February 8, 1964
When the Swedish economist published An American Dilemma (1944), his seminal 1,500-page work on race in America, The New Republic was the only publication to assign the book to an African American reviewer. That book deserves its place in the canon of liberalism for the role it played in shifting elite opinion. Yet the book is somewhat overrated, more widely cited as impactful than actually read. Myrdal caricatured both white Southern culture and its black counterpart. He didn’t much care for the numbing effect of religion on black culture—with all the “shouting and noisy religious hysteria in old-time Negro churches.” It would take a liberal vanguard, he argued, to challenge Jim Crow, to educate the masses and prepare them for change. His book, in other words, failed to anticipate the civil rights movement.
As an outsider—a Scandinavian Tocqueville—Myrdal wasn’t hindered by any inherited assumptions about American politics. And even if he got some big things wrong, he could be a genuine prophet. As Lyndon Johnson unleashed his antipoverty programs, he already understood the dangers of racializing social policy in America. Myrdal foresaw the backlash against affirmative action and welfare; he understood that the white working class, with its racial prejudices, might turn against social policy even if it stood to gain itself.
Having to live with large pockets of poverty-stricken people in their midst is not a new experience in the American nation. Right from slavery the masses of Negroes formed such pockets, both in the rural South and in the cities South and North. Such pockets were also formed by other colored people who immigrated to work as laborers from Asia, Mexico and Puerto Rico. Most American Indians in their reservations were also poor and isolated as they are today. There were also, as there are still, pockets of “poor whites,” ordinarily of old American stock, who lived by themselves in abject poverty and cultural isolation.
I believe it is important to have in our minds this broad picture of the historical reality of American poverty as a background to the discussion of the problems facing us today. The regular, prosperous Americans have become accustomed to living with unassimilated groups of people in their midst, about whom they know in a distant and general way that they are very poor. The fact that in earlier times they themselves lived under the risk of being thrown out of work and losing their livelihood, if only temporarily, made it easier for them to feel unconcerned about the people who more permanently were enclosed in the pockets of poverty. Otherwise, the existence of all this poverty in the midst of progressive America stood out in blunt contradiction to the inherited and cherished American ideals of liberty and equal opportunity, as these ideals increasingly had been interpreted, particularly since Franklin D. Roosevelt and the New Deal.
Automation and other changes are all the time decreasing the demand for unskilled and uneducated labor. Standards are rising fast even in household and other menial work. Something like a caste line is drawn between the people in the urban and rural slums, and the majority of Americans who live in a virtual full-employment economy, even while the unemployment rate is rising and the growth rate of the economy is low. Except for a lower fringe, they experience a hitherto unknown security, for it is a tacit understanding in America, as in the rest of the Western world, that a recession will never again be permitted to develop into anything like the Great Depression. But there is an underclass of people in the poverty pockets who live an ever more precarious life and are increasingly excluded from any jobs worth having, or who do not find any jobs at all.
I want to stress one important political fact. This underclass has been, and is largely still, what I have been accustomed to call the world’s least revolutionary proletariat. They do not organize themselves to press for their interests. The trade union movement comprises only about one-fourth of the workers, mostly its upper strata who in the main belong to the prosperous majority. To a relatively higher extent than normally they do not register and vote at elections—even apart from the large masses of Negroes in the South who are prevented from doing so.
In very recent times we have seen one important break of this empirical rule of the political apathy of the poor in America. I am, of course, referring to the rebellion of the Negroes in Southern and Northern cities. Without any doubt, this is a true mass movement—so much so that the Negro leaders in the upper and middle class have had to run very fast to remain in the lead, as have, on the other side of the fence, the Administration and other whites responsible for American policy.
