FIGURE III U.S. program for general and complete disarmament submitted to the U.N. in September 1961 First Stage 1. U.S. and U.S.S.R. armed forces are to be reduced to 2.1 million each. 2. The levels of armaments are to be reduced by "balanced steps." 3. Production of strategic nuclear delivery vehicles is to be discontinued or limited. Second Stage 1. A U.N. Peace Force is to be established. 2. National armed forces are to be further reduced by "balanced steps." 3. Levels of armaments, including stocks of nuclear delivery vehicles, are to be further reduced. Third Stage 1. Each nation is to keep only those nonnuclear forces and armament required for internal order. 2. The U.N. Peace Force is to be fully functioning. 3. The manufacture of armaments is to be prohibited except as needed for internal order or the U.N. Peace Force. THE FEAR OF DEPRESSION A net reduction of defense expenditures of $6 billion a year, or about 1 percent of the gross national product, would be a far smaller percentage of the GNP than was represented by the post-World War II and post-Korean defense cuts, which for a time were, respectively, 30 and 3 percent of GNP. However, an initial deflationary net impact of $6 billion a year could cause a serious slowdown. The reduction in defense spending would be reflected in reduced incomes for employees of the defense industries and of the industries supplying, directly and indirectly, the defense contractors. Declines in personal and corporate incomes would occur. In addition, the decline in overall demand would lead to a reduction in capacity and inventory requirements and thus to some falloff in investment. As a result, a $6 billion yearly cutback in defense spending, if not offset, might well generate a total decline of several times that amount in the national economy. We have never had a situation exactly parallel to this in our history, and we cannot be sure just how this would affect business and consumer anticipations and expenditure plans. LONG-TERM ADEQUACY OF DEMAND The essential economics of the situation do not create the difficulties as much as do the institutional and attitudinal limitations of an essentially political character. With a sufficient willingness to embark on new offsetting nondefense programs and/or to contemplate drastic tax reductions, the problem of maintaining the level of demand required to employ our expanding resources for civilian production may be less than many anticipate. We have, indeed, a considerable degree of choice as to just how to handle the economic adjustments to disarmament. The major problem of policy planning would be in choosing an initial policy which would be sufficient to prevent serious unemployment and excess capacity. There is a wide range of fiscal and monetary policies which have a comparable impact on aggregate demand but different efforts on the composition of output and on the allocation of resources among competing needs. The balance struck between tax reduction and increased Government spending will be influenced by the relative importance accorded to private demand for goods and services such as food, clothing, housing, recreation, health, high education, and research and development-as against public demand for roads, space exploration, urban renewal, area redevelopment, public health, and social services. OTHER CONSIDERATIONS A good deal of attention needs to be given to the fundamental economic climate which would encourage private business to take the initiative in making the necessary and difficult changes in product lines and markets served which would be required in converting from military to commercial production. A balance needs to be struck between tax reduction and increased Government spending. Most of the discussion thus far has centered on the possibilities for expanding Government programs. Almost nothing has been done, at least in any of the officially published disarmament work, concerning alternative types of tax reform and other needed improvements in the general business environment.* This may be an important gap in our disarmament planning and should be placed on the research agenda. Numerous estimates have been made of the funds that could be channeled into social welfare programs, area redevelopment, urban renewal, foreign aid, natural resource development, and many others. To achieve that balance between Government spending and tax reduction, research might be devoted to such other questions as the types of liberalized depreciation systems that would provide the most effective incentive to increase business investment and, hence, economic growth; to the proper role of downward adjustments in both corporate and individual income tax rates in a general program of tax reform; and to the necessary changes in the taxation of investments, including reviews of capital gains and dividend taxation. The various economic regulatory agencies of the Federal Government represent another neglected facet of the problem. There are enough examples in their past performance to raise considerable concern that, if ignored, the operations of these agencies might offset much of the positive action being taken to effectuate a successful economic adjustment to disarmament. From an overall viewpoint, the bulk of the production of goods and services in the United States, including military weapons, is now carried on in the private sector of the economy. In the event of disarmament, it would be critically important to carry out public policy so as to avoid unwittingly a basic shift from private to Government ownership and operation of business enterprise. CONCLUSION The purpose of this article in drawing attention to some of the difficulties resulting from disarmament is not to discourage, but to point up the problems to be met. The recent panel report of the Arms Control and Disarmament Agency stated that we "should feel no constraint on the economic side in adjusting defense expenditures to whatever level seems best to accord with our political objectives." Our economy does not require defense spending for its continued growth and well-being. On the other hand, it could support an even larger defense program if that were desirable from a political or military viewpoint. A transition to a more peacetime economy will be successful only if we recognize and take proper account of the job involved in making a major change in the structure of American industry. If we could channel the same scientific and industrial skills to peacetime pursuits that are now devoted to military programs, we would make a most significant contribution to human welfare and progress. Senator KENNEDY. Thank you very much, gentlemen, for appearing here and making a very informative statement before the committee. Thank you very much. The committee will stand in recess until tomorrow morning at 10 o'clock. (Whereupon, at 11:15 a.m., the subcommittee adjourned, subject to the call of the Chair.) U.S. Arms Control and Disarmament Agency, "The Economic and Social Consequences of Disarmament." reply to the inquiry of the Secretary General of the United Nations. March 1962: United Nations, "Economic and Social Consequences of Disarmament,' February 1962. U.S. Arms Control and Disarmament Agency, "Economic Impacts of Disarmament," op. cit., p. 3. NATION'S MANPOWER REVOLUTION WEDNESDAY, DECEMBER 4, 1963 U.S. SENATE, SUBCOMMITTEE ON EMPLOYMENT AND MANPOWER OF THE COMMITTEE ON LABOR AND PUBLIC WELFARE, Washington, D.C. The subcommittee met at 10:30 a.m., pursuant to notice, in room 4200, New Senate Office Building, Senator