discounting of such paper would draw
in order to extend their medium term credit operations and
1
Cf. Manchester Guardian, 13 April 1931.
Cf. H B N E I CLEBO : Une Solution monétaire à la Crise Mondiale.
from the review Notre Temps.
1
Reprinted
FINANCIAL PROBLEMS
113
their international business. The Sub-Committee of Economic
Experts considered this scheme to be a suitable means of reviving
trade by the granting of both long- and medium-term credits,
and added that among the financial transactions undertaken
would be those connected with the execution of important works. 1
A more recent proposal on somewhat similar lines is
that of Mr. Alheinc, who proposes the establishment of a
European Credit Insurance with a capital of 100,000,000 gold
dollars. According to this scheme, all the European countries
would guarantee the capital in proportion to their budgetary
expenditure by issuing bonds carrying no interest, and valid for
a period of thirty years, at the rate of 3 per cent, of the budgetary
expenditure per annum. These bonds would be handed to the
Bank for International Settlements at intervals during a period
of five years, and the financial responsibility of each State would be
limited. The European Credit Insurance would use its own credit
and t h a t of its guarantors to obtain money either from the Bank
for International Settlements or from private banks, and thus to
provide loans for works likely to encourage an international
economic recovery. 2
I t maybe recalled that Mr. Francis Delaisi, in two publications, 3
put forward a scheme for the improvement of the equipment of the
Eastern European countries by the development of their means of
communication, etc. To finance this scheme, he proposed the
raising of loans on the international market and through the Bank
for International Settlements. In order to give confidence to the
lenders, each of the countries concerned would create an autonomous Transport and Communications Office which would receive
certain public revenues derived from railways, etc., and, after
retaining a proportion of these revenues for maintenance work,
would pay the remainder to the Bank for International Settlements
for the payment of interest and sinking fund charges on the loans.
Other schemes proposed were intended above all to overcome
the difficulty of possible exchange fluctuations and depletion of
gold reserves as a result either of raising prices in the lending
country as a result of its own programme of public works or of
the actual lending of money abroad.
The most recent of these proposals is t h a t of Mr. Keynes, put
forward in view of the meeting of the Monetary and Economic
Conference in June 1933. Mr. Keynes had in mind particularly
1
Cf. LEAGUE o r NATIONS : Document C.510. M.215. 1931, V I I .
Cf. INSTITUT D'ECONOMIE EUROPÉENNE, Brussels : Projet d'une Assurance
Européenne de Crédit.
' DELAISI : Les Deux Europea, and Un Plan Quinquennal Européen.
2
114
PUBLIC WORKS POLICY
the first of the problems mentioned above, but he also emphasised
the importance of an international co-ordination of public works
schemes in different countries. H e proposed t h a t .an international authority should be set up for the issue of gold notes
issuable u p to a maximum of 5,000 million gold dollars. These
notes would be obtainable by the participating countries against
an equal face value of the gold bonds of their Governments, up to
a maximum quota for each country. The proportionate quota of
each country would be based on some such formula as the amount
of gold which it held in reserve on some recent normal date—for
example, at the end of 1928. Each participating Government
would have to pass legislation providing that these gold notes
would be acceptable as the equivalent of gold, provided t h a t they
be held only by Treasuries, Central Banks, or in the reserves
against domestic note issues. Each participant in this scheme
would be free to use its quota as it thinks best, and the organisation of schemes of national development would be one of the ways
in which the quota could be used. 1
Mr. Vladimir Woytinski takes as his point of departure the
recommendation by the Gold Delegation of the Financial Committee of the League of Nations t h a t the minimum gold cover
should be lowered. The gold thus set free would be used to
extend the volume of credit and of money in circulation in such
a way t h a t the newly created money would have sufficient legal
cover, and the stability of the currency would not be endangered.
I n other words, the lowering of the minimum gold cover would
increase the power of issue of the banks to an equal degree in
every country, and provide them with an effective means of
regulating world economic movements. 2
Mr. Stafsing, a Swedish economist, proposed to double the
price of gold, thus devaluing currencies by 50 per cent, and
liberating gold for an expansion of credit. • Although this was
not suggested in view of public works schemes, it nevertheless
has a bearing on the financing of such schemes in countries
having a low gold reserve.
Professor Edgard Milhaud is mainly preoccupied with the
importance of overcoming possible exchange difficulties due to
the export of capital by way of loan from the richer countries
to the poorer countries.
He proposes that in each country
which has money available a loan should be raised for the
financing of public works abroad. The money would be deposited
with a national clearing house which would issue " purchase
1
2
Cf.
Cf.
K E Y N E S , op. cit., p p . 26 e t
W O Y T I N S K I , op. cit., p . 19.
seq.
FINANCIAL PROBLEMS
lliï
bonds " for a corresponding amount.
These bonds would be
valid for purchases only in the issuing country. The loan to a
foreign country would be made with these bonds, and, as they
would have a limited validity (say one year), it would soon
be used for the purchase of materials in the issuing country. 1
Finally, a number of proposals have been made for the raising
of a loan under the auspices of the League of Nations.
A somewhat novel scheme has been proposed for the mobilisation of the war debts in the financing of public works.
The
debtor States would pay their debt annuities to the Bank for
International Settlements in monthly instalments for a period
of say five years. The Bank would immediately invest 90 per
cent, of each monthly payment in self-liquidating public works
in the country making the payment, and would pay interest
to the creditor countries. Before the end of the period fixed,
the creditor States would reduce the remaining debts in proportion t o the degree t o which they had then recovered their
prosperity. 2
*
*
I t has been pointed out in the foregoing analysis that during
a period of depression the financing of additional public works
by means of taxation may lead merely to the transfer of purchasing
power from one pocket to another, without any increase in
effective expenditure.
Additional loans on the other hand,
by tapping unused resources, provide a net increase in expenditure, and consequently in the national income, since these are
merely two sides of a single phenomenon. The corresponding
increase in employment will lead to a saving on unemployment
relief and the increase in the national income will lead to an
increased yield from existing taxes.
There will, however, be
a comparatively small increase in taxation necessary to pay the
interest and sinking fund charges. I t is important that a public
1
Cf. EDGAR MILHAUD : Nouveau travail; Nouveaux débouchés.
Un projet
d'action immédiate contre le chômage et contre la crise. Paris, Maison Co-operative
du Livre, 1933, 212 p p .
2
Cf. New York Times, 24 Sept. 1933. There is also another proposal, due
to Mr. Waclaw Dzierzgowski, according to which an international tax, levied in
t h e form of a supplement on postage stamps, would be raised. The author of
this proposal claims t h a t the money would be paid mainly by large commercial
undertakings, which send a large number of communications through the post.
The sums collected would be paid into an International Employment E u n d
and lent to various Governments for public works a t an interest of about 3 per
cent. The Fund might be managed b y the Bank for International Settlements
or some other financial organisation, and the amount of t h e loans might vary
in accordance with the changes in the unemployment figures of various countries
registered by the International Labour Office. (Cf. DZIERZGOWSKI : Miedzienarodoiey Fundusz Pracy.)
116
PUBLIC WOBKS POLICY
works policy be accompanied by a suitable banking policy so as
to ensure that the expenditure on public works is not neutralised
by a decrease in expenditure elsewhere.
Examples have been given of financing by taxation and by
loans, and of the diflferent methods adopted for facilitating the
raising of money by authorities and others engaged in carrying
out works. Reference is also made to methods of encouraging
capital expenditure by private bodies and individuals.
A number of international problems have also been considered.
Public works carried out in one country alone will have the
effect of raising prices, and may have an unfavourable influence
on the exchange rate, and possibly on the gold reserve. It is
suggested that public works should, during a depression, be put
in hand first in creditor countries, and at a later stage in debtor
countries, and this may raise a problem of international financing
owing to the inability of the latter to finance their own works on
a sufficiently large scale. Numerous plans have been suggested
during the last few years for the purpose of facilitating such
financing.
The conclusions to which the foregoing facts lead seem to
fall into two distinct parts, dealing respectively with the national
and the international co-ordination of financing operations.
With regard to public works programmes in each country,
it is suggested that advance planning is as important from a
financial as from a technical point of view. Numerous schemes
have in fact broken down because, when the depression comes
and an expanded programme is required, outstanding indebtedness is so great that it is difficult or impossible to borrow any
more, either for fear of upsetting the budget or because of legal
or constitutional limitations. Moreover, it is essential that
monetary policy should be co-ordinated with the public works
policy. If the monetary conditions are unfavourable, the public
works policy has very little chance of success. It is advisable that
there should be a National Employment Fund which would
be used exclusively for financing public works, and which would
be able to influence very considerably the rate at which public
works are put in hand by varying the conditions on which it
lends money to the bodies concerned. If such a Fund arranged
that during years of good trade it received more in repayment
of loans than it paid out in the form of new loans, it would
do something to bring about a reduction in the quantity of
public works put in hand at a time when private undertakings
are making full use of the available savings, and it would also
FINANCIAL PEOBLEMS
117
build up a reserve which could be used to finance an expanded
programme of public works when depression conditions prevail.
I t is true, of course, that money placed to reserve will presumably
be invested, and therefore used by a borrower for the purchase
of capital goods (this is true even if the money be invested in
Government bonds, because in t h a t case an equivalent amount
of capital will be released for investment in private enterprise).
But from the budgetary point of view it is most important
t h a t there should be a reserve in hand ready for use when trade
declines. There is, perhaps, another possibility, namely to
hoard the money and not t o invest it at all. I n any case,
Sir Arthur Salter would seem to be right in saying that, at a
time of industrial expansion, public works that are not urgent
should be held back and the public finances strengthened by
the formation of reserves or the increase of sinking funds. 1
This national co-ordination of the financing of public works,
or, indeed, of loan expenditure in general, would be most
effective if it were extended to all forms of financing of works
carried out either by the Government or by local authorities,
or by public utility undertakings. Only under these conditions
will it be possible to ensure the systematic planning of public
works as an aid in fighting economic depression. The particular
form of reserve fund t h a t should be set up must be left to each
country to decide for itself. Already numerous financing
institutions have been created in various countries, but as a
rule they cover only part of the field—as, for example, the
various financing institutions or consortia in Germany and
Italy, the Local Loans Fund in Great Britain, and the Employment Fund and Investment Fund in Poland.
The second part of the problem concerns the international
co-ordination of financing operations, and this may be divided
into two subsections, namely works which are nationally financed
and works for which foreign loans are required.
As to the first of these, this is perhaps the most important
aspect of the whole problem. If a policy of international coordination of public works policies be accepted and it is agreed
t h a t during a depression public loan expenditure shall be increased
on parallel lines in a number of countries in order to use the idle
bank balances, and thus increase purchasing power, when shall
such a policy be adopted and when shall it be eased off ? This
question of timing is of the utmost importance. The policy
may be applied in the early stages of a depression, as is laid
1
The Times, 18 Aug. 1933.
118
PUBLIC WORKS POLICY
down in the United States Employment Stabilisation Act of 1931.
Or it may be postponed until the later stages of the downward
movement of a trade cycle, as suggested by Sir Arthur Salter
in the letter already quoted. In either case there must be some
international body able to give advice to the various Governments
or national financing bodies on the subject, and to suggest the
best measures to be taken in order to avoid exchange fluctuations
and depletion of gold reserves. An international body of t h a t
kind would also have an important part to play in watching
the situation of the creditor and debtor countries respectively,
and in suggesting the application of the policy to those two
groups of countries at different times.
Lastly, there is the problem of the international financing
of works in those countries which are too poor to finance an
expanded programme on their own account. Here we have to
face the difficulties inherent in all international lending. I t
is not likely to be difficult to find money available for investment,
but t h a t money will not be invested, especially in foreign
countries, unless the investor has confidence t h a t his capital
will be reasonably safe. There is only one way in which t h a t
can be ensured, namely by the creation of an international
financing institution, which might be the same body as t h a t
suggested in the last paragraph. Such an institution could
obtain the fullest information not only on the economic value
of the public works schemes themselves, b u t on the financial
stability of the borrowers and the value of the assets. I t
might itself arrange the transfer of capital from country to
country for the purpose of public works financing, and by close
and careful watching of the situation would offer certain guarantees
to lenders as to the safety of their capital.
CHAPTER
III
METHODS OF OPERATION AND CONDITIONS
OF EMPLOYMENT
The procedure for drawing up public works programmes and
the methods of supervising the technical and financial aspects of
such work are laid down in the various countries in administrative
rules and regulations. One of the chief points dealt with is
whether the work should be carried out by direct labour or should
be given to contractors. Special legislation usually exists concerning work undertaken under a concession, which is a third procedure
commonly adopted. I n addition to such special legislation
and administrative regulations, reference may be made to labour
legislation which determines the conditions of employment of t h e
workers engaged on work undertaken by the authorities or carried
out by other bodies on their behalf. As a general rule these
conditions do not differ from those existing in private undertakings. In some cases, however, such workers enjoy rather more
protection than they would under general labour legislation. In
a number of countries, for example, where hours of work in private
undertakings have not so far been regulated, hours have been
limited for workers directly or indirectly employed by the
authorities. I n other cases a minimum wage is fixed, although the
matter may scarcely have been dealt with in the general legislation
of the country.
