The War and Your Business



Delivered before the Washington Athletic Club, Seattle, Washington, October 14, 1942

Vital Speeches of the Day, Vol. IX, pp. 106-111.

IT is a great country we live in. We still try to have a little sense of humor about it all, in spite of the problems that we face. That is one reason why I am rather optimistic about our capacity to beat the Axis. They don't seem to have much sense of humor. Once they hit bad news I don't think they will be able to take it for very long. Certainly the British have shown a remarkable capacity to take reverses, and I think it shows something about their character.

Well, out here on the West Coast, all the way from San Diego up to Seattle, we see an extraordinary amount of activity. We see a fulfillment of the age-long dream for industrialization, and some of my friends here in Seattle think that the expansion is only beginning, and that it will survive after the war, and I think New York had better send an ambassador out here to begin to negotiate with you to ask you to treat New York better than it used to treat you.

We were hoping all through the depression period, all through the long years of sub-normal economic activity, we were hoping that some new industry would be developed that would give a stimulus to employment and to expansion, and there was a good deal of mental speculation as to what human ingenuity would invent to fill up the gap.

Well, I think all of us would be more cheerful and would take a more optimistic view of the trend if this new industry had been something other than the armament industry, because much of the activity which we now see on the surface is not business or industry as we know it, for real business and real industry in my opinion represents an exchange of goods and services among producers; and as they continue this process, it can go on endlessly until maladjustments intervene.

But what we are witnessing now is really a commandeering by Government of the productive machinery of the country for emergency uses and needs; and though it may have some of the physical outward characteristics of business, it is quite different than business as we know it.

In the first place, Government, which is the sole buyer of the armament industry, has nothing to give to that industry in exchange for its products. Government must rely on means of payment by taxing or borrowing from other producers. So that instead of a normal exchange with a quid pro quo between buyer and seller, it is a sort of one-way transaction; and in the nature of things, much of the stimulus which comes from this type of Government buying is not a net increase in demand, but is a substitution of Government buying for civilian buying; and as the Government through taxes and borrowing gets the means of payment from its private citizens, it is at the same time and by the same token depriving the individual citizens of their right to buy the goods and to give the employment that results from such transactions.

That wouldn't be so bad if that were the end of it; but in the nature of things, this type of transaction is ephemeral and temporary, at least we hope so—we are optimistic enough to hope so—and when the war episode is over we will have created more economic and social problems than we will have solved.

The war is no answer to our economic dilemma. Thewar is no answer to our riddle of solving the paradox of poverty amidst plenty. The war is no solution to our employment problem; although we are bringing into payrolls men and women who were not previously on payrolls, we are at the same time diverting into the armed services and out of production millions of fit and able young men, and we will have the problem of reabsorbing them later.

I am not making this analysis for the purpose of indicating to you that General Sherman was perhaps correct in his characterization of war. War is not the American game. It is our enemies' game. It was forced on us. We have no choice except to pursue the war to its successful conclusion in the shortest possible time, but in doing so there is no objection to our keeping the books accurately so that we know where we are going.

I am not one of those at all who believes that we should pursue the war economically, who believes that we should only spend some arbitrary amount on prosecution of the war. That was the French doctrine, and it is ridiculous.

The French assumed that they could only afford half a Maginot Line. They also decided that they didn't want to ruin Paris, so they transferred the title to Paris.

It just doesn't add up and make sense. We are willing in the United States to pay the price for victory and to get it at the earliest possible time; and if that means some dislocation to our national finances, if that means some dislocation to our agriculture and our industry, well, then let's make the most of it.

But let's not fool ourselves. Let's not call this stimulus to armament production national prosperity. Let's not confuse ourselves as to the nature of the present wartime boom. Let's not fail to see its temporary and ephemeral characteristics. Let's not fail to see the price which we must pay for it in post-war maladjustments and dislocations.

An esteemed economist at Harvard University, Alvin Hansen, in the current issue of the Atlantic Monthly, takes a more cheerful view of this whole subject. He presents the thesis that this is a great release to American ingenuity, inventiveness and creative power, and that it is a prelude to bigger and better times for the nation.

I wish I could go along with him a hundred percent, because that is an enticing doctrine.

I recall when Professor Nadler spoke at the Cotton Textile Club in New York in August, 1929. He then risked personal unpopularity by telling these cotton textile merchants that there were many clouds on the business horizon, and that wise and prudent men would pull in their sails and get ready for a storm. That was at the very crest of the prosperity boom, and his words were unwelcome.

