Shall We Guarentee Full Employment?

8/6/2019 Shall We Guarentee Full Employment?

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HarpersVOL 190 No 1137 February 1945

R J J

SHALL W E GUARANTEE FULL

EMPLOYMENT?

STANLEY LEBERGOTT

{

Mr. Lebergott is a Washington economist specializing in postwar em-}

ployment problems. Articles of his have been published in vari-

ous technical journals, but this is his first appearance in Harper's.

BACK in 1941 a well-known publicist alone knows how many millions of unem-

suggested that "at attainable full ployed munitions, ship, and aircraft work-employment" the United States could ers is a matter demanding the utmost

produce even more than the 99 billion sobriety and forethought, not the blanddollars' worth of goods and services turned wishful thinking of the love-will-find-a-

out in the then unequaled boom year way school of economic analysis. We must1929. Many an eminent economist and face the gloomy possibilities with the

business man politely called him a vision- tough-minded clarity of a man taking out

ary. But, to everybody's amazement, the insurance to protect his family, or a board

war has demonstrated that a production of of directors setting aside reserves against

150 billion dollars or more is quite possi- the coming of a lean year. An effort toble. Furthermore-and this is the fright- deal with such possibilitiesin advance is an

ening thing-this vast flood of production. essential part of the duty of every responsi-

has been achieved without any of the ten ble parent and business man-indeed, of

million energetic and efficient young men who every responsible citizen who is con-

normally provide the backbone of the labor force. cerned for the future of our country.

Obviously, therefore, the problem of At present this responsibility is, by and

finding jobs in postwar production for large, being ignored. There has been talk

ten million ex-service men and heaven of 60 million postwar jobs, but we have

Copyright, 1945, hy Harper & Brothers. AURights Reserved.


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194 'HARPER'S MAGAZINE

yet to see a detailed plan, with strong

business or government support, which

proposes to assure them. Throughout

the country a happy-go-lucky optimism

says to the soldier and war worker: "Take

it easy, bud. There'll be work a-plenty.

Three hundred_bucks in dismissal pay is a

lot of money for a soldier.; and every war

worker has his little pile of savings. There

will be more than enough loose money to

get things going again."

But will there be?

In support of the comfortable belief that

the postwar world is bound to be one of

humming prosperity, three arguments are

commonly advanced:1. Business is planning it that way.

2. The spending of war savings will

bring about an unprecedented demand for

goods.3. The plastics, light metals, electronic

gadgets, and other scientific wonders de-

veloped in the course ofthe war will create

new demands, new industries, and new

high levels of business activity.

It would seem to be simple prudence toexamine each of these arguments to find

out whether it really contains a satisfac-

tory answer to our coming employment

problem.

II

FIRsT, let us look at the plans of business.

Many far-sighted business men have

realized that another major depression

might wreck our system of private enter-

prise for good, and they have planned asnever before to forestall such a catastrophe.It is a poor firm indeed which does not

have its Vice President in Charge of

Postwar Planning-often with a consid-

erable staff-and many trade associations

and special organizations (such as the

Committee for Economic Development)

have laid plans for whole groups of indus-

tries. Moreover, nearly all businesses ex-

pect to hire back their veterans "wherepossible" in accordance with the terms

of the Selective Service Act. A good deal

of energy and advertising space has been

devoted to spreading the idea that thislegal provision, together with the well-

publicized plans of the business commu-

nity, will make the return to peace a rela-tively smooth and painless affair.

A better way of giving business a blackeye-r-since the change-over will not be

painless-could hardly have been figured

out. For if business fails to come up with

the jobs, it will find that its generous prom-ises have laid up a store of wrath. Of

course business men will do their best to

follow the terms of the Selective Service

Act, and we may depend upon it that they

will do everything possible to provide jobs

for displaced civilian workers as well as for

returning service men. But we must keep

an eye on what is possible, as well as what

is desirable.

Businessalone could do the job if it had

(1) the resources; (2) the united direction;and (3) the willingness to buy raw materi-

als, turn out goods, and keep men at work,

regardless of sales, profits, and general

economic conditions.