I t would lead us beyond the scope of the present study if an
attempt were made t o give even a brief analysis of all the administrative and other rules dealing, sometimes in great detail, with
public works in each country. At t h e same time, in connection
with the works recently undertaken as a remedy for unemployment, particularly the large-scale plans, certain measures have
been adopted for the purpose of increasing their effectiveness in
relieving the economic depression and unemployment.
Other
sections of this Report have already made reference to some of the
administrative innovations, which, although they are to some
extent the result of the methods adopted for financing the work,
also aim at speeding up the procedure for the approval of plans
and shortening the period during which the work is to be carried
out. Recent programmes reveal no new trends with regard to
the choice between direct labour and work undertaken by contractors. I t may be noted, however, t h a t the German programme
119
120
PUBLIC WORKS POLICY
of June 1933, unlike that of January 1933, which provided for
direct labour, stipulated that public works should be carried out
through contractors, preferably those in small-scale or mediumsized undertakings. General contractors are as a rule excluded,
but small contractors may constitute special ad hoc groups.
The administrative regulations of 28 June 1933 further stipulated
that the construction materials used should be produced in
Germany, foreign materials being used only if nothing equivalent
was available in the country, or if the use of home products would
make the work unduly costly. The same rule prohibiting the
use of foreign materials is included in the specifications for
public works in a number of other countries.1
The desire to provide employment for the greatest possible
number of unemployed workers sometimes leads to clauses restricting the use of machinery. The German Decree referred to above
provides that machines and other mechanical methods of work
must not be employed unless they are absolutely indispensable or
if the cost of the work would be unduly high if machines were not
used. In the United States, section 206 of the National Industrial
Recovery Act stipulates that the maximum of human labour is
to be used in lieu of machinery wherever practicable and consistent with sound economy and public advantage. Clauses of a
similar character are inserted in France in the loan contracts for
works included in the programme of 1934. In most countries an
effort is made to give preference in employment to those who
have most need of it either because of their family responsibilities
or because they have been out of work for so long ; it is therefore
stipulated that labour for public works must be recruited through
the public employment exchanges, and rules relating to the
order of preference are often prescribed in considerable detail.
As public works are considered in this Report chiefly as a
remedy for the economic depression and unemployment, the
provisions of a social character in the legislation or specifications
concerned deserve special attention. The following pages deal
with the method of recruiting and the conditions of employment
of workers employed on public works, with special reference to
wage-rates and hours.
§ 1.—Methods of Obtaining the Labour Required
Although there is only one country {Italy) in which private
employers are obliged to engage workers through public employ 1
Cf. Chapter II, p. 108.
METHODS OF OPERATION AND CONDITIONS OF EMPLOYMENT
121
ment exchanges, a number of States impose an obligation of this
kind on the public authorities. It would appear, however, that
the laws and regulations on this point are not always strictly
observed. An example of a rule of this kind will be found in
Germany, where undertakings working on behalf of the Government must recruit their staff through the public employment
services. A similar obligation is often imposed on private
undertakings by collective agreements, which thereby guarantee
to some extent that the workers engaged on work done for the
authorities will be recruited through the public exchanges. In
Italy a circular issued by the Head of the Government on
20 August 1932 stated that the rule laid down in the Decree of
9 December 1929 that private employers must recruit workers
through the public employment exchanges applied also to the
public authorities
In the case of work undertaken specially for the purpose of
providing employment for the unemployed (relief works) the
labour is naturally obtained from the public employment
exchanges.
In France, for works included in the big public works
programme inaugurated in 1934 for the relief of unemployment,
contractors are obliged under the terms of a Decree dated
26 July 1934 to make known their labour requirements to the
public employment exchanges and to indicate the conditions of
work. They are not obliged to take on workers who do not
possess the necessary skill, but they must communicate to the
employment exchange within three days the name, address,
trade and nationality of the workers whom they have engaged
otherwise than through the exchanges. The proportion of foreign
workers who can be taken on should in each case be determined
by the terms of agreement, and should not exceed 10 per cent.
of the total number of workers.
In Germany, according to instructions issued on 28 March
1928 by the Governing Body of the Federal Institution for
Employment Exchanges and Unemployment Insurance, employment on relief work can be obtained only through the public
exchanges. The instructions further indicate an order of
preference. The first workers to be recruited are those who have
been unemployed for a long period, and especially those who have
exhausted their right to statutory benefit and would otherwise
be claimants for emergency relief. If the relief work involves
the transfer of the unemployed worker to a different district,
preference should be given to young unemployed persons or
122
PUBLIC WORKS POLICY
those who have no residence ; for local work preference should be
given to unemployed persons with dependants.
In Great Britain all men engaged on the relief works which
were subsidised by the Government up to 1932 had to be taken
on through the local employment exchange, but men might also
be nominated by the Public Assistance Committee, and in this
case information had to be furnished to the employment exchange.
In some cases the payment of a subsidy was made conditional on
a certain proportion of the men being brought from other
particularly depressed areas.
Certain recent programmes for the development of employment extend this obligation and make it compulsory for workers
to be recruited through the public employment exchanges for
most of, or even for all, the types of work specified in the programmes. They often regulate in more or less detail the order
in which the unemployed are to be engaged for the work.
In Estonia, all workers engaged on public works must be
recruited through the public employment exchanges. The only
persons who may be employed are Estonian citizens who have
resided for at least twelve months in the district in question
and have worked at least eight weeks during the same period.
Every applicant must, moreover, be able to prove that neither
he nor any member of his family possesses an income sufficient
to live upon. Priority is granted to unemployed persons who
have family responsibilities.
Under the German Decree of 28 June 1933, containing
administrative regulations under the Act of 1 June 1933 for the
development of employment, the only persons who may be
engaged for the work prescribed under that Act are unemployed
persons and, in the first instance, those who have a family to
support and who have been unemployed for a long time. At the
same time, preference was to be given to members of NationalSocialist or Stahlhelm organisations belonging to the occupations
concerned. At least 80 per cent, of those for whom employment
is thus provided must be unemployed persons in receipt of
unemployment insurance benefit, emergency relief, or public
assistance. By a recent decision of the Minister of Labour, these
regulations now apply to the recruiting of unemployed workers
for relief work under the programme for the development of
employment.
In the United States, under the National Industrial Recovery
Act, an emergency organisation to deal with the selection and
METHODS OF OPEBATIOX AND CONDITIONS OF EMPLOYMENT
123
placing of applicants for work on public works under the Act was
set up in July 1933. It is known as the National Re-employment
Service, and is under the direction of the United States Employment Service. It is financed by the Public Works Administration.
Opportunities for employment are to be equitably distributed
among qualified workers who are unemployed, local labour and
materials being given preference. Lists of qualified workers are
submitted by local employment agencies designated by the
United States Employment Service, but union labour is obtained
through recognised union locals. The Act further provides that
preference shall be given, where they are qualified, to ex-service
men, and after that to citizens of the United States and aliens
who have declared their intention of becoming citizens, and who
are resident in the local areas concerned.
§ 2.—Wages
Generally speaking, a public authority, whether national,
regional or local, in its capacity as an employer of labour, is on
the same footing as private employers. It is generally accepted
that the conditions of employment of workers engaged on public
works, which are in many cases carried out by private contractors, should be the normal conditions prevailing in the
place where the works are situated. It would be contrary to
the principles of a systematic public works policy, which reserves
work as far as possible for periods of depression so as to make
good the loss of purchasing power resulting from the decline of
business in general, to accentuate the fall in wages by employing workers on public works at lower rates than those customarily
paid. This rule, however, has not always been followed. The
efforts which the public authorities have made in recent years to
extend public works when private initiative has been slack
were undertaken under pressure of an overwhelming mass of
unemployment. The result is that at the present time the wages
policy for public works is far from clear. There are two conflicting desires. Some programmes for the development of
employment, such as the American public works programme,
definitely state that the aim is to restore purchasing power.
Special attention is therefore devoted to mamtaining the level
of wages, and the regulations contain provisions guaranteeing
the payment of normal rates. Other plans, while theoretically
aiming at the same end, would seem to aim primarily at
reducing the number of the unemployed, either in order to
save public expenditure on relief or in order to withdraw as
124
PUBLIC WOEKS POLICY
many of the unemployed as possible from the demoralising
effects of idleness. In certain public works plans, the main object
of which is to substitute " productive relief " for unemployment
benefit, or to combat the psychological effects of unemployment
on the individual worker (for example, the voluntary labour
service), the rule of normal wages has been abandoned and the
rates fixed for public works of this kind are considerably lower
than the ordinary rates, so that as many of the unemployed as
possible can be given employment. So long as relief work or
labour service is limited to a comparatively small number of
workers, the only objection to this practice of low wages will be
one of principle. But when the system extends to a large
number of workers, as is the case in certain countries, there
would seem to be a risk of low wages exerting pressure on the
general level of wages and thus running counter to the basic
purpose of restoring employment and purchasing power. In the
following survey of wage conditions for persons employed on
public works in different countries, it will be seen that most of the
countries referred to have, given up the practice of paying lower
rates of wages to the unemployed, while in others official opinion
is tending towards the same conclusion. When no reference
is made to a special system of wages, it is to be understood
that the workers employed on public works, whether they
were unemployed or not, are paid normal wages. This is by far
the most frequent case.
In some countries, such as Austria, Germany, Great Britain,
Sweden, etc., where there was considerable unemployment
even during the period of prosperity, relief works have been
organised for many years and in some cases are still continued
in the form of a programme for the development of employment.
The purpose of such relief works is to substitute, to some extent,
" productive relief " for direct relief. The Government or an
autonomous unemployment fund, instead of paying benefits to
the unemployed, pays subsidies to the public authorities, who
are generally municipal authorities prepared to employ unemployed workers. Some unemployment funds in Australia,
Canada and elsewhere have even undertaken relief work on their
own account, but this practice would seem to have been
abandoned to some extent because it was found that the cost
of providing employment under such conditions was much higher
than the cost of direct relief. The most usual practice, therefore,
is to subsidise the employment of the unemployed in work
undertaken by local authorities or other public corporations.
METHODS OF OPERATION AND CONDITIONS OF EMPLOYMENT
125
I n Axistria it is provided t h a t the unemployed engaged in relief
work subsidised out of the National Unemployment Fund should
be paid at less than the normal rates of wages ; wages should
be kept within such limits as not to incite the workers t o give
up other employment.
In China a large number of workers on public works have
been paid in kind from a stock of wheat provided by the United
States as a loan for the carrying out of these works. 1
In Denmark wages for relief work are fixed in such a way
t h a t the unemployed are encouraged to accept such work rather
than continue to draw unemployment benefit, but the rate
should be such that it will be still more advantageous for
them to seek normal employment. A Bill brought forward by
the Minister of Social Welfare on 22 March 1933 shows a certain
reaction against the employment of the unemployed at low rates
of wages.
The Bill provides t h a t on all public works or subsidised works undertaken as a remedy for unemployment the wages
should be those laid down in collective agreements, even when
the workers in question are not organised.
I n Estonia, where public works are considered mainly as a
means of reducing unemployment, the wages of the workers have
been fixed at a rate considerably lower than that applied on
private work. I n virtue of an Instruction of 13 December 1933,
these wages may not exceed 0 • 9 to 1-1 crowns per day, according
to the district, to which must be added a supplement of 0 • 10 crown
per day in respect of each child under sixteen years.
In France, by the terms of a Decree dated 9 July 1934, the
wages of workers employed under the big public works scheme
should not be less in each trade or category than the salary
obtaining in the district where the work is carried out, and this
normal or current rate must be specified in the terms of agreement and posted up in the yards and workshops. I n addition,
the body on whose behalf the work is being performed has the
right, if there is a difference between the wage paid to a worker
and the current wage, to pay the difference to the worker
concerned by deducting it from the sum the contractor has
deposited as a guarantee.
I n Germany the provisions concerning relief work (undertaken with subsidies from the Unemployment Fund, from the
Federal Government, or from the States) provided t h a t the
unemployed should, as a general rule, be paid a t t h e same
rates as were current in officially recognised collective agreements.
1
See above, p . 10.
