Henry A. Wallace, Technology, Corporations and the General Welfare

Selected Works of Henry A. Wallace

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Technology, Corporations and the General Welfare

Henry A. Wallace

A series of three lectures delivered at the University of North Carolina and published in pamphlet form as Technology, Corporations and the General Welfare.
From Henry A. Wallace, Democracy Reborn (New York, 1944), edited by Russell Lord, p. 119.

The biggest single fact in the modern world of economics is the recent growth of technology. Ever since the beginning of the nineteenth century, when new textile machines were introduced into England, when mill workers began to see that their jobs were insecure, and landowners and sheep growers sought protection against the threatening advance of cotton, the impacts of technological change have periodically baffled economists and statesmen. The early battles against the rise of the machine were battles against the inevitable. Today we readily accept the benefits of technology but find ourselves incapable of grappling effectively with the trail of economic insecurity and waste of human and natural resources.
The forward march of technology in industry is well known. Not so many people realize that technological change has come with equal speed on the farm.
I well remember my astonishment some twenty-seven years ago, when taking a walking trip across Iowa, in discovering from the farmers themselves that the countryside had been to some extent depopulated during the previous thirty years. They told me how there used to be forty children at their country school, whereas at that time there were only ten. The farmers of Iowa in 1910 were producing more than in 1880, but there were fewer of them. Many of the farmers in 1910 felt that the tremendous changes which they had seen take place were about to come to an end. They were satisfied with the binder and the two-horse cultivator and the gang-plow, and had no desire to look forward to the tractor, the combine, and the two-row cultivator.
And now today, in the year 1937, we look back sixty years to the time when it took twenty-five hours of man labor to produce twenty bushels of wheat, as compared with ten hours today. Eighty hours of man labor would produce forty bushels of corn in 1880, while today only forty hours are needed. In the cotton belt in 1880, a bale of cotton required about three hundred hours of man labor as compared with a little over two hundred hours today. New machinery and new methods have not been quite so helpful in improving the efficiency of the corn and cotton farmer as they have been in improving the efficiency of the wheat farmer, but everywhere the influence has been felt.
During the first hundred years of our national existence the efficiency of the average farmer was increased about fivefold. During the past fifty years the average farmer has about doubled his efficiency.
Looking ahead fifty years, we know that it is possible again to double the efficiency of the average farmer. We cannot be certain of this, however, because there is no assurance as yet about the city unemployment problem. If unemployed people are forced back on the land, the efficiency of the average farmer will be tremendously cut down. Technologically it is possible that in the year 1987, when Philadelphia holds her bicentennial celebration of the signing of the Constitution, the average farmer will be producing twice as much as today and twenty times as much as the farmer of 1787. In 1787 it required nineteen people living on the land to support one person in town. Today nineteen people on the land support fifty-six people in the towns and cities of the United States, as well as from five to ten in foreign countries.
Looking toward the future, I can conceive of conditions under which agricultural efficiency per farmer would not increase. A combination of insect pests, diseases, drought, flood, declining soil fertility, and unemployed people from the city going back on the land might produce a condition under which the agricultural output per farmer in 1950 would be actually less than today. I think it much more likely, however, that the weather during the next fifty years will be about the same as it has in the past fifty, although the fluctuations from one extreme to the other may be somewhat more violent. Furthermore, I believe that the Federal and State governments will continue to support research looking toward the control of insect pests, diseases, and soil erosion, and that eventually the intelligence of man will triumph splendidly in all of these fields of activity. Solving the unemployment problem in the cities is more difficult than taking care of insect pests, diseases, and soil erosion; but I would anticipate, if proper measures are adopted, that even this problem ten years hence would not be quite so bothersome as it is today.
Offsetting the forces that work toward reduced efficiency per farmer, there are powerful forces on the side of increased efficiency. Take the corn-hog situation, with which I am intimately familiar by reason of personal experience. I am certain that five or six years from now, if the weather is normal, the yield of corn in the corn belt will be at least 200 million bushels greater than would otherwise be the case on the same land, merely as a result of the widespread planting of hybrid seed. It is now definitely known, as the result of thousands of tests, that on the better land in the corn belt, adapted hybrids one year with another will outyield the old-fashioned corn by at least ten bushels an acre. At the same time, better rotations and more labor-saving machinery are being used. Within twenty years the improved rotations should increase yields on that part of the corn belt which is properly handled at least five bushels an acre.
With equally good weather, it should be possible thirty years hence to produce the necessary corn in the corn belt with about half as much land and labor as was required during the decade of the twenties. We will not need as many bushels of corn in the future as in the past because of the improvement which we shall make in the efficiency of our livestock and the improvement in our methods of feeding. It will be a long time before we improve the efficiency of our beef cattle so very much, but within thirty years we should have strains of hogs which will produce a hundred pounds of gain for seventy-five pounds less feed than required today, a reduction of nearly a fifth.