How about the resources? It is true

that some businesses have' been making

enormous profits and h..ve laid aside huge

reserves. These concerns may be able to

assure postwar jobs to a relatively small

slice of the total labor force. But forevery firm in this category, there are a

hundred others which either do not have

substantial reserves or cannot convert to

peacetime production. The shipyards,

which have been absorbing workers and

still more workers ever since Pearl Har-bor, are an example. During less than

two years of war we tripled our ocean

tonnage, and we will go into the peacewith a merchant marine at least equal

to that of all other nations combined.Obviously we will not need to build verymany more ships for some time to come.'

The huge chemical factories can hardly

expect stump-blowing and highway blast-

ing to require explosives on anything like

the scale demanded by the siege of Aachen

or the bombing ofTokyo. Plane demand,

according to the Aeronautical Chamber of

Commerce, is likely to skid by 85 or 90

per cent, and with it will go the demandfor astronomical tonnages of aluminum

and magnesium. The machine tool in-

dustry has turned out enough equipment

during the war, in the estimation of some

manufacturers, to supply the needs of the

next twenty years. And so on. How

many jobs can such industries safely

promise?


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SHALL WE GUARANTEE FULL EMPLOYMENT? 195

MOREOVER, business is neither a mon-

ster directed from some mythical

Wall Street lair, as some people believe,

nor the single-souled Hercules which the

institutional advertisements sometimes pic-ture. It is a collection of many enter-

prises, big and little and in between.

Each of them has a healthy tendency to

go its own way; every firm is intent, first

of all, on doing the best it can for itself.

No spokesman, however eminent and en-

crusted with directorships, can honestly

speak for "business" as a whole. At best,there can be only a great many individual

plans, which we hope may add up tosomething approaching full employment.And it can be only a hope, not a guaran-

tee. Only one business in a hundred can

promise to hire a given number of workers,

or turn out a fixed tonnage of its product,regardless of general business conditions.

Many a firm has a neat postwar plan for

hiring lots of men, for turning out plenty of

goods, and perhaps even for expanding its

plant; but it also has a reservation which

doesn't show on the blueprints-it ex-pects to wait and see how things are going

after the war before it puts the plan intoeffect. 'A spokesman for the Association

of American Railroads, for example, re-

cently asserted that "the nation's railroads

do not expect to place orders for new

postwar equipment until at least sixmonths after the close of the present con-

flict, at which time it will be possible to

determine their postwar needs."This wait-and-see attitude is perfectly

reasonable. Any business which would

guarantee to buy equipment and providejobs before it had a shrewd notion whether

it could sell its product at a profit wouldsimply be risking suicide. But while each

individual firm waits to see what other

industries will do, what the general post-

war business picture may look like, ex-

soldiers will be waiting for jobs. In this

period of prudent waiting, a deflationary

trend may well set in, which will make the

shiny postwar plan of each firm look im-practical, and which may indeed dictate

a further curtailment.It would be utterly unfair to expect

business men-each intent on the survival

of his own firm-to shoulder the sole re-

sponsibility for guaranteeing jobs for all

veterans regardless of uncertain markets.

The business man will have problems

enough, in all conscience. He is going to

have to help Captain Joe, who com-

manded a bomber on fifty combat mis-sions, to make the delicate adjustment

back to a humdrum stock clerk's job .. He

is going to have to switch machines which

made bomb components over to making

some peacetime gadget, and to try to find

a market for the new product. He mustfind some way to make his employees con-

tent with a normal wage, in the face of the

fact that the GI had an income-in-

cluding pay, clothing, food, and quarters-considerably higher than the average

real income of single men in peacetime.

Surely these are .problems enough. Is it

fair, in addition, to hold a shotgun at the

head of business and say: "Employ all

these men, or take the responsibility for

bringing on a postwar depression'tr

The insistence that all will be well just

because business wants it to be well not

only will fail to solve the basic problem-s-

it also will boomerang on business itself.William Carpenter, economist for the

Edison Electric Institute, has warned that

"unless planning rests upon a solid founda- .

tion of common sense, the public, oversold

on the future, will inevitably react in dis-

appointment, and will look around for

someone to blame."

