Thus, under the conditions assumed, the laborsaving improvements would add to the productive resources of the community in two ways: (1) they would displace a body of laborers who would become available for other work, (2) they would create new capital saved out of the profits arising from the improved processes. The employment of each of these two added resources would necessarily increase the total output of goods and cause a tendency in the direction of falling commodity prices. The price decline consequent upon the employment of added capital goods would not necessarily cause a maladjustment in costs and prices. Not so, however, with respect to the displaced labor. The displaced labor could not be permanently reabsorbed at the old money wage level, unless the increased output of goods were balanced by an increase in monetary purchasing power, thus enabling a maintenance of the former price level. This would require additional credit. But since we have assumed rigidly controlled prices in the laborsaving industry, no credit could be released for use elsewhere. Should the displaced labor be absorbed in new industries, purchasing power would be deflected from the old industries, prices would fall, and with no fall in wages, certain firms would be unable to meet their costs. Thus labor would again be displaced. If the discharged labor is to be permanently absorbed, the cost and price relationship must not be disturbed. Since, however, the price decline here considered is not occasioned by a gain in efficiency (but merely by the employment of more labor), a corresponding reduction in wages is required.12

IV

We have noted the effect, under certain conditions, of rigid trade union control of wages upon the absorption of displaced labor. Might not the restriction of output by monopoly control also prevent the reemployment of discharged labor? Monopoly power, if universal, could indeed rigidly limit the total output of goods and thereby the employment of labor. The extent of the profits would then merely be a question as to how much the total money income of the community exceeded the total money paid out in wages. If wages went up, the monopolists, if in control of the banking system, could merely extend more credit to themselves, and so bid the limited output of goods away from the wage earners. Prices would rise, but output being closely regulated, unemployed labor could not be reabsorbed into industry.

Let us take as a starting point Aftalion's 13 equation of exchange I=R P in which "I" is the money income of the country, "R" is the real income, the physical quantity of goods and services produced, while "P" represents the prices paid for these goods. Assume that "I" is controlled by the central banks, and that "P" is controlled

It is of course desirable to have the highest possible wages consistent with full employment. There is much force in Dr. Altschul's suggestion that there is such a thing as an optimum wage. If the wage is below the optimum there is a loss in efficiency (not primarily personal efficiency of the laborer, but more especially management efficiency, which of course affects the productivity of labor). If the wage is above the optimum there is an increase in unemployment. Cf. Eugen Altschul, "Lohnniveau und Kapitalbildung," Die Wirtschaftskurve, Heft iv, 1928.

13 Albert Aftalion, Revue d'économie politique, May-June 1925.

partly by monopoly and quasi-monopoly power, and partly by the holding up of cost prices through working rules, customers, etc.-the striving of all classes for the highest possible income, as Conrad puts it. If "I" is limited and "P" is artifically raised, it necessarily follows that the quantity of goods, "R" which can be sold at the abnormally high prices will be less than would otherwise be the case. Thus if the price level were maintained at an artificially high level in a community with a given money income, the total volume of goods and services which could be sold would be restricted and unemployment would of necessity ensue.

It is, however, scarcely thinkable that all prices can be controlled. The number of competing commodities and services that can be put on the market is so large and the conflict of interest so great (in contrast to the single "commodity" and large homogeneity of interest in the labor market) that universal monopoly is scarcely thinkable. There are, indeed, in modern societies numerous monopolies and quasimonopolies, but total output of goods and services is far from subject to arbitrary control. Hence, to control the general price level from the side of production is scarcely possible. And if P as a whole were not artificially boosted, no absolute restriction of R would result.

Nothing short of a complete control of the prices of all goods would be needed to bring about a curtailment in the employment of the agents of production. A partial control of prices would merely produce a redistribution in the output of goods and services. The real income might indeed be less in terms of utility, but there would be no absolute curtailment of the outlets for the products of the agents of production, provided the prices of these agents were determined by free market forces. If, however, the price of one of the agents were controlled, other agents would be substituted for it to such an extent that a part of this agent could find no employment. The result would be an absolute curtailment of R due to the idleness of a part of this productive agent.

14 Otto Conrad, Absatzmangel und Arbeitslosigkeit als Dauerzustand.

[From the Atlantic Monthly, August 1931] BUSINESS LOOKS AT UNEMPLOYMENT

(BY JULIUS H. BARNES)

I

To find work for the worker has become a universal task. As an international problem it has been taken up by the Economic Committee of the League of Nations. President Hoover's Conference on Unemployment and a special committee of the U.S. Senate are approaching it as a national problem. Legislative commissions are attacking it as a State problem. Numerous trade organizations are weighing it as the most formidable of the difficulties barring the way to industrial advancement, and as many more civic organizations are considering it as the most portentous of social questions.

At the turn of the year there were approximately 14 million workers in the United States and Europe for whom no work had been found, and efforts to check the rising tide of suffering and distress were worldwide. Great Britain, in 1911, had set the example by establishing its state system of unemployment insurance, which has since become the "dole," and the movement spread to Austria, Australia, Bulgaria, Germany, the Irish Free State, Italy, and Poland. Voluntary systems are in force in eight other countries. It has been estimated that 37,500,000 workers, not including Russia's sweating millions, now have thrown about them a protective mantle of one sort or another to shield them against the hardships of economic storm and stress. As this is written, 24 bills, all looking to the same end, are pending before 16 State legislatures in this country.