The chairman of the program committee was berated for his lack of good judgment and good taste in inviting a pessimist to throw water on the enthusiasm of the membership. This poor man, wanting to please, tried to right himself with the membership, and the following month he invited a distinguished professor from Yale University to address the same group, and this man told a much more cheerful story. This man in September, 1929, electrified the membership by saying that we were on a new high plateau of prices and prosperity, and that from that level businessmen and financiers could plan ahead with full confidence, knowing that what they were experiencing was the new normal, and he was greeted with great applause, and the speakers' committee had redeemed itself. It had at last brought popular doctrine to the platform, and a month later, as you remember, the panic came.

So that tonight we are facing rather serious times. The nation is in peril; you and I have an obligation to make our full contribution to popular understanding of what is ahead of us, and it would be a dissipation of our opportunities and our obligation to indulge in wishful thinking or mere pleasant platitudes, and I am far from pessimistic even now. I still think that this is the greatest country in the world. I still think that we have been blessed with the richest natural resources, with the greatest power technology and the finest tools in the world, and with the finest plan of government and of social life; and I believe that whatever price that we pay for victory, that we can emerge from the exhaustion that results from war, provided that we save out of this catastrophic period the American plan of Government and of enterprise.

And I believe that if we preserve our constitutional system and our enterprise system, that American ingenuity, American energy and American talent after the war will set to work to rehabilitate the depleted capital and the losses in material well being.

Now, you may say, "Are there enemies within, against whom we must fight in order to preserve the system?"

I say there may be such, but they are relatively unimportant in the economic and social and political battles that may be ahead.

Far more dangerous is the inertia, the habit of departing from our accustomed ways of freedom, and the danger also which comes from sheer economic exhaustion, because in times of exhaustion and maladjustments and dislocations people are suckers for men on horseback.

It was under such conditions in post-war Europe that these strange and funny little men gained leadership over great and once fairly intelligent peoples and it is not too early now to get clear in our own minds that what we are doing, what we are properly doing in wartime is, in the nature of things, a departure from normal. We have shifted our objectives for the duration, and if we know that we have done it, and if we keep it before us always, we will be ready to get back on the main track after this war job has been successfully consummated.

The objectives of the American economic system in time of peace, in my opinion, have been to produce more and better goods for tens of millions of American families. That has been the achievement of American business and industry. We have raised living standards to the highest level attained anywhere.

But in wartime we have departed from that objective, and it has been necessary and desirable that we do so. Instead of producing more and better goods for civilian families, we have shifted our objective in wartime to this new and temporary goal of instead producing dead Japanese, dead Nazis and dead Fascists; and unless we know that, unless we keep that fact before us every day, you and I will be confused as to what is essential and what is non-essential in wartime.

There has been a transmutation of values; but unless you and I and every one of us keep a little legend on our desk each day and say that these are abnormal times, we may slip into the intellectual fallacy of assuming that this is a new way of life, that this is a new normal, that there is some advantage in centralized direction from Washington as to what we may buy and what we may not buy, as to how critical materials should be allocated.

People might begin to say, "Well, if this type of regimentation was successful in winning the war, why isn't it good for the peace?" People might say, "If lend-lease has been helpful as a means of attaining victory in this war, why does it not furnish us a pattern for post-war tariffs and economic policies and principles?"

Not only people might say this, but Sumner Welles already has said this; and I say, if rules, restrictions, priorities, allocations, censorship and other wartime regimentation, which are necessary and desirable in wartime, have contributed to the objective of producing a sufficient number of dead Japanese, dead Fascists and dead Nazis, it by no means follows that those same interferences with human liberty, with business freedom, and with the right of the individual to make his own choice, will help to restore the peacetime objective of producing more and better goods for 35,000,000 American families.

And I say that in giving patriotic compliance to these rules during wartime, we should also keep alive in the public mind and in the public heart the desirability and the necessity of reversing these restrictions after the job of war has been successfully accomplished.

Now, gentlemen, this is not pure theory. In the last war we proceeded in a somewhat similar direction, and Woodrow Wilson had committed himself in advance to reverse these wartime restrictions and policies; but some people, some special interests, including some businessmen, found these cartel arrangements easy crutches to lean upon, and they were a little apprehensive about disturbing these newborn conveniences and aids to strenuous living, and there was considerable pressure on the President after the Armistice not to disturb the existing arrangements, and he called a meeting of his counsellors and asked them whether the time had come to get rid of these wartime apparatuses, and I am informed that to a man they advised him, "Mr. President, if you don't get rid of them now at this psychological moment, you may never be able to get rid of them." And he did get rid of them, and we did suffer a post-war inflation and a sharp post-war deflation late in 1920 and 1921.

