By JAMES F. BYRNES, Director of War Mobilization

Delivered before the Academy of Political Science, New York City, April 12, 1944

Vital Speeches of the Day, Vol. X, pp. 435-437.

WE have reason to be proud of the success of our armed forces. But we must not be blind to the task ahead of us. American and British armies are approximately 500 miles from Berlin. The Russian forces are about the same distance on the other side from Hitler's capital. In the Pacific, we are 1,800 miles from Tokio, and the British in Burma are approximately the same distance.

The roads to Berlin and Tokio are not only long, but bloody. Already our casualties, including killed, wounded, missing and prisoners, number 173,239; United Kingdom, 667,156, and the Soviet Republics, 4,500,000.

The casualties of the enemy are almost double those of ourselves and our Allies, and we expect to keep them in that ratio. Some are impatient at our lack of progress in Italy. No other major European battlefield on which we might choose to fight or on which we might be forced to fight, can give the enemy the natural defense advantages that the Nazis have at Cassino. But on the whole, the Italian campaign is a success. Our major victory is the defeat of Italy, the opening of the Mediterranean, the control of the Adriatic, the control of Italian air bases, the transfer of the Italian fleet and the tying up of nineteen German divisions during the period of crucial Russian operations.

Must Wait and Pray

Ahead of us is the greatest military adventure in the history of the world. Of the part our forces will play in at great drama we can say nothing, and those of us at home can do little. We must wait—and we must pray.

While the armed forces are winning the war, we must prepare to win the peace. That is a necessary part of our war effort. The knowledge that the government is planning for the transition of war to peace should relieve industry, agriculture and labor of the fear of post-war depression and unemployment. It should help those on the home front and on the righting front to concentrate on winning the war.

Because we have changed from the defensive to the offensive, it has already been possible for us to cut back some programs. These cutbacks are not primarily for the purpose of producing civilian goods. They are cutbacks in war programs no longer urgent, in order to expedite war programs that are urgent. The cutbacks in the Array programs approved for 1944 and 1945 amount to sixteen and three-quarter billion dollars. That does not include the air service.

A review of the spare-parts program of the Army and Navy just completed indicates that by Dec 31, 1944, there will be reductions in these programs for the Army aggregating one billion dollars and for the Navy aggregating $402,000,000.

Must Close Unneeded Plants

The government must take a firm stand and close plants no longer needed in the war effort. From civic groups and from men in public office, there will come the cry, "Woodsman, spare that plant." But we must realize that Santa Claus has gone; that there are no more plants to distribute, but there are many more bills to pay. It will be far better for communities to have plants closed now when the employees can find other jobs, than to continue operating and later close the plants when employees may not be able to find jobs.

The constructive report of B. M. Baruch and John Hancock on the problems of post-war readjustments has gone far to dispel the fog of controversy which had hung over the discussions of the termination of war contracts and the disposition of surplus property.

Legislation is necessary to effectively solve these problems. However, from my long experience in the Congress, I realize that delays in legislation are unavoidable. I believe it essential for the Executive to take no chances, but to proceed to the fullest extent possible under existing law.

While waiting for legislation, we have established an inter-departmental board to unify and simplify the procedures of our procurement agencies in handling contract terminations. The government will promptly pay contractors and promptly remove war materials no longer required, in order to make room for the installation by manufacturers of equipment and materials for civilian production.

Frozen Capital Problem

The more difficult problems center about the freezing of I capital which industry has tied up in terminated war contracts. Procurement agencies must have the power to settleand pay promptly items on which they and the contractorsagree.

Where claims cannot be settled by agreements, we must make adequate provision for interim financing of war contractors, particularly of small business which has only limited working capital of its own.

We must give adequate authority to the procurement agencies to take over and settle in appropriate cases the claims of subcontractors.

We must authorize the procurement agencies to make advance or partial payments on account and we must give a contractor the right to require a procurement agency to make, within a reasonable stated period of time, its determination of the value of the contractor's claim and to pay, on account, a substantial portion of such determination.

A Surplus War Property Administrator has been appointed. If we wait to get a complete inventory from all war theaters, the inventory will be only of historical value. But we will secure an inventory in sufficient detail to enable us to know what surpluses we have and where they are located. This list of surplus materials will be furnished to each procurement agency and no agency will purchase additional supplies without first consulting that list in order to ascertain if government supplies are already available.