Since the World War we have learned to produce about forty percent more milk with an increase of only fifteen percent in dairy cow numbers. We have increased our pork and lard production eighteen percent with nine percent fewer hogs. Our chickens today have the capacity to turn one hundred pounds of feed into more eggs than could the chickens of twenty years ago. Thus far the greatly improved animal efficiency is largely the result of better methods of feeding and sanitation, but better breeding from now on will count for more and more, especially in chickens, dairy cows, and hogs. Inasmuch as eighty percent of our corn is fed to livestock, it would seem to be possible thirty years hence to avoid plowing all land subject to erosion, and to put into corn only such a percentage of the land as will result in maintaining the soil fertility of the corn belt at a higher level indefinitely.
The cotton belt faces about the same prospects in technological progress as does the corn belt. In the future it may easily be that three-fourths of the agricultural products entering commerce will be produced by one-third of the farmers. It is equally possible that the other two-thirds of the farmers, producing only one-fourth of the commercial agricultural output, will be producing three-fourths of the children which will supply the next generation. As methods now stand, these children will be raised and trained under miserable conditions. One of the most difficult things about the unequal application of the benefits of modern culture and education is the effect it has of exaggerating the differences between man and man. My guess is that the genetic or inborn differences between farmers are exaggerated perhaps tenfold by the differences that are derived from the training, education, proper food, and the possibility of getting a little capital as a send-off.
The children of the farmers at the bottom of the pile are usually poorly educated and poorly fed, and more than half of them drift to town to work in the factory. Here, because of poor education, they are subject to exploitation of many kinds and easily fall for modern variations of the old rabble-rousing cry, "Bread and circuses." Both State and Federal governments may well ask what their proper duties toward the poorer farmers are, and especially toward the education of their children. Agricultural technology with all its boasted glories, realized and to come, sharpens this problem and makes it even more acute.
On the whole, it seems clear that in industry as in agriculture a rather high percentage of the benefits of increased productivity, resulting from new inventions and new methods, goes to the people who are already better off. Organized labor tends to benefit more than unorganized labor, and the well-to-do farmers benefit more than the poor farmers. Corporations, and especially large corporations, tend on the whole to benefit more than the small corporations and individual businessmen. There are plenty of exceptions, but on the whole technology exalts the dominance of those already on top and makes more hopeless the position of those at the bottom of the pile. Unfortunately, the landless, the homeless, and the unemployed have nearly twice as many children as are necessary to replace themselves; therefore, the problem seems to grow as the machine becomes more triumphant.
There is nothing inevitable about this situation. It is possible to make the machine the servant of man and not the master. But it is going to be necessary sooner or later to change many of the governmental rules of the game as they apply to agriculture, to labor, to industry, to our natural resources, and to the distribution of our national income. All civilizations have had to face this problem in one form or another as they approached maturity, but no nation has ever had to face it in such a sharply focused form as the United States, because no nation has ever had such a powerful technology accentuating the differences in power and income between those at the top of the pile and those at the bottom.
* * *
Beginning in a big way seventy years ago, corporations have more and more dominated the business and political world.
Today, everyone lives in the sunlight or the shadow of corporations. More than ninety percent of the workers in manufacturing, transportation and mining work for corporations. For a long time the family-sized retailing establishment resisted the chain store and the mail-order house remarkably well, but in the last fifteen years the retreat of the small businessman before his big corporate competitor has been almost continuous. More than ninety percent of agriculture is still conducted by family-sized units, but even here the trend of technological development is bound to give the corporate form of organization many of the advantages it must have in order to compete successfully with cheap family labor.
The proportion of total assets controlled by the two hundred biggest corporations of the country is constantly increasing. It seems probable, assuming a continuation of the conditions of the past fifteen years, that by 1950 the 200 largest corporations then will own seventy percent of all corporate wealth.
Thus far, the people of the United States on the whole have been rather friendly to corporations, just as they have been friendly to labor unions and farm organizations. But from now on it would seem that the general public will become more and more critical of special grants of Federal or State power to particular groups. It is not enough that in the past the great corporations should have furnished most of the people of the United States with automobiles, telephones, electric lights, and radios.
I am not one of those who cares to raise prejudice against corporations. It is a mistake to condemn all corporations as ruthless monsters seeking to plunder defenseless competitors and gouge the public. The directors of great corporations are usually earnest gentlemen, well versed in the rules of the competitive profit game and oftentimes unusually skilled in the management and technology of their particular enterprise.