But we went through that medicine and the system survived, and we have followed it with a great further advance in the material well being of the people; and I think it is not too early now for public opinion to become alert to the need and the desirability of reversing these policies after they have done their emergency job, and I think it will be very reassuring to businessmen and to investors and to the middle classes generally if there were a definite commitment in this direction.

Now, there will be some agitation on the other side. There will be some argument, as there was last time, that we had better keep these crutches.

Professor Hansen, who sometimes is an advanced weather-vane of public thinking on these questions, already is arguing against giving up these emergency powers and these emergency crutches until after re-conversion of industry has been completed. He doesn't even say then that we should definitely relinquish those powers.

Now, in paying a price, an economic price—and the economic price, of course, is very small compared to the human price that our young men are making in the armed service where they are risking their lives; of course, there are no non-combatants in this war, and bombers are no respecters of women and children—but I say that the economic price is a small price compared with the human price in the tearing apart of families, and we are willing to pay that price. The American people are willing to pay that price. Families that have contributed their loved ones to the armed services are in a pretty serious mood. They want to get on with this war. They want to accomplish victory in the earliest possible time, and they are very impatient with political fiddlers who are afraid to put out the truth too quickly.

I want to salute the President for his statement in the Fireside Chat day before yesterday that he finds it necessary to draft men in the eighteen- to twenty-year group. The President made a very substantial contribution to raising the integrity of our national life by making that statement and refuting the forecast by cynics that that news would be kept from the people until after November 3rd. I think it was a very fine thing to make it before the election; and I think that it is not only good humanity to do it, but I think it is also good politics to do it, because it is my opinion as I go around the country from coast to coast that what the people respond to now are the facts. What they want to know is the truth, and they don't want anything withheld from them.

Well, if that viewpoint is correct, then we could now demobilize the whole propaganda campaign for kidding the public. We could get away with the whole effort to break the bad news, the bad economic news to the public gradually.

Here is what I mean, my friends. I don't think we can wage total warfare in the United States and maintain our standard of living. I don't think we can successfully prosecute the war on various fronts and at the same time retain all of our social gains. I think that the price in human terms which we have to pay for winning this war is some backsliding for the duration in the material well-being of 35,000,000 American families.

Well, you might say, "Isn't that self-evident?" You might say, "Isn't that obvious?"

I think it is, but it is only a few weeks since the National War Labor Board in its Little Steel decision appeared to promulgate a contrary view. In rendering its decision on steel wages, wage rates, it decided that rates should be advanced sufficiently to meet the rise in the cost of living since January, 1941. That appeared to me to convey the wrong impression to American working men. It seemed to me to try to have the effect of pulling the wool over their eyes and saying that "we will so manipulate the national economy that you will have to make no contribution to the cost of the war; that if things go up in price, we will advance your money income so that your purchasing power will remain the same."

Well, that just doesn't add up, my friends, because the Government program as recently announced by Donald M. Nelson, chairman of the War Production Board, is to attempt to divert next year 60% of all production to the purposes of the Government in connection with the prosecution of the war and otherwise.

That means that the average working man will be working two days a week for himself and his family, two days out of a five-day working week, and three days for the purposes of Government; and it means that in making available necessary and critical materials for the war effort, that the working man's family, like every other family, will be foregoing some of the comforts and some of the tokens of a high standard of living to which the American families have become accustomed.

I say that is the outlook, and I say that it is timely now to tell the people what is ahead so that they can adjust themselves to it.

We haven't quite faced the facts yet because we have been living on inventory, inventory in the hands of consumers and inventory in the hands of merchants. Although the Better Business Bureaus, in cooperation with the Government, have asked merchants not to stimulate or whet the public appetite for goods by dramatizing forthcoming shortages, you and I know that the prospect of shortages is real and not illusory.

Some of the wise and intelligent department store owners,facing the prospects of increasing scarcities of certain items, are already surveying their floor space with the idea of shrinking certain departments and making studies of what to do with the space released.

So that we are definitely departing from this normal quest for a more abundant life, and we are entering the grimmer career of what Winston Churchill described as "blood, sweat and tears."

