ALL of our discussion up to this point has been in terms of 200 billion dollars of annual production for the next few years—in other words, the total amount of goods and services which all of us, working an average 40-hour week, can produce with our present skills and technical equipment.
That’s all right for the next few years, but certainly that can’t be taken as a ceiling on our national output. Our population isn’t going to stop growing, technology isn’t going to stand still, and all these new plants and machines, bought by an average of 30 billion dollars a year in business investment spending, will steadily increase our ability to produce. Where is our productive capacity going to be ten years hence, twenty years from now? Where will we be in the late 1950’s and the late 1960’s? I think it fair to say that this is the most important single question that is raised in this book.
It always surprises me to realize how infrequently most of us really think in terms of the future—not the distant future, not a century hence—but just beyond the next couple of years to the time when today’s kindergarteners will be in college. To be sure, we look ahead in the sense that we take out insurance to make sure that our kids can go to college, but that’s about as far as it goes with most of us. And I am equally surprised that a people so proud of their achievements as we Americans often fail to realize how great some of these achievements actually are and how far we have come.
Everybody knows that a handful of Pilgrims landed at Plymouth in 1620 and that today we are a nation of 140 million souls. Everybody knows that in 1776 we were thirteen colonies huddled along the Atlantic Coast and that today we are a mighty Union that spans a continent. But how many of us know that since the Civil War our total annual national production of all goods and services, including farm products and everything else, has been doubled every twenty years? Yet that is the cold record of our growth.
In the light of that, let me raise the question once more: How much will we as a people be producing in the late 1960’s? Clearly it would be foolhardy to prophesy, especially so now that the energy locked in the atom has been released. Our population will increase at a far slower rate than in our grandfathers’ day. On the other hand the technological developments of the next twenty years may simply dwarf anything we have known. The progress of a century past may be telescoped into a single future generation.
Certainly, in the light of this greatest scientific stride made by man, it is unlikely that in the future we shall grow less rapidly than we have in the past But if we merely maintain the rate of growth which we have had since the Civil War, by the late 1960’s our national production, based on present price levels, will have grown to the breathtaking total of 400 billions of dollars a year!
Now, there are some people who will say that anyone who even talks of such a thing as 400 billion dollars of annual output must be a crackpot. But is it visionary to believe that my generation can do what my father’s generation did, what his father’s did before him, and what his father’s did earlier still? Is one a crackpot to believe that America is still as robust and vigorous, as ingenious and inventive, as ever? Is it really foolish to say these things, particularly at a time when we have just unlocked the secret of the atom?
For my part, I have not the slightest doubt that in the future our annual productive capacity will not only equal but will far exceed 400 billion dollars. If there is anything that troubles me, it is not our capacity to produce. That we know and have known throughout our modern history.
What troubles me is that we may not succeed in learning how to use our productive capacity to raise our standards of living, to lighten the burden of toil for all of our people, to harness the vast forces under our hand to serve the welfare of our entire nation. I believe most of you who are reading this book will share my concern.
Very reasonably some of you may ask, “Where are we going to find markets for 400 billion dollars of goods? Who is going to buy all that output? Wouldn’t it be better not to produce so much, but to work shorter hours instead?”
Let me answer this last question first. Let’s not forget that over the last generation or two the average work week has been cut from a standard running in some industries as high as 72 hours a week to a nationwide standard of 40 hours a week. It is in spite of that rapid reduction of working hours that our output has doubled every twenty years.
The figure of 400 billion dollars for the late 1960s is based on the continuation of our whole pattern of economic growth. It, therefore, includes the further shortening of hours below their present levels at about the same pace as in the past 20 years.
In the sixties, I have no doubt, a 30-hour average work week will be standard, with a comparable reduction in hours of work on our farms. Indeed, the standard week may be shorter still, as our machines constantly help us to develop more leisure. But in spite of all this, if all goes well, we are still likely to have the not-unpleasant problem by 1970 of finding buyers for somewhere around 400 billion dollars of output That will mean an average annual income of about $5000 for every man and woman who works for a living.
Will we go on doubling our national output every 20 years indefinitely? Will we produce 800 billion dollars’ worth of goods and services in 1987? We probably could, but we probably won’t.
While there are almost no technological limits to the output that we can attain in future generations, the practical limits are obvious. There is no sense in producing goods and services that no one needs or wants, and someday we shall reach a production level that will satisfy all the requirements of our people. When that happy day comes the shortening of the work week will become even more rapid, and our greatest problem will be how best to use our leisure.
