Procesos de Descentralización frente a los Procesos de Globalización

The Keynesian approach to full employment was, nonetheless, gain-ing support around the world. British prime minister Winston Churchill had already made his countryman, Keynes, an economic adviser in 1940; however, it was the publication of William Beveridge’s Full Employment in a Free Society, followed closely by the British govern-ment’s White Paper on Employment Policy, in 1944 that demonstrated the dominance of Keynesian economics in Great Britain. Also in 1944, Sweden’s ruling Social Democrats adopted full employment as one of that party’s three major goals for the postwar period. Canada and Aus-tralia followed with similar statements (Furniss and Tilton 1977, pp.

125–126; Garraty 1979, pp. 228–230).

Observers and subsequent scholars assumed that, after the disman-tling of the NRPB, the administration’s postwar economic planning was fragmented and virtually nonexistent. Accounts of the day as well as historical reviews make no mention of the executive branch’s role in developing a full employment policy. Yet a group of people from various executive departments began meeting in mid-1944 to discuss and draft a proposal for postwar employment. Many of the issues they debated and the compromises they made foreshadowed the legislative debate on the full employment bill.

Alvin Hansen, who joined the Federal Reserve Board as a con-sultant after leaving the NRPB, believed that full employment would become a partisan political issue in the 1944 election. In July 1944, he confided to Gerhard Colm, a German-born economist who worked in the Bureau of the Budget, that he had had a conversation with Federal Reserve chairman Marriner Eccles regarding the importance of prepar-ing an American “White Paper on Employment Policy.” This paper primarily was to be used for the Democratic platform and Roosevelt’s acceptance speech. Hansen and Eccles both feared that Dewey would follow up the reference to full employment in his presidential nomina-tion acceptance speech with a statement on fiscal policy similar to the British government’s Keynesian White Paper on Employment Policy.

Hansen suggested that Colm begin to draft a paper making a clear dec-laration that the government should accept the primary responsibility for maintaining full employment.¹⁶

Colm had led the research division of the Institute of World Eco-nomics at the University of Kiel until the Nazi Gleichschaltung, or process of bringing the country under totalitarian control, in 1933. He fled Germany and became a founder of the University in Exile at the New School for Social Research in New York. Secretary of Commerce Harry L. Hopkins selected Colm in 1939 for a key role in Commerce’s industrial economics division to develop national income estimates for economic planning. Colm then went to the Bureau of the Budget as a principal fiscal analyst.

After Hansen contacted him, Colm immediately discussed the American “White Paper on Employment Policy” with Harold Smith, director of the Bureau of the Budget, and J. Weldon Jones, also at the Bureau of the Budget. Smith thought it was too late to have such a pro-posal included in the Democratic Party platform. However, Smith said he was very sympathetic to the idea and acknowledged that consider-able spade work had been done already. Colm then replied to Hansen that he would begin working on the project while Smith discussed the matter with Marriner Eccles.¹⁷

Within a few weeks, Hansen, in collaboration with Eccles and Smith, had called together a group of men that included Colm, Richard Gilbert (from the Federal Reserve) and Emile Despres (formerly at the Fed and now in the State Department) to discuss a paper on full employment.

Soon the study group added Richard Musgrave and Kenneth Williams (both from the Federal Reserve), Harvard economist Walter Salant, University of Chicago economist Jacob Mosak, University of Wis- consin economist Jim Earley (all from the Office of Price Administra-tion), and Harvard economist Arthur Smithies (from the Bureau of the Budget).¹⁸ This group, hereafter referred to as the postwar employment study group (Table 2.1), formed the core unit of full employment plan-ners within the executive branch. The participants reported to Budget Director Harold Smith and Federal Reserve Chairman Marriner Eccles.

The first major issue of debate was the role of government spend-ing. Gilbert thought the report should begin with the statement, “Gov-ernment would take all action necessary to assure full employment and a high level of consumption.” Colm, Salant, Musgrave, and Williams expressed the view that it was unwise to emphasize government spend-ing, noting that the public mind often perceives it as boondoggling.

Colm suggested that there should be two phases of expansion in the

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postwar period: first, one of business expansion; and second, one of expansion of consumption. When Smith commented on the minutes of this meeting, he agreed that more attention should be placed on the expansion of business.¹⁹

Recognizing the postwar employment study group’s need for more explicit guidance, Smith and Eccles met with Hansen, Musgrave, Wil-liams, and Colm to provide more direction on the full employment policy paper. Smith emphasized the reasons for a consistent program and planning and thus the development of administrative machinery to handle what he identified as the most critical concern: unemployment when war production ended. Eccles agreed with Smith’s ideas for eco-nomic planning to avert postwar unemployment, but he elaborated on the political aspects, such as states’ rights versus national planning and the relationship between a national policy and an international program.

They all acknowledged that the difficulty of defining full employment posed political problems. The meeting resulted in two directives: a draft of a presidential message and a more detailed, technical document for background.²⁰ Thus, the postwar employment study group was charged with the task of preparing the American white paper.

