Postwar economic problems can be divided usefully into two categories: The immediate postwar problems of reconversion to a peacetime economy and the long-run problem of full employment. It is my view that effective government policy designed to cope vigorously with these problems would promote the workability and expansion of our system of private enterprise and ensure the continued development of our free political institutions.

The economy is, under the war program, undergoing a drastic distortion. It will be necessary to reconvert it back to normal civilian output. This task of reconversion back to normal should be undertaken as rapidly as possible.

In this reconversion period we shall be in great danger of experiencing a postwar inflation if we do not continue the wartime controls in this limited interval.

On the one side there will be a great accumulated demand for durable consumer's goods of all kinds. On the other side it will take some considerable time before industry is retooled and equipped to produce a large supply of civilian goods, in this interval, therefore, demand will greatly exceed supply and the wartime peace controls, including rationing, will almost certainly be necessary in order to prevent a chaotic inflationary development.

As soon as the gigantic reconversion process is over and industry is again equipped to satisfy in large volume the requirements of civilian demand, all these direct controls, including priorities, allocation, rationing and price control can and should be removed.

Bases for Prosperity

Taking a long-run view of the postwar period, it is probable that great technical developments will emerge from the war experience. Improved plant layouts, new and cheaper methods of production, the discovery and development of substitutes, new raw materials, new processes and new products will offer a great stimulus to the postwar economy. On the basis of this technological development plus the accumulated shortages in housing, accumulated deficiencies in the ordinary type of public works especially in urban communities, shortages in durable consumers' goods; and in plant and equipment for civilian industry, there is the basis for postwar prosperity. A balancing and stabilizing fiscal and monetary policy is necessary to forestall turbulent and speculative tendencies.

Sooner or later according to all past experiences this postwar period of prosperity will end in a depression unless we adopt a positive program to maintain full employment. This is the great new field of economic statesmanship. Our modern highly urbanized, highly industrialized sections can no longer stand the social strain and economic shock of great depressions.

The program to maintain full employment, and an ever advancing national income as productivity increases, requires a more positive role by government than we have had in the past. We have neglected the conservation and development of our material and human resources. By means of sound public investment projects we can raise the productivity of the country, increase the real income, and open up investment outlets for private enterprise.

These developmental projects include urban redevelopment; express highways through and around our metropolitan centers; reorganization and rebuilding of our terminal facilities; the development of our largely undeveloped river valleys, including hydroelectric power, reforestation, soil conservation, flood control, irrigation projects, sewage disposal projects, and cleaning up of polluted rivers.

Social Security

Several pertinent comments may, be made with respect to the Beveridge and the American social security programs.

Critics sometimes caricature the program of security "from the cradle to the grave" as a beautiful scheme of living in luxury without working. This it is not. An adequate system of social security would become completely unworkable spread unemployment will not endure, unless we could look forward to an expanding economy with high levels of income and employment.

No system of unemployment insurance, for example, can possibly stand up in the long run in a society where any large proportion of the working population is continuously unemployed.

It needs to be stressed, however, that a social security program does not make it more difficult to insure an expanding economy at high levels of income and employment. It is not true that social welfare expenditures constitute a drain on national income and tend to depress the economy.