Harpers

VOL 190 No 1137 February 1945

RJJ •

SHALL WE GUARANTEE FULL

EMPLOYMENT?

STANLEY LEBERGOTT

Mr. Lebergott is a Washington economist specializing in postwar em-}

ployment problems. Articles of his have been published in vari-
{
ous technical journals, but this is his first appearance in Harper's.

in 1941 a well-known publicist alone knows how many millions of unem-

B
ACK
suggested that "at attainable full
employment" the United States could
produce even more than the 99 billion
dollars' worth of goods and services turned
out in the then unequaled boom year
1929. Many an eminent economist and
business man politely called him a vision-
ary. But, to everybody's amazement, the
war has demonstrated that a production of
150 billion dollars or more is quite possi-
ble. Furthermore-and this is the fright-
ening thing-this vast flood of production.
has been achieved without any of the ten
million energetic and efficient young men who
normally provide the backbone of the labor force.
Obviously, therefore, the problem of
finding jobs in postwar production for
ten million ex-service men and heaven
Copyright, 1945, hy Harper & Brothers.
ployed munitions, ship, and aircraft work-
ers is a matter demanding the utmost
sobriety and forethought, not the bland
wishful thinking of the love-will-find-a-
way school of economic analysis. We must
face the gloomy possibilities with the
tough-minded clarity of a man taking out
insurance to protect his family, or a board
of directors setting aside reserves against
the coming of a lean year. An effort to
deal with such possibilities in advance is an
essential part of the duty of every responsi-
ble parent and business man-indeed, of
every responsible citizen who is con-
cerned for the future of our country.
At present this responsibility is, by and
large, being ignored. There has been talk
of 60 million postwar jobs, but we have
AU Rights Reserved.
194 'HARPER'S MAGAZINE

yet to see a detailed plan, with strong
business or government support, which
proposes to assure them. Throughout
the country a happy-go-lucky optimism
says to the soldier and war worker: "Take
it easy, bud. There'll be work a-plenty.
Three hundred_bucks in dismissal pay is a
lot of money for a soldier.; and every war
worker has his little pile of savings. There
will be more than enough loose money to
get things going again."
But will there be?
In support of the comfortable belief that
the postwar world is bound to be one of
humming prosperity, three arguments are
commonly advanced:
1. Business is planning it that way.
2. The spending of war savings will
bring about an unprecedented demand for
goods.
3. The plastics, light metals, electronic
gadgets, and other scientific wonders de-
veloped in the course ofthe war will create
new demands, new industries, and new
high levels of business activity.
It would seem to be simple prudence to
examine each of these arguments to find
out whether it really contains a satisfac-
tory answer to our coming employment
problem.
II
A better way of giving business a black
eye-r-since the change-over will not be
painless-could hardly have been figured
out. For if business fails to come up with
the jobs, it will find that its generous prom-
ises have laid up a store of wrath. Of
course business men will do their best to
follow the terms of the Selective Service
Act, and we may depend upon it that they
will do everything possible to provide jobs
for displaced civilian workers as well as for
returning service men. But we must keep
an eye on what is possible, as well as what
is desirable.
Business alone could do the job if it had
(1) the resources; (2) the united direction;
and (3) the willingness to buy raw materi-
als, turn out goods, and keep men at work,
regardless of sales, profits, and general
economic conditions.
How about the resources? It is true
that some businesses have' been making
enormous profits and h..•ve laid aside huge
reserves. These concerns may be able to
assure postwar jobs to a relatively small
slice of the total labor force. But for
every firm in this category, there are a
hundred others which either do not have
substantial reserves or cannot convert to
peacetime production. The shipyards,
which have been absorbing workers and
still more workers ever since Pearl Har-

F IRsT, let us look at the plans of business. bor, are an example. During less than
Many far-sighted business men have two years of war we tripled our ocean
realized that another major depression tonnage, and we will go into the peace
might wreck our system of private enter- with a merchant marine at least equal
prise for good, and they have planned as to that of all other nations combined.
never before to forestall such a catastrophe. Obviously we will not need to build very
It is a poor firm indeed which does not many more ships for some time to come.'
