they became better understood and more widely desired by workmen, they became contributory. The same evolution may be expected in the case of unemployment compensation.

Many persons have questioned whether unemployment compensation can be of much help in fighting depression. This depends, of course, upon whether reasonably adequate reserves are accumulated. It was found in the last depression that a deficit of two or three billion a year gave great support to business. Unemployment reserves probably cannot be paid on this scale, but even considerably smaller payments would be of considerable help. The sales of bonds from the unemployment reserve fund would supply a much-needed outlet for individual savings that otherwise would be hoarded. Thus they would permit the consumption of one part of the community to be financed by the savings of another part at a time when savings are too large relative to investment opportunities and when the decline in consumer incomes is itself reducing the number of investment opportunities. It is not ordinarily realized that we had a system of unemployment reserves in the depression of 1920-21. It took the form of Liberty bonds purchased by workers during the war which they sold to support themselves when they became unemployed. The remarkable stability of retail trade during the depression of 1920-21 must be attributed in large measure to those sales of Liberty bonds-which was, of course, equivalent to a system of unemployment reserves.

IV

My analysis indicates that business activity is bound to drop whenever the prospects for profits become less favorable and that these downturns cannot be entirely avoided. We speak of the stock market being in a strong technical position or a weak technical position. Suppose we apply this concept to business. If business is in a strong technical position when a downturn occurs, the recession will not be prolonged and perhaps it will not be severe. Since recessions cannot be entirely avoided, the most important thing of all is to prevent their being prolonged or severe by keeping business at all times in a strong technical position.

When is business in a strong technical position? On the whole it was in a strong technical position in 1920 because the war had created large capital shortages and because consumers, instead of being in debt, held large quantities of Government bonds. Consequently, the resulting depression, although severe, was very short. Keeping business in a strong technical position involves the following:

(1) Keeping the short-term indebtedness within limits because short-term debts involve mortgaging future incomes and reducing future consumer power. Concretely, this means exercising a strict control over installment buying by insisting upon substantial downpayments and by keeping the term of payment short.

(2) Keeping inventories within reasonable limits by avoiding speculation in commodities. This involves carefully controlled credit policies. Even more important, it involves the avoidance of production bottlenecks in industry by foreseeing increases in demand.

(3) Building up large unemployment reserves to protect consumer purchasing power from being drastically reduced by drops in the volume of business spending.

(4) Finally, and most important of all, maintaining at all times industrial research on a large scale for the purpose of creating new opportunities for profitable investment by improving equipment and products and by developing new products. A large reserve of investment opportunities in the process of being developed is a necessary foundation to a strong technical position of business.

[From "Common Sense," September 1938]

THE PARADOX OF THE WPA

DEPRESSION BORN, IT REPAIRS THE RAVAGES OF PROSPERITY-AND NOBODY PROFITS EXCEPT THE AMERICAN PEOPLE

(BY DEAN R. BRIMHALL)

Have you a friend who says: "Why don't the unemployed do something useful?" If he won't shut up, show him some of the following figures and then tell him to look around-in his own community. Mr. Brimhall, an official in the Employment Division of the WPA, points out that the popular conception of the WPA as an agency devoted to correcting the ravages of the depression is inaccurate. On the contrary, the unemployed are now actually making up for the ravages of "prosperity."

The United States is a better place to look at since the Federal works program started to clean it up. It is not only better looking than it was in 1932-it is better looking than it was in 1929. It wasn't just the depression that left the country looking like a dumpheap-it was the old system of not doing anything, no matter how much it needed to be done, until some private individual could make money out of it. And that system dates a long way back into prosperity days.

It is customary for us to think of the New Deal's recovery program as an attempt whether successful or unsuccessful, according to the point of view, to repair the ravages of the depression. This is only partly true. A large part of the recovery program consists in an attempt to stop the slide into chaos that was blithely going on in the crazy days of so-called prosperity.

The "looks" of America-its visible apparatus of community welfare, its roads, parks, schools and so on are only part of the whole process of civilization. And I wish to indicate briefly that the neglect and consequent disintegration of the whole process of civilization in America did not date from 1929, but began far earlier and was going from bad to worse under cover of our so-called prosperity.

BEFORE THE NEW DEAL DEALT

In 1935 we had about one-sixth of the population of the country on relief. How many of them got there because of the depression? We have now set up a social security program which provides-so far inadequately-for people whose economic helplessness would not be cured by the return of the "prosperity" of 1928. These include first of

all the needy blind, the needy crippled, the needy aged, and the needy mothers with dependent children requiring their care at home. The depression did not first create helpless and indigent old age-prosperity saw that tragic group growing into its vast proportions, and looked away, muttering its business incantations, and did nothing. There was no profit for anybody in providing for old age, so it wasn't done. So that large group can be chalked up to the debit side of prosperity.

