The New Ruml Plan

Two years ago a Ruml plan led to a revolution in the way the U.S. collects its taxes. Last week, in his first book, Tomorrow's Business (Farrar & Rinehart; $2.50), rotund Beardsley Ruml unveiled a new plan. This time Mr. Ruml was far more ambitious. He aimed at something like a revolution in the way 1) many U.S. businessmen think; 2) the U.S. thinks about business.

Like most well-heeled businessmen who decide to write a book, the first thing Beardsley Ruml did was to hire a ghost writer to do it for him. This did not work out. So Ruml squeezed enough time from his other jobs (treasurer of R. H. Macy & Co., chairman of the Federal Reserve Bank of New York, etc.) to set down his liberal business gospel in his own adding-machine style.

Business, says Ruml, affects everyone. Such ideals as freedom from want and fear, freedom of the individual to live as he chooses can be realized by business, through its instruments: high employment and productivity. But business itself must first learn a new concept of freedom. It must learn and conform to the controls for freedom--e.g., reasonable Government regulation--within which it must act. In the same manner, those who wield the power over business for Government must also learn the controls which, by giving business its greatest freedom, can enable it to do its job.

Order In Business. Business, Ruml holds, is itself a private government (like the trade union, the family, the church). It is a rulemaker with the job of bringing "order and certainty to the production of things for use." But Ruml concedes that business has frequently brought this order only at the cost of the freedom of others. The reason lies in excesses of the very qualities most desirable in businessmen. Thus without regulation "initiative becomes arrogance; resourcefulness, cunning; efficiency, greed; tenacity, obstinacy; and willingness to take authority and responsibility, pride and lust for power."

Because human nature is inevitably low, says Ruml, the Federal Government must protect the public from business excesses, by exercising certain minimum controls. In turn, business can do much to head off further regulation by increasing the freedom of those it governs--stockholders, employes, customers and consumers. He suggests one way: give each of them a director-trustee to represent their interests on the boards of directors which run business, thus a voice in management.

Order In Labor. What labor must learn is that it, too, as a private government, must eventually be regulated. But first Ruml foresees a "period of serious conflict" to which the present turmoil over the union shop is only the prelude. Philosopher Ruml, admitting that the labor union has a proper and necessary function, approves the principle of the union shop: "It seems inescapable that those who benefit [by union bargaining] may fairly be required to share the burden."

But, as a businessman, he contends that the time is not ripe for the rapid extension of the union shop. His reason: labor leadership is "not competent to use this great power wisely." Moreover, because it is a monopoly power, Ruml argues that the union shop must inevitably lead to Government regulation of unions to bar racial discrimination, excessive production costs through "feather bedding," etc. Until "the majority of labor leaders . . . are willing to accept such regulations as the price of the union shop ... too much haste [in extending it] would cause bitter, wasteful and unnecessary strife."

Up Profits. Ruml bluntly reaffirms the principle that the great energizer of business is profits. But he candidly admits that "public opinion today is skeptical of accepting the highest obtainable profit as a desirable social standard." But he firmly believes that it is time the public learned that high profits are socially desirable.

How high should profits be? "If the goods are priced competitively, if costs are fair ... if there is no subsidy, then the higher the profits the better the interests of all are served." Without high profits--and he feels that they are now far too low--no one will risk his cash in the new enterprise which the U.S. must have.

Down Taxes. Another basic principle set forth by Ruml is that business can function consistently at a high level of productivity and jobs only if the U.S. adopts the proper fiscal policy. This means that the chief instruments of fiscal policy, the U.S. budget and taxes, should be planned primarily with an eye to maintaining purchasing power and employment. In effect, the raising of revenue through taxes should be a secondary object.

Ruml tends toward a "compensatory budget," i.e., heavy governmental spending in depression years to keep up purchasing power, diminished government spending and consumption taxes in boom years. More specifically, Ruml would levy taxes which would balance his estimated postwar budget of $18 billion only at a high level of employment (probably around a national income of $140 billion).

Below this level, the budget would show a deficit; above it, he hopes for a surplus to pay off the national debt. Taxes, once set, would be left alone. In addition he would reform the tax system along the lines of the now familiar Ruml-Sonne plan to abolish corporation taxes (TIME, Aug. 7), put the tax burden on income taxpayers. As a corollary, he would reform the policy on public works.

Ups & Downs. Ruml is sure that public works as a method of stabilizing the ups & downs of business might as well be abandoned. His reason: public works on the vast scale required would be impracticable. Instead, he would use public works as a means of stabilizing the construction industry. His hope: if this seasonal, up & down industry representing 8% of the national product could do a steady volume business, it would give stability to the whole economy.

But even there he is against Government spending as long as the industry holds to its present policy of high costs, restrictions on output, etc. Ruml would have Congress investigate the industry, reform it into a quasi-public utility.

Yes & No. The lessons which Planner Ruml preaches may well fall on many deaf and angry ears. Diehard businessmen will rage at the union shop just as labor leaders will rage about union regulation. Budget balancers will howl at his deficit spending.

Even those who lean toward a compensatory budget might well question Planner Ruml's figures. The burden of arms a postwar U.S. may have to shoulder may well boost the budget far above $18 billion (ex-Treasury Counsel Randolph Paul has predicted a budget of $25 billion).

If that happens, Ruml's tax schedules might leave the U.S. with a $7 billion deficit, even at high employment. Or they might balance the budget, only to have full employment recede as soon as the balance was achieved, leading to new deficits. If either of these possibilities occurred, the Ruml plan would prove inflationary in the long run.

But the number of the complaints the book may stir up may well prove the measure of its value. In treading a narrow middle of the road between all manner of conflicting interests, Ruml has trod on many toes. But the toe-treading may perform a service for free enterprise.

Concluded Ruml: "Without a conception of freedom, the direction of business in the future will be at best tentative and uncertain. The cliches of freedom may become the mask [for] new exploitations. . . . Not 'freedom for business' but 'business for freedom' must be the objective of business leadership."

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