As the momentum to develop a postwar full-employment policy increased, so too did tension over who should administer such a pro-gram. Eccles thought the president should appoint a committee for the development of this economic program, but Smith doubted whether the president would want a formal structure. Rather than that, Smith said he would request an informal assignment from Roosevelt.²¹ This disagree-ment marked the first sign of the struggle within the administration over whether the Bureau of the Budget or a specially designated committee Table 2.1 Postwar Employment Study Group Participants

Bureau of the Budget Federal Reserve Office of Price Administration

Gerhard Colm Alvin Hansen Walter Salant

J. Weldon Jones

Arthur Smithies Emile Despres

(moved to State) Jim Earley Jacob Mosak Richard Gilbert

Richard Musgrave Kenneth Williams

should control the direction of postwar economic planning, an issue that would prove significant later.

Subsequently, J. Weldon Jones sent a confidential memo to Bureau of the Budget colleagues Julius Wendzel, Louis Bean, and Paul David discussing the outline of what was jokingly referred to as an American

“pink” paper on a postwar employment program, because critics on the right were likely to label it “socialistic,” in disregard of its actual objec-tives. Jones made clear that the project was being kept “within the fam-ily,” but that contributions were truly to be a joint effort. He outlined the various sections of the report and indicated who had primary responsi-bility and oversight. These participants extended beyond the Bureau of the Budget to include other interested parties.²²

The postwar employment study group, meanwhile, became con-cerned about the lack of coordination on demobilization legislation that was pending in late August 1944. Specifically, the study group feared that its proposal might not be fully consistent with what President Roo-sevelt was discussing with congressional leaders regarding the legisla-tion proposed by Senator George, chairman of the Special Committee on Post-War Economic Policy and Planning. Given that George had positioned his committee as the authority on postwar planning and had made recommendations at odds with Roosevelt’s Economic Bill of Rights, their concerns were not unfounded. They acknowledged that any document written at that time might be in conflict with agreements other members of the Roosevelt administration might have been mak-ing with congressional leaders.²³

The postwar employment study group continued, though the presi-dent did not know of its existence. At the beginning of October 1944, Jones prepared a draft of the white paper along with a proposed cover letter addressed to the president from Smith. The accompanying memo to Smith queried whether it was time to inform Roosevelt of the docu-ment. At this point, they assumed that it would not be used until after the election, which was only a month away.²⁴

As he appraised the final draft, Jones concluded to Smith that “some will think that the document, as it now stands, is too bold; some will think it is not bold enough. As a product of a high-grade group of gradu-ate students in economics, or of a privgradu-ate organization, it can be criti-cized as being a timid compromise; as a State Paper it is probably more

Federal Role in Employment Stimulation 33

outspoken than the White House, and if issued by the President would be a landmark.”²⁵

The confidential document was titled “Postwar Employment” and set forth the following goals (Colm 1944):

• To maintain full and stable national production, income, and employment to the maximum possible extent through encour-aging the expansion of private enterprise

• To assure minimum standards of health, education, and per-sonal security for all members of the community

• To promote a steadily rising standard of living for the nation as a whole by developing our economic resources and improving the efficiency with which they are used

• To support a high level of world prosperity and world trade in cooperation with other nations

The report provided a transition from the “Economic Bill of Rights”

Roosevelt had championed in January 1944 to a plan of action for post-war full employment.

Several critical factors and assumptions constituted the framework of the report. The economic achievements during the war had demon-strated the United States’ capacity to produce, and the country would not have tolerated a return to the prewar production levels and accom-panying unemployment. Although it gave primary emphasis to policies that directly encouraged private business investments and consumer demand, the report stated that government fiscal policy, on both the revenue and expenditure sides, must be the ultimate stabilizing factor.

Some uses of the federal budget and fiscal policies were indicated. The report, furthermore, discussed the need for sufficient flexibility in the administration of the economic program to allow for adequate legisla-tive supervision and control as well as for coordinated action by federal, state, and local governments (Colm 1944).

The document presented a package of postwar programs to achieve long-term economic stability and full employment. The report encour-aged measures to promote competition, risk-taking, capital facilities, and industrial research for both large and small businesses. It recom-mended income support and the principle of the ever-normal granary for agriculture (i.e., storage of overproduced agricultural yields for

sale later in order to stabilize prices). The report outlined a plan for the development of river valleys, agricultural resources, transporta-tion facilities, and the redevelopment of urban areas. It sketched the minimum-standard requirements for programs in health, education, social security, and labor. The document extended its recommendations by stating the importance of handling the American postwar economy within a full international context so that American unemployment was not merely exported abroad (Colm 1944).

“Postwar Employment” addressed three of the four central elements of what soon became the full employment bill. First, it stressed national planning and gave examples of the kinds of planning that should occur.

Second, although it did not propose a new federal structure to handle this planning, it was implicit from the report and evident from the dis-cussions that the Bureau of the Budget would have assumed the major responsibility for that under this plan. Third, the report acknowledged the option of federal monetary and fiscal policies—for example, com-pensatory spending—as a tool to stabilize the economy. On the fourth element—the federal government’s guarantee of employment—the report was silent. It offered no right to employment as Roosevelt had in his Economic Bill of Rights.