I am not at this time going into the question of how this movement, so exceptional to what has been the pattern of passivity on the part of the poor in America, has come about. But I should mention two things about which I am pretty sure. One is my belief that the outbreak of this rebellion just now is not unconnected with the high and, as a trend, rising rate of unemployment, which as always runs much higher—about double—for Negro workers than for whites. Another thing of which I am convinced is that this movement will not abate unless very substantial reforms are rapidly undertaken to improve the status in American society of its Negro citizens. I am optimistic enough to forecast that in the next 10 years the Negroes will get legal rights equal to the white majority, and that these will be enforced. What will still be needed are, in particular, social sanctions to defend the Negroes’ equal opportunities to employment, against the resistance of trade unions more than employers and the business world, particularly big business. And even when all this is accomplished, the Negro masses will nevertheless continue to suffer all the lasting effects of the disabilities and disadvantages of their poverty, their slum existence and their previous exclusion from easy access to education and training for good jobs.
Indeed, it is easy to understand why some of the Negro leaders, and some white liberals, are now raising the demand for a new Marshall Plan to make good the effects of the maltreatment in America of the Negroes from slavery and up till this day. Nevertheless, I am convinced that this demand for a discrimination in reverse, i.e., to the advantage of the Negroes, is misdirected. Nothing would with more certainty create hatred for Negroes among other poor groups in America, who have mostly been their bitterest enemies as they have been the only ones who have felt them as competitors. Moreover, special welfare policies for Negroes are not very practical. Negro housing cannot very well be improved except as part of a plan to improve the housing situation for poor people in general. The same is true of education. Special welfare policies in favor of the Negroes would strengthen their exclusion from the main stream of American life, while what the Negroes want is to have equal opportunities.
What America needs is a Marshall Plan to eradicate poverty in the nation. This is a moral imperative. The unemployed, the underemployed and the now unemployables are also America’s biggest wastage of economic resources. The poor represent a suppressed demand which needs to be released to support a steady rapid growth of American production. The goals of social justice and economic progress thus are compatible. A rapid steady economic growth is impossible without mobilizing the productive power of the poor and clothing their unfilled needs with effective demand. The existence of mass poverty in the midst of plenty is a heavy drag on the entire economy.
The statistics on unemployment in America do not tell the whole story. Besides the four million unemployed there are the workers who are only part-time employed, those who have given up seeking work, and all the underemployed. It is an ominous fact that even the prolonged upturn in production from 1961 and onward has not implied a substantial decrease in the rate of unemployment. Nobody seems to expect that the continuation of the present boom will bring down unemployment to a level that could be considered even to approach full employment. And nobody assumes that there will not be a new recession, if not this year then the next. It is reasonable to expect that the unemployment rate will then reach a new high point. There are definite signs that the trend is rising.
For this there are explanations. I believe it is important to stress that none of the specific explanations put forward makes a rising trend of unemployment inevitable, or could by itself prevent the attainment of full employment. Only in conjunction with each other do these influences have the present disastrous result. If in the Sixties exceptionally many young workers enter the labor market, this should not necessarily mean more unemployment. Production could expand rapidly enough to absorb them, and all the new workers could have been properly educated and trained so that they fitted the demand for labor as it has been changing. Long ago, Professor Alvin Hansen and other economists, including myself, used to think that in rich countries, where capital is plentiful, a rapid population increase would rather act as a spur to expansion. It would stimulate the demand for new housing, and for new schools, teachers, and productive capacity.
Likewise, automation should not by itself lead to unemployment if output expanded enough and the labor force were adjusted to fit the change in demand, caused by automation itself among other things. There are countries with full employment that have an equally rapid pace of automation. There, automation is viewed as driven forward by the scarcity of labor and as resulting in higher productivity of labor, higher earnings and a rising consumers’ demand for products and services: in America, as a cause of unemployment.
Our Changing Society
What type of society are we moving toward in the modern rich countries? A continually smaller part of our total labor force will be needed in agriculture, manufacturing industry, heavy transport, distribution of commodities, banking and insurance. If we could countervail Parkinson’s law, which for various reasons is working with particular force in America, even many sectors of public service would demand less labor.
