Blueprint for Prosperity

There is nothing inevitable about extreme business fluctuations any more. Weapons are at hand capable of controlling a boom, and of offsetting and shortening a depression. If we use these weapons intelligently, we are the masters of our economic fate.

With this credo, the editors of FORTUNE last week introduced, in the third of their series of post-war supplements, their blueprint for a new and better U.S. economic system. In acceptance of many of Franklin Roosevelt's works--social security, "pump priming," recognition of labor unions, vigorous trust-busting--this document might have been written by a zealous New Dealer. But in its overriding faith in the creative spirit of private enterprise it sounds a battle cry to which individualists can rally, provided only that their ruggedness is tempered by awareness of social responsibility.

By John Maynard Keynes, Britain's 20th-century apostle of Government-sponsored security, out of Adam Smith, whose 18th-Century Wealth of Nations ushered in the golden era of free enterprise, comes this new viewpoint.

Chance for Security. FORTUNE'S basic point is that the Government, as the only agency capable of doing so, "should underwrite permanent prosperity: that it should be established Government policy, whether Republican or Democratic, to maintain reasonably full employment in the U.S." Its proposals:

1) An expanded social security program, including increased Government responsibility for public health, housing, nutrition and education.* ("Such a program is absolutely essential to the well-being and the sense of security of the American people. . . . [It] is a definite aid to full employment, for it maintains consumer income and effective demand.")

2) A flexible program of public works planned in advance and put into motion when private employment falls off.

3) Encouragement of private initiative. ("The first and most important step is for the Government to see to it that private industry, which produces the vast bulk of goods and services and employs the vast bulk of the working population, has every opportunity to operate at capacity and to invest as much of the nation's savings as it can absorb.")

Chance for Progress. Much of the blueprint is concerned with point three, for FORTUNE'S editors believe that "the daring individual, the risk-taking entrepreneur, should ... become the darling of America's future economy." They do not believe that the mere lending of money, without risk and without contributing to production, should be rewarded with high interest rates. But "tax policy, and every economic policy, should favor the man who invests in new or expanded business."

Chief suggestions:

>Government "policing" of the market to preserve the benefits of free and vigorous competition, to discourage monopoly and price-fixing agreements.

>Removal of interstate trade barriers, high Federal tariffs, use of patent privileges to hold down competition.

>Establishment, perhaps with Government assistance, of a system of "equity banks" which would lend money to small new business enterprises involving considerable risk.

>Complete overhauling of the Federal tax system, after study by a nonpartisan commission of Government and private experts. Recommended changes: 1) reduction or repeal of taxes on corporation income (which in a free market should be a just return for risks taken and jobs provided); 2) "a new (and better) undistributed profits tax" designed to keep corporations from hoarding money instead of putting it to productive use; 3) personal income taxes on a graduated scale, but never becoming so high as to prevent individuals from saving and investing their money; 4) a high -- perhaps confiscatory --inheritance tax.

FORTUNE concedes that its 20,000, word blueprint of "economic revolution" ignores many practical difficulties, that to some critics its arguments "may seem partial or rudimentary, and its conclusions naive." But, say the editors:

"This program is not socialism, nor fascism, nor a return to laissez faire. It is, we believe, a synthesis of the conflicting elements in our recent past; a new democratic capitalism, which will allow production and consumption to keep on expanding as fast as science and human ingenuity point the way."

*FORTUNE'S social security program is less specific but more far-reaching than the "revolutionary" proposals made for England last week by Sir William Henry Beveridge (see p. 44).

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