A Nation of Economic Illiterates

We are a nation of economic illiterates.

Harsh words, yes! And even harsher ones are being spoken by groups which are taking the trouble to dig into the extent of our ignorance, such as the highly respected, nonpolitical Com­mittee for Economic Development, the Ford Foundation, and The Carnegie Corporation.

So seriously does the CED view our illiteracy that the last meeting of its 160 trustees (consisting of the nation's leading industrialists and scholars) was devoted to the question, "Can a Free Economy Survive Its Own Economic Ignorance?" and out of the conference came general agreement that it well may not be able to. Consider.

Less than 5 per cent of America's high school students have been taking the equivalent of even one course in economics; eight times as many students enroll in music as in economics.

Even those who do take courses get inferior training, for fewer than 10 per cent of elementary school teachers and fewer than 25 per cent of high school teachers have had as much as one-quarter course in economics.

At the college level the situation isn't much better. Not more than 15 per cent of students in liberal arts colleges take courses in economics. Even at the schools of business most of the educa­tion is in "practical" stuff and only a tiny part of it is devoted to the basic make-up of our system.

At the adult level it's unlikely that one in twenty today has had any formal training in economics, and so great is the lack of understanding that in one recent survey adults placed the whole field of social studies (which includes economics) on a par with such subjects as training in driving a car!

It's downright awful, and the CED's trustees believe the sit­uation is now urgent enough to warrant an all-out attack. At the high school level, the CED is planning to expand its support of the Joint Council on Economic Education, the ten-year-old head­quarters for work on the problem of economic illiteracy. The Joint Council is pioneering in training economics teachers and is preparing objective and quality material in economics for use by teachers and students.

At the college level the Ford Foundation and The Carnegie Corporation are now completing studies on illiteracy which hope­fully will become the basis for a national policy to strengthen economic education in the colleges. At the adult level the CED is promoting the establishment of "CED Associates" in twenty major centers to help local leaders of business and education promote the widest understanding of our economy.

It's a beginning at least. I salute it with a prayer, for I've always feared that if our system ever dies, it will be because, in our ignorance, we didn't know that it was dying or that we were killing it.

No Job at the Factory

The number of workers employed in producing goods in our nation's factories probably never again will return to the levels of 1956-57. Millions of Americans who are able and willing to work will still be jobless even when our economy regains the over-all peaks set in 1957.

In the prosperous years of 1952-53, around 3 per cent of our labor force was out of work—unemployment averaged under 3,000,000. In the prosperous years of 1959-60, around 5 per cent of our labor force is likely to be out of work—unemployment well may average over 4,000,000.

The sickening uptrend is clear.

What's more, joblessness will be concentrated in major in­dustrial production centers. In past years, textile and mining areas have had the miserable distinction of being regions of chronic and substantial unemployment. In coming years, informed sources fear several leading manufacturing centers may move into the dread classification. And the hardest hit will be younger men with little job experience, the unskilled and the semi-skilled, and Negroes.

It will happen unless we, as a nation, wake up to the funda­mental reasons for the unemployment, determine to take positive steps to moderate the suffering, and hasten the transition back to high employment. For the joblessness I'm discussing here is not just a recession hangover; its cause goes far deeper. You need only a few statistics to grasp the vital importance of this story.

Although our economy has been in a strong, solid, and im­pressively broad upswing for months, unemployment is still more than 7 per cent of our labor force compared with only 4.5 per cent a year ago.

Although more than 2,000,000 factory jobs were lost during the recession months, only about 250,000 of those jobs have been regained since the recession hit bottom in April. A chilling esti­mate by Washington authorities is that a full 1,000,000 of the lost jobs never will be regained. The jobs have simply disappeared. Although unemployment should fall below 4,000,000 this month and next, it will climb back above this mark during the early months of 1959—and this assumes a continuing business recovery.

And just as these few statistics dramatize the unemployment tale, so a few sentences and figures will underline the basic reason why. In the past decade our factories have become vastly more productive. The billions spent by industry on new, modern plants, mechanization, automation, are now paying off and in­dustry can turn out more goods with fewer workers. Since 1948 our factories have increased production 35 per cent, but today there are 6 per cent fewer factory production jobs than ten years ago. Since April our factories have hiked their output 9 per cent, but they've added only 1 per cent more production workers.

The whole job structure of our land has turned upside down. While jobs in factories are shrinking, millions of workers are being absorbed into Government jobs at every level, into the fields of finance, the services, and trades. We are the first in­dustrial nation in world history in which the number of white-collar workers exceeds the number of blue-collar workers. Talk about a social-economic revolution!

What are possible answers to our undeniable unemployment problem? One solution that labor unions unquestionably will pursue will be the shorter workweek. This is certain to become a key issue in the sixties. Another solution would be a program at the national level to aid distressed areas by helping to relocate and re-educate younger workers and to assist the older unem­ployed who are too attached to home to move.

