Automation is irrevocably changing the shape of the American economy and the work-pattern of the American people. With the rapid development of self-regulating machines, unskilled, semi-skilled and white collar workers have in turn been left jobless. Since the mid-fifties unemployment has tended to rise in times of prosperity as well as recession.

Almost as if they lacked a sense of history, the Government economists have treated automation an aberration rather than the fundamental condition of future economic development. The new technology calls for readjustments of policy geared to a vision of structural change; but they have not been forthcoming.

The President's plan to reform the tax mechanism, set forth in the budget message as a panacea-of-sorts, was described by Leon Keyserling as "a pigmy sent out to do a giant's job." The economist explained to the Joint Economic Committee that the Kennedy tax program assumes that awarding rebates to those in the upper-brackets will provide the financial and psychological impetus to reinvest. But the program rests on a hope, and the hope itself entails certain assumptions about the risk-taking mentality of the prevailing industrial leadership.

At one point in his budgetary address the President did mention that tax reform would help the economy toward its goal of "full employment" (a level which he, like Eisenhower, before him, defined as a 4 percent unemployment rate). The Administration has thus taken a third-hand role in trying to reach a fairly conservative employment level.

There seems little reason to expect that such an indirect governmental commitment can begin to solve the problems of unemployment. Eighty thousand new jobs must be created each week for workers displaced by machines plus others entering the labor force. The United States must foster "a new DuPont every week," as Walter Reuther put it, just to hold the employment rate steady.

Those who fear governmental participation in the economy insist that maintaining a margin of unemployed fellow-citizens is "the price we have to pay for prosperity." This readiness to degrade a minority for the benefit of a prosperous majority implies moral acceptance of the breadline as a way of life (for others). To advocate a margin of unemployment as if it were static or intermittently fluctuating is to ignore the dynamics of technological unemployment in America. Moreover, it is not only the jobless who suffer. People in mills and factories and offices throughout the country today live in fear that their seniority may soon be insufficient to save their jobs when the next lay-off comes.

The waste and inefficiency of unemployment were emphasized both in ethical and commercial terms when Secretary of Labor Willard W. Wirtz told the Joint Economic Committee that "more manpower had been lost in the past year of unemployment than in 35 years of strikes." Wirtz added that if unemployment statistics properly embraced young people trying to get into the work force, the poorly educated, the semi-skilled and the non-white, the jobless rate could be placed as high as 12 percent.

Public concern and Presidential indignation, however, have focused largely on the melodrama of strikes rather than on the tragedy of unemployment. The newspaper dispute, the East Coast dock strike, and a prospective walkout by the rail-road employees served to evoke the image of "featherbedding" by reactionary union leaders (ironically, the Typographers' rank-and-file now demand more advantageous terms than Mr. Powers had settled for).

But what if the alternate to mass feather bedding is mass unemployment? In both the newspaper, shipping and railroads, technological progress is not creating jobs while it obviates them. Nor will railroad jobs be opening up twenty years hence. The fact is that automation renders certain jobs and skills extraneous, and just a handful of growth industries (chemicals, electronics, book publishing) are expanding at a rate broad enough to offset the modernization lay-offs.

Eventually automation, like previous technological upheavals, should lead to new industrial expansion. But only if the Government acts to speed and case the process can this country hope to avoid the protracted dislocation and human suffering that characterized the historical analogues of automation.

A program to combat the possibility of an aimless, technically helpless generation in America would certainly be worthy of the long, twilight struggle envisioned by the President. The questions raised by the structural changes in the economy are national in character and scope: they deal with the level of education and vocational training to which the nation must aspire, the composition and purpose of the labor movement, and the uses to which the society will direct its leisure. Certainly the tone of American life will change in the next twenty years, and that change need not imply misery, insecurity and a Luddite reaction to progress--if the Administration acts with foresight.

To Ease the Readjustment

The Federal Government should embark on a policy of full, rational employment by establishing a United States Employment Agency, staffed, financed and chartered to sponsor research, make policy recommendations to the President, and administer necessary compensatory, retraining and relocation programs. With its national perspective, such an agency could treat regional and industry-wide patterns of disruption in the context of structural economic change.

The Agency should therefore consider the following approaches to meaningful employment:

* Endorsement of a 35 hour work-week in those industries where a 40 hour week is causing layoffs and/or featherbedding.

* Direct federal financing of an urban renewal program to eliminate the backlog of substandard housing in which, according to the 1960 census, a fifth of the nation dwells.

* Parallel sponsorship of a school, hospital and public works program. The AFL-CIO estimates that a directly financed federal undertaking to eliminate the backlog of necessary construction, would keep ten million men working for twenty years and would cost ten billion dollars annually.

