Concrete Suggestions for a Program of Economic Planning

MUCH THINKING on the nature and methods of our economic system has been stirred up by recent events. The spectacle of the most advanced industrial country in the world suddenly hurled from the heights of prosperity into depression was a shock even to the firm believers in the providential working of natural economic law. Most people have been aroused to a sense of humiliation at the sight of an economically sound country unable to use its resources and to direct its economic destinies. The more or less general reaction has been to call for more conscious control over economic life and for new techniques to attain that end. The single idea which has emerged out of the discussion with special clarity and force is that of planning, and the demand for some kind of economic guidance has been urged by one organized group after another.

It is not necessary to trace here in detail the processes by which the idea of planning made its way into our consciousness. We may have heard the voices of the few economists and men of business who even before the crash had advocated the need of forward planning and budgeting not only within single plants, but within an entire industry, and for all industries considered as a system. We may have been influenced by the vigorous prosecution of the Five Year Plan in the Soviet Union, and by the information which has been filtering in about economic planning in Germany, France and other countries. To a certain extent, the idea is the culmination of processes of social thinking which have been slowly molding our minds for at least a quarter of a century.

Whatever its source, it is a striking tribute to the force of the idea that within six months it has pushed its way out of a vague subconsciousness into the open forum of public discussion and of legislative consideration. In a more restricted way, it has now become part of our framework of government through the passage of the law creating the Federal Employment Stabilization Board. In private industry, it has found application in the new efforts of some industries to plan their development through voluntary associations such as the Petroleum Institute, the Textile Institute and others. And in its most comprehensive form, it is now finding expression in proposals for a federal economic council which would aid the American people to visualize their economic life as one vast enterprise and to guide it safely between the Scylla of inflation and the Charybdis of depression. 

ECONOMIC PLANNING IN FRANCE

While the American situation calls for special forms and methods, there is something to be gained from an examination of the experience of other countries. Much might be learned from the Soviet Union, both in a positive and a negative way, if we had more detailed information on the techniques and procedures of Soviet economy. But in view of scanty information at hand, and of the peculiar characteristics of Soviet economy which make it unavailable as a model, the Soviets may be left out of the picture. Outside of the Soviet Union, attempts to guide and direct economic activities on a national scale have been made in seven countries––France, Germany, Great Britain, Italy, Spain, Czechoslovakia and Japan. But the most notable are those of Germany and France, and it is to their experience that one must turn for suggestions.

French experience with their National Economic Council dates from January, 1925, when the Council was established by government decree. The distinctive features of its organization are compactness and a direct connection with the executive branch of the government. The French wished to avoid a large delegated body which might become a second parliament, and yet they wanted a body representative of all the economically active elements of the people. To attain these two ends, the French adopted the method of arranging the nation into three groups, consumers, labor and capital. The delegates to the Council are selected from the most representative organizations in each of these three groups, such as the National Federation of Production, the Chamber of Commerce, the General Confederation of Labor and so on. The total number of delegates in the Council is forty-seven. Nine of these represent the consumers; eight represent capital; and thirty represent labor, including eleven delegates for management, two delegates for independent artisans, three delegates from teachers’ associations, two delegates from civil servants, nine from the General Federation of Labor, and one from the Christian Trade Unions. The representative organizations are designated by the Minister of Labor, but the nominations for places on the Council are made by the organizations themselves.

The French Economic Council meets four times a year and each session lasts ten days. Between these plenary meetings, the business of the Council is carried on by a standing committee of ten and by its permanent secretariat. The Council also has a number of experts who are associated with its work on a permanent basis.

Primarily and essentially, the French Economic Council is an advisory body to the Prime Minister, who is the ex-officio chairman of the Council. The budget of the Council is paid out of the funds of the Ministry of Labor, but that does not affect its legal position, nor does it infringe upon its autonomy. The Council is free to fix its own agenda, and it has the power to settle disputes which arise out of the government’s choice of representative organizations invited to send delegates.