Preference to Small Firms

Our surplus supplies must be disposed of at a fair price, and as rapidly as possible without demoralizing trade and industry. There must be no scrapping or destruction of useful property. Private monopolies must not be created or strengthened. Small independent local businesses must begiven preference and industrial loans made available to them on appropriate terms.

The government's war-time investment in new plants and new machinery amounts to approximately $15,500,000,000. But about one-third of this amount is invested in plants specially designed for the manufacture of munitions which could have little or no peace-time use.

The problem of disposition, however, is enormously aggravated because 70 per cent of the government's total plant investment is in projects costing more than $10,000,000 each. The Surplus Property Administration must be authorized to lease as well as sell these plants if independent and local enterprises are to be given an opportunity to take over any of the larger plants. And where possible we must subdivide the larger units.

We cannot consider the problems of transition from war to peace without considering the problems of the farmer, the worker and the returning soldier.

Agriculture, no less than industry, has established unprecedented production records in this war. The farmers must not be penalized for their war efforts as they were after the last war, with widespread foreclosures and bankruptcies.

Steps have already been taken to protect the farmers from a repetition of such a disaster. In the stabilization act of Oct. 2, 1942, the Congress, acting on the President's recommendation, authorized the Commodity Credit Corporation to make loans on basic crops at the rate of 90 per cent of parity for two full crop years after the formal termination of hostilities.

The full significance of this provision may not be realized. Within two years after the last war the net income of our farmers was cut in half. The government now guarantees that it will not happen after this war. It is a wise policy, not only for the farmers, but for the nation as a whole. It gives assurance that after this war we will have a policy not of scarcity but of food abundance.

Full crops will mean employment for those engaged in transporting, financing and selling them. The purchasing power of the farmers will turn the wheels of industry. Full crops will give our people health and strength. The mass of our people under conditions of full employment brought about by the war has been eating more food than ever before. We should see to it that they have the means to continue to do so.

Such surpluses as we can produce will be necessary to help replenish our reserves and to help the war-devastated countries during the period of rehabilitation. Such help is not misguided philanthropy. It is intelligent self-interest and plain common sense.

Duty to Help Labor

In the national interest the government also has a duty to help labor tide over the period of transition from war to peace. The workers want work—productive work. But workers cannot create jobs that do not exist. The war has caused great movements of labor from state to state, from industry to industry, from farm and home to industry, and from farm, home and industry into the armed forces. Not only have we taken eleven million able-bodied men and women into the services, but the net increase in industrial employment between 1937 and 1944 is estimated to be more than seven-and-one-half million.

Even if industry is helped to reconvert with unprecedented speed; even if agriculture is helped to continue a policy of abundance; there is bound to be considerable unavoidable unemployment during the adjustment period, and the problem will be much more aggravated for some types of work than for others.

We cannot say to our service men and women, or to the men and women who supplied them with food and ammunitions, "You must shift for yourself until you find a job." That sort of attitude can only bring discredit upon and sap the strength of our system of free, private enterprise. A Retraining and Re-employment Administration has been established and is co-ordinating the activities of the various agencies having anything to do with veterans' affairs. There will be established in every urban center an information office where the veteran can learn what assistance he can secure from the government, and talk with an individual handling the particular kind of assistance in which he is interested.

Benefits for Veterans

Congress has already provided mustering-out pay for our service men and women. The broadest possible facilities have been provided for their retraining and opportunities Will be accorded to those who wish to continue their education. Not only must we do everything possible to find or create jobs for our service men and women, but we must provide unemployment benefits for them until they do find jobs.

Some persons have urged that a dismissal wage be paid to workers on their discharge and that the cost of dismissal Wages be recognized by the government as part of the cost of contract termination. However, the dismissal wage would bear no exact relation to the needs of the workers, and some who might quickly find new jobs would get more than they needed while others would get much less. If the dismissal wages were limited to employees of war contractors, it would unfairly discriminate against workers in essential civilian industries. And it is difficult to draw a line .between war workers and non-war workers.

The dismissal wage would be exceedingly difficult of fair and equitable application, but we should realize that neither industry nor government will be able to resist the demand for dismissal pay unless a better alternative is offered to them.

The existing state unemployment insurance laws were framed to meet local conditions of temporary unemployment and are not adequate to deal with the nationwide problem of re-employment. Demobilization must be regarded as a national problem and its costs as part of the costs of the war.