have its Vice President in Charge of The huge chemical factories can hardly
Postwar Planning-often with a consid- expect stump-blowing and highway blast-
erable staff-and many trade associations ing to require explosives on anything like
and special organizations (such as the the scale demanded by the siege of Aachen
Committee for Economic Development) or the bombing of Tokyo. Plane demand,
have laid plans for whole groups of indus- according to the Aeronautical Chamber of
tries. Moreover, nearly all businesses ex- Commerce, is likely to skid by 85 or 90
pect to hire back their veterans "where per cent, and with it will go the demand
possible" in accordance with the terms for astronomical tonnages of aluminum
of the Selective Service Act. A good deal and magnesium. The machine tool in-
of energy and advertising space has been dustry has turned out enough equipment
devoted to spreading the idea that this during the war, in the estimation of some
legal provision, together with the well- manufacturers, to supply the needs of the
publicized plans of the business commu- next twenty years. And so on. How
nity, will make the return to peace a rela- many jobs can such industries safely
tively smooth and painless affair. promise?
 SHALL WE GUARANTEE
business is neither a mon-
M OREOVER,
ster directed from some mythical
Wall Street lair, as some people believe,
nor the single-souled Hercules which the
institutional advertisements sometimes pic-
ture. It is a collection of many enter-
prises, big and little and in between.
Each of them has a healthy tendency to
go its own way; every firm is intent, first
of all, on doing the best it can for itself.
No spokesman, however eminent and en-
crusted with directorships, can honestly
speak for "business" as a whole. At best,
there can be only a great many individual
plans, which we hope may add up to
something approaching full employment.
And it can be only a hope, not a guaran-
tee. Only one business in a hundred can
promise to hire a given number of workers,
or turn out a fixed tonnage of its product,
regardless of general business conditions.
Many a firm has a neat postwar plan for
hiring lots of men, for turning out plenty of
goods, and perhaps even for expanding its
plant; but it also has a reservation which
doesn't show on the blueprints-it ex-
pects to wait and see how things are going
after the war before it puts the plan into
effect. 'A spokesman for the Association
of American Railroads, for example, re-
cently asserted that "the nation's railroads
do not expect to place orders for new
postwar equipment until at least six
months after the close of the present con-
flict, at which time it will be possible to
determine their postwar needs."
This wait-and-see attitude is perfectly
reasonable. Any business which would
guarantee to buy equipment and provide
jobs before it had a shrewd notion whether
it could sell its product at a profit would
simply be risking suicide. But while each
individual firm waits to see what other
industries will do, what the general post-
war business picture may look like, ex-
soldiers will be waiting for jobs. In this
period of prudent waiting, a deflationary
trend may well set in, which will make the
shiny postwar plan of each firm look im-
practical, and which may indeed dictate
a further curtailment.
It would be utterly unfair to expect
business men-each intent on the survival
of his own firm-to shoulder the sole re-
sponsibility for guaranteeing jobs for all
FULL EMPLOYMENT? 195
veterans regardless of uncertain markets.
The business man will have problems
enough, in all conscience. He is going to
have to help Captain Joe, who com-
manded a bomber on fifty combat mis-
sions, to make the delicate adjustment
back to a humdrum stock clerk's job .. He
is going to have to switch machines which
made bomb components over to making
some peacetime gadget, and to try to find
a market for the new product. He must
find some way to make his employees con-
tent with a normal wage, in the face of the
fact that the GI had an income-in-
cluding pay, clothing, food, and quarters
-considerably higher than the average
real income of single men in peacetime.
Surely these are .problems enough. Is it
fair, in addition, to hold a shotgun at the
head of business and say: "Employ all
these men, or take the responsibility for
bringing on a postwar depression'tr
The insistence that all will be well just
because business wants it to be well not
only will fail to solve the basic problem-s-
it also will boomerang on business itself.
William Carpenter, economist for the
Edison Electric Institute, has warned that
"unless planning rests upon a solid founda- .
tion of common sense, the public, oversold
on the future, will inevitably react in dis-
appointment, and will look around for
someone to blame."