Our present workmen's compensation legislation dates roughly from World War days. Many of our large numbers of blind and crippled men were blinded and crippled back in their youthful prime when private industry was still unhampered by any responsibility for its frightful accident rate. They are the relics of those glad, mad prosperity days when we just didn't bother about such things.

All over the country there are stranded towns and regions-industrially dead, because their industries have moved away, leaving there a population with no work, too poor even to move. Now they are on relief. But when were these towns deserted by business and left to die in lingering misery? Back in the riproaring days of prosperity. In some recent years a large proportion of our farm families-more than a million of them-were on relief. The great middle western drought came during the depression, but it was not caused by the depression-it was caused by prosperity carelessness, prosperity greed, prosperity neglect of our natural resources.

Altogether, about half of the people taken care of by relief today are unemployables. How did they get to be unemployable? Chronic malnutrition and the diseases of poverty account for a vast amount of unemployability, and these scourges were not first unloosed by the depression-they were already rampant in prosperity days. It "paid" us to put our money into Wall Street, but it wouldn't have paid us to protect the Nation's health, so we let things slide.

THE WPA'S RECORD TO DATE

That is the background. Coming into the foreground, let us ask a question about certain WPA jobs of improvement and repair on public buildings. The WPA has done such work on over 30,000 buildings in the last 2 years, besides constructing over 11,000 new public buildings. The question is: Does this work make up merely for depression neglect, or for prosperity neglect too? There are no general figures to quote. But anybody who has read the descriptions of work-relief projects will recall phrases like these:

A rural school built in 1882 has been entirely rebuilt, inside and out, from basement to flagstaff, and is entirely modern.

An abandoned school building has been steel reinforced and thoroughly reconditioned for use.

A two-story brick high school was built, replacing one condemned as unfit by the board of education.

The old municipal hospital was a potential deathtrap, due to fire hazards. The library was a revolutionary landmark and had fallen into disrepair. "The bats," said a circuit judge, "have taken this courthouse, and the court will not sit here until something is done about it." It has now been thoroughly repaired, and the judge can preside in dignity and comfort.

Long-hoped-for-this is a familiar phrase in the description of road projects. A smelly garbage dump, the resort of the city's flies, rats and buzzards, has been replaced by a handsome tile-roofed incinerator.

It will no longer be necessary to dump sewage into open creeks from which cattle drink.

Five acres of swamp were turned into a playground.

These examples-they are all actual work-relief projects, not imaginary ones could be multiplied indefinitely. And these disreputable, insanitary conditions of neglect date from prosperity days.

PRIVATE INITIATIVE-AND THE CONTRACTORS

Private initiative—which boasts that it is the source from which all our blessings flow-seems to have overlooked a lot of opportunities to increase the public welfare back in prosperity days. Our contractors who are now so indignantly complaining about WPA "competition"—where were they then? They had no WPA to take the bread and jam out of their mouths then; and why didn't all that new construction and improvement get done by them? Why did it have to wait for the CWA and the ERA and the WPA? The magic of private initiative seems not to have worked in a lot of cases all over the country. The profit incentive didn't get done a vast amount of public work that desperately needed doing.

One moment more for the contractors. They are not being neglected by Uncle Sam and our States, counties, and localities, though you would think so to hear their cries of anguish. Take a look at the figures.

The volume of contract public works construction-all public works, Federal, State, and local, exclusive of WPA work-approximately maintained the predepression level during the 2 years 1936 and 1937 when WPA was in full operation.

The average for the 2 years is about $2,200 million, as compared with the predepression annual average of $2,500 million.

The volume of contract public work this year is running about the same as in 1936 and 1937.

On the other hand, private construction work during 1936 and 1937 was running at the rate of only three-eighths of the predepression level of $8 billion.

In brief, the contractors get practically as much public work to do now as they did in prosperity days. It isn't Uncle Sam or our States or towns that are letting them down. If they are getting no ice cream on their pie, it is for the lack of private building jobs. We need millions of houses, and private initiative is fighting desperately to keep the Federal Government from building those houses, even on a contract basis. It wants to build those houses itself. And why doesn't it go ahead and build them? Because the houses most needed are for the low-income population who can't pay enough rent to make such housing a profitable venture for private initiative. Private initiative can't build the millions of houses we need, and so far it has prevented the Federal Government from building many of them. And that is why the poor contractor sits weeping into his ginger ale. It is his own buddies who have let him down, the private initiators who don't initiate and won't let the Federal Government initiate-housing for the masses.

It was a funny sort of prosperity we had back in those predepression days. It didn't mean much to the 3 million unemployed in February