During the war, production for civilian use was limited by war needs and
available manpower. Economic stabilization required measures, to spread
limited supplies equitably by rationing, price controls, increased taxes,
savings bond campaigns, and credit controls. Now, with the surrender of our
enemies, economic stabilization requires that policies be directed toward
promoting an increase in supplies at low unit prices.
We must encourage the development of resources and enterprises in all parts
of the country, particularly in underdeveloped areas. For example, the
establishment of new peacetime industries in the Western States and in the
South would, in my judgment, add to existing production and markets rather
than merely bring about a shifting of production. I am asking the
Secretaries of Agriculture, Commerce, and Labor to explore jointly methods
for stimulating new industries, particularly in areas with surplus
agricultural labor.
We must also aid small businessmen and particularly veterans who are
competent to start their own businesses. The establishment and development
of efficient small business ventures, I believe, will not take away from,
but rather will add to, the total business of all enterprises.
Even with maximum encouragement of Production, we cannot hope to remove
scarcities within a short time. The most serious deficiencies will persist
in the fields of residential housing, building materials, and consumers'
durable goods. The critical situation makes continued rent control, price
control, and priorities, allocations, and inventory controls absolutely
essential. Continued control of consumer credit will help to reduce the
pressure on prices of durable goods and will also prolong the period during
which the backlog demand will be effective.
While we are meeting these immediate needs we must look forward to a
long-range program of security and increased standard of living.
The best protection of purchasing power is a policy of full production and
full employment opportunities. Obviously, an employed worker is a better
customer than an unemployed worker. There always will be, however, some
frictional unemployment. In the present period of transition we must deal
with such temporary unemployment as results from the fact that
demobilization will proceed faster than reconversion or industrial
expansion. Such temporary unemployment is probably unavoidable in a period
of rapid change. The unemployed worker is a victim of conditions beyond his
control. He should be enabled to maintain a reasonable standard of living
for himself and his family.
The most serious difficulty in the path of reconversion and expansion is
the establishment of a fair wage structure.
The ability of labor and management to work together, and the wage and
price policies which they develop, are social and economic issues of first
importance.
Both labor and management have a special interest. Labor's interest is very
direct and personal because working conditions, wages, and prices affect
the very life and happiness of the worker and his family.
Management has a no less direct interest because on management rests the
responsibility for conducting a growing and prosperous business.
But management and labor have identical interests in the long run. Good
wages mean good markets. Good business means more jobs and better wages. In
this age of cooperation and in our highly organized economy the problems of
one very soon become the problems of all.
Better human relationships are an urgent need to which organized labor and
management should address themselves. No government policy can make men
understand each other, agree, and get along unless they conduct themselves
in a way to foster mutual respect and good will.
The Government can, however, help to develop machinery which, with the
backing of public opinion, will assist labor and management to resolve
their disagreements in a peaceful manner and reduce the number and duration
of strikes.
All of us realize that productivity--increased output per man--is in the
long run the basis of our standard of living. Management especially must
realize that if labor is to work wholeheartedly for an increase in
production, workers must be given a just share of increased output in
higher wages.
Most industries and most companies have adequate leeway within which to
grant substantial wage increases. These increases will have a direct effect
in increasing consumer demand to the high levels needed. Substantial wage
increases are good business for business because they assure a large market
for their products; substantial wage increases are good business for labor
because they increase labor's standard of living; substantial wage
increases are good business for the country as a whole because capacity
production means an active, healthy, friendly citizenry enjoying the
benefits of democracy under our free enterprise system.
Labor and management in many industries have been operating successfully
under the Government's wage-price policy. Upward revisions of wage scales
have been made in thousands of establishments throughout the Nation since
VJ-day. It is estimated that about 6 million workers, or more than 20
percent of all employees in nonagricultural and nongovernmental
establishments, have received wage increases since August 18, 1945. The
amounts of increases given by individual employers concentrate between 10
and 15 percent, but range from less than 5 percent to over 30 percent.
