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consumers and buyers in the Nation's domestic markets. We have no other place to look. It is possible for us to organize our economy on that basis because we are constantly reducing the unit cost of production through the application of improvements and scientific achievements and new facilities. Senator ToBEY. And we want those to be a blessing instead of a curse. Mr. LEwis. We want those to be a blessing, Senator, instead of a curse. Senator ToBEY. That is right, and it is our job to devise ways and means to do that. Mr. LEwis. An invention that comes from an inventor's mind that does the work of 100 men and employs only 2 to run the machine, that merely furnishes a royalty to the inventor and a margin of profit to the manufacturer and destroys the buying power of 98 men becomes a curse instead of a blessing. We must pass that down through the population. If we progressively and mathematically destroy the opportunity for employment in America, then in inverse ratio we must give participation in the remaining amount of work to all the population. I don't think there is any other answer if we want to preserve our economy and our form of government. Now, I do trust that the committee in its wisdom and discretion will give full consideration to that very important subject. On page 8, section 4 (c), I think—section 4 (c) on page 8, we think that “may” should be changed to “shall.” I see it is suggested in an amendment that has been offered by some of the Senators. The President shall consult with representatives of industry, agriculture, labor, and State and local governments. The CHAIRMAN. Mr. Green suggested that, too. Mr. LEwis. I am glad to know it. I was sitting behind that screen and I couldn't hear him very well. Certainly it should not be optional. Certainly labor is entitled to have that consultation with these representatives of other interests, industry and labor and so on. Certainly it should not be the whim of whoever may be President 10 years from now as to whether or not he will consult labor. We do like to be cousulted, whether or not our views are accepted. I think that is a human trait that probably prevails in the minds of a lot of people as well as those who represent labor organizations. In the amendment presented on the legislative day of July 9, a copy of which I have here, on page 4 in the twelfth line, section 10 (a) of the act, it sets forth that opportunity to engage in productive work at locally prevailing wages and working conditions for the type of job available shall be the standard by which full employment is defined. I don't think that language should be in the bill for very obvious reasons. “Locally prevailing wages.” I think it is not only unfair to the workers in limiting their opportunity because the locally prevailing wages become a maximum instead of a minimum, but I think it is unfair to industry, to investors, and to capital. I think it will operate to maintain and continue indefinitely substandard wages in many of the rural sections of the South. I think that the wage minimum in the Wage-House Act is a sufficient floor. I think this either should be stricken out—either that “locally prevailing wages” should be stricken out, or it should be inserted in lieu thereof that wages fixed through collective bargaining, if you are going to deal with wages there. I think you are treading on dangerous ground by putting that in, because it will be used by the government contractors in the remote areas of the country as their defense against any attempt to increase wages or raise the standard of living or to increase the buying and consuming power of the population of that area. I have this in mind. In 1933, 1934, and 1935, when the first National Labor Board was functioning, of which the distinguished chairman of this committee was Chairman— The CHAIRMAN. And you were a member— Mr. LEwis. I recall that, Senator. We found wages in Lousiana in the lumber industry in those remote and mosquito-infested swamps, as low as 10 cents an hour. We found similar wages in Mississippi, in Alabama, and in Florida—10 cents an hour. Fifteen cents an hour was almost an excessive wage in some of those area. We found that the lumber manufacturers and producers of the Pacific Northwest and other areas in this country were compelled to compete in the national lumber markets with the 10-cents-an-hour wage levels of Louisiana. At the same time they were being required to pay a wage four, five, and six times that to work their plants in the Pacific Northwest. It constituted unfair economic competition from any national standpoint. I merely mention the lumber industry in passing as an outstanding example. This amendment, if it goes into this bill, will be utilized by contractors and employers in the South, notoriously antiunion and antilabor, to continue their unwholesome and their vicious economic exploitation of the Nego race. It will maintain the standard of living in the South which is unwholesome and vicious and should be abolished. It should not be done by the Congress or by the people of the country. America has to look forward to a constantly increasing standard of living, with greater leisure for its people, greater opportunities for recreation, and greater opportunities for education. Otherwise we cannot keep our economy running. Our productive machine will overwhelm us in every economic and social sense. So, in consequence, the Congress should not undertake to do anything that will put a burden upon the backs of men who want to organize and bargain collectively in harmony with the public policy of the United States. Certainly labor has a right to bargain in the open market for the only thing it has got to sell, that is the labor of its hands and the time of its being. So I think this amendment here will be unwholesome and of bad effect. I don't know that there are any other details I should discuss here. Anticipating a possible question, because I understand it has been a matter of discussion in the committee here, the matter expressed in section 2, paragraph (b), on page 2, “it is the policy of the United States to assure the existence at all times of sufficient employment opportunities.” Well, that word “assure” is not binding because it is dependent on what Congress will do when Congress gets the report from the President in the manner prescribed, making suggestions as to what should be done. No one can bind a future Congress, and the American people are going to express themselves in the future through their elected representatives as in the past, and you cannot bind the American people. I personally would be perfectly satisfied if that word “assure” was “promote.” I would be just as satisfied with “promote” as with “assure” because I think neither of them is binding upon the Congress or upon the people. They are simply a declaration of policy. The desire to execute the policy depends on the circumstances and the time. So to me that is of no more importance than the difference between “the" and “thuh.” Finis. The CHAIRMAN. Thank you very much. Any questions to ask of Mr. Lewis? (There was no response.) Thank you very much, Mr. Lewis. Mr. LEwis. Thank you, Senator and gentlemen of the committee.

