IV - Repcrt

September 9, 1957

# SUBPANEL IV - U. S. ECONOMIC AND SOCIAL OBJECTIVES AND POLICY

## FOREWORD

The task assigned to Subpanel IV is as challenging as it is formidable. It is the assessment of our prospects for social and economic development over the next twenty years.

Such a task would be difficult enough were it confined merely to a review of the material resources and the technological skills which will determine the physical limits of our future expansion. But it is rendered still more complex by our knowledge that America's future does not rest solely with such material considerations: at best, these delineate the framework within which realism forces us to confine our calculations. Within that broad framework of possibilities, the actual course of American development depends on the ideas and ideals which impel us forward, as well as on the moral aims and attitudes which guide and restrain us. Thus to project what our future _can_ be inescapably involves us in an effort to project what it _should_ be -- to take into account, that is, the immaterial as well as the material drives and desires which motivate us.

Hence we base this report not alone on the _possible_, but on the _desirable_; and we are guided in our suggestions, conclusions, and cautions by the ultimate objectives to which we aspire as well as by the immediate capabilities which we have at hand. These ultimate objectives appear to us to be the creation of a society in which each individual has the fullest

IV - Report

September 9, 1957

- 2 -

possible opportunity to live in conditions of material comfort, social peace, personal creative endeavor, and spiritual affirmation. This is the goal to which we believe. All Americans would wish our social and economic policies to be oriented.

We view our purpose, accordingly, as the discussion of the ways in which we can work toward the achievement of that environment. And our unanimous conclusion is that we can best do so if we concentrate our nation social and economic effort, over the span of years of this Report, toward one paramount objective. This is *growth*. We believe that the enlargement of economic output in real rather than illusory terms, and the development of social welfare in self-directed rather than paternalistic patterns are the most important contributions which social and economic policy can make to our ultimate objective of the enhanced dignity of the individual person.

Because our scope of interests is so large and the matters pertinent to growth so varied, we have sought to avoid the presentation of an exhaustive catalogue of the problems facing our nation today and over the foreseeable future. Instead, in the interests of unity and brevity, we have limited this Report to what we believe to be the most *critical* issues, and have even curtailed a full discussion of their complexities in favor of a concise statement of their principal features and of the line of action we favor in regard to each. Readers who wish a fuller exposition of some of these issues are

IV - Report
September 9, 1957

- 3 (revised) -

referred to the rich background of supporting material which forms the foundation of many of our remarks.

Within our overall concern with these main issues of growth, two distinct but complementary tasks have devolved on our Panel. The first of these involves a consideration of the *process* of growth. Here we begin by an examination of the objectives which can be realistically envisioned for 1975, and then take up the problems which hinder and the measures which may assist us in the achievement of that goal. This task occupies the first and most of the second sections of our Report.

The second task of our Panel concerned a discussion of social claims produced by the *moral* concerns of our society. The problem of the aged for example has implications for our economy in the effective utilization of older people. But we would consider it a challenge whatever its contribution otherwise.

The third task is not less important. It consists in an examination of the *use* to which the growth process shall be put. Here we have two functions to perform. First we considered the claims against out total output -- the demands which our economy will be asked to satisfy. These claims originate in part from the conclusions of other subpanels and in part from our own analysis of what is required of a growing economy. Secondly we sought to adjudicate among and adjust these claims insofar as they exceed the available output of our economy. These exceedingly important concerns are dealt with at length in the third section of this document.

IV - Report
September 9, 1957

- 4 (revised) -

Since our Report touches on a wide diversity of matters, it may assist the reader to present here a very abbreviated summary of the main conclusions which the text develops at greater length:

- We believe that the possibilities for growth which now confront this nation are of unparalleled magnitude. It is possible to contemplate the creation of an economy of very nearly universal well-being by 1975 -- well-being not only measured in terms of economic prosperity, but in terms of the lives meaning, purpose, and realizable achievement which it can make possible.

- We further believe that this promising environment can be reached through the framework of our present economic system. While there will undoubtedly be an evolution of many of economic and social institutions, we believe that the structure of American capitalism will give us the stimulus, the vitality, and the responsibility by which we may arrive at our desired objective.

- Within this overall setting of sanguine expectation, many difficult problems remain to be dealt with. Indeed, the attainment of our objectives requires that we will cope with obstacles, many of which are formidable, if never impassable, barriers to growth. We group these problems under five headings: Resources, Motivation, The Role of Government, Social and Economic Distress, and National Priorities, and we now very briefly review our main conclusions with regard to each.