There is only one way out of this im-
possible situation, in which we want em-
ployment assured and want business to do
the assuring. That is to support the as-
surance of each individual firm to keep
its output and employment at the maxi-
mum with some general assurance con-
cerning the overall volume of employ-
men t, and hence the overall demand for
the products of business. The possibility
of providing such an underlying guarantee
is discussed in a later section of this article.
III
N ow let us look at wartime savings and
postwar demand. Some of the rosy
estimates of the pent-up flood of postwar
demand are misleading. It would be
difficult for the average American to buy
in the few months after the war's end the
three cars which he normally would have
196 HARPER'S MAGAZINE

bought in the war years, or the one and a consumer. It will create a "new pattern
half refrigerators and two radios which of spending and saving. Some 20 million
some ca1cuiators expect him to buy. And .families, thanks to war savings, may be
to these swollen estimates of demand is inclined to use their current earnings more
added the confident assumption that peo- freely, and their spending may check the
ple not only will want these unusual tendency toward oversaving which many
numbers of cars and radios, but will be students hold responsible for deflationary
able to buy them. With the billions- phenomena in the 1930's."
some economic soothsayers put the figure Maybe so. But most of us know from
at $250 billion-of wartime savings which simple experience, as well as from the
will be on hand, we are told that we shall budget surveys of the Bureau of Labor Sta-
have a perfect thunderhead of spending tistics and the Bureau of Home Econom-
power, which is bound to sweep us into ics, that the middle and lower income
prosperity. groups always have spent all of their earn-
Here again the comforting legend re- ings.i aside from the slender and probably
quires a little cold-blooded dissection. irreducible margin saved for emergencies.
First of all, it must be realized that the These families will continue to save and
massive estimates of "savings" which are spend in about the same pattern after the
being bandied about are savings only in war-unless we develop a much broader
the economist's very special sense. They system of social security than we have. rea-
include such items as decreases in prewar son to anticipate. It was not the savings
debts, larger holdings of insurance, and in- of these families that created the deflation-
creases in the liquid assets of the upper ary spiral of the last depression. I t will
income groups. If we want a realistic not be their unnatural spending behavior
estimate of the immediate postwar de- which will create a postwar boom. Forty
mand for consumers' goods, .such items or 50 billion dollars split among 39 million
have to be stricken out. People rarely families is not enough to change their
cash in their insurance policies to buy a long-established buying habits, or to wipe
new radio. Nor are rich families in the out their worries about the future.
habit of trespassing on their savings in
order to purchase a second car or a new
set of flat silver; they are more likely to
live on their ample current incomes.
T HERE is another school of thought
which admits that wartime savings
may not radically change the average
Any useful estimate would count only man's pattern for spending his current
the reasonably spendable savings tucked income, but argues that these savings will
away during the war by the lower and be spent directly for consumers' goods.
middle income groups earning less. than Followers of this school point to U. S.
$5,000 a year. And it must not include Chamber of Commerce surveys which in-
the basic reserves which these families dicate that 1,500,000 families will build or
had built up before the war, since what we buy new homes, 3,700,000 will seek auto-
are concerned with is the increase in mobiles, and so on for furniture, washing
spendable money-the "something new" machines, and refrigerators. Such esti-
which might bring prosperity. Such an mates give some indication of what people
estimate recently was compiled by the would like to do. But in order to foresee
Federal Reserve Board, which calculated what they actually will do, we need some
that in June, 1944, the increase in the more information. This was fairly well
readily spendable savings of these families provided by a recent public opinion sur-
amounted to about $40 billion. To this vey of War Bond owners. It disclosed
may be added whatever sum seems rea- that 100 per cent wanted to spend, and
sonable for the rest of the war. How that 11 per cent were going to spend right
potent a force do we get? away after the coming of peace. But 73
per cent planned to wait a while and see
according to one school of how things went. While they wait, busi-
T ERRIFIC,
thought. This fund will be a source ness will wait. Production will wait.
of security. It will ease the mind of the And employment will wait.
 SHALL WE GUARANTEE
The reasons why consumers may go
slow in their postwar spending are by
no means trivial:
1. Overtime payments-now running at
perhaps $12 billion a year and averaging
15 to 20 per cent of payrolls-will be wiped
out at the end of the war, or perhaps earlier
if we taper off on production after the
defeat of Germany.
