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Albert Gates

Unemployment: A Post-War Prospect

Revelations of Recent Studies

(May 1943)

From The New International, Vol. IX No. 5, May 1943, pp. 139–141.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The end of the war is nowhere in sight, but already the bourgeois leaders of the United Nations are busily engaged in discussing and mapping out post-war plans for so-called economic reconstruction. These discussions take on a more practical character with the increasing military strength of the Allies and the growing conviction that they shall win the victory in the war. The burdens of the economic and political theorists have become lighter – not in the problems they must solve but in the need to hurl vistas of the beautiful post-war life awaiting the masses. We have pointed out many times that, as the military power and the military fortunes of the Allies improves, the reactionary political and economic policies to which they really adhere, are spoken of more openly. The Atlantic Charter and the Four Freedoms are now hardly uttered by their initiators and popularizers. Their watchword is: first the victory, then we shall see.

But at home the Administration and the congressional leaders are deeply concerned with the concrete economic problems which will confront the nation in the post-war period. Congress, the Administration and the organizations of big business (the National Association of Manufacturers and the Chamber of Commerce of the United States) have been studying post-war economic problems and discussing these among themselves. They attempt to determine, on the basis of economic data of the pre-war period extending over four decades, i.e., the economic trends and experiences through the the rise of American imperialism, the prosperity years and the crisis, what lies in store for their economy immediately after the war.
 

Senator George’s Future for America

All of them are acutely aware of one thing: There is a rocky road full of pitfalls ahead for capitalist economy. The crisis of 1929–32 shook this order to its very foundations. The effort of reformism to stave off complete and irremediable collapse through the New Deal failed in its basic experiments. During the years 1929–40, there were improvements in the economy, but these improvements were measured against the low years of 1929–32. At no time did the Administration feel that it had really conquered the crisis. Prior to the outbreak of the war in Europe (September 1939) American economy was again headed for a sharp decline. The war, with its tremendously abnormal demands, saved Roosevelt and his panaceas for capitalist economic survival. For the war demanded so much in goods that it absorbed the mass of unemployed and called upon the total capacities of American industry (primarily heavy and manufacturing) to meet its needs.

But these gentlemen are now worried again. Supremely confident of a military victory, they are also aware of the fact that the demands created by the war will cease immediately upon the military triumph. What will be the main problem then? How shall it be met? Needless to say, the main single problem facing the bourgeoisie will be mass unemployment. They will endeavor to solve that problem as in the past, and they will be unable to solve it. But other problems – decline in production, change in the character of goods, mass unemployment, reconstruction and readjustment – will be uniform to all the powers. They will be especially acute in the United States, with its tremendous industrial plant and high rate of productivity. That is why the discussion over these problems in this country has become so practical recently.

The greatest fear of American capitalism is that the economic problems of the post-war period will be so acute as to endanger “free enterprise.” That which they fear so much, another period of “New Dealism,” is a dead certainty. This was the theme of the speech made by Senator Walter F. George at the annual dinner of the Chamber of Commerce of the United States. Senator George is not a New Dealer. He came to the dinner to discuss the common problems of big business and the government and he said many things. He was for free enterprise (read: big business), but unfortunately he foresaw the inability of free enterprise to live without the closest collaboration and aid from the government. This must be reasonable, however. It must not interfere with initiative, ownership and profit. The government, in his eyes, as in the eyes of the Chamber, exists to aid business in need. Taxation will be high, but the government will try to keep it as low as possible; it will try to spread it so that it covers the mass of workers and poor farmers in the country. He is in favor, as are his listeners, of a national sales tax. Pay-as-you-go is likely to remain in the post-war period, etc. But the most important point made in the George address relates to the general problem of the rate and level of production and employment.

On the basis of well-established figures, the senator estimates a post-war labor force of fifty-five or fifty-six million workers. This figure is half again as large as the labor force in 1929 and two and a half times as large as that of 1932! In order to keep employment at a “normal” level, production will have to reach a peacetime level of $155,000,000,000 annually! What this means concretely we shall soon discover.
 

A Department of Commerce Study

Senator George’s figures are the result of many studies now being made by government economists and statisticians. But of particular interest is an important review entitled Post-War Manpower and Its Capacity to Produce, by S. Morris Livingston, published in the April issue of the Department of Commerce Survey of Current Business. Mr. Livingston investigated several basic tendencies in economy observed over four decades beginning with 1899: growth in labor force, a general shifting from industries of low productivity to those of high productivity, a constant increase in productivity in general and productivity per man-hour, and a tendency toward the shorter work-week. These basic tendencies, the study reveals, have been uniform during these many years covering the period of the upward development of American capitalism and its most severe and devastating crisis. In some respects, the tendencies were accelerated during the period of the crisis when capitalist economy sought to increase production at the expense of its labor force.

