Thus they could present a convincing claim for compensation at current market prices. We may thus pursue relentlessly the tragic illusion that more and more positive government will cure our ills; or we may reject political romanticism and resolutely con struct that dualism of competitive and political controls which 146 POSTWAR ECONOMIC PROBLEMS minimizes the need for government imposed from above. What matters is the rules of policy which guarantee the Rxity of the exchange rate. The fact that both in Europe and in the United States the capitalist process displayed unmistakable symptoms of strain exactly since the break in the legislative and administrative attitudes of public authority occurred may be significant. All of this will help prevent a boom during the years when surplus savings are being worked off and demand deposits are abnormally large in relation to prices and production. Terms, through an administrative structure which can assure prompt clearance of applications. Rtywl to CoBfyreM on Lcwd-tcase OperaftofM (Washington, 1942), $75 376 POSTWAR ECONOMI C PROBLEMS be remembered that the disintegration of the international economic system during the interbeUum years continued to take place at a rapid pace during the decade of the 1930's, after war debts and reparations had passed from the international scene as live issues. Scarcely less unfortunate than a public works pro gram would be another expansion of the WPA. This is not, of course, always the case.
There is always the possibility, of course, that the con struction techniques actually used will be different from those used on PWA; but where differences in techniques are subject to control, as in the Work Progress Administration regulations, no serious problem arises. Throughout the whole of the last 20 years, the rate of increase of productivity of labor has been unprecedented. We have a vast new Reid of knowledge which we speak of as Everyday eating which contributes to the most favorable growth and health of human beings is called pood Eating which does not meet the minimum requirements for favorable development and good health is called Through most of man's history, food getting has been a hit-ormiss matter. The possibility that large and more or less unforeseeable taxes may be imposed upon proBts is bound to have most unfavorable effects upon estimates of prospective returns and, therefore, upon the volume of investment and of employment. A true understanding of the meaning and significance of governmental debt and of the general principles of over-all fiscal policy is essential to true "sound Rnance" on the municipal level. Today, modest incomes can buy more than a king's fortune could command in former times. Everybody is afraid of a postwar slump, threatening from a drastic reduction of military expenditure financed by inflationary methods as well as from mere reorientation of production. In the latter case, the net yield of the bonds is reduced insofar as he is asked to pay for the financing. Full employment of labor and other productive resources* depends, in a capitalist economy, on the maintenance of an adequate flow of investment expenditure. Here, any adequate exposition of that theory would have to digress into political sociology in order to show that the behavior of a society toward a particular interest is primarily determined by the inducement and the opportu C A P I T A L I S M IN THE POSTW AR WORLD 119 ttue o/ cowpara^ve performance or ^service.
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It starts from an undeniable truth, more or less explicit recognition of which constitutes its chief merit. Durable peace implies extirpation of bar T R A D E AND THE PE A C E 149 ter trade, of quota limitations, and of arbitrary exchange controls. If the theory is correct, it means that society can devote a 82 POSTWAR ECONOMIC PROBLEMS larger proportion of its resources in the future to satisfying current consumer wants, including such things as the provision of more adequate medical care, better housing, wider educational oppor tunities, etc. It is, rather, a matter of failure to foresee the consequences of eminently respecta ble attitudes and business practices projected into an era of rapid and profound changes in the technology of our society—attitudes and practices which we ourselves thus far have barely begun to alter. The all but general opinion seems to be that capitalist methods will be unequal to the task of reconstruction. The men and women of these trades and industries are needed elsewhere in total war. It is hoped that a conscious choice will be made; the more leisure, the easier it will be to keep consump tion at a sufRciently high level. It continued on the momentum of these expenditures plus transient speculative elements of inventory accumulation induced by booming farm and industrial prices. Another important lesson that will have to be learned by the time the war is over is that the most economical way, as well as the most just way, of overcoming opposition to policies that have to be undertaken in the public interest is to provide generous compensation for all who have to make a special sacrifice. Reviews of Colin Clark, FcottottM qf 1960 (London, 1942), which is C* not yet available at the time of writing, indicate his view that a new shift in the terms of trade in favor of primary products will occur in the near future. In particular, it now appears that much of the world will for quite a period suffer a fairly chronic shortage of American dollars unless these are made available by substantial loans from the United States to those nations requiring capital, who in turn would be permitted to pay over the dollars to third countries where they will be needed to pay for an excess of imports from the United States. Further, I make bold to assume that the United States will bear its full share in constructive world leadership. Now * It goes without saying that, if a preferential regime is brought about not by reducing duties between the member states but by raising them against the out side world, it constitutes a step backward from the free-trade point of view.
