PRODUCTION DEPENDS ON BUYING-POWER
By CHARLES R. HOOK, President, The American Rolling Mill Co.
ed at the Wartime Conference of the American Legion, Department of Ohio, Cincinnati, Ohio, August 8th, 1943
Vital Speeches of the Day, Vol. IX, pp. 699-701.
TWO great challenges now face the United States. How well we meet them will influence everyone of us for the remainder of our lives. The first and immediate challenge is to press our present military offensives and advantages to a quick conclusion of the war if possible. The other is to work and plan, now, to create conditions which will make possible a high level of production and employment after the war, when 10,000,000 returning soldiers will want good civilian jobs in private business.
Our first responsibility is to devote our time, our brains, our physical effort and our finances to the extent they are required in the direct war effort, until victory is ours.
Just when victory will come, no one can pretend to foresee, no matter how much he knows about the present situation. Victory may not be near, it certainly will not be easy, but the handwriting is on the wall.
On every front, the defeat of the Axis is being spelled by the united effort of the Allied nations. And that, gentlemen, makes our enemies vicious, more dangerous, than before. They are now fighting with desperation, not patriotism. It is with the fury of fear that they face our gallant boys at the front. This means that we at home will be called upon for even greater courage, greater sacrifice and harder work in the job of completing victory than we were in the dark and uncertain days after Pearl Harbor when we worked at staving off defeat.
You men of the American Legion are realists. You know that these are facts which can not be escaped.
You know too that whatever the burden that falls on our shoulders, however great the demands created by more offensives, they can never remotely compare with the sacrifices our sons are making in the steaming fox holes of the Solomons, the soul-searing heat of Mediterranean warfare, or the crippling cold of the Aleutians.
Yes, the Big Push is under way and America must not ask complacently, "I wonder when the war will be over," but, rather, "How can I help to make this war end quickly?"
No man can escape his responsibility in this crisis without forever having a sense of broken faith.
I am not a military expert, but I do know that the crack in our enemy's armor can be widened into victory only with the united support of every man and woman in the United States; only with industry, labor and government working together for the good of America. In that effort there is no room for selfish purpose or group improvement at the expense of others.
Two factors determine the length of a war: (1) the effectiveness of the fighting forces at the front: (2) the productive support of the working forces at home.
Every delay in war production, regardless of the reason—be it a wilful strike, the purposeful creation of discontented groups, or inefficiencies in management—reduces the effectiveness of our army as a whole, postpones the day of victory and lengthens our casualty lists.
You can't separate the two ingredients of a victorious army. They can't be effective at the front if they don't get productive support from home. And they never needed that support more than now when they are on the offensive.
It was my privilege last year to learn, first-hand, to what heights the home-front support of the fighting forces can rise.
As chairman of a Steel Mission, appointed by the Combined Resources and Production Board of the United States and Great Britain, I flew to England. There I observed a unity of purpose, a combining of interests, of which not only England but the United Nations can be proud—and very thankful.
Let me read a few items from the conservative London Times which will give you a glimpse of that home-front spirit.
The following news story is a direct quotation of Mr. Oliver Lyttleton, British Minister of Production:
"We have factories making guns—big guns—which are manned, and I use the word deliberately, over 70 per cent by women. Women are doing skilled men's jobs really well. A great proportion of these women had never been in a factory two years ago, and yet they are working 56 hours a week at the machines. You must not forget, too, that we . . . . have been under constant air attack, and that we have had to disperse our industries, to black out factories and torebuild damage caused by bombs, while increasing production. I have seen a factory working at 90 per cent of capacity while part of it was still on fire!" End of quotation.
And here is a little story of interest, also from the London Times.
"Nine young male and female employees of a Lanarkshire Industrial works appeared before Sheriff Brown in Hamilton Sheriff Court today and admitted charges of being persistently late for duty in recent months. The accused . . . were spoken to in scathing terms by the Sheriff and fined 40 shillings or 10 days imprisonment."
An still another story from the Times:
"Three factory workers were each fined 15 pounds (approximately $42) and one pound costs at Southampton yesterday for being asleep when they should have been at work. It was stated they were prosecuted at the request of the factory shop stewards."
In the same edition there was a story telling that Mr. J. A. Hall, President of the Yorkshire Miners Association had a few thoughts about the union's responsibility in the war over there. He said, "The men who deny their duty, whether it be for one hour, one day or one week are entitled to be placed in the same category as quislings."
Certainly the British fighting men in the battle zones take pride in the serious effort reflected in such news items.
