Mobilizing for Abundance is an economics book from an unparalleled period in history. Published in 1944, it confronts the question that was then looming at the heart of American politics: how will the economy survive the end of the war? While the decades of largely steady economic growth that followed the end of the Second World War may seem like a foregone conclusion now, the outlook of the time was pessimistic. The economy was pulled from the Great Depression by the incredible increase in demand placed on it by the war effort, and that source was soon to disappear. Worries of a slide back into economic dysfunction were therefore quite commonplace.
It was in this atmosphere that Robert Nathan felt the need to write Mobilizing for Abundance. Born in Dayton, Ohio to immigrant parents, Nathan was admitted to the prestigious Wharton School at the University of Pennsylvania. He studied economics there from 1927 to 1933, during the most turbulent period of the Depression. It was there that he met his mentor Dr. Simon Kuznets. They both moved on to the Department of Commerce, where Kuznets introduced the concept of national income measurements like GNP to the United States. Nathan worked alongside Kuznets in that effort for several years, eventually working his way up to Chair of the Planning Committee on the War Production Board.
In 1943 disillusionment with the internal politics of the WPB led him to volunteer for service in the US Army. Unfortunately, he had suffered from back injuries for the past several years, and basic training badly reaggravated them, leaving him hospitalized for three months at the US Army’s Walter Reed General Hospital. Surrounded by wounded soldiers from across the country, Nathan was struck not by the conversation about the soldiers’ experience on the front, but on their expectation of the future. In his interactions he notes, “quite frequently, especially after “lights out,” the discussion turned to the future and there was almost universal concern over jobs and security and peace. After a period of expressing worries and doubts, the tone shifted, with emphasis on what might be done in the way of insisting upon employment for the demobilized soldiers.”
The nation’s anxiety over its economic security was embodied in the young men who talked about how they could secure good jobs and stability for themselves after the war. It was this experience that led Nathan to write on the economic situation and what could be done to ensure stability from a perspective that would be accessible to everyone — to the soldiers he’d shared a long recovery with, not just his fellow economists.
The position Nathan takes in his book is a bold one. He asserts that the only way to maintain full employment and consistent prosperity is through extensive government intervention in the economy to ensure that the forces of production which have been dedicated to the war effort are smoothly reconverted into factories that can satisfy the postwar demands of a peacetime economy. He notes that the evolution of the modern economy, specifically related to our increasing dependence on continuous employment, has necessitated such actions if national economic wellbeing is to be maintained.
The absolute necessity of eliminating business depressions is increasing all the time because of the greater dependence of growing portions of our population upon continuous employment for their livelihood. When the United States was a less highly industrialized nation, the continued economic well-being of the individual was much more the result of his own initiative than at the present time. As long as there were frontiers where people could migrate and produce and live by their own efforts, the problem of adverse general economic conditions was not as serious as it is today, when so many of our people have no other possible source of income than that derived from working for others.
As the size of our business enterprises increases, there is less and less opportunity for the individual to assure himself of continued income through his own initiative. Although exceptions might be cited, the possibilities for an enterprising man to enter into the production of automobiles or of steel or of aluminum “on his own” are very remote. When there is large-scale unemployment, it is foolhardy and wholly unrealistic to believe that by some means or other these men and women, who always have worked for others, can now by their own efforts somehow earn a livelihood. They must have jobs and wages in order to survive.
Nathan goes on to strengthen the idea that the economy cannot depend upon private industry to provide the employment necessary to sustaining livelihood. He notes that in such an employment-based economy where individuals are expected to provide for themselves, depressions must actively be averted.
When there is an economic depression, the factory worker can do very little except walk hopelessly from one employment office to another in search of jobs which do not exist or of the few jobs for which there are thousands of applicants. As this development of working for others grows, depressions will become increasingly difficult to accept blandly as inevitable. Businessmen must come to realize that in a highly industrialized state there must be continuous opportunities for all employables to work. This, competitive industry itself cannot guarantee. Under the proper economic environment, which government can provide, industry can offer continuous job opportunities for all who can work. The utter helplessness of the individual to provide for himself and the resultant hardships will surely make more and more people realize the utter stupidity and absurdity of unemployment, idle resources, and unsatisfied wants.
More provocatively, he claims that if the government fails to act decisively and allows the economy to slip back into chaos, he deems it only a matter of time before the very veterans who inspired the writing of his book become the base of a new and dangerous American phenomenon, “delivered into the hands of demagogues who have no respect for or desire to follow the principles of democracy.” Not only at home, but abroad, we can expect “new Hitlers” to come to the fore again and again if the democratic system fails to provide for its people.