- We find the problem of *Resources* a permissive rather than active factor in growth, and our summary view is that a shortage of men or materials

IV - Report
September 9, 1957

- 5 (revised) -

is not apt to present a major obstacle to growth. This generally hopeful
finding must however, be importantly qualified in respect to at least two raw
materials, petroleum and water, and also in respect to our misuse of some
human resources. We shall recommend husbanding of our domestic oil
reserves, a unified federal water policy, and an improvement in employment
practices with older workers and certain ethnic groups.

- The problem of Motivation is a crucial one for growth and we are
fortunate in possessing, on the whole, a superb economic and social morale.
Yet even in this area of strength there is room for improvement if we are to
encourage our growth to the maximum. We are disturbed at the evidence of
a lack of creative and meaningful jobs for many factory and office employees,
and no less concerned by the neglect of executive development in the upper
echelons of industry. Both problems need scrutiny and action by the business
community.

- The problem of the Role of Government in an expanding economy
naturally bulks large in our analysis of growth. We find reason for satisfaction
in the evolution of a climate of agreement on the general relation between
government and business, and believe that this in itself augurs well for the
continuance of growth. Within this agreement, however, lies a wide variety
of desirable government actions to encourage growth. Specifically we call
attention to the crucial role of private investment, and to the ways in which
tax and fiscal policy can create an atmosphere favorable to private expansion.

IV - Report

September 9, 1957

- 6 (revised) -

This leads us to recommend:

The reform of our tax structure to encourage economic growth.

The refinement of our anti-inflation and anti-recession fiscal and
monetary powers to minimize the fluctuations that impede growth.

The provision of needed public assets to support the demands of a
growing economy and of an increasingly urbanized society.

The desirability of increased efficiency and economy in some areas
of government spending to make room for needed public
expenditures.

The pressing need for an impartial commission to review the entire
field of local, state, and federal financial policy with reference
to how best to promote our general objective of growth.

- The problem of *Economic and Social Distress* involves our growth directly and indirectly: directly, by presenting bottlenecks to the general advance, and indirectly by sapping our human vitality and undermining our moral purposefulness. In our report we deal with two such areas of distress in particular, agriculture and urbanization. We recommend a revised agricultural policy which seeks to cure rather than to palliate the problem by recognizing the need to reeducate and reorient the submarginal improverished farmer. The urbanization problem, with its sombre overtones of racial discrimination, strikes us in many ways as the most serious and difficult of any problem we face, and we shall urge vigorous coordinated private and public measures to eradicate our slums.

VI - Report
September 9, 1957

- 7 (revised) -

As a final aspect of the general area of economic and social distress we have turned to aspects of our social welfare programs which result not so much from our desire to achieve economic growth though they affect this indirectly, as from our general moral concern from in short being the sort of people we are. Here we have called attention to changes in the concept of social welfare and we have recommended a number of improved health measures, both public and private, and to suggest some changes and adaptations in our social insurance plans.

- The final section of our report deals with the problem of <u>National Priorities</u>. Here we confront the fact that our economy of growth will accomodate many, but not all, of the claims which are levied against it.

It will be our conclusion that if we are to carry out in a free market economy just the <u>minimum</u> programs needed for national security and national welfare, a number of otherwise desirable Federal programs will have to be deferred, and that even consumer growth may have to be held below its upper limit of natural increase. This is not a pessimistic conclusion, in that it recognizes that without growth the accommodation of many demands which we <u>will</u> meet would be altogether impossible. But it is a necessary reminder of the continuing need for intelligence and moderation if we are to make the best of the opportunities before us.

A final word concerns the consensus of the Report proper. We have been fortunate in drawing upon the wisdom of many scholars in the fields

IV - Report
September 9, 1957

- 8 (revised) -

with which we have been concerned, and in benefitting among ourselves, by
the variety of backgrounds, areas of special competence, and diversity of
viewpoints of our Panel. We cannot hope that so far-ranging a discussion will
do justice to all the expertise from which it has benefitted, nor that the
views of every member of the Panel can always be adequately represented
by it. Yet with full allowance for individual reservation about details, the
broad outlines of the objectives and policies which appear here command
the assent and affirmation of all.