* A retraining program, intellectually and financially capable of defining the skills needed in tomorrow's economic structure, and of reorienting men and women toward these skills. (Here several questions loom: given the failure of pilot projects, it becomes clear that sufficient retraining will cost billions of dollars. What would be the acceptable cost-per-worker of retraining? Beyond what age should displaced workers not be retrained? And, most important, from where is the money going to come if worker-retraining is given real priority?

* Recommendation that early retirement on social security be an alternative to relocation allowances and unemployment benefits for workers over fifty who are displaced by machines. Plans should be considered in which companies who automate with financial assistance from the government must in turn pay part of the compensatory benefits to workers they displace.

With the formation of the U.S. Employment Agency, the President should choose the most effective means at his disposal to remove the stigma with which the concept of economic planning has been damned. Reference might be made to the example of Western Europe, where thriving free enterprise has been made possible by government efforts to structure the economy.

Into the Capital Market

In addition to providing public assistance for the displaced, government economists and policy-makers must strive to hasten the Automation Revolution to the point where industrial expansion gives rise to new jobs.

Unfortunately, the Administration's fiscal policies assume that the tax rebate will set in motion a self-perpetuating cycle of reinvestment, opening up new jobs, new income, new demand. But the corporations to whom the Administration intends to refund capital already have extensive plant and production facilities in existing industry. Investment by such mature firms tends to take the form of buying equipment to reduce costs; in a word, it takes the form of automation. Thus the business-as-usual cycle may well stop half-way, before new job opportunities are opened. The firms benefitting from the tax cut will be able to increase their production and, in some sense, increase the GNP, without improving the level of employment.

Moreover, there exists no guarantee that tax reduction will produce an increase in even this sort of investment; precisely because the large public corporations are run by essentially conservative management corps, there is no reason to assume that they will take the risks involved in product innovation and expansion of output. As the enormous concentration of capital in the arms industry demonstrates, these men prefer to have a demand for their product assured in advance, and are not overly fond of the fickle consumer market-place. From the corporation's point of view the priority is not one of creating jobs, but quite the opposite: maximizing profits by eliminating jobs.

If the corporations choose either to save the tax rebate which the government offers, or to distribute it among their stock-holders, society has gained nothing. Capital will simply have passed from the timid hands of management to the even more cautious hands of the nation's banking institutions.

Yet the instinct of the President and his advisers is correct to the extent that investment must be encouraged if the economy is to regain its vigor. The problem here is how to place capital in the hands of new entrepreneurs, much of whose investment will be in plant and whose dollars therefore will have the "multiplier" effect described by Keynes. (It is assumed--necessarily, through perhaps inaccurately--that such men exist, either independent of the large corporations, or within them, but anxious to be free of them).

Since the tax reduction program sets out to subsidize private investment (but, as indicated, with no assurance that economically useful investment will result), the government should consider entering the capital market directly, making long-term, low-interest loans available to bright risk-takers whose enthusiasm has failed to impress the men at Morgan or Chase, Manhattan. The U.S. Government does precisely this in an effort to encourage development in ex-colonial countries through its contributions to the World Bank and the International Monetary Fund; perhaps such direct credit expansion is necessary here, too, where the managerial mentality is so firmly entrenched in the seats of private economic power that entrepreneurial spirit is just a memory.

This "national" version of the International Bank might grant priority to investment in America's own underdeveloped areas, like West Virginia or western Massachusetts. Similarly, those prospective entrepreneurs would be encouraged whose proposals could yield a significant multiplier effect. Thus enterprises in commerce, education, research and development would be supported in the areas where they are most needed.

The scheme might also end the near-sighted economic rivalries between political figures who compete to lure industry to their states. It would impress upon younger businessmen the principle that maximization of profits cannot serve as the lone criterion for American industrial development.

But even governmental presence in the banking structure, as suggested above, would represent an "indirect" approach to achieving full employment. Direct action entails government participation in the economy as a capitalizer, and would require a political and financial leeway which the Congressional right-wing has not granted the Administration unless defense contracts were being issued.

This year's $57 billion defense expenditure is supplying only 3.1 million workers with jobs in the increasingly automated defense industries; and the multiplier effect of arms spending is muffled by the nature of the product, which is not made to be used, and which creates few ancillary needs. Because of the reinvestment pattern in the highlylucrative areas of defense production, more and more money is being spent each year to keep fewer and fewer men working.

If some of the $57 billion could be diverted, retraining, urban renewal, education and public works programs could be vastly broadened in response to automation. This fact in no way disputes the logistic necessity of the current defense budget, but does suggest that the government's ability to expand the volume of job opportunities in the United States is limited by the continuing arms race. The cold war has frozen the economy by restricting the political and financial means with which the government can effectively combat unemployment.