Incomes Policy I. The Background To The Argument

Abstract

The "national interest" of the advanced capitalist economies of Western Europe, it is commonly argued, require that rates of increase of wages and salaries be kept within the bounds set by the rate of growth of real production. Laissez-faire methods of wage determination, in a context of full employment, or even where some key types of labour are in short supply, cannot be relied on to observe these limits. There are several theoretical solutions where growth of earnings threaten to exceed growth of production. A migration of labour may be encouraged, from agriculture to industry, or from low wage-high unemployment areas or countries to high wage-low unemployment areas. Monetary restrictions may be applied, which check the excess growth of incomes, reduce demand, and perhaps generate some unemployment. Inflation may be tolerated, and recourse may be had to devaluation. Each of these solutions has been employed at one time or another by the countries of Western Europe since 1945. A point has now been reached, however, in the development of neo-capitalism, where traditional solutions are not available, or have been rejected by governments and employers. There remain only two other possibilities. One is to reduce permanently the share of national income going to property, in order that wage increases are paid out of profits, thus enabling price stability to be achieved. Merely to state this alternative is to suggest that it is unlikely to be welcomed by property owners, and that even if carried out by a determined reforming government, it is a once-for-all measure. The economic factors which are responsible for the general problem would still exist after the limits of re-distribution had been reached. The other alternative is to establish forms of wage determination which will permanently guarantee predictable and controllable movements of wage incomes. Thus arises the crucial debate about Incomes Policy, which is presenting a major challenge to the trade union and socialist movements of Western Europe.