What Is the future of Democratic
Those Government-Owned Plants Shall We Utilize Them for Public Welfare—or to Strengthen Monopoly? By Abba V. Lerner THERE mm now aomo SlS,<k»,00v,0Oo worth of industrial plants, constructed at...
...And, too, Philip Murray, President I of the CIO, aays this job priority legislated by Congress is not s very ! reliable key to prosperity...
...In seme caaes the incremental cost may be so low that h> sell the product at the incremental cost would not ¦Wa cover the operating expenses (which include a fair return on'the working capital...
...And suppose Ave or six chops hsd the same job in succession before I'ncle Ssm tspped them on the shoulder...
...It is the m»c of the Plants that is important, not the collection of rentals ay the government...
...Joe Comes Home—to What...
...CoNtiKKSS thought it got every, thing set for s lirst-class home coming party...
...But there are more thsn t.OOO.MO , union men in the Army and the Navy...
...Prof...
...The important thing is that the equipment be fully utilised in giving work to Americans, in producing goods for them to consume, and in building up a wot Id free from the poverties and frustrations that would bring forth another war...
...PRINCIPLES These conclusions are based en tke following fundamental principles 1. Plants should net be ieVc if they ran produce something for which the public It willing to par mere than the cost of tke other resaareea used up in the coarse of its production...
...Jf there were real competition the operatoi would be SpMUtisfied with the scale of his output .s long as it at*pOSSible to sell an extra unit of output foi more than 9m coat of the extra factors of production, labor and Spterials, etc., that are used up in making this extra jjfiuduct...
...An absence of competition from private enterprise would permit such agencies to operate in exceptionally favorable circumstances which, however, cannot be expected to last...
...The plants should be leased to the highest bidder, the cost of the plant playing no part in determining the rental...
...Why should he not be happy...
...Government agencies should have the same right to bid for the use of the plants as private firms or cooperative ventures, and on the same conditions...
...No special form of enterprise should be penalised in competing with the •thers, but neither ahould it be favored...
...And, moreover, Joe has had a fine line of anti-union propaganda fed to j him sll through these war years...
...I. Every kind of enterprise—private, public, or cooperative—must Justify itself ky providing as good a service as any other form of productive organisation can provide...
...This means that the government agency must (a) adopt accounting practices similar te those which would be imposed on a private enterprise, (b) be subjected to the time conditions and restrictions, and (c) be able to offer a greater rental for the plant than is offered by any private enterprise, 0. A plant should be scrapped (for junk, for conversion or for export) only if the rental comes to leas than tht si„„ of tha interiit on the acrap value and the iI'/piin of the scrap value for the period ot the lease...
...So—it' is prelty clear—there will not be jobs snd security for G. 1. Joe unless we hsve jobs and security for just, about everyone...
...Those to whom government ownership snd operation spoil progress violently attack any such suggestion of transference to private ownership...
...If they are sold, even at good prices, there can be no check on whether the plants are used in the most effective manner fur raising the standard of living of the people...
...if the government plants did not exist, for they - wesM then not have to fear competition from them...
...If I tere are any private enterprisers who are more efficient than these government agencies they would be able to earn as profit the whole of the savings that their greater efficiency could bring about It would not be very long before the temptation »f these profits overcame their indignation * * • Conclusions I. The government should retain ownership of the plants...
...The same rules governing output in the government owned plants shorld then be applied to the other plants too...
...G.I...
...The ideal tett is to see whether the products are being sold at l|bs price which would prevail under real competition...
...A lot of others ' will find that they can't recognize tke old place when they get back home...
...But although the government should retain owmri - skip of the plants there ia no need for them to be eperafed by the government...
...This is the justification, from the social point of view, of private property and private enterprise as socially beneficent institutions (under con§of real competition), plants should therefore be hired out to the bidder who would undertake to utilize them up point where the incremental cost is equal to the price of the product...
...And we can't have anything of that sort unless we hsve strong Unions...
...And if the beys coming home went to enjoy regulnr mess instead of getting into s mess—it might be s good Ides for them to join up...
...Who will get the nod when the whistle blows...
...A. P. Lerner, formerly of tha Ixindua School of Economics, ia now on the graduate faculty of The New School for Social Research...