In the meantime there’s plenty of extra output needed to achieve a modern standard of living for all of us. So let’s get on with our discussion of how this output can be best attained.
There are some people—people who would not seriously question our growing to a 400-billion-dollar economy in the next generation—who will ask, why should this huge increase in our national production create any great problems? If the spending of all of us consumers, plus the investment spending of business and government, can be harnessed to provide markets for 200 billion dollars of goods and services, why can’t we do the same for any output that we may reach in the next twenty years? If we double our output, for instance, why can’t we just double the spending of each of the three groups that add up to our total?
I agree wholeheartedly that an answer can be found. But as we shall see, it’s not quite that simple. During the next few years, I think we might expect a national full-employment budget to look something like this:
It is at this point that we must watch our step. Where is business going to find opportunities for spending 60 billion dollars a year on increased facilities and equipment?
In the late twenties, business investment spending ran at 16 to 18 per cent of our total production. At that rate it was only a few years, as we have seen, before we far overbuilt our productive plant—our factories and hotels and office buildings and all the rest. Or, to put it more properly, the purchasing of all of us together was insufficient to buy all the goods and services which our increased production capacity made possible.
Again, in 1941 and 1942, it required business investment spending of less than 15 per cent of our total gross national income to convert our economy from peace to war and to make possible an increase of 75 per cent in our total output of all goods and services. In 1943 and 1944, with all our energies going directly into the production of goods for war and for civilian use, business investment spending practically disappeared. Yet in those same years production continued to expand.
The expenditure of only about 15 per cent of our gross national income was required to prepare our industrial plant for war. So 15 per cent is probably a reasonably good figure to start with for business investment spending in the period immediately following the war, when the problem is to reconvert our industrial plant for full peacetime production.
However, I am pretty sure that very soon, when the present backlogs of repairs and expansion have been worked off, and assuming a full-employment economy in which our total output grows year after year, business investment spending ten or twenty years from today will provide a steadily diminishing proportion of the total purchasing power we need to keep our economy running at a high sustained level.
No one can say, of course, just what business investment spending will come to, year after year, by that time, but I am sure that by 1967 it will represent considerably less than 15 per cent of our total annual output. Ten per cent of our total production, or about 40 billion dollars out of the 400 billion dollars, sounds like a far more reasonable figure.
Thirty-five to 40 billion dollars a year will probably buy all the new railroads, factories, machinery, homes, and other private facilities that even our great country will be able to find good use for. The replacement cost of all our plants plus all the equipment in our factories today, including those built for war purposes, totals no more than 75 billion dollars. A million and one half new homes each year can be built for 10 billion dollars.
Now, if the percentage of our steadily growing national production which goes into business investment spending gradually decreases year after year, we know there will be trouble—unless something is promptly done to provide a new balance. We know that the spending either by government or by us consumers or by both groups will have to increase enough to make up for this lag of business investment spending. And since our full-employment output of goods and services will itself be growing year by year, this means that spending from our other two sources must not only increase to match that expansion of output but must increase faster. Otherwise, we’ll soon find ourselves floundering in another depression.
Very well, some people will say, what’s so tough about that problem? Over the next twenty years we can simply double government spending—state and local as well as Federal—and double consumer spending and then increase each of them a little more to make up for this lag of business investment spending.
The “Public Plant” Has Its Limits
But let’s not rush along quite so fast. First let’s examine the practical possibilities in additional government spending. It’s only to be expected, as we grow from a 200-billion to a 300-billion and on to a 400-billion-dollar country, that it is going to take more money than it does today to do the work of government. We have already seen that there are a lot of things that we want government to do for us that it isn’t doing now.
There are the hospitals and the schools we need and need badly, the highways and the dams and the power developments, the slum clearance and modernization of our cities. All these are desirable in themselves. They will add to the general welfare and increase substantially the well-being of all our people. As we have seen, there isn’t a county in the land where people don’t actively want these facilities for better and richer living, for the prevention of suffering, the opening up of new opportunities, and the satisfaction of our national urge to roam the country in our leisure time and learn to know each other better.
But how much more do we actually need to spend, through government, to buy all these things that we want? Let’s bear in mind that a doubling of government spending over the next twenty years means an additional total of 35 billion dollars a year—Federal, state, and local government spending lumped together —over what we have estimated we will need in 1947.
