a group whose interests as a group are in harmony with those of the society. So far as hours and conditions of labor are concerned, organizations of employers in single trades may do much good, since here some at least of the worst evils arise from demoralized and demoralizing competition, acting in an imperfect market with grossly unequal force. But when it comes to questions of output, prices, and profits, the case is different. And the basic social interest for the purpose now in hand is the interest in output in using our productive resources to produce goods, not in protecting or enlarging the income of any group

as such.

The interest of a single businessman under genuine competition is to increase production, simply because competition will not let him gain by limiting production. The group that includes all the employers in one trade is proverbially the group whose interest lies in limiting production; and organizations of this sort, intended though they may be to promote social ends, have this basic force to reckon with. Once we have broadened the unit of organization beyond the single competing business enterprise, we must go a great deal further before we shall have a group whose interest as a group lies in increasing production rather than in limiting it. The group must incorporate and not merely in an advisory capacity-labor, consumers, public. In fulfilling this requirement, there is need for more thoroughgoing representation of these groups on existing code authorities, but this alone will probably not be sufficient. We have not yet evolved an adequate form of constitutional organization suited to this situation, so different from those which form the setting of our system of political representation. More practical perhaps is a different kind of enlargement. great objectives are: stablized demand for durable goods, and sustained general purchasing power. If one business were to stabilize its demand for plant equipment, it would help stablize the demand exerted by the members of the equipment industries, but the benefits would be diffused among industries in general. Or if this business pays high wages, it sustains consumers' purchasing power, but again the benefits are diffused among industries in general. Industry as a whole gets back what it contributes to such policies as this, but single industries do not. Hence their interest in such policies is far weaker than that of business as a whole. Under the circumstances, it is remarkable that the philosophy of high wages has made the headway it has. But so long as it is merely a philosophy, it will not go as far as the interest of business reqiures.

Two

To that end, it needs to be converted from a mere philosophy into an organized interest, wide enough to include those who contribute and those who benefit, on a basis somewhat more solid than mutual expressions of good will. This requires a genuine affiliation of consumer-goods industries, capital-goods industries and credit institutions, capable of stabilizing capital investment and demand for durable goods, sustaining diffused purchasing power and reducing the spread between the most efficient and the least efficient producers.

Such a system involves reciprocal agreements between capitalequipment industries and their customers, in which the capital equipment industries would use systematic price concessions in the duller periods to make it worthwhile for their customers to assume the costs and risks of putting their requirements on something like a

scheduled basis. The cooperation of credit institutions would be also required to provide a basis on which orders might be maintained in what would otherwise be a depression, as well as to restrain tendencies to expansion of the boom type. This is a form of customer representation which, difficult as it plainly is, might yield tangible results. It might require the setting up of quotas for equipment expansion as distinct from output, and would almost certainly call for a more coherent organization of credit institutions themselves. In attempts to stabilize demand for durable consumers' goods, control of credit would have to bear the brunt of the burden.

Industry may or may not be capable of evolving a workable constitution of this sort. Toward such an end, the organization set up under the National Industrial Recovery Act is only a step, portentous as that step may now appear. It is an intermediate stage, at which some of the worst dangers of the whole movement are encountered, while the full benefits are not yet within reach.

[From the Yale Review-December 1934]

FIFTH WINTER OF UNEMPLOYMENT RELIEF

(BY E. WIGHT BAKKE)

For the fifth consecutive winter the United States faces "emergency" unemployment relief on a grand scale. The unyielding dimensions of the "emergency" challenge our confidence in the ability of our industrial machinery to provide a satisfactory standard of living for all of us. In financial terms, in human terms, in terms of repercussion upon government, the problem of providing for the men without jobs hangs like a great black cloud over the Nation's future.

The total public obligations-Federal, State, and local-incurred strictly for unemployment relief in the year 1933 and the first half of 1934 averaged $894,302,510 for a 12-month period. This is exclusive of the $824 million spent upon CWA projects. It is exclusive of the money spent for the Civilian Conservation Corps. It is exclusive of the money spent by the Public Works Administration on emergency housing and other public works. It is exclusive of the money spent by the Department of the Interior for the setting up of subsistence homesteads.

Consider for a moment what this means. It means that we are each year spending strictly for unemployment relief a sum which would almost build two Panama Canals. It does not quite equal the billion dollars and more that we spend for interest on and redemption of obligations for past wars. Had the relief expenditures been met out of current income, we should have spent a quarter of a billion dollars more than we collected from current Federal income taxes in 1933.

Consider the magnitude of the problem in human terms. In July of 1934 about 17 million persons (1 out of every 7 of our population) were receiving relief. In 39 States more than a tenth of the total population, in 15 States more than a sixth, in 9 States more than a fifth, and in 1 State, South Dakota, over a third of the people were existing on the money given them from public funds. The Federal Emergency Relief Administration unemployment census of October 1933, indicated a still more serious aspect of these numbers. Over 50 percent of the families were in eight States, and over 33 percent of the families were in the four States of Pennsylvania, New York, Illinois, and Ohio.