In contrast, I would like for you to recall some of the headlines American newspapers have carried about our home-front and then let you make your own decision as to how our fighting men felt when they read those headlines.
American boys are entering bitter and decisive fighting, where quality and quantity of equipment will count heavily and where morale can spell the difference between success or failure. Both of these all important items, gentlemen, have their roots at home. If America fails to provide both in the trying days ahead, then America is prolonging the war.
I can not help but look ahead to the peace which will come some day and wonder how those who interfered with this nation's war effort are going to answer the questions of ten million boys who will very definitely be interested in getting the answers.
There is still time, there is great reason, for Americans in all walks of life to insist upon our boys being backed up at home.
If we permit some groups to throw obstacles upon the track in the race toward victory then we, as well as they, will be to blame for the price our fighting men will pay for those delays.
Our second great responsibility also has to do with winning the war because it influences the morale of our armed forces.
I refer, again to working and planning now to create conditions which will make possible a high level of production and employment after the war.
We can not evade the question, "Are we going to have! enough jobs in America after the war?"
Some people believe it is too soon to be thinking about that, saying, in effect, "Don't count your chickens before they are hatched. Let us win the war first."
To those people we say that America was caught unprepared for war, it must not be caught unprepared for peace.
Our government recognizes the great need for making post war plans, without delay. Charles E. Wilson, Vice Chairman of the War Production Board, has said that despite the driving, time-consuming demands of the war program it is imperative that post war planning be done.
High ranking Army and Navy officials have been universal in their opinion that planning for the post war period is one of the greatest factors of morale building in the ranks of our fighting men.
The question "Are we going to have enough jobs in America after the war," must be settled during the war. We can not, we will not fail America's fighting men in doing everything possible to find the answer.
Studies which have centered on the coming crisis of peace have been labeled "Post War Planning."
Unfortunately, in the minds of many, that has come to mean ultra-streamlined household equipment, airplanes that will fly the family to New York for a week-end and land on any empty lot, and a wide variety of other completely amazing scientific improvement!
Of course wonderful new things will undoubtedly follow this war. But they aren't the things which alone will give your sons jobs after they fall out at the end of the Victory Parade down Main Street.
New products will provide a harvest—but not immediately. When the unconditional surrender of our enemies comes it will require jobs for our boys then, not a year later.
When you think of post war studies, think first of the things industry made before the war started; the things which industry can most readily make immediately after the war ends; and then of the new things which will require capital investment encouraged by a favorable business environment.
Think of the automobiles, radios, furniture, electric refrigerators, washing machines, stoves and all the other complements of normal living. Those are the things people already know about—already want—and are the things to which peoples' minds will most quickly turn when peacetime production can be resumed.
With that definition of the products of post war employment in mind, it is obvious that a better title, more truly descriptive of so-called "Post War Planning," would be "Post War Production."
And there is no mystery about the way production can help America hurdle the coming crisis of peace.
If industry can produce, then payrolls will pour into your community to buy the products of industry, the products of farmers, the services of doctors, lawyers, dentists, architects; the services of laundries, shoemakers and countless others.
If industry can't produce fully then the amount of money available all down the line is limited because jobs and payrolls are limited.
Well, you might say, "If it is as simple as all that, why worry about jobs for our returning soldiers and those now working? Let industry produce. What is there to prevent it from doing so?"
Gentlemen, if anything prevents industry from producing as it can it will be the fault of every group, every man and every woman in the United States.
Industry can plan production, determine what it can efficiently make, where it can make it and to whom it can sell it, but industry must have a demand for that production.
And demand, very simply, is purchasing power.
Future demand—future purchasing power—is created by savings now.
Therefore, the formula for the conversion of post war production plans from paper to payrolls is expressed in two words.
For prosperous post war conditions we must have individual thrift; corporate thrift and government thrift.
There is nothing mysterious about it. You just simply must have the money, a sound financial position, to buy an item—or you can't buy it, now or in the post war period.
Individuals must save from their earnings, buy war bonds,stay out of black markets, pay off their debts, sacrifice now, to be able to buy after the war.
The fact that industry, through its planning, may be ready to quickly resume the production of peacetime articles won't mean a thing if people do not have the money, the credit standing, to buy them.
Corporations, too, must pay off their debts, must save, if they are to be in a position to readjust their plants, to get back into post war normal business, quickly.
The reserves necessary for the changeover, for insuring post war jobs, can not be created when there is a tax of 81 per cent on the amount of such reserves. Government should allow industry to create a genuine post war cushion—reserves which mean jobs for our boys returning from the war.
Government, too, must economize, drastically.