Just one billion dollars in one year will buy a lot of public plant. That’s about what the TVA cost, for example, over a period of years—the dams, the power installations, the whole works. The Missouri Valley Authority is estimated at only a little more than a billion. A good modern hospital can be built and equipped for $500,000. At that price one billion dollars will buy 2000 hospitals. A good modern school can be built for even less. That means that a billion dollars will buy more than 2000 schools.
Let’s look at something bigger—slum clearance, for example. The need there is terrific. It is estimated that there are at least 10 million housing units that urgently need to be replaced. At an average cost of $6000 a unit it would take around 60 billion dollars to do that job—perhaps a bit more or a bit less. The major part of that rebuilding should, of course, be done by private builders, the government assisting them by, perhaps, assuming the cost of demolition and clearance.
If the government were, one way or another, to finance as much as one third of this total cost in order to take care of low-income families who can’t pay a sufficiently high rent to yield a fair profit to builders, the government’s share would come to 20 billion dollars. Spread over a ten-year period, which the experts say is the only practical basis for planning this sort of program that cost would total only 2 billion dollars a year.
But I’ve said enough, I think, to make the point. If we were to add together all the programs I have mentioned and add, too, the St. Lawrence Seaway and the five new river authorities that have been proposed, together with all the lesser items that could reasonably be included in an enlarged public-works program, 5 billion dollars a year would go a long way toward doing the job in ten years. I find it hard to see how we could possibly spend as much as an additional 10 billion dollars a year in the public interest for as long as ten years.
Of course, no sensible person wants to have government spend a single dollar on public works that we as a people don’t actually need. The ancient Egyptians built the pyramids, into which went millions of man-hours of work, simply to enable workers to make a living during the flood season of the Nile. However they may have tickled the vanity of the pharaohs, the pyramids were just as useless then as they are today.
We don’t want made work, we don’t want modem pyramids, we don’t want boondoggling on any scale, large or small. When we’ve reached the point where this country has built all the dams, highways, housing projects, all the schools, hospitals, all the recreation centers, national parks, concert halls, and museums that we really want, the time will have come to slow down and to look in the other directions for the spending we will need to maintain our total purchasing power and thus to keep our economy running and producing.
What I have been saying with regard to public plant—public investment spending, if you like—parallels exactly what we found to be true of private business investment spending. Twenty years hence, in the late 1960s, we shall still need a lot of government spending on our public plant, just as we shall need a lot of private business spending on our private plant. But the point is that we can’t expect either our government spending or our business spending to provide as large a proportion of our total necessary markets as it will during the next few years.
There is, of course, a lot of government spending that falls outside the field of public investment, and this spending too must be expected to increase. There are the current services of the schoolteachers, the firemen and police, the mailmen. There are the technical and information services of the Federal and state departments of agriculture, of the departments of labor and of commerce and all the others which serve us.
Today we are not paying our teachers nearly enough, even in the states which have the best salary scales. As the standard of living of the rest of us increases, we shall want to raise the standard of living of public servants, too. It is an old saying that we get only what we pay for. This holds for government as for everything else. If we want better government, and I think we do, we shall have to pay for it.
Finally, there are a lot of things that government is not doing today that I, for one, would like to see it get busy on. And I think most people in the country agree with me.
I believe we must establish a real health and medical service that will bring the blessings of modern medicine and good health into every home in the land, even the lowliest of them. Certainly our standards are disastrously low right now. I am told that there are homes in some of our states in which mothers, without benefit of doctor or even qualified midwife, bear their children on old newspapers because they cannot afford a sheet. That sort of thing has no place in our modern civilization.
We have seen in previous chapters that there are children, millions of children, who never get enough of the right food to build strong bones and strong bodies. Full employment for all of us at good income will go a long way to correct such problems. But there will still be need for government help and guidance.
And we all know that there are millions of our older people whose work is done, whose children have grown up, who have been unable to build up enough savings to permit them to live out their lives in comfort and security, free from want and free from fear.
Some Eskimo tribes are said to have a way of dealing with their aged. When a man’s useful years are ended, the tribe takes him away from the village, provides him with food for a few days, and leaves him to die.
To us this sounds shocking, but let us remember that in the Eskimo economy, life is a bitter struggle even for the young and vigorous. In such an economy no one wonders how to find ways to consume more goods. There is scarcely enough to go around even for the young and productive. The old are an almost impossible burden.