The crucial point is that joblessness among factory workers will continue a nagging, gnawing problem for a long time—and this, I repeat, assumes a continuing business recovery.

A national awareness of the problem and its fundamental causes is imperative if we are to find acceptable solutions. And solutions must be found if this new phase of expansion is not to leave millions of able, willing American workers cruelly and wastefully on the outside looking in.

The above report was written in mid-October 1958, at the start of the upswing out of the 1957-58 recession. It pinpointed the problem which became painfully clear as 1959's modest ad­vance fizzled into 1960's recession—the problem of large and long-term unemployment in good times as well as bad.

In early 1961, there were 5,500,000 jobless in our country, representing close to 7 per cent of all men and women able and willing to work. More than half of the 150 major labor market areas of the country were classified as regions of "substantial labor surplus," and in some of the deeply distressed cities unemploy­ment was at a heartbreaking 15 to 20 per cent of the work force. At the "hard core" of America's millions of unemployed was the man who had lost his job because his factory's business had dwindled and other factories or industries hadn't expanded enough to provide him with a new place. This man represented two of every five Americans seeking jobs in the winter of 1960-61. There were a full 1,000,000 such men in our depressed areas alone.

These were the grim realities at the start of this year—even though the current recession has been among the mildest of all the downturns since World War I. And these are the realities which we simply must face if we are to meet the challenge of mounting unemployment.

For the fact is that while we had prosperity with only minor interruptions throughout the decade of the 1950s, the rate of unemployment has stabilized at a higher level after each re­cession. Before the 1954 recession, the jobless rate was 3 per cent or less. After this recession, the low was 4 per cent. After the 1957-58 recession, the low was 4.8 per cent. Beginning in 1959, the rate rose to 5 per cent, then 6 per cent, then close to 7 per cent.

The fact is that, in recent years, our periods of prosperity have not been strong enough to absorb our expanding number of workers, provide new places for workers whose jobs have been erased forever by revolutionary improvements in production tech­niques, and great changes in our type of economy and in our industries.

The challenge is not just preventing serious recessions. The challenge is propelling our economy into an advance sufficiently powerful and broad to slash unemployment to a tolerable level.

The problem is not just achieving prosperity again. It is achiev­ing a prosperity sufficiently varied and modern to make millions of new jobs during each year of the 1960s.

The essential is not just growth. It is a speeded-up, sustained growth which will increase the employment of American workers. This is the fundamental answer. Next to it, all other solutions are stop-gaps, holding actions.

A twelve-year-old seventh-grade student writes to the Board of Education to ask "a $2 or $3 raise" for her math teacher be­cause he "has to put up with a lot from our class." Says a board spokesman: "No comment."

A survey in the New York City school system reveals that "Morale of the high school staff is at a low ebb."

An urgent plea comes to me from the head of the school my little girl attends to write an article explaining how parents can save tax money by contributing to the school. "I don't know how our teachers get by on their pay," she moans. "They have to be dedicated individuals, and how many dedicated individuals are there?"

Virtually all the attention now being paid to America's educa­tional problem is concentrated on the deep need for schools. In many areas the situation is desperate, with millions going to school in dilapidated, overcrowded firetraps, many able to go only part time. But as critical as the school building problem is, just as critical—and possibly in the years ahead, much more critical—is the problem of getting enough trained people to teach in the schools.

If today's trend continues, it's probable that even if we do build a sufficient number of new schools, we won't have the educators to staff them! And the heart, the core, the root of the matter is: Money.

A teacher with a college degree starts in most school districts at a salary ranging from a little over $1,000 to about $3,900 a year. A driver of a heavy truck starts at an average of over $4,400. A worker in a major factory will get $4,000 and up. A stenog­rapher's pay will dwarf the teacher's salary from the very beginning.

A teacher who is devoted to the calling and who spends years earning a Ph.D. degree must in the America of this era do so only because to him education is its own reward. After that teacher has completed the work necessary to get the degree, his earnings will be far below the average earned by, say, a railroad conductor or a statistician in Uncle Sam's employ. And the gap will be painful between his pay and the pay of even a minor executive in a large corporation. Add to this brutal pay difference the irritations of overcrowded schoolrooms, generally deteriorat­ing conditions, the increasing amount of paper work, and it's no wonder that morale among America's teachers is at a new low.

A teacher crisis—as distinct from a school building crisis—is developing under our eyes. It cannot be missed by any who will see. In the coming ten years, the number of students entering all grades of school will skyrocket. The estimate is that the num­ber entering grade schools will jump 23 per cent, the number entering high schools, 59 per cent, the number entering colleges, 50 per cent.

