Reconversion Days


By HENRY A. WALLACE, Vice-President of the United States

Delivered before the Political Action Committee of the CIO, New York City, January 15, 1944

Vital Speeches of the Day, Vol. X, pp. 226-229.

WE have completed a year of great accomplishment and have begun a year which will be of even greater significance. The President by his daring and his wisdom has set our feet on the road toward complete victory. Cairo and Teheran mean not only the closest cooperation for war but also effective cooperation in the peace to come.

For two days you have been discussing the problem of post-war employment. There cannot be in any country full employment for the purpose of full production of peacetime goods except on the basis of an assured world peace. Such a peace is necessary to a large volume of goods flowing between countries. Without a large volume of foreign trade unemployment is certain in the United States and England. Therefore, I say that of all the actions taken in 1943 looking toward full post-war employment, the Cairo and Teheran conferences were probably the most important.

There are those on the home front who have continually tried in one subtle way and another to create discord, especially between the United States and England and the United States and Russia. Ill-timed statements and partial truths have from time to time lessened the hearty will of the American people to cooperate to the utmost every day with our Allies in winning the war at the earliest possible moment. Through all of these attacks, and some have been slanderous, the President has kept his eye on just one objective—how best to win an early and complete victory, how best to attain a secure peace.

President's Efforts Praised

Many things which some of us have not been able to understand have been explained by the fact that the President is keeping his mind on those two things to the exclusion of anything else.

At this time I want to express my appreciation of the magnificent job the President has done on the home front. To transform 135,000,000 people from an easy-going peace to an overwhelming war effort involves complexities beyond the mind of man to comprehend. The necessarily hasty solution of these complexities has given small men a chance to complain—and I am sorry to say that larger men in their hatred of Roosevelt have forgotten the need of winning the war and have played up the mean, the small, the irrelevant in a way to deceive the public mind as to the real truth. Of course there are imperfections in a huge task of this sort. Everyone who has built a local union, everyone who has started a great corporation, everyone who has developed a great agricultural cooperative knows the sleepless nights, the heartaches and the mistakes involved. How infinitely greater the task of the President.

And so I say that what we have before us is a prodigious performance which, compared with World War I, is almost miraculous. In terms of airplanes, tanks, guns and munitions we have produced in this war from five to a thousand times as much as we did in World War I. In World War I our expeditionary force used chiefly French guns, planes and ammunition. Compared with the pre-war base, we have in this war stepped up our production both in factories and on the farms much more effectively than we did twenty-five years ago. We not only have done twice as good a job in stepping up production but we have also done twice as good a job in holding down prices.

Cost of Living Curbed

Since the beginning of the war in Europe the cost of living in the cities has risen by only about a fourth. This is less than half as much as in the same length of time in World War I. In World War I iron, steel, copper, lead, zinc and tin prices more than doubled. In this war there has been very little rise. Petroleum more than doubled in World War I, but this time it has increased less than a fourth. And so it goes all down the line. Nearly everywhere the advances nave been far less than in World War I. The outstanding exception has to do with food, and even here the advance at retail has been less than 50 per cent, as compared with about 75 per cent in World War I. When we take into account that food prices were abnormally low in 1939 and that since then the world-wide demand for foodfrom the United States has been greater than in World War I, it is surprising that such a good food job has been done.

I have recently made a tour of many counties in Iowa, talking to the farmers at first hand. I made the point to them of the great need of the farmers understanding labor, and told them that the satisfaction of their needs in the postwar period depended on production. I said the farmer could not get legislation without labor men and their Congressmen lined up.

The so-called leaders of agriculture in Congress do not speak for the rank and file of farmers, thank God for that! So I want you to by-pass certain leaders—I don't want to condemn any group wholesale—and get in touch with the farmers on a county level. Get your message and your picture across. It is much more important to the future of civilization than any of us realize.