In its advisory capacity, the French Economic Council deals primarily with economic measures which are under consideration by the legislature. Any bill introduced into the Chamber of Deputies which bears on an economic question must be transmitted to the Council for examination. The Council then submits its opinion to the Prime Minister, who has to make this opinion public. The Prime Minister, however, is under no obligation to carry out the recommendations of the Council, though he has to inform it of the action taken. Aside from this basic function, the Council makes specific recommendations to the different Ministers and to the Prime Minister which are also advisory in character. And it carries on special studies of a general and technical nature for the purpose of bringing to view the permanent interests of French national economy.

In the five years of its existence, the French Economic Council has proved its practical value as an aid in systematizing the work of the government departments and in quickly preparing a program of action in an emergency. It drew up a comprehensive scheme for relieving unemployment by public works in 1926, when France was threatened by financial disorganization. Its main work, however, has been the making of a survey of French economic life and the mapping of a plan for the overhauling of the national economic equipment. This study has led to plans for the reconstruction of railways, ports and docks, and of the other economic instrumentalities, and points towards a systematic and coördinated reconstruction of French economic life in the future. That these plans are not abstract was indicated a short time ago when former Premier Tardieu referred to them during the discussion of the French budget in the Chamber of Deputies and pointed out the possibilities which they offer for a methodical expansion of French economy.

AND IN GERMANY

Like the French, the German Economic Council is also based upon the idea of the representation of all economic and social groups. But the German Council, which has been in existence since 1920, and which is based upon a special clause in the Weimar Constitution, resembles more an economic parliament than an advisory body. This characteristic is due to the conditions under which the idea originated in Germany during the revolutionary days of 1918-1919. It is because of this that the German Council is larger in size, being composed of 326 members. The greater articulation of economic groups in Germany is reflected in the method of representation, which provides for sixty-eight delegates from agriculture and forestry; sixty-eight from industry; forty-four from banking, commerce and insurance; twenty-four from transport and public utilities; thirty-six from the artisan class; thirty from consumers; sixteen from public officials and teachers; and twenty-four legal and and technical experts appointed by the government and the Reichstag. Within these groups, the number of places is divided equally between employers and employees, to keep a balance between opposing forces.

Being in the nature of an economic parliament, the German Economic Council is not attached to any branch or department of the government. It is an independent body with its own budget, amounting at one time to about $150,000 a year, and keeps in close touch with both the Reichstag and the government. It has the right to examine representatives of the government, and its meetings are open to the government. At first, the main work of the German Council was done in plenary sessions, but these proved unwieldy and since 1923 no plenary sessions have been held. The German Council has found it more convenient to work entirely through standing committees, of which there are eleven. The two most important committees, the economic committee and the social-policy committee, are composed of thirty members each. The economic committee has nine subcommittees on foreign trade, coal, lumber, credit for production and so on. The committees meet periodically, have permanent staffs for carrying on their work and call in experts or representatives of different interests when necessary.

The work of the German Economic Council has differed in its character from that of the French because of the peculiar economic and political conditions of Germany. The Council has not considered large general schemes, but has helped in the solution of emergency problems which have followed one another in Germany since 1920. It has dealt with reparations, housing and rents, cartels and prices, and has studied the problems of shipping and exports. It cannot be said that the policies recommended by the Economic Council have been accepted by the German government. German domestic and foreign policy has been shaped by the exigencies of Germany’s post-war international situation. Neither can it be said that the existence of the Economic Council in Germany has allayed the conflict of interests and points of view which is such a marked feature of political life in present-day Germany. But there can be no question that the Council has helped to bring into clearer view the facts bearing on important economic problems and to elucidate the issues involved in many problems of national and international policy, and that it has been of great assistance in the departmental work of the German government. Its value is attested by a new bill pending in the Reichstag which aims at making the Council more effective by restricting its membership to 151 and by giving it a more definite place in the legal system.