IV - Report
September 9, 1957

I

The Opportunity

An extraordinary economic opportunity confronts the American nation at mid-century -- an opportunity not only without precedent in terms of all previous American accomplishment, but quite literally without parallel in history. It is nothing less than the creation of a new economic environment for an entire society. Another twenty years as productive as the past two decades can bring about in America a degree of well-being never before attainable or enjoyed by any great nation. And it is not merely an economic change, a further quantitative elevation of our standard of living which the future holds in store. It is also a qualitative change, for in our economic potential achievement lies the foundation for a profound and hopeful elevation of our standard of life.

This challenging statement is not a prediction of what will be, but what _can_ be. It is a projection of the opportunity which lies within our grasp -- of a future for whose realization we have the necessary materials, energy and skills.

Whether we shall in fact realize that future is a question which only history will answer for us; how we may best go about trying to realize it is the theme of this report. But before we turn to an analysis of the problems which must be met, let us briefly describe the statistical basis which makes such a projected future possible.

IV - Report
September 9, 1957

- 10 -

For the past seven years--in fact since the unleashing of the economy from the controls of World War II -- American business enterprise has been adding to its productive equipment at a rate of approximately $25 billions a year. This is in itself too large a figure to be visualized: we may give it concreteness by pointing out that it is the equivalent of adding to the nation each year all the productive assets of General Motors, Standard Oil (N.J.), Ford, U. S. Steel, and General Electric.

If the American business community continues for another two decades to add $25 billions a year to its plant and equipment, this will give us half a trillion dollars worth of new capital goods by 1975. In fact this is a highly conservative estimate, since the trend of capital expenditures in a growing economy must be upwards -- indeed, those expenditures are the growing edge of the economy itself. However, the half trillion figure is stupendous enough. It is the virtual equivalent of adding fifty percent to the value of our entire present stock of national wealth -- the land, gold, machines, houses, cars, grain which comprise our national economic riches.

This colossal increase of plant and equipment will bear its fruit in the quantity of goods and services which the American people can annually produce. By 1965 the leverage of this investment on our Gross National Product -- the gross value of the annual output of the nation -- could raise it from today's value of $432 billions to at least $550 billions, in value terms of today's dollar. By 1975 the total could easily reach $700 billions. And these projections cautiously assume that our economy will grow at only three

IV - Report
September 9, 1957

- 11 -

per cent a year. It is quite within the bounds of plausibility for it to grow
at four per cent -- in which case our Gross National Product for 1975 could
exceed $800 billions, again measured in today's prices.

These are astronomical figures which have a bewildering rather than
clarifying effect, but they can be translated into magnitudes which are more
readily comprehended. By 1975 according to the upper range of estimates,
our population will be 220 millions, or about 70 million households. Hence
we must divide the $700 to $800 billions of potential Gross National Product
into 70 million shares. Then we must reduce each share to eliminate that
part of Gross National Product which does not become part of individual
income.* If we make these adjustments, we end with an average income per
household of approximately $7,500 a year -- once more in terms of the
purchasing power of today's dollars.

This figure must now be considered in the light of the expected
characteristics of our 1975 economy. There is no doubt that it will be earned
in an average work week of 35 hours or less, for the trend of worktime has
shown a steady decline over the past decades. It may further be assumed
that this average income will be supplemented with an amount of "free"
(i.e., socially supported) services considerably larger than today: the trend

*This eliminates such items as business depreciation allowances, etc.
The relationship of Total Personal income to GNP 1948-1956 has been approximately 3:4.

IV - Report
September 9, 1957

-12-

of welfare services has also shown a steady tendency to increase. It is probable that the dependability of this income will be greater than that of most incomes in the past, primarily by virtue of more effective public control over economic fluctuations, but also by some growth of private responsibility for the "guaranteeing" of incomes: both these factors as well point toward increased income stability. And finally we must picture the $7,500 family income as a more "typically" representative figure than the corresponding average income of $5,500 today. Although we cannot know what the actual distribution of income will be in 1975, it is certainly in line with the trend of the past to expect to find the great bulk of the nation's families within the $5,000 to $10,000 range.

But what is significant here is not alone the quantitative magnitude of these figures themselves. It is the qualitative meaning of the level of life which such figures make possible. If we consider that the average income for all professional and semi-professional families in the United States in 1954 was just over $7,300, and that of "managerial" families just under $7,500,* it can be seen that the possible economy of 1975 represents the upgrading of an entire society to the point where its representative family enjoys an income comparable to that of the upper middle class today. Hence it is not the abolition of poverty which is the signal factor of the potential

*United States Statistical Abstract, 1956, Table 368, p. 306.