But it is clear that ours is not an Eskimo economy. Our problem for a long time now has been to find ways of getting more money into more people’s pockets in order that they may buy all the goods which we are capable of producing. To quote an old bromide, our problem has not been poverty alone, but poverty in the midst of plenty. I, for one, think we owe it to ourselves to square a long overdue account with our aged by providing pensions sufficiently generous to banish all fear of want and insecurity, providing them as a matter of right and not as a matter of charity. Right now these payments are neither large enough in amount nor broad enough in coverage.
There is no need of m y going on and on. There are a lot of improved governmental services needed in a lot of places in this land of ours. It will be some time before government has grown up to its full responsibility. Nonetheless, here, too, no sensible person wants to see government spending money to provide services that people don’t need and don’t want. Moreover, most of the desirable and necessary services, plus a heavy proportion of the needed schools, hospitals, highways, dams, and other public improvements, can be provided under the 25-billion-dollar Federal budget which we have suggested for the next few years.
This Is Where the Consumer Comes In
This brings us to a very basic point. There are some things that government must do for us. But most things we can do better for ourselves. And we should do them for ourselves. Unless we fail to use our collective abilities and intelligence in grappling with the problems before us, we should be able to do for ourselves individually many of the things government would otherwise have to do for us. That is why I see no reason for government to spend money on unnecessary projects just to keep total spending up to the level that is necessary to buy all that we are producing. If it is bigger and still bigger markets we need, and if business spending has reached its profitable limit and if government spending is about to reach the foolish stage, why not see to it that we 140 million consumers get enough money to do our own spending— enough money in itself to keep our economy in balance and hitting on all cylinders?
Now, this is what I have been building up to for a good many pages. It is in the increase of consumer spending on the things that consumers want and need that we must look for the basic and lasting solution to our economic future. We must all learn to live constantly better, a lot better. Our standards of living must rise steadily year by year to match the increase in our productive capacity. Indeed, they must rise even more rapidly as the years go by, since, as we have seen, both the spending of business on private plant and the spending of government will, during the next twenty years, provide a steadily decreasing proportion of the total spending we must have to keep our industrial machine running in high gear.
As Secretary of the Treasury Fred M. Vinson has aptly phrased it, we are faced right now and in the year or two ahead with the “pleasant predicament” of having to learn to live 50 per cent better than we did in 1940. Over the next twenty years we face the greater and even more pleasant predicament of having to learn to live 100 per cent better even than that!
Are you skeptical? You shouldn’t be. There are tens of millions among us who would have no trouble at all in doubling and redoubling and again redoubling the standards of living to which they have been held down. Let us remember that in 1940 there were about 39 million people who lived on annual family incomes of $900 and less. Even today the situation is none too good. The number of people living on family incomes below $1000 is still 16 million.
Anyway, difficult or easy, there’s our problem. Our productive capacity is going to grow year by year. Four hundred billion dollars’ worth of goods and services by the late sixties, with an average income of around $5000 a year for every person who works for a living, is wholly possible and even probable. If we can’t grow up to it, grow up with it, learn to use it, the very achievements of our science and technology will be our undoing. And what could be more ridiculous!
I cannot believe that we face a future of growing “technological unemployment,” with our incomes lagging further and further behind our ability to produce. As I said earlier, I am convinced that the people of this country, with the knowledge which the war has given them of our power and productivity, simply will not let that happen. Never again will the American people tolerate such blindness and stupidity in public and private policy as those which led us into the dark years of the Great Depression.
At this point I should like to pull all this together in a few figures that show where we have been, where we shall be during the next few years, and where it seems to me we must come out twenty years hence.
Of course, the figures for the future are guesses. They have to be. But they show the shape of things to come, and we’ll need, all of us, to bear them in mind as we make our plans and our decisions next year and the year after and the year after that.
Two things about the national full-employment budget for the late 1960s are certain. First, our total productive capacity will be at least double the level that we have today. It may be much more than this; it cannot be much less. Second, the spending of all of us consumers will have to add up to a sum sufficient to buy at least three quarters of our total annual production. In other words, consumer spending will have to play a much larger part in our economy than it does today or has in the past.
Here, then, are our budgets for the late 1920’s, the late 1940’s, and the late 1960’s:
In 1929 each family spent on the average $2000 a year. In 1949, if a ll goes the way we hope it will, each family would spend roughly an average of $3000. In 1969 each family would spend an average of around $5700.
That means unlimited opportunity for health, recreation, and good living. It means an end to poverty and insecurity. To every family in our land it offers a tomorrow without fear.