This mounting enrollment will call for a minimum increase of 1,600,000 teachers to replace those retiring and to take care of the additional students. Yet, at today's graduation rate, our colleges will graduate only about 870,000 teachers—only half the minimum needed. And a startling percentage of those qual­ified to teach will never enter the teaching system, past records emphasize; they'll take better-paying jobs elsewhere.

Thus if we permit today's trend to continue, students in this coming period will be "taught" by those appallingly unsuited or untrained—or they'll not be taught at all. If we let conditions go on as they are, we'll be turning out a generation utterly in­capable of understanding our ideals, much less capable of pro­tecting them from our enemies within or without.

It will take vast amounts of money to solve this crisis—which means taxes at every level. Let's not fool ourselves. The alterna­tives are intolerable and the crisis is swelling every day. It's imperative that we tackle it before it explodes into a nightmare —a nightmare in which we will have the beautiful school build­ings filled with eager students who have no teachers.

One side of the problem is the shortage of trained teachers and of schools in America, at a time when we are being openly challenged by a Soviet social-economic system which places a premium on education. The other side of it is the failure of millions of our youngsters to recognize how bleak their lives probably will be unless they get enough education to take them and keep them out of the unskilled worker class.

The Appalling Problem of Dropouts

At the end of the school year, hundreds of thousands of young Americans will reach a decision which will blight the rest of their lives, cost them tens of thousands of dollars during their best years, and dim our nation's chances to triumph in the com­petitive race with the Soviet Union. The decision they will make will be to drop out of school when the term ends in June— not to finish high school, not even to complete their grade school education.

A horrifyingly large 7,500,000 of our youngsters will reach this decision in the decade of the sixties, unless you, a friend, a parent, a businessman, a citizen awakened to our imperative need to develop a skilled labor force, do something to stop them.

This will be the fate of the youngsters who will drop out this year and of the millions who will follow them: They will begin at and, in most instances, stay at the bottom of the job pile. The great majority of jobs opening during this decade will demand at least a high school diploma. The dropouts will be forced into occupations which are shrinking, fields which already have pockets of unskilled, beaten down, frightened unemployed.

They will face recurring periods of joblessness during every business downturn, will be frequent job shifters, will always be in danger of joining the "hard core" of a new generation of un­employed. The jobless rate among the unskilled is nearly eight times that among professional, technical, and managerial workers. The jobless rate among blue-collar workers is three times that among professional, technical, and managerial workers. The job­less rate for those with less than a high school diploma is above 8 per cent today as against only around 2 per cent—a virtual minimum—among those with some college education.

They will be at the bottom of the pay as well as the job pile. The wage they'll get at thirty-five and forty-five years of age will be about the same as they get at twenty-five. At their peak work­ing years, they'll be averaging less than half the pay of those who have obtained training and acquired skills. They will be unable to contribute to our nation's growth in areas where manpower resources are most needed.

Another harsh indictment of us? Yes, and this one is deserved too. It is imperative to get across the message to every youngster, and to every adult who can influence a youngster, of how much he'll need an education in this new decade. Here is the straight story in plain words.

In the 1960s, industry's needs for workers will undergo dramatic changes, and the biggest increases in employment opportunities will occur in occupations requiring the most education and train­ing. Skill requirements will be rising all across the board.

In this decade, an army of 26,000,000 youngsters will be enter­ing the labor force for the first time, providing our manpower reservoir. But the present outlook is 7,500,000 of these will not have completed high school, and 2,500,000 won't have even a grade school diploma. An appalling 30 per cent will be woefully undereducated.

What can we—must we—do about it? We must guide these youngsters into getting more training and encourage them to obtain the maximum education possible. We must actively sup­port every effort to expand educational facilities and improve all forms of training on the job. We must develop a positive attitude toward the manpower challenge and accept the responsibility to raise the quality of our education. It's not just for the sake of the youngsters themselves, you know. It's for your own safety in the space age, too.

Your Health Isn't Free

At least one out of ten of us will become a bed patient needing medical care this year—and every one of us is a potential hospital case.

Only the pace of the rise in transportation costs has topped the pace of the rise in medical care expenses. The cost of medical care has gone up much more than the cost of food, housing, or apparel.

If you have not been ill recently or had an enforced "rest" in the hospital, you may regard yourself, as the Federal Reserve Bank of Philadelphia puts it in a superb study of medical costs and the value of health insurance, "a superman—perpetual strength in perpetual motion." But even if you have escaped the misfortune of a hospital illness, you surely are aware of the zooming costs of one, and although you agree with the Phil­adelphia Reserve Bank that "health isn't free," you surely have grumbled a few "whys" about the bills.

Here, therefore, are a few of the "whys."

Hospital costs have been ballooning because salary and wage levels have been rising, and hospitals must compete with in­dustrial and commercial concerns to get the employee skills and talents they need.