THE STATUS OF THE COUNCIL

Considering a Federal Economic Council for ourselves, we may start with the suggestion indicated by French and German experience that under present conditions an economic council can be merely advisory in character and that too large a body is undesirable and unwieldy. A council of one hundred delegates would seem large enough to meet our needs of representation and yet not too large for effective deliberation. One plenary session a year lasting ten days or two weeks would seem desirable. The latter part of November would seem an appropriate time, in view of the opportunity it would afford for presenting facts upon which government departments and the President might base some of their recommendations. The plenary sessions would be devoted to the consideration of reports and to the discussion of policies.

The work of the Council should be done through standing committees and a permanent staff. Committees on foreign trade, shipping, banking policy, on standards of living, distribution, taxation, might be composed of fifteen to twenty members each and meet three or four times a year to examine and consider the reports of the staff working on these particular topics. The permanent staff should consist of a director, one or two associates and a number of specially trained men and women in the different fields of economics and government. In view of the nature of the work and the magnitude of our problems, a budget of $500,000 a year might be necessary, though a start might be made with less. 

It would seem best to have the Federal Economic Council in the form of an independent commission, operating under an act of Congress and subject to the authority of Congress. The Secretaries of Labor, Commerce and Agriculture might prepare a list of organizations which would be recognized as representative of the different economic interests of the country and which would be required to send delegates to the Council. This list should be submitted to Congress for approval, and should be subject to change in accordance with changing conditions. In view of the large number of trade associations, it would be best to proceed by arranging the industries of the country in major groups, such as food and kindred products, textiles and clothing, agriculture and forestry, iron and steel and machine industries. Certain national associations, such as the United States Chamber of Commerce, the National Manufacturers’ Association, the American Federation of Labor, the several national farmers’ organizations, should be given special place as transcending industrial lines and uniting large economic sections of the people. Special representation should also be given to science, management and research, considered as a single group, on the basis that these hold a peculiar place in society, tending to take an objective view and to reconcile conflicting interests.

The number of delegates allotted to each group should be specified in the act of Congress creating the Council, and the delegates should be elected for a term of two years, half of them, equally from each group, being retired annually. The Secretaries of the Treasury, Agriculture, Commerce and Labor might be ex-officio members of the Council and alternately preside at the meetings of the plenary session. The organization recognized as approved might submit a list of names giving their first and second choice of delegates, from which the President might select the delegates for each term.

PURPOSES AND TECHNIQUE

The main purpose of the Federal Economic Council should be to present what may be called an annual audit of the United States, giving a connected view of economic developments. Since this would be done annually, the Economic Council would in time be able to indicate economic trends and tendencies. What the President’s Committee on Recent Economic Changes was called in to do specially, would be done continuously and in a more coördinated way, supplying a basis of judging whither we were going economically and whether along the lines of our best social interests. In addition, the Council might prepare specific recommendations on special economic problems of urgent national importance and be of assistance to the various government departments and to members of Congress seeking information on economic matters.

For some of its work the Council might have to inaugurate special collections of data, but most of it could be done on the basis of data already being gathered. In fact, one of the prime services of the Council would be to bring into closer coöperation the different state and federal agencies which are now collecting statistical and economic data and to lay the foundation for better methods of economic information. It is understood that the Council would not in any way violate the protection now afforded to private information by government agencies. All members of the staff of the Economic Council should be under the civil service and would be subject to the same obligations and duties as other government employees. The discussions of the annual plenary session and the reports of committees would be the chief medium through which the work of the Council would be made available to the public.

It is not claimed that a Federal Economic Council would at once bring about complete agreement of ideas either as to trends or as to policy. Neither can it bring the millennium of social weal and harmony. But it could lift us out of our present state of spotty social thinking and haphazard economic research and help us to think of our economic problems as interrelated aspects of national social welfare. It could push forward the frontiers of objective economic thinking and reduce the area of unnecessary social conflict. Above all, it should hold out the promise and hope of becoming in time the economic guide of the nation, pointing to dangers ahead and indicating the path along which economic safety lies. In brief, an economic planning council is the growing technique of integrated social coöperation for using scientific method and our conscious powers to harness a dynamic industrial technology in the service of orderly economic progress.