IV - Report
September 9, 1957

- 13 -

future -- indeed, it is fair to say that poverty in its ugliest sense is already
on its way to being eradicated in America today. Rather it is the first approach
to a society of wealth -- a society in which the average person enjoys not
merely the perquisites of civilized existence but a modest share of its
luxuries as well. <u>Such a mass social environment has never before existed.</u>

This bright image, it must again be emphasized, is not a prediction
but a projection. It assumes that we <u>will</u> grow, that we will be able to
keep economic recession within tolerable proportions, and -- which may be
more difficult -- that we will not vitiate our growth in inflation. It further
assumes that all the difficult problems of taxation and fiscal policy, inter-
national economic imbalance and domestic economic and social bottlenecks
will have been, as they can be, met and mastered. Thus the outlook is at
once enheartening and sobering -- great with promise but chastening in the
degree of intelligence, self-discipline and energetic action which it presupposes

It is not, let us hasten to say, a vision of the perfect society which
we project. At the very best, 1975 will be far from a Utopia. Laggard
economic sections of the community will undoubtedly remain. Great and
necessary works will remain to be performed. Vexing, perhaps even grave
problems of economic policy will assuredly assert themselves. Social problems
such as those connected with our mass movement to metropolitan areas, will
very likely aggravate and heighten the tensions of daily living. And finally,
it is by no means impossible that the gain in mass well-being will not itself

IV - Report
September 9, 1957

- 14 -

produce new problems in the place of older ones: the use, or misuse, of an unaccustomed leisure comes quickly to mind as such a problem of the future.

To many of these issues we will revert in the course of this report. But at this initial juncture it is well to realize that the cautions and reservations at best obscure the magnitude of the underlying potential achievement itself. If,--and it is this _if_ to which the bulk of this report addresses itself -- the American economy performs according to its capacities, we shall have created a society different in kind, as well as in degree, from any heretofore. This is the proper measure of the opportunity we face. It is the creation of an economic environment which will offer the average individual an opportunity for self-realization comparable to that enjoyed only by the favored strata of past societies.

## The Framework of Economic Organization

The projected economy of 1975 will be the outcome of, and will itself represent, a method of economic and social organization which we call _American capitalism_; and it is directly germane to the purposes of this report to reflect for a moment on the meaning of that term.

Capitalism as such implies an _economic_ system -- a means of arranging the essential social provisioning process. Its core is the private ownership and direction of the means of production and its equally indispensable attribute is the free contract market for labor.

IV - Report

September 9, 1957

- 15 -

But such a bare description of capitalism is at best a kind of text
book definition. It brings out the two main points by which capitalism is
critically differentiated from alternative economic systems, but it fails to
clothe these economic abstractions with the garments of reality. For
capitalism cannot be described in economic terms alone, any more than
communism can be accurately depicted only with an economic vocabulary.
Capitalism in living reality must be visualized in its full context as an
amalgam of social, political and moral -- as well as economic -- ideas.

This point is of the essence when we talk of American capitalism.
For the path which "capitalism" has followed in many foreign nations differs
importantly in social, political and moral ways, from that followed by
American society. Consequently we often bear the opprobrium which attaches
to these social and political and moral attributes -- or lack of attributes --
of other "capitalisms". The most important stereotype in this regard is the
common communist assumption that the features of social and moral life of
19th century England which so forcibly struck Karl Marx are inextricably
connected with and bound into any society which bases its economic
structure on private ownership and free contract labor.

Americans do not need to be told of the falsity of this assumption,
but it is useful nonetheless very briefly to enumerate some of the influences
which have gone into the making of the system in which we believe, and
which will go into the making of our future.