Hospital costs have been zooming because their own "house­keeping expenses" have been increasing. As improvements in diagnosis and treatments have shortened the average stay of a patient, the average cost per day of handling a patient has gone up. The higher turnover in patients increases a hospital's over­head, and the hospital's patients pay that overhead.

Hospital costs have been climbing because our rapidly growing population is using more hospital services than ever before. Today the annual admission rate to hospitals is 12 per cent of our total population, as against 8 per cent a generation ago.

Hospital costs have been rising because hospitals are offering more services than ever before—more diagnostic and treatment services, more private and semiprivate accommodations, more outpatient service—and it costs money to perform all these new and expanded functions.

And actually none of the statistics I've quoted tells the whole tale. For the official medical care index measures price changes only of the same quantity and quality of items bought by city families in 1947-49—and we're not buying the same quantity and quality of medical care as a decade ago. A patient may pay hundreds of dollars just for the use of a life-saving machine that wasn't even in existence in 1949. Again, to quote the Philadelphia Bank, "You can't pay bills with index numbers." Although I can't prove it, I'm positive the rise in the cost of medical care averages out to a lot higher than 44 per cent.

What's more, there are no signs whatsoever that the rising trend is ending. Even if it were ending, and all our hospitals were modernized, adequately staffed, and completely efficient, the size of a typical hospital bill to a typical American family would be a shock.

The answer, then? The answer is, of course, health insurance.

Right now, about seventy million people own insurance pol­icies protecting them against hospital expenses. Right now, about fifty-five million subscribe to more than eighty Blue Cross Plans operating through the nation and in 1957, Blue Cross paid about one billion dollars in hospital bills.

While this represents great progress over the conditions of past decades, there still are immense gaps in the insurance, there still are millions utterly without protection, there still are few who can financially survive a catastrophic physical illness. It is against this background that the demand is persisting that Con­gress help by developing a comprehensive "health insurance" program.

No elaborate comment is necessary from me to update this report written back in January 1959! You know that medical care for the elderly was a key issue in the 1960 Presidential elec­tion campaign. You know that the pioneering but exceedingly modest medical care law passed by Congress at its special post-convention session was just a starter. You know that health in­surance programs will go far beyond this law and beyond aid to the elderly during this decade in our country. The questions lie in the sphere of the form the programs will take, how they'll be financed, and to what extent the Federal Government will enter the picture. But the trend? That's obvious!

Our Obsolete Cities

"The traffic jam already has made a fiction of the 40-hour week for the commuter. He loses more time, in many cases, getting to and from work than he has gained from shorter hours on the job. Without an attack on the planless growth of cities and suburbs, the rush hour snarl is inevitable. The new multi-billion dollar Federal highway program may aggravate rather than reduce urban congestion unless cities coordinate road con­struction with community development."—Wilfred Owen, one of the nation's leading experts on transportation and author of a massive Brookings Institution study, "Metropolitan Transpor­tation Problem."

"Every large American city is now obsolete. The mass trans­portation system is in chaos and is headed for collapse where it is not already bankrupt. The street pattern in the business, shopping and manufacturing centers is already a tremendous handicap to effective work and living. Slums are increasing in spite of subsidized housing programs. Recreational facilities are either too congested or too hard to reach because of traffic difficulties. The truly disastrous fact is that there is now no way of developing a plan of cooperative action. We need new community machinery, new powers for local government."—Luther Gulick, one of the country's top authorities on city problems and president of the Institute of Public Administration, New York.

There they are—two blunt, hard-hitting statements on the staggering problems facing our cities today. Actually, the com­ments are moderate. Rare is the city in America which has kept up to the growth in population, use of autos, etc. Most have approached their problems piecemeal, have come up with only haphazard proposals, have been cursed by political maneuvering.

Money to finance improvements—construction of expressways, parking facilities, and terminals—and to clear slums is brutally short. Local taxes, already at a record high, are painfully inade­quate. The borrowing power of most cities is rigidly limited and the credit ratings of more and more communities are sinking to all-time lows.

What's going to happen?

Constantly during the last Administration, there were reports discussing the problems of the cities at length and stressing that action must be taken to help them. There were a number of proposals. The creation of a new government agency that will concentrate solely on city problems, help co-ordinate planning, and show cities how they can get government funds to assist in slum clearance and redevelopment. Additional appropriations by the government to aid cities in financing the projects. More funds to help cities control pollution of air and water and to develop imperative public works. But despite their depth and urgency, the problems were ducked.

"And if we do go on this way and nothing important is done?" I asked Mr. Gulick. This time, he didn't mince words.

"No one outside a home for the feeble-minded can miss the irreversible forces at work," said he. "What we call difficult and 'crucial' problems today are just minor ripples compared to the tidal waves which are already sweeping toward us."

That was in January 1957. The ripples are now becoming waves.