It seems to me that very few of us can criticize the corporation directors for lack of knowledge of their particular business, but we can criticize many of them for having very little knowledge about the relationship of their business to the general welfare over a period of years. True it is that many of the big corporations have shown a splendid attitude with respect to their labor and with respect to the charities in the cities where they are located. Individually they have done wonders in building up-to-date factories to expand production, but collectively they have not yet learned the secret of expanding consumer purchasing power as rapidly as production. Corporations, until they have learned how to co-operate together or with the government to keep consumption in step with balanced expansion in production, will be one of the dominating factors in causing the alternating period of boom and depression.
Previous to 1929, very few people felt that corporations had even a partial responsibility for booms and depressions. But now we know that corporation policies having to do with production, employment, prices, and savings are dominating factors in the business cycle. True it is that the individual corporation is almost powerless to do anything about it, aside from displaying ordinary common sense and decency. It seems to me, however, that the directors of the great corporations might show a more enlightened attitude toward the government in its efforts to see that corporate management does not produce such wide fluctuations in production, employment, savings and profits. It seems to me that corporations must more and more be prepared to accept the doctrine that capital and management have received from government a grant of power which entitles them to make profits on condition that certain rules of the game are observed with respect to production, prices, wages, and savings.
Both the Federal government and the corporations are rather inexperienced in thinking about this kind of thing, because it was not until 1931 that anyone realized what extraordinary power big corporations have over production and prices.
To nearly everyone, the big corporations have been in a position to say, "Take it or leave it," and the public had to take it even when it meant millions of men walking the streets, even when it meant thirty-cent wheat, even when it meant prices for manufactured products which had been cut very little.
In some ways the situation with the big corporations today. is like it used to be with respect to individual banks and the central bank. In the old-fashioned bank panic the individual banks invariably did the things which made the panic worse. In the mad scramble of suddenly called loans and rapidly withdrawn deposits, everyone got hurt. In the banking world we have learned enough so that the central banking policies of the Federal Reserve System enable us to avoid the barbarism of the old-fashioned bank panic. We learned that central banking principles in certain respects had to be almost exactly the reverse of local banking principles—that in time of stress the central banks must be liberal and in time of prosperity hardboiled. In the field of corporate organization the ingenuity of man has not yet developed a central clearinghouse for increased balanced production. If such a central clearinghouse were developed I am convinced the principles governing it would be as different from the principles governing a particular corporation as the principles of a central bank differ from those governing a local bank.
The relation of the big corporations to the general welfare is an even more complicated problem than the relation of local banks to central banking policy. There must be the most careful study, therefore, in every field of industry, of price, wage and production policies, and relationships between these policies in one industry and the policies in another industry.
It would be a fine thing if businessmen representing all of the heavy industries could get together and survey the business outlook not only for the ensuing year but also for the ensuing three or four years. They might say, for example, "This building boom is coming on fine now, but it can't go on this way indefinitely. What is going to happen to us when it breaks? Can we co-operate with the government to prevent it from getting out of hand? Can we co-operate with the government to be sure that the government has a sufficient volume of public works and subsidized housing to take care of the situation when the boom finally does break? Are there interrelated industries which could; under some appropriate assurance against loss, undertake a program of production over a period of years so as to contribute to stability of employment?" Or representatives of the heavy producers' goods industries might perhaps meet with the representatives of the consumers' goods industries and survey the outlook for the ensuing year. They might say in this conference, for example, "The activity in heavy producers' goods is now climbing up faster than the activity in consumers' goods. This cannot be sustained for more than a year or so without a break. We believe the unusual activity can be sustained, however, if consumers' goods are stimulated. To do this means the adoption of policies which increase consumers' buying power. We therefore recommend to the government so and so and so and so."
Businessmen with the individualistic attitude they have had in the past will undoubtedly be slow in starting anything of this sort. But it is to be hoped that they are not too slow, because one of these days another 1929 will be upon us and in the haste and flurry of a moment like that it is difficult to act sensibly.
Corporations in their policies are not alone in their neglect of the general welfare. Organized labor and organized agriculture, insofar as they have the power, act in a somewhat similar way. Labor tries to get higher wages per hour and to make higher wages more certain by cutting the hours of work per week. In like manner farmers want higher prices per bushel, backed up if need be by production control. Obviously, if the price, wage and production policies of all three groups are completely successful the result will be to give everyone more and more money and less and less goods. Modern technology means increased production, but the rate of increase is undoubtedly being held down by these organized pressure groups which are striving for profits and wages and not for increased output of goods. The organized groups, having no suitable machinery to enable them to co-operate for their mutual welfare, fight each other and promote the general "ill-fare."
