2 Facing the Crisis

2 Facing the Crisis The disastrous crisis that hit the world economy in the wake of the 1929 New York stock market crash deeply affected the International Labour Organization (ILO) in a variety of ways. Confronted with a global economic downturn of an unprecedented dimension, Albert Thomas – who died at the height of the crisis in 1932 at age 53 – and his successor, Harold Butler, vigorously promoted the social and economic benefits of social legislation. Under Butler’s leadership, the ILO took a distinct economic turn, committed itself to a Keynesian programme of reforms, and brought the fight against mass unemployment once again to the centre of all the Organization’s activities. The sense of urgency with which the ILO acted during this period was heightened by the presence of powerful authoritarian alternatives to the liberal model represented by the Organization. The mostly antagonistic stand of the Soviet Union towards the Organization and the withdrawal of Nazi Germany and (later) Fascist Italy from membership were reminders of the increasingly hostile environment in which the ILO operated. Under Butler, the ILO answered this challenge with a geographical reorienta- tion towards the western hemisphere. The entry of the United States in 1934 and the first Labour Conference of American member States of the ILO in Santiago de Chile in 1936 were important steps in this regard. Under Butler and his successor from 1938, the American John Gilbert Winant, the United States rapidly turned from an outsider to one of the Organization’s most important supporters. The engagement with the United States and the intellectual and practical input received from the Roosevelt administration’s New Deal policies constituted a source of inspiration and gave new impetus to the political project of provid- ing legitimacy to the (re-) organization, in the context of the crisis, of capitalist economies under liberal democratic premises. At the same time, the Organiza- tion took steps to discard its narrow European focus, which, in the later part of the 1930s, resulted in a closer cooperation with Latin America, especially on issues like social insurance. It also affected other regions and spilled over onto the question of colonial labour. All these developments gave further leeway to expanding the ILO’s portfolio of activities beyond standard-setting and to building a nucleus for developing into an agency of technical cooperation. Open Access. © 2019 International Labour Organization, published by De Gruyter and the ILO. This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. https://doi.org/10.1515/9783110650723-004 86 2 Facing the Crisis Figure 4: Chilean President Arturo Alessandri Palma and ILO Director Harold Butler (centre) leaving the inaugural session of the First American Regional Conference, Santiago de Chile, 1936. The World Economic Crisis and the ILO’s Keynesian Turn For the great majority of people affected by the Great Depression, their personal crisis arrived brutally in the form of unemployment.225 At the peak of the crisis, in 1932, about 25% of Americans and 32% of Germans were out of work. Similar sit- uations existed in most other European and North American industrial societies. Welfare schemes, if they existed at all, were not in the least prepared to alleviate the effects of the crisis. For workers and their families everywhere, unemployment thus posed an immediate threat of poverty. The depression hit industry the hardest, but its repercussions were also felt in agriculture, where overproduction in the United States combined with Soviet price-dumping to finance Stalin’s five- year plans. With the breakdown of international trade, this started a downward 225 Dorothea Hoehtker, “The ILO’s Role in the Economic Debate (from 1919 to the 1990s)” (un- published note for the IILS, ILO, Geneva, 2013); Stephen Hughes and Nigel Haworth, “A Shift in the Center of Gravity: The ILO under Harold Butler and John G. Winant”, in ILO Histories, ed. Van Daele et al., 293–312. The World Economic Crisis and the ILO’s Keynesian Turn 87 economic spiral. The situation was further aggravated by the fact that no consensus existed on the right economic policies to deal with the crisis. Some governments began to experiment with Keynesian ideas of stimulating the economy by means of countercyclical spending; others – like the German government under Chancellor Heinrich Brüning – did the exact opposite, promoting austerity and cutting down on social programmes, which soon made the situation in the labour market only worse and led to disastrous social and political destabilization.226 The opinions on how to contend with mass unemployment also differed widely among the ILO’s constituents. The lack of consensus among trade unions and employers became particularly visible in the discussions preceding the adoption of a “Convention concerning the Reduction of Hours of Work to Forty a Week” in 1935.227 While