At the risk of severe oversimplification these influences can be

IV - Report

September 9, 1957

- 16 -

reduced to three. The first is a religious strain which has permeated
American society from its beginnings. A product of the Calvinist movement,
this somewhat severe, self-denying ethic was a natural complement to a
society seeking to convert a wilderness and needing to encourage attitudes
of hard work, thrift, and dedication to one's worldly calling. But the
religious roots of American capitalism have had important results over and
above this supportive role. From the beginning they have infused the system
with a self-conscious morality, with an ideal of public service, and with
an uneasy feeling that the pursuit of gain was not to be an end in itself but
must be justified by the use to which that gain was put. Thus our Puritan
ancestry has been importantly involved in the evolution of the American
moral attitude of social consciousness. And despite the fact that much of
our gaudier economic history is the story of irresponsibility writ large, this
strain of self-imposed public and private accountability has been a persistent,
if not always dominant note of our society. It has asserted itself in the
typically American phenomenon of philanthropy, in the championship of the
causes of the underprivileged by some of our most patrician leaders, in the
essential recognition -- sometimes tardy and reluctant, but never totally
lacking -- that the purpose of the economic system was, in the final
analysis, not the private pocketbook but the public weal. This ethical
concern will continue to provide a moral guide for the future.

A second vital point of difference between American capitalism and

IV - Report

September 9, 1957

- 17 -

the Marxist stereotype of capitalism has been the absence of a national
feudal heritage. It was not a matter of class ties alone, not merely a
question of titles and the privileges of nobility which were of the essence
here, but a deeper attitude toward the inherent capacities and the rightful
opportunities to be accorded to the common man. Over the history of
American capitalism that common man has frequently been abused, misused,
even exploited, but -- and this is the crucial thing -- he has never been
despised. The idea of a permanently *inferior* class of men is and always
has been repugnant to the American mind. Traditionally ours has been the
only country in the world where a man was proud of his humble ancestry
rather than ashamed of it, and where his advancement typically depended
on his abilities rather than his blood.

Again, the result for the living reality and for the future of American
capitalism is profound and salutary. Quite aside from the fraternal tone
which such an idea gives to social life, the absence of a feudal preconception
of "classes" has rescued American capitalism from the terrible civil conflict
of internecine warfare. Certainly there are classes in this nation, and class
antagonism has been sharp and sometimes bitter. Yet it has never burst
the bonds of the communal consensus; it has never rigidified into an
irreconcilable conflict not only of economic interest but of social aim. At
the height of the anti-union or the anti-capital days of the late 19th century
or the desperate 1930s, the idea of a struggle *à outrance*, a fight to the brutal
finish, never characterized more than the fringe of the contestants.

IV - Report

September 9, 1957

- 18 -

A basic outlook on men as individual men rather than as representatives of a class has always permeated American thought, and will continue to be its central emphasis.

A third point of difference for American capitalism has been the democratic political framework within which it has operated. In effect this has meant the supremacy of the political ideal over that of the economic, and since that political ideal was itself responsive to the will of the people as a whole, it has meant constant adaptation of the economic system to the political wishes of the electorate. Thus capitalism in America has always been contained within the political framework and has had to make its peace -- sometimes an uneasy peace -- with the political desires and ideals of the populace.

And it is not only in the largest national setting that this has been true. The democratic concept in America has also expressed itself in a certain suspicion of power, private or public, and in the insistence that power be regularized, curbed, and legitimized by public consent. Hence the wariness with which the public eye has always regarded size, whether in Washington or Detroit, has resulted in the gradual evolution of an attitude of self-consciousness on the part of big organizations, economic or political. Big business has been a focal point of attack, justly and unjustly, over the American past, but the happy consequence of this hostility has been the recognition on the part of big business that it existed by public sufferance rather than by God-given right. Thus the democratic strain in American life,

IV - Report

September 9, 1957

- 19 -

has imposed a standard of good conduct which has shaped American economic institutions as importantly from within as from without. This allows us to envision our economic future as a _self-disciplined_ rather than as an externally directed movement.

This is far too cursory a review of the factors which render American capitalism unique. Yet it is important that we appreciate the role which they may play in our future development.

We see their influence most dramatically in the extraordinary capacity of a pragmatic, morally disciplined and socially open society to grow. The frontier, with its implications of adventure and expansion has not only been a reality of American history but a deeply meaningful symbol of its economic attitude as well. A belief in economic growth, a liking for social movement, a bent toward technological innovation, a climate of optimistic expectation--these have been some of the expressions of that complex amalgam we call the American character. As a result growth has been the hallmark of American capitalism. In less than two hundred and fifty years our nation has progressed from an underdeveloped country to the industrial center of the world. While our population has increased 100-fold in numbers since 1752, our individual incomes have increased literally beyond the power of comparison with that earlier day. Even during the last century our expansion has been little short of astounding. The average American workman today produces nearly six times as much wealth in an

IV - Report

September 9, 1957

- 23 -

hour of work as his great-grandfather did in 1850. The statistics of the American performance are a unique record of powerful increase of economic strength.