Of all the palliatives and remedies proposed or applied, it cannot be said that any holds promise of curing the disease. Government has found no way out of the economic dilemma which faces these efforts to allay the fear of unemployment. If the worker is to be sheltered against the privation and distress that follow in the wake of involuntary idleness, productive enterprise must eventually bear the cost at the risk of intensifying the ailment. Paul cannot be paid without the danger of pauperizing Peter. The National Confederation of Employers' Organizations of Great Britain points to the heavy public expenditure for social services-$1,946,600,000 in 1929-as one of the serious obstacles to national economic recovery. Even Russia, with all its scorn of bourgeois practices and philosophy, has been unable to suspend this inexorable rule. It has injected capitalistic libeblood into the veins of production by transfusing it from the veins of consumption, paying for the powerplants and factories of the 5-year plan with enforced labor and meager rations. Many of the social nostrums proposed for the cure of unemployment would reverse this process by paying for relief with industrial plants.

Unfortunately, ill assorted and antagonistic as they are, unemployment and business cannot be forcibly divorced. They are at opposite ends of the economic seesaw. When business goes up, unemployment declines, and when unemployment rises, consumption languishes and business sinks to lower levels.

This inescapable relationship was obvious enough when bread-andbutter getting was largely a matter of shepherding flocks and tilling the soil and industry kept close to the domestic hearth. The choice between working and having and not working and doing without was a mere matter of volition. No one cherished the delusion, now not uncommon, that a way could be found by which one could stand idle in the marketplace and at the same time receive the penny that was the hire of the worker in the vineyard.

So interpreted, the parable still holds good. Getting a job is not so simple a matter as applying to the lord of the vineyard or turning one's hand to one of the many tasks that crowded the days of our fathers before the coming of the machine. Nevertheless, businessbusyness-and unemployment, or idleness, remain antithetical. They cannot be reconciled by a wave of the legislative wand or the invocation of social justice. Sympathy for those who suffer, however keen it may be, cannot be minted into coin to pay for their relief. Neither can a paternalistic state provide them with necessities merely by enacting a law.

Obviously the only cure for unemployment is employment, as the only effective remedy for idleness is work. But this affords small consolation to the worker who makes his futile rounds looking for something to do. Between him and his job, modern industrial civilization has interposed a system of producing, financing, storing, transporting, advertising, and distributing so vast that the plight of the man who can find no task to which he may put his hand and the plight of business, which should provide the task, are frequently not associated at all.

Baffled and bewildered, the worker justly demands opportunity to earn a livelihood, and the industrial order which denies him this opportunity cannot escape indictment on the plea that the giving of it does not lie within its control. To him the machine which robs him of his toil is a relentless monster. He cannot understand why the overthrow of a government 5,000 miles away, a discovery by a scientist of whom he has never heard, an invention that has revolutionized the making of glass bottles or the shaping of steel, the collapse of an unwise economic policy that has swamped world markets with a deluge of commodities, should deprive him of a chance to work.

Neither can it be gainsaid that business, long after the machine had begun to change the whole aspect of industry, looked upon unemployment as a social misfortune or an act of providence, the distressing effects of which were to be alleviated by poor laws and almshouses, and not as an economic ailment which would inevitably sap its own strength. It was slow to recognize the consumer in the

of the early directors of industry were disposed to selves as beneficent dispensers of employment w poor and the threat of destitution rather the

that is conferred by the lengthy payroll. scured in the lengthening vista of dem

II

The widening of the breach between the worker and his job is the price paid for productive efficiency. When industry forsook the serenity and security of the domestic fireside and sought out markets in the far corners of the world, it exposed itself to the winds and storms that blow up and down the Seven Seas. It laid itself open to the vicissitudes of political agitation and turmoil. By massing its resources in huge plants and regimenting labor in highly trained armies, it increased its output enormously, but at the same time it sacrificed the flexibility and mobility it possessed when every man was his own master. By enlisting science and invention, it opened the door to the feverish forging of new economic weapons that are constantly widening and altering the character of the conflict in which it is engaged. Change takes its toll of industry in unemployment and obsolescence. When manufacturing was a houshold craft, the worker encountered no difficulty in turning from one task to another. If there was no wood to be hewn, there was water to be drawn, wool to be carded and spun, candles to be dipped. No elaborate readjustment of machinery, no shifting and training of labor, no planning of advertising and sales campaigns, were necessary. To adapt modern industry to the changing requirements of consumer demand is quite another thing. When public taste turned from narrow to wide carpets, new looms had to be installed, factories had to be rearranged, and labor had to be trained to the new task. When Henry Ford decided to manufacture a new model of his automobile, an army of workers was affected and millions were spent in designing and installing new equipment. It would be fatuous to attempt to escape these disadvantages, as some suggest, by returning to the older and simpler order of existence. Our fathers avoided them, but they went without broadloom carpets and automobiles.

For the havoc wrought upon industry and its workers by economic changes and dislocations, the machine bears the heaviest burden of blame. It is the most spectacular of the devices originated to relieve labor of muscular toil-but it is not the only one. Industrial engineering and business management are constantly shortening the steps of production and reducing the waste of time and effort. But the machine is luridly portrayed in its social effects as an economic jugger

naut.

From the first, its advance was resisted. Appeals were made to government to stay its march centuries ago when use was first made of the power of flowing water. Labor took more direct measures by resorting to sabotage, smashing the looms which marked the beginning of the end of household industries. At the present time critics are pointing to technological unemployment as the most disconcerting of the evils which follow in its train, another name for the age-old grievance.

More often than not, this is taken to mean that the machine is comstantly encroaching upon the right to labor and that the opportunity to earn a livelihood is constantly shrinking. In the narrow perspective of single industries this is true. The continuous mill in steel enables 4 men, operating gigantic machines housed in a building 21% blocks long, to do the work formerly done by from 30 to 50 men. The continuous furnace and automatic machine in glass have almost entirely