Any such reductions in the workweek, and even smaller ones of substantial magnitude, would have major impacts on our economy. Among other things, they would materially enlarge the possibilities of full-time participation in the labor force by students, mothers of school-age children, the handicapped, and the elderly. There are suggestive indications that old age, in physiological and psychological senses, is being deferred and that each decade is seeing a "youthening of the elderly." If this tendency exists and persists, it will reinforce the influence of shortened hours of labor in facilitating the holding of full-time jobs at higher ages and may conceivably check if not reverse the trend toward reducing the percentage of older people who are in the labor force. Such possibilities may, of course, not eventuate. But, if they should, we might have a marked expansion of the percentage of the population in the labor force-itself a factor favoring reductions in the length of the workweek. Since Americans typically like to work, to hold jobs, to earn, and to feel needed, this expansion itself could constitute a distinguishable component of a higher level of living. Moreover, if a large proportion of the workers did not have to work beyond the point at which continuation becomes irksome, satisfaction in work would increase and presumably efficiency with it. IX. OTHER PROBLEMS There are a few economic problems that the postwar population upsurge can be expected to render less difficult to solve. Such, for example, are (1) avoiding serious unemployment, and especially "structural unemployment," by expanding aggregate demands for consumption and investment as the postwar babies grow to full maturity; (2) maintaining the financial soundness of the American railway system, as traffic volume expands under these influences; and (3) carrying our huge Federal debt, as the number of taxpayers and the real aggregates of taxable income and property rise. It is generally agreed that the problem of minimizing economic fluctuations belongs in this group, but we must not overstate the contribution that the population upsurge is making toward its solution. We shall long have with us the problem of keeping the economy reasonably stable as it expands-of preventing or holding to a minimum the three degrees of depression recently termed a "pause" (as in 1940), a "recession" (as in 1938), and a "slump" (as in the early 1930's).31 Entrepreneurs' expectations of the future constitute a powerful force influencing the level and trend of economic activity. Whereas the prospect of a stationary or declining population made for pessimistic expectations,32 the new prospect of continuing population growth makes for optimistic ones. The enormous rise in capital investment in the postwar defense program might be ominous if our businessmen could not count, with considerable assurance, on rising demand for civilian goods from the mere growing-up of the postwar babies and the further rise in consumption standards. Coupled with The Economist (London), Mar. 28, 1953, pp. 917-928. J. J. Spengler, "Population Movement and Economic Equilibrium in the United States," Journal of Political Economy, XLVIII (April 1941), pp. 153-182, especially p. 172. recent experience in converting war plants to civilian uses, this yields a substantial insurance against big overinvestment in plant. If "major depressions *** are likely to result from impairment of long-term investment opportunities," 33 it is reassuring that such impairment, in a secular sense, is not imminent. Nevertheless, the possibilities of miscalculated, misdirected, and maladjusted investment will remain large. Yet we have better data and skills than formerly to minimize such mistakes. And economists are thoroughly agreed that assurance of a population growing in total number (and especially at the lower ages) tends to ease and shorten the period of investment readjustment if maladjustment occurs. Broadly speaking, the higher the consumption level, the larger is the proportion of contractible consumer expenditures, and swings in spending tend to promote fluctuations in the whole economy. Yet, with so large a fraction of the population in the younger age groups, it is safe to count upon important growth of urgent wants as compared with a society in which the median age is rising rapidly and larger proportions of consumer expenditures are readily postponable or dispensable. The population upsurge has contributed to, though it has by no means caused, important interregional and local migration. The former has led to truly rapid growth in the population of some States and areas, thus intensifying their growing pains. Suburbanization has been proceeding at a rapid rate in many areas, creating major problems of local transportation and relocation of shopping centers. Both have had early effects on the requirements for schools, electric power, gas, and telephones. California is the largest State that increased in population by more than 50 percent in the 1940's and is continuing to grow at a rate not far lower. It has passed Australia and is overtaking Canada, two countries of vigorous population growth. Such rapid growth presents many difficult economic and social problems. Yet, by and large, private and public investment are proceeding apace, our level of living holds up well, and even the water shortage has not grown significantly worse. The company that furnishes gas and electricity to about one-half of the State's population (not including Los Angeles) doubled its electric-generating capacity between V-J Day and the end of 1952 and in another 3 years will have nearly trebled the 1945 figure.34 In the whole Nation electric power output has been growing three times as fast as the average for all industries, averaging nearly 10 percent annually since 1910. Expansion of atomic energy and aluminum production, which use power lavishly, have been important factors since 1940 outside California. Since the war private utility companies have spent over $10 billion enlarging their facilities, and by the end of 1954 their capacity is expected to be a third larger than in 1951.35 Thus far, despite all the fears about drying up our sources of new capital, raising the funds for such expansion has not proved difficult. 33 H. H. Villard, in his review of R. A. Gordon's "Business Fluctuations," in Journal of the American Statistical Association, XLVIII (March 1953), pp. 159–162. 34 P.G. & E. Progress, March 1953. Survey of Current Business, January 1953, p. 10. Indeed, considering the highly progressive rates of taxation affecting income groups that hitherto have been responsible for the great bulk of our annual net savings, the volume of savings has continued to grow impressively. Looking ahead, one may reasonably ask: Will our home investment requirements be so large, and our consumption demand so large a proportion of our output, that our surplus savings will be inadequate to supply any large foreign investments and grants? The answer will depend heavily on our productivity, our incentives to save and invest, and our international trade policy. In any event, the climates for American investment abroad exert a dominant influence on the extent of such investments, public and private. Thus far, despite the marked rise in our population since 1940, the size of our export surplus continues very large, and, where conditions abroad are favorable for American investment, this takes place. Clearly, however, domestic investment will continue to be a strong competitor with investment abroad. X. HIGHER LEVELS OF LIVING? For generations an essential component of American standards of living (in the sense of levels earnestly sought) has been the urgent desire to keep raising experienced levels of consumption and living. Mere failure to advance is frustrating, as the depression decade convincingly showed. Each new generation strives to live better, and have more to do with, than its predecessor. By and large we have succeeded: witness shortened hours of labor, improved working conditions, higher life expectancies, more durable consumer goods per household, larger and more varied consumption, increasing freedom of choice, ampler public services, and greater financial security as compared with 100, 50, or 25 years ago. Does the recent and prospective population growth threaten to prevent fresh achievements of this sort in the next 25 to 50 years? Aside from cyclical influences, economists here and in England have been disposed to argue that slow population growth, or none, is favorable to raising levels of consumption and living and that the necessity of devoting a sizable fraction of the national product to capital expansion tends to limit advances in per capita consumption in a growing population. The latter may be true in a sense; but, since other important factors are involved, it does not clearly support the main It is growth rather than nongrowth of population that is a major obstacle to man's economic betterment in all but a few countries * * *. That population growth will continue to be a major obstacle to the betterment of man's material lot is apparent. Still under the illusion that most of the population of North America and Oceania "is approaching a stationary state," he did not except the United States from these statements or from his assertion that the population of most countries "has passed the income optimum." In his view, one of the major determinants of economic bet terment the ratio of a nation's labor force to its population tends to be most favorable when this population has become stationary under Western mortality cond.tions.30 Under his reasoning, in moving away from instead of toward a stationary population, we are making this ratio increasingly unfavorable, especially in the period before the babies born in the last 15 years enter the labor force. As applied to the United States-and we are dealing solely with this country-such reasoning seems wholly unrealistic. Doubtless there is a rate of population increase so rapid that it would thwart our normal ambitions, but there is no sign that such a rate has been reached over the last 30 years or is in prospect over the next 30. In the 1940's, despite rearmament, war, and extensive aid to other countries, our gains in consumption level were strikingly large. Per capita personal consumption expenditures in constant dollars-not a measure of, but a crude first approximation to, the consumption level-rose by 31 percent between 1940 and 1950, more than twice as much as between 1930 and 1940, when our population increase was less than half as large. Mills recently calculated that, in the 1940's, increase in consumption level took 51 percent of the excess of national product over maintenance of the people at the per capita level of the 1930's plus capital maintenance a larger amount indeed, than went for defense and war.37 Within experienced limits here, conditions favorable or unfavorable for population increase seem also favorable or unfavorable for inproved consumption levels. Certainly our young people in recent years have given successive votes of confidence in the future that one cannot imagine having been cast by their counterparts in the 1930's. The high level of employment and the phenomenal upsurge of productivity that were largely responsible for this contrast are continuing. Perhaps, indeed, we are in the midst of a new industrial revolution in which, as in the one that began two centuries ago, population increase is partly a consequence and partly a stimulating cause. Colm, assuming a 1960 population of 175 million, projects figures implying a 1951-60 rise in per capita consumption averaging 2.3 percent per year, as compared with an average of 1.5 percent per year in 1929-51, when most of the net gain occurred in 1939-50,88 Our consumption level has risen to heights unprecedented here and unmatched elsewhere, yet there is no sign that the gap between consumption standards and levels is closing. If genuine peace should really come, and the brakes on advances in consumption be released. the question posed by the stagnation theorists may again be pertinent: Can we count upon our consumption standards rising fast enough to keep the economy fully employed? Most economists are loath to differentiate levels and standards of consumption and living, still generally mean per capita consumption when saying "standard of living," and commonly imply that maximizing consumption is the prime goal of economic effort. But it ought now to be clear that American standards of living-the levels that we 38 J. J. Spengler, "The Population Obstacle to Economic Betterment," American Eco nomic Review, XLI, No. 2 (May 1951), pp. 343–354. 87 F. C. Mills, "Productivity and Economic Progress" (National Bureau of Economic Research, Occasional Paper No. 38 [1953]), p. 14. 38 Op. cit., pp. 53 and 159. earnestly desire to attain, sooner or later-include not merely more consumer goods but also better working conditions, thicker cushions against shocks, current and deferred leisure, earlier marriage, children, independent households, and a congenial atmosphere, domestic and international. The higher level of living that we seek and are ready to work for includes a balanced combination of such varied components. An unprecedented proportion of our people have reached the point where we readily accept slower increase in consumer goods to permit enlargement of other components. Standards of living, in the strict sense of the phrase, call for intensive examination. They reflect determining values of profound significance. Particularly crucial is the balance that the people want in respect to goods and services, leisure, and children. More economists might well be concerned with changes in the composition of standards as they affect people's choices, especially if growth in productivity and lessened defense requirements enlarge the scope of such choice. One important problem concerns the forms in which we shall take such increased leisure as we can and do choose within the workday, the workweek, or the work year; before the years of full-time employment begin; or during the years after full-time employment ends. In recent years, there has been little reduction in the length of the workday and workweek, but an extension of the practices of intermissions within the workday and paid vacations within the work year. When, however, the numbers reaching age 18 rise in the 1950's, we can reasonably expect not merely increasingly delayed entrance into the full-time labor force, as youths extend their period of formal education, but also pressure for shorter hours. On the whole, it seems to me likely that, in our dynamic American economy, substantial population increase in the next 30 to 50 years will be accompanied by larger gains in levels of consumption and living than would have come if population growth had proceeded in accordance with the forecasts of 1933-46. Gains in consumption level bid fair to be satisfying, if by no means the maximum possible; but much of the gain will be, as hitherto, in other components of living. If so, we shall need to be concerned with the resulting reactions upon population growth. If the foregoing discussion appears on the whole optimistic, instead of simply objective as intended, let it be recalled that American economic development has rather consistently confounded the pessimists and that no attempt is made to look beyond 1980, or at most 2000. Further, no inferences are to be drawn as to what would be said if the country in question were Great Britain, the U.S.S.R., Japan, or India. [From "America's Next Twenty Years," Harper & Row, Inc., 1957.] (By Peter F. Drucker) The most important economic event of the last few years has gone almost unreported in the newspapers. Few carried any announcement that well over 4 million babies have been born in this country every year since 1954 the largest baby crops ever. Yet 1954, 1955, and 1956 should each have brought a record low in births rather than a record high. For the young women who reached marriageable age, 36-510 O-64-(vol. 1)-3 |