% G S344
I
126
PUBLIC WORKS POLICS"
The competent authorities were, however, empowered to pay lower
rates in certain exceptional circumstances. Until quite recently no
advantage seems to have been taken of these powers except in
certain cases where the rates laid down in collective agreements
were considerably higher than the wages previously earned by
the unemployed in their own occupation, or when the output of
employees belonging to another occupation did not reach the
average normally required. The programme of June 1933 stated
t h a t certain categories of work might, or even should, be considered
as relief work. These included land improvement, the régularisation of water-courses, work for the development of water, gas and
electricity supplies, and afforestation. Special rules were laid down
for this programme, to the effect t h a t the unemployed engaged
on such work (known as " land levelling or digging work for
municipalities or groups of municipalities ") should be paid the
normal unemployment benefit together with vouchers from the
Federal Government to a value of 25 RM. for four weeks' work
and in addition one hot meal daily or its equivalent in cash, to
be provided by the authority for whom the work was undertaken.
The voluntary labour service introduced in Germany towards
the middle of 1931 is intended mainly to combat the demoralising
effects of unemployment on young persons, and the age for
admission is fixed at twenty-five years except in the case of
leaders of groups. Under the programme of J u n e 1933, certain
types of public utility work, particularly land improvement,
régularisation of water courses and road repairs, were assigned
t o the voluntary labour service. The conditions of work in the
service are quite different from those in other occupations. A
Decree of 29 August 1933 raised the remuneration from 2 RM. per
working day to 2 • 14 RM. per calendar day, from which 43 pfennigs
are deducted and paid into a fund to provide adequate remuneration for the leaders and administrative staff of the service. The
remainder is paid to the association which has recruited the
voluntary workers and which is responsible for their maintenance
in labour camps.
I n Great Britain, where the Government made grants from
1920 to the beginning of 1932 to local authorities undertaking
relief work, special rates of wages were not paid except during a
short period in 1923. Under the regulations then in force the
rate of wages for unskilled labourers for a probationary period of
six months was not to exceed 75 per cent, of the local authority's
lowest rate for unskilled labour for the particular class of work
METHODS OF OPERATION AND CONDITIONS OF EMPLOYMENT
127
undertaken. This system was abolished in 1924. Thereafter
it was laid down that where the local authority undertook the
work by direct labour the rate of wages was not to exceed the
recognised district rate. Where the work was to be carried out
by contract, the contract had to include the Fair Wages Clause
as inserted in Government contracts.
In Poland, since 1 April 1933, relief work has been encouraged
by loans from the Employment Fund. The unemployed engaged
on relief work are paid a fixed wage of 3 zloty a day, except
t h a t skilled workmen receive a higher wage. The first report on
the work of the Employment Fund, covering the period from
1 April to 30 September 1933 expressed dissatisfaction with the
system of low and inelastic wages, which made it impossible to
pay bonuses or piece rates.
In Spain, in virtue of an Act of 7 July 1934, the wages of
workers engaged on public works organised to provide work
for the unemployed must not be less than the minimum fixed
by the competent joint committees.
The Swedish Government has, since the 1920-1921 depression,
been providing subsidies for what is known as " reserve work."
The wages paid for such work must not exceed the lowest
wages for unskilled labour at the place where the work is
carried out. In the autumn of 1932, however, the Government
decided to take more direct action by granting loans and
subsidies for important public works with a view to reducing
unemployment.
Only some of these works were to be treated
as reserve work, while the greater part was to be carried out
under normal conditions, with normal wages for the unemployed
persons engaged on the work. The Government subsidy for work
of this type was 100 million crowns ; for reserve work 55 millions.
I t may therefore be roughly estimated t h a t two-thirds of the
unemployed engaged on public works will be working under
normal conditions and that the special wage rates apply only to
about one-third. I n May 1934 the average daily wage of workers
engaged on reserve works was estimated at 4 . 4 2 crowns. I n
addition, lodging is provided free of charge.
In the United States, the National Industrial Recovery Act
declares that on all public works subsidised under that Act " all
employees shall be paid just and reasonable wages which shall be
compensation sufficient to provide, for the hours of labour as
limited " (see below, p. 130), " a standard of living in decency and
comfort." All construction contracts must prescribe minimum
I 2
128
PUBLIC WOBKS POLICY
wage rates, as determined by the body executing the contract. An
agreement between the Public Works Administration and the
Labour Advisory Board fixed the minimum rates at from $1 to
$1 • 20 an hour for skilled workers and 40 to 50 cents for unskilled
workers according to the district concerned, it being understood
that where more favourable collective agreements are in force, the
rates therein prescribed will apply.
§ 3.—Hours o! Work
In order to find employment for the greatest possible number
of unemployed workers many countries which have not adopted
legislation for the general reduction of hours of work have
enforced shorter hours for work undertaken by the public
authorities. Reductions in hours have been applied not only to
work undertaken directly by the authorities, but also to work
entrusted to contractors, who are sometimes made to observe
a fixed maximum working week, involving shorter hours than
those current in private work. The same obligation may be
enforced on those who supply materials for public works. In
the case of work encouraged or subsidised by the State, reduced
hours of work form one of the conditions sometimes imposed for
the granting of subsidies.
In Australia, the specifications for subsidised work in New
South Wales contain a clause restricting hours of work to forty-four
in the week, which may be distributed over five or more days
with a daily maximum of nine hours. Every worker must be
given an opportunity of making good during the same week or
the following week any time lost on account of bad weather,
sickness, public holidays or any other cause beyond his control.
In Canada, two Orders in Council, which came into effect on
1 and 15 July 1933 respectively, were issued by the Government
of the Province of Quebec.
The first Order, applying to the building industry in the
Montreal Division, limits hours of labour to eight a day and
forty a week where the cost of the proposed works exceeds $500,
but a contractor may, at his option, adopt a two-shift system of
six hours a shift for six days a week. Further, it is stipulated
that from 1 May to 1 October of each year the two-shift system
must be established by any contractor for works exceeding
in cost $20,000 which are executed for municipal or school
authorities or for parish trustees or for the Provincial Government, and by any contractor for works for an institution or
corporation 50 per cent, of the cost of which is paid or
METHODS OF OPERATION AND CONDITIONS OF EMPLOYMENT
129
guaranteed by the Provincial Government or by a municipal
corporation or by both.
The second Order applies to the Quebec City Division and
the Eastern Townships and its provisions are similar, with the
exception that the Order does not apply if the cost of the construction does not exceed $300 for the Quebec Division and $200
for the Eastern Townships Division.
A decision of the Council of Ministers of Czechoslovakia in
June 1933 urged the competent authorities to include in their
specifications for public works, and particularly works financed
out of the internal labour loan of 2,000,000 crowns, a clause
concerning the forty-hour week ; contractors were t o be obliged
to observe these hours, particularly for skilled labour, provided
t h a t the measure in question did not affect the total time taken
for the work or the cost.
The Bill introduced on 22 March 1933 by the Minister of
Social Welfare of Denmark makes provision for the introduction
of a forty-hour week as a temporary measure up to 1 April 1935
for all public works or subsidised works intended as a remedy for
unemployment. The reduction may be applied on one or more
days during the week or may be distributed over one week in any
period not exceeding six weeks. The Minister reserves the right
to restrict the working week to thirty-six hours or extend it to
forty-two hours in certain cases.
Reduced hours of labour are also provided for in Estonia in
virtue of an Instruction of 28 October 1933.
In France, the Bill relating to the social and economic equipment of the country presented, in October 1933, by the Daladier
Government provided t h a t a clause might be inserted in contracts
reducing hours of labour to a number not less than forty hours
per week.
A similar proposal was made in the Chamber at the time of
the discussion of the "plan Marquet," but was not adopted. A
Decree of 9 July 1934, relating to works included in this
plan, provides that the hours of work shall not exceed or be
less than the number legally in force and adopted by similar
undertakings in the locality or district employing the greatest
number of workers of that trade. Further, if the body on whose
behalf the work is being performed has obliged the contractor to
employ a proportion of unemployed workers at least equal to
50 per cent, of the total working force, it may, with the consent
of the Minister of Labour, also oblige the contractor to p u t in
130
PUBLIC WORKS POLICY
operation shorter working hours in order to enable as large a
number of unemployed as possible to be taken on.
I n Germany, the administrative regulations under the Act of
1 June 1933 for the development of employment specified t h a t
work carried out on behalf of the Federal Government, States,
municipalities, associations of communes or public corporations
should be given only to contractors who undertake to reduce
hours of work in their undertakings to forty in the week until
30 J u n e 1934. A Decree of 16 November 1933, while confirming
the principle of the forty-hour week, provided that longer hours
might be worked if the wages for forty hours of work were below
the rate of unemployment benefit previously drawn by the majority
of the workers concerned.
I n the United States, the National Industrial Recovery Act
lays down that a thirty-hour week is to be worked so far as
practicable and feasible by all persons engaged in work subsidised
under the Act, except executive, administrative or supervisory
staff. For work located in remote places where camps are
necessary for the housing and boarding of the labour employed,
the thirty-hour week may be replaced by a working schedule
not exceeding eight hours a day and forty hours a week. Similar
provisions were contained in the Emergency Relief and Construction Act of 21 July 1932. I t may also be noted t h a t several of
the American States enforce reduced hours for work undertaken
on their behalf. I n Wisconsin, for example, the hours of work
of those employed on public works have been reduced to thirty
in the week ; the same applies in California with regard to building
work undertaken by the State or the local authorities.
I n this connection mention may be made of the system of
rotation which is generally adopted in those special types of
public works known as relief works or in the voluntary labour
service. The purpose of this measure, as of shorter hours, is to
provide employment—if only temporarily—for as many unemployed workers as possible. I n relief work and in the voluntary
labour service the period during which an unemployed person
may be employed and a subsidy paid on his behalf is restricted.
To give only one example, the German regulations of 28 March
1928 specified t h a t as a general rule employment on relief work
should be restricted to three months, and t h a t in no case should
it exceed six months. An Order issued in October 1933, however, permitted the competent authorities to ignore this rule
and prolong the period of employment for certain types of work
METHODS OF OFEBATION AND CONDITIONS OF EMPLOYMENT
131
or certain categories of persons. I n the case of the voluntary
labour service the maximum period of employment was recently
raised from twenty weeks a year to fifty-two weeks in any period
of two years.
*
*
*
•
In this chapter concerning the methods of operation chief
stress has been laid on the methods of engaging labour and the
conditions of employment in work undertaken by the public
authorities or on their behalf. Regulations intended to ensure
a good economic and financial administration of public works
have been only very briefly referred to.
The method of engaging the labour and the conditions of
employment may have a considerable influence on the success
of the work in its economic and social aspects and they are therefore deserving of special attention Avhen public works are considered as a remedy for the economic depression and
unemployment.
With regard to the engagement of the labour required, it has
been seen t h a t the public authorities generally obtain their
labour supply through the public employment exchanges and that
in many cases a similar obligation is imposed on contractors.
This obligation not only leads to more efficient organisation in
the work ; it is also an important factor in the protection of the
workers. If workers are taken on directly by the authorities or
by the contractors the door is left open to all the disadvantages
of unorganised recruiting, and there is a great danger that workers
from areas where little work is available will flock to others
where public works are being carried out. If workers are
recruited through the public employment exchanges, public
works can be made a far more effective remedy for unemployment. Work will not be undertaken in such a way as to produce
a transference from private industrial undertakings in the same
district, which would mean a useless and harmful disturbance
in the process of production. Similarly, the public employment
exchanges being in a position to survey the whole of the labourmarket are most fully qualified to supply the necessary skilled
help. At the same time, they can ensure that the work in
question will be as effective as possible from the social point of
view. During periods of severe unemployment involving serious
social consequences the necessary labour cannot be selected
solely on the ground of occupational qualifications. I t is true
that occupational skill must still be the fundamental criterion,
132
PUBLIC WOBKS POLICY
but in periods where there is an abundant supply of labour
with all the necessary qualifications account must also be taken
of the social position of the unemployed, their degree of poverty,
the length of time they have been out of work and their family
responsibilities. Many national laws prescribing public works
as a remedy for unemployment have laid down an order of
preference for the selection of workers. I t is only the public
employment exchanges, which have full knowledge of the individual position of the imemployed and which can act impartially,
t h a t are fitted to apply regulations of this kind.
With regard to conditions of employment, and more especially
wage rates, it has been seen t h a t they are usually the same as
for workers in general since the public authorities generally
recruit their workers under the same conditions as private
employers. I t was also noted, however, t h a t in the case of
relief work which is intended more particularly to provide
immediate employment for the unemployed, conditions of
employment have sometimes been less favourable than the
normal, either " in order to prevent an influx of workers from
other industries " as the Austrian Act has it, or to induce the
unemployed " to seek normal employment " which is the formula
in the Danish Act. I t should be remembered t h a t relief work
existed in most countries several years before the present depression as a substitute for unemployment benefit and as a means of
testing the will to work of the unemployed. Clauses such as
those cited above may have a certain effectiveness when the
economic situation is comparatively favourable and when there
actually are possibilities of employment in industry, but in a
period of severe economic depression it does not appear t h a t
lower rates of pay for the unemployed are likely to hasten their
return to normal employment. Many countries have therefore
abandoned the system of paying lower rates to the unemployed.
