Private Investment in a