Dealing with the aim of American capitalism to enjoy a “normal” existence in the post-war period, Mr. Livingston writes that it will not exist unless “productive jobs can be provided for the vast majority of those seeking employment; and, that in providing these jobs, the volume of production could go far above any pre-war level.” (emphasis mine – A.G.) The writer takes the year 1940 as a measuring point. In that year, “the nation turned out more goods and services ... than in any previous year.” Yet of the total labor force, only 46,000,000 persons were employed. There were still 8,900,000 unemployed! There were other millions “ekeing out an existence on sub-marginal farms and in other unproductive occupations.”

The year 1940, however, marked the turning point in the transition from a partial peacetime and war economy to a total war economy. America’s entry into the war implied a complete transformation of the economy. This transformation took place more rapidly than appeared during the days of the actual change. The most easily discernible features of this war economy is the almost complete change-over to the production of war goods and the precipitate decline in the production of consumer goods, luxury and service commodities.

A marked shift took place in the occupations of millions of workers. The tendency to shift from unproductive to productive industries was sharply accented by two factors: the guaranteed profits arising from government war orders and the establishment of priorities in raw materials virtually excluding non-war industries and compelling either their permanent dissolution or temporary closing. By the year 1943, unemployment was reduced from 8,900,000 to about 1,000,000, which is regarded as normal in capitalist economy. This decline in unemployment was accompanied by the longer work-week, an influx of women into industry, partially offsetting the drain of manpower by the enlarged armed forces, and an increase in the physical volume of production half again as large as in 1940.
 

Some Basic Trends in Economy

In assessing the relative values of production in 1940, when there was a reserve army of unemployed totalling 8,900,000, to 1943, when unemployment reached a “normal” stage, Mr. Livingston points out in a footnote that the present annual rate of production of the gross national product is at about one hundred and seventy billion dollars as compared to ninety-seven billion dollars in 1940 (first quarter estimates). Taking the price differences into account, the 1940 production value would be one hundred and forty-six billion dollars as compared to one hundred and seventy billion in 1943. According to the Federal Reserve index of industrial production, an increase of sixty-five per cent is to be recorded from the year 1940 to the first quarter of 1943.

We have already mentioned several constant factors in the economy, as, for example, growth of the labor force arising from the natural growth of population (despite the fact that the birth rate in this country has been declining), and increasing productivity per man-hour. Livingston points out that during the years 1929 to 1941 there was a two and a half per cent growth per year in output per man-hour. At the rate of growth of the labor force and productivity, the available manpower capacity in 1946 (1946 is used on the assumption that the war might end in that year) will be fifteen to twenty per cent greater than the capacity in 1940 and output will be forty to fifty per cent greater than the actual output in 1940. The writer than adds: “This takes into account the long-term trend toward shorter hours. It allows for only a rock-bottom minimum of unemployed. Therefore it it an optimum goal and not a forecast.” Why it is a goal and not a forecast is indicated in his review and we will refer to it.

There is an interesting discussion of population growth and the sources for increased manpower in Livingston’s study, but these are not wholly essential for this article. He does show that the present increase in the total number of workers employed has been 3,500,000, despite the vast expansion of the armed forces. Moreover, the “abnormal” increase in the number of workers may reach 6,000,000. A large section of this labor force will, upon the conclusion of the war, leave industrial occupations. In general, however, it is expected that by the year 1946, the total labor force will have reached 59,400,000. Population growth after 1946 will “add about half a million per year in each of the years immediately following.” This will not lessen the problem of employment, but make it more acute.

Interestingly enough, this Department of Commerce economist hazards a guess as to the number of persons remaining in the armed forces for “policing the world” at 1,900,000. This might be inadequate, he adds, but points out that it is more than “five times the manpower devoted to this purpose in 1939.”

Another factor of interest revealed by Livingston is that while there has been a decline in the work-week and the output per worker has greatly increased, as previously mentioned, the output per worker has been two-thirds greater than the increase in output per man-hour. This means that the process of rationalization, i.e., the rate of exploitation of labor, has greatly increased. One of the features of the crisis years was the rise of productivity with a reduced labor force and this was one of the reasons, though not the most important, for the inability of American capitalism to relieve mass unemployment.