This article appeared in the April 29, 1931 issue of the magazine. MUCH THINKING on the nature and methods of our economic system has been stirred up by recent events. The spectacle of the most advanced industrial country in the world suddenly hurled from the heights of prosperity into depression was a shock even to the firm believers in the providential working of natural economic law. Most people have been aroused to a sense of humiliation at the sight of an economically sound country unable to use its resources and to direct its economic destinies. The more or less general reaction has been to call for more conscious control over economic life and for new techniques to attain that end. The single idea which has emerged out of the discussion with special clarity and force is that of planning, and the demand for some kind of economic guidance has been urged by one organized group after another.

It is not necessary to trace here in detail the processes by which the idea of planning made its way into our consciousness. We may have heard the voices of the few economists and men of business who even before the crash had advocated the need of forward planning and budgeting not only within single plants, but within an entire industry, and for all industries considered as a system. We may have been influenced by the vigorous prosecution of the Five Year Plan in the Soviet Union, and by the information which has been filtering in about economic planning in Germany, France and other countries. To a certain extent, the idea is the culmination of processes of social thinking which have been slowly molding our minds for at least a quarter of a century.

Whatever its source, it is a striking tribute to the force of the idea that within six months it has pushed its way out of a vague subconsciousness into the open forum of public discussion and of legislative consideration. In a more restricted way, it has now become part of our framework of government through the passage of the law creating the Federal Employment Stabilization Board. In private industry, it has found application in the new efforts of some industries to plan their development through voluntary associations such as the Petroleum Institute, the Textile Institute and others. And in its most comprehensive form, it is now finding expression in proposals for a federal economic council which would aid the American people to visualize their economic life as one vast enterprise and to guide it safely between the Scylla of inflation and the Charybdis of depression. 

ECONOMIC PLANNING IN FRANCE

While the American situation calls for special forms and methods, there is something to be gained from an examination of the experience of other countries. Much might be learned from the Soviet Union, both in a positive and a negative way, if we had more detailed information on the techniques and procedures of Soviet economy. But in view of scanty information at hand, and of the peculiar characteristics of Soviet economy which make it unavailable as a model, the Soviets may be left out of the picture. Outside of the Soviet Union, attempts to guide and direct economic activities on a national scale have been made in seven countries––France, Germany, Great Britain, Italy, Spain, Czechoslovakia and Japan. But the most notable are those of Germany and France, and it is to their experience that one must turn for suggestions.

French experience with their National Economic Council dates from January, 1925, when the Council was established by government decree. The distinctive features of its organization are compactness and a direct connection with the executive branch of the government. The French wished to avoid a large delegated body which might become a second parliament, and yet they wanted a body representative of all the economically active elements of the people. To attain these two ends, the French adopted the method of arranging the nation into three groups, consumers, labor and capital. The delegates to the Council are selected from the most representative organizations in each of these three groups, such as the National Federation of Production, the Chamber of Commerce, the General Confederation of Labor and so on. The total number of delegates in the Council is forty-seven. Nine of these represent the consumers; eight represent capital; and thirty represent labor, including eleven delegates for management, two delegates for independent artisans, three delegates from teachers’ associations, two delegates from civil servants, nine from the General Federation of Labor, and one from the Christian Trade Unions. The representative organizations are designated by the Minister of Labor, but the nominations for places on the Council are made by the organizations themselves.

The French Economic Council meets four times a year and each session lasts ten days. Between these plenary meetings, the business of the Council is carried on by a standing committee of ten and by its permanent secretariat. The Council also has a number of experts who are associated with its work on a permanent basis.

Primarily and essentially, the French Economic Council is an advisory body to the Prime Minister, who is the ex-officio chairman of the Council. The budget of the Council is paid out of the funds of the Ministry of Labor, but that does not affect its legal position, nor does it infringe upon its autonomy. The Council is free to fix its own agenda, and it has the power to settle disputes which arise out of the government’s choice of representative organizations invited to send delegates.

