In 1946, Chester Bowles, director of the Office of Price Administration during WWII (and popularizer of the soap opera before that) wrote a remarkable book about how to maintain a full employment economy after demobilizing from the war—and how creating a just distribution of income would be fundamental to the success of that effort.
There are two aspects of this book that stand out to me. First is its economic point. Income inequality causes many problems, including several I’ve explored in my research. But Bowles highlights one that is perhaps most fundamental and yet under-appreciated today: inequality is a major constraint on economic growth. And it constrains growth in the most direct way possible: because poor people buy more things when their incomes go up, while rich people don’t. As he puts it:
Let us suppose that one per cent of the population were to receive 95 per cent of our entire national income, with the remaining 5 per cent spread among the rest of us. Could our system—could any system—work on that basis? One per cent of the people couldn’t possibly consume 95% of all the goods and services which the rest of us could produce.
And surely if they couldn’t consume our annual output, they would have no reason to use their savings to build more and more plants and facilities to produce more and more goods which they couldn’t consume. In a system as unbalanced as that there couldn’t be much production and not many of us could find jobs.
I’ve taken this extreme case, not because it makes any sense but because it demonstrates the nonsense of the contention that the way our national income is divided among us has nothing to do with how much we produce or how many of us have jobs. On the contrary, the distribution of our annual income has almost everything to do with our total production and employment.Chester Bowles, Tomorrow Without Fear
The idea that inequality constrains growth is coming back into fashion among economists today–it’s at the heart of the secular stagnation debate, for instance. EPI even wrote a report about it. But it’s not nearly as widely discussed as it was back in the 1940s and 1950s.
The other thing I love about this book is the rhetoric. Bowles became a multimillionaire (during the Great Depression) by writing advertisements, and it’s clear he knew what he was doing. The way he channels can-do, commonsense American spirit in the service of a progressive economic vision is something progressives today could learn from. In his view, fixing the economy is a straightforward matter of “learning to live better” in light of our continual technological progress. Here’s how he introduces the need to boost incomes among the poor and middle class:
The problem of 140 million people learning to live better and better year after year sounds easy and pleasant. But strangely enough we shall probably find it a somewhat difficult task.
It will be difficult because what it requires is that we get a lot more purchasing power–in other words, a lot more money–out into the hands of a lot more people, particularly those people who need it most and who in our system have always had the most difficulty in getting it–the wage earner, the farmer, the lower-income groups generally.
This means a different distribution of our national income than we’ve had before. And the redistribution of income is a subject which many people find distasteful to talk about–much less to do something about.
But talk about it and do something about It we must, because this is not a matter of taste; it is a matter of national economic necessity.Chester Bowles, Tomorrow Without Fear
Then there are the illustrations. How do you use drawings to convey the idea that stagnant wages amid rising productivity will induce unemployment as demand fails to keep up with supply? Like this: