THE ECONOMIC PATTERN FOR POSTWAR AMERICA

...6. Surplus War Supplies Here some planning has been done...

...While great mobility of labor has always been an American tradition, we may find that our labor markets have become rather stable...

...As a justification for peaee optimism," he says, "these calculations are worthless...

...Myrdal uses (and dissects) the widely publicized and soothing figures issued by Prof...

...Myrdal poses two questions: (1) Do the plans of private enterprise add up to full employment, and (2) from what source will the needed purchasing power for full employment come when the Government no longer needs almost half of our income and production for war...

...Alvin H. Hansen of Harvard University, figures which have been used by many economists and writers to show that our postwar problem is really nothing to worry about...

...Myrdal analyzes our war boom and finds that it resulted from (1...

...Myrdal is careful to point out, however, that the war effort has been backed by an unlimited demand procured by unlimited purchasing power, but that the postwar economy will be faced with a limited demand, backed by orthodox financing...

...War production will be sliced tremendously: aircraft to five per cent its present level, shipbuilding to 10 per cent or less, machine tools to 10 per cent (with its present capacity, this industry could supply a country the size of Italy with all the machine tools it needs within six weeks...

...Myrdal: Release of Soldiers and Workers Myrdal gives a minimum figure of 14.5 million soldiers and workers to be released after the war...

...To keep the boom going we must, in a very short time, catch up with the rise in the standard of living which . has been accumulated during the past 15 years...

...Myrdal then takes up the favorable and unfavorable factors for the maintenance of boom conditions . after the war...

...While America is the second largest importing country in the world, and while we were before the war the world's largest exporter, foreign trade plays a very subordinate role in our economic planning...

...But thereafter an over-production crisis must be apprehended...

...Came the war, and with the impetus of Pearl Harbor the American economy jumped from stalemate to full employment...

...Dr...

...True, many workers have built up nice nest-eggs during the war, but unemployment and lower wages will prevent such savings from being turned into purchasing power...

...Myrdal is no superficial alarmist...

...3 million . . . building trades (presupposing a building program of about $15 billion a year...

...A gradual rise, fine during a recovery period, could not keep the business curve from nosing downwards...

...Concerning these figures, Dr...

...Myrdal is concerned with the conversion problem is best expressed by his words to his own countrymen...

...Entitled Economic Developments And Prospects In America, the Swede's survey was first read as a paper before the Economic Society of Sweden and has subsequently been circulated privately in this country as one of the ablest documents on postwar prospects for America...

...In the field of agriculture a continued shortage of production and very high prices are to be expected for a few years after the end of the European war...

...Many munitions plants and shipyards have been located in towns where there is no other industry and where the war industry has no peacetime counterpart...

...Yet both housing and business construction will reach at peak only about seven billion dollars, leaving about eight billion dollars to be accounted for by Federal, state, and local building of hospitals, schools, etc...

...This cannot help depressing the business cycle...

...Still we ought to be careful not to be too optimistic...

...Further, there will be a great demand for American products by foreign countries...

...For those who seek a short work week as a solution to all employment ills, Livingston states that a work week of only 33 hours will still leave us with 13 million unemployed...

...Myrdal finds the American public highly—and un-warrantedly—optimistic regarding its chances to retain the high level of war production and business in peacetime...

...Livingston analyzes the meaning of full employment as follows: In 1940 we had nine million unemployed and 46 million employed...

...This is very dangerous, for "if private enterprise should not prove capable "of stabilizing full employment, discontent of the people with the system of private capitalism should certainly be all the greater, and radicalism would perhaps become really dangerous...

...Which contracts and which contractors will be cut off...

...Why not...

...Yet it is possible that a "sellers' market" will be established so generally as to avoid an immediate postwar slump...

...Herein, says Myrdal, is the economic dilemma of American postwar discussion...

...the making of postwar plans for Sweden is a much simpler proposition...

...This is a favorable factor because price and production controls will be maintained, and because war expenditures will decline slowly instead of being choked off suddenly...

...By not raising wages, and, even more, by reduc. ing them, the foundation of purchasing power for full employment is withdrawn and the depression curve . begins to move downward," adds Myrdal...

...The stocks will be disposed of, but hardly without a depressing effect upon business here...

...4. "Too Little and Too Late" Planning "One of the most disturbing features of the lack of postwar economic planning, resulting from the unfortunate internal political conditions in America," says Myrdal, "is the lack of willingness to face the conversion problem and to take the steps necessary to solve it...

...There are plenty of reasons for care, lest, by too optimistic assumption, we make the task seem too easy for our-' selves...

...Apparently it is based on the super-successful war effort of American industry...

...Hansen liquidates the 14% million workers who will be released this way: 3 to 4 million...

...Underlying this optimism is the growing conviction that this is the job of private enterprise, and that the abolition of Government regulations is one of the prerequisites of the maintenance of full employment...

...A severe slump—probably a culmination of the 1929-'32 crisis—is in prospect within six months to three years after the war, Myrdal warns us...

...In a situation where people are demanding full employment, the most simple device for preventing radical views from spreading is to claim that free enterprise will do the job...

...Optimism And Politics Why all this optimism...

...The main features of peacetime conversion are thus outlined by Dr...

...In contrast to our attitude early in the war, our attitude now is rather chilly towards foreign trade...

...6. Tanering Off of the War The strong possibility that the war with Japan will continue a year or two after the defeat of Germany . means that the gradual displacement of war economy ^ will give conversion a badly needed pause and help to keep things going until V-Day...

...3. Liquid Savings We have immense savings in cash or liquid form...

...3 million . . . service industries (domestics, etc...

...The favorable factors are: 1. Restocking Of Inventories and Relief The restoration of exhausted stocks to normal volume may amount to 10 billion dollars after the war...

...2. Deferred Demand Our greatest hopes are tied up with the extensive deferred demand, especially for durable goods...

...Many businessmen believe that full employment in the postwar world is the great test of private capitalism...

...2. Severe Regional Upsets Myrdal decries the tendency to talk about "overall situations...

...Myrdal concludes that: "It is to be expected that America after the war in Europe will experience a high degree of economic unrest...

...It is not at all concerned with how the whole procedure is to be brought-about—by developments over a period of time .. .it presupposes full employment and then studies the direction of demand for manpower required for realizing this supposition...

...The national income, %ith full employment, would amount to $149 billion in 1948, compared with 1940's 97 billion dollars...

...but how can it be done in an unregulated capitalistic society where, it seems, every boom must have an end and lapse into depression ? With Government supporting the war boom by purchasing war materials to the extent of half the national income, most people are looking forward to peace as a situation in which we will have no state regulation or state bureaucracy...

...3. Transfer of Labor The economic and social problem of transferring workers between industries and geographical locations will be tremendous...

...America's postwar problems depend upon what is going to happen when Government demand for war materials drops and then stops, and when compulsory regulations are relaxed and replaced by "free enterprise...

...the Government thus controls 100 per cent of America's total production of synthetic rubber and high-octane aircraft gas, 92 per cent of magnesium production, 50 per cent of the machine tool industry, and even 10 per cent of the steel industry...

...There will certainly be mass unemployment in large areas...

...According to Myrdal, America's economy was in a seemingly perennial and irreparable stalemate from 1930 to 1940...

...He speaks from long acquaintance with the American scene and world economics, and this study is a welcome antidote to the newspaper and magazine advertisements of postwar gasless automobiles, iceless refrigerators, insectless Summer homes, and big wages for all...

...He recently authored the definitive, profound work on the American Negro, An American Dilemma (incidentally, if you haven't read it, it's past high time...

...Perhaps half the workers in California alone will be released...

...aluminum to five per cent...

...To baek up Dr...

...1 million .., will return to agriculture...

...The Principal Factors Dr...

...Because of rigid habits of economy and unstable income, the American standard of living during the '30s did not keep pace with our increase in productivity...

...The internationally known head of the Swedish Postwar Planning Commission, Myrdal spent several years in the United States making a survey of social and economic conditions...

...Price development will be uncertain and the price structure will be badly shattered...

...them—at the high wartime cost...

...5. Unemployment Relief Taking for granted that unemployment relief will be generous this time, Myrdal adds that we will have 15 million veterans who, with their relatives, will dominate politics to the extent of making relief grants generous, thus increasing purchasing power...

...When World War II broke out, the national income had not.reached the level attained in 1929—even though our increasing population affords 500,000 workers each year, and our technical advances increased productivity by about 2% per cent a year...

...Myrdal laconically remarks, "However, the political prerequisites for the realization of such a program hardly exist in America...

...However, while foreign loans and trade are unimportant to us, they are extremely important to the rest of the world...

...it is no longer regarded as being important for keeping up employment in the United States...

...But the huge stocks of state-owned products which the War Department will have on hand at the end of the war—office equipment, blankets, cars, tools, and foodstuffs—may amount to as much as 60 billion dollars...

...Built at exceedingly high cost due to the war, and privately-operated, they amount to three-fourths of all factories built during the war and are valued at 15 billion dollars...

...7. Cancellation of Contracts Contracts involving 100,000 principal concerns and 10 times as many sub-contractors, and amounting to over 75 billion dollars may well have to be cancelled and individual damages settled at war's end...

...Sounds good, doesn't it...

...Myrdal: "I dare make the prediction that, whatever party may be in control of Congress, there will not for a long time to come, not during this decade anyhow, be a balanced budget in America...

...A recent survey indicates that 53 per cent of the American public is ready to buy 2.3 billion dollars worth of cars, and almost one billion of household appliances, as soon as the war ends...

...8. No Balanced Budget Says Dr...

...This means that the respective enterprisers merely believe in full employment in general, presuming that everyone else will act...

...For agriculture he sees a continued production shortage and high prices for a few years after the close of the European phase of the war, but over-production and depression afterwards...

...But Dr...

...about three fourths of them can be converted to peacetime production...

...Unemployment and unemployment relief will tend to keep labor immobile everywhere...

...He passes on to the international scene and says that the repercussion of American economic developments on the rest of the world will be serious...

...Livingston raises a danger signal: he is careful to point out that if 1946 production merely equals that of 1940 (a good year by 1930-1939 standards), unemployment will amount to 20 millions, as a result of increased productivity, new workers, and our 1940 figure of nine million unemployed...

...to trade—if there is full employment...

...Many who have migratedto the agreeable climate of the West Coast plan to stay there...

...If America goes into a crisis and depression . . . loans as well as importation tend to drop considerably and the result will be that economic possibilities will deteriorate throughout the world...

...Absorption of Workers To estimate this process, Dr...

...However, whether or not they will immediately be converted to purchasing power is doubtful, depending on how much security the purchasers can be assured of...

...In answer to the second question he says, "Are the American enterpriseiv likely to stand up before the country and complain that the critical economic situation compels-them to suggest a huge rise in wages in order to create a sufficient basis of purchasing power for production at a level of full employment...

...Relief and the needs of reconstructed Europe may offer what Myrdal calls "opportunities for humanitarian dumping on a large scale under . .. . UNRRA," but even this won't suffice...

...However, much of the demand will be for goods of which there will be a shortage in the United States, so that there will be a considerable reduction from our wartime exports of some 13 billion dollars...

...The unfavorable factors are: 1. Sharp Decline in Postwar Purchasing Power Unemployment caused by the conversion to peacetime production, plus the return to the normal workweek without overtime bonuses and the end of high wartime wages, will, Myrdal feels, cut the national income severely...

...Our optimism is also underlaid with political considerations...

...Full employment depends on our ability to stabilize our present boom...

...Survey By A Distinguished Swede The Economic Pattern For Postwar America By SYDNEY H. KASPER MASS UNEMPLOYMENT, shortages in some critical fields and overproduction in others, and a badly shaken price structure—these are the principal economic developments that Gunnar Myrdal, famed Swedish economist, predicts for postwar America...

...Myrdal prefers the calculations made by S. Morris Livingston of the Bureau of Foreign and Domestic Commerce...

...at the same time, 80 per cent of American workers who are now employed, according to a poll by Fortune Magazine, are convinced that they will have jobs after the war...

...This slump may turn out to be a culmination of the deflationary crisis of the early '20s and the gigantic crisis between 1929 and 1932...

...If we assume that there will not be full employment, then the release of manpower in industry would be greater in all industries and the possibility of providing the unemployed with new jobs would be less everywhere...

...is altogether static...

...5. Labor-Business Conflict Over Wages While employers want wages lowered, workers who, for the most part, have kept their no-strike pledge, want wages unfrozen and pushed higher...

...Words that Americans, as well as-Swedes, might take to heart as they behold the dawn of victory and the prospect of peace...

...One striking fact constantly overlooked in popular discussion is that if motor car production should be expanded to eight million a year, compared with the prewar peak of six million in 1937, the motor ear industry would, nevertheless, be forced to lay off several hundred thousand workers...