But whereas growth has always been an integral part of the American economy, it has not been economic growth alone which has characterized American society. Growth has also been the means by which we have met the demands of Americans for a better life in non-material ways -- providing us with the necessary environment in which better health, a fuller family life, more leisure, greater opportunities for learning, and richer possibilities of self-realization could also be achieved.

This total and many-sided growth has been the product not only of the special moral, religious, and social traits of American capitalism, but also of the specific economic institutions which those traits fostered. Thus a free enterprise system has evolved in which economic incentive and moral suasion meet to form a singularly fruitful combination. A zest for enterprise, combined with a willingness to innovate, has given us a driving stimulus which has been socially tempered by an acceptance of competition, a tradition of low-profit margins and high volumes of output, and an acquiescence in the regulation of private excess, such as that provided by the anti-trust laws. Equally important, a strong and free trade union movement has contributed to growth, not alone in protecting the dignity of the workingman, but in assuring the widest possible sharing of the economic results of increased productivity.

IV - Report
September 9, 1957

- 21 -

These institutions of capitalism have been -- and will be -- the vehicles for the American economic odyssey, but they are not yet its ultimate justification. This we find in the paramount focus of capitalism on the individual -- in its ability to spur him on, reward him, encourage him, sustain him. The American economic system is oriented to the man -- it is built around the idea of private growth. The religious, the moral, the political underpinnings and accompaniments of our economic system all come to a common terminus in this central ideal.

It is well to bring our Introduction to a conclusion with this cardinal point. For the importance of the individual, indeed the paramountcy of the individual, was never more necessary as the ultimate justification of our economic system than today and tomorrow, within the perspective of growth which we have projected as our national task. There is a certain danger in the magnitude of the sheer achievement before us, and in the natural feelings of pride and eagerness which the vision of a society of universal well-being inspires. The danger is that of confusing *more* with *better*, and of assuming that because we may bring about an environment of unprecedented abundance, that this will necessarily be an end in itself.

It will not. Indeed, if the prospect of such a society "solves" some age-old questions of economics, it opens new questions of a still deeper nature. There is not, in a society of increasing abundance, the same easy rationale for much economic endeavor, for the pursuit of private gain, or for the high estimation of economic activity itself, which prevails in a

IV - Report

September 9, 1957

- 22 -

society still coping with the strictures of want and need. In the past American society has not had to ask itself for what purpose it worked so hard, saved so much, built so furiously: the answer was apparent in the needs of the people themselves. But when those needs have been met, when additional economic effort administers not to basic human wants, but to the satisfaction of increasingly trivial ones, the question of the moral purpose of economic activity itself cannot so easily be dodged.

This is not to suggest that the motives, the institutions, and above all the moral core of capitalism will not continue to serve us well. Rather, it highlights the probability that in the future, the question of *quality* will come to have a higher degree of social importance than quantity; that the meaningfulness of work will weigh more heavily in the scales than its monetary rewards. It suggests, in a word, that with the solution of the problem of want, society will have an increasing motive to turn its attention away from an absorption in economic affairs to social, cultural, and spiritual pursuits. The real justification of our impending economic achievement is not the mere creation of wealth for its own sake, but the building of a society in which each individual, in a climate of plenty, may realize to the full whatever capacities for self-expression he may possess.

IV - Report

September 9, 1957

- 23 -

II

The Path Ahead

In the possibilities and the promise of a society of well-being -- and
in full cognizance of the problems which such a society may impose -- lies
the inspirational purpose of American economic and social policy over the
next twenty years. It is to these policy considerations which we now turn,
for with our goal in mind, we have a set of ultimate objectives which may be
useful in assessing the practical problems immediately before us.

Clearly the overriding necessity, if we are to achieve our final ob-
jective, is the continuation and encouragement of economic growth and this
will accordingly be the theme which runs through the following pages. At
this first juncture, however, it may help us to survey the problem at large,
if we group the many issues facing us into an orderly array.

These are the broad categories of issues with which our economic
and social policies must cope:

1. The problem of resources.

Growth must concern itself with limitations as well as with objectives;
it is a matter of capacities as well as determination. Our economic growth
will therefore depend, in the final analysis, on the availability of men and
materials. We must assess the resources of the nation for each.

