17 AUGUST 1934, Page 8

THE NEW DEAL: RELIEF, RECOVERY AND REFORM

By THOMAS F. WOODLOCK*

THE European viewing President Roosevelt's "New Deal" in the United States is apt to find it none too easy of comprehension as a whole. The old adage that one cannot see the wood for the trees here seems to find application. There are several apparent cross-currents, represented by the many and various measures adopted in the past eighteen months, and the unifying principleā€” if there is oneā€”is likely to be concealed. In this and a second article I shall attempt to describe that principle, or group of principles, as I believe American property- owners see it,ā€”speaking as a. mere observer and pre- tending to no knowledge other than that deduced from the visible facts.

In the first place, it must be noted that the New Deal has a triple objectiveā€”Relief, Recovery and Reformā€” and it is a cardinal point of the President's programme that all three campaigns shall proceed simultaneously. By Relief I mean actual relief of destitute people. By Recovery I mean restoration of reasonably normal conditions of employment for the nation's workers. By Reform I mean a change in the relative positions of capital and labour, and of wealth and poverty, or, as the President himself has put it, a re-integration of the country's social structure so as to bring about a more equitable distribution of income and wealth, and of the power and influence that accompany these possessions. It would be more correct to describe this part of his programme as Revolution than as Reform, but names do not matter.

So far as Relief is concerned the task is simple and uncomplicated, involving no more than the raising and distribution of public funds. Beyond waste, inevitable in any such operation (it probably has not been much worse than was inevitable), relief measures can proceed without getting in the way of either Recovery or Reform and this they have done, and probably will continue to do in the coming winter. The need will be greatly increased this winter owing to the catastrophe of the drought coming on top of the industrial unemployment, but it will be met without stint. I shall avoid so far as possible the use of figures in this article as my object is to sketch the broad outlines of the New Deal as a whole, omitting details. Of Relief therefore, suffice it to say that there is yet ample Government credit and it will be liberally used to prevent, if possible, anyone in America from going under for lack of food, clothes or shelter.

Now as regards Recovery and Reform the one great fact that stands out clearly on the face of the New Deal is that the recovery campaign is at present being blocked by the campaign for "reform." The result is exactly ana- logous to a block in traffic such as would follow an attempt by two parades moving in opposing directions to occupy ā€¢ Mr. Woodlock was formerly a Comlnissioner of Inter-State Commerce and is now Contributing Editor of the Wall Street

Journal. ā€¢

a single highway at the same time. This fact is not merely patent but of primary ā€” indeed dominant ā€” importance.

The essence of Recovery is employment. The situation as to employment is broadly this : Workers in the United States (according to the 1930 census) totalled some 49 millions. Of these some 26 millions were pro- ducers, while 23 millions were engaged in trade, transporta- tion. and personal services of all kinds. Of these 49 millions about 8 per cent, were for one or another reason unem- ployed at the time of the census. Of the producing class over 14 millions were engaged in agriculture, mining, fisheries, 8ce., leaving less than 12 millions in industry. Of 'these 12 millions somewhat less than one-half were engaged in producing what economists call "consumption goods "ā€”that is, commodities of general use which are quickly consumed. These include the common necessaries of life. The remainder were engaged in producing "capital," or "durable," goods, which include all forms of. semi- permanent construction, notably building and machinery. At the beginning of the summer it was estimated that employment in the consumption goods industries was perhaps 85 per cent, of normal, while employment in durable goods industries was a scant 50 per cent. Thus, assuming that the total roster of unemployed was then between 9 and 10 millionsā€”really accurate statistics are not yet availableā€”the great majority of the unemployed were workers who normally should be producing capital goods, together with those who would normally be employed in personal services collateral to such produc- tion. In times of depression production of consumption goods seldom falls below 75 per cent, of normal. Pro- duction of capital goods is subject to much greater variation, and in the United States had fallen at its lowest point to about 20 per cent, of normal.

The problem of employment, therefore, at the present time in America is almost entirely one of resumption of production of capital goods. For such there is required a resumption of investment of new capital by the private owners of that capital. Of that resumption there is not at present the smallest sign. The reason is that the Reform policies of the administration have been such as to create in the minds of capitalists a complete distrust of the future. This has driven them to seek safe harbours for their money, as reflected by the ridiculously low rates for short term safe employment and the high prices for gilt-edged long-term investments.

At the outset of the New Deal a double blow was dealt at their nerves. They were told that profits must be subordinated to wages and hours. The heart of N.R.A. was an increase in wages and a shortening of hours, and capital was told that it should wait for its profit until the volume of business increased. It was moreover plainly intimated that in the future the share of capital was to be lessened for the benefit of labour, management and the public. At the same time there occurred the series of currency changes (of Which I shall omit discussion) and on top of this came the Securities Act). The result was a general strike of capital. To make the matter more certain there later came the famous section 7A of the N.I.R.A. Act which seemed to give the American Federation of Labor a charter to organize" the country, and finally the Act to regulate the Stock Exchanges (passed this summer) crowned the entire structure.

Thus we have an impasse which has thrown upon the Federal Government the burden of finding work for the idle workers by means of public works. In his Budget address last January President Roosevelt assumed this burden by budgeting a total extraordinary expenditure for the fiscal years 1938-34 and 1934-35 of $9,000,000,000. at the same time stating that he expected to return to a normal budget for 1935-36. Presumably he reckoned on private capital coming to life by that time.

At this moment the owners of capital display an utter lack of confidence in their position. In a second article I shall attempt to describe the political theories which seem to underlie the policies and measures of the Roosevelt administration, for it is these theoriesā€”as business men think they understand themā€”which have brought about the present situation.