I n some other countries, where the chief desire is t o provide
employment for the greatest possible number a t the lowest
possible cost, the practice has been extended during the depression. This method is likely to exert a certain pressure on the
general level of wages and thus destroy the effects which are
expected from public works by reducing purchasing power instead
of increasing it. I t is clear t h a t the engagement of workers for
public works under conditions less favourable than those normally
applied cannot be reconciled with the fundamental principles of a
far-sighted public works policy.
The desire t o find employment for the greatest possible
METHODS OF OPERATION AND CONDITIONS OE EMPLOYMENT
133
number of the unemployed has led certain countries to reduce
the length of the working day or week on work undertaken by
the public authorities or on their behalf. Except possibly in the
United States, this reduction of hours has been accompanied
by a reduction in individual earnings and is therefore little more
t h a n a sort of short time enforced by law. Just as in private
industrial undertakings efforts to extend the practice of short
time met with an obstacle in the fact t h a t wages could scarcely
be reduced any further, so in public works the adoption of short
time is likely to bring the workers' earnings down to an unduly
low level. For this reason, the German Decree of 16 November
1933 referred to above had to permit exceptions to the principle
of the forty-hour week which had been previously laid down,
because in certain cases the wages paid for forty hours of work
were less than the unemployment benefit previously drawn by a
large number of the workers.
CHAPTER
IV
CO-ORDINATION AND CENTRALISATION
I t is clearly impossible to apply a policy of regulating the
volume of public works in such a way as to balance, a t any rate
partially, the fluctuations in general economic activity unless
the works and orders which can be expedited or held over are
controlled by some central body which is empowered to decide
when they shall be undertaken, or at any rate has some influence in
determining the date at which they shall be carried out. I t is no
easy matter to set up such a central body with wide powers, as is
shown by the comparative lack of success which has attended the
attempts made in the past by certain countries which realised the
value, or even necessity, of centralised co-ordination in their public
works. A survey of many such attempts was given in a study published by the Office in 1932 under the title Unemployment and Public
Works.1 That study showed that, where co-ordinating bodies
had been set up, their task had generally been restricted t o the
collection of information on works already undertaken or planned
for the near future, drawing up lists of possible works, and, in
the light of the information collected, making suggestions which
were sometimes of real value, but were very seldom p u t into
effect.
The information at the disposal of the Office seems to show
t h a t one of the most advanced countries in this respect is Germany,
where even before the depression the most important Government
Departments had entered into negotiations with a view to coordinating their public works policy.
One obstacle to co-ordination is the multiplicity of the authorities giving orders for public works. In the Government of every
State there are generally at least half a dozen different departments
carrying out extensive public works or giving large orders for
supplies. The advance planning of public works must involve
more than merely co-ordinating and regulating the flow of Government orders, which generally constitute a comparatively small
fraction of the total amount of public works in the country. If
co-ordination is to be really effective, it must cover work undertaken by local authorities and by various public utility undertakings which, in complete independence, are expending large
sums on new plant, extensions, renewals and maintenance work.
1
Studies and Reports, Series C, No. 15.
134
CO-OBDINATION AND CENTRALISATION
135
The same applies in many cases to works undertaken by colonial
administrations. All these bodies enjoy a considerable degree of
administrative autonomy, which frequently implies financial independence. That is what creates the difficulty, because one cannot
dictate to a financially independent body as to the date and volume
of the public works which it is to carry out without interfering to
some extent in its financial organisation. Consequently the most
effective method of persuading local bodies and public utility
undertakings to follow the same policy in then: public works and
orders as is followed by the national Government still seems to be
that of financial assistance. The Government can grant loans or
make grants on condition that the work is undertaken at the
desired time. I t is true t h a t the method of subsidies is useful
mainly for persuading local authorities to carry out public
works earlier than they intended, but it might also be possible,
by adopting suitable methods, for the Government to exercise a
certain influence to have work retarded if it promised financial
assistance at some later and more appropriate date.
The method of subsidies, which is a general feature of practically all the recent programmes for the development of employment, and which has sometimes led to a considerable degree of
co-ordination in public works, had already been applied previously
in the more restricted field of rehef work. I n some cases—as, for
instance, in Canada, Sweden and Switzerland, to give only a
few examples—rehef work undertaken by local authorities
was subsidised out of the State budget. More generally,
however, rehef work was subsidised either out of independent
unemployment funds constituted by the revenue from special
taxes, as was the case in several of the Australian States and
in New Zealand, or out of unemployment insurance funds, as
in the case of Austria and Germany. Under this latter system, the
grants from the unemployment insurance funds may be supplemented by long-term loans from the central or district authorities.
The subsidising of rehef work by unemployment funds is based on
the idea that work can practically always be found which is of
undoubted value for the community, but which the authorities
concerned are hesitating to undertake on account of financial
difficulties. The subsidies granted to these authorities in respect
of the unemployed for whom they provide employment on such
work are sometimes a sufficient inducement to begin the work.
As a general rule it is stipulated t h a t the grants made by the
fund must not exceed the total saving in benefit. This system of
grant-aided rehef work necessarily involves a certain degree of
136
PUBLIC WORKS POLICY
co-ordination, because the public employment service has t o
consider the plans and decide as to the desirability of putting them
in hand in view of the position on the labour market. Relief
works, however, repiesent only a small part of public works, and
the co-ordination involved is only partial.
§ 1.—National Co-ordination
An effort will be made in the following pages to show how a
greater degree of co-ordination in the application of public works
has been achieved in several countries b y means of State subsidies
to local authorities or public utility undertakings.
I n Belgium, the creation under the Act of 24 April 1928 of two
central funds—the Public Works F u n d and the Road Fund—
together with the second Special Road Fund set up by the Act
of 12 August 1933, led to a considerable degree of co-ordination
in public works. The preamble to the later Act pointed out
t h a t the policy of the funds set up in 1928 had been to postpone
public works so long as unemployment was slight, which was the
case up to 1930, whereas after t h a t date they endeavoured to
encourage public works to the best of their ability. I n connection
with public works, the preamble declared, a policy of advance
planning would regulate activity in accordance with the principle
recommended by the International Labour Office, by postponing
orders during periods of industrial activity and advancing orders
in times of depression.
I t would also appear t h a t an institution like the Crédit
National de Belgique, the object of which is to facilitate the
raising of loans by the communal and provincial authorities, or
of loans guaranteed by those authorities, might contribute to a
better co-ordination of public works.
I n Estonia the organisation and supervision of all public
works are centralised, in virtue of an Act of 13 J a n u a r y 1933, in
the Ministry of Communications, which also has at its disposal
the whole of the money for such works derived from the State
budget. This money is paid into a special unemployment fund,
which is managed by a committee including representatives of the
various Government Departments concerned. This committee has
as one of its principal tasks to examine all proposals for public
works made by the central or local authorities from the point of
view of their value as a means of reducing unemployment, to draw
up the general programme, to calculate the cost of carrying it out,
and to decide on the grant of loans or subsidies.
CO-ORDINATION- AND CENTRALISATION
137
I n Germany the Legislative Decree of 15 December 1932
appointed a Federal Commissioner to co-ordinate and accelerate
all measures for providing work for the unemployed. The
Commissioner was directly responsible to the Chancellor, and must
collaborate in his work with a special inter-Departmental Committee, of which the Chancellor, or, failing him, the Commissioner,
acts as chairman. The Committee drew up general rules
concerning the approval of public works, and took decisions
concerning the date of specially important public works. The
Commissioner had extensive executive powers, and was entitled
to the assistance of the administrative services of the Federal
Government, the States, the local authorities, and all public
institutions. In January 1933, when a programme for the
development of employment allotted 500 million RM. t o loans
for encouraging public works (other than relief work) undertaken
by the States, local authorities, public corporations, or mixed
undertakings, it was decided t h a t all these plans should first be
submitted to the Federal Commissioner. A few months later,
however, there was a return to the system of decentralisation.
In the programme for June 1933, all plans, including relief work
for which subsidies might be granted, had to be submitted to the
competent authorities of the States, who transmitted them
directly to the credit institutions which were to provide funds.
The administrative regulations concerning this programme also
provided that in the case of work for the restoration or extension
of public buildings, the régularisation of watercourses, the extension of water, gas and electricity supplies, land levelling work,
or underground work, a copy of the plans should be submitted
at the same time to the State employment office, which would
study them from the point of view of the labour market, and to
the State Public Works Office, which would examine their
technical and financial aspects. When the employment office
had expressed a favourable opinion to the State Public Works
Office, the latter might transmit the plan directly to the financial
institution concerned. The office of the Commissioner for the
Development of Employment and the Advisory Commissions
have not been abolished, but their functions were transferred by
an Act of 13 July 1933 to the Minister of Labour, who is thus
in a position to supervise the developments in different sections
of the country.
In Great Britain the works carried out directly by the Government do not seem to be co-ordinated at all. With regard to the
works carried out by local authorities, a certain co-ordination
138
PUBLIC WORKS POLICY
exists in virtue of the powers which the Central Government
possesses of influencing the capital expenditure of local authorities.
I t can do this in two ways. I n the first place, grants are made
t o local authorities under various Acts of Parliament for various
purposes. These may be varied from time to time in accordance
with the circumstances. Secondly (and more important from the
point of view of this report) no loan can be raised for any purpose
except by the medium of a local Act of Parliament or by the
sanction of a Government Department, usually the Ministry of
Health.
I n December 1920, a committee known as the Unemployment
Grants Committee was appointed to assist the local authorities in
carrying out approved schemes of useful work in relief of unemployment. Only part of the field of public works was surveyed
by this Committee, as only works for which special Government
assistance was requested were submitted to it, but so far as it
went the Committee fulfilled to some extent the function of a
co-ordinating body and the volume of such works undertaken
varied in accordance with changes in the policy adopted from
time to time by the Government. The Committee's term of
appointment ended on 31 August 1932.
I n deciding on grants, the Committee took into consideration
whether the schemes were of sufficient public utility to justify
assistance from the Exchequer; to what extent the work was
calculated t o promote economic development in the United
Kingdom ; and t o what extent the works were being accelerated
in view of the unemployment situation. I n its first interim
report, this Committee expressed the view t h a t provision should
be made for closer working relationship between the central
government and local bodies.
From 1921 onwards, statutory bodies, not trading for profit,
were admitted as eligible for grants. I n 1923, the Committee
were also authorised to consider applications from public utility
companies, universities, colleges and voluntary hospitals. I n
1929, however, a second committee known as the Development
(Public Utility) Advisory Committee was set u p as an independent
body advising the Treasury to consider applications from such
bodies.
I n Italy the task of the Superior Public Works Council 1
is to express an opinion on the more important public works
plans, and on draft laws or regulations concerning public
works. These decisions may be taken either by the Council
1
Created by an Act of 15 July 1926, amended by an Act of 1 June 1934.
CO-ORDINATION AND CENTRALISATION
139
as a whole in the case of very important plans, or by sections
of the Council meeting separately or jointly, or by special committees appointed by the Council, which meet regularly at the
middle and end of each month. The Council has four sections :
the first dealing with ordinary road work and building ; the second
with waterworks, forestry, land improvement, irrigation, maritime work, aqueducts and sewers ; the third with the utilisation of
water power and waterways and the national fuel supply ; and
the fourth with railways, tramways, public motor services and
inland navigation. During 1932 the Council dealt with 2,805
of t h e 2,818 plans on which its opinion was asked.
Early in 1932, a proposal was made to set up a new section
of'the Superior Council which would act as a central technical
service responsible for supervising and co-ordinating, on the
basis of a systematic plan and uniform methods, all the technical
activities of the Civil Engineering Department. This technical
service was also to be made responsible for certain tasks under
section 17 of the Act of 1 June 1931, and for the collection of the
necessary information concerning technical programmes in general.
This new service has not yet been formally constituted, but it
began work in 1933. Its activities include the collection of
statistics concerning public works (plans submitted, plans under
consideration, and work in course of completion), the preparation
of plans for different districts with a view t o the systematic
organisation of the annual programme of public works, the collection of information as to the technical activities of the Ministry
of Public Works during the first ten years of the Fascist régime,
and the preparation of standard specifications with a view to
achieving uniformity in the methods of carrying out different
types of public works. The service was also made responsible for
drawing up the programme for dealing with unemployment in
1932-1933. I t was asked to study a number of technical questions,
more particularly technical problems concerning public works
suggested by private individuals. I t has organised a laboratory
for testing building materials and an experimental track. I t
is further responsible for co-ordinating hydrographie and meteorological observations and for examining plans for the utilisation and
development of water power and waterways, the transmission
and distribution of electrical energy, etc.
