As Victor Hugo said, “There is one thing stronger than all the armies in the world, and that is an idea whose time has come.” In frontier days [before 1890], 75% of the population lived on farms in which one’s crop depended on the weather and one’s own decisions and efforts e.g., your poverty is your fault so don’t ask others for help. That was the big idea.

WPA

As Victor Hugo said, “There is one thing stronger than all the armies in the world, and that is an idea whose time has come.” In frontier days [before 1890], 75% of the population lived on farms in which one’s crop depended on the weather and one’s own decisions and efforts e.g., your poverty is your fault so don’t ask others for help. That was the big idea.

Inventions in the era before 1920 so increased productivity in agriculture that by then half the population had left farms where machinery had taken over their tasks and moved to cities where factories were offering them jobs. But, something had changed in that historic transition: now the fate of urban workers no longer depended mostly on their own efforts but was due to worldwide phenomena beyond their control and correctible only with public assistance.

What hadn’t changed so quickly was the simple idea of accountability. Men still believed that they should work and whether they worked was their responsibility. Work is clearly commanded in the Bible, equal pay for unequal work was unsuccessfully tried by the first Christians and the Pilgrims, and working for your keep was a firmly-held value in the thirties.

This being the case, fixing the Great Depression presented a serious policy question e.g., providing families with free food—the dole—or providing men with so-called make work that maintained their dignity and self-respect. The Roosevelt administration had no manual to go by since this was unprecedented given the shift in demographics from farm to city. The idea of work relief won out over the dole in this philosophical contest and the Federal Emergency Relief and Construction Act of May 1932. This act marked the beginning of federal responsibility which offered emergency loans to the states to help meet the costs of relief. It began with disbursal of relief in cash but went on to create the Civilian Conservation Corps in March 1933 which offered jobs to young men. We looked at it last week. This was the new big idea.

WPA-type government sponsored public works was and remains a viable solution for the nation. It provides work for workers and gives the public something for their money—a timely post-election topic for Congress.

In May 1933, Congress created the Federal Emergency Relief Administration with awarded grants to the states for both work and direct relief. It lasted until 1935 when the economy improved. In 1935, the emphasis of the Roosevelt administration shifted from relief to government-sponsored public works that infused money into the economy—thus overcoming some of the insufficient aggregate demand—and preserved the dignity of the workers.

The federal government continued attempts to stimulate the economy with creation of the Public Works Administration [PWA] in 1933. The PWA morphed into the Works Progress Administration [WPA] in 1935 which assisted in building La Guardia Airport in NYC.

By the time the WPA disbanded in 1943 it employed 8.5 million people. They tried to provide one paid job for all families in which the breadwinner was unemployed. State and local governments provided 10-30% of the costs. They built airports, dams, highways, and sanitation systems. They created a Division in 1937 responsible for white-collar projects including education, recreation, and arts programs at an estimated costs of $1200 per worker per year.

At its peak the WPA employed 3.3 million workers in 1938.Over 40,000 artists and other talented workers were eventually employed. At its peak, 12,700 performers and 6,686 writers were employed. Scores of public buildings today have beautiful murals painted by WPA artists.

Next Big Earthquake [AI]

Successive revolutions in productivity have eliminated jobs of the working class, hollowed out the middle class, and inordinately rewarded owners [capital] e.g., the 1% who chose to retain the profits it generated rather than raise wages “Regression analysis has identified economic dissatisfaction coupled with anger directed at a political establishment that ignored the pain of the people left behind as the two factors that mattered most in the recent presidential election.” This has not escaped the notice of our youth. “More young people have been dealing with bouts of depression in recent years, researchers say. The annual rate of people ages 12 to 20 reporting a major depressive episode jumped 37% from 2005 to 2014.” [1]

What was true of individuals is also true of firms. The “frontier firms” or top 2% of global firms saw their labor productivity increasing 2.8% a year against 0.6% for the rest according to the OECD. Diffusion in a knowledge economy is harder because of its dependence on workers creating and possessing proprietary knowledge—thereby inhibiting diffusion. [2]

Historian Robert J. Gordon believes the rate of growth in productivity—on which improvements in our standard of living depend—peaked permanently in 1970. He thinks the great age of progress is behind us and the age of stagnation is permanent for most Americans. [3]

“ The election became a referendum on globalization and immigration when the real issue was jobs for the working class. “….yet there has been little discussion about the next big earthquake—artificial intelligence [AI], smartphones that can diagnose a melanoma [from across the globe]. Globalization may have ravaged blue-collar America, but AI could cut through the white-collar professions in much the same way. …Another major economic shift is coming, perhaps sooner than people realize. Many of the jobs in today’s economy will change fundamentally during the next 20 years in which machines and software [algorithms, robots] supplant humanity.”][4]

[1] TimeNov.28, 2016, p10.

[2] The Economist, Nov.12, 2016, p62.

[3] Gordon, Robert J., The Rise and Fall of American Growth, Princeton Univ.Press,2016.

[4] Yardley, Jim, States of Confusion, The New York Times Magazine, 34-57.