When we think and act solely in terms of wages per hour or prices per unit, superficially there seems to be conflict among the interests of farmers, laborers, and business, for higher prices and profit per unit for one group seem to mean higher costs and reduced standard of living for the others. This conflict is unnecessary. It arises from an overemphasis upon prices alone, and from a failure to realize that each individual's income depends not only on how much he makes per unit, but also upon how many units he sells. Sometimes the biggest gains can come from lower prices per unit, together with an increased volume sold. Such gains can be realized, however, only with a wise balancing of production, so as to get most of the increases in those products, such as housing and industrial products generally, where human wants and needs are least well satisfied. Policies which result in moderate costs and profits per unit, either of farm products, labor, or manufactured products, but also in a balanced expansion in the total number of units sold per producer, can increase the income of each group at the same time without being burdensome to any of the others. Viewed in these terms, there is thus an essential unity among the interests of all three groups. Only by developing our national economic policy in terms consistent with this fundamental unity can all profit at the same time.
It is appropriate that agriculture and labor should not rest until they get bargaining power equivalent to that enjoyed by the corporations. But after they have obtained the power it is even more important that the attention of all three groups be directed at once to co-ordination in the production of ever-increasing quantities of the right kinds of goods.
At the moment there are many misunderstandings, but nevertheless the productivity trend of the United States seems to be steadily on the upgrade. Many people are deeply concerned about the temporary misunderstandings. Serious as they are, I am inclined to think that they are relatively unimportant compared with the growing appreciation on the part of the labor, agricultural and industrial leaders of the necessity of co-operating with each other and with the government to increase production in a balanced way.
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Is it now conceded that the function of government is somewhat more than that of an economic salvage crew? Is the cost of salvage, of cleaning up the wreckage from boom and depression, now so great that government should be asked to prevent some of the destruction from ever occurring? If the answer to these questions is "Yes," then of course government must exert an integrating and stabilizing influence in our economy.
Corporations, labor unions and farm organizations are continually making decisions which affect both production and prices. Many of the decisions made by corporations, labor unions and farm organizations are made with the knowledge or actual help of the government. More and more the government is being made aware of the way its monetary policies, tariff policies, regulatory activities and Federal expenditures affect the general welfare. A new science of government is in the making, the broad outlines of which are just beginning to appear.
There is a tendency for organized groups to believe that by exerting pressure they can get from society more than is there. They have had enough temporary success with the use of pressure to be encouraged in this belief. It is easy for farmers to feel that with the help of government they can get two dollars a bushel for their wheat year after year. It is easy for industrial corporations to feel that through monopolistic tariffs and rigid prices they can rake in excessive profits year after year. It is easy for labor to feel that because corporations have frequently accumulated excessive profits, organized labor has only to put on the screws and obtain, year after year, increasingly higher wages and shorter hours.
It is perfectly true that any one group can for a time get a larger share of the national income, but it doesn't work when all try it at the same time. Sooner or later the pressure game will blow up in our faces unless we provide a constantly larger national income to divide up. This is really a matter of simple but intensely practical arithmetic. Unless we learn it, our future is black indeed.
If government is to be partly a policeman, partly a co-ordinator, partly a clearinghouse, and partly a stimulator—all on behalf of the general welfare—the problem of economic democracy becomes supremely important. If government marches into the economic field decisively and directly at the top, the result can be a regimentation of all types of activity in a manner completely abhorrent to the American temperament. Carefree exploitation without thought of the consequences is, of course, delightful to the American temperament. But that has come to an end and we now have to do some searching thinking about serving the future by the processes of economic democracy.
Economic democracy means that the various economic groups must have equality of bargaining power. But going along with this right, there is also the duty of serving the general welfare.
Fundamentally, the most significant things in a modern economy are ideas, technology and natural resources. Secondary to -these are the corporations, the co-operatives, the labor unions, the farm organizations and other organizations through which a true economic democracy can express itself. Here in the United States, at the moment, we have by far the best opportunity to work out an economic democracy which can serve as a model for the entire world. The new world of the general welfare is beckoning. New opportunities await the men with a bent for public service, whether in government,rin labor or in management. The rewards in terms of satisfaction are far beyond those which any captain of industry in the nineteenth century could dream of. The world to which I refer is not fanciful or unreal. The foundation is now being laid, and it is to be hoped that no disturbance abroad will distract our attention from the real job here at home.

Introduction | Essay | Documents | Resources

Selected Works of Henry A. Wallace

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