That is what I meant when I said that this great boom in industrial activity, this unprecedented rise in the indexes of production in the United States, is not normal business, is not normal industry, but is something else.

We are going to have a new type of paradox of poverty amidst plenty, one caused not by unemployment, not by failure to produce, but caused by the conscious national design to divert an ever-growing percentage of our total production away from raising the living standards of civilians, toward the wartime goal of producing dead Japanese, dead Fascists and dead Nazis; and unless we recognize that major change, then everything that we see in the way of bank clearings and indices of production will mislead us and betray us.

A frequent question that I am asked is, "How much can we stand? How big a national debt can we stand? How much diversion of goods from civilians is tolerable, and what is a proper limit to the war bill?"

I believe that it is foolish and foolhardy to try to give dogmatic answers to those questions.

Just before Pearl Harbor last year I was in to see A. P. Giannini in San Francisco, and if he knew that there was going to be an attack on Pearl Harbor he didn't tell me, and if I knew I didn't tell him, but he asked me a great many questions as searching as those I have just raised. "Are we going to peacefully settle our differences with the Japanese, or are we going to get in the war? How long before the war would end?" And for some reason I was astute enough to be noncommittal. So A. P. called in some of his vice-presidents and said, "Rukeyser is here, and he knows what is going on, but he won't tell us."

Well, my viewpoint is that it is foolhardy to set a ceiling on the amount of effort that we can safely make in the successful prosecution of the war. That type of reasoning is too much like the French thinking they could afford only half a Maginot Line, of saying that we can afford so much on defense and no more; because if you lose the title to our great national resources and to our national wealth and our spiritual privileges, that doesn't seem to make much sense.

We Americans don't want to keep our economy intact or our physical life unharmed so that we can turn it over whole and safe to the enemy.

On the contrary, all of our material well being, all of our spiritual values and our liberty and our privileges are naturally contingent on the successful prosecution of this war. Our physical assets and our spiritual values would be as nothing if they became subject after this war to the whims of Nazis or Japanese overlords.

Now, some years ago there was some speculation as to how big the national debt could be blown, and an authoritative spokesman at Washington quoted an unnamed investment banker as saying that the national debt could safely go to seventy or eighty billion dollars, and it seemed at that time an extravagant figure. Now we are talking about two hundred billion.

At the time, my comment was that I didn't think that was a fair criterion. I didn't think the question was, "how large could we blow the bubble of federal debt before it burst," but rather, "what type of fiscal policy would most contribute to the well being of the American people, with due regard to financial reserves for such contingencies as war and other national calamity?" And I say now tonight thatthe restraining factor in our war effort will not be purely financial considerations.

Now, as to the collateral question of the limits beyond which it is impossible to go in diverting goods from producers to Government, that it seems to me is more a human problem, more a psychological question, than a purely economic one which can be measured and predetermined by mathematics.

We entered this war with a much higher standard of living than the enemy. If we go down anywhere near the level which prevailed in Germany, or to the much lower level which prevailed in Japan, we could, of course, make a very substantial descent; and I am not predicting how far we would go before there would be great resentment.

I think that the people now are in a mood to pay the price, but at the same time in going down toward the international level, as we are during wartime, we have an additional psychological obstacle to face, namely, that our people have experienced a higher standard of living, and this process means to them giving up things to which they have long become accustomed, whereas in Germany part of what the people give up is the theoretical increment in productivity of the last ten years. The same is true in Japan.

But certainly the capacity to produce which was behind our superior standard of living is no handicap in wartime. It makes time our ally. Once we get fully under way, once things really get rolling, time is on our side; and though there may have been in the last ten years some occasional misunderstanding between public officials on the one hand and businessmen, bankers and industrialists on the other, the turn of history has been such that the implementation of the President's policy and his war aims hinges very largely on the cooperation of men with "know-how" in industry and their employees, and we have seen in the nature of things the realities catching up with us. Under the stress of wartime necessity there has been consultation of new groups. In the nature of things, since our job in the battle of production is the capacity to make things, it has been necessary to seek new consultants and new advisers.

In the matter of designing new products, new weapons, and putting them on the assembly line, the theorist and the academic critic and the professional politician have had definite limitations; and under the stress of necessity it has been found desirable to call into consultation men with practical "know-how," who are at last coming into their own.