...l-erner will write regulsrly for The New leader on economic subjects...
...Conservative business men think that the •hit right thing to da, in returning to the "normalcy" tt peace, is to transfer them all to private business...
...flmka incremental cost is the value o( tin extra ma aerials, the extra labor and the extra wear of machinery ¦jaelved in producing an extra unit of output...
...In ex imMing output to this point (for the sake of making ¦¦greatest possible profit) he would be serving society amst efficiently every time he converted a dollar's worth ¦Ppateriais and labor service into more than a dollar's Mtib of his product...
...The owners of competing plants would naturally be kappie...
...3. The lease should stipulate that the plant it to operate at full capacity (i.e...
...Firms might tryto get around the plan by producing "at full capacity in the government owned plants while Mtrletiag output in other plants they own or even *»ing them down...
...They could be leased out te anyone who would utilize them fully for production...
...where price is equal to incremental cost) unless the price it so low that this would prevent the operator from covering hit working expenaet...
...In the middle will be those who only want to be sure that profiteers and monopolists do not get these valuable properties for a Ron i of these approaches touches the really important issue...
...There won't be anything resembling ' the old job within shooting or shouti ing distsnce...
...These con septs have no close connection with the needs of the people of this country, snd how they will be affected by what is done with the plants...
...If is possible that for a time private enterprise would not be willing to work the plants on such terms, but even if there are iki bids whatever from private firms there is no need for the plants to stay idle...
...That is to say he would rhoo e to produce ¦Bt output which would make the price of the product ige greater than the "incremental cost" of producing it...
...The . union men have laid down on the job of making planes and tanks and guns, Joe was told...
...Tha imposition of this condition will reduce the " rental, but the loss to the government in rental will always be much less than the gsin to the community at a whole from the full utilization of the plants...
...Output at lest than full capacity thould be permitted only if the operator it making lest than a fair return on his working capital...
...2. Firms which rent the government plants should not be permitted to make monopolistic preftts by restricting the output of those plants...
...The higher rental that could be obtained in the absence of this condition would merely mean that the government would get some of the extra profit that the operator ¦of the plant could get by a monopolistic restriction of output, so as to be able to charge a higher price to the consuming public...
...cost °f construction of the plant should play no ,J*** in determining its rental because it is better that >~?.Plant be weed, even at no rental, than that the eWemment should collect high rentals from a few of while the rest remain idle...
...1 And there is Onvernor Dewey—who thinks there will he jobs enough if we just reduce the taxes and let business ' alone...
...SoME simple test ia necessary to check whether the plants are really being used most effectively...
...Only if they could not otherwise cover their operating expenses should they be permitted to charge more than the incremental cost and to work any of their plants at less than full capacity...
...Without the lease being considered broken, by as much *» "i necessary to prevent the incurrence of losses, but ,n«yer sufficiently to permit the operators to earn more ¦B* a fair rate of return on their working capital...
...There may be some bull sessions at the front in which the unions are not without friends...
...In such cases the price ^hou'/ ^ allowed to go above the incremental cost...
...For this reason, and not because of any socialist doctrine, the government should not sell the plants outright...
...4. Where the lessee controls other plants producing the same or closely competing products the same stipulation should apply to all such other plants 5. Plants may be operated by government agencies provided these do not compete unfairly with private enterprise...
...The veteran bark front the wars is to have his old job hack...
...By Abba V. Lerner THERE mm now aomo SlS,<k»,00v,0Oo worth of industrial plants, constructed at government expenso, ana the problem of their disposal soon {ness as...
...This subterfuge can be prevented . W making it mandatory for bidders to disclose ownership or control of other plants producing the same or closely competing products...
...His "Economics of Control" was published recently by Marmillsn...
...Free enterprise really means s fair field for all forms of enterprise, public, private, and cooperative, enabling each form to survive st those points in the eeonomv which it serves society more efficiently than the others...
...A lot of G.I.'t never hsd s job before they put ! on their uniforms...
...All three of them are based on a sentimental allegiance to an abstract notion of Private Enterprise, or Socialism, or a Fair Price...
...They might even try to buy them only to destroy them i of keep them idle...
Vol. 27 • October 1944 • No. 42