John H. Davis, Executive Secretary


Full employment of labor, capital, and natural resources under our American system is the result of optimum production of needed goods and services. Our free, expanding economy normally generates its own new production to employ the gradual increase in our supply of workers and to employ those who are displaced by labor-saving improvements in production and distribution. Increased production efficiency, which is reflected in lower unit production costs, provides opportunity for a constantly increasing number of jobs, more goods and services per consumer, and hence a gradually higher standard of living for all.

It is the function of our Government to provide a favorable business climate in terms of such factors as money, taxes, and monopoly regulations, and other fair trade practices, in order that private enterprise through effective labor, thrift and investment can fully use our manpower, capital and natural resources. Under such conditions unemployment should be largely transitional, pending the reestablishment of conditions which will absorb such workers in productive private enterprise. It devolves upon Government in times of emergency to assist persons in need or distress to a subsistence income through well-planned and -managed work and relief programs thus improving the business climate by providing incentives to greater development and use of individual initiative, skills and managements.

A free economy should be protected by a government which restrains its activity to that of an umpire, rather than participating in management or capitalist roles. Real wages under such circumstances will be advance by competition through adjustments in wages or prices or both as fast as increased

man-hour productivity will permit. It is important that gains in real wages benefit workers generally instead of being limited to select groups through monopoly practices. If maximum employment is to result, it is essential that increases in the general standard of living be reflected in the real earnings of self-employed persons such as those engaged in agriculture and services.

In a free economy, labor, and management, if properly responsible to the public and in their own long-time interest, will negotiate conditions of employment voluntarily and will reduce strikes and lockouts to a minimum. Production or services essential to the daily welfare of the people should be maintained with the aid of appropriate public conciliatory machinery, where voluntary efforts fail.