2. Many workers who shift into peace-
time industries must expect lower pay.
For in general, pay rates in those occu-
pations which dominate peacetime activ-
ity-light manufacturing, retailing, serv-
ice trades, farming, finance-s-are' con-
siderably lower for the average worker
than wage rates in the highly productive
durable-goods industries which are domi-
nant in wartime. For example, in the
month before Pearl Harbor hourly earn-
ings in durable-goods manufacturing av-
eraged about 82 cents, or a full 24 per cent
higher than earnings in light non-durable-
goods industry. Those workers who shift
over to the making of durable consumers'
goods, such as automobiles and washing
machines, have better prospects, of course;
but they will be far fewer than those who
must shift from highly paid war industries
to less lucrative jobs, such as running cot-
ton looms or driving laundry trucks. This
shift, plus loss of overtime, probably ,will
more than offset any reduction in taxes
and decline in bond purchases.
3. The conversion period probably will
range from a week or two for some lucky
plants up to six months for those which
face a lot of complicated retooling and re-
organization. During this period, of what-
ever length, most of the factory's workers
will be idle, and their futures will be uncer-
tain. Naturally they will hang on to their
savings until they are sure of steady work
again.
4. The price of postwar consumers'
goods may determine to a considerable ex-
tent the vigor of the buying boom. A few
manufacturers, such as Ford and Charles
E. Wilson of General Electric, have an-
nounced that they hope to price their
products as low as they were before the
war, or lower-that greater efficiency in
manufacturing can be expected to offset
higher labor and raw material costs. But
many other 'producers expect to set their
FULL EMPLOYMENT? 197
prices as much as 40 per cent above pre-
war levels. If this happens on a wide-
spread scale, many potential buyers can
be expected to wait a while for prices to
drop back to the levels they have long re-
garded as "normal."
All this might be summarized by noting
that the primary factor which will deter-
mine postwar spending will be not the
size of past savings but the size of antici-
pated future income. Job security, not
wartime savings, is the key to what lies
ahead. Give the average consumer a rea-
sonable assurance of steady work and he
will spend a good part of his wartime re-
serves. But leave him uncertain of the
future and he will hoard. The mere
promise of security, in other words, would
go a long way toward creating jobs; while
fear of unemployment inevitably will help
bring on the very thing we fear.
IV
about new products? Perhaps
W HAT
the gaudiest of all the arguments
that insist on automatic prosperity after
the war is the one which points to the Mar-
vels of Science. Technical and scientific
developments during the war, we are told,
have created a whole range of new prod-
ucts and potential new industries. The
demand for plastic houses, electronic quick-
freezers, magnesium dishwashers, and a
helicopter in every garage is certain to
bring jobs and more jobs.
For any given industry, these hopeful
predictions may well be true. But we
must be quite clear about the difference
between such a conclusion and the con-
clusion we are interested in getting at:
will there be a net-gain in employment as
the result of such substitutions?
I NA few cases there may. If the develop-
ment of prefabricated plastic-and-
aluminum houses, for example, helps
break down the network of restrictions
which have so greatly hampered a real
boom in home-building, then we can
look for new business activity and new
jobs.
But to the extent that plastics merely re-
place steel and glass, or magnesium re-
places cast iron, there will be no immediate
198 HARPER'S
increase in employment. There will be
more jobs in the plastics factories, but
fewer in the steel and glass plants. Often,
in fact, there may be a net decrease injobs,
since one of the most attractive things
about many of the new products is that
they can be turned out with a lower labor
cost. (A recent addition to' one of the
big aluminum plants in the South cost
several million dollars, and phenomenally
increased the output of the factory; but
the increase in employment totaled only
forty workers.)
There will of course be some new hiring
to build factories and machinery for the
new products, but this source of employ-
ment is easy to exaggerate. For the war
will leave us with a huge stock of general-
purpose industrial buildings and equip-
ment which can be adapted to the manu-
facture of many gadgets still in the incuba-
tor stage. For many years construction of
factories is likely to lag below the prewar
"normal."