The businessman and the banker passed into eclipse for a period of years. They were suffering from the sins of the Twenties and from the emotional aftermath to those sins of omission and commission.

But there was a tendency in that period of moral deflation to put the emphasis on the hole of the doughnut and to overlook the doughnut. There was an attempt to over-dwell on the moral shortcomings of the few, on the intellectual mistakes of the few, and there was neglect of the larger and more fundamental job of looking at the overall picture, striking a balance sheet and recording the accomplishments as well as the failures of business and of industry. Until recently the businessman and the financier had been unable to rehabilitate their prestige through propaganda.

But now in wartime, when we need men with "know-how" who can turn out things and do it in a hurry, industrialists are getting a God-given opportunity to rehabilitate themselves before the public through the propaganda of good works and accomplishment. And make no mistake of the fact that the public is aware of what is going on; and before the process is over, the public will have a new understanding of the sociological by-products of American business and industry. They will know that American business and industry are the means of making things, which means victoryin time of war and higher standards of living in times of peace.

Business and industry will be reinterpreted as the basis for social gains, if by social gains we mean improved material well being as measured by additional and better goods and services on the one hand and by more leisure for the working population on the other. And there will be a reunion between our social aspirations and our economic procedures, and the businessman in facing the public will be less defensive and less apologetic, and in the great society which may follow this war, business can make a contribution to national welfare by contributing some of its techniques, some of its scientific approaches to modern life, to other fields of human endeavor.

The great contribution that business has given to the modern world has been the process of recording its transactions and measuring its cost and its accomplishments.

It has done this through double-entry bookkeeping which, for every item, shows "where from" and "where to", and relates every isolated transaction to the totality so that men and activities in an enterprise can be seen in their proper perspective.

Now we are living in an increasingly complicated world, and you and I have a strong bias in favor of the democratic system. We think it is superior to regimentation of the European or Asiatic brand.

But I say times are too serious for us merely to give lip service to an ideal. It seems to me that we ought to do more and that we ought to provide the public with better intellectual tools for performing the career of intelligent self-government; and I say that if we apply the analogy of business to public life and develop techniques of social bookkeeping techniques of national bookkeeping which will record the total efforts of the American people to earn their livelihood in peace and to carry on their economic activities in time of war, and if we summarize the findings of national bookkeeping in simple form so that the man who runs may read, then we are implementing the voter. Then we are strengthening him. Then we are making him more capable of deciding as between public men and public issues. Then we are giving him yardsticks for comparing the accomplishment of public men with their promises, and we are giving them yardsticks for measuring the cost of public activities. And if these yardsticks are to be useful they must be scientific and unbiased. They must be used consistently against friendly administrations and unfriendly administrations.

I have always advised officers of private corporations not to follow my recommendations of streamlining and simplifying corporate accounts unless they have nothing to hide. I say that this simplification, this streamlining of accounts is like pulling up the shades so that the public can look into your house and see what is going on; and I say that the type of device should only be used by people who have nothing to hide.

I would like to recall to you some of the changes in corporate accounting which I have advocated in the last half-dozen years, and to relate them to some of the emotional problems of war financing today.

In urging the streamlining and simplification of corporate accounts, I pointed out that archaic accounting was depriving American business of getting the sympathetic understanding from the public to which it was entitled.

I said that archaic accounting was a survival of something which grew up in the Nineties when we were in a promotional area, and when the end-all and the be-all of the accounts was to whet the public appetite for stocks which were being created, so that in that type of accounting the emphasis was always on the net profit or the net income figure; and sometimes the newspapers in their endeavor to condense and to save space would print out of the interim reportof a corporation only the net profit figure. This procedure made it appear that the corporation was just a selfish enterprise feathering the nests of its owners, and overlooked the fact that the corporation was a consolidation of tools resulting from a collaboration of many thrifty persons banded together to join their savings so that they could buy more and better tools, better power technology, better management, and enable their working men to become more productive, to turn out better goods at a lower cost, and to get a higher weekly wage for fewer hours per week.

I suggested that that story could be told in accounting by the simplified short form which some companies have been using. I said that the corporation should make it clear that it puts itself in funds by submitting each year to a plebiscite among its customers, and that its customers vote "yea" or "nay" on its products and policies by either buying its products or withholding orders; and that if it succeeds in attracting orders, the corporation has itself receipts out of which the various costs of the business are met, and these costs are five in number.

I will ask you to bear with me for a moment as we go over them, because it has a great bearing on these current tax debates.

