PAYING FOR PRODUCTIVITY

The first requirement is capital. We may not know much, but we do know that an increase in capital investment and an increase in productivity are tied together; and the higher the capital per worker the higher the productivity-and, incidentally, the wages and salaries paid.

By 1955 we were spending $40 billion a year on capital investment. A good many economists consider even this tremendous sum to be too low; they feel that we have not yet made adequate allowance for the inflation of the forties, and they point to the fact that a good many businesses (especially the small ones) still base their provision for future new equipment on the deflated prices that prevailed in the thirties. These economists feel that in three major areas of the national economy we have an overage plant which needs more capital investment than it gets: in housing, in transportation, and above all in education. They feel, too, that in many industries the machinery is rapidly wearing out and that American equipment, far from being modern, might well, in important respects, be on the verge of obsolescence.

But let us assume that $40 billion in capital investment are adequate for the needs of the 1957 economy. We would then need $65 billion a year in 1965 and at least $100 billion 20 years from now. To obtain such gigantic sums would not be easy under the best of circumstances. To make matters worse, as a later chapter will point out, the large investment trusts and pension funds are currently emerging as the country's only real "capitalists"; and this development by no means encourages the supply of that kind of capital.

But there is another and more important question: can the Nation afford investment at such a rate? Today 11 cents out of every dollar produced in this conutry is put back into capital for the future. To obtain an adequate amount in 1975, however, we would have to put back 15 cents out of every dollar. Eleven cents is already high— higher than we have ever plowed back except in wartime. Fifteen cents may be wholly impossible, except under such stringent Government control of interest rates or installment buying as would be considered unbearable and rightly so.

We must, if this is the case, find ways to obtain more productivity for our investment dollar than we do today. If new investment is to be kept at or below 10 percent of national product, we must learn by 1965 to get as much additional productivity out of $55 billion per year as we now would get out of $65 billion-as much, in 1975, out of $70 billion as we now would get out of a $100 billion. We must, in other words, increase the productivity of capital itself by one-sixth by 1965 and by one-third during the next 20 years.

This is not a new problem, to be sure. Economic progress might even be defined as the process of continually obtaining more productivity for less money. The means to achieve this is innovation. Without constant innovation, that is, all the capital invested in this country since 1750 might have been barely enough to permit the present population to live at a 1750 scale of living; the entire improvement in

living standards since then is the result of innovation. Innovation has been the real "frontier" of the Western world these past two centuries. And what now distinguishes an "underdeveloped country"-and keeps it underdeveloped-is not so much a shortage of capital as it is shortage of innovation.

THE CHALLENGE TO INNOVATE

To the layman, and the typical businessman, "innovation" means "research" or "engineering," new products or new productive processes. These are indeed important aspects of innovation; and the fourfold increase (from $1 billion in 1950 to $4 billion in 1955) in the sums spent by American business on research and engineering for new products and new processes is therefore a highly encouraging sign. We already know that the next 20 years will bring about major changes in manufacturing, amounting to a technological revolution. And we also know that in a major industry like housing we badly need both radically new products and much more efficient production. But it is a serious mistake to think of innovation exclusively as technological innovation. The most important area of innovation, and the most productive one, may well be the opposite of technological.

During the past 10 or 15 years, the innovations that have had a major impact on the American economy were nearly all nontechnological, were nearly all innovations in something else than product or process. First among them stand the tremendous changes in distribution methods. Hardly less important, especially in its impact on productivity, has been the development of new concepts of business organization. There have been tremendous innovations in plant, store, and office architecture; similarly in respect to the management of worker and work, whether industrial engineering, human relations, or personnel management. Finally there is the emergence of new basic management tools, especially measurements and controls like budgets, cost accounting, production scheduling, and inventory controls.

Among the major innovations of the past 10 or 15 years, only one can even remotely be called an innovation in product or productive process. That is the development of systematic and organized methods of materials handling. Otherwise, in their aggregate, the basically nontechnological innovations have had a greater impact on the American economy, and have contributed more to the increase in productivity in this country, than all technological innovations of the past 10 or 15 years. In the long view of history, it is for social inventions, and not technical ones, that Americans may be best remembered.

During the period ahead, in any event, the greatest need for innovation seems more likely to lie in the social than in the technological area. Indeed, the technological revolution itself will be totally unproductive unless it is accompanied by major innovations in the nontechnological field. Among them, above all, is again innovation in marketing. Equally badly needed are innovations in methods, tools, and measurements for doing the managerial job in the modern enterprise, large or small; for the development of competence, skill, and

imagination among managers (still considered a luxury by many companies) is probably the greatest necessity any business, let alone the economy, faces. Finally, the need is for effective innovation in the management of workers and in the organization of work; despite the progress in this area, it may well be the most backward sphere, and the one with the greatest potential for increased productivity.

Compared to electronics, rocket engines, or synthetic chemistry, these are unglamorous subjects. They are rarely discussed except by professional managers, and not as often as they should be, even so. Yet our success at innovating in these four areas may well decide whether the population revolution, which has already taken place, will be an opportunity for further growth and strength, or whether it will prove a strain, a burden, and perhaps even a threat to social and economic stability.

ADDRESS BY SENATE DEMOCRATIC LEADER LYNDON B. JOHNSON BEFORE THE AFL-CIO UNEMPLOYMENT CONFERENCE, THE ARMORY,

APRIL 8, 1959

WASHINGTON, D.C.,

I am here today as a member of the Democratic Party.

No one man can speak for the Democratic Party because it is the party of all the people. But all men know what the Democratic Party is-and the facts cannot be distorted even by other parties for which one man can speak.

The Democratic Party is the one which believes in expansion, in building, in developing the Nation's resources, in full employment, and in a growing country.

The Republican Party believes in the status quo, laissez faire, in not doing anything because anything might be too much. It is the party of timid counsel.

It is against this background that I am with you today.

You are here today not just as representatives of the unemployed, but as representatives of every American who works for a living.

That statement is based upon a lesson which America learned the hard way in the early thirties. Unfortunately, it seems to have been forgotten in the years that have intervened.

CONTAGION OF UNEMPLOYMENT

The lesson is that there is no germ, no virus, no disease known to mankind as contagious as unemployment.

Furthermore, unemployment is a condition which cannot be quarantined. Every man and every woman out of work represents a direct threat to the security of every American.

And the only way to meet that threat is to provide jobs for those who want and need jobs.

I did not come here to commiserate with you or to indulge in idle wringing of hands. I came because I believe you have a cause which should be the cause of every citizen.

HIT AND-RUN POVERTY

It is the alleviation of hit-and-run poverty in a time of get-up-and-go prosperity.

There are those who think that the only approach to unemployment should be the approach of charity. There are others who even toy with the idea that a certain amount of unemployment is "healthy" and "normal."

These are the people who tell us that our economy is "stabilized"with nearly 42 million men and women looking for jobs.

A nation is not "healthy" when it is infected with the contagion of large-scale unemployment.

A country is not "normal" when a significant proportion of its citizens must live off unemployment compensation or charity.

An economy is not "stable" when the productive talents of nearly 412 million of its inhabitants lie unused and rusty.

PAYROLLS VERSUS RELIEF ROLLS

A healthy, normal, stable country is one which makes the fullest use of the productive capacity of its citizens. A stable and prosperous country is a country in which working men and women are on payrolls not on relief rolls.

This is a year in which the balanced budget has become the major topic of discussion. We are told that it is also the major issue before our people.

I believe that most Americans want the budget to be balanced. I do not think that any significant proportion of our countrymen divide over this so-called issue.

THE QUESTION OF HOW AND WHEN

But I think there is a deep and underlying question of how the budget shall be balanced. And upon this question there is a division which must be resolved.

There is one school of thought which holds that we must defer the problem of finding jobs until the budget has been balanced. This is the group which constantly tells us about the things we must not do. We are told we must not have an adequate housing bill; we must not have a modern airport bill; we must not have a comprehensive highway bill; we must not have an effective depressed areas bill: we must not have even a small community facilities development bill. These things, it is said, will unbalance the budget.

WASTED TALENTS

But there is another-and I believe more sober and prudent-school of thought. It holds that we will never balance the budget as long as we are wasting the talents of 412 million men and women who want jobs and cannot find them.

This group holds that houses and airports and highways produce jobs. And jobs, in turn, produce payrolls and human dignity and revenue the kind of revenue that will balance the budget and bring this country a truly stable dollar.

The Federal budget will be balanced when our household budgets are balanced. And no household budget was ever really balanced yet on the basis of relief checks.

The best way to balance the budget is to put 42 million Americans back to work.

I am not talking here about wild and reckless spending. The action that must be taken does not require fiscal insanity.

WORK-NOT CHARITY

The housing bill which the Senate passed recently is not a wild, reckless measure. But it would make possible the construction of 200,000 housing units and that translates into nearly 600,000 jobs.

Neither do I regard the airport bill or the depressed areas bill— which together could create tens of thousands of jobs-as wild and reckless. In fact, the wild and reckless action would be to veto them and dash the hopes of Americans who want work--not charity.

The governmental process is not solely the prerogative of Congress. We in the Congress can pass the laws and reflect your needs and desires. But we are not the action arm of the Government. The Government process is not solely the prerogative of the Executive. The laws must be administered by the Executive.

TWO HURDLES AHEAD

For at least another year and a half every proposal must leap at least two hurdles. First, it must find a majority to pass Congress; second, it must somehow find the strength to secure the approval of the executive agencies or get at least a two-thirds vote to override Executive

vetoes.

And when Government is divided, the veto can be king.

I do not pretend to be satisfied with the emergency, stop-gap unemployment compensation measure that Congress has passed. It did not nearly begin to meet the needs.