Our Industry Is Out of Date

If you're a typically proud American, you often have boasted out loud that your country has by far the most modern, most efficient industrial plants in the world. You have confirmed your confidence just by glancing around you, marvelling at the fabulous factories which have sprung up all over our land since World War II.

Your boast isn't justified, your confidence isn't warranted.

Huge amounts of the production and distribution facilities in our great America are shockingly obsolete. Our industrial ma­chinery is not efficient enough to ensure our continuing superior­ity over the Communist world. Almost 50 per cent of our industrial capacity was installed before the end of World War II and this capacity is definitely "old." Less than one-third of all our business plant and equipment is modern in the sense of "new" since 1950.

If these figures don't have sufficient significance to you, this one other statistic will: the latest machine tools are about 40 per cent more productive than the models of 1950. To interpret that statistic with bold bluntness, it means that many prices are being kept needlessly high because our industries are using obsolete facilities and thereby are wasting billions a year in labor and materials. It means that many of the industries showing the smallest profits (or biggest losses) are those which are using the most antiquated facilities, and which, therefore, have toweringly high operating costs.

As a typically proud American, I often have boasted about my nation's industrial might. Yet: Over 65 per cent of the freight cars in our railroads are more than ten years old. To grasp the implication of this to railroad profits and railroad charges you need only realize that a combination of new freight cars and modern freight yard equipment could reduce railroad operating costs up to 50 per cent.

Less than half the capacity to process chemicals, rubber, or petroleum is new since 1950. To grasp the implication of this you need only realize that post-1950 processing instruments often can reduce costs enough to pay back the cost of the instruments in one year.

Enough. The indictment is in the figures.

Over all, industry is not prepared to raise output-per-worker sufficiently to keep pace with probable wage hikes and thus to give us the growth which is our normal way of life without price inflation. Vast numbers of individual firms are not in position to achieve better quality or to lower costs so they can compete satisfactorily and grow at a profit in our new cycle of economic expansion. Our industrial superiority in relation to Russia is being increasingly threatened and our factories are not the "showplaces of modernization" which would leave a foreign visitor unable to say "I saw much better" in Russia, or West Germany, etc.

What would replacing today's obsolete equipment cost? A special McGraw-Hill survey puts the cost at a staggering ninety-five billion dollars—nearly twenty billion dollars a year for the next five years. And McGraw-Hill estimates another eight to ten billion dollars a year for modernization will be required just to keep pace with technical advances from 1958 on.

How can this monumental job be financed? The answer ob­viously lies in reform of the tax laws governing investment in modern equipment to permit and to encourage companies to set aside more money for rapid replacement of equipment. Also essential is a concerted drive for modernization so industry will be aware of the need and be stimulated to action.

If industry fails to meet the modernization challenge at once, it will be a national calamity. Powerful as it is, "calamity" may not be too powerful a word considering that among the things at stake in modernization are control of inflationary price rises, meeting the Soviet Union's economic threat, and the successful survival of countless companies.

Industry is spending billions of dollars a year on modernization of facilities now. But it's making progress at a snail's pace. In the fall of 1960, McGraw-Hill reported that Russia was well on her way toward attaining her goal of the "largest and youngest machine tool population in the world." The USSR will have a national inventory of 2,350,000 machine tools by 1965, a full 60 per cent of them less than ten years old.

In contrast, our machine-tool inventory at latest count was 1,707,000 metal-cutting machines, 40 per cent of them under ten years of age. Our output of machine tools reached its peak during the Korean War with 240,000 in 1952. Last year alone, Russia built 140,000 machine tools, double its 1955 output.

The Big Are Getting Bigger

A hat corporation moves into the soft drink field . . .

A packing company buys out a casket firm . . .

An aircraft giant takes over a plumbing supplies firm . . .

A textile manufacturer absorbs a typewriter ribbon maker . , .

A baking outfit marries a maker of frozen meat pies . . .

What is this? It's the weird, "hodgepodge" phase of today's great corporate merger movement—the most astounding and quite possibly the most significant part of it. Each of these mergers is fascinating not because the marriage seems so logical but because it seems so illogical. Honestly, would you offhand think it common sense for Adam Hat Stores, a leader in the nation's hat business, to buy the rights to manufacture and sell Canada Dry beverages in Germany and Japan? Of course you wouldn't. Yet that was precisely the announcement the hat company made —an announcement which sent me hunting through the files for other "odd" ones and which pounded home to me the crazy-quilt pattern of today's mergers.

We are in the middle of the greatest era of mergers since the giant corporate build-ups of the late twenties, and in many ways today's mergers are on a scale unknown in all history. This you know, for the fact has been widely publicized. And you know too that economists in and out of government are openly worried about the trend toward business bigness in our land. But you well may not be aware of the fact that we also are in the middle of the greatest era of corporate "diversification" of all time. A soaring number of recent mergers have been of the type men­tioned above. As one astute Wall Streeter put it to me, "It's reaching the point where a company soon will be able to build a successful advertising campaign simply around the slogan 'our squidgits are the best because all we make are squidgits.' "

Why is this happening? Even the top experts of the country are just becoming aware of the extent of the trend, but authorities I've checked offer some plain reasons for it.