I said that the disposal of the receipts goes into five principal categories of cost.

First, there is the tax cost, and that consists of federal, state and local taxes of every kind which the company is required to pay. The company is not really a taxpayer. It is a tax collector, because it gets the receipts from its customers and redistributes them to government.

The next major element of cost is the cost of goods and services purchased from others, and has to do not only with sub-contracting in wartime, but with the whole process of assembly in time of peace. The automobile manufacturers, as you know, are assemblers, and a great deal of what goes into the automobile consists of goods and services purchased from other independent manufacturers.

The third major category of cost is the cost incidental to the wearing out of tools; wear and tear on tools, machinery, and other physical resources. In addition to wear and tear, the tendency of resources to get out of date, the obsolescence factor; and in the case of mining companies, the depletion factor, the exhaustion of natural resources.

After those three categories of cost have been met, there is a residue, and that residue is available for the traditional split between capital and labor. In the case of the steel corporation which broke down its earnings in this manner, nearly 90% of the residue went to labor in wages and salaries—I think it was eighty-five over the seven-year period, and about fifteen percent went as the fifth category of cost, the cost of capital.

In this residue are the fourth and fifth categories; the fourth being wages and salaries paid to employees, and the fifth being the capital cost, the cost of capital.

Now, what does this breakdown mean? This type of breakdown puts in public and social terms the realities about the corporate process, and it gets away from some of the emotional epithets which have an anti-business bias in them.

If all corporations had used this form we wouldn't be facing the current era of demagogy in which it is popular for business baiters to confuse the issue by speaking of the enormous corporate profits being made this year; and when you pin these demagogues down, what they have in mind is profits before taxes, not profits after taxes. It would make just as much sense to speak of corporate profits before wages or corporate profits before depreciation.

Thinking that the demagogue was particularly burdensome and destructive in wartime, since he confuses the issue and retards productivity and hence wittingly or unwittinglyaids the enemy, I stuck my neck out a number of times this year in radio debates, unrehearsed radio debates with distinguished senators, distinguished socialists, distinguished academic professors and others; and when they spoke as they did recurrently about these colossal current corporate profits, I said on two occasions, "It is too bad that this is Sunday afternoon and that it is after three o'clock, so that the public won't be able to rush down to the stock market and take advantage of the inside information which you have.

But what I am getting at is that if the short form were used and if the tax item were set up properly as it should be as one of the costs of the enterprise, then we would be looking at the net after taxes rather than the net before, and a great deal of the emotional orgy against the modern corporation would be dissipated and a great deal of the emotional excitement against the item of profit would be dissipated if the profit item were correctly set up as it should be in truth as a cost, a cost of capital.

Of course, where the capital is supplied by the equity, the return on capital is a residual item. It is the final claim after all prior claims have been met; and though the theorist and the business baiter and the Marxian are always tearing their hair over the excessive profits of industry, those of us who have gone to the figures of the Internal Revenue Bureau and examined the records of nearly 500,000 corporations through the years, know that the net overall record shows that business profits are inadequate rather than excessive.

Now, in wartime it is the public sentiment that this is a time for giving, not getting. You approve that sentiment and I do. We are in sympathy with the thought that there should be no wartime millionaires.

But that is rather an emotional clamor. In carrying out that objective we must be careful to know and to understand the price that we are paying.

The treasurer of your local company, the Boeing Works, went to Washington a few weeks ago before a Congressional Committee and said that if a maximum excess profits tax were levied, that his company might be put out of business.

It seems to me an absurdity to create a situation, if we are in the danger of creating one, in which the Government might chloroform one of its own facilities. The whole process of using the corporation as an intermediary for tax collection is made useless in wartime when the corporation, instead of serving many customers, serves only one customer, namely, Uncle Sam; and the corporation engaged a hundred percent in war work is in this double position of overcharging Uncle Sam on the selling price so as to have a taxable surplus with which to pay taxes.

Now, you and I don't object to that double bookkeeping if no physical harm results; but if through miscalculation or error or greed we should be in danger of killing off one facility which is useful to the Government in producing the weapons of war, that would be muddleheaded.

If our aim is to prevent undue enrichment of individuals, if something slips through the corporate hopper, we can get the fellow through the individual tax hopper.

If the problem is to find the line at which taxation becomes destructive, then I say better to err on the side of forbearance than on the side of greed.

