Social Priorities, Economic Policy, and the State

Twenty-five years ago Lord Beveridge published his Full Employment in a Free Society, perhaps the most lucidly argued economic program of social democracy. In this work he assigned three basic functions to public finance. First, total public outlays must always be large enough to ensure full employment. Second, and “subject to this overriding categorical imperative,” outlays should be directed within a well-defined framework of social priorities. Third, “subject both to the first and second rule,” taxation rather than borrowing should, if possible, be used to finance outlays. This third rule Lord Beveridge did not regard as of prime importance, since either taxation or borrowing could be used to realize the first and second goals. But he favored taxation because, in keeping interest rates low, it would promote the “euthanasia of the rentier.”

Full employment and social priorities were inseparably linked in Beveridge’s work. ...