Moreover, we must remember that this war is costing about ten times as much as World War I and that the savings in the hands of the people as the result of full employment amount to more than $80,000,000,000. This means there is tremendous monetary pressure on the side of higher prices. Nevertheless, OPA has held the line remarkably well. If it had not done so, if we had had controls only like those in World War I, the consumers in the United States last year would have had their pockets picked by the rising cost of living to the tune of more than $25,000,000,000. Moreover, the debt of the United States, because of the greater cost of the war effort resulting from such inflation, would have been increased by something like $50,000,000,000. In brief, what I am saying is that the President is entitled to great credit for his leadership in bringing about a truly remarkable expansion of production with the minimum expansion of prices. The great majority in business and in labor is entitled to great credit for their contributions which make his leadership effective.

Accomplishments of OPA

Many people do not like OPA. Many criticize it for being a New Deal agency started by Leon Henderson. Others criticize it for being an Old Deal agency staffed in the North by appointees of Republican Governors. Many criticize it for red tape and bureaucracy. Some of these things may be true. But we have to recognize that, so far as the net effect is concerned, the job has been a good one. To increase production and hold down prices is like defying the law of gravitation. Just the same, the job has been done and will continue to be done provided the people will stand behind their President and against selfish, greedy, noisy men.

There has been much criticism of the Congress for not setting taxes high enough. Some claim that the corporations have been growing rich out of the war. This may be true in some cases but, even though Congress has not carried out in full the recommendations of the President and the Secretary of the Treasury, the facts are that in this war we have done a much better job in covering back into the treasury excess profits than we did in World War I. The corporations during the past two years made gross profits two and a half times as great as in the two years of World War I but they paid taxes nearly five times as great. Taxes in World War II have been used twice as effectively to recover excess profits as in World War I.

The President, the Congress and all the great groups of the nation are entitled to congratulations for having done a truly remarkable job. In retrospect we can see how many things might have been changed. Certain expenditures have been proved by hindsight to be needless, but the head of a great nation cannot take chances and therefore I am thankful that the President tried so vigorously to provide against every contingency, whether it might be in South America, in Alaska, in Africa, Persia or China. He has done a job in which he and a grateful nation can take satisfaction.

Isolationists Are Assailed

There are two groups of big businessmen in the United States. In one group are found those who believe in allied war unity, those who have always hated and distrusted Hitler. In the other group are found those who believe in "isolation first." Some of these finance anti-Semitic movements. Some organize hatred of the President and discord in the Democratic party. Maybe some have been working in the past forty-eight hours. Others promote isolationism in the Republican party. Certain isolationist politicians have been and will be beneficiaries in their campaigns of the money of these big business isolationists. One probable reason why some of these wealthy isolationists so strongly oppose the President and the kind of peace he stands for may trace to the fact that they have had profitable relationships in the past and hope to renew them with the big German trusts. They believe in international corporations or cartels, but they do not believe in any type of international government which would prevent these cartels from preying upon the people of all lands.

Generally speaking, isolationist big businessmen use the tariff as a screen behind which to conduct their monopolistic operations in the various countries. They are not so much interested in a larger volume of international trade as they are in parceling out markets for individual profit. Some of them have been interested in every nation distrusting every other nation so that their armament industries might always have a big market. Flash—footnote—look into the Argentine. They do not believe in a long-lasting international peace and will do their best to prevent it by daily hammering the public mind through their agencies of publicity. Unfortunately for the nation and the world, these men because of the war will come into the peace with huge financial reserves and, even more important, with the control of many profitable inventions of great importance to the American public. I wonder if someone will talk to people in high places about the channels through which this money comes. They control so many new inventions that in the post-war many businesses and certain communities will be able to exist only by grace of their sufferance. Unfortunately, there are businessmen of this sort in every country.

