G. L. S. Shackle, Toward Full Employment (1939)

G. L. S. Shackle’s book review assesses Toward Full Employment, the collaborative work by H. S. Dennison and others published in 1938. His judgment is strongly appreciative but discriminating: he endorses the programme’s general direction while questioning its timing, assumptions about debt repayment, and interpretation of bank lending. The review proceeds through the book’s three divisions—public finance, monetary policy, and taxation—presenting them as complementary means of sustaining employment and effective demand.

Shackle first establishes the practical scope of the undertaking:

They do not offer a systematic diagnosis of the business cycle: they assume that incipient depression will show itself from time to time in the future, and they put forward a programme for maintaining employment and aiding recovery.

The distinction matters: the book offers a response to recurrent depression rather than a comprehensive explanation of its origins. Its flexible budget would finance public works through deficits once unemployment exceeded a predetermined threshold, then generate surpluses in prosperous years to repay the debt. Federal Reserve policy would restrain speculation while easing borrowing during depression. Tax reform would preserve income otherwise spent on consumption and draw more heavily upon income otherwise saved.

Shackle’s principal objection to the public-works programme concerns the interval between approaching depression and remedial action. He accepts advance planning and contingent appropriations but believes the authors have not fully understood their urgency:

In regard to public works, the authors insist on the need for plans to be matured well in advance and finance to be provided by contingent appropriations, but they seem not to realise the chief reason for this—namely, the vital importance of instantaneous action at the very first sign of a slump.

Waiting until unemployment clearly exceeds frictional or seasonal levels may mean acting too late. Shackle proposes investigating whether frequent reports of intended building and construction could forecast employment changes, using an established relationship between constructional and total employment. This is a suggestion for anticipatory policy, not a claim that a reliable forecasting method already exists. He also identifies an unanswered fiscal question: what happens if prosperity does not produce enough surplus to extinguish the preceding deficit?

His treatment of monetary policy is similarly favourable but qualified. He praises the discussion of attainable business stability, the powers and limits of banking policy, and the distinction between production expansion, price inflation, and mixtures of the two. Yet he challenges the importance attached to classifying outstanding loans by their original purpose or collateral. A loan’s first use cannot adequately describe its subsequent economic effects:

The purpose to which a loan is applied by the borrower is, of course, important; but if when he pays the money away it becomes an addition to somebody else’s stock of purchasing power, it matters just as much to the economy what this second person does with it, and to what use the third recipient to whom he pays it will put it, and so on.

The conceptual move is from the classification of credit at its origin to the circulation of purchasing power. Shackle nevertheless accepts that changes in applications for particular kinds of loans can be useful symptoms. His criticism therefore limits the explanatory reach of lending categories without dismissing their diagnostic value. He also emphatically endorses the book’s attention to business confidence.

The final division asks how government spending can supplement rather than displace private consumption. Its proposed replacement of indirect taxes by steeply graduated income and inheritance taxes rests on the belief that higher-income households’ consumption is unaffected by their direct-tax burden. Shackle praises the accompanying account of saving, accepting that an excessive propensity to save can create deficient effective demand. He reports the narrower claim that low interest rates stimulate investment chiefly in projects such as housing and public utilities, and commends the case for a prohibitive tax on undistributed corporate income.

Statistical appendices complete the programme. The review’s significance lies in its combination of support for coordinated demand management with scrutiny of how that policy would actually operate: intervention must be timely, monetary effects cannot be inferred simply from initial loan uses, and fiscal recovery cannot be assumed to cancel accumulated debt.