UP TO this point we have been talking about our economic system, how it has worked in the past and what is required in order to make it work better in the future for the benefit of all of us. And so we’ve had to talk about consumption and investment and spending, and the flow of purchasing power, which is the lifeblood of our economic system.
It is time now that we talked, not about our economic system, but about our people. It is time we talked, not about the billions that flow through the channels of trade and industry, but about the dollars of income that you and I and the next fellow earn and spend in supporting our families and putting our children through school.
Let us try to look back again on how we lived before the war and then look forward to see how we will live in the years that lie ahead both in the near future and twenty years from now. Let us see what our steadily expanding economy will mean for the daily living of the more than 40 million families that make up our great nation.
I will begin with the material side of our living, not because things we can see and touch are more important to us than the things of the spirit, but because so long as hunger gnaws the stomach and cold stiffens the limbs only saints can bring themselves to think of anything beyond food and clothing and shelter. For the truth is that it is only when men have satisfied their basic bodily needs that there is room in their thinking for anything else, and it is only when fear of hunger and cold and the insecurity which makes hunger and cold an ever-present threat have been banished that they can begin to live like free men.
Let us look back again on how we lived in 1940. For millions of American families, although it was far easier than ten years before, living was still brutally hard in that year. In Chapter 2, I gave considerable attention to the cold facts about the way our workers, our farmers, our clerks, stenographers, and businessmen, fared in 1940. I am still shocked each time I turn to those facts again. In that year there were about 40 million so-called “family units” in this country. This number included not only the households with children and the childless married couples, but also the single men and women living alone.
Now, everyone knows that the incomes of these families ran all the way from practically nothing at the bottom of the economic scale to those of the millionaires at the other end. But how much more than that do we know? President Roosevelt dramatized the fact that one third of the nation was “ill-housed, ill-clothed, and ill-fed.” We saw the privations and insecurity of our farmers, our workers, and many of our small businessmen. But do you know what the income of an average family in the lowest third amounted to? Or, for that matter, what the income of an average family in the middle third was or of one in the upper third?
As it happens, we do not have those particular figures for the year 1940, but we do have them for 1941, when stimulation of war had pushed our national income about 10 per cent higher than in 1940. If, therefore, we use the 1941 figures on family income as representative of 1940, we shall get a somewhat more favorable picture than actually existed in the earlier year.
In 1940 the 13 million families which were in the bottom third in our economic scale contained 38.5 million men, women, and children, or a little under three persons to the family. Of the families having two or more members, about one in three had a second breadwinner. Yet in spite of this, the average family income was the pitifully low figure of $527 a year, or $10 a week. Do you find this shocking? You should. It is shocking.
How could a family of three manage to live on so low an income? I’ve gone over these figures many times and I still can’t see how they did manage. Here are the figures in a little table:
We know that somehow, in spite of privation and no small amount of actual suffering, these 13 million families did manage, and these figures show how an average family in this group spent its meager income. Let’s look now a little more closely at the items that are listed. The first one is $210 for food. That amounts to just about $4 a week, or, with three in the family, about 7 cents per meal per person. How much food and what kind of food could that put on the table?
You don’t need to be a mathematician to see that 21 cents a meal for three people wouldn’t pay for much of even the cheapest meat or for eggs, butter, milk, or oranges—even at the somewhat lower prices which we paid in 1940. For that reason, these basically essential items didn’t appear on the table very often. It was difficult enough to manage on cabbage, potatoes, beans, oleomargarine, and bread.
On the farm and in the rural areas, things were a little easier, of course, and even in the cities the good housewife could make her money go a little further by picking over the fruits and vegetables just before the close of business on Saturday, when the grocer had to mark down his stock to avoid spoilage over the week end. And occasionally the distribution of surplus food by the Department of Agriculture through the food stamp plan brightened the diet.
But the going was far from easy, and it is not hard to understand why one out of four of our people in that year had insufficient food and three out of four did not get enough of the “protective” foods—the citrus juices, the milk and eggs, the butter and meat-that all dietitians agree are necessary for good health. And even with mothers taking care to give the children the best of what they had, there were millions of American children who were undernourished and rickety, sluggish at school, and easy victims for disease. The draft boards found that out two years later.
The next item is $75 for clothing. This was the sum spent not for one person, but for an average family of three, and not for one season, but for the entire year. Any family in which the man of the house got an overcoat and suit in a single year would have had less than half its entire clothing budget left for everything else. So, mighty few of these families did that. They didn’t buy coats, anyway, for the most part. They wore lumber jackets or sweaters, at a cost of $3 or so, and they made these last three or four years.