The United States Conciliation Service since VJ-day has settled over 3,000
disputes affecting over 1,300,000 workers without a strike threat and has
assisted in settling about 1,300 disputes where strikes were threatened
which involved about 500,000 workers. Only workers directly involved, and
not those in related industries who might have been indirectly affected,
are included in these estimates.
Many of these adjustments have occurred in key industries and would have
seemed to us major crises if they had not been settled peaceably.
Within the framework of the wage-price policy there has been definite
success, and it is to be expected that this success will continue in a vast
majority of the cases arising in the months ahead.
However, everyone who realizes the extreme need for a swift and orderly
reconversion must feel a deep concern about the number of major strikes now
in progress. If long continued, these strikes could put a heavy brake on
our program.
I have already made recommendations to the Congress as to the procedure
best adapted to meeting the threat of work stoppages in Nation-wide
industries without sacrificing the fundamental rights of labor to bargain
collectively and ultimately to strike in support of their position.
If we manage our economy properly, the future will see us on a level of
production half again as high as anything we have ever accomplished in
peacetime. Business can in the future pay higher wages and sell for lower
prices than ever before. This is not true now for all companies, nor will
it ever be true for all, but for business generally it is true.
We are relying on all concerned to develop, through collective bargaining,
wage structures that are fair to labor, allow for necessary business
incentives, and conform with a policy designed to "hold the line" on
prices.
Production and more production was the byword during the war and still is
during the transition from war to peace. However, when deferred demand
slackens, we shall once again face the deflationary dangers which beset
this and other countries during the 1930's. Prosperity can be assured only
by a high level of demand supported by high current income; it cannot be
sustained by deferred needs and use of accumulated savings.
If we take the right steps in time we can certainly avoid the disastrous
excesses of runaway booms and headlong depressions. We must not let a year
or two of prosperity lull us into a false feeling of security and a
repetition of the mistakes of the 1920's that culminated in the crash of
1929.
During the year ahead the Government will be called upon to act in many
important fields of economic policy from taxation and foreign trade to
social security and housing. In every case there will be alternatives. We
must choose the alternatives which will best measure up to our need for
maintaining production and employment in the future. We must never lose
sight of our long-term objectives: the broadening of markets--the
maintenance of steadily rising demand. This demand can come from only three
sources: consumers, businesses, or government.
In this country the job of production and distribution is in the hands of
businessmen, farmers, workers, and professional people-in the hands of our
citizens. We want to keep it that way. However, it is the Government's
responsibility to help business, labor, and farmers do their jobs.
There is no question in my mind that the Government, acting on behalf of
all the people, must assume the ultimate responsibility for the economic
health of the Nation. There is no other agency that can. No other
organization has the scope or the authority, nor is any other agency
accountable, to all the people. This does not mean that the Government has
the sole responsibility, nor that it can do the job alone, nor that it can
do the job directly.
All of the policies of the Federal Government must be geared to the
objective of sustained full production and full employment-to raise
consumer purchasing power and to encourage business investment. The
programs we adopt this year and from now on will determine our ability to
achieve our objectives. We must continue to pay particular attention to our
fiscal, monetary, and tax policy, programs to aid business--especially
small business--and transportation, labor-management relations and
wage-price policy, social security and health, education, the farm program,
public works, housing and resource development, and economic foreign
policy.
For example, the kinds of tax measures we have at different times--whether
we raise our revenue in a way to encourage consumer spending and business
investment or to discourage it--have a vital bearing on this question. It
is affected also by regulations on consumer credit and by the money market,
which is strongly influenced by the rate of interest on Government
securities. It is affected by almost every step we take.
In short, the way we handle the proper functions of government, the way we
time the exercise of our traditional and legitimate governmental functions,
has a vital bearing on the economic health of the Nation.
These policies are discussed in greater detail in the accompanying Fifth
Quarterly Report of the Director of War Mobilization and Reconversion.