PREFACE Among the specific duties assigned to the Temporary National Economic Committee by the "joint resolution" which created it was that of hearing and receiving evidence on the "effect of existing tax, patent, and other Government policies upon competition, price levels, unemployment, profits, and consumption." The joint resolution directed the committee to make recommendations to Congress on the subjects studied. Apparently, Congress contemplated nothing less than that the committee look into the laws and working rules of our society for the causes of depression and that it suggest remedial measures for depression. The basic problem of economic statesmanship for Congress in this period undoubtedly consists in discovering ways in which to utilize our entire labor supply while preserving civil liberties and the individualistic values of democracy. While the problem is drastically changed by the current defense program, this situation is likely to be a relatively temporary one and the longer-term economic problem of overcoming depression and unemployment is likely to continue to challenge us. Dozens of well-known leaders of thought were consequently called and heard by the committee; hundreds of others submitted views and evidence by mail. From all sections of the country came the contributions of thoughtful men of learning and experience. These views constituted a large and varied body of opinion bearing on the problem of depression. Practically all of those well-known approaches to the recovery problem with which the American public had been made familiar through books and magazines, were presented in one form or another in the plans submitted to the committee. In addition there were presented many worth-while approaches which had never been made known to the public before. The latter plans in particular, as well as the better-known approaches, the writer was employed to analyze. This he has tried to do in an integrated manner. The committee believed that an integrated review of the many extant plansbrief as the review of each type would have to be-would be of public interest. The interpretations made and conclusions drawn in this report naturally will not find universal agreement. They are the author's own. If they also represent the views of the committee or any member of it, that is entirely accidental. The committee entrusted the author with the task of making an analysis, and this he has done to the best of his ability. The author is of the opinion that the causes of depression are clearer than is generally believed; also that these causes lie not so much in fields which have been tediously surveyed as in fields which are just beginning to be explored. Despite the great diversity of thought reflected in current reemployment plans, a reading of them makes one feel that there has come to be a core of economic thought common to many of the plans. Ten years of Nation-wide reflection on the problem of depression seem not to have been in vain. Recommended cures are still extremely diverse, but surprising agreement exists in the analyses which underlie them. A remarkable change in the direction of economic thought seems to have occurred since the early years of the 1929 depression. During those early years, public attention was focused in the main on those proposals which sought to solve the problem of depression by fixing minimum wages, eliminating "unfair price competition," establishing production quotas, reducing working hours, sponsoring collective bargaining, impeding the introduction of technical improvements, and so forth. Those early proposals sought to interfere rather directly with the administrative details of industrial operation. Monetary proposals were more or less left in the background. The problems of production and distribution as such held the spotlight, at least in the popular journals. The problem of exchangethe processes which constitute it and the laws and institutions which facilitate it-received scant attention. Today, a reading of current "recovery literature" leads the writer to believe that the orientation has changed. Most of the current proposals seem to seek continuity of exchange as a primary requirement for business recovery. Much more direct attention than before seems to be given to the problem of how to maintain an adequate monetary demand. This study was made within rather severe time-limitations during 5 months of the fall and winter of 1939 and 1940. These limitations and the pressure of other duties prevented the author from considering as many recovery plans as he would like to have surveyed. However, he feels that he has considered the more important types and those which have enlisted the largest amount of public interest. If judged by their details, recovery plans are legion in number. There are however, only a few major types. Inasmuch as the mere matter of mass made it unfeasible to discuss the details of plans, and because the details are important only if the premises on which the plans rest are sound, the author has elected in this report to focus most of his attention on the premises underlying the various plans. And to do this, even in an abbreviated manner, precluded extensive discussion of the details of the plans themselves. Should the reader become interested in the details of any plan referred to, he may investigate it further himself. Since many of the plans mentioned herein have not been formally published but only submitted to the Temporary National Economic Committee in manuscript form, the home address of the authors of unpublished plans is given in every case. The subject matter of this report is obviously of an electric nature. Views bearing on the causes and cures of depression tend to entangle themselves deeply in our emotions; they tend to be held tenaciously and to be sponsored vigorously. Unfortunately, the conclusions arrived at and judgments rendered herein by the author are not susceptible of rigorous "scientific proof." Relationships, facts, emotional proclivities, and cultural values necessarily enter in varying degree into the making of social judgments. And there is no calculus by which one can extract provable answers. For