Thus, on the basis of past trends and current tendencies, the potential “man-hours of productive employment in 1946 become twenty per cent greater than the actual employment in 1940, or ten per cent greater than in 1941.” Taking the figure of 2,000,000 as a “normal” army of unemployed in 1946, Mr. Livingston presents the following chart:

It will be immediately noted that the reduction by one-half for shorter hours is an assumption based on past trends. This seems very probable, but how great a decrease is difficult to estimate now because that too is dependent on many factors, economic and political, which the writer does not even consider, but which are completely dependent on the war, which side wins, how the victory is won and what the relations of the powers will be in the post-war period as respects the domination of the world market.

On the other hand, Mr. Livingston is quick to recognize that the reduction of the unemployed army to one million in March of 1943 has been unusual and resulted wholly from the demands of the war. “In other words,” he adds, “it is better than we can hope for during a peacetime year.”

Part of the explanation is to be found in the following situation: increase in productivity. From 1899 to 1941 “the number of persons employed in all manufacturing increased by 130 per cent. The average hours worked per week declined 25 per cent from 54.0 to 40.5. Thus the number of man-hours worked in manufacturing increased only 72 per cent. Over the same period the physical output of manufactures increased 458 per cent. Over the forty-two years the gain in output per man-hour averaged 2.9 per cent per year compounded. From 1929 to 1941 the increase was 3.1 per cent per year.” (emphasis mine – A.G.)

It is obvious that the sharp rise in per man-hour output during 1929–41 resulted from the requirements of the economic crisis. But the main over-all tendencies are dear. “In constant prices the gross national product in 1941 was approximately thirty-one per cent greater than in 1929 ... Thus the output per man-hour was increased by roughly one-third over the twelve-year period, or at the rate of about 2.5 per cent per year compounded.”

In addition to all the factors already cited, the problem of technological advances must be considered. That these will be enormous, goes without saying. To what extent productivity will be influenced is difficult to say now, for the facts are as yet unavailable. But the war will greatly accelerate technological progress as it did after the First World War. Livingston, while mentioning this factor, is unable to incorporate the problem in his forecasts except on the basis of past trends. But it is certain that the rate of acceleration will be greater now than twenty-five years ago.
 

Post-War Output and Employment

On the basis of his investigation, however, taking the figure of a 2.5 per cent per year average increase since 1929, our economist determines that by 1946 output per man-hour will be 13.5 per cent greater than in 1941. And further, on the basis of the available labor force, improved technology, increased productivity, Mr. Livingston writes: “the potential output of available manpower in 1946 would be 25 per cent greater than the actual output in 1941 and 46 per cent above 1940.”

Thus, for unemployment “to be held within reasonable bounds,” output in 1946 must “substantially exceed the 1940 level.” And suppose that this enormous output cannot be fulfilled? Mass unemployment will be the outstanding feature of economic life! If production is maintained on the level of 1940, on the basis of the same hours of work, Mr. Livingston concludes that there will be the 8,900,000 unemployed which was normal in 1940, plus 2,600,000 of the increased civilian labor force (population growth), plus 8,000,000 who will have been displaced by “improvements in efficiency over the six-year period, or a total of more than 19,000,000! And he adds: “Even with an average work-week five hours shorter than in 1940 there would be more unemployed than in 1932.” (emphasis mine – A.G.)

These are the prospects of the continued existence of capitalist society. All of this assumes the best variant of a quick military victory (not a paralyzing war-exhaustion). Only American economic dominance of the post-war world can effect the above prospect. But if the war is protracted, if exhaustion accompanies a long war, if American imperialism fails to achieve its economic and political aims, the above variant will be unrealized, i.e., a variant of 19,000,000 unemployed! It will be much worse! Thus the victory will confront the masses with economic conditions worse than 1932. The problems which the working class will need to solve in such a situation become inherently clear.

Fully conscious of these economic prospects, American imperialism plans to solve them by a ruthless drive for world political and economic hegemony. In this endeavor, it will face the competition of the other powers composing the United Nations. Whatever the concrete turn in events, international relations are certain to be sharply antagonistic, the economic and political rivalries severely intensified. Given the certain inability of capitalism to solve its problems on the home front, under conditions even less favorable than before the war, the class struggle will inevitably sharpen. It will be a period of heightened international and national contradictions of imperialist capitalism.

The new socialist society will be on the order of the day!

 
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