In Poland until 1933 public works were in the hands of a
number of different authorities, but this situation was changed
when the Employment Fund was set up. Section 4 of the Act of
] 6 March 1933 lays down t h a t one of the purposes of the F u n d is
140
PUBLIC WORKS POLICY
to encourage, and collaborate in, the preparation of public works
plans or plans for public utility work and any other work which
is obviously likely to decrease unemployment. Section 5 of the
Act goes on to state t h a t the plans and the order of carrying out
the work must be approved by the Prime Minister. The various
sections of the Employment Fund undertake the necessary
technical and financial investigations and submit to the Prime
Minister their considered opinion as to the order in which
different tasks should be undertaken. The Head of the Government has the final say in determining the general plan of public
works.
The Employment F u n d comprises a central committee and
a number of local committees, which collaborate with the central
authorities in carrying out the work of the Fund. Government Departments, independent local authorities and private individuals
who wish to undertake public works or public utility work, and
who desire financial assistance from the Fund, must submit their
plans, containing estimates for the work, proposals for financing it
and an estimate of the economic effects of the work when it has
been completed. They are also required to show evidence of the
social and economic importance of the proposed work. Plans
for railway development, the régularisation of watercourses, road
making and land improvement are submitted to the F u n d through
the competent departments ; proposals for public works by local
authorities are submitted through the provincial governors ; plans
for work showing an immediate profit, if undertaken by the
local authorities, are submitted through the provincial governors
provided they have had the approval of the Polish Municipal
Union. Plans put forward by individuals or organisations for
capital outlay which will show a profit in the future are submitted
directly to the Employment Fund, together with an expression of
opinion by some organisation such as a chamber of commerce
or industry; these applications have to be approved by the
competent authorities. Plans for the building of houses are submitted through the Bank of National Economy. The F u n d will be
required to collaborate very closely with the central authorities
and the local authorities, more particularly the Polish Municipal Union, which has a technical and financial committee
responsible for considering the plans submitted by various towns
and advising town councils in the choice of work to be undertaken. This collaboration between the Employment Fund, the
central authorities and the local authorities is intended to lead
to the drafting of general plans covering a period of years.
It
141
CO-OBDINATION AND CENTRALISATION
will then be the duty of the Fund to allocate the work in
such a way as to obtain the maximum effects in reducing
unemployment and promoting the economic development of
the country.
The year 1933 was one of preparation for the work of the
Fund. The experience gained during t h a t period led those
in charge to lay down the following guiding principles for 1934.
Instead of financing a number of minor works of various kinds
the Fund will endeavour to devote the sums at its disposal to a
few extensive capital works of general importance. Work of
merely local importance will not be financed save in exceptional
cases. The local provincial committees will draw up uniform
programmes for the whole province in collaboration with the
administrative authorities concerned. The programme of work
for 1934 must be considered as an integral part of a more extensive
programme, which will ensure continuity in the work. Financial
assistance will be granted in the form of loans, grants being
made only in exceptional cases. These loans must be used in
the first instance for capital development which will show a
direct profit. All estimates for public works must indicate the
amount of the subsidy required and the amount which will be
paid by the institution responsible for the work ; the administration of the F u n d will take special account of the financial effort
made by those undertaking the work when deciding whether to
grant the subsidy. The quota of loans granted to any one province
must represent a certain number of days of employment for each
unemployed person in the province. For this purpose the plans
submitted to the Fund must specify the number of days of
employment for each proposed piece of work in the territory of
the province and in the territory of any other province where
work will be provided as a result of orders. I n 1934 the work
would doubtless have to be organised in rotation and this would
have an important effect on the type of work and the place where
it is to be carried out. The programme for 1934 was to begin on
1 April 1934 at latest, the plans being submitted to the Employment Fund not later than 30 November 1933.
I n Spain, an Act of 7 July 1934 provides for the setting up of
a National Committee, including representatives of employers
and workers, whose task it will be to advise the Government as
to those works to which preference should be given, when they
should be put in hand, the places in which it is desirable to carry
them out and the most appropriate method of financing them.
The committee is also entrusted with the task of drawing up a
X G S344
K
142
PUBLIC WOKKS POLICY
plan of public works suitable as a remedy for unemployment,
including works carried out by the local authorities.
y^'' In Sweden the Government decided in the autumn of 1932 to
undertake a special plan of extensive public works. The report
of the committee set up to prepare a list of public works suitable
for this purpose has already been referred to in the first chapter
of this study. As the Government subsidises most of the work
it supervises most of the work carried out by the local authorities.
No information is available as regards the methods of coordination except in the case of " reserve " or relief work, which
is at present incorporated in the general programme for the
development of employment. These reserve works, which include
drainage, construction of waterways, preparation of aviation and
sports grounds, road-making, etc., come within the competence of
the National Unemployment Committee, which selects the work
in view of its probable effects on the labour market.
I n Switzerland, a special office recently attached to the
Federal Department of Industry, Arts and Crafts and Labour
has been in existence since 1933. Its purpose is to co-ordinate
public works and orders made by the various federal, cantonal
and communal administrations and to determine as far as possible
the time at which they shall be put in hand, account being taken
of the state of the labour market. This office has recently been
absorbed into a Central Office for the creation of employment
openings, the establishment of which was decided on 4 August
1934. The function of this new office is to keep in daffy touch
with openings for work in Switzerland and see t h a t they are
utilised in such a way as to employ the largest number of persons.
For this purpose it will take steps to see t h a t programmes of the
ordinary and extraordinary works of the Confederation, the
cantons and the communes are drawn up periodically, and t h a t
the execution of works with regard to time and place is arranged
in such a way as to ensure the maximum possibility of employment for Swiss workers and to reduce seasonal unemployment to
the strict minimum. I t will also try, in co-operation with
associations of architects and contractors, to obtain a similar
result with regard to private building. This Central Office will,
moreover, be responsible for subsidising relief and other works
and will encourage the organisation of voluntary labour service
for young unemployed persons.
I n the United States, even before the present depression, there
were signs of a tendency towards more scientific planning of
permanent improvements over a number of years in American
CO-OBDINATION AND CENTRALISATION
143
municipalities. Such attempts were made, for instance, in
Buffalo, Schenectady, Detroit and Cincinnati. Moreover, a
number of municipalities had set up bureaux of municipal research
or regional planning commissions which had no executive power,
but which were able nevertheless, by means of their analyses and
programmes, to have a substantial effect on the plans of the
public authorities concerned.
In 1931 Congress adopted an Employment Stabilisation Act,
the purpose of which is to provide for the advance planning and
regulated construction of public works and for aiding in the
prevention of unemployment during periods of business depression.
This Act, however, applies only to work undertaken by the
various federal services, so that its scope is decidedly limited.
A Federal Employment Stabilisation Board has been appointed,
consisting of the Secretary of the Treasury, the Secretary of
Commerce and the Secretary of Labour, whose duties are to
advise the President from time to time as to the trend of employment and business activity, and as to the existence or approach
of periods of business depression and unemployment, and to
co-operate with the construction agencies under federal control
in formulating methods of advance planning.
The President must take into consideration the volume, based
on value, of contracts awarded for construction work during any
three-month period in comparison with the three-month period
of three previous calendar years, and also the index of employment
prepared by the Department of Labour, and any other factors
which he may consider pertinent. Whenever the President, upon
recommendation of the Board, finds that a period of business
depression exists or is likely to exist within six months, he is
requested to transmit to Congress such supplemental estimates as
he deems advisable for emergency appropriations to be expended
upon the authorised construction of highways, river and harbour
works, flood control, public buildings, and other constructions
authorised by Congress.
The President may direct the construction agencies of the
federal administration to accelerate during such periods the
prosecution of all authorised construction within their control.
The Act contains a declaration of policy in favour of arranging
the construction of public works in such manner as will assist in
the stabilisation of employment through the proper timing of
such construction. For this purpose, each construction agency is
directed to prepare a six-year advance plan, with estimates
showing projects allotted to each year, and also to prepare a
K 2
144
PUBLIC WOBKS POLICY
programme for prompt commencing and carrying out of a wider
programme at any time.
These plans are to be submitted to the Board, and to the
Director of the Bureau of the Budget, and the President is
requested each year, before recommending the amount of construction appropriation, t o take into consideration the volume of
construction in the United States, the state of employment, and
the activities of general business.
Finally, the Board is directed to collect information concerning
advance construction plans and estimates of States, municipalities
and other public and private agencies.
I t is to be noted t h a t the above Act applies only to Federal
construction agencies, and, moreover, t h a t it lays down a permanent programme which can, in the future, if thought necessary,
be put into operation effectively during a depression. A commencement has, however, been made and the procedure followed
is illustrated by the example of the District of Columbia, which
includes the City of Washington, and is administered by three
commissioners appointed by the President. I t is therefore
subject to the provisions of the Federal Employment Stabilisation
Act.
Plans were submitted for the six years 1 July 1932 to 30 J u n e
1939, but these are subject to a yearly revision. I n calling for
returns for the year 1933-1934, the Board requested the commissioners of the District of Columbia to indicate the relative
urgency of each project listed for t h a t year. Thus all construction
projects are classified in three groups. The first group includes
those which are necessary to sustain the physical properties of the
Government in a satisfactory condition, or which are under
construction and must be completed, if financial loss to the
Government is to be avoided, or projects for which commitments
have been made. The second group includes other essential
projects which, if added t o the first group, would ensure a normal
programme of construction. The third group includes projects
which are of reproductive value, b u t not immediately necessary,
or which may meet with delays due to the time factor in acquiring
sites or preparing plans, or which are of less value or importance
than those in the first two groups, but which may have particular
value as a medium in the relief of unemployment. Maintenance
programmes are similarly divided into two groups. 1
1
UNITED
STATES
DEPARTMENT
OF
STABILISATION BOARD : Advance Planning
Columbia.
COMMERCE,
of Public
FEDERAL
EMPLOYMENT
Works in the District of
CO-ORDINATION AND CENTRALISATION
145
The Federal Employment Stabilisation Board emphasises the
importance of other cities in the United States formulating and
executing a programme of advance planning. For this purpose
it is necessary t h a t " some existing or newly created board or
commission should have administrative control of planning. I t
is likewise essential to have a staff to execute the will of this
Board." I t is suggested t h a t the Board should include " the
finance officer, possibly some one representative of the banking
or investing interests, one who speaks for the utilities, and
perhaps others."
Under the National Industrial Recovery Act, 1933, a Federal
Emergency Administration of Public Works was set up t o
administer the public works section of the Act. A Special Board
for Public Works was appointed, consisting of the Secretary of the
Interior, the Attorney General, the Secretaries of War, Agriculture,
Commerce and Labour, the Director of the Budget and the
Assistant Secretary of the Treasury. The Secretary of the
Interior was appointed as administrator. The Act requires the
performance by this Administration of three functions : (1) the
formulation of a comprehensive plan; (2) the examining and
drafting of a contract between the United States and the applicant body; and (3) supervision by the administrator of the
performance of the contract. The first of these functions
involves determining the eligibility of projects for inclusion in the
plan, the tests for eligibility being : (i) the relation of the project
t o co-ordinated planning and its social desirability; (ii) the
economic desirability of the project, that is to say, its relation
to unemployment, and the revival of industry ; (iii) the technical
soundness of the project ; (iv) the financial ability of the applicant
body to complete the work, and t o give reasonable security for
any loans made by the United States ; and (v) the legal enforceability of any securities which may be purchased by the United
States, or of any lease which may be entered into between the
applicant body and the United States.
For these purposes, a central organisation has been created,
which includes : (1) a Planning Board to advise and assist the
administrator in the preparation of the comprehensive programme
of pubhc works required by the Recovery Act ; (2) a Labour
Board, to advise the administrator as to the requirements of
contracts in so far as they affect labour; (3) a Technical Board
of Review for the consideration of particularly difficult questions
of engineering, finance or law; and (4) technical units for the
146
•
PUBLIC WOEKS POLICY
consideration of specific projects from a technical, legal or financial
point of view.
In addition, a decentralised organisation has been set up.
This includes : (1) regional advisers to assist the Planning Board
in formulating a plan for each region ; (2) State advisory boards,
the main functions of which are to stimulate the submission of
projects, to consider projects from the standpoint of local coordinated planning, social and economic desirability, the provision
of employment, the diversification of employment and engineering
soundness, and to submit to the administrator with their recommendations all projects considered ; (3) State engineers who are
appointed by the administrator, and are executive officers of the
Federal Board, their duty being to examine all projects in their
various technical aspects.
The procedure is as follows. Projects of the Federal
Government are submitted to the Federal projects division of the
Public Works Administration and then to a sub-committee of
the Special Board for Public Works. Local projects are examined
by the Engineering, Legal and Financial Divisions of the
Administration in Washington, and, if approved, are submitted
to the Administrator and, if they meet with his approval, to the
Special Board, which selects those which are considered most
worthy of receiving federal aid. If a project is recommended for
rejection by the three examining divisions, it is referred to the
Technical Board of Review, which consists of engineers in
private practice. Housing projects are examined by a special
Housing Division, but there were so few desirable projects that
the Administration formed the Emergency Public Works
Housing Corporation through which the Government could make
a beginning by initiating suitable projects where they were most
needed. Special examining divisions have been set up to consider applications for loans to railways, and for loans in aid of
subsistence homesteads, the latter being detached from the
Public Works Administration and attached to the Department
of the Interior. All projects have to be finally approved by the
President.