2. The problem of motivation.

Growth is also a response to stimulus; it is a matter of positive
action, rather than routine. Our economic growth will depend in part on the

IV - Report
September 9, 1957

- 24 -

nature of the stimuli which affect it, and on the environment in which it takes
place. We must pay due regard to this in our analysis.

3. The problem of the role of government.

In a complex industrial society, economic growth must be supported
and encouraged by government action. This is not to say that it must be
made the subject of direct government planning, but it cannot escape the
influence of indirect government planning. We must consider the ways in
which necessary government activity can best encourage growth, by provid-
ing an economic climate conducive to enterprise and secure from the dangers
of severe recession and inflation.

4. The problem of social and economic distress.

Economic growth is not a uniform process, for a society is not a
uniform entity. And economic growth is not meaningful when measured only
in economic terms, for our society, as we have been at pains to point out, is
not merely an economic entity. Growth demands special attention to those
areas of our society -- social as well as economic -- in which progress is
slow or absent.

5. The problem of national priorities.

Economic growth over the next twenty years must take place in the
larger context of a society enmeshed in a needful world and threatened by
the possibility of fearful aggression. The growth potentials with which we
have been and will be concerned, are those of our total economic framework.
But within the framework, no matter how successfully enlarged, we must still

IV - Report
September 9, 1957

- 25 -

reconcile and accommodate claims which may well exceed our total capacity.
Thus we shall see that while growth will make many things possible, *it*
*will not make all things possible*, and part of our task must be the
assignment of priorities other than those provided by the marketplace
alone. How to divide the use of our increased wherewithal between
private and public wants, between civil and military needs, and among
competing social objectives is a critically important problem to which
we will return in the third section of this Report.

This systematization of the issues before us is not intended to be
more than a conceptual guide to the multiplicity of questions with which
we shall be forced to deal. A cautionary word before we begin our
closer analysis may be useful. This is the essentially unitary nature
of the problem before us. We may be forced, for the purposes of clarity,
to discuss "economic" problems as distinct from "social" problems, or
problems of fiscal policy as distinct from those of, say, agriculture. In
reality no such hard and fast dividing line exists. A social problem has
economic results; an economic action will make its impact felt on social
matters in turn. The problems of cotton and wheat impinge on our
monetary mechanism, just as a tax revision may eventually make itself
felt in slum clearance. There is a unity to social and economic concerns
which is all-important for their understanding and which inhibits dogmatic
or overly-precise prediction. In looking at the future it is wise to have

IV - Report
September 9, 1957

- 26 -

this chastening sense of the inevitable incompleteness of any diagnosis.

* * *

## The Problem of Resources

### 1. Materials

A major element in the strength of a nation's economy is its stock of, or its access to, the raw materials from which it must fashion its output. For the most part the United States is happily gifted in this regard. We have been abundantly endowed by nature in respect to the most important raw materials: agricultural land, basic minerals, sources of power. To state a broad generality, there is no prospect that our overall desired rate of advance of about three to four percent a year should be importantly hindered by the lack of any single major resource -- land, minerals, or most important of all, energy.

This generally reassuring statement derives in part from the dynamic nature of the contemporary resource problem. As one writer concludes: *

"The time must inevitably come when ores as such no longer exist and machine civilization, if it survives, will feed on the leanest of substances -- the rocks which make up the surface of our planet, the waters of the seas, and the gases of the atmosphere . . .

"One hundred tons of igneous rock contain, in addition to other useful elements, eight tons of aluminum, five tons of iron, 1,200 pounds of titanium, 180 pounds of manganese, 70 pounds of chromium, 40 pounds of nickel, 30 pounds of vanadium, 20 pounds of cooper, 10 pounds of tungsten, and four

* Paper IV-13, Lindsay, F.A., Planning for Non-Renewable Resources, page 4. (Italics added).

IV - Report
September 9, 1957

- 27 -

pounds of lead. Given adequate supplies of energy these ele-
ments could be extracted from the rock, _and it appears likely_
>_ that the rock itself contains the requisite amount of energy in_
>_ the form of uranium and thorium._"

These hopeful generalities must however, be immediately qualified.
They serve a useful purpose in redressing the gloom which sometimes
obscures the resource issue, but they must not be taken as a glib dismissal
of the problem. We are only at the threshhold of a technology of such
powers as those described, and in the immediate future we shall depend
directly on ores and conventional resources. Many of these, particularly
in their top qualities, are dwindling fast: an example is the probable
exhaustion of iron ore containing 50% iron within two decades. These
impending stringencies -- and iron ore is only one of many -- will compel
us to turn to ever less economic domestic sources of raw material.