In its advisory capacity, the French Economic Council deals primarily with economic measures which are under consideration by the legislature. Any bill introduced into the Chamber of Deputies which bears on an economic question must be transmitted to the Council for examination. The Council then submits its opinion to the Prime Minister, who has to make this opinion public. The Prime Minister, however, is under no obligation to carry out the recommendations of the Council, though he has to inform it of the action taken. Aside from this basic function, the Council makes specific recommendations to the different Ministers and to the Prime Minister which are also advisory in character. And it carries on special studies of a general and technical nature for the purpose of bringing to view the permanent interests of French national economy.

In the five years of its existence, the French Economic Council has proved its practical value as an aid in systematizing the work of the government departments and in quickly preparing a program of action in an emergency. It drew up a comprehensive scheme for relieving unemployment by public works in 1926, when France was threatened by financial disorganization. Its main work, however, has been the making of a survey of French economic life and the mapping of a plan for the overhauling of the national economic equipment. This study has led to plans for the reconstruction of railways, ports and docks, and of the other economic instrumentalities, and points towards a systematic and coördinated reconstruction of French economic life in the future. That these plans are not abstract was indicated a short time ago when former Premier Tardieu referred to them during the discussion of the French budget in the Chamber of Deputies and pointed out the possibilities which they offer for a methodical expansion of French economy.

AND IN GERMANY

Like the French, the German Economic Council is also based upon the idea of the representation of all economic and social groups. But the German Council, which has been in existence since 1920, and which is based upon a special clause in the Weimar Constitution, resembles more an economic parliament than an advisory body. This characteristic is due to the conditions under which the idea originated in Germany during the revolutionary days of 1918-1919. It is because of this that the German Council is larger in size, being composed of 326 members. The greater articulation of economic groups in Germany is reflected in the method of representation, which provides for sixty-eight delegates from agriculture and forestry; sixty-eight from industry; forty-four from banking, commerce and insurance; twenty-four from transport and public utilities; thirty-six from the artisan class; thirty from consumers; sixteen from public officials and teachers; and twenty-four legal and and technical experts appointed by the government and the Reichstag. Within these groups, the number of places is divided equally between employers and employees, to keep a balance between opposing forces.

Being in the nature of an economic parliament, the German Economic Council is not attached to any branch or department of the government. It is an independent body with its own budget, amounting at one time to about $150,000 a year, and keeps in close touch with both the Reichstag and the government. It has the right to examine representatives of the government, and its meetings are open to the government. At first, the main work of the German Council was done in plenary sessions, but these proved unwieldy and since 1923 no plenary sessions have been held. The German Council has found it more convenient to work entirely through standing committees, of which there are eleven. The two most important committees, the economic committee and the social-policy committee, are composed of thirty members each. The economic committee has nine subcommittees on foreign trade, coal, lumber, credit for production and so on. The committees meet periodically, have permanent staffs for carrying on their work and call in experts or representatives of different interests when necessary.

The work of the German Economic Council has differed in its character from that of the French because of the peculiar economic and political conditions of Germany. The Council has not considered large general schemes, but has helped in the solution of emergency problems which have followed one another in Germany since 1920. It has dealt with reparations, housing and rents, cartels and prices, and has studied the problems of shipping and exports. It cannot be said that the policies recommended by the Economic Council have been accepted by the German government. German domestic and foreign policy has been shaped by the exigencies of Germany’s post-war international situation. Neither can it be said that the existence of the Economic Council in Germany has allayed the conflict of interests and points of view which is such a marked feature of political life in present-day Germany. But there can be no question that the Council has helped to bring into clearer view the facts bearing on important economic problems and to elucidate the issues involved in many problems of national and international policy, and that it has been of great assistance in the departmental work of the German government. Its value is attested by a new bill pending in the Reichstag which aims at making the Council more effective by restricting its membership to 151 and by giving it a more definite place in the legal system.