They didn’t buy shoes very often, and when the shoes wore out they were repaired and repaired again. There wasn’t enough money to buy rubbers or overshoes for the youngsters. A new item of clothing was an event because, except for the oldest child, clothing consisted of hand-me-downs.
How these families kept themselves clothed with even reasonable dryness, warmth, and decency is a miracle to me. Even when we take the bargain counter into our reckoning, where prices were cut below cost because most customers had passed over the goods, it just doesn’t seem possible that they were able to make out.
The other items in the budgets of these 13 million lowest-income families tell the same story. Ten dollars a month for rent and fuel combined couldn’t buy very much more than the shabbier of the cold-water flats in one of our city slums, with coal to be brought in by the scuttleful, and an indoor toilet the exception rather than the rule. Another $2 a week went into carfare to and from work, for soap and brooms, for gas and electricity if there were gas and electricity, for infrequent haircuts, drugs, and an occasional doctor bill. Two dollars didn’t buy very much of any of these things.
For everything else there was left about $1.25 a week. This had to cover tobacco, an occasional movie, newspaper, or magazine, and, for some families, insurance to assure a decent burial. Out of this, too, bad to come the purchase price and the upkeep of the jalopy which, believe it or not, several million of these families, mostly in the rural areas, managed to buy.
It shouldn’t be surprising that the average family, try as it might, couldn’t make both ends meet. Occasionally they got help from the relief agencies and from relatives who weren’t quite so badly off. But for the average family this was not enough. They ran up debts at the corner grocery and with the doctor which they simply could not pay off. The average family in this group ran in the red to the tune of $38 a year. There is the picture of the “bottom third” of our people in the peacetime year 1940. It’s not a pretty picture, but those are the grim details that added up to one third of the nations being ill-housed, ill-clothed! Here is the picture of the bottom third of our and ill-fed.
What about the rest of us in 1940? How well off were we? In 1940, it is true, the middle third of American families were a lot better off than the bottom third, but only by dismal comparison. The average family income of this group was $1311 a year, or about $25 a week. Their families averaged a little over three members, but with incomes about times those of the lowest third, this still meant a far-better standard of living—but again only by comparison with those nearer the ragged edge.
For them there was rarely a question of a large enough amount of food, although the food budget normally didn’t permit the buying of enough of the protective foods so vital to health and especially to the growth of the youngsters. There was enough money for clothing at least to keep the family warm, even though it took careful budgeting and buying to do it. And with an average of $18 a month for rent and fuel, these families were not obliged actually to live in slums. They occupied the smaller row houses such as are common in Baltimore, Philadelphia, Brooklyn, and other eastern cities.
On the farm, they occupied reasonably weather-tight homes. They generally had running water, indoor toilets, and gas and electricity. Where a city family in this middle group owned its home, it was worth about $2000.
And after paying for food, clothing, rent, and the other necessities, there was about $30 a month—for a few of the better things of life, including savings and insurance. These families pretty generally had cars, bought second or third-hand, but usable. Usually they had radios and a few other electrical appliances. They could afford some insurance and to put aside some money for a rainy day. The average family of this group managed by scrimping to save about $10 a month.
This is probably not your idea of our American “middle class,” but that’s what the figures show. The following table pulls them all together. I think you may find it instructive to get out a pencil and see whether you can figure out how you would have managed in 1940 on this budget. Remember, 13 million average families of three did, and even thought of themselves as sharing in the high American standard of living!
There remains the third of our families who had the highest incomes. And this brings me to a question I often put to my friends: “How high an income does a family have to have to be included in the highest third of all American families?” I have rarely received an answer that wasn’t at least $3000 off . Suppose, before you read any further, you make your guess, remembering that we are talking about 1940, of course.
Surprising as it may seem, the answer is a bare $1675 a year. In other words, two thirds of all American families had incomes in 1940 of less than this amount. You will be surprised, too, to learn that the average income of this upper third—including the millionaire as well as the $1675 family—was only $3722.
Now, you may think there is not much point in talking about an average income for a group of families having incomes that are spread out so widely as those in this group. And you will be quite right.
However, only a very small proportion of our families, even in this more favored group, have really high incomes. Only one in every seven families among the upper third had an income of over $5000, and only one in twenty-five an income of over $10,000. The average for the entire group is therefore only slightly higher than the average for the families in the group having incomes of $5000 or less.
It is only here in this upper third of our families that we find the American standard of living we all talk about, but so few of us actually enjoy. It is only here that we have the really comfortable homes, the good and stylish clothing, the well-set tables, as well as a plentiful supply of the automobiles, refrigerators, the electric fans, the toasters, and all the rest of the modern conveniences that technology has produced.