We are not concerned here with the
question of whether replacement of old
products by new ones is a good thing for
our economy in the long run. Every
advance in technology may eventually
increase employment, by making our in-
dustry more efficient and labor more val-
uable. Our concern here, however, is for
the immediate postwar months and years.
And within that period there is little pros-
pect that the Marvels of Science will pro-
vide a substantial number of additional
jobs. Whatever gains are made in one
industry are likely to be largely offset by
losses in another.
v expected to leave the labor market to raise
to these three Dream High-
I NADDITION
ways to Prosperity, there are other
paths and byways which some people hope
may lead us automatically out of the eco-
nomic woods. In many circles, for ex-
ample, there is a touching confidence that
a soaring increase in foreign trade will
avert a postwar employment crisis. This
possibility is examined elsewhere in this
issue of Harper's in an article by Bernard
B. Smith and John A. Kouwenhoven on
the dangers of an export boom unaccom-
panied by a great increase in imports.
MAGAZINE
Here, therefore, it is enough to note that
reliance on a foreign trade boom seems to
be as ill-founded as belief in the other
panaceas.
The GI Bill of Rights sometimes is cited
as a solution for the re-employment prob-
lem. This legislation is an excellent thing
in itself-but it is not the answer we are
looking for. The $300 maximum dismiss-
al pay which it provides will take care of
transportation, civilian clothes, a brief nec-
essary vacation, and a short period of job-
hunting for the ex-soldier; but it gives him
no assurance of steady work. The provi-
sion for retraining and education will be a
godsend to those service men who want
to take advantage of it. They will num-
ber less than 10 per cent of all men in the
services, however, if Army surveys are
correct. It is clear that most of the vet-
erans will want real jobs with adequate
incomes as soon as possible to support
themselves and their families. No legis-
lation now on the books pretends to give
any such assurance to the veterans, much
less to the civilians who will be looking
for jobs immediately after the war.
H ow many jobs will they need? In
November, 1944, America's total
labor force amounted to about 65 million
men and women. Of this number, some
10 million were in the armed forces, while
55 million were at work in our factories,
farms, and service trades. There were, of
course, virtually no unemployed.
Assuming .that the war ends sometime in
1946, we can calculate that our labor force
will then total something like 60 million.
At least 5 million women, old folks, and
youngsters now busy in war work can be
families, retire, or go back to school. At
a guess, perhaps 2,U million men will re-
main in the services to police occupied
countries and to provide a larger standing
army' than we ever had in the past. An-
other 2 million or so will fit into what
economists describe as "the pool of fric-
tional unemployment." These are people
temporarily out of work while they shift
from job to job. A relatively small pool of
this sort-between 3 and 4 per cent of the
total labor force-is necessary to make our
economy flexible at the joints; it is not the
 SHALL WE GUARANTEE
kind of chronic, large-scale unemployment
we are worrying about.
That leaves 55?'5 million men and
women who will have to find jobs if we
are to achieve anything like "full employ-
ment." Roughly the same number, or
perhaps 1 per cent less, were at work when
war production was at its 1944'peak. No-
body really knows what may happen when
war spending is cut from the present $84
billion a year to, say, $3 billion, which was
about what we spent on "defense" in 1940.
It is probably conservative, however, to
estimate that at least 7 million people
might be thrown out of work. The total
might add up to a good many more; after
all, we had some 7,400,000 unemployed
in 1940.
this forecast is too gloomy.
P ERHAPS
Such skepticism about the job-provid-
ing capabilities of the wave of postwar
spending, the plans of business, and the
blossoming of a host of new products may
be all wrong. Maybe the optimists will
turn out to have been right after all.
The basic moral problem still remains.
All the optimism in the world-right or
wrong-s-cannot touch it. That problem
is simply this: are we going to let security
for our demobilized soldiers depend on
chance, on the hope that the optimists are
guessing right about an indefinite future?
Or does the nation have a responsibility
for guaranteeing security and an opportunity
to work to all veterans and war workers,
just as they have the individual duty of
doing their share in wartime? Is the
economy which clothes and feeds the
service man with such amazing efficiency
today unable to carry out the essentially
similar function of assuring him work the
month after the war ends?