First, many companies are gobbling up others in industries far removed from their own in order to offset seasonal ups and downs in their original field or ups and downs in business gen­erally. For instance, a business that prospers in summer buys one that prospers in winter.

Second, many firms are eager to diversify in order to pull them­selves out of a shrinking market and put themselves in a spot to grow. A company which sees demand for its product declining hunts around for a company in a newer, expanding industry.

Third, many companies are spurred to diversify by our tax laws. Companies which are making out well and thus are subject to stiff taxes buy out firms which have big losses—regardless of what the losers do—and then use the "tax credit" gained for their own advantage.

When you weigh these reasons, some of the most illogical marriages become logical and the power of the trend is underlined.

What does it mean? So far, the experts say the effect has been good, for the mergers have helped stabilize earnings and protect jobs. But more and more worry that some of our giants will become so big and diversified they'll become corporate monsters which can stifle competition and stunt the nation's growth. More and more admit the movement has a sickening resemblance to the development of the cartels which almost strangled Europe before World War II.

Inherent in the trend, therefore, is a threat to our system which administrators of our antitrust laws dare not ignore. This is one field which cries out for the most searching analysis; this is one movement which is really ripe for a Congressional probe.

And the Small Are Getting Smaller

"Within 18 years, all manufacturing business and most of the distribution and service business of the nation will be controlled by corporations having more than $100 million of assets. . . ." So predicted the House Small Business Committee back in January 1957. It qualified its forecast with only one "if"— ". . . if small business failures and big business expansions continue at the rate of the past five years."

With a shiver, I report that the Committee's timing for the triumph of industrial giantism in our land is beginning to appear conservative.

For the rate of small-business failures is not just "continuing." The rate is intensifying by the week. So far in 1958, businesses are failing at the appalling pace of more than 306 a week, close to 16,000 a year! Businesses are dying at a rate topping anything seen since the thirties, and week after week, Dun & Bradstreet's figures emphasize that most failures involve small firms.

At the same time the business birth rate is slowing down. In January new business incorporations were 2.3 per cent below the number of new formations in January a year ago. In 1957 business births were below both 1956 and 1955. In manufacturing and construction particularly, the business birth rate is off sharply.

Meanwhile the merger trend is as strong as ever. Voluntarily or involuntarily, dozens of medium-big firms merge and consoli­date every day. In addition the number of companies which do not "fail" but which disappear nevertheless through merger with stronger firms or through just simple dissolution runs from 350,000 to 400,000 a year now, authoritative sources estimate.

There's no missing the trend or the reasons behind it. The squeeze of rising costs of materials and manpower is a major force. While this cost squeeze may pinch a big corporation, it often strangles a smaller one. The difficulty of getting loans and capital is an immense factor. While stiff credit requirements may annoy a large corporation, they frequently destroy a smaller one which cannot get the cash it must have in time and at a price it can afford to pay. Taxes are a brutal killer. In prosperous periods the tax burden doesn't permit a smaller firm to accumulate a nest egg to carry it through rougher times. Again, while the tax lead may slash a big company's net profits, it often wipes out a smaller one's.

This new era of fierce competition is proving the final blow to painful numbers of little businesses. The price wars which have followed the abandonment of fair trade on small appliances may be building plenty of business for the big stores, and they're cer­tainly giving consumers a chance to grab some bargains, but the wars also are dooming small appliance retailers the nation over.

There's nothing new about the plight of small business in our country. The only news is that the plight is getting steadily worse.

What, then, did the first session of the Eighty-fifth Congress and what did the Administration do about it last year?

Nothing.

Oh, there was plenty of talk. There were lots of proposals, promises, speeches, pledges, hearings, "tidbits" of assistance. But when you ask what important and practical moves were made, the answer must be: nothing significant was done.

What, then, is the outlook for 1958? Because of the business recession, because this is an election year, because some leaders in Congress really seem to care about preserving our system of free, competitive enterprise, there may be some tax relief meas­ures and a few other moves. But there still is no convincing evidence of a major effort to solve the problems of financing and taxation of small business. Until this effort is made, our industrial giants will dominate our land more and more. And our economic system will continue to die—fast.

The report on bigness in business was written in 1955 and the one on the problems of small business, which you've just read, was written in 1958. I have included them without changing a statistic or deleting a comma to underline that the challenges spelled out so many years ago are still to be faced. Despite the measures taken by Congress in the last few years to ease the tax and financing problems of small business, the failure record of small business, as you read in Chapter 1, is more serious than ever.