But fortunately, there are many big businessmen who believe whole-heartedly in Allied unity in just the same way as the President. They believe in unity for both the war and for the peace. They want to see an enduring peace based on a higher standard of living and a growing volume of world trade and therefore believe in the Good Neighbor policy not only between the United States and Latin America but also between the United States and the other United Nations in the post-war period. These businessmen do not finance anti-Semitic movements or American Fascists. They believe in clean, aggressive competition in foreign markets. They may fight Roosevelt on his domestic policies, but in the main they do it fairly. If the common man has to choose between these two big business groups there is no question as to where his interest lies.

All groups of businessmen, large and small, good and bad, are enormously interested in the Government's policy with regard to reconversion and contract termination. Already 40,000 contracts amounting to more than $12,000,000,000 have been terminated, and while many contracts have been reinstated there has been enough net change to cause serious unemployment in some localities. When the European war ends there will probably be a $40,000,000,000 curtailment in war production. This could conceivably costthe jobs of more than 10,000,000 men unless plans are made. It is commonly understood that Mr. Baruch will soon submit a report to Justice Byrnes on this subject. No doubt suggestions as to how the Government may help business finance its reconversion.

Prompt Reconversion Urged

Many of the businesses which used Government capital to convert when the war started will have to use Government capital in reconversion. When the Government knows it is going to terminate a contract it should be prepared to do its part in removing promptly its inventory of materials and machines which are not needed by the reconverted plant so that in the shortest time possible men may be at work on production of peacetime goods. Congress may well consider setting up a "reconversion plant corporation" with extensive powers to facilitate the most rapid possible transition from war production to peace production, or it may want to add new and concrete power to an existing agency.

Businessmen and laborers will face a sharper crisis when contracts are terminated than the nation faced when war was declared. They have a right to demand that there be some agency in Government which has the power and the courage to speak clearly and decisively on all reconversion problems. There must be public responsibility in the reconversion. Reconversion must not be made a grab-bag for monopoly. Small business, the backbone of our nation, must be protected. The sub-contractors as well as the prime contractors must be protected. The prime contractor usually has big cash reserves—the sub-contractor almost never.

Labor should back up business in its demands that the problem of reconversion be given prompt and effective consideration. Both labor and business should also join in urging on the Army and Navy a policy of restraint in the tool rapid disposal of surplus products. And there are huge mountains of them. After this war the UNRRA may serve as a useful outlet in many cases. Some businessmen who have been shocked at the proposal which they held to be idealistic would be exceedingly happy to see UNRRA use these goods in foreign lands. Their hearts will bleed for humanity. It will be remembered that after World War I certain labor groups in August of 1919 called on President Wilson. At that time it will be remembered that the wages of labor had lagged far behind the cost of living. Labor leaders, calling on President Wilson, said that either their wages had to be advanced or the cost of living had to come down and that on their part they would prefer to see the cost of living come down. Soon thereafter the Army and Navy disposed of large Quantities of materials and the Federal Reserve Board adopted a policy of high interest rates. The country had been over inflated but the deflation cure was almost as bad as the inflation disease. The large supplies of stuff put on the market cost many laboring men their jobs. The rapid fall in prices cost many businessmen their businesses. The farmers suffered worst of all. All groups have a right to ask both the Congress and the Army and Navy that this time discretion be used.

Role of Labor in Reconversion

Congressional committees have been discussing these problems. Policies are under consideration which during the next year or two will affect the jobs of millions of workers. Labor should prepare to be represented at all hearings of the Truman committee and the various committees which have to do with post-war planning. Just as labor played a prominent part in pushing for the complete conversion which is now doing so much to win the war for us, so labor also should be an equally determining factor in seeing that reconversion gives us full employment, should play a constructive role in post-war planning.

I do not propose in this talk to say just what the Government ought to do with regard to post-war employment. But I do say that, inasmuch as the Government had to take full responsibility for getting cooperation from all groups to convert our economy from peace to war, it will have to take equal responsibility in converting from war to peace. Those who want to handle the post-war problem merely by turning things loose are asking for anarchy. There are, of course, certain branches of the economy where all that is necessary is to enforce the anti-trust laws. There are other branches where all that is necessary is to make sure that adequate financing is available through the RFC or the Farm Credit Administration. But there are other fields of activity where it will be necessary to engage in specific physical planning. When the contracts are terminated there will be hundreds of thousands of people out of work unless there is detailed advance planning.