THE STATUS OF THE COUNCIL

Considering a Federal Economic Council for ourselves, we may start with the suggestion indicated by French and German experience that under present conditions an economic council can be merely advisory in character and that too large a body is undesirable and unwieldy. A council of one hundred delegates would seem large enough to meet our needs of representation and yet not too large for effective deliberation. One plenary session a year lasting ten days or two weeks would seem desirable. The latter part of November would seem an appropriate time, in view of the opportunity it would afford for presenting facts upon which government departments and the President might base some of their recommendations. The plenary sessions would be devoted to the consideration of reports and to the discussion of policies.

The work of the Council should be done through standing committees and a permanent staff. Committees on foreign trade, shipping, banking policy, on standards of living, distribution, taxation, might be composed of fifteen to twenty members each and meet three or four times a year to examine and consider the reports of the staff working on these particular topics. The permanent staff should consist of a director, one or two associates and a number of specially trained men and women in the different fields of economics and government. In view of the nature of the work and the magnitude of our problems, a budget of $500,000 a year might be necessary, though a start might be made with less. 

It would seem best to have the Federal Economic Council in the form of an independent commission, operating under an act of Congress and subject to the authority of Congress. The Secretaries of Labor, Commerce and Agriculture might prepare a list of organizations which would be recognized as representative of the different economic interests of the country and which would be required to send delegates to the Council. This list should be submitted to Congress for approval, and should be subject to change in accordance with changing conditions. In view of the large number of trade associations, it would be best to proceed by arranging the industries of the country in major groups, such as food and kindred products, textiles and clothing, agriculture and forestry, iron and steel and machine industries. Certain national associations, such as the United States Chamber of Commerce, the National Manufacturers’ Association, the American Federation of Labor, the several national farmers’ organizations, should be given special place as transcending industrial lines and uniting large economic sections of the people. Special representation should also be given to science, management and research, considered as a single group, on the basis that these hold a peculiar place in society, tending to take an objective view and to reconcile conflicting interests.

The number of delegates allotted to each group should be specified in the act of Congress creating the Council, and the delegates should be elected for a term of two years, half of them, equally from each group, being retired annually. The Secretaries of the Treasury, Agriculture, Commerce and Labor might be ex-officio members of the Council and alternately preside at the meetings of the plenary session. The organization recognized as approved might submit a list of names giving their first and second choice of delegates, from which the President might select the delegates for each term.

PURPOSES AND TECHNIQUE

The main purpose of the Federal Economic Council should be to present what may be called an annual audit of the United States, giving a connected view of economic developments. Since this would be done annually, the Economic Council would in time be able to indicate economic trends and tendencies. What the President’s Committee on Recent Economic Changes was called in to do specially, would be done continuously and in a more coördinated way, supplying a basis of judging whither we were going economically and whether along the lines of our best social interests. In addition, the Council might prepare specific recommendations on special economic problems of urgent national importance and be of assistance to the various government departments and to members of Congress seeking information on economic matters.

For some of its work the Council might have to inaugurate special collections of data, but most of it could be done on the basis of data already being gathered. In fact, one of the prime services of the Council would be to bring into closer coöperation the different state and federal agencies which are now collecting statistical and economic data and to lay the foundation for better methods of economic information. It is understood that the Council would not in any way violate the protection now afforded to private information by government agencies. All members of the staff of the Economic Council should be under the civil service and would be subject to the same obligations and duties as other government employees. The discussions of the annual plenary session and the reports of committees would be the chief medium through which the work of the Council would be made available to the public.

It is not claimed that a Federal Economic Council would at once bring about complete agreement of ideas either as to trends or as to policy. Neither can it bring the millennium of social weal and harmony. But it could lift us out of our present state of spotty social thinking and haphazard economic research and help us to think of our economic problems as interrelated aspects of national social welfare. It could push forward the frontiers of objective economic thinking and reduce the area of unnecessary social conflict. Above all, it should hold out the promise and hope of becoming in time the economic guide of the nation, pointing to dangers ahead and indicating the path along which economic safety lies. In brief, an economic planning council is the growing technique of integrated social coöperation for using scientific method and our conscious powers to harness a dynamic industrial technology in the service of orderly economic progress.

This article appeared in the April 29, 1931 issue of the magazine.