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From Labor Action, Vol. 14 No. 3, 16 January 1950, pp. 1 & 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
President Truman’s economic report submitted to Congress last week is being studied with interest by all groups in our economy. The report represents the thinking of the president’s economic advisers, which means that it represents the ideas about the state of our economy on the basis of which the government is going to shape its policies during the present session of Congress and beyond.
The central point in the report is the belief that the country is on its way to a sound recovery from the drop which began in the fall of 1948 and extended till the middle of 1949. To dramatize the idea that this recovery will last for a long time, Truman states that if present trends continue, and if all groups in the country do the right thing, the national income will reach 300 billion dollars in five years. This would mean, he said, an average increase in income of $1,000 for every family in the United States, and would wipe out extreme poverty for almost everyone in the nation.
This situation, if it should come about, would be something new for any country in history. But before we let ourselves become dazzled by the dream of prosperity for all Americans, it would be better to take a close look at the economic facts and theories on which the president bases his predictions.
The first striking thing is the still great economic strength of the country. All the figures on production and income show a general relative prosperity compared to the poverty which grips the rest of the world. Further, they show no apparent trend towards a deep and lasting depression, at least within the next few months. It is important to keep that in mind. For what is going to happen politically during 1950 depends to a very great extent on the ability of the country to continue with something like its present degree of prosperity.
On the other hand, however, the TRENDS in the economy are not as reassuring as the general optimism of the president’s report would seem to imply. And that is important too. For if there is one thing that needs to be firmly grasped by working people, if they are to know how to act in their own best interests, it is to look at the TRENDS and not at the situation as it is at any particular moment.
One trend of vital importance to workers is unemployment. According t0 the report, average unemployment during 1949 was 3.4 million, or about five per cent of the working force (or one out of every twenty employable workers). Even during December, after considerable improvement had taken place from the high point in July, unemployment was 3.5 million, and 1.6 million more than during December of 1948. Further, there has been a rapid rise in the number of workers who have exhausted their unemployment benefits without being able to find a job. This means that unemployment is not just a matter of turnover between jobs but is long-term unemployment for increasing numbers.
Another trend is the continued falling-off of business investment. Six months ago, when the president submitted his previous economic report, he stated that the key to the whole question of continued prosperity was business investment. At that time, he urged businessmen to continue to act as if there would be prosperity by not laying off workers, not cutting production, and by continuing to invest in plant.
As purchasing power gradually caught up with the goods piled up in inventories, the capitalists did, in fact, increase production slightly in many fields. But they have not yet shown enough confidence in their own economic system to invest their money in substantial amounts in new plant or plant improvement.
Such continuous investment is vital to the capitalist system. The president states in his report that this economy must either continue to grow, or it will go into a sharp decline. And the only way in which it can grow “healthily,” that is, through private investment, is precisely the way in which it is failing to grow.
But then why are we not in the midst of a depression? Most of the answer can be found in two words: government spending. The ratio of all government payments to the total national output increased from 20 per cent in 1948 to 23½ per cent in 1949.
That is quite a bit, even in this vast economy. It is approaching a quarter of the whole national output. A part of it is spent on things of benefit to the people, such as schools, highways, and various municipal, state and federal services. But an increasing share of it is spent on various direct and indirect subsidies to business, and on preparations for World War III. Expenditures for past, present and future wars are up to 76 per cent of the budget.
Savings are another index of a healthy capitalist economy. Yet the trend in this respect has been downward since 1948. A third of the families of America spent more than they earned during the year. That means that they will have even less to spend during the coming year. And as the rich do most of the “saving,” it is safe to estimate that another third just about broke even.
Now, what policies does the president propose which, if carried out, are to bring us to the 300 billion mark in five years? They are the usual policies of the "Fair Deal,” with one difference. All the commentators who represent business interests agree that the policies proposed in the economic report tend to create a more favorable atmosphere for the capitalists than was the case last year.
Specifically, there is a general proposal to change the tax laws to favor the big boys, with a vague promise that this will also result in an overall increase in revenue. Further, there is no insistence, as there was six months ago, on a general wage increase.
Instead, the president states that prices are leveling off, and that the workers should look for improvement to higher productivity rather than to an increasing share in the total product through wage increases. That is what the capitalists and all their spokesmen have been saying for years, and it fits their plans of speedup like a glove.
The report proposes an increase in social-security payments and a widening of their coverage to additional groups in the nation. It is quite likely that some such measures will be passed by Congress. The union drive for company pensions during the past years has converted some of the most rock-ribbed opponents of improvements in social security into ardent supporters of social security financed by taxation rather than out of profits.
Another trend noted by the president has been a sharp falling-off in exports during the, latter part of 1949. This was caused by the devaluation of foreign currencies and by the inability of other nations to sell to the United States. This trend is of major importance not only to the American economy itself, but to the stability of the whole capitalist world.
The report proposes to overcome if chiefly through the "Point 4" program of encouraging technical assistance and investment in the more backward countries. But so far neither Congress nor the big investors have shown much inclination to splurge in foreign investment.
The most significant aspect of the report is the soothing effect on government thinking of the failure of the 1949 recession to work itself into a full-blown depression. Most of the proposals for increasing business activity are purely technical in character. The report shows little of the apparent crusading spirit of the one submitted six months ago.
Working people may well take note of the complacency. For at bottom it means that the administration feels that everything is now working out satisfactorily and labor can take care of itself in the “normal” processes of collective bargaining.
This shift in thinking can be blamed chiefly on the leaders of the labor movement themselves. Since the election victory of Truman at the end of 1948 the labor leaders have taken the position that, since they have a friend in the White House, their policies should be such as not to embarrass “their” administration. The failure to fight for major wage increases during the past year is now reflected in an economic report which doesn’t suggest that wage increases are necessary.
True, their policies have led to drawing big business into extension of the social-security program. But everyone recognizes that necessary as such a program is, it will not solve the problems of the economy.
As for the president’s rosy predictions of a $1,000-a-year increase for every family in five years, it is perfectly safe to predict that this will not become a fact. Rather, the chances are that five years from now the working people will be somewhat worse off than they ore today.
There are three major reasons for this. First, there is no reason to believe that either total unemployment or the proportion of unemployment to the total labor force will decrease, short of a full-blown armament economy. It is more likely that in five years there will either be a deeper recession than we had in the early part of 1949, or that even with a high general level of employment there will also be a constant increase in the army of the unemployed.
Second, the Marshall Plan and the whole European economy is heading into a storm of major proportions. Should this develop into full collapse, the effects here would be devastating. But even a new Marshall Plan and further props to the dying capitalist system abroad cannot hope to restore the American economy to long-term health, as such a program necessarily distorts normal economic development here.
Thirdly, the final resource for keeping the American economy out of major trouble is government spending, and particularly government spending on armaments. Though such spending can keep the economy going at a relatively high level, it does not increase the real standard of living of the people.
In the meantime, the public shift of government pronouncements to an openly pro-businessmen’s economic point of view should make organized labor stop and think a bit. Labor has allied itself through its leaders with this government, and through its leaders it has got to depend on it more and more for support and favors. But the nature of this alliance has been one in which labor does the work and delivers the vote, and the Democratic politicians make policy and have the power.
Perhaps the politicians’ shift will convince some workers who have gone along with this policy in the past that it is high time that they organized their political forces in such a way that they have the power. A careful reading of the president’s economic report might help that conviction along.
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