Gentlemen, individuals will not; corporations can not, put their financial houses in order if government does not.
In this representative democracy the government is a mirror of all the people. Therefore, the people of America must demand of their government that it set the pattern of thrift and encourage thrift, or all the post war production studies in the world won't do a bit of good when victory comes.
And by encouraging thrift I don't mean for the government to promote individual savings with one hand and spend and take away those savings with the other.
Don't consider me a special pleader in the cause of industry alone. I am pleading for all America. You can't have unhealthful influence exerted on thrift—on future purchasing power—whether it be individual, corporation or government—without hurting all of our American way of life.
Thrift! Now! That is the formula for making the post war production plans work.
I would like to tell you about some of those plans, some of the conclusions that have been reached—and some of the problems involved.
The one inevitable problem which wartime industry faces is the layoff of men while a plant is being physically reconverted to peace. The number of men involved and the length of the reconversion layoff depends on the degree of mechanization of the individual company and the extent to which it has taken on entirely new lines of goods in its war work. Some companies will have no reconversion problems. Others will have serious ones. To give an average figure would be meaningless because the variations are too wide.
This unavoidable layoff for reconversion would present an unemployment problem of depression size, IF the war ended on one day as it did a generation ago. We would be faced, immediately, with the mass forces of 10 million veterans, all legally or morally entitled to jobs, in addition to a working population increased during the war by some 5 million. This latter figure takes into consideration the reduction brought about by voluntary retirement of the over-age, the under-age, and women who will want to go back to housekeeping.
It is taken as a practical certainty, however, that the war will NOT end on a single day but over an interval of time extending principally from the victory over Germany to the victory over Japan.
Moreover, the return and demobilization of the armed forces will be spread out by the necessity of consolidating their victories and policing the occupied regions until it is safe to leave them. For a large fraction of the troops, the reconversion problem of industry will be solved by the tune they return from overseas.
It now appears, also, that the conversion of some enterprises to normal production will get under way as they complete their contribution to victory. After another peak year,our armies and those of our allies should be fully equipped and should need only replacements of equipment and ammunition. This will permit increasing numbers of partial conversions of industries back to peacetime work.
Generally, the procession of war industries back to peacetime operations may well extend over two or three years from this summer. Our reconversion layoff will therefore be distributed up and down the calendar and correspondingly thinned out. It is assumed that the layoff at any moment can be given transition employment without recourse to any huge federal program of "made" public works.
Private residential construction, together with municipal, county and state construction and maintenance will mop up a lot of the reconversion layoff. Plans are to put at the top of the list those projects which will be quickest in starting and which have the greatest labor content.
Industry plans call for maximum speed in reconversion and maximum employment when plants are ready to make peacetime goods. And as I stated previously, industry plans to produce first after the war the same products or models which were perfected when war broke out, with such improvements as can be made without holding up employment.
In that connection, I have mentioned the desirability of making those things which people already desire, are already familiar with. One such product that serves as an excellent example is automobiles.
If you want a sample of the demand, of the need which has built up during the war for this one product alone just consider a study made by Sumner H. Slichter, dean of American economists, affiliated with Harvard University. Without regard for the fact that Americans will want more automobiles than ever before, Slichter's figures show that by the middle of 1945 we will have six million less cars left in service than were in use in 1941!
If the level of employment after the war is approximately 55 million, the incomes of individuals at 1942 prices will be about $125 billion. At this level of income the country would wish to maintain a stock of approximately 35 million automobiles—6 million more than we had in 1941. Considering the drop in stock of cars during the war and for retirement of 2.3 million cars a year, an output of 5 million cars a year for four years or of 4 million for six years would be required to enable us to adjust our supply of cars to the demands of a national income of $125 billion!
I will not endeavor to discuss all the phases of post war production planning and all the detailed information presently at hand. But the above indicated demand for automobiles is typical. That demand and many others can be translated into employment and payrolls if we think and act wisely now.
In summary, the cessation of peacetime production has built up tremendous needs for essential civilian products; we should experience a spread-out ending of the war and spread-out demobilization of industry extending over several years which will gradually fill that need. Further, those spread-outs should, in combination with industry's production planning, avert any large or abrupt unemployment. Gentlemen of the Legion, I am sure it has been obvious to you that both of the two major challenges to America are challenges to all of us, not to any single group.
The intensified home-front war effort must come from all of us—individuals, corporations and government; the need for approaching the crisis of peace with plans in our hands, understanding in our hearts and money in the bank, falls on all of us.
With confidence in each other, with faith in our representative democracy, we must and will successfully meet these challenges—together.