If this analysis is correct, then the very existence of the democratic form of government will be threatened if serious depressions are permitted to occur. The world is in the midst of a social, economic, and political revolution, the major factors being economic in nature. Beyond a doubt the United Nations will win the present war. But in so doing there is no guarantee that totalitarianism, with its imperialistic tendencies, has been crushed and defeated or the reasons for its existence eradicated. Hitlers and Mussolinis will arise again and again if the inherent forces of democracy are not strong enough to create in the minds of the people the desire for no other system but a democratic one.
Nathan therefore counsels the same application of vigor to securing a booming peacetime economy as was devoted to defeating Hitler on the battlefield, and for the same reasons. Quoted below is his final summary of that first and critical part of his argument, the “why”:
A strong and determined desire for the free enterprise system will not emerge from Fourth of July speeches and flag waving alone, or from bread lines and the sight of ranks of the unemployed. Democracy as a form of government is being seriously challenged. That challenge is not going to be successfully met for very long through war or through platitudes. Rather, it must be met through a vigorous, dynamic application of the principles of democracy, to the end that the democratic free enterprise system becomes the system most successful in guaranteeing not only individual political, social, and religious freedom but also economic freedom. This can only be achieved through the maintenance of full employment and continuous prosperity.
Apparently there are certain forces inherent in our economic system which cause recurring periods of depression. A number of prominent economists believe not only that we will be faced in the future with frequent declines in economic activity, but that influences are at work which will hold production continuously and substantially below those levels where there will be jobs for all workers. If we are so threatened, we must certainly determine the causes of depression and of stagnation, and provide the solutions. The extreme reactionaries oppose doing anything, on the assumption that nothing can be done or that any change will interfere with their vested interests. The extreme radicals also oppose corrective measures, on the ground that the system is no good and a different system is necessary. Both extreme policies spell doom for the free enterprise system.
The second part, which much of the book is concerned with, is an explanation of the key economic principles underlying the Keynesian outlook that drove American policy for the best periods of economic growth in its history. At its heart lies the principle of aggregate demand as the driver of economic growth and therefore stability. Below, Nathan summarizes his understanding of how the economy might be preserved through the application of that theory:
As we produce goods and services, we simultaneously generate income or buying power. As long as that buying power is fully spent to buy what is produced, production will be maintained. If that buying power is augmented by expenditures out of credit expansion or out of past savings, increased production can be expected. On the other hand, if any substantial portion of the current flow of income is saved and these savings are not utilized or offset by expenditures from other sources, a decline in production will occur.
At higher levels of total production and total employment, the volume of current savings becomes quite large in relation to total income. Therefore, to maintain prosperous conditions, the outlets for savings or offsets to savings must be large enough to keep total spending in line with total production. If such a large volume of offsets to savings through private channels is not available year after year, then prosperity can be maintained continuously only by increasing direct consumer and business expenditures and thereby reducing savings, or by large-scale government spending.
Historically, large savings during periods of prosperity have found private outlets in precarious or self-terminating investment channels which sooner or later dried up and resulted in depressions. Investments in productive assets tended to expand capacity to produce disproportionately with actual consumption, with the consequence that sharp declines in new investments ensued. Likewise, investment in new housing tended to result in more new units than consumers’ expenditures of the masses of our people could justify—not more than consumers needed, but more than the income of the masses of the people could buy or rent. The result was a decline in production.
Other offsets to savings, such as the accumulation of business inventories, foreign loans, and increases in installment credit, would increase only for a limited time before they got out of line with consumption or with prospects for repayment, and caution then brought depressions. We would have been much better off over the years had we saved less and consumed more and if the offsets to savings had borne a more stable relation to consumption. Our standard of living would have been higher, we would have had steady progress, and we would not have wasted tremendous quantities of resources during periods of inactivity.
In order to provide job opportunities to all workers in the postwar years, our gross national production will have to total $150 billion or more per year. On the basis of past and prospective patterns of income distribution and of spending-saving habits, a minimum of $30 billion of that total income will be saved. An analysis of private investment channels and of other private offsets to savings give no hope of absorbing $30 billion per year for any considerable period of time. It is possible that for a very few years after the period of reconversion such a large quantity of savings might be absorbed, but it is inconceivable that this could persist for very long before a serious depression occurs.
The solution to our economic problems lies in bringing about a continuous balance between savings and offsets to savings at levels of full employment. This can be accomplished either by reducing the volume of savings to a point where private investment and other private outlets can absorb all savings year after year under prosperous conditions, or else by augmenting private offsets to savings with government spending.
Summarized by Michael Donnelly
RGK 