It is the serious lag in adjusting the education and training of our labor force to the needs of this new society which is the general cause of the situation where we have serious overemployment in some sectors of our economy, at the same time as there is an uncomfortably large and growing residue of structural unemployment and underemployment that cannot be eradicated by an expansion of our production that is feasible.
Against this background it is easy to establish the broad lines of the policies that we will have to apply in order to cure our economic ailments. Huge efforts will have to go into education and vocational training, not only on the higher levels but on the level of grade schools and high schools. Particularly will we have to lift the level of elementary education for the poor people in the urban and rural slums, who are not now getting an education that fits them to the labor market. We must at the same time undertake the retraining of the older workers who are continuously thrown out of jobs without having the abilities to find new ones in our changing society.
I see it as almost a fortunate thing that America has such vast slums in the big cities and smaller ones in the small cities; so many dwellings for poor people that are substandard; so many streets that need to be kept cleaner; such crying needs for improved transport. To train unskilled workers to do such jobs should be easier than to make them teachers or nurses.
Increased Public Spending
It should be stressed, however, that a primary condition for success is rapid and steady economic expansion of the national income. Without an increased demand for labor, no efforts for training and retraining workers on a mass scale can succeed. This is the important argument for the view that expanding the economy is the essential thing. Expansion is, in a sense, the necessary condition for any effort to readjust the supply of different types of labor to demand.
A common characteristic of all the reforms directed at raising the quality of the labor force and eradicating poverty in the midst of plenty is that the increased expenditure will be public expenditure. Even when poverty is gone, when there is little or no unemployment or underemployment, a relatively much larger part of the nation’s needs will have to be met by collective means. In the future society toward which we are moving, where our productive efforts will increasingly have to be devoted to the care of human beings, health, education, research and culture, and to making our local communities more effective instruments for living and working, public spending will be an ever larger part of total spending. This is because it is not very practical and economical, and in most cases not even possible, to rely on private enterprise for filling these types of demands.
This brings up the problem of balancing or not balancing the federal budget. Large sections of the public and Congress hold, on this question, an opinion that has no support in economic theory and is not commonly held in other advanced countries: that, in principle, expenditures of the federal budget should be balanced by taxation.
A recent experience from my own country Sweden must seem curiously up-side-down to Americans. In a situation of threatening overfull employment and inflationary pressure, the Swedish social democratic government, which has been in power almost a third of a century, felt that it needed to put on brakes, and decided to raise taxation to a level where, for a while, we actually had a balanced budget in the American sense. The political parties to the right of the party in power criticized the government fiercely for overtaxing the citizens, and insinuated that this was a design to move our economy in a socialistic direction, by robbing the citizens and private business of the funds they needed. So differently can the problem of balancing the budget appear in two otherwise very similar countries. In fact, you have examples nearer at hand. When the railroads were built in America, the federal government favored the railroad companies in various ways, which occasionally broke the rule of balancing the budget.
The analogy that a nation must handle its purse strings with the same prudence as an individual is false. An individual is not in the position to borrow from himself. Moreover, if the implication is that the government should not borrow even for productive purposes, it is a rule which no private householder follows, or should follow, if he is wise and prudent. And we know that there has been a huge increase, both absolutely and relatively, of private borrowing by business as well as by consumers.
This does not mean that Congress should not carefully weigh each dollar that is spent and each dollar that is taken in by taxation or other means. But the weighing should be in terms of progress and welfare for the nation. I can see no virtue in America having decreased its national debt in postwar years to half its size compared with the national income, while abstaining from undertaking a great number of public expenditures that would have been highly productive from a national point of view. America has been satisfied for a whole decade with a rate of growth of only a little more than one percent per head, and with unemployment rising to the present high level. In the interest of public enlightenment I would wish my American colleagues to spend a little more of their time disseminating some simple truths about budget balancing and related issues. America cannot afford to remain the rich country that has the highest rate of unemployment, and the worst and biggest slums, and which is least generous in giving economic security to its old people, its children, its sick people and its invalids.