...The analysis...

...a heavy inflationary pressure initiated from underneath by Government demand for war goods, and (2) severe compulsory regulations from above by means of which production and prices are directed and controlled centrally...

...in its most terrifying form...

...7. Continuation of High Government Expenditures There seems to be general agreement that defense expenditures, interest on the Federal debt, pensions to veterans, extension of social insurance, relief, educational and health services, and housing costs will keep combined Federal and state expenditures up to about 30 billion dollars after the war, in contrast to pre-war's eight to nine billions...

...Such things do not happen in real life and hardly ever in the world of fiction...

...Shall the Government operate them in defiance of American tradition, or shall private industry buy...

...A boom could conceivably be stabilized in a country with a centrally directed economy, such as the Communist and Nazi economies...

...How seriously Dr...

...By the end of 1943 unemployment was down to a minimum, manpower rose from 55 to 64 millions, and production increased by 50 per cent over the prewar level...

...Other industries which have been curtailed by the war—leather, glass, textiles, furniture— will need a lot of manpower, but even the highest forecast indicates a total industrial employment of 14 millions, compared with today's 18 millions and pre-war's 10 millions...

...Fifteen billion dollars would be the proper share of building under full employment conditions...

...Livingston then proceeds to translate such full employment into concrete plans of production and investment for every branch of industry and product...

...But, probably within . . . half a year to three years this development will change into a slump...

...Such separate plans, he adds, will inevitably lead to slump, unemployment, further slump, further unemployment, etc...

...In answer to the first, Myrdal states that numerous industrialists have made extensive calculations on the basis of Livingston's figures, regarding their own production and investments...

...8. Government-Owned Plants and Equipment Most difficult of all is the problem of disposal of government-owned plants...

...Adding to this the 2% million people who have and will have come of age from 1940 to 1946, subtracting the women, youth, and older workers who will retire, and figuring a peacetime army of two millions, we find-that full employment in 1946 will mean an increase in employment over 1940 by 10 millions...

...Even if the miracle occurs and employers maintain or p raise present wage levels, Myrdal doubts that the average American will increase his standard of living so as to absorb all the new products produced by full employment...

...Then unemployment will arise...

...How much will be paid ? Myrdal remarks, "If the whole matter is not handled with great wisdom, the resulting disputes will keep busy for a long time a much larger number of American lawyers than America is now encumbered with...

...2 to 3 million...

...These factories are solidly built and modernly equipped...

...Myrdal's painstaking survey of the United States economy is now widely consulted by Government and business economists...

...Add to this, says Myrdal, the restlessness engendered by the reconversion procedure, mass unemployment in war centers, and probably a confused political situation, and the result may be a "radicalization" of labor opinion, actual conflicts on the labor front, and, unfortunately, even "the race question...

...when questioned about the part they would play in the general plan, they have said that their own figures would run at a considerably lower level than was necessary for the fulfillment of a full employment program...

...There will be shortages in certain fields and over-production in others...

...Prof...

...to produce full employment...

...War Boom Analyzed The study begins with a brief summary of pre-war conditions in this country...

...We are also dependent on developments in the outside world . . . my studies of the economic situation in America and my reflections as to what a slump in America would mean to Sweden have made me feel very serious...

...Myrdal's statement, one should read the statements of Robert M. Gaylord of the National Manufacturers Association and Eric Johnston of the U. S. Chamber of Commerce in hearings before the WLB on the steel workers' request for higher wages...

...4. Construction We all expect lively building and construction activity after the war...

...Myrdal mercilessly douses us and these figures with cold, icy logic...

...Only a rapid rise in our standard of living will make for full employment...

...The greater part of-American industry will be involved...

...women, youth, and older work- ers who will voluntarily retire from the labor market...

...Government-owned plants dominate certain fields...

...Wages have risen considerably and corporation profits have zoomed to an all-time high...

...This crisis may be very severe and can have an unfavorable influence on industrial activity in case the latter at the same time shows a tendency of passing i^to a state of decline and depression...

...Even with the most favorable assumptions, he says, the shifts during the conversion period will comprise almost half of the American population...

...Peace will undoubtedly leave us with many depressed areas in the South and on the West Coast, and in some places in the Middle West and New England...

...Because everyone is outbidding everyone else in urging reduction of taxes for the purpose of promoting investment and production...