There is only one way out of this im-

possible situation, in which we want em-

ployment assured and want business to dothe assuring. That is to support the as-surance of each individual firm to keep

its output and employment at the maxi-

mum with some general assurance con-

cerning the overall volume of employ-ment, and hence the overall demand for

the products of business. The possibility

of providing such an underlying guarantee

is discussed in a later section of this article.

III

Nowlet us look at wartime savings and

postwar demand. Some of the rosy

estimates of the pent-up flood of postwar

demand are misleading. It would be

difficult for the average American to buy

in the few months after the war's end the

three cars which he normally would have


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196 HARPER'S MAGAZINE

bought in the war years, or the one and ahalf refrigerators and two radios which

some ca1cuiators expect him to buy. Andto these swollen estimates of demand isadded the confident assumption that peo-ple not only will want these unusualnumbers of cars and radios, but will beable to buy them. With the billions-some economic soothsayers put the figureat $250 billion-of wartime savings whichwill be on hand, we are told that we shallhave a perfect thunderhead of spending

power, which is bound to sweep us intoprosperity.

Here again the comforting legend re-

quires a little cold-blooded dissection.First of all, it must be realized that the

massive estimates of "savings" which arebeing bandied about are savings only inthe economist's very special sense. Theyinclude such items as decreases in prewar

debts, larger holdings of insurance, and in-creases in the liquid assets of the upperincome groups. If we want a realistic

estimate of the immediate postwar de-

mand for consumers' goods, .such itemshave to be stricken out. People rarelycash in their insurance policies to buy anew radio. Nor are rich families in thehabit of trespassing on their savings inorder to purchase a second car or a newset of flat silver; they are more likely tolive on their ample current incomes.

Any useful estimate would count onlythe reasonably spendable savings tuckedaway during the war by the lower andmiddle income groups earning less.than$5,000 a year. And it must not includethe basic reserves which these familieshad built up before the war, since what we

are concerned with is the increase inspendable money-the "something new"

which might bring prosperity. Such anestimate recently was compiled by theFederal Reserve Board, which calculated

that in June, 1944, the increase in the

readily spendable savings of these familiesamounted to about $40 billion. To thismay be added whatever sum seems rea-sonable for the rest of the war. How

potent a force do we get?

TERRIFIC, according to one school ofthought. This fund will be a source

of security. It will ease the mind of the

consumer. It will create a "new patternof spending and saving. Some 20 million

.families, thanks to war savings, may beinclined to use their current earnings morefreely, and their spending may check the

tendency toward oversaving which manystudents hold responsible for deflationaryphenomena in the 1930's."

Maybe so. But most of us know fromsimple experience, as well as from the

budget surveys of the Bureau of Labor Sta-tistics and the Bureau of Home Econom-ics, that the middle and lower incomegroups always have spent all of their earn-ings.i aside from the slender and probably

irreducible margin saved for emergencies.These families will continue to save and

spend in about the same pattern after thewar-unless we develop a much broadersystem of social security than we have. rea-son to anticipate. It was not the savingsof these families that created the deflation-ary spiral of the last depression. It willnot be their unnatural spending behaviorwhich will create a postwar boom. Forty

or 50 billion dollars split among 39 millionfamilies is not enough to change theirlong-established buying habits, or to wipeout their worries about the future.

THERE is another school of thoughtwhich admits that wartime savingsmay not radically change the averageman's pattern for spending his currentincome, but argues that these savings willbe spent directly for consumers' goods.Followers of this school point to U. S.Chamber of Commerce surveys which in-dicate that 1,500,000 families will build orbuy new homes, 3,700,000 will seek auto-mobiles, and so on for furniture, washingmachines, and refrigerators. Such esti-mates give some indication of what peoplewould like to do. But in order to foreseewhat they actually will do, we need somemore information. This was fairly well

provided by a recent public opinion sur-vey of War Bond owners. It disclosed

that 100 per cent wanted to spend, andthat 11 per cent were going to spend rightaway after the coming of peace. But 73per cent planned to wait a while and seehow things went. While they wait, busi-ness will wait. Production will wait.

