White Paper on Full Employment

The White Paper Full Employment in Australia was the defining document of economic policy in Australia for the 30 years between 1945 and 1975. For the first time, the Australian government accepted an obligation to guarantee full employment and to intervene as necessary to implement that guarantee. The preparation of the paper was ordered by The Australian Labor Party Prime Minister John Curtin and his Employment Minister John Dedman and undertaken by a group of economists headed by H.C. Coombs.

The contrasting experiences of the Great Depression and the Second World War convinced the Labor Party that governments could and must intervene to ensure the achievement of full employment. The introduction to the White Paper summed this up:

The basic ideas behind the White Paper were those set out by John Maynard Keynes in his 1936 work, The General Theory of Employment, Interest and Money. Keynes’ neoclassical contemporaries, argued that the economy was naturally self-correcting. Unless real wages were held above their market level by union action or government regulation, unemployment could only be a short run phenomenon. The neoclassical economists drew the same conclusion as that of the fundamentalists today — that government action to reduce unemployment could only make matters worse in the long run. Keynes’ first, and perhaps most important, contribution was to show that the economy could remain at high levels of unemployment for indefinite periods in the absence of government action.

As well as demonstrating the possibility of unemployment in equilibrium, Keynes provided an analysis of the causes of periodic unemployment and the basis for a policy response. Keynes argued that recessions and depressions occurred because the economy was destabilised by fluctuations in private demand, and particularly in levels of investment. To simplify, the remedy he advocated was that governments should increase their own demand in periods of depression, particularly through public works. The increase in income generated by public works would then be fed into demand for other goods and services, yielding a stimulus to the private sector.

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