An agreement is then prepared covering the loan or grant
provided for. In the case of applications from States and local
authorities, this gives rise to considerable delay, as the States
have established a definite procedure that must be followed
whenever a political unit of the State issues bonds or financial
obligations of any kind. This procedure includes giving public
notice of intention to act, and in some cases the notice requires
CO-ORDINATION AND CENTRALISATION
147
a period as long as ninety days between one step of the process
and the next. Another difficulty has appeared in certain States
where the legal powers of the municipalities and other local
bodies were not such as to permit their conforming to the
requirements of the Act. The Public Works Administration has
co-operated with the State legislatures in formulating new
enabling legislation, but this has also involved considerable delay.
When contracts have been let and work actually begins, the
Inspection Division assigns the necessary inspectors to see t h a t
the work is well and honestly carried on and that the specifications and the provisions of the National Recovery Act are
faithfully observed.
The National Planning Board has begun a series of long-range
studies into the relation of public works to the many other
factors in social and economic life, and a Mississippi Valley
Committee has been established to approve the immediate
projects having to do with the control and utilisation of that
river and to formulate a general long-range programme covering
flood control, power, irrigation, soil erosion and navigation. 1
There has been considerable difficulty in stimulating works
by local bodies. As a result of the detailed and apparently
endless formalities incident to the consummation of loans to
such bodies under American law, the amount of re-employment
has been less on projects of this kind than had been hoped. This
seems to demonstrate the necessity for centralised control. On
the other hand, local projects stimulate local interest and cannot
be abandoned altogether. 2
I n Yugoslavia regulations were adopted in October 1934
providing for the creation of local public works councils throughout the country. These councils, which were to meet for the first
time in October, must draw up lists of public works to be
undertaken in each district, and must fix the methods of carrying
them out.
In each Banovine a similar public works council is being set
up. Its task will be to draw up an annual programme for the
whole Banovine, on the basis of the reports sent in by the local
councils. These annual programmes will be submitted to the
Council of Ministers, which, after examining them thoroughly,
will, if it approves of them, make the necessary grants from
State funds which have been voted for public works.
1
For full details of the work of the Public Works Administration up to
March 1934, see Senate, 73rd Congress, 2nd Session, Document No. 167.
* Communication from the Public Works Administration to the International Labour Office..
148
PUBLIC WOBKS POLICY
Preference is given in the engagement of labour to the poorer
members of the population residing in the district concerned.
The normal rate of wages will be paid to all workers without
distinction. The maximum rate must not exceed 20 dinars per
day, except for skilled workers and other skilled staff, for whom
the maximum will be 40 dinars. 1
§ 2.—International Co-ordination
I n the course of an analysis in Chapter I I of some of the
international aspects of the financing of public works it was
pointed out t h a t an extensive programme of works, even when
financed by capital from within the country, might raise economic
and financial problems affecting other countries. When a plan
of public works is sufficiently vast to give a real impetus to
economic activity in general, its effects on prices m a y affect the
monetary situation of a country in such a way as to neutralise
part of the expected benefits. These disadvantages could be got
over if the chief countries concerned would agree as to the date
and volume of the work in question so t h a t the consequent
changes in the average level of prices would be parallel and
simultaneous.
International co-ordination in public works is therefore
necessary, but it cannot be brought about suddenly without
preparation. I t pre-supposes the existence of an international
body to which the different Governments would transmit
information as to the work they were undertaking or proposing
t o undertake. This international body would then be able t o
draw up a common plan of action within which the various
national schemes would produce the most effective results. The
task of this body would therefore be to synchronise the public
works programmes undertaken by a certain number of countries
with their own financial resources. On the other hand, international co-ordination is also desirable in respect of public works
which are of an international character either because they
concern several countries or because they cannot be carried
through without the assistance of foreign capital. I t is from
this point of view t h a t the International Labour Office and
subsequently the competent bodies of the League of Nations
have been advocating, since 1931, the adoption of an extensive
plan of international public works. I t may not be without
interest t o retrace the history of their efforts.
1
Yugoslav Lloyd, 10 Oct. 1934.
CO-ORDINATION AND CENTRALISATION
149
I n January 1931 the Unemployment Committee of the
International Labour Office mentioned " the possibility of
Governments coming to an agreement through the appropriate
organs of the League of Nations with a view to joint execution
of extensive public works of an international character." The
Director of the Office brought the matter before the Commission
of Enquiry for European Union in May 1931 with an extended
survey of the arguments which had led the Unemployment
Committee to take this view. H e pointed out t h a t the value of
such work would be twofold. I t is of direct use to the country
in which it is carried out, and it is of indirect but not less vital
importance to other countries through the substantial improvements provided for all concerned and through the orders for
material or equipment and the demand for labour to which it
gives rise.
The Commission of Enquiry considered t h a t the main problem
was one of finance, and it therefore referred the question t o its
Committee on Credit Problems, which met at the end of August
1931. The Director of the International Labour Office, who was
anxious to submit certain definite proposals, h a d in the meantime
asked all the European countries to state briefly what public
works they thought it would be desirable to carry out in the near
future in their respective countries, and for which they would be
ready to ask for international credits. Practically all the Governments replied and submitted programmes of works representing
a total of 550 million man-days of employment and requiring a
total credit of 5,000 million Swiss francs spread over a period
of ten to fifteen years.
I n the meantime, in July 1931, the Mixed Committee on
Unemployment set up by the Commission of Enquiry for European
Union also held a meeting. The Committee therefore dealt with
the labour aspects of this question, adopting a resolution
requesting the Committee on Credit Problems " to investigate
urgently the means of securing the permanent international
co-operation necessary to facilitate the execution of any works
which may be recognised as favourable to the economic development of Europe and to promote for this purpose a policy of longterm credits which may inspire the confidence indispensable to
lenders and secure favourable condition to borrowers."
With regard to the economic and technical value of the various
plans, the Committee on Credit Problems proposed t h a t the
Council of the League should instruct the Committee of Enquiry
on questions relating to public works and national technical
150
PUBLIC WORKS POLICY
equipment set up by the Communications and Transit Organisation, to which should be added for the purpose representatives
of the International Labour Office, to examine the proposals of
the Governments, with special reference to the following points :
(a) their economic necessity and their co-ordination with other
schemes from a national and European point of view ; (6) their
chances of profits and productivity at an early date.
These two resolutions were approved by the Commission
of Enquiry for European Union and subsequently b y the Twelfth
Assembly and the Council of the League of Nations.
On 14 October 1931 the Committee of Enquiry on Public Works
and National Technical Equipment, which had been instructed to
act as a technical body, held its constituent session and decided t o
send a circular immediately to all the States Members of the
League of Nations and to the U.S.S.R. and Turkey, which at
t h a t time were not yet Members, requesting them to submit
detailed plans of public works. The Committee held three
sessions in 1932, and a fourth in June 1933, a t which it examined
proposals from some twenty Governments. I t noted more
particularly certain plans p u t forward by the Austrian, Bulgarian,
Greek, Hungarian, Latvian, Polish and Yugoslav Governments,
and recommended them for examination by the Monetary and
Economic Conference. 1 A short summary of these plans is given
in Appendix I I . According to rough calculations made by the
Office on the basis of the very scanty information which some of
these plans contain, the programme so far approved would cost
about 2,000 million Swiss francs and would provide from 150
million to 200 million man-days of employment. The Committee
was prevented by its terms of reference from studying the financial
aspect of the proposed operations.
The problem then came before the Council of the League of
Nations in May and again in September 1932, when it was decided
to transmit the recommendations of the Committee on Public
Works to the Preparatory Commission for the Monetary and
Economic Conference. The proposals were approved by the
Economic Sub-Committee of this Commission and the matter was
referred to the Monetary Sub-Committee to deal with questions of
finance. On the unanimous recommendation of the representatives of the Committee on Public Works, of the International
1
LEAGUE OF NATIONS : Monetary and Economic Conference. International
Questions relating to Public Works. Report submitted to the Monetary and
Economic Conference by the League of Nations Committee of Enquiry on
Questions relating to Public Works and National Technical Equipment of the
Organisation for Communications and Transit. (Document C.377. M.186.
1933, VIII.)
CO-OBDINATION AND CENTRALISATION
151
Labour Organisation and of the International Institute of Agriculture, the question of public works was in J a n u a r y 1933 placed on
the agenda of the World Monetary and Economic Conference.
As the problem of public works has economic and financial aspects,
it was recognised at the very outset of the Conference t h a t it
should be studied by a su.b-committee to be set up by the Economic
Committee and the Monetary and Financial Committee of the
Conference. The Economic Committee proceeded to discuss the
question and recommended the Officers of the Conference to set
up the proposed sub-committee, which should be composed in
such a way t h a t the economic and social aspects and the financial
aspects of the matter would be equally considered. They suggested that this Committee should be convened as soon as circumstances permitted, and the Officers of the Conference therefore
decided on 27 July 1933 to authorise their executive committee,
when they thought fit, to set up a sub-committee to deal with the
question of public works.
The Council of the League, in talting note of the discussions
on this subject at the London Conference, expressed the view in
September 1933 that, apart from the question whether the execution of works involves an appeal for foreign capital, a continuous
study of general questions relating to public works financed
by States themselves would make it possible to collect information
as to the experience acquired in the different countries, particularly
as regards the effects of the execution of public works on the
resumption of economic activity and on unemployment.
In
accordance with this desire which was transmitted to the
Fourteenth Assembly of the League and agreed to by the Assembly
on 7 October 1933, the Secretariat of the League sent a questionnaire to all Governments on 7 March 1934. This questionnaire
was drawn up in agreement with the International Labour
Office and is reproduced in an Appendix to the present Report. 1
The information which has been received in reply to this
questionnaire has been communicated by the Secretariat of the
League of Nations to the International Labour Office and has
been used in the drafting of this Report. 2
While it is true t h a t the preparatory work which has been
carried through, and more particularly the work of the Committee of Enquiry on Public Works and National Equipment, is
far from negligible, it must at the same time be admitted t h a t
1
See Appendix I .
The whole of this information will shortly be published by the Secretariat
of the League of Nations under the title : " Enquiry Concerning National
Public Works."
2
152
PUBLIC WORKS POLICY
the efforts of the various international organisations have so
far borne no practical fruit. In particular, the problem of
financing the plans which have been examined and approved
has not yet been tackled. I t is clear t h a t the application of a
policy of advance planning on an international scale, whether it
consists in co-ordinating public works which are undertaken
with capital available in each country concerned or in influencing
the volume of international investments in public works, would
be considerably facilitated by the creation of a permanent advisory
and co-ordinating body. If works which are financed internationally are to be put in hand immediately when the time is
opportune, a list of such works must be drawn up a long time in
advance, and the various plans must be classified in an order of
preference based on careful consideration of their technical
value, their national and international economic utility and the
guarantees they " offer to those who lend capital. Any plan
recommended by an international body of this kind acting in a
strictly impartial and objective manner would have the best
possible chance of obtaining the necessary capital even in a time
of depression, when a great deal of capital is lying idle.
Mr. Oersted, Employers' Vice-chairman of the Governing Body
of the International Labour Office, expounded this idea at a
meeting of the Economic Commission of the London Conference 1
when he pointed out that if it were found possible to recommend a scheme for the financing of any definite proposal, it
would first be necessary to bring into existence the international
machinery for the purpose. He therefore suggested t h a t a permanent international commission should be set u p under the
auspices of the League, which would act in co-operation with
the League's technical bodies. The Commission would include
Government representatives, chosen from the National Economic
Councils, where such bodies existed. I t should also contain
representatives of the International Labour Organisation and
of the Bank for International Settlements. The public must
be convinced by an authoritative body that any scheme recommended was a sound investment and that there was no risk
of a repetition of the unfortunate disappointments which had
occurred too frequently in the past. The proposed permanent
commission would be a body qualified to give a guarantee and
to exercise supervision, and it should be such as to deserve the
confidence of the public.
Any scheme which it was proposed to carry out, Mr. Oersted
1
Cf. Journal of the Monetary and Economic Conference, No. 30, 14 July 1933.
CO-OEDINATION AND CENTRALISATION
153
continued, would clearly have to be thoroughly investigated and
a report, on the lines of an engineer's report, would have to be
drawn up. The body best qualified to consider such a report
would be the international commission on public works whose
creation he recommended. This body would receive complete
reports on public works proposed for execution in all countries
and would deal with requests for advice from Governments and
from contractors. Furthermore, it would be in a position to take
a comprehensive view of all the schemes submitted and to consider
them in their international aspect. It would thus be able to
point out any mistakes which had been made and to take precautions against certain dangers. It should include financial
experts.