that reason alone, conviction regarding social action should perhaps always be tentative. Solutions are necessarily relative to one's own changing time and culture, and social forces at any time are too numerous and dynamic to warrant fanatical conviction. Any plan meeting with public approval, therefore, should probably be introduced gradually, cautiously, a little bit at a time, rather than impetuously and sweepingly. For more than a decade the American people have been plagued with continuous industrial stagnation on the one hand and divided counsel on the other. One of the author's major hopes is that this report may be of assistance in portraying better the basic economic problem of our time, and in synthesizing somewhat the more important plans advanced toward its solution. JULY 1940. ARTHUR DAHLBERG. CHAPTER I MAJOR TYPES OF RECOVERY PLANS AND THEIR SUMMARY OF MAJOR TYPES OF RECOVERY PLANS Although extant re-employment plans which do not look to a complete abandonment of our present economic order have a great diversity of detail, they can all be classified into a few types. They seem to fall into five convenient classifications, namely: Those which emphasize or call for— 1. A modification of our existing monetary mechanism. 2. A modification of our existing tax mechanism. 3. A modification of our existing price mechanism. 4. A modification or extension of the structure of our business 5. A larger role for the Federal Government as the producer of Many plans are so comprehensive that they cover more than one of these classifications. To facilitate analysis, however, the writer has considered each plan under that particular heading which calls attention to the piece of economic mechanism that would be most vitally affected by the adoption of such plan. Apropos of the plans as a whole, it can be said that they are unanimous in regarding our present institutions as imperfect. Until either the physical capacity of our workers or the engineering capacity of our plants comes to be the factor which limits the volume of industrial production, they feel justified in believing that it is our institutions rather than our machines which are in need of repair. Most of the proponents of plans indicate that they were moved to submit their recovery proposals by the belief that democracy is doomed to be replaced by totalitarian government unless the institutional maladjustments which make for recurrent depression are rectified. Most of them also seem to have been moved to action by the unemployment, poverty, and disparity of income distribution generated by our socio-economic system. In the main, they try to design a distribution mechanism which will divert more of the national income to wages and salaries and less to capital return, not particu larly for reasons of "justice," but in order to get more income into the hands of people who will re-spend it promptly and spontaneously. They believe that those who spend income mainly for consumers' goods, which minister directly to personal needs, always tend to spend it quickly, while others tend to hold it idle when investment opportunities are unattractive. With the exception of those few people who recommend that the Government go into business on such a wholesale scale as to change materially the nature of our economy, nearly all of the proponents explicitly or implicitly indicate that they wish to rely on a system of private ownership of the means of production, to perpetuate individual initiative, to have the state enforce contracts, and to have both the prices of goods and the distribution of income determined mainly in a competitive market rather than by the agents of government. They hope to attain legally and without violence any changes which they advocate. A FRAMEWORK FOR THE PLANS: THE ECONOMIC MECHANISM THEY PREMISE A review of the extant plans suggests that the proponents of all of them have in their heads a definite picture of the economic mechanism to which they relate their plans. Although they throw the spotlight by turns, as it were, on those parts of our economic machine to which their recommendations most directly pertain, they all premise a certain overall mechanism into which their suggestions fit. What is the nature of this mechanism? It was possible to assemble the elements of this economic machine from the brief descriptions with which the writers prefaced their arguments. The composite picture derived may serve as a framework against which to evaluate the different proposals. The writer will therefore describe some major parts of the economic mechanism assumed, and at the same time will attempt to fit into this framework the important types of reemployment proposals. Space does not permit the writer to qualify fully his description of the economic mechanism which he finds at the core of the recovery proposals; the reader should bear in mind that the aim here is not so much to present a detailed blueprint of our economy, as it is to provide him with a frame of reference for the evaluation of recovery proposals. As the writer sees it then, the following is the economic machine which the proponents of recovery plans apparently believe to exist: ROLE OF LAW, CUSTOM, AND WORKING RULES Essentially our economic machine consists of those institutional arrangements-customs, laws, and rules--which circumscribe individual economic behavior. Through its laws and customs the community institutionalizes behavior by specifying the kind of agreements which it will initiate, tolerate, prohibit, or enforce. Some of its laws are old, others new, some date from colonial times, some from yesterday. Some meet with general approval; others have been under criticism for a hundred years. Whatever institutional arrangements happen to prevail currently, however, our over 131,000,000 people try to carry on under them an activity that is essentially cooperative. In the light of their laws-regardless of how flagrantly these laws may favor or disfavor them-workers, entrepreneurs, landowners, and money savers make agreements with one another. With a view to the production and distribution of particular goods, they make agreements not only 273442-41-No. 25-2 |