which we live is to be maintained. This intention is implicit in the whole structure of the act and was emphasized throughout its legislative history. The Council reaffirmed and expounded this philosophy in its first annual report and has emphasized it at many points in this report. But the Employment Act does not limit its purposes or our responsibilities to the carrying out of this intention. The declaration of policy in the Employment Act likewise affirms

* *

the continuing policy and responsibility of the Federal Government to use all practicable means consistent with its needs and obligations and other essential considerations of national policy * * * to coordinate and utilize all its plans, functions, and resources, for the purpose of creating and maintaining conditions under which there will be afforded useful employment opportunities, including selfemployment, for those able, willing, and seeking to work, and to promote maximum employment, production, and purchasing power.

This statement per se does not involve precommitment to an expanding role for government at the expense of voluntary initiative. But it does involve frank recognition that the government accepts a complementary role in areas where, or in times when, private enterprise fails to provide adequate productive use of the Nation's resources.

From our economic analysis of sustained maximum production, we have concluded that we have reached a state of the industrial arts where the full utilization of our resources makes possible and will call for the increasing enjoyment of satisfactions that go beyond merely "keeping body and soul together." The expectation that keeping our resources vigorously and steadily in use would give us not merely more adequate food, clothing, and shelter for the lower ranks of workers, but also reveal much reserve productivity to raise the level of health care and culture activities for all but the present top income layers, who are already well supplied, raises the question of how far private enterprise will cultivate the total field and particularly this latter area.

The United States has never barred private enterprise from running private schools, from law and medicine to dancing and modeling. We have never, except in time of war scarcity, deterred private promoters from developing any legitimate amusement enterprise. Nor have we barred private physicians, dentists, or oculists from developing the private practice of their profession, provided they met suitable standards of competence formulated by their own craft. On the other hand, in none of these areas has the public enterprise of local community, state agency, or the Federal Government hesitated to step in to organize facilities through which any one of these services would be rendered the public more amply than unorganized individuals or organized firms had been able or interested to supply them.

The point of our question, therefore, becomes this: Will private physicians and non-governmental hospitals, will schools and training agencies outside the public system, and will commercial ventures in music, art,

drama, radio, and recreation attract a sufficiently rapidly expanding personnel and provide sufficiently enlarged facilities so that the satisfaction of wants in these areas, superimposed on those which have been more exclusively the area of industrial and commercial activity, bring the level of total activity in the economy up to an acceptable total of maximum production? If not, is it reasonable to expect that we shall channel more of our resources and derive more of our satisfaction through Government agencies in these areas? We must then find ways of developing them no less prudently and operating them on the average as efficiently as the much larger area which we may hope will continue to be organized and operated through the agencies of the private market.

Transportation is another area in which a substantial measure of governmental participation has become traditional. The history of our improvements in transportation strikingly proves the case that certain public activities, far from competing with private business, are indispensable to its operations and give mighty impetus to its progress. Notable at the present time is the strong and legitimate desire to have both local and central governments move to establish municipal airports and an over-all system of regulation of air traffic. Actual transportation service by air is left to private enterprise, and popular sentiment has called for Government patronage and several forms of financial aid so that the service might be developed more amply and rapidly than it could be through sole reliance on the commercial rates which the traveling and shipping public could or would pay.

Similarly, both manufacturers of highway machinery and roadbuilding supplies on the one side and bus and truck companies and farmers and tourists on the other have been ardent proponents of the hard roads program. While both the building and the using of the roads remain in the realm of private enterprise, the economic leadership in developing these enlarged areas is the connecting link for which public action provides the most adequate agency.

Perhaps the most important of the new frontiers of private institutions in step with complementary Government action is the field of urban redevelopment. Many of our cities and towns are outmoded in whole or in part. There have been telling dramatizations of the social consequences of this. But we are only beginning to probe the depths of the economic consequences, such as the effects upon property values, local tax structures, and institutional investments. Yet there is an almost universal realization that no single investor or group of investors can bear the cost of writing off this obsolescence at a sufficiently rapid rate. Some writing off does take place, it is true, through reorganization, recapitalization, and shifts in ownership. But adjustments of this kind are inadequate from the viewpoint of increasing our national wealth or releasing truly productive energies.

The application of some Government resources at all levels to the preparatory stages of urban redevelopment would have an extraordinary leverage effect upon opportunities for the private employment of men, money, and materials. Just as the hard surface road accelerated the automobile industry, and the automobile industry in turn touched so many points in our growth after the First World War, so an appropriate exercise of public initiative in urban redevelopment could serve to touch off varied economic developments of almost incalculable proportions.

In our first report, we indicated profound scepticism as to the theory that government spending should or could effectively be used to make up for huge deficiencies in employment and production caused by periodic break-downs of the economic system. This did not mean rejection of the sound principle that public works should be accelerated or retarded somewhat to counterbalance the mild fluctuations in the operations of business which will occur periodically despite our best efforts. But it did mean that we consider the primary purpose of public works to be the provision of services that cannot otherwise be supplied. The offsetting of fluctuations in the business system, which is a secondary purpose, can be achieved only if these fluctuations are held to manageable proportions. We emphasize again that government economic activities should be carefully designed to add to the resourcefulness, the productivity, and the growth of our business system as a whole instead of being regarded mainly as a device for applying poultices to that system when it becomes infected.

Other economic policies of government, such as taxation, regulation, and international trade policies should be conducted in a manner which, consistent with the attainment of other national objectives, shapes these policies to the promotion of health and growth in our business life. No principle is more firmly embedded in the Employment Act. No one"conservative" or "liberal," businessman, worker, or farmer-quarrels with the urgent need for this enlarged perspective within which the evaluation of governmental policies should take place. Depending on circumstances, this may mean more government or less government. But in any event, it will mean better government, more economical government in the true sense of that much abused word.

To conclude this discussion of the bases of maximum production, the whole congeries of mixed private and governmental efforts will not add up to continuous maximum production unless our business system itself functions increasingly well. This better functioning toward maximum production, and the more adequate consumption that goes with it, depends on the maintenance of certain balances to which we have allotted most of our discussion in this report. These include the balance between capital growth and consumer consumption of goods and services; the balance between work and leisure; the balance between output and absorption, or between supply and demand, which can be achieved only through ever-improving management of the wage-price-profit structure

by those who shape it; and the balance which depends upon economically efficient distribution of national income not only between producers and consumers, or between employers and workers, but also between industry and agriculture and among the various sections of the country.

Although those who operate our business system will continue voluntarily to make the decisions that add up to or subtract from the various essential economic balances, it does not follow that any individual or group alone can acquire the perspective and sweep of view over the whole economy which would enable them to synchronize and coordinate their efforts with those of others. The Congress clearly recognized this in requiring that the President in his annual Economic Report to the Congress should state "needed levels" of employment, production, and purchasing power. In discharging this responsibility, the Chief Executive exercises some leadership, but these needed levels cannot be dissected and defined and amplified without consultation and advice from businessmen, workers, farmers, and consumers. This is necesary not only to decide what the Government should or should not do, but also to make available working forums in which these groups may meet together and come to better accords as to what they themselves can and should do.

In the pursuit of its clearly defined responsibilities under the Employment Act, the Council fully recognizes that the tasks of economic analysis which it is called upon to perform require more study, more exchange of views, and further improvements in the tools of economic and of political science. We anticipate that in succeeding reports we may bring more exact measurements and refined judgments to bear upon the key issues that we have here disclosed.

III. Maximum Production Would Involve Real Price Competition

Our review of the meaning of maximum production and means of attaining it has touched on the parts played by natural resources, created capital, labor effort, and managerial direction. It has emphasized the basic role of private enterprise and the complementary role of government action. In accord with the national purposes declared in the Employment Act, we have stressed the objective of continuous and well-balanced use of the Nation's productive resources as against shortlived booms of unbalanced overexpansion and overcapitalization, with neglect of prudent measures of conservation, these booms being followed by wasteful periods of unemployment, plant idleness, and demoralizing liquidation of property.

If this general analysis is projected against the concrete conditions which have unfolded during 1947, it should give us some sobering reflections. Have we used the time and opportunities available to us since VJ-day to organize our economic life skillfully and effectively for sustained maximum production and peacetime prosperity? Or can we discharge ourselves of responsibility in the matter, assured that the productivity of our resources, spontaneously—even if tardily-expressing itself in a flow of goods, will automatically solve our economic problems? In closing this report, we wish to focus attention on a broad issue, already touched on from particular angles, which we believe may have to be faced more definitely before the end of 1948. Or if not then, sooner or later in the not distant future. This issue may be put pointedly in the form of a question: Will our present economic problems-inflation, high cost of living, threatened recession, and all the rest-be solved merely by "production, more production, and still more production?" Or may full production, in catching up with market demand, force disastrous price breaks, result in production cut-backs and thus prove to be its own undoing?

In the midst of a period of postwar shortages and strong domestic and foreign demand, it is but natural that both consumers and businessmen should look to the acceleration of production as the panacea by which all their ills would be cured. Consumers have felt the inconvenience of not being able to find the goods they want even though they had dollars with which to buy them. They have also felt the pressure of mounting prices as a result of buyer competition for scarce goods. They clamor for all possible expansion of production as a means of relief from these conditions. Businessmen, on their part, have been glad to make the most of the scarcity argument to absolve themselves of responsibility for high prices and to hold out hope that fuller production will automatically remedy the situation.

Prominent leaders in business and public life have proposed that the standard work week be lengthened from 40 hours to 44 or even 48. This done, they say shortages would rapidly be brought to an end, prices would come down, and all would be well. This proposal, however, leaves several unanswered questions.

It is evident that we cannot all work longer hours and thereby end present shortages. There are many industries that are on a continuous process basis, and hours cannot be added to their working day. In some industries, too, the problem is shortage of materials; lengthening the hours of work would not produce more final output but simply aggravate the amount of unproductive time which already shows such an adverse effect on productivity rates. And farmers' output is not determined to any significant extent by standard hours, but basically by weather conditions.