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To the Members of the Board:
Following this memorandum you will find mimeographed an article from
the January 19 issue of The United States News* It is not an authorized preview of administrative policy* but is presumably a good piece of reporting*
The article goes into detail in a variety of policy areas* with the
provision of jobs for 60*000^000 workers as the main objective* Ih this i t
agrees with Senator Murray*g more direct and detailed proposals* although
the figure is not given ixi the proposed Act itself. It has been used by the
President*. It is also in general agreement with Mr* Beveridgefs objective
of w full employment/1 which Dr* Hansen defined to us at our last meeting as
having ^more jobs looking for workers than there are workers looking for
Providing 60,000*000 jobs which are looking for workers would seem to be
a translation into American terms of Mr* Severidgefs definition* It represents a higher percentage of our population employed than we have ever had
(except in wartime) since our early dependence on a low-level agricultural
economy* Were our general standard what we can now make i t , i t is doubtful
if 60*000,000 people would want to work* It is doubtful if 60,000,000 ought
to work for a living* Perhaps 55*000^000 is nearer right* If we are really
successful in high productivity* the figure may be nearer 50,000*000 for a
population of 130,000*000*
The less successful we,are in our productivity and resulting living
standards* the more necessity fca* labor by youths who should be in school, by
girls who should be married* by mothers who should be caring for their families*
and by old people who should be resting after a lifetime of useful effort*
Whether i t be 60*000*000 or 55,000*000 or what* the determination to
provide more jobs than there are workers will* in my opinion* lead in a short
time to serious social disorder* It will mean the perpetuation in normal
peaoa-tiwesof the wartime wage and price relationships which have made wage
and price controls necessary* If such controls were necessary in war* when
both employers and employees were stongly affected by patriotic emotion* they
will be needed s t i l l more in peace-times* when the pull of immediate selfinterest is stronger and the common interest less obvious and emotionally
If this is true* as I believe it to be* we will have a continuance of
governmental control of prices and wages* which in a peace-time economy can
only mean such a centralized authority and such destruction of individual
initiative by both employer and employed as will quite justify Hayekf# prophetie
As against this fear* the belief is expressed that management and labor
will be educated in due time to arrive at wise agreements* This argument takes
for granted the moral perfectability of the human race* Numerous social experiments have foundered on this shoal*
The successful direct management of wages and prices calls for more than
perfectionism in morals*. It calls also for a perfectionism in intelligence

- 2 /

which approaches omniscience. More than one official of O*P*A* has been
astonished at the far-reaching and unexpected results of his actions* He
cannot foresee these results, nor can the officials who set wage rates; nor
can producers and consumers and employers and employees be convinced that
the imposed judgments are wise and just*
The only hope for a centrally managed economy^ toward which I believe
the Administration-Murray-Beverldge plan is driving us, lies in a drastic simplification of our eeonpmy* through standardization of products and regimentation
of distribution and consumption* The thought is attractive to the mechanistically-minded social dreamer* but i t will be rejected by men who value freedom*
All the foregoing requires that an alternative be set forth? The alternative to central planning and control is a profit system, under controls
adapted to its essential nature*
The profit system has demonstrated its usefulness as an organizing
principle for human society* It takes into account the fact that the human
race is not oimiscient and perfectly benevolent* It guides the millions of
separate human decisions into channels v/hich exhibit a steady progress in
material well-being for whole nations, for,many generations*
That progress has not been unbroken* Ixi particular, it has been subject
to recurring depressions* These depressions demand our most earnest study*
They require the same earnest study as is given to sickness in the human body*
Their control may likewise require medications, perhaps surgery in critical
situations. But the great advances in general health have been made by im«proved hygiene, with a lesser dependence on more drastic measures*


We need more intense study of the hygiene of the profit system* Yf cannot
safely permit these recurring illnesses of depression* Can they not be as
successfully brought under control as have been the illnesses of the human body?
Is it not perhaps significant that the Great Depression lasted far beyond its
term, perpetuating mass unemployment right up into the beginning of war prow
duction* under recovery policies basely on suspicion of our fundamental
principle of social organization—the profit system?
In the past the princes of private business have been puffed up with pride
as they viewed the expansion of industry and increase of production made under
their control* Had they seen the picture more clearly, they would have
realized what a minute part tReir own decisions played as compared with the
millions <£ determinations continuously and automatically made by this organizing principle of our society*
This same baseless pride threatens the economist and planner, as he views
the deceptive ease with which such a large part of our economy is managed
and lays his plans for moulding i t more nearly to his heart1 s desire* It is
not managed by any man, or any group of men* It is in the control of this
natural WgaaiUing principle—the profit system* To get along without i t requires perfection of morals and perfection of intelligence* To work against i t t
or to endeavor to control i t without understanding it?, invites disaster*

Finally* may I express my own convietion that our old social system, under
improved hygiene, will make it possible for those able and willing to work to
find profitable work v/ithout serious delay or hardship* Such a goal is attainable and is a worthy objective of our industrial societyt

Ralph E» Flanders
50 Pearl Street

January 29f1945t

This file contained a transcript of a copyright-protected article that has been removed.
The citation for the original is:
United States News, “A Double Budget for U.S.: Guide to Full Employment – More Spending by
Consumers and Business As Way to Make Work,” January 19, 1945.