Now, that isn't very popular doctrine. We are still infants and economic illiterates in many of these matters. A good many of the public officials think that we are in our economic childhood. They think that we are unaware of the fact that in peacetime the corporation isn't the taxpayer but is only the tax collector, and that it gets the means of paying the taxes by adding something to the selling price of all its goods and services.

Accordingly, it was never true that the low income groups got off Scot-free of taxation, even when only four millionpersons filed federal income tax returns, as was the case until about 1937 or '38.

Even then every gainfully employed man, woman and child in the United States made a substantial contribution to the cost of Government. He paid his taxes in the price of everything that he bought from a corporation which was subject to the income tax and the corporate tax and the local real estate taxes and other imposts, so that the corporation was an intermediary through which taxes were collected.

This attempt of the demagogue to make it appear to the public that if you bleed the corporations you can spare the individuals is pure poppycock. There is no antithesis between the corporation tax and even the hated sales tax, because the corporation tax is paid in the sweat of every man who labors and who uses the fruits of his labor to buy the products of corporations.

The only problem that we face in financing this war is one of keeping the system intact so it can continue to operate, and I say that it is foolhardy in wartime to destroy any of the facilities that are useful in this great battle against Hitler, Hirohito, and their stooges in Italy.

If we are to make a maximum war effort, if we are to win the war in the shortest possible time with the least expense of human life, it is important that we should see through these misconceptions and deal frankly with the realities, and there is an obligation on the part of every businessman and every financier and every one of us to make his contribution to public understanding.

It is no longer intellectually honest to compromise with the truth and only tell as much as you think might be publicly acceptable. If young men can risk their lives in the air and at sea and on land, then we older and doddering fellows—I never thought I was so old until I read General Marshall's statement today in which he said that when you get beyond the middle twenties and so forth you are pretty decrepit—but I say that it is the obligation of us dodoes to risk our reputations, to risk our thin skins, and if necessary to go in for competitive office, public office, so that we can make our full contribution to a better handling of our state affairs and our local affairs and our national affairs.

There is an obligation on the part of all of us to be helpful to the Commander-in-Chief, not only with compliance, but with constructive ideas and with constructive criticism.

The time has passed when men ought to consider what will be the effect of this on my personal advancement. The time is pretty serious, when each man has an obligation to strengthen the economy and to strengthen the nation in this fight against the enemy by clarifying issues, by dissipating intellectual fog, and by auditing the demagogue.

The American public admires true liberalism. The American public admires true progressivism. But it is my beliefthat the American public despises mountebanks, political blue-sky artists and fakers; and the way to destroy such men, whether they are in Congress or in academic halls or in public or private life, is to audit them. They can't stand an audit.

If you take their premises and show that they bear no relation to their conclusions, you have discredited them for what they are; and I say if only a half a dozen men of a new type go into Congress at this coming election, they can render a great service by disciplining the windbags and the demagogues and the loose-talkers.

We are great partisans in this country of free speech. You and I wholly believe in it, and also in a free press.

But I say with freedom goes a responsibility. The man who appears in public, on the radio, on the platform, in the press, must expect to be audited and must be willing to be audited; and as we improve these techniques of public bookkeeping—and they are doing some monumental work in this direction at Notre Dame University and at Fordham University and at certain other places—as these tools for auditing become available we can reduce a good deal of the friction, a good deal of the political friction which comes from sheer misunderstanding, which comes from misconceptions and through fallacious reasoning.

I say in wartime, when the strain on the economy is necessarily great, we can't afford to be as negligent of these things las we are in time of peace.

I think that the man who deliberately confuses issues, who deliberately sets class against class, is more helpful to the enemy, though maybe unwittingly, than paid agents who are in the business of peddling treason.

If we face our responsibilities, if we recognize the realities, we become strengthened. The shadows and the problems that we fear become soluble.

I believe that in war and in peace the United States reaches its full stature when the harmony of interests of all groups is promoted, all economic, social and geographical groups; and I believe that we are weakened in war and that we are weakened in peace by those who sow the seeds of class conflict, sectional conflict, and who seek to divide America.

I believe that we should keep that thought of the harmony of interests in our minds as we go through this dark and trying period; and that if we promote it through the war we will quicken the attainment of our objectives, and that if we hold fast to it in peace after the war we will enable our system to survive and we will rapidly, with American ingenuity, with American inventiveness and with American science and technology, set about at restoring the depleted capital, and then once more go upward and onward.

Thank you.