This planning must be on a broad basis and not on a little basis. The Federal Government will have the responsibility of paying the interest on more than 200 billion dollars. The only sound way to pay this interest is by the maximum productive use of labor.

National Income Needed

We have to have full employment and an expanding economy to carry our debt load easily. This means a national income in excess of 130 billion dollars. I am speaking of at least 130 billion dollars net income. This would mean 170 billions in terms of total goods and services to carry the debt load easily. If we go up to 200 billions, as we can go, we could carry the debt load that much more easily. Some very large businessmen are making their plans on the basis of a national income of only 100 billion dollars. That is not enough to give full employment or to utilize the factory facilities which we shall have available or to carry the national debt load easily. The tendency will be for some businessmen to avoid thinking of the maximum output of the best quality at the lowest price. When the price is held up and the production is held down there is unemployment, which produces still greater contraction. We must keep in mind that the profits to be made by monopoly practices are not a net profit for business. All business has to help pay the costs of unemployment.

It seems to me that each business, as it confronts the problem of its responsibility for furnishing that amount of employment which will eliminate unemployment, must be guided in the main by the maximum use of labor and plant facilities. Obviously there are some businesses where production of more than a certain quantity is sheer waste, but in most lines of consumers' goods consumptive power is as great as productive power, provided labor is kept fully employed and the profits and savings are put to work as rapidly as they are acquired. The wise men in labor, business and government will have to give to the individual small businessman the same assurance of a big market as our government at war has furnished during the past two years. Labor can't do it by itself. Business can't do it by itself. Nor government. All three must recognize their joint responsibility. This country belongs to all of us and we've got to keep it at work to keep it strong.

Of course, we must have a vast stockpile of blueprints for public roads, schools, sewers, reforestation, irrigation dams and flood control projects for every State in the Union so that if employment falters for any length of time in any area Government employment may be promptly thrown into the breach. Personally I am hopeful that our taxation system can be modified with such rapidity after the war thatthe financing for most employment will come from private capital.

Increasing Federal Revenue

Incentive taxation by increasing employment and by increasing the national income can increase the Federal revenue. Rates which are too high on rapidly expanding young enterprises will reduce employment and decrease the revenues of Federal taxation. Some place there is a happy medium and it is very important for both business and labor to learn just exactly where that point is—the point which will promptly prevent either inflation or deflation as one or the other tends to develop. Both labor and business might well consider recommending to Congress the delegation of power to some governmental organization to make continuously those slight shifts which are necessary if the national income is to stay on the road of full production, full consumption and full employment without inflation or deflation.

Labor took the lead after Pearl Harbor in putting real vitality into a complete war effort. To labor goes a very large part of the credit for the production miracle. Labor's hands every day are producing the munitions that are relentlessly destroying the might of Germany and Japan. Labor will not turn back. Our workers will finish what they have started. They will not let our boys down overseas.

During the war, labor has come of age and from now on must bear its full share of responsibility for molding public opinion and Congressional opinion on behalf of taking those steps which will prevent unemployment in plenty of time. You have shown by your presence here that you are intensely awake and aware of the rights of the common man, as well as the duties of the common man. You are going home to carry on in 1944 your business as true Americans. You will have your family duties. You will have your days of work. But above all in this great year of 1944, you will have the splendid privilege of seeing and believing and fighting for those things which are to come, for those things which we have been paying for these past years in that great symbolic phrase, "blood, sweat and tears."

And now as we look beyond the "blood, sweat and tears" I see ahead work, happiness and peace; peace which will come through jobs for all and the full use of the resources of this world for the benefit of the people of this world; work, because there is no man of sanity who does not wish to work; happiness, because with permanent peace and full employment, man will pursue the usefulness for which he was created.