trade unions, however wholeheartedly, supported the 40-hour week as a means of distributing employment more equally and made the case for wage increases to stimulate consumption, employers were staunchly opposed to both. When the project for a Convention concerning a 40-hour work week had first been put on the agenda of the ILC in 1934, the employers had refused even to discuss the draft proposals prepared by the International Labour Office. Against this background its eventual adoption was a success for the workers. But the con- tested nature of the question was clearly reflected by the fact that, although many governments supported the Convention in principle, almost none of them was prepared to ratify it. It took, therefore, until 1957 before it entered into force. The discussion about working hours was but one example of the debates on the appropriate economic strategy to overcome mass unemployment. In this con- troversy, the International Labour Office took a position that, over time, became increasingly more explicit. Attempts on the part of the ILO to gain recognition as a player in international economic and monetary debates were as old as the Organization itself. In the 1920s, the ILO had started to conduct research on the connections between economic and social issues, in particular with regard to employment. Based on his own wartime experience, Albert Thomas had long been a proponent of international economic planning, and he always considered the separation of the economic and the social realms to be an artificial one. He had tried to make the ILO’s voice heard at international economic conferences, such 226 Zara Steiner, The Lights that Failed. European International History 1919–1933 (Oxford: Ox- ford University Press, 2005), 640–42. 227 The preamble of Forty-Hour Week Convention, 1935 (No. 47) made a direct connection to the immediate economic and social context, by stating that “unemployment has become so wide- spread and long continued that there are at the present time many millions of workers through- out the world suffering hardship and privation for which they are not themselves responsible and from which they are justly entitled to be relieved”. 88 2 Facing the Crisis as the World Economic Conference of 1927, organized by the League of Nations. However, while the Organization’s contributions were generally acknowledged, the ILO was invariably relegated to a subaltern position by the League’s Economic and Financial Section, which clearly saw the ILO as a competitor.228 Quite apart from this, Thomas had to reckon with strong resistance from within the Organiza- tion’s own ranks: employers, in particular, and most governments were strongly opposed to the ILO expanding its competences into the economic field.229 The world economic crisis offered a chance to the ILO to renew its claim. In 1930, Deputy Director Harold Butler pleaded to “take this opportunity of shifting our centre of gravity, so to speak, from the purely social to the economic sphere, by devoting the whole of our attention to the effects on the workers oft the world depression”.230 The next year, the Governing Body followed up on this appeal, offering a catalogue of measures to fight the crisis. It promoted, among other means, the reinforcement of public works, the coordination of labour migration, the extension of unemployment insurance schemes, and a limitation of the hours of work, which, taken together, amounted to a Keynesian programme of state- led active employment creation and the stabilization of consumption through income security.231 Even if Keynesianism was still in its infancy in the early 1930s (Keynes’ General Theory of Employment, Interest and Money was only published in 1936), the ILO had, in fact, endorsed its basic ideas at an even earlier time. ILO economists like Percival W. Martin can be considered proto-Keynesians in the 1920s and 1930s. They were part of a network of economists who had either worked directly with Keynes or shared his core ideas. Keynes’ approach compellingly asserted the positive interdependence between social and economic progress and promoted economic planning and state intervention within an open market setting. In 1931, Thomas had already referred directly to Keynes in his ILC report to justify public works as a remedy for the crisis. Later, the ILO’s relationship to Roosevelt’s New Deal administration further deepened this connection. During the 1930s, the ILO began to enter into a quasi-symbiotic relationship with Keynesianism. It became instrumental in spreading Keynes’ ideas, building an international epistemic community around them, and ultimately establishing Keynesianism as the new economic paradigm that was valid until far into the 1970s.232 At the same time, 228 For a broader perspective, see Clavin, Securing the World Economy. 229 Hoehtker, “The ILO’s Role in the Economic Debate (from 1919 to the 1990s)”.

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