Favors Federal Payments

I think the most constructive approach to this problem is to supplement existing state unemployment benefits to the extent necessary to give workers, during the transition from war to peace, suitable unemployment benefits to be prescribed in a Federal demobilization law.

The Federal law could fix a maximum and minimum benefit. Within the range prescribed by the law the benefits payable should be a stated portion of the worker's previous earnings with allowances for the worker's dependents. In view of its purpose, the Federal law should cover practically all workers. If there is a waiting period it should be very limited. The number of weeks in any year that the benefits are payable should not be as restricted as they are under existing state laws. Those receiving benefits should report to the employment services and should lose their benefits if they refuse suitable employment. Such a plan might be put into effect after the collapse of the Nazis and be continued for a period after the war.

Of course no one would suggest that unemployment benefits should be considered as an adequate substitute for a real job. But in an interdependent society the worker cannot make his own job and the burden of unemployment must not be allowed to rest solely on the worker.

The proposal gives to private enterprise the assurance that its efforts to expand after the war will not be frustrated and stalled at the outset by unemployment and falling purchasing power. It gives private enterprise assurance that unavoidable unemployment shall not breed avoidable unemployment. It gives to all of us the assurance that our hopes for the future will not be blasted by growing social discontent during the period of transition from war to peace.

Must Prevent Inflation

But all of our plans for the reconversion of industry and for the progressive improvement of agriculture and labor, however, carefully and cautiously they may be worked out, are likely to come to naught if we have not the courage and self-restraint to withstand the threat of inflation.

The greatest danger to post-war reconstruction at home is the danger of inflation. If prices are to skyrocket and then fall, as they did after the last war, industry, agriculture and labor are going to be hurt and our efforts to help all or any of them will be a failure.

So far, I think the American people can be proud of the fight that they have made against inflation. We have had to draw much more drastically upon our man power and resources than during the last war. Yet in this war the co& of living has risen only 25.9 per cent as against a rise of 64.6 during the comparative period of the last war. During the last year, with the help of the hold-the-line order and the judicious use of subsidies, the cost of living has not risen at all.

While we are now taxing our people more heavily, more money is left in the hands of our people after they have paid their taxes than they had during the last war. A large measure of credit for the success of our stabilization program must go to the mass of our people who have been patriotic and intelligent enough to save their money and buy War Bonds.

Urges People to Save

If the people will preserve their purchasing power until after the war, not only will reconverted industry have a better market for its products, but the people will get better products for their money.

Our present stabilization program may not be perfect, but it has worked. So far as inflation is concerned, we are on a dangerous sea, and any group that rocks the boat now is taking on itself a grave responsibility.

The price-control act and the stabilization act expire on June 30, and legislation to extend them is now pending before the Congress. It seems clear to me that this is no time to tinker with those control measures. Any concession to any group will only invite demands for other concessions from other groups. As we value the future and the peace for which our boys are fighting and dying, we should stand firm against any relaxation in the fight against inflation.

If we do hold the line against inflation, when the war is over, we can proceed with confidence to build for the future. We have the energies, the food and resources, the productive plants, the technical skills, the scientific knowledge, to supply in greater abundance than ever before the needs of our people.

Taxation which is best suited to the needs of a war economy is not at all suited for an expanding peace economy. With the end of the war there should be an end of the wartime system of taxation.

Planning Post-War Taxes

The history of tax legislation shows that the drafting and passage by Congress of a general tax bill frequently requires six months. We must avoid this delay. An interdepartmental committee is now working under the direction of the Secretary of the Treasury upon proposals which he will submit to the Congress at the proper time. Congress is also studying the problem and I am sure that, with the coming of peace, the government will quickly provide a system of taxation that will enable us confidently to build for the future.

Nothing is more essential to peace and well-being of the world than a prosperous and fully employed America.

Out of this war we will come with great natural resources and greater productive capacity. We will have most of the gold of the earth and most of the ships on the seas and in the air. We will have a powerful army and the most powerful navy. Our economic and military strength will be greater than that of any nation on earth. The use we make of that power will be the test of our statesmanship.

More than our material prosperity is at stake. Of what value is our wealth and military strength compared with the lives of the boys, and girls too, who today are dying for us? My prayer is that God will inspire us to rise above selfishness and love of luxury and demand that the power and wealth He has given us shall, at the peace table, be used to make certain that never again will the mothers of the world suffer the anguish and pain they now endure.