And employment will wait.


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The reasons why consumers may goslow in their postwar spending are by

no means trivial:1. Overtime payments-now running at

perhaps $12 billion a year and averaging15 to 20 per cent of payrolls-will be wipedout at the end of the war, or perhaps earlier

if we taper off on production after thedefeat of Germany.

2. Many workers who shift into peace-time industries must expect lower pay.For in general, pay rates in those occu-pations which dominate peacetime activ-ity-light manufacturing, retailing, serv-

ice trades, farming, finance-s-are' con-siderably lower for the average workerthan wage rates in the highly productivedurable-goods industries which are domi-nant in wartime. For example, in themonth before Pearl Harbor hourly earn-ings in durable-goods manufacturing av-

eraged about 82 cents, or a full 24 per centhigher than earnings in light non-durable-goods industry. Those workers who shiftover to the making of durable consumers'

goods, such as automobiles and washingmachines, have better prospects, of course;but they will be far fewer than those whomust shift from highly paid war industries

to less lucrative jobs, such as running cot-ton looms or driving laundry trucks. Thisshift, plus loss of overtime, probably ,willmore than offset any reduction in taxesand decline in bond purchases.

3. The conversion period probably will

range from a week or two for some luckyplants up to six months for those whichface a lot of complicated retooling and re-organization. During this period, of what-ever length, most of the factory's workerswill be idle, and their futures will be uncer-tain. Naturally they will hang on to theirsavings until they are sure of steady workagain.

4. The price of postwar consumers'

goods may determine to a considerable ex-tent the vigor of the buying boom. A few

manufacturers, such as Ford and CharlesE. Wilson of General Electric, have an-nounced that they hope to price theirproducts as low as they were before thewar, or lower-that greater efficiency inmanufacturing can be expected to offsethigher labor and raw material costs. Butmany other 'producers expect to set their

prices as much as 40 per cent above pre-war levels. If this happens on a wide-

spread scale, many potential buyers canbe expected to wait a while for prices to

drop back to the levels they have long re-garded as "normal."

All this might be summarized by notingthat the primary factor which will deter-mine postwar spending will be not the

size of past savings but the size of antici-pated future income. Job security, notwartime savings, is the key to what liesahead. Give the average consumer a rea-sonable assurance of steady work and he

will spend a good part of his wartime re-serves. But leave him uncertain of the

future and he will hoard. The merepromise of security, in other words, would

go a long way toward creating jobs; whilefear of unemployment inevitably will helpbring on the very thing we fear.

IV

W

HAT about new products? Perhaps

the gaudiest of all the argumentsthat insist on automatic prosperity afterthe war is the one which points to the Mar-vels of Science. Technical and scientificdevelopments during the war, we are told,

have created a whole range of new prod-ucts and potential new industries. Thedemand for plastic houses, electronic quick-freezers, magnesium dishwashers, and ahelicopter in every garage is certain to

bring jobs and more jobs.For any given industry, these hopeful

predictions may well be true. But wemust be quite clear about the differencebetween such a conclusion and the con-clusion we are interested in getting at:

will there be a net-gain in employment asthe result of such substitutions?

INA few cases there may. If the develop-

ment of prefabricated plastic-and-aluminum houses, for example, helpsbreak down the network of restrictionswhich have so greatly hampered a realboom in home-building, then we canlook for new business activity and new

jobs.

But to the extent that plastics merely re-place steel and glass, or magnesium re-places cast iron, there will be no immediate


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increase in employment. There will bemore jobs in the plastics factories, butfewer in the steel and glass plants. Often,

in fact, there may be a net decrease injobs,since one of the most attractive things

about many of the new products is thatthey can be turned out with a lower laborcost. (A recent addition to' one of the

big aluminum plants in the South costseveral million dollars, and phenomenallyincreased the output of the factory; but

the increase in employment totaled onlyforty workers.)

There will of course be some new hiringto build factories and machinery for the

new products, but this source of employ-ment is easy to exaggerate. For the warwill leave us with a huge stock of general-purpose industrial buildings and equip-ment which can be adapted to the manu-facture of many gadgets still in the incuba-tor stage. For many years construction offactories is likely to lag below the prewar"normal."