Joseph S. Clark (chairman of the subcommittee) presiding. Present: Senators Clark, Pell, Javits, and Jordan. Committee staff members present: Stewart E. McClure, chief clerk of the subcommittee, and John Stringer, minority associate counsel. Senator CLARK. The subcommittee will resume its session. We are happy to have here four very able witnesses who will discuss the problems with which the committee is concerned as a panel and I will ask that the statement of each shall appear in the record at this point. (The statements referred to follow :) PREPARED STATEMENT BY DR. JEROME B. WIESNER, DIRECTOR, OFFICE OF SCIENCE AND TECHNOLOGY Mr. Chairman and members of the committee, I am very pleased to have the opportunity to respond to your request for my comments on the relationship of science and technology to our social and economic well-being. I would like to make it clear at the beginning that I am not an expert on many important aspects of this problem; however, I have had many opportunities and indeed many needs to think about the impact of science on the development of our Nation and in fact on the welfare of mankind in general and this testimony will reflect the insights I have thus developed. It is quite apparent that maintaining a vigorous economy in the years ahead, fully utilizing our labor force and truly capitalizing on our opportunities, is our major challenge, a challenge whose solution is made difficult by the complexity and rapid change of modern technology and by the need to remain ever aware of international challenges to our well-being as well. We have the opportunity— the means to create a much-improved society for ourselves in the course of the next decade. Indeed, we need to do so, for the consequences of not harnessing fully our technological and economic skills and our growing labor force could be dire indeed. On the one hand, we have the very real opportunity of satisfying a vast array of community and individual wants; on the other, we must avoid ever-increasing technological unemployment and disenchantment with our society. I would hope that the studies your committee proposes would so clearly illuminate the opportunities before us that the Nation would insist upon capitalizing on them. Our present preeminent position in the world results, I believe, from three principal factors. First, our unusually favorable endowment of productive resources-human and natural; second, the nature of our society which encourages individual initiative and readily awards achievement; and, third, which obviously flows from the second, the unusual zeal and success which have been evidenced in the exploitation of technology in support of our objectives. 98-961-64-pt. 9- 21 It is interesting to note that science and engineering have always played an important role in the development of our country, and, in fact, many times in the past have been the subject of soul searching as serious as that we are experiencing today. For example, technical problems such as surveying, standards of weights and measures, navigation, agricultural research, were important in earlier periods, and our forefathers found it desirable to support work in these fields with Federal funds. Both private and Federal establishments were created to carry out research in these fields. There is amazing similarity between the arguments about the merits and disadvantages of a Department of Science that were raised in 1884 and much of the current discussion on the same subject. In fact, one could reproduce whole paragraphs of the 1884 debate verbatim and the material would have a contemporaneous ring. However, in the past the actual sums of money were relatively small compared to those involved in the Federal support of science today, although I imagine that they were not insignificant for their times. In the recent past, that is the period from 1900 or just a bit earlier until the beginning of World War II, private exploitation of technology and private support for the underlying sciences was a major factor in our national growth, and the exciting technological advances which contributed so much to the development of our Nation-the telegraph, the railroad, the electric light, the electric streetcar, the telephone, the automobile, the radio, products of chemistry, many advances in agriculture, and even the triumphs of medicine-were largely the result of private efforts undertaken for profit. Basic research, primarily a university activity, was supported by philanthropy. It is important to appreciate the role of technology in our society, to understand its trends, its dangers, and the opportunities that it offers. Man is using his knowledge of the physical world to greatly enhance his own productive capabilities and to enrich his store of resources. By the ability to control energy he has greatly increased the work that a human being can do; with modern transportation and electronic communication facilities, he has greatly extended his range of operations; and by the mastery of biology, chemistry and physics, metallurgy, and agricultural science he has opened a boundless store of resources for man's use. Consequently, it no longer takes the full-time labor of many men to provide a bountiful life for one; it is not necessary for a modern technological society to resort to conquest to obtain wealth and well-being. This is the wonderful fact of our lifetime. The increased productivity that modern technology makes possible is the key reason for this basic change in man's relationship to his environment. It is also the cause for much alarm; the most spectacular manifestation of this increase in productivity can be seen in our agricultural economy where a mere 5 million workers on the land, about 6.7 percent of our civilian labor force, feed this Nation and do it very well. In a traditional society, this would require 90 percent or more of the work force. The consequences of the increased productivity can be seen all around us. On the positive side is the abundance of goods and services available to us. On the good side, too, is the fact that our society is one in which more and more individuals are being allowed to work nearer to the limits of their native abilities with all the satisfaction and rewards that that entails. Unfortunately, though, these developments generate new problems, too, one of the most serious being that of worker displacement. There are problems of great concern to us-contamination of our environment which the careless employment of new technology leaves in its wake, the waste of natural resources and the spoilage of much of our land. And hanging over all our lives, the vast powers for destruction which modern science has made possible. If we are to make the most of our opportunities, we must find ways to use our available manpower and technical resources to maximum advantage to solve existing problems, and we must create new industries. New industries and new products are primarily the responsibility of the private sector of our society, but the Federal Government should be seeking to maximize the possibility that they do emerge. To do this, we should insure that an ample supply of technical manpower is available to private industry, encourage basic research which might lead to new applications, and we should see to it that social conditions, particularly laws and labor practices, do not unduly discourage such developments. There are increasing opportunities for important investments in the public sector of our country. The opportunities—which are really needs are enor |