I am arguing that when peace comes the
nation will have to take on this responsi-
bility. From that day on, it will have to
guarantee jobs for something like 55 mil-
lion people. This will become one of the
fundamental tasks of government, just as
keeping the peace and providing for the
common defense have been its fundamen-
tal tasks in the past.
. Those who shrink from this conclusion
may argue that we have faced large-scale
unemployment in the past, and that in all
FULL EMPLOYMENT? 199
these crises the government has success-
fully avoided taking on the responsibility
of assuring work to all who wanted it.
Even the New Deal in 1933 never pre-
tended to put all the unemployed to work;
at most it managed to rig up makeshift,
temporary jobs for something less than
half of them. Can't we get by in the
same equivocal fashion if we run into a
postwar unemployment crisis?
W E CANNOT. The veterans are not
going to accept unemployment
with the bewildered docility which was
characteristic of most of the jobless in the
last depression. Anyone who thinks they
will simply does not understand the vast
gulf between what the American civilian
is getting out of this war and what the
American service man is getting. And if
we do not all realize it in time, it will be
firmly-perhaps violently-brought to our
attention.
The civilian-because of age or a rickety
physique-has been able to remain safe
and secure at home. He has his wife if
married, and the chance to meet plenty
of eligible young women if not. He has
been left almost completely free to decide
where to work and where to move if he
chooses. By and large, he has eaten
better than he did in peacetime. He has
had his choice of a vast range of clothing,
from ornate ties to silk hats. He has had
at once more security and more luxuries
thaI) any other civilian in the world.
By contrast, the men in the services
have been given the privilege of forsaking
their families, friends, and careers. They
have endured discomfort, colossal bore-
dom, and in many cases danger. The
years in which they can learn most rap-
idly, get ahead fastest, are lost forever.
The years in which age and economic
standing make marriage possible are pass-
ing. Many who are already married will
return older, less resilient, less able to take
up their lives gaily where they left off.
Some will return so crippled, physically
or mentally, that they cannot take up the
thread at all; they will have to begin all
over again, under heavy handicaps.
This contrast is underlined in the sol-
dier's mind by the stories which news-
papers and gossip carry into every post
 200 HARPER'S
exchange and USO-manufacturers re-
marking: "I don't want much profit ..
with my profit cut down to $1,200,000
my road is made extremely difficult finan-
cially"; contractors who gleefully an-
nounce that if the war lasts another two
years they will salt away ten million bucks;
shipyard workers earning $5 an hour,
$50 a day; strikes in war industries; war
plants palming off defective material on
the Army; civilians demanding a halt in
war production so they can get more
whisky, complaining about gas rationing,
whining about a shortage of prime steaks
and cigarettes in a world aflame.
None of the stories is pretty. And
some of them are true. True or not, these'
stories get around, and on them (together
with others that are unprintable) most
service men are basing their attitude to-
ward those who have stayed at home.
What action will result from that atti-
tude, when the veteran hunting work is
met with cheery statements that "things
are bound to turn out all right," "just wait
till the reconversion period is over," and
"the spending of war savings ought to pro-
duce a lot ofjobs any day now"? Nobody
knows, of course. But we have some hints,
and they are hints which should make any
American start worrying.
One of them is the report of a historian
who watched fascism rise in Italy and
Germany after the last war. He noted
then that "everyone who had no chance
of a peaceful occupation was offered the
opportunity to be a soldier in a civil war
in which the opponent was not armed.
Pent-up resentment found an easy out-
let. . .." Another is a warning from
the commander of the Veterans of Foreign
Wars that "there has been too much talk
and not enough action on the idea of mak-
ing sure our men in the service have jobs
waiting for them after the war . . . a
hungry man will listen to proposals he
would never otherwise dream of."
And there already are discharged vet-
erans who are saying: "The country could
feed me and give me clothes and furnish
medical care so long as I was fighting.
We can provide jobs for everybody while
the war's on-why can't we do the same
, thing in peacetime, if we really make up
\ our minds to it?"