We are not concerned here with the

question of whether replacement of oldproducts by new ones is a good thing for

our economy in the long run. Every

advance in technology may eventuallyincrease employment, by making our in-dustry more efficient and labor more val-uable. Our concern here, however, is forthe immediate postwar months and years.And within that period there is little pros-pect that the Marvels of Science will pro-vide a substantial number of additional

jobs. Whatever gains are made in oneindustry are likely to be largely offset bylosses in another.

v

INADDITION to these three Dream High-

ways to Prosperity, there are otherpaths and byways which some people hopemay lead us automatically out of the eco-

nomic woods. In many circles, for ex-ample, there is a touching confidence thata soaring increase in foreign trade will

avert a postwar employment crisis. Thispossibility is examined elsewhere in thisissue of Harper's in an article by Bernard

B. Smith and John A. Kouwenhoven onthe dangers of an export boom unaccom-panied by a great increase in imports.

Here, therefore, it is enough to note thatreliance on a foreign trade boom seems tobe as ill-founded as belief in the otherpanaceas.

The GI Bill of Rights sometimes is cited

as a solution for the re-employment prob-lem. This legislation is an excellent thingin itself-but it is not the answer we are

looking for. The $300 maximum dismiss-al pay which it provides will take care oftransportation, civilian clothes, a brief nec-

essary vacation, and a short period of job-hunting for the ex-soldier; but it gives him

no assurance of steady work. The provi-sion for retraining and education will be a

godsend to those service men who wantto take advantage of it. They will num-ber less than 10 per cent of all men in theservices, however, if Army surveys arecorrect. It is clear that most of the vet-erans will want real jobs with adequateincomes as soon as possible to supportthemselves and their families. No legis-lation now on the books pretends to giveany such assurance to the veterans, much

less to the civilians who will be lookingfor jobs immediately after the war.

How many jobs will they need? InNovember, 1944, America's total

labor force amounted to about 65 millionmen and women. Of this number, some10 million were in the armed forces, while55 million were at work in our factories,farms, and service trades. There were, ofcourse, virtually no unemployed.

Assuming .that the war ends sometime in1946, we can calculate that our labor forcewill then total something like 60 million.At least 5 million women, old folks, andyoungsters now busy in war work can beexpected to leave the labor market to raisefamilies, retire, or go back to school. At

a guess, perhaps 2 ,U million men will re-main in the services to police occupiedcountries and to provide a larger standing

army' than we ever had in the past. An-other 2 million or so will fit into whateconomists describe as "the pool of fric-tional unemployment." These are peopletemporarily out of work while they shiftfromjob to job. A relatively small pool of

this sort-between 3 and 4 per cent of thetotal labor force-is necessary to make our

economy flexible at the joints; it is not the


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kind of chronic, large-scale unemployment

we are worrying about.That leaves 55? '5 million men and

women who will have to find jobs if we

are to achieve anything like "full employ-

ment." Roughly the same number, orperhaps 1 per cent less, were at work whenwar production was at its 1944'peak. No-body really knows what may happen whenwar spending is cut from the present $84billion a year to, say, $3 billion, which wasabout what we spent on "defense" in 1940.It is probably conservative, however, toestimate that at least 7 million peoplemight be thrown out of work. The total

might add up to a good many more; afterall, we had some 7,400,000 unemployed

in 1940.

PERHAPS this forecast is too gloomy.Such skepticism about the job-provid-

ing capabilities of the wave of postwarspending, the plans of business, and theblossoming of a host of new products maybe all wrong. Maybe the optimists willturn out to have been right after all.

The basic moral problem still remains.All the optimism in the world-right orwrong-s-cannot touch it. That problemis simply this: are we going to let securityfor our demobilized soldiers depend onchance, on the hope that the optimists areguessing right about an indefinite future?Or does the nation have a responsibilityforguaranteeing security and an opportunityto work to all veterans and war workers,

just as they have the individual duty ofdoing their share in wartime? Is theeconomy which clothes and feeds theservice man with such amazing efficiencytoday unable to carry out the essentiallysimilar function of assuring him work themonth after the war ends?

