High employment, fast economic growth and stability are now considered normal in western capitalism.  Half the working population have known nothing else.
Unemployment has not disappeared. The American method of counting would show the current British figure of around 2½ per cent to be a full percentage point higher; if German definitions were used it would go up another seven tenths. Unemployment is particularly harsh on some sections of the population – the unskilled, the uneducated, the old – and on the national scapegoats: Negroes in the US, immigrant workers in Europe. But it is not the problem it was before the war when ten per cent unemployment was thought low and twenty-five per cent and above not unknown. On the whole, it has been less of a problem than the shortage of labour, particularly skilled labour.
Something of the sort can be said of growth. Individual performances have been very different, and most countries have had bursts of speed and then suffered hold-ups, but the system as a whole has never grown so fast for so long as since the war – twice as fast between 1950 and 1964 – as between 1913 and 1950, and nearly half as fast again as during the generation before that. 
Not everyone has benefited. In Britain there are still seven or eight million people living below the official subsistence minimum. In the United States two fifths of all families – a large proportion of them Negroes – live on less than the ‘modest but adequate’ working-class budget defined by the Bureau of Labor Statistics. And even when these poor and poorest are lost in broader categories it is still true that better living for all has not upset the traditional social pattern. In Britain where real wages have doubled since the war, their share in the national income – forty-two per cent – is still roughly what it was in 1870. Give or take a few percentage points, the same goes for the other countries – their even faster rise in living standards has made as small an impact. Yet after all the qualifications and refinements, the general point remains: economic expansion since the war has been unprecedented and with it has gone an unprecedented rise in living standards.
So too with stability. There have been very few occasions anywhere that output has actually fallen since the war, and then by no more than two per cent on an annual basis, while between the wars it was below peak in most countries for one third of the time and there were falls of up to one fifth of gross domestic product.
High employment, growth and stability explain one another to some extent. Without the immense increase that took place in labour input – it rose 3½ times faster in the fifties than between 1913 and 1950 – and the accompanying rise in fixed investment – up by two thirds to twenty-two per cent of total output  – growth could have been nothing like as fast. But without rapid growth the economies could not have absorbed the additional labour and capital. Had expansion been erratic, the vast migrations from rural occupations at home and abroad would have been less likely; and so too the high rate of investment. But without them stability would have been less. And so on and on. Each can be seen as the immediate cause of the others, together forming a causal loop that can be made to revolve in any direction from any point.
The loop itself needs to be explained. In the thirties it was one of unemployment-stagnation-instability; now it is one of high employment-growth-stability. The interconnexions and sequence are the same. Only the level is different.
Part 1 of this essay will attempt to explain the reasons for the new situation; Part 2 will look at some of the results; and Part 3 will set out the reasons for believing western capitalism will show itself to be a very unstable system in the seventies.
1. For the purposes of this essay ‘western capitalism’ covers Belgium, Denmark, France, West Germany, Italy, the Netherlands, Norway, Sweden, Switzerland, the United Kingdom, Canada and the United States, the choice having been governed primarily by the availability of comparable figures.
2. Unweighted averages, based on Angus Maddison, Economic Growth In the West, New York: The Twentieth Century Fund, George Allen & Unwin, 1964, Tables 1-1, A-2, pp. 28, 201-2; and How Fast Can Britain Grow?, Lloyds Bank Review, January 1966. Table 1, p.2.
3. From Maddison, Economic Growth, Tables 1-6,. G-1, G-2. 111-1, pp.36, 76, 228. Unweighted averages.
Last updated on 14.2.2005