MAGAZINE
VI
W ELL, why not? What we need is
a firm assurance that unemployment
never ag~in will be permitted to become a na-
tional problem. Such an assurance is re-
quired not only to meet our obligation to
the returning veterans; it is required to
protect the stability of our whole system
of private enterprise. Nobody can sup-
pose that a war which has put 10 million
men under arms and affected every fiber
of our economy can end without a dan-
gerously violent shock to the entire system
-a shock which we must prepare now to
meet. A guarantee against large-scale
unemployment would be no panacea, no
sure-fire recipe for eternal prosperity; but
it might prevent the shock of peace from
wrecking our economy.
Such a guarantee might take the form of
an official statement of national policy by
Congress and the President, with the ad-
vance concurrence if possible of the major
organizations of industry and labor. It
might simply declare that unemployment,
aside from seasonal fluctuations, would
never be permitted to exceed 4 per cent
of the total labor force. If the number of
jobless should climb above this level during
any three-month period, the Executive,
with the advice and consent of a joint
congressional committee, would then take
action to put the guarantee into operation.
And Congress should set forth in, specific
legislation precisely the kind of action
which should be taken whenever the guar-
antee needed to be invoked.
I t is quite possible that the guarantee
would rarely have to be put into effect-
that its very existence would be enough to
prevent a major depression. It would
serve as an assurance to business that it
could go ahead and put its postwar plans
into operation immediately, with confi-
dence that there would be an ample mar-
ket for its products. It would forestall
the retrenchment and precautionary moves
which business must make when a depres-
sion seems possible-and which themselves
help bring on depression. It would as-
sure every family that it could safely spend
its wartime savings for that new automo-
bile or radio right now, without waiting
to see how the postwar job situation turns
 SHALL WE GUARANTEE
out. It would put an end to that uncer-
tainty and fear of the future which are
among the major obstacles to an expand-
ing economy.
HE principle on which this -suggestion
T is based has been universally accepted
by Americans for two hundred years. It
is, of course, simply the insurance princi-
ple. So far, our closest approach to this
kind of measure on a national scale is the
guarantee of bank deposits by the Federal
Deposit Insurance Corporation. That
guarantee has achieved its purpose at
trivial cost. It has, in fact, almost never
been invoked, because its mere existence
has eliminated those runs on the banks
which were so common and so disastrous
in the earlier periods of our history. The
entire banking system stands higher in
public esteem, safer against any kind of
attack, because of that assurance.
Similarly, the National Employment
Guarantee might never have to be in-
voked, if our system of private enterprise
still possessesthat vitality which has made
American production the envy of the
world. It should, in fact, be made quite
clear that no government action beyond
the guarantee is anticipated in the first
instance. Operations to make the guar-
antee effective would begin only when
unemployment threatened to become a
national problem, only when the economy
needed the underpinning which the
government alone can provide.
Just how the guarantee should be put
into effect if the need ever arose is a matter
for Congress and the Executive to decide,
after prolonged debate and much careful
planning. Undoubtedly the primary method
would be public works. Not hastily im-
provised WPA leaf-raking projects, but
well-conceived investment in enterprises
which would protect our natural resources
and build up our productive capacity.
Reclamation projects, reforestation.. rural
schools, soil conservation, new highways,
development of the great river valleys on
the TVA pattern-these are the obvious
examples. And employment should not
be handled on a WP A basis; the men hired
for such undertakings should have regular
jobs, at regular salaries, and should be
held to regular standards of efficiency.
FULL EMPLOYMENT? 20t
Public works projects might well be sup-
plemented by other measures to stabi-
lize employment, some governmental and
some private. A more adequate social
security system, higher minimum wages to
bolster consumer spending, a shorter work
week, incentive taxation, establishment of
the annual. wage principle in industries
where it is feasible-all these would help.
A rigid formula is the last thing we want.
Experience and ingenuity should con-
stantly produce better economic devices
for fighting unemployment, just as they
bring forth a continuous stream of new
weapons in wartime.
VII
B UT can we afford it? Many worried
citizens, who are by no means reac-
tionaries, will point to our postwar debt of
some $300 billion. How can we go on
spending to guarantee employment with-
out shoving the country into bankruptcy?