I am arguing that when peace comes thenation will have to take on this responsi-bility. From that day on, it will have to

guarantee jobs for something like 55 mil-lion people. This will become one of thefundamental tasks of government, just as

keeping the peace and providing for thecommon defense have been its fundamen-tal tasks in the past.

. Those who shrink from this conclusionmay argue that we have faced large-scaleunemployment in the past, and that in all

these crises the government has success-fully avoided taking on the responsibilityof assuring work to all who wanted it.Even the New Deal in 1933 never pre-

tended to put all the unemployed to work;

at most it managed to rig up makeshift,temporary jobs for something less thanhalf of them. Can't we get by in thesame equivocal fashion if we run into apostwar unemployment crisis?

WE CANNOT. The veterans are notgoing to accept unemployment

with the bewildered docility which was

characteristic of most of the jobless in the

last depression. Anyone who thinks theywill simply does not understand the vastgulf between what the American civilianis getting out of this war and what theAmerican service man is getting. And ifwe do not all realize it in time, it will befirmly-perhaps violently-brought to ourattention.

The civilian-because of age or a ricketyphysique-has been able to remain safeand secure at home. He has his wife if

married, and the chance to meet plentyof eligible young women if not. He hasbeen left almost completely free to decidewhere to work and where to move if hechooses. By and large, he has eatenbetter than he did in peacetime. He hashad his choice of a vast range of clothing,from ornate ties to silk hats. He has had

at once more security and more luxuriesthaI) any other civilian in the world.

By contrast, the men in the serviceshave been given the privilege of forsakingtheir families, friends, and careers. Theyhave endured discomfort, colossal bore-dom, and in many cases danger. Theyears in which they can learn most rap-idly, get ahead fastest, are lost forever.The years in which age and economicstanding make marriage possible are pass-ing. Many who are already married will

return older, less resilient, less able to takeup their lives gaily where they left off.Some will return so crippled, physicallyor mentally, that they cannot take up thethread at all; they will have to begin all

over again, under heavy handicaps.

This contrast is underlined in the sol-

dier's mind by the stories which news-papers and gossip carry into every post


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exchange and USO-manufacturers re-marking: "I don't want much profit ..with my profit cut down to $1,200,000my road is made extremely difficult finan-cially"; contractors who gleefully an-nounce that if the war lasts another twoyears they will salt away ten million bucks;shipyard workers earning $5 an hour,$50 a day; strikes in war industries; warplants palming off defective material onthe Army; civilians demanding a halt in

war production so they can get morewhisky, complaining about gas rationing,whining about a shortage of prime steaksand cigarettes in a world aflame.

None of the stories is pretty. And

some of them are true. True or not, these'stories get around, and on them (togetherwith others that are unprintable) mostservice men are basing their attitude to-ward those who have stayed at home.

What action will result from that atti-tude, when the veteran hunting work is

met with cheery statements that "thingsare bound to turn out all right," "just waittill the reconversion period is over," and

"the spending of war savings ought to pro-duce a lot ofjobs any day now"? Nobodyknows, ofcourse. But we have some hints,and they are hints which should make any

American start worrying.One of them is the report of a historian

who watched fascism rise in Italy andGermany after the last war. He notedthen that "everyone who had no chanceof a peaceful occupation was offered the

opportunity to be a soldier in a civil warin which the opponent was not armed.Pent-up resentment found an easy out-let. . .." Another is a warning fromthe commander of the Veterans of ForeignWars that "there has been too much talkand not enough action on the idea of mak-

ing sure our men in the service have jobswaiting for them after the war . . . a

hungry man will listen to proposals hewould never otherwise dream of."

And there already are discharged vet-erans who are saying: "The country couldfeed me and give me clothes and furnish

medical care so long as I was fighting.We can provide jobs for everybody whilethe war's on-why can't we do the same

, thing in peacetime, if we really make up \ our minds to it?"