Furthermore, this problem will be greatly increased this winter. The burden will probably be greater than any we have borne in the last 4 years. The reason for that is clear. Four winters of severe economic weather have exhausted the resources of a large part of our working population. During the winter of 1933-34, two-thirds of the new applicants for relief had never received it before 1933; and fresh recruits are being constantly added to the relief army. Even if only the normal number were to fall victims to the hazards of fortune this

year, the proportion of those to whom that event would mean actual destitution would be large. When we view the prospects of the next 9 or 10 months, we cannot do so with any confidence that an uptake in business will result in the lessening of our relief load.

A problem of such magnitude demands a relief program which raises issues of tremendous importance. Is our program adapted to the needs and characteristics of the unemployed group? Can we pay the bill? Are we being realistic in allocating the responsibility for paying that bill? Can we administer such a vast system efficiently? Is our relief effort aiding the unemployed in the maintenance of character and morale? Is this effort also consistent with business recovery within the present economic organization, or is it tending to perpetuate itself, setting up, as it were, an economy within an economy? Is it accompanied by and in harmony with efforts to stimulate private business and reabsorb the unemployed into the regular industrial army? We can well afford to give serious attention to these issues.

The first fact we run into when we ask whether this system is adapted to the nature of the unemployed is that we have few facts. We do not even know definitely just how many unemployed we have. Certainly we do not know how they should be classified, according to employability, length of time out of work, and occupation. The administration is at the moment summarizing a survey of the relief cases of 80 cities in the United States. But even granting the adequacy of such surveys, they tell us very little about the total number of the unemployed.

One fact which should dominate our thinking is that the unemployed on relief are not the only workers out of jobs. During July and August of this year there were approximately 4 million families on public funds. Roughly, this means that there were at least 6 million unemployed in these families. If we accept the American Federation of Labor estimate of unemployment for this same period, there were between 3 and 4 million out of jobs for whom no provision was made. Our relief measures do little for a family until it becomes destitute.

The one big attempt to date to deal with this group on the road to destitution was the CWA project. How well did that succeed in meeting their problem? The original plan was that half the number on CWA projects should be drawn from relief rolls and half from those without work, but with no respect to their needs. As a matter of fact, the large majority came from relief rolls. Only about 500,000 of the 4 million eventually engaged were hired through the U.S. Reemployment Service. How close this group was to the borderline of destitution is shown by the fact that practically all taken from relief rolls and a high proportion employed through the national employment service returned to the relief rolls as soon as the CWA project was completed.

There were many criticisms of the CWA. It was said that political patronage dominated the assignment of work; that wages were too high in certain sections, making it difficult for local employers to secure labor at an economic rate; that the work was inefficient. But the fact remains that the CWA was a serious effort to spread a net for those in transition from jobs to charity. The coming winter will see a renewed need for such a net.

The Public Works Administration has been kept from extensive functioning as a relief organization. That policy should be maintained. The PWA can best focus on providing jobs for those who are not yet on relief. Whatever the rearrangement of responsibility during the coming winter, this group of men now moving from wages to relief should not be forgotten. They are daily augmenting the relief rolls as they arrive at acknowledged destitution.

It is relevant here to discuss the place of unemployment insurance, for it would provide another excellent method of meeting the needs of this transition group. So far only one State has made such a measure a part of its attack on unemployment. Present indications are that the coming session of Congress will attempt to direct legislation by the States to this end.

Unemployment insurance is a method of compensation for loss of wages through unemployment which assumes a very definite picture of the workers of the country going about their business of getting a living. It assumes that adults go daily to work for wages; that they normally expect and get a full week's work; that they normally expect and get work throughout the year; that when they do fall or step out of a job, it is for a brief period, and that then they find another job. It assumes that the period of unemployment is ended as quickly as possible by the desire and initiative of the individual. Such a routine is still characteristic of the large majority of our workers. It may be characteristic of those who have recently left jobs.

Unemployment insurance is adapted only to the case of a man who has been jobless for a short period. For such a period, a simple cash subsidy to help him maintain his normal standard of living and industrial quality is his greatest need, and this subsidy could be provided by insurance. After a man has been without work for 6 months or more, he begins to lose his sense of participation in the community life, and his skill at work; his health tends to deteriorate; his whole world threatens to crumble. In this case, he needs assistance other than a cash subsidy. He needs work in line with his occupational qualifications. He needs in many cases industrial rehabilitation. Any sound program for dealing with unemployment should take these facts into account during this period of 6 months to a year when a man would be receiving a compensation for his loss of work. After that time, carefully planned relief work may be called upon not only to supply his financial necessities but to rehabilitate his physique, his skill, and his social status.

It is well to recognize that the immediate effect of unemployment insurance so conceived-and, indeed, all forms of social insurancewill not be to lighten our relief load. The primary object of such measures is to prevent that load from increasing. A predominant majority of those now on relief have been out of jobs so long that they will not qualify or could not qualify for unemployment insurance. The net result of any unemployment insurance act proposed at present would be simply to spread a net for those who are in transition from work and wages to relief, and to keep them from augmenting the group who are at the moment destitute.

Another characteristic of the unemployed group is that an unknown but certainly large number of them form a permanent prob