So all the methods of expanding the labour force could work, up to a certain point-but beyond that they tended to imply quite considerable overhead costs. Welfare costs could be borne while the system was expanding rapidly. The "insurance" principle ensured, as we saw in Chapter Five, that some sections of the working class paid for welfare provision to other sections. The extra cost amounted to only 2 or 3 percent of GNP in Western Europe, while in the US the state made a small surplus. 39 But the costs would become a burden once the Great Boom collapsed.
There was another solution available to the labour shortage. But it was even more expensive. It was to increase state expenditure on the reproduction of the labour force, so as to increase the average level of skill. In all the advanced countries there was a considerable increase in educational expenditures during the Great Boom-particularly in the upper grades of secondary education and in higher education.40
Finally, there was a third area of expansion of state expenditures designed to increase productivity-expenditures designed to provide a feeling of security for employed workers. Into this category fell old age pensions and unemployment benefits. As James O'Connor noted, "The primary purpose is to create a sense of economic security within the ranks of employed workers and thereby raise morale and reinforce discipline".41 Hence in many countries in the late 1960s wage-related unemployment benefits and redundancy payments were introduced. They were the other side of the "shake-out" of labour from older industries.
This "socialisation" of labour costs had some important consequences for the system as a whole. Under conditions of acute labour shortage, the national capitalist state had to tend and care for labour power as well as exploit it if productivity was to match international levels. But this meant that workers had some possibilities of being able to sustain themselves without selling their labour power. There was a partial negation of the character of free labour-but only a partial negation, since the state applied all sorts of pressures to keep people in the labour market.
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Capitalism in the 20th Century