And will the guarantee really do much
good if people doubt the fiscal ability of
the government to make it work? What
good is an insurance policy backed by
a company of doubtful solvency?
This, of course, is a critical problem,
and the question has to be answered
squarely. There are at least two factors
to be noted.
First, we know that the government is
going to have to spend public funds to
deal with unemployment in any case.
Prolonged unemployment on a large scale
is no longer politically possible. The 10
million veterans won't stand for it-nor
will the 45 million other members of our
labor force. The alternative to the guar-
antee is not economy; it is spending in a
relatively wasteful and haphazard fashion
after unemployment has reached the stage
of crisis.
The real question is: shall we commit
ourselves in advance to spend whatever is
necessary to keep men at work, or shall we
spend hurriedly and on a larger scale to
put them back to work after a depression
has hit? If we make the commitment in
advance, there is a good chance that we
may never have to spend at all. If we do,
we can spend in an orderly and methodical
way to produce the most benefit with the
 202 HARPER'S
least waste. We can avoid rushing into
expensive boondoggles in an attempt to
put men to work. as quickly as possible.
Moreover, we shall not invite a political
- upheaval which might smash our tradi-
tional fiscal system and endanger our
democratic institutions as well.
Second-and most important-the cost
of a National Employment Guarantee
would hinge upon its success in revitaliz-
ing the spirit of enterprise, in opening the
door to a truly expanding economy. It is
clear that our $300 billion debt can be
handled onlY if we succeed in maintaining
a high level of production, employment,
and national income. If we can keep the
national income at $140 billion a year, the
carrying charges can be met handily and
we can make some progress at paying off
the principal. If the national income
should slump back to the 1932 level,
however, the present debt would become
completely unmanageable, and we would
be bankrupt indeed.
Under these circumstances, the public
spending of a few billion a year in order
to avert a major depression would seem
to be simply good business. If the guar-
antee enabled us to increase our output
of goods and services at a faster rate than
it increased the cost of government, it
would be the most profitable of irivest-
ments. The cost should of course be met
out of current tax revenues whenever
possible, painful as that may seem. If
part of it must be covered from time to
time by deficit financing, however, that
need not be catastrophic. As a matter of
fact, the addition of a few billion to a debt
already a hundred times that size would
hardly be felt-so long as employment and
the total national income remained high. And
if income does not remain high, if our
economy does not continue to' expand,
all considerations of interest, debt, and
taxation may become the most academic
of matters.
. It is true that a National Employment
Guarantee would involve some fiscal risk
-but it would be far smaller than the
MAGAZINE
risk involved in taking a chance on an-
other depression. From a cold-blooded
financial standpoint, the most hazardous
thing we can do is trust to luck and do
nothing ..
1fT MIGHT be noted in passing that an
1l overall guarantee of this sort would
have another important advantage. It
would reduce the pressure on Congress
for a host of costly individual guarantees
to protect various special groups in the
economy. If farmers did not fear a gen-
eral spiral of falling prices, they might be
less insistent on subsidies and crop control
to prop up farm prices. Labor might
forego some of the "featherbed rules"
and restrictions on output which now
protect jobs in certain industries. Busi-
ness men might be willing to give up
tariffs and cartel arrangements which
serve as their private dugouts against an
economic storm. Each of these special
guarantees not only is expensive; it also
damages the economy as a whole, making
it lessefficient, lessflexible, lesscompetitive
-and less able to resist depression. Yet
there is little hope of removing them unless
some general assurance can be offered in
their place.
The first step is simply for Congress and
the President to make a formal acknowl-
edgment-now-of the responsibilitywhich
they cannot in any case escape. They
need go only as far as Emil Schramm, the
sagacious and conservative president of
the New York Stock Exchange, who has
warned that "any sound postwar domes-
tic program must contemplate the produc-
tion of goods and services at a level suffi-
ciently high to occupy all who wish to
work and are able to do so." If this can
be established as a settled national policy,
with assurance that the full resources of the
nation will, if necessary, be mobilized to
.carry it out, we not only will be discharg-
ing an obligation to' our service men;
we will be taking our first effective meas-
ure to insure the whole country against
another economic disaster.