Despite all our efforts to solve the farm problem, it is also with us on an even more gigantic scale, as the 1955 report below reveals. Administrators of our antitrust laws are now openly wor­ried about the trend toward mergers but it continues with only minor interruptions.

Giantism in Fanning

Of all the trends toward giantism in our land, none is more startling none is more revolutionary—yet none is so underplayed —as the trend toward giantism in farming. The little family farm, so deep a part of our tradition, is fast disappearing from the American scene. The rugged farm "individualist," so much a part of our folklore, now exists mostly in our minds.

Look around you. Drive through the rich farm lands in almost any area in our country. See for yourself. In place of the small farm which was dominant until recent years, you will see huge farming operations often covering thousands of acres and more akin to industrial than agricultural organizations. In place of the farmer of folklore, you will meet a professional, well-trained, well-heeled expert who can talk with ease the lingo of any agricultural scientist.

This is the trend and it's still in its infancy, insists every private authority I've checked. This is the fundamental solution to the "farm problem," emphasizes every Washington official I've que­ried.

Just a few figures highlight the extent to which the trend toward giantism in farming already has been carried: In 1920, there were about 3,500,000 farms of 10 to 99 acres. Today, in 1955, there are only about 2,500,000—a drop of a full million. In 1920, there were about 67,000 farms of 1,000 acres or more, accounting for 23 per cent of all the land being farmed. Today, there are over 131,000 farms in this giant class, accounting for more than 42 per cent of the millions of acres being farmed. In 1920, theaverage size of the American farm was 148 acres. Today, the average size is up to a whopping 215 acres.

While the total output of our farms has skyrocketed in these years, the number of people working on farms has slumped. While our total population has soared, the percentage of Americans devoting themselves to farming has dwindled steadily.

Why has this happened and why is it continuing? It is happen­ing because in today's society most small farmers simply haven't been able to produce enough, efficiently enough, to show a profit—even with the Government's price supports. Simultaneously, though, the big farmer has had an increasingly tremendous ad­vantage due to his ability to finance mechanization of his farms, to turn every scientific discovery to his own use, to hire and get the most out of top professional farm managers.

It is happening because under our farm price support laws the largest benefits have gone to the giant operators rather than the small. Designed to help the little man, they've made millionaires out of the big. In the words of Agriculture Secretary Benson: "For every dollar that comes to (the small farmer) many more dollars come to the big operator, and the competitive advantage of the larger operator is thereby increased."

The efficiency of giantism in farming is presumably overwhelm­ing. (The key advantage claimed for giantism in every sphere is efficiency.) But the human and social elements? The implications to America generally of the decline of the family farm as a way of life? These are either ignored or shrugged off as secondary considerations.

To my comments about the human and social elements, I get the retort, "The little, marginal farmer always has been the problem, and the answer for him is a job in the city." To my questions about the basic dangers of giantism, I get the reply, "Even in periods of chaotic depression, the large mechanized farm has been able to make money, and this is a way out of the 'farm problem' for all of us."

Fewer and fewer farmers dividing up the total farm income— that's the trend, bold and bald. It's truly a revolution. And I do not have to stretch my imagination much to understand how our forefathers would have viewed it.

The 1958-60 business upswing is two years old this month. If the current upturn matches the average of past expansions, it has only about another six months to go, and since it already shows signs of getting tired, it may not have even that much life in it. Since no previous expansion which involved neither a great war nor a rebound from a severe depression has lasted as long as forty months, the current rise will be setting a new record for longevity if it is still going much more than another year from now.

We have had two years in which to plan wisely to offset the next recession. And another recession will hit us because there is a rhythm to the business cycle as there is a rhythm to life itself, and advances do tend to run down after a while.

What have we achieved in this long period? Nothing.

We have not reformed our unemployment insurance system at the national level even though agreement is unanimous that this reform is essential, and we know that a sound system for adequate unemployment benefits is a top-notch weapon against a business slump.

We have not passed legislation to help our chronically de­pressed areas back to health, even though it is obvious that these depressed areas will become even more depressed during the next downturn.

We have not reached any decisions on whether the best way to restimulate the economy is through immediate tax cuts across the board or through sharp increases in government spending, even though we know these are the only practical alternatives, and if we don't think through the question now, we'll once again choose hastily and haphazardly.

We have not faced up to the fact that we are in a new trade era in which our businessmen must make an all-out effort to produce and sell abroad competitively priced and quality goods, and we know the Federal government must encourage this effort on a major scale.

We have not made reasonable price stability an aim of national policy, even though we know that having this as an aim might help us avoid making moves that would lay the base for another inflationary blow-off.

We have not come any closer to solving the farm problem, even though we admit today's policies are an abysmal failure.

We have not encouraged the sort of public debate that would crystallize public opinion on using government funds voted during the next recession for improved education, rebuilding our cities, and the like.