Among the measures to be recommended or imposed would be
a proviso that the borrowing country should give its moral support
to the scheme proposed and should furnish some portion, however
small, of the necessary capital. On the other hand it should be
provided that a portion of the capital supplied should be employed
on orders placed in the lending country. It might also be possible
to conclude agreements between creditor and debtor countries,
by means of which the money intended for the repayment of
debt would be devoted to public works of a remunerative character
in the debtor countries, the creditor States sharing in the work
and receiving a fair return on their capital.
The proposed permanent commission, in Mr. Oersted's view,
would thus be at the same time an office for the filing of records,
for the giving of information, for the provision of guarantees and
for the exercise of supervision.
*
*
*
In summing up it may be said that a policy of advance
planning pre-supposes, in the national field, the existence of some
guiding and co-ordinating body sufficiently influential to decide
that work should be put in hand earlier or later than was intended
provided that the work is of such a nature that it can be thus
expedited or retarded. If such a policy is to be really effective,
co-ordination must extend not only to work undertaken and
orders given by the various departments of the central Government, including the Governments of Colonial territories, but also
to work undertaken by district or local authorities and by
public undertakings. The best method of inducing these
latter bodies to follow the same policy as the central Government with regard to public works has hitherto proved to be
154
PUBLIC WORKS POLICY
assistance in the form of long-term advances or grants. This
method usually enables the central Government to induce the
local authorities to advance the date of their work, but it would
be useful to employ the same method to persuade local authorities
to retard certain works. In any case this method requires the
least amount of change in the administrative systems of the
different countries.
It has further been shown that the application by any one
country of a public works programme sufficiently extensive to
prove a real stimulus to economic activity is likely to have international monetary consequences. The economic reactions which
follow may to a great extent neutralise the good results expected
from increased spending by the public authorities. These difficulties disappear if the chief countries concerned come to an agreement within some international advisory and co-ordinating body
as to the date and volume of the public works to be put in hand.
The international body in question would also be responsible for
the continuous systematic co-ordination of all public works
plans financed on an international basis so as to influence the
flow of international investment in public works to the best
advantage of the economic system as a whole.
CONCLUSIONS
The preceding chapters summarise the available information
relating to pubhc works. Although this summary is necessarily
incomplete, it at least shows the importance of a pubhc works
policy, in the widest sense of the term, for national economic
wellbeing and consequently for the economic system of the Avorld.
B u t for t h a t it is above all necessary t h a t a definite policy should
be adopted, directed to planning public works and orders in such a
way that the employment they provide may enable the authorities to exercise an effective influence on economic activity during
periods of depression. I t is obvious t h a t such a policy will be
all the more effective if public works are understood to include
not only actual works in a narrow sense but also all orders by
public authorities for supplies and materials. These authorities
should have continually before them an advance programme of all
public works throughout the country and time these works in such
a way as to constitute an unfailing reserve to be drawn upon
for the purpose of making good a decline in private business.
Such a policy is possible only if there is some central body to
co-ordinate it. Co-ordination is required in the first place in
planning the work of the central Government, which is always
scattered over a number of different Government departments ;
it is also needed, in so far as it is compatible with existing constitutional and administrative practices, in the work of local
authorities and public corporations.
Finally, co-ordination is
required in the international field.
Advance planning is essential not only on the technical side,
but also on the financial side. I n this connection it is of the first
importance t h a t a pubhc works policy should be accompanied
by a suitable monetary policy. Apart from that, however, it
may be difficult on the spur of the moment to obtain the capital
required for a programme of pubhc works sufficiently far-reaching
to have a real effect on the economic situation. I t would therefore seem desirable t h a t every country should endeavour to
create a fund which would accumulate steadily during periods of
prosperity and would be used to finance pubhc works in periods of
depression. The development of pubhc works during a depression
can be effective only in so far as it helps to bring about a rapid and
appreciable increase in effective purchasing power. If no fund
is created in advance, there are two possible methods of paying
for important pubhc works during a depression. The first is
155
156
PUBLIC WORKS POLICY
taxation; but taxes come in slowly and may produce little, for
times of depression are marked by an increasing tendency towards
tax evasion. The second possibility is by loan. This method, if
applied with the necessary safeguards and used only for work of
undoubted economic value, seems calculated to provide immediate
and abundant resources without danger for the future. It
provides an economic use for capital which is temporarily unused
because of the slump, but which will readily be lent to the State.
As was pointed out in Chapter II, all the countries which have
launched an extensive public works policy as part of their plan
for economic revival have financed that work by loans, and
have in many cases adapted their banking policy to the needs of
the situation. It is too early to say to what extent these attempts
have been really effective. A few figures are given below to illustrate the extent of the effort made in certain countries to use, for
public works purposes, capital which was at the moment lying
idle. In Germany, the various public works programmes drawn up
in 1932-1934 provided for the expenditure of 5,400 million RM.,
of which 2,400 million had been actually spent up to June 1934,
as compared with a total budgetary expenditure for all purposes of about 8,000 millions per year. In Italy, all the public
works carried out by the State, the local authorities and public
institutions subsidised by the State cost 5,800 million lire in 1932,
while the total budgetary expenditure was 21,000 million. In
Sweden, loan expenditure represented about 250 million crowns
in the fiscal year 1933-1934 and is estimated at 220 million
crowns in 1934-1935, as compared with a total budget of 1,000
million crowns. In the United States, in 1933-1934, the total amount
of loans approved for financing work of this kind was $3,700
million, but this is only to be spent over a period of three years ;
the total ordinary estimates of the Federal Government in
1933-1934 amounted to 4,000 millions.
Whatever method may be adopted for financing the work,
public works cannot be suddenly launched in a period of depression
unless some restraint has been exercised in the preceding period
of prosperity, but such control by the authorities must be very
prudently exercised. There are many types of work which cannot
be postponed; work for protection against the elements and
work for public health or national defence may by their very
nature have to be carried out irrespective of any economic considerations. On the other hand, it cannot be denied that there are
numerous other works to which the principles of advance planning
might be applied.
157
CONCLUSIONS
These principles are indeed generally accepted, and in many
countries are at the basis of the laws and regulations concerning
public works. I n practice, however, the results are still somewhat
discouraging. I t is true t h a t some Governments have made considerable efforts to increase the volume of their orders during
periods of unemployment, but the examples mentioned in the
preceding pages show that in practically every case achievement
has fallen short of expectation. As a result of the lack of t h a t
co-ordination which the International Labour Conference recommended as early as 1919, the efforts of the central authorities have
not been adequately supported by the local authorities ; because
of the lack of preparation in advance results were too slow in
appearing. Notwithstanding these shortcomings, it has been seen
t h a t in several countries the authorities have deliberately
endeavoured to increase their public works as a means of combating the depression. On the other hand, there are very few
instances in which the authorities have systematically postponed
public works during a period of prosperity until the arrival of a
slack period when private activity declines. I t is certainly difficult
in times of prosperity, when the public purse is well filled, to urge
moderation upon an authority wishing to engage in public works.
The money is there, and who knows whether it will still be there
to-morrow ? Nevertheless, the correlation between the two phases
of a sound public works policy is clear. • From the financial point
of view, there is no possibility, other than t h a t of a loan, of
financing an increased volume of public works during a depression
unless reserves have been accumulated for t h a t purpose during
periods of prosperity. From the technical point of view, moreover,
as the economic equipment of the various countries improves, it
becomes more difficult in times of depression to find work which
is of any economic value (let alone promising a profit) if too much
has been done during boom years.
One obstacle t o a policy of advance planning in most countries
is the multiplicity of Government departments giving their
separate orders for public works. Moreover, the influence a t
present exercised by Governments on regional and local authorities is often insufficient to enforce national co-ordination in place
of the necessarily narrower view by which the local authorities
are guided.
The first necessity, therefore, is national co-ordination. I n
each country, a central institution endowed with such powers
as may be required should be made responsible either for administering all the budgets for public works and orders for supplies
X O 8341
L
158
PUBLIC WORKS POLICY
from the central authorities, or at least for bringing about the
necessary co-ordination between different departments. The same
institution should be in a position to exercise sufficient pressure on
local authorities and public corporations to bring their policy into
as close harmony as possible with that of the central authorities,,
so t h a t they may all follow the general policy required for the
economic welfare of the country. The activities of this central
body should apply also to the social aspects of public works so
t h a t the recruiting of workers for t h a t purpose should as far as
possible be in the hands of the public employment exchanges, and
the conditions of work be such as to ensure t h a t the largest
possible number of workers are employed on public works and a t
the same time t h a t the purchasing power of the workers is
increased. .
- Summing up, it would appear t h a t the following principles
may be deduced from what has been said above.
1. I n every country, all public works and orders for supplies
of the central authorities should be in the hands of, or supervised
by, a single body which, according to the constitutional form and
the customs of the various countries, might be an office, a commissariat, a committee or some other permanent body. I t should be
competent to consider every aspect of the problem : the economic
value of the work, its social consequences and the possibilities of
financing it. As a rule, none of these three should be the sole
guiding principle in the decisions of the committee. A public
works policy should not be thought of merely as a means of
combating unemployment and aim solely at providing employment. I t should contribute to an ordered development of
national economic activity and should consequently be adapted
t o the needs of each country. The aim must not be to drive the
publie authorities.into a systematic policy of undertaking risky
and unprofitable schemes which would never be contemplated
by private enterprise. What is wanted is t h a t the State should,
as far as possible, reserve its normal public works programme for
slack periods, when private undertakings are short of orders and
often of cash, while the public authorities can with comparative
ease use the capital which has temporarily been withdrawn from
productive activity in private economic undertakings.
2. The proposed central institution should have considerable •
financial autonomy. If it is to accumulate funds during times of
prosperity it. must, for example, be permitted to carry forward'
from one, year to another the appropriations made to it. I t must,
moreover,..endeavour..to keep its assets in as liquid a.form as.
159
CONCLUSIONS
possible so as not to have an unfavourable influence on the market
when in the middle of a depression it needs to obtain the use of
some of its reserves.
3. Such a degree of centralisation is inconceivable • for a
variety of reasons in the case of public works undertaken by local
authorities or public corporations, which generally represent a
very large proportion of the total public works of any country.
But the central body should at least be able to influence the policy
of these authorities to a sufficient extent to ensure the necessary
co-ordination. For this purpose the method which involves the
least degree of interference with local autonomy is that of loans or
grants which should be made liberally in times of depression and
much more sparingly in times of prosperity.
I t might also be suggested for certain types of work, even when
carried out by district or local authorities, that the central body
should act as a purchasing agency, collecting orders for supplies
and distributing them judiciously so as to have a stabilising effect
on various industries.
4. These national bodies would be incomplete if they were not
in turn co-ordinated by an international body. Quite apart from
the fact that extensive public works programmes may, particularly
in their financial aspects, have international consequences which
can be prevented by a co-ordination of national policies, it would
appear that a centre for the exchange of information and of the
experience of the various countries would be of considerable value
to Governments. This body might also be responsible for
examining programmes of public works which are definitely international in character, either because the work in question directly
affects several countries or because foreign capital is required to
finance it.
From this point of view, its first task would be to collect the
fullest possible technical, economic, financial and social information concerning all international works and keep a complete file
of t h a t information. If it were given the necessary powers and
could consult recognised experts in the financial, technical and
social aspects of the problems with which it dealt, such a centre
would be not only a very valuable information and research centre
but might also in time acquire sufficient authority t o take active
international measures.
Surely a national and international public works policy, built
up along these lines, would be more than merely a means of
reducing unemployment; it would go far towards proving an
effective method of preventing it.
X G 8344
M
APPENDIX I.
LEAGUE OF NATIONS
NATIONAL PUBLIC WOKKS 1
At its Seventy-sixth Session, the Council of the League of Nations,
when taking cognisance of the work of the Committee of Enquiry on
Questions relating to PubHc Works and National Technical Equipment
set up by the Organisation for Communications and Transit, and of
the stage reached in the discussions on that question at the Monetary
and Economic Conference in London, noted that, quite apart from the
question whether the execution of such works involved an appeal for
foreign capital—a question which had until then formed the
subject of the Committee's enquiries—a continuous international
study of general questions relating to public works, including
important programmes of work carried out by national means, would
undoubtedly be of great value, as permitting of a comparison, in the
interests of all the Governments, of the experience acquired in the
different countries, particularly as regards the effects of the execution
of public works, or of a particular category of public works, on the
resumption of economic activity and on unemployment, and that it
would certainly be useful to collect without delay any preparatory
information which might be.required on this matter, with a view to
subsequent discussion.
The report adopted by the Assembly at its Fourteenth Session
made similar recommendations. It points out that information
which might be collected on this subject " would be particularly
useful in order to enable Governments to judge of the possibility and
desirability of pursuing, in present circumstances, a policy of carrying
out programmes of public works on parallel lines. In the present
period of distress, this question cannot fail to be of particular interest
to pubHc opinion and Governments in most countries."