And it is only here that medical and dental service is adequate, that trips to the seashore or the country or to hunt or fish are part of the normal family budget. The average family in this group goes to the movies regularly and to the theater from time to time. It gets a paper daily, subscribes to several magazines, enjoys a hobby or two, entertains and is entertained. The children look forward to a college education and generally get it.
Families in this group support the community chest and other charities, are generous church supporters, and still have enough left to carry reasonable insurance and to put aside substantial savings. Just to compare this group with the others, here are the figures:
Now, when we put these three budgets side by side, we get a picture for 1940 that looks about like this. The third of our families having the lowest incomes lived in really pitiable circumstances, far below the very minimum level that our great nation should demand of itself. Families in the middle third, while twice as well off, still did not share in the things that go to make up a “real American standard of living.” And even the upper third, where comfortable living standards did prevail for families at and above the average, included other families whose incomes ran down to $1675 a year and who lived only on the fringe of the better things of life.
All in all, it was not a pretty picture for the country as a whole. The good things of life, the opportunities for free and full living, were enjoyed by a very small part of our people. And the worst of it was that it was all so wholly unnecessary.
As I have said again and again, here were vast unsatisfied needs, here were vast potential markets. And alongside them were idle factories and idle men and women—7.5 million of them—eager to go to work. Our trouble was insufficient purchasing power in the hands of the families whose spending of it would at one and the same time have enabled us to satisfy those needs and to put those idle hands and idle plants to work producing at a profit more of the goods which most of us needed so badly.
It is sometimes said, and it will be said again, that a redistribution of our income cannot help anybody because there is not enough money in the hands of the upper income groups to raise incomes very much at the lower levels—even though everyone had an equal share. That argument misses the point altogether. Of course, it isn’t a question of taking money from the few to give to the many. It’s simply a question of producing more so that we can all have more—the upper third along with everyone else.
Better distribution of our national income, more wages paid out to the workers in the lower-income groups, narrower profit margins for business on each individual unit, will create the purchasing power which will put more men to work at good wages. This will mean higher incomes for everybody, including most of our businessmen, and a higher standard of living for everybody.
The benefits of a better distribution of income do not lie in the fact that some people get a larger slice of our economic pie, but in the fact that our pie—what we all have to share—becomes so much larger. And it cannot be made larger unless we do get the better distribution of income. We’ve seen that again and again.
Let us turn now to the future and see the promise it holds for us all. In the late forties, when we shall have completed our reconversion from war to peace, we can, if we are wise, have a country with 200 billion dollars of output distributed among all of us to use for the purposes of peace rather than those of war. As we have seen, we can all, as consumers, be spending 135 billion dollars a year, 50 per cent more, on the things that we eat and wear, than we consumed in 1940.
This means that while the average standard of living of the nation must rise by 50 per cent, the standard of living of the lowest two thirds of our families must rise by more than 50 per cent and that of the upper third, most of whom are already living well, by somewhat less.
No one, of course, can say how much of a redistribution of income is required, but here are some figures that suggest something of what the next few years must bring.
As we have seen, the lowest third of our families received, in 1940, only 9 per cent of the total income. By the late forties, I think, we must see that they have something like 13 per cent of the much larger total income which full production will make possible at that time. In fact, 13 per cent of our bigger economic pie for one third of our people sounds like an absolute minimum.
If we are able to do this, the average income of these families will be raised from $527 to $1365. The increased percentage of the larger total national income would more than double the dollar incomes of our “bottom third”—the ill-housed, ill-clothed, and ill-fed of the 1930s.
In the following table, you may see how the income redistribution I am suggesting would affect each of the three groups of American families:
As you see from this table, if all goes well the average family in each of the three groups will have sharply improved its position by the late forties, in terms both of dollar income and of its real standard of living. For all families taken together, the increase in the standard of living is 50 per cent. For families in the bottom third, the increase will be twice as great— 100 per cent. For families in the middle third, the improvement will be 66 per cent.
Families in the upper third, although receiving a smaller slice, will benefit from the increase in the size of the total economic pie and will themselves enjoy a standard of living 30 per cent higher than in 1940. This last percentage, of course, understates the improvement that will be felt by the families in the lower part of the upper third, families which in 1940 earned between $1675 and $5000 a year. Generally speaking, these are the families of our doctors and lawyers, our skilled workers and educators, our foremen and accountants.
In 1940 most families in the really high income group were able to buy about everything they wanted to buy. It is in the lower ranges of the upper third of our families that incomes still really need to go up and the standard of living really needs to rise to achieve what ought to be our “American Standard of Living.”
