In his preface to Jobs, Machines and Capitalism, Arthur Dahlberg explained that the economic views upon which his book was based were inspired by his reading of Stephen Leacock's The Unsolved Riddle of Social Justice. The latter book's inspiration can be summarized in the sentence, "The economics of war, therefore, has thrown its lurid light upon the economics of peace."
Contrary to Frank Knight's dismissive arm-waving about bibliographies and footnotes, Dahlberg did in fact cite two economics textbooks along with contemporary economists such as Leacock, Wesley Mitchell, Thorstein Veblen and John R. Commons. One may infer from the sarcastic comment at the end of his review that Knight failed to grasp Dahlberg's (and Leacock's, Mitchell's, Commons's and Veblen's) point that the economic organization of modern society is not "based on price competition" as had been empirically demonstrated by the experience of the war. The implication of these statistics and analyses was that even spending on destruction stimulated productive activity. (For a concise summary of Dahlberg's argument, see his 1933 Senate subcommittee testimony, cited in "What is the most useful idea in economics.")
Quibbles about Knight's review of Dahlberg might be of merely antiquarian interest were it not for several other related observations. In addition to Leacock's book, Dahlberg had been provoked by the "disturbing figures" given by David Friday in his book on wartime profits, wages and prices. Just a year before publication of Dahlberg's book, John Maurice Clark introduced the concept of the economic multiplier in The Costs of the World War to the American People.
In "The Political Aspects of Full Employment," Michal Kalecki wrote, in 1943, that "most economists are now agreed that full employment may be achieved by government spending." The exceptions to this consensus, though, were significant:
Among the opposers of this doctrine there were (and still are) prominent so-called 'economic experts' closely connected with banking and industry. This suggests that there is a political background in the opposition to the full employment doctrine, even though the arguments advanced are economic.
Kalecki went on to assert that this opposition to government spending withers when the spending is on armaments. Almost as if to confirm Kalecki's argument, Leon Keyserling in 1950 advised the author of NSC-68 that the tripling of arms spending would pay for itself by "siphoning off" a portion of the resulting increase in national income.
...if a dynamic expansion of the economy were achieved, the necessary build-up could be accomplished without a decrease in the national standard of living because the required resources could be obtained by siphoning off a part of the annual increment in the gross national product.Twelve years later, Clyde Dankert counseled against "any sizable reduction" in hours "in view of the current cold war situation":
If shorter hours are to be advocated today -- and in view of the current cold war situation the present writer would not recommend any sizable reduction in them just now -- it would seem desirable to use, not the arguments of the past, but a more comprehensive and up-to-date argument. The one here suggested points to the maximization of worker satisfactions as the objective.I was led to these ruminations by the reading I assigned for last week to my Politics of Working Time class, Benjamin Hunnicutt's "The End of Shorter Hours." Hunnicutt cited standard economists' arguments for why the movement for shorter hours in the United States faded away after World War II and proposed his own explanation. Hunnicutt cited "the reduction of fatigue, availability of consumer credit, commuting time, stability of employment, easier work, pent-up consumer demand, increased cost of education and raising larger families, and stable cost of recreation" as the typical explanations for the demise of the movement given by economists.
Hunnicutt's own explanation consisted of a combination of subjective distaste for "idleness" arising out of the depression experiences of unemployment, the influence of the business philosophy of "the new economic gospel of consumption," a new commitment from government to maintain full employment through government spending and public works, and the consequent erosion of the idea that "work-sharing" was necessary to combat technological unemployment. In his subsequent book, Work Without End: Abandoning Shorter Hours for the Right to Work, Hunnicutt did address the factor of military spending in a paragraph toward the end of the last chapter.
This takes me back to Leacock's evocative observation:
The economics of war has thrown its lurid light upon the economics of peace.During the presidential campaign of 1952, Dwight Eisenhower prepared a speech that he didn't deliver because it was pre-empted by Nixon's Checkers speech. In the prepared speech published in the newspapers, Ike warned about depending on the production of armaments for national prosperity:
There is in certain quarters the view that national prosperity depends on the production of armaments and that any reduction in arms output might bring on another recession. Does this mean, then that the continued failure of our foreign policy is the only way to pay for the failure of our fiscal policy? According to this way of thinking, the success of our foreign policy would mean a depression.Four years later, during the 1956 presidential campaign, vice-presidential candidate Richard Nixon foresaw the likelihood of a four-day work week "in the not too distant future." "These are not dream or idle boasts," he argued, "they are simple projections of the gains we have made in the last four years." But during his subsequent 1960 campaign for president, Nixon backtracked,
Well, the 32-hour workweek just isn't a possibility at the present time. I made a speech back in the 1956 campaign when I indicated that as we went into the period of automation, that it was inevitable that the workweek was going to be reduced, that we could look forward to the time in America when we might have a 4-day week, but we can't have it now.Nixon's rationale for why we can't have it contradicted his earlier claims about the gains made in the first four years of the Eisenhower administration:
We can't have it now for the reason that we find, that as far as automation is concerned, both because of the practices of business and labor, we do not have the efficiency yet developed to the point that reducing the workweek would not result in a reduction of production. The workweek can only be reduced at a time when reduction of the workweek will not reduce efficiency and will not reduce production.Production of what? "There is in certain quarters the view that national prosperity depends on the production of armaments..."