We have not reformed our income tax structure, even though we are aware that reforms could be vital incentives to impera­tive growth.

"The best time to think about anti-recession policies is not when the economy is faltering, but when it is strong," says Dr. Arthur F. Burns, the widely respected president of the National Bureau of Economic Research and President Eisenhower's chief economic adviser during the recession of 1953-54. Dr. Burns particularly stresses immediate reform of our unemployment in­surance system and a policy on tax reduction.

But the voices of such men as Dr. Burns, which should be heard everywhere, seem to fall into a vacuum. The Republican Administration and the Democratic-controlled Congress have had two long prosperous years in which to improve our recession defenses. Score card: a dreadful zero.

The "official" date for the peak of the 1958-60 upturn is now placed in May 1960.

The most recent business upswing, in short, lasted a bit more than two years and, as we entered the fourth recession of post-World War II, the judgment you've just read was a glaring fact.

This past Saturday morning I took our ten-year-old daughter, Cris, to the orthodontist for the monthly adjustment of the braces on her teeth: cost, $30.00. On the way back, we stopped to get her a new pair of sturdy school shoes: cost, $8.95. It then being well past lunch time, we went to a nearby hamburger stand where she consumed an adult-sized medium-rare and malted: cost, 95 cents. When we got home she had her piano lesson: cost, $5.00. She spent a major part of the evening listening to her Christmas record player: cost, $45.00. She went to bed to read her new book on natural history: cost, $5.95.

Only a few years ago that same Saturday shopping-lunch trip would have cost at least one-third less—at least. Only a few years ago Cris's cost of living involved no such expenses as an orthodon­tist, piano lessons, expensive books, or a "good" record player.

Without stretching my imagination one bit I can project the Saturday shopping-lunch trips a couple of years hence and boost the tag a minimum of 35 to 50 per cent. I'm not even trying to guess what will be the cost of her reading, records, recreation, hair-dos, and so on.

Am I wasting your time with a minor personal financial anec­dote? Hardly! This is an economics story of tremendous im­portance. For what I have reported here in terms of my own Saturday experience is the pocketbook pinch which is now being felt by millions of families across the land, and which will be felt with increasing intensity by mounting millions in the next five years. This pocketbook pinch of the 1960s is due only in minor part to the climbing cost of goods and services in recent years. This pinch is due to the simple and yet profoundly signifi­cant fact that the record number of babies born in our land in the first years after World War II are now entering the expensive teen-age years.

It is in these teen-age years that their consumption of food soars to levels never touched before and never to be touched again. It is in these years that their need for and destruction of clothes skyrockets. It is in these years that their dental, medical, and recreation expenses reach heights anticipated by few parents.

For parents of only one or two teen-agers the squeeze will be rough enough. For parents of three to five, food and clothing costs alone will rise by several hundreds of dollars in a single year. Just as an indication, one authoritative study puts the average annual cost of feeding a one-year-old at $190.00 and the average cost of feeding the same child at eleven years at $318.00. It puts the average annual clothing cost of a one-year-old at $36.00 and of the same child at thirteen years at $133.00. To me, these are ridiculously low figures, but it's the comparisons they show that counts.

To industries competing for the spending dollars of adults with growing children, the shifting pattern of spending presents a hard, cold challenge. Income of these families must grow as the teen-agers grow or something will have to give—and it will be the adults' spending on things they want.

Putting it in plainest words, the family with one or two or more teen-agers to feed, clothe, educate, and entertain must switch its spending patterns and cut down on many purchases the adults may want—unless the family's income is in a sharp upswing. Parents may not consider what they are doing as a significant influence on the markets for housing, furniture, ap­pliances, etc. and learnedly discuss it as such, but when they are multiplied by millions, the influence is unquestionable.

To such industries as food and textiles, though, the pattern should bring sheer delight. It may be an exaggeration to claim the teen-agers of 1960-65 are the American farmer's secret weapon, but they'll surely try to eat him into prosperity! Teen-agers don't just eat food; they devour it, as any parent of a teen-ager reading this is fully aware. An expert estimate is that a teen-ager eats at least 20 per cent more than an adult—a figure I'm also inclined to think is decidedly conservative.

The lightest eaters in our population are those in the under-ten-and-over-fifty-five age groups. The under-ten group will drop sharply between now and 1965, while the over-fifty-five group will rise about 10 per cent. The heaviest eaters are those in the ten-to-nineteen group. This group will skyrocket to over 19 per cent of the total by 1965. And as these millions of new teen-agers eat and eat and eat, their parents will have no alternative except to spend more on food.

The volume of food consumed in this country will hit a fan­tastic, "unbelievable" one hundred billion dollars a year by 1965, authorities predict. "Unbelievable," perhaps, to anybody who hasn't watched a teen-ager get up from a complete dinner, wander around for only a little while, and then go to the pantry mumbling, "What's there to eat?"