This is an exciting prospect—a standard of living for all groups considerably higher than we have ever known. Not less for anybody, but more for everybody. Enough food and enough of the right kind, enough clothing—not just for some of us, but for all of us— and more of the better things of life for everybody, too. And unless we fail miserably to meet the present issues, this is not the prospect for the distant future, either. This is the prospect for 1947, 1948, and 1949.
The Department of Commerce suggests that in 1947, with full employment and full production, we should be able to buy 72 per cent more clothing than we bought in 1940; 62 per cent more food; 140 per cent more automobiles; 74 per cent more electric refrigerators and washing machines; 165 per cent more radios; 105 per cent more furniture. We should have 77 per cent more money for traveling, and 42 per cent more for recreation. That surely sounds like an easier world to live in!
And even this is only the beginning. For alongside this almost immediate increase in our average standard of living we may look for 30 billion dollars of business investment every year, a full 50 per cent more than we have ever had before in peacetime. And this investment will mean more and better factories and railroads and airways. It will mean 1/2 million new houses a year. It will mean more and better machines and the full application of our technological genius.
All this will continue to sweep us forward. Where in the past we have taken two steps forward in every boom and one step back in every depression, we shall now move steadily forward, with increasing stride, year after year.
And year by year, if we will use good judgment and a little courage, this will mean a further increase in the standard of living for all of us. And it will mean more and more of the better things for the families at the bottom of the scale. Before ten years are out, our present slums will be only an unpleasant memory. Every American family will have a good, sound, substantial home, provided with the necessary equipment for decent, healthful family life.
Every American family will enjoy the good health that complete medical service will make possible. Every American family will know the joy of a vacation every year. All our children will be able to finish high school and no one will miss a college education because he can’t afford it.
And we won’t stop after ten years. We’ll keep right on going. Once we get over our initial difficulties and stumbling blocks, once we have learned how to do the things we know we must do to make our system work the way we know it can work—there will be no stopping us.
Let me show you, then, where I think we will be in the late sixties if we follow a program that calls for full production and the employment of all of our people. And remember that in offering this outline of the future I am assuming that during these next twenty years our annual national output will grow no faster than it has grown every generation since the Civil War. I myself can’t see how, if we lick recurring depression and with the discovery of atomic energy, we can fail to grow even more rapidly than this, but I’m putting my figures on the basis of only another doubling of our output by the late sixties.
Here, then, is another table, showing where our three groups of families will stand in the late sixties as compared with the late forties and with 1940—if we approach our problems with courage and good sense:
In other words, by the late sixties, there is no economic reason why the lowest-income third of our families should not be nearly as well off on the average as the average of the highest third was in 1940. Does that statement startle you? I hope so, for then you’ll remember the challenge inherent in it. We’ll all need to remember it in the months and years that lie ahead of us if we are to have an understanding of what our country can do and if each of us is to have a proper perspective for judging the policies and measures that will be under debate.
On every possible occasion I have expressed my own conviction that we can and should accomplish these economic goals not only under free enterprise but with free enterprise taking the lead and carrying the major part of the load.
Although government has a key role to play, it is to free enterprise that we must look for our production. It is primarily to free enterprise that we must look for our jobs. It is to free enterprise that we must look for the purchasing power without which we cannot keep producing or keep working. Finally, it is in free enterprise that we have our best hope of technical advances, initiative, and continued freedom of the individual.
I am convinced that free enterprise can create the increased prosperity for all of us which I have just outlined. I am equally convinced that free enterprise will do it.
But I think I owe it to my readers, especially those who are in business themselves, to point out the alternatives we face in the event I am wrong and our present free-enterprise system, for one reason or another, is unable to meet the test of the future. For there is one thing of which we may be certain. If our present system fails to keep our people fully employed and our production running near or close to capacity levels, our people will insist that our system be modified.
We Americans are not going to sit by and patiently accept 10 or 15 or 20 millions of unemployed. With all that needs to be done to develop our country and our future, we are not going to be able to understand why there should be even 5 millions of unemployed.
We are not going to accept farm prices and farm incomes that condemn millions of our farm people to lives of poverty and squalor. We are not going to accept business failures at 10 and 15 and 20 times the low rate that we knew during the war.
We are not going to accept poverty and slums and mass insecurity while our great productive machine chugs along at half speed.
In other words, we Americans are not going to accept another Great Depression as a substitute for the prosperity and abundance which we are all so anxious to create and to share. One way or another, the job is going to be done. I wonder if any thoughtful person really doubts that?