In fact this reduces the "resource" issue from that of sheer physical
availability to a series of related technical, social and economic problems.
It enjoins the need for heightened research into substitute materials and
better extraction and utilization methods. It makes imperative a sound
policy of conservation. It highlights the need for a steady flow of critical
materials from abroad. And not least it emphasizes the importance of the
capital expenditures which will be necessary to use secondary resources
efficiently. Thus the investment problem, to which our report will shortly
turn, is itself directly connected with the resource issue.

Within the 20 year range of our immediate interest however, two
major resource items call for special attention. One of them is oil. Our

IV - Report
September 9, 1957

- 28 -

basic dilemma in oil is well known: if we rely on domestic supply, we risk an early exhaustion of oil reserves; whereas if we turn to foreign sources, we run a certain risk of discouraging the domestic exploration for new oil fields. The problem is an exceedingly complex one, and rendered no simpler by its inevitable entanglement with the delicate political situation of the Near East and by the fact that we do not have a fully reliable estimate of the total available supply of oil at home.

The extremes of current estimates of oil supply are widely variant, from alarmist projections that would cover our needs only for another few decades to optimistic projections that give us an "indefinite" future availability. Two facts are of importance in this geological guessing game. One is that oil shale exists in gigantic quantities. This insures us an ample _physical_ supply of petroleum, provided that we can bring down the present uneconomical cost of extracting the oil, and we note with satisfaction that considerable experimentation is now going on in this line. The second important fact is that more adequate recovery methods could add 10 and 20 percent to our domestic resources without the need to discover another oil field. Hence a solution to the oil resource problem rests partly with the further development of oil technology and partly with the turn of international events. Pending clarification of the political situation and development of a still more efficient oil technology, we recommend the husbanding of domestic resources as most clearly in the national interest. We suggest the abolition of oil import quotas as the

IV - Report
September 9, 1957

- 29 -

best implementation of this policy by means of the natural pressures of
a free market.

The second critical item for the next 20 years is that classical
"free good" of economic texts, water. The magnitude of the water problem
is indicated by the fact that already in 1953, 25 out of every 100 persons
in the United States were restricted in their use of water because of supply
failures or inadequacies. Yet by 1975 it is estimated that the domestic
demand for water will have _doubled_ and the industrial demand _trebled_.

A solution appears to be partly dependent on technology and partly
upon social action. The industrial use of water -- which accounts for
38% of the total -- can be greatly economized: an instance in point
being the fact that modern steel mills need but one-quarter the amount
of water per ton of those built 20 years ago. In agriculture as well more
efficient techniques can stretch water use. On Hawaiian sugar plantations,
for example, it has been found that overhead irrigation is four times as
efficient as standard irrigation through ground-troughs. In the arid
regions of the west, losses through evaporation account for as much
as 50% of the total water impounded in reservoirs. Active research is
now under way to reduce this loss by thin surface films of other liquids.
And finally, there exists the heroic possibility of distilling sea water
for use along our coastal areas.

Perhaps of even greater _immediate_ urgency than an improved water
technology, however, is the need for a unified water program, under the

IV - Report
September 9, 1957

- 30 -

aegis of a federal water resource agency. This agency should be charged
with the coordination of federal water programs and with the supervision
of flood control, irrigation, stream pollution, navigation and other
measures at the state and local action. Since we must realistically
anticipate an increase of government expenditures for water control from
their present level of $1.5 billion to $2.5 billion by 1965, we strongly
urge prompt action along these lines.

2. The Human Factor

It is quite possible that in the final analysis the size and quality
of a nation's working force are more directly related to its economic
growth than any other single factor: one might only instance the handicap
to a nation such as India of a population which crushes and a level of
skills which cripple its rate of advance.

Once again, to take an overall view, the human resource problem
in America is propitious for growth. Its skills, versatility, industrial
aptitudes are proverbial. Its morale, to which we turn in the next
section for a closer examination, is on the whole excellent. Its numbers
are increasing, itself both a stimulus for and a consequence of economic
expansion. In fuller detail, however, the human resource problem needs
considerable attention and this has been provided in the report of
Subpanel V. Here we confine ourselves to a few immediate economic
issues, relevant to growth.