The intent of the full-employment bill, S. 380, is noble. In an ideal society, its members are all employed. That is a high goal of aspiration. But the methods outlined in the bill will not realize that goal. The bill calls for “a national production and employment budget for the ensuing fiscal year or long period.” It is beyond the possibility of any man or group of men to make such a forecast. Look at the fluctuations in the index of production over the past 30 years or more. What businessman or economic organization, what Government official or political administration in the past 30 years has predicted these fluctuations correctly, even up to 50 percent? The history of prophecy by Government officials is none too brilliant, even by our Presidents. During the weary years of depressions, from 1930 to 1932, we heard a memorable, short-term prophecy from President Hoover, “Prosperity is just around the corner.” In the spring of 1937, when President Roosevelt said, “We planned it that way,” the country went into a depression a few months later at a speed unparalleled in American history. In 1928 President Coolidge and Secretary Mellon said that stocks were not too high and that broker's loans were not too high. In the spring of 1937 President Roosevelt said that commodity prices were too high and a few months lated the administration was frantically trying to lift commodity prices off the bottoms to which they collapsed. Who can guess the future? Forecastig economic conditions 16 months ahead is a task for gods, not mortals. When the Interstate Commerce Commission tried to forecast earnings of railroads in reorganization, Commissioner Carroll Miller, an engineer by profession, wisely said, “We are not omniscient and cannot foresee the future” (242 I. C. C. 475). The human mind is fallible. A hundred human minds are equally fallible, even if they be Government officials engaged in forecasting. What a strange dogma we hold, that a Government forecast is infallible. Look at Government estimates in a narrow field made by specialists in that field. Look over the Department of Agriculture forecasts in the spring of what the final crop would be for the year. Yet the size of the crop determines the market price and both determine farm purchasing power and demand for machinery and automobiles. Look at the ICC forecasts over a period of years. Read Fairman B. Dick's revealing history of the complete failure of the ICC to forecast economic conditions or earnings, cited in his testimony before the House Judiciary Committee on the Hobbs bill (H. R. 2857 of 1943, pp. 85–86). What Government forecasts have ever been reasonably correct over a period of years? How much Government foresight is revealed in the Pearl Harbor report? Or in our prewar policy of unpreparedness? For the Government to forecast an employment budget 16 months ahead is obvious nonsense to any dispassionate economist, even now. It will be obvious nonsense to the man in the street after the first few guesses. The notion will be discarded, undoubtedly. In addition, the proponents of the forecasting feature of this measure will be discredited. The Government's prestige will fall both in the eyes of its citizens and in the opinion of the rest of the world. No other Government ever attempted such an impossible task as is now proposed. The whole conception is naive. It represents wishful thinking by sincere high-minded men. In 1933 we lagged 30 to 50 years behind Europe in unemployment insurance, old-age pensions and other social legislation. In 1945 we rush thoughtlessly ahead in a field where other nations have feared to tread. For Congress now to pass a bill that all Americans have the right to regular, full-time employment, and for the Federal Government to assume the responsibility, is similar to a convention of physicians voting perpetual perfect health for everybody. But, medicine did reduce disease and mortality rates greatly in the past century. How did the doctors attack their problem? They conducted research in each particular disease—typhoid, smallpox, etc. As a result the scientists devised methods to prevent a particular disease. Typhus, cholera, and smallpox, the scourges of a century ago, have been effectively prevented. Scientists also found means of curing particular diseases like pneumonia and tuberculosis. Similarly, our Congress in Washington must study individual unemployment problems. Is unemployment in the building industry due to the gap between the wages of masons and of tenants? Can a $20-a-day mason be kept employed building homes for clerks who earn $25 a week? Is the high cost of building affected by uneconomic labor practices and rackets such as Attorney General Thurman Arnold pointed out in his congressional testimony before the Truman committee? Are workers in the electrical-equipment industry idle because the SEC is breaking up the utilities instead of consolidating them into regional systems as the law requires and as the British did with their railways? Are railroad workers idle because the Government is subsidizing the competitors of the railroads? There is no panacea for general unemployment. Foach particular industry must be studied. When Louis D. Brandeis was asked “What is your social philosophy?” he answered, “I have no general philosophy. All my life I have thought only in connection with the facts that come before me.” The United States Government has few jobs and it can create relatively few. The Soviet Government, which is in business, has many jobs and can create others. But it has a very low wage scale and low standard of living, lower than our relief clients. It is so low that in the Potsdam Declaration, the Big Three agreed to keep Germany's standard of living below the average of European countries, excluding Soviet Russia, which was presumably too low even for a defeated enemy. Whoever produces goods, whether the private businessman or the capitalist state, can give jobs. In the United States, business is still conducted by private enterprise. All the Government really can do is to see that suffering due to widespread unemployment is alleviated. The Government can increase employment by encouraging the job givers. Encourage the entrepreneur, or, at least, cease penalizing him unduly by taxes on production and by wasteful labor practices, which raise costs. The question of full employment can be made clear through the income account of a business. Profit is what makes the economic machine go. Profits create employment. Periods of maximum employment are periods of maximum profits. Periods of maximum unemployment are periods of maximum losses. If the costs exceed the selling price, a business loses money. Costs must be reduced. Then labor is discharged temporarily. If not, the employer becomes bankrupt and the jobs disappear permanently. In the order of priority of claim, wages come first, and dividends, if any, come last. To employ workers involves risks. The volume of employment depends on the risks, economic and political. But when our Government employs, it takes no risks. It “passes the buck” to business, which provides the taxes. But when the Soviet Government employs workers, it does take a risk. It cannot transfer the responsibility. There is no private business which provides income for taxes. Therefore in Soviet Russia wages are fixed to leave a profit. Therefore there is full employment. The Soviet Government can take responsibility for full employment because it has power over wage rates. Strikes are not allowed. No union dare fight the Soviet State. The American employer has no such power over wage rates. American unions, however, undertake to manage, but refuse responsibility for business losses and resulting unemployment. They look to Government to bail them out. The Government then assumes the responsibility for union policy. We talk about the profit motive and then permit or foster policies which prevent profits and create unemploy...ient. It is a fallacy to say that the Government can employ workers if industry won't. If there is a profit, industry will operate. But if there is a loss, even a Government cannot operate permanently. Permanent subsidies for unprofitable public business is impossible. The full employment bill must be checked against a businessman's statement of income, or profit and loss. Public works, the reliance of bill S. 380, are not important factors in employment. Look at the record from January 1934 to January 1939. Our unemployment figures were about the same at both dates. But our debt increased about

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$13,000,000,000. When a national income falls by $20,000,000,000 a public-works : program is insignificant. What we need are flexible wages. When selling prices decline, costs must decline. Only under flexible wages is constant high employment possible. Dividends average about 6 percent of the national income and wages about 70 percent. Even if the stockholders were wiped out, and the workers took over the business, costs could not exceed selling price. Wages would then have a ceiling, determined by selling prices. Today there seems to be no ceiling. In a simple primitive economy the wages of the artisan depends upon the selling price of his product. That is clear. In our complex modern economy of mass production by coordinated specialists, wages must also be determined by selling prices. That is not so clear. It is the task of economists to enlighten the public. We should not talk in generalities. We must study individual causes of unemployment. We must change our attitude to the railroads and the utilities. The British in 1921 consolidated their 126 railroads into 4 systems. None went bankrupt ever since. Orders for locomotives and cars were fairly steady; employment was steady. We do not have a single Nation-wide telephone service. But we did not permit our railroads to consolidate. Almost 40 percent went bankrupt in the last 10 years—the highest in history. Their orders for equipment fluctuated violently; then workers in the railroad-equipment industry lost their jobs. We are breaking up the utility-holding companies. In 2 years, 1934–35, orders for electric-utility equipment declined 80 percent below the average of 1919 to 1933. We should not disintegrate but consolidate the utilities as the law demands, We could thus stimulate expansion and employment. If selling prices remain flexible, as our antitrust laws contemplate, wages must remain flexible. Rigid wages would require rigid selling prices. Labor monopoly requires industrial monopoly. High employment requires balance between wages and selling prices. Not legislation, but bookkeeping tests, will give us full employment. The full employment bill, S. 380, has embarked on a huge undertaking in Government control of business. We might well recall a dissenting opinion, by Justice Louis D. Brandeis, on the right of the State of Oklahoma to control the manufacture and sale of ice (1932) : “We have been none too successful in the modest essays in economic control already entered upon. The new proposal involves a vast extension of the area of control. Merely to acquire the knowledge essential as a basis for the exercise of this multitude of judgments would be a formidable task.” This wise man, in a letter to Robert W. Bruere in 1922, wrote: “And do not pin too much faith on legislation. Remember that progress is necessarily slow; that remedies are necessarily tentative; that because of varying conditions there *. be much and constant inquiry into facts * * * and much experimentation.” By all means, let us keep in mind the high goal of full employment. But let us concentrate more on the method of attaining this goal. There is no immediate danger... We need not worry about long-term unemployment immediately, or even for séveral years, until the unsatisfied demands of consumers are met. Then, long-term unemployment may become a pressing problem. Therefore, let the Congress appoint a committee of experts to study the causes and cure of unemployment, not merely in its broad aspects but also industry by industry. Let this committee of experts point out what evil practices, by business, by Government, and by labor, prevent employment and create unemployment. Here is a task for practical social idealists. The passage of the bill as it stands can only result in failure to realize the goal and thus discredit the lofty aim with which there is universal agreement—“useful, remunerative, regular, and full-time employment.”


NEw York, N.Y., September 27, 1945. CARTER MANAsco, Chairman, House Committee on Erpenditures in Erecutive Departments, House of Representatives, House Office Building, Washington, D. C.:

I regret that I will not be able to accept your kind invitation to testify before your committee on the full-employment bill, but I do wish to avow my complete support for the measure. Not merely because there can be no fair employment without full employment, nor because fascism festers only among the insecure,

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