In order to faciHtate, by the coUection of suitable documentation,
in accordance with the wishes of the Council and the Assembly, any
subsequent examination of the question of pubHc works, including
that of national pubHc works, the Secretary-General would be grateful
if the Government of
would be so good as to
communicate the following information to him by 15 August next :
I.—A brief description of the main pubHc works—
(a) undertaken since the beginning of the year 1929 and now
completed ;
(b) now in course of execution ;
(c) the execution of which is at present in contemplation or
schemes for which are in preparation.
The term " pubHc works " is intended to include the various categories of work mentioned in the Hst annexed to the present circular,
and the pubHc works described should, as far as possible, be classified
according to the categories shown in that Hst.
IL—The principal administrative methods foUowed or contemplated
for the execution of the work referred to in I, and any legal provisions
relating to such work.
i Document C.L. 24. 1934. VIII.
160
APPENDIX I
161
(Has the work in question been carried out, or is it being, or to
be, carried out on behalf of or by the order of a central, regional or
local or other authority, or on behalf of a company holding a concession from public services, or on behalf of private persons receiving a
grant from the public authorities ? I s such work being carried out
directly by the authorities, or by contract, etc. ?)
III.—The principal methods employed for financing such work.
(Is the expenditure on the work charged to the ordinary or the
extraordinary budget of the State, the budget of regional or local
administrations, the budgets of public bodies, etc., or is it financed b y
an internal or external loan ? Security of such loans ; plans of
repayment, etc.)
IV.—An estimate, as far as is possible, of the allocation of
expenditure on the execution of the public works referred to in I, as
between materials and equipment provided b y national or foreign
industries, on the one hand, and labour—that is to say, wages and
miscellaneous social expenditure—on the other.
V.—The Government's opinion with regard to the effects obtained or
expected from the execution of the public works referred to in I on the
resumption of economic and industrial activities and on unemployment.
Governments are requested to forward their replies, and any
documentation annexed thereto, in triplicate.
Geneva, 7 March 1934.
[ANNEX]
CLASSIFICATION OE PUBLIC WOBKS BY CATEGORIES.
(a) Roads and bridges.
(6) Railway lines, including tramways, metropolitan railways, etc.
(If possible, mention the more important construction works separately.)
(c) Complete agricultural land reclamation (drainage, irrigation,
construction of dwelling-houses and various new buildings, or establishment of entire new settlements, country roads and other works connected
with land settlement).
(d) Canals and other inland waterways (including improvement work
on rivers, defensive work against floods, etc.). (Work not already included
under (c).)
(e) Land improvement work, bringing of new land under cultivation,
reafforestation, etc. (Work not already included under (c).)
(/) Provision of drinking-water supplies and sewage disposal. (Work
not already included under (c).)
(g) Work carried out in sea and river ports, including mechanical
equipment of such ports.
(h) Work for the establishment of air ports.
(i) Building and construction work forming part of a general plan
and carried out (or to be carried out) with the participation or approval of
public authorities, classified according to category (administrative buildings, dwelling-houses, etc.) (Work not already included under (c).)
(j) Electric installations, hydro-electric and heating power centres,
motive power transmission.
(k) Gasworks and long-distance gas supply.
(¿) Telegraph and telephone installations, wireless broadcasting
stations.
•
. •
(m) Other work.
<
APPENDIX II
LIST OF PROGRAMMES OF WORKS RETAINED BY THE
COMMITTEE OF ENQUIRY ON QUESTIONS RELATING TO
PUBLIC WORKS AND NATIONAL TECHNICAL EQUIPMENT. 1
Estimated
expenditure
(inmillions of
Swiss francs)
;
AUSTRIA :
Programme for the modernisation of long-distance routes ...
95
Favourable influence on the unemployment situation ;
Scheme already in course of execution ;
Contribution towards the economic development of the country ;
Establishment of better communications with the principal road
systems of other countries.
BULGARIA :
Programme of drainage and river correction (Works at KaraBoaze, at Messemvria and at Mandra-Yakezli)
...
1-3
Favourable influence on the unemployment situation ;
This work would contribute to the salubrity of the areas in
question ;
Possibility of receipts in the form of taxes, from the reclaimed
and improved land.
Programme of road and bridge construction ...
...
...
11
Favourable influence on the unemployment situation ;
Economic development and improvement of the national
technical equipment of the country ;
Improvement of communications with other countries.
ESTONIA :
Programme of road and bridge construction ...
...
...
8-1
Favourable influence on the unemployment situation ;
Economic development and improvement of the national technical
equipment of t h e country, whose road system has hitherto
remained somewhat undeveloped ;
Improvement of communications with other countries.
HUNGARY :
Programme for the reconstruction of national roads ...
...
35
Favourable influence on the unemployment situation ;
The work has already been commenced ;
Contribution to the economic development of the country ;
Establishment of better communications with the principal
road systems of other countries.
1
The characteristics of t h e various projects are those drawn u p b y the
Committee itself.
162
APPENDIX
163
n
Estimated
expenditure
(in millions of
Swiss francs)
LATVIA :
Programme for the construction of roads and bridges1
...
98-5
Favourable influence on the unemployment situation ;
Economic development and improvement of the national technical
equipment of a country whose road system until now has not
been highly developed;
Improvement of communications with other countries ;
Possibility of progressive execution.
Scheme for the construction of railway lines from Riga to
Karsava and Riga to Rujiena1 ...
...
...
...
33-4
Favourable influence on the unemployment situation ;
Development of national technical equipment and economic
revival in the regions in question ;
Important orders in foreign countries ;
Possible remunerativeness, derived from the operation of the
railway.
POLAND :
Various hydraulic works
(a) Régularisation of the Rawka
2-9
(b) Completion of the Government water12
conduit system in Upper Silesia ...
Reconstruction
of
the
Royal
Canal
...
35
(c)
(d) Drinking-water supply for and drainage of
the towns of Lowicz, Rzcszow and Lomza
(e) Drinking-water supply for the town of Lodz
(/) Extension of the Warsaw water supply and
sewerage system ...
31
Total ...
113-9
All these works would be of great utility from the
point of view of unemployment ;
The works under items (a), (6) and (c) have already
been commenced;
The works under items (a), (6), (d), (e) and (/) would
contribute to the salubrity of whole towns and areas ;
Economic development and improvement of national
technical equipment over wide areas (Royal Canal) ;
Acknowledged urgency of the work under item ( / ) ;
Direct remunerativeness, derived from taxation on the
use of water (schemes (b), (d), (e), (/) ), and by taxation on the use of the sewerage system, emptying
into the Rawka (scheme (a) ).
Apart from these works, the Committee retained, on principle,
programmes for the supply of drinking-water to the towns of Posnan,
Cracow, Lwow, ïarnov, Bydgoscz and Kattowice, which would also be
of great public utility and would have a favourable influence on the
unemployment situation ; however, the Committee has not yet received
detailed plans with regard to these works.
1
With regard to these two programmes, as, according to the sketch, the
two railway lines proposed run more or less parallel to certain roads
included in the road programme submitted by the Latvian Government, the
Commission felt unable to recommend the adoption of both the schemes and
considered that the Latvian Government should decide whether preference should
be given to the railway or to the road, in each particular case.
164
PUBLIC WORKS POLICY
Estimated
expenditure
(in millions of
Swiss francs)
II. Programme of reconstruction of the principal road system
and the construction of bridges1 ...
...
...
186
Favourable influence on the unemployment situation ;
Contribution towards the economic development of the western
region of the country ;
Establishment of means of communication between different
parts of t h e country and with the road systems of other
countries.
III. Programme of railway construction and development1
(a) Warsaw railway junction ...
...
... 55
(6) Cracow railway junction
9
(c) Warsaw-Radom-Ostrowiec-Bodzechow railway line ...
...
...
...
... 50
(d) Miechow-Craeow railway line
...
... 16
(e) Electrification of the Warsaw suburban
railway system
25
Total
155
All these works would have a favourable influence on
the unemployment situation and especially those
mentioned under items (a) and (6), in the vicinity of
the big towns of Warsaw and Cracow ;
Contribution towards t h e economic development of
the country ;
Establishment of- better communications between
different parts of the country and with other
countries;
Direct remunerativeness derived from the operation
of the railway (item (e) ).
IV. Programme of development of the long-distance telephone
cable system
78
Favourable influence on t h e unemployment situation ;
Important orders to be placed in foreign countries ;
Establishment or improvement of communications with other
countries ;
Direct remunerativeness to be derived from the operation of the
telephone system.
V. Programme of electrification works for Poland ... •
116
Favourable influence on the'unemployment situation ;
Important orders to be placed in foreign countries ;
The works would contribute towards the industrial development
and t h e social progress of the country ;
Direct remunerativeness to be derived from the sale of electric
current.
1
With regard to these two programmes, as, according to the outline shown
on the plan, most of the roads would run parallel to railway lines, the Committee
did not feel justified in recommending both schemes and considered t h a t it was
for t h e Polish Government to decide in each particular case whether preference
should be given to the railway or t o t h e road.
165
APPENDIX I I
Estimated
expenditure
(in millions oí
Swiss francs)
i
VI. Programme for the extension of the communal powerstation at Stanislawoiu ...
...
...
...
...
1"7
Favourable influence on the unemployment situation ;
Acknowledged urgency of the work ;
Favourable influence upon industry, commerce and craftsmanship
in the region ;
Important orders to be placed in foreign countries ;
Direct remunerativeness to be derived from the sale of electric
current.
VII. Scheme for the supply of gas to Upper Silesia
18
Favourable influence on the unemployment situation ;
Orders to be placed in foreign countries ;
Contribution towards the social and industrial progress of the
region ;
Direct remunerativeness to be derived from the sale of gas.
RUMANIA :
Programme for the construction of railways ...
...
...
280
Favourable influence on the unemployment situation ;
The works would improve communications between various parts
of the country and would facilitate international traffic ;
Important orders to be placed in foreign countries ;
Direct remuneration to be derived from t h a t part of the programme which deals with the electrification of the CampinaBrasow line (15 millions) on account of increased profits;
Possibility of remunerativeness of the works comprised in the
other part of the programme (construction of railways) to be
derived from the profits earned ;
Possibilities of carrying out this programme by stages.
YUGOSLAVIA :
I. Programme for the improvement of the principal road
system
137-51
Favourable influence on the unemployment situation;
Contribution towards the economic development of the country ;
Establishment of improved communications between various
parts of the country and with the principal road systems of
neighbouring countries.
II. Programme for the construction of a railway line and of a
bridge over the Danube
50-5
•Favourable influence on the unemployment situation ;
Important orders to be placed in foreign countries ;
Economic development of an important region ;
Establishment of much shorter communications between
Rumania, Yugoslavia and the East on the one hand and with
the U.S.S.R. on the other hand (45th parallel) ;
Possibility of remunerativeness to be derived from the operation
of the railway.
1
In the event of reconstruction being undertaken on a smaller scale, this
sum would be reduced to 68-5 millions.
166
PUBLIC WORKS POLICY
Estimated
expenditure
(inmillionsof
Swiss francs)
III. Scheme for the improvement of the port of Belgrade ...
10-2
Favourable influence on the unemployment situation ;
Important orders to be placed in foreign countries ;
Contribution towards the economic development of the country
and of the capital ;
Improvement of traffic within the country and with foreign
countries ;
Direct remuneration, to be derived by means of taxes and port
dues.
IV. Programme for the improvement of the State railways ...
180
Favourable influence on the unemployment situation ;
Important orders to be placed in foreign countries ;
Contribution towards the economic development of the country ;
Improvement of interior and foreign communications.
ADDENDUM
THE PUBLIC WORKS PROGRAMME ne FRANCE.
The amounts to be spent on public works in France, as shown in
p. 14, already appear to be insufficient considering the volume of
work to be undertaken. M. Bedouce, in his report on the public
works budget for 1935,1 notes that owing to a lack of money " the
whole programme for the repair of the road system which was carried
on so satisfactorily during the years 1929-1933 is in danger of being
held up." The sum of 799 million francs included for roads in the
budget of 1935 hardly suffices for maintenance purposes, and if it is
desired to undertake the most urgent improvements it will be necessary
to add 1,000 million francs per year for a period of five years. Similarly,
in respect of internal navigation, the Superior Public Works Council
considers that without undertaking any new work it would be necessary
to have during the next ten years a sum of 3,500 million francs, that
is to say 350 millions per year, while the budget provides only 38
millions. Finally, concludes M. Bedouce, it is desirable, both because
of the urgency of the work and because of the need to reduce the
number of the unemployed, to speed up the application of the Marquet
scheme and to draw up and put into execution a general plan of
national equipment. This, he says, " is a question of financial ingenuity
and boldness. Should not France, which lends its capital to other
nations to enable them to carry out big public works programmes,
show equal confidence in carrying out its own programmes ? "
1
Chamber of Deputies, 15th Legislature, Session 1934, Document No. 3,850,
of 6 July 1934.