Nutritionists and students of food habits, as well as commodity, Bnancial, shipping, and political experts, will need to work over the drafts if serious mistakes are to be avoided. The terms of trade have moved against agricultural products and in favor of industrial commodities because of differences in the institutional organization of production in the two Reids, on the one hand, and in the character of the demand for them, on the other. They see, among other things, that the people themselves— gropingly and usually with no more collective control than before— have been taking advantage of rapid transit in general and of the automobile in particular, to try to escape from the overcrowding and congestion of the interior of the towns. Let me indicate some implications of this general position, 6rst as regards Germany. RE M OV AL OF R E S T R I C T I O N S ON T R A D E 349 as "wholly inadequate. " We shall be shortsighted if we embrace the theory that "the age of enterprise has given place to the age of security. It could raise capital very cheaply and in the large amounts required. BALANCE SHEET OF THE FUTURE With the theory of income determination outlined in the previ ous section we are now in a position to evaluate the factors favorable and unfavorable to high levels of employment in the postwar years. This is a big assumption, to be sure; but we are obliged to start from some such premise, else we can hardly hope even to survive the war, much less afterward to organize and maintain the peace. We have assumed that consumption expenditures would be held down to $78 billion for the year 1943. For some months past, basic war-production planning has been done in terms of the over-all limits of resources, factories, and man power rather than in terms of the estimated numbers of planes, tanks, ships, and guns needed to outshoot the Axis. We cannot now forecast its timing and length, but we may safely expect some years to elapse before peace becomes full-fledged. 350 P O S T W A R E C O N O M IC PR OBLEMS change in underlying conditions, would meet the same fate. EC O N O M Y OF BLOCS 329 In the comparatively libera!
Not even from a geographical-locational point of view can the Americas as a whole be regarded as a well-rounded region with clear boundaries all around. Furthermore, some indications will be given of the degree and types of non tariff intervention that would seriously upset the conclusions reached earlier in this essay. Surpluses of basic crops were pro vided for in the Ever-normal Granary program, under which farmers received government loans for commodities stored under govern ment seal. SpeciBc, comprehensive advice must wait on maturer understanding than anyone yet has. But under these conditions, the expansion of money is offset by a rise of output; and the increase of prices should not be large. The final form of social insurance, workmen's compensation, is seldom mentioned in discussions of social security in this country, but in benefits paid it ranks among the most important of our social security institutions. Moreover, in some cases the categories of work are too broad, as in public buildings, and the breakdown into labor types is inadequate in nearly all cases. Hypothetical cases are suggested in Table 2. The greatest obstacles are the vested interests of the millions of workers whose livelihood depends on the maintenance of artificially protected industries. If a modem economy temporarily stagnates, the reason must surely be found elsewhere than in lack of true capacity either to consume or to produce. For example, the additional school teachers for a new school may be hired and used in existing buildings before construction of the new building actually begins; in this case, maintenance and operations costs start before construction costs. This is the promise which the future holds for us, provided that we are lucky or provided that we manage our affairs well. SUMMARY AND CONCLUSIONS In this paper, we have outlined some practical economic problems of planning public work; "practical, " because they arise from an attempt to apply widely accepted economic principles in the execu tion of a stated policy, as distinct from the attempt to develop new principles or to formulate a new policy.
Other lands can feed these families after they have been transferred to productive work in the war effort. 328 PO ST W AR EC ON O M IC PROBLEMS is sometimes easier to bring about necessary price adjustments by changing the relative values of two currencies rather than by price changes in one or both of the countries concerned. The required payments to bondholders may be assessed upon them; or in part on them and other holders of wealth; or in part on each of these groups and on labor incomes. 246 POSTWAR ECONOMIC PROBLEMS greatly discourage enterprises from making the urgent replacements of equipment which will represent most of the equipment buying immediately after the war.
Even where a strong financial position prevails, legal, political, and psychological barriers against accumulation of reserves in boom periods and expansion of debt in depression periods complicate the public work planner's operations. We shall have need for expanded vocational training services and educational bonuses and, probably, also for cash payments to men who cannot find jobs or hold them, which should be conditioned upon participation in training programs designed to make them more valuable to industry. To make the general public nutrition-conscious is one of the main purposes of the National Nutrition Program. This point is indicated in the lighter curve which takes the shape of ascending spirals; these are counterclockwise in direction because of the delayed adjustment of consumption to new levels of income. At such a time sharp reductions in certain rates could be made with the least harm and opposition.