VI

WELL, why not? What we need isa firm assurance that unemployment

never ag~in will be permitted to become a na-

tional problem. Such an assurance is re-quired not only to meet our obligation tothe returning veterans; it is required toprotect the stability of our whole systemof private enterprise. Nobody can sup-pose that a war which has put 10 millionmen under arms and affected every fiber

of our economy can end without a dan-gerously violent shock to the entire system-a shock which we must prepare now tomeet. A guarantee against large-scale

unemployment would be no panacea, nosure-fire recipe for eternal prosperity; butit might prevent the shock of peace fromwrecking our economy.

Such a guarantee might take the form ofan official statement of national policy by

Congress and the President, with the ad-vance concurrence if possible of the majororganizations of industry and labor. Itmight simply declare that unemployment,

aside from seasonal fluctuations, wouldnever be permitted to exceed 4 per centof the total labor force. If the number of

jobless should climb above this level duringany three-month period, the Executive,with the advice and consent of a jointcongressional committee, would then takeaction to put the guarantee into operation.And Congress should set forth in, specificlegislation precisely the kind of action

which should be taken whenever the guar-antee needed to be invoked.It is quite possible that the guarantee

would rarely have to be put into effect-that its very existence would be enough toprevent a major depression. It wouldserve as an assurance to business that itcould go ahead and put its postwar plansinto operation immediately, with confi-dence that there would be an ample mar-ket for its products. It would forestallthe retrenchment and precautionary moveswhich business must make when a depres-sion seems possible-and which themselveshelp bring on depression. It would as-

sure every family that it could safely spendits wartime savings for that new automo-

bile or radio right now, without waitingto see how the postwar job situation turns


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SHALL WE GUARANTEE FULL EMPLOYMENT? 20t

out. It would put an end to that uncer-

tainty and fear of the future which areamong the major obstacles to an expand-ing economy.

THE principle on which this -suggestionis based has been universally accepted

by Americans for two hundred years. Itis, of course, simply the insurance princi-ple. So far, our closest approach to thiskind of measure on a national scale is theguarantee of bank deposits by the FederalDeposit Insurance Corporation. Thatguarantee has achieved its purpose attrivial cost. It has, in fact, almost neverbeen invoked, because its mere existencehas eliminated those runs on the banks

which were so common and so disastrousin the earlier periods of our history. Theentire banking system stands higher inpublic esteem, safer against any kind of

attack, because of that assurance.Similarly, the National Employment

Guarantee might never have to be in-voked, if our system of private enterprisestill possessesthat vitality which has made

American production the envy of theworld. It should, in fact, be made quiteclear that no government action beyondthe guarantee is anticipated in the firstinstance. Operations to make the guar-antee effective would begin only when

unemployment threatened to become anational problem, only when the economyneeded the underpinning which thegovernment alone can provide.

Just how the guarantee should be putinto effect if the need ever arose is a matterfor Congress and the Executive to decide,after prolonged debate and much carefulplanning. Undoubtedlythe primary methodwould be public works. Not hastily im-provised WPA leaf-raking projects, butwell-conceived investment in enterpriseswhich would protect our natural resources

and build up our productive capacity.Reclamation projects, reforestation.. rural

schools, soil conservation, new highways,development of the great river valleys onthe TVA pattern-these are the obvious

examples. And employment should notbe handled on a WPA basis; the men hiredfor such undertakings should have regular

jobs, at regular salaries, and should beheld to regular standards of efficiency.

Public works projects might well be sup-plemented by other measures to stabi-lize employment, some governmental and

some private. A more adequate socialsecurity system, higher minimum wages to

bolster consumer spending, a shorter workweek, incentive taxation, establishment ofthe annual. wage principle in industrieswhere it is feasible-all these would help.

A rigid formula is the last thing we want.Experience and ingenuity should con-stantly produce better economic devicesfor fighting unemployment, just as theybring forth a continuous stream of newweapons in wartime.

VII

BUT can we afford it? Many worried

citizens, who are by no means reac-tionaries, will point to our postwar debt ofsome $300 billion. How can we go onspending to guarantee employment with-out shoving the country into bankruptcy?And will the guarantee really do muchgood if people doubt the fiscal ability of

the government to make it work? Whatgood is an insurance policy backed bya company of doubtful solvency?

This, of course, is a critical problem,and the question has to be answeredsquarely. There are at least two factorsto be noted.

First, we know that the government isgoing to have to spend public funds todeal with unemployment in any case.

Prolonged unemployment on a large scaleis no longer politically possible. The 10million veterans won't stand for it-norwill the 45 million other members of ourlabor force. The alternative to the guar-antee is not economy; it is spending in arelatively wasteful and haphazard fashionafter unemployment has reached the stageof crisis.

The real question is: shall we commitourselves in advance to spend whatever is

necessary to keep men at work, or shall wespend hurriedly and on a larger scale to

put them back to work after a depressionhas hit? If we make the commitment inadvance, there is a good chance that wemay never have to spend at all. If we do,

we can spend in an orderly and methodical

way to produce the most benefit with the


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least waste. We can avoid rushing intoexpensive boondoggles in an attempt toput men to work. as quickly as possible.

Moreover, we shall not invite a political- upheaval which might smash our tradi-

tional fiscal system and endanger ourdemocratic institutions as well.

Second-and most important-the cost

of a National Employment Guaranteewould hinge upon its success in revitaliz-

ing the spirit of enterprise, in opening thedoor to a truly expanding economy. It isclear that our $300 billion debt can be

handled on lY if we succeed in maintaininga high level of production, employment,

and national income. If we can keep thenational income at $140 billion a year, thecarrying charges can be met handily andwe can make some progress at paying offthe principal. If the national income

should slump back to the 1932 level,however, the present debt would becomecompletely unmanageable, and we wouldbe bankrupt indeed.

Under these circumstances, the publicspending of a few billion a year in orderto avert a major depression would seemto be simply good business. If the guar-antee enabled us to increase our outputof goods and services at a faster rate thanit increased the cost of government, itwould be the most profitable of irivest-ments. The cost should of course be metout of current tax revenues wheneverpossible, painful as that may seem. Ifpart of it must be covered from time to

time by deficit financing, however, thatneed not be catastrophic. As a matter offact, the addition of a few billion to a debtalready a hundred times that size wouldhardly be felt-so long as employment and

the total national income remained high. Andif income does not remain high, if our

economy does not continue to' expand,all considerations of interest, debt, and

taxation may become the most academic

of matters.. It is true that a National EmploymentGuarantee would involve some fiscal risk-but it would be far smaller than the

risk involved in taking a chance on an-other depression. From a cold-bloodedfinancial standpoint, the most hazardousthing we can do is trust to luck and donothing ..

1fT MIGHT be noted in passing that an1l overall guarantee of this sort wouldhave another important advantage. Itwould reduce the pressure on Congressfor a host of costly individual guaranteesto protect various special groups in theeconomy. If farmers did not fear a gen-eral spiral of falling prices, they might beless insistent on subsidies and crop control

to prop up farm prices. Labor mightforego some of the "featherbed rules"and restrictions on output which now

protect jobs in certain industries. Busi-ness men might be willing to give uptariffs and cartel arrangements whichserve as their private dugouts against aneconomic storm. Each of these specialguarantees not only is expensive; it alsodamages the economy as a whole, makingit lessefficient,lessflexible, lesscompetitive-and less able to resist depression. Yetthere is little hope of removing them unlesssome general assurance can be offered intheir place.

The first step is simply for Congress andthe President to make a formal acknowl-edgment-now-of the responsibilitywhichthey cannot in any case escape. Theyneed go only as far as Emil Schramm, thesagacious and conservative president of

the New York Stock Exchange, who haswarned that "any sound postwar domes-tic program must contemplate the produc-tion of goods and services at a level suffi-ciently high to occupy all who wish to

work and are able to do so." If this canbe established as a settled national policy,with assurance that the fullresources of the

nation will, if necessary, be mobilized to.carry it out, we not only will be discharg-

ing an obligation to' our service men;we will be taking our first effective meas-ure to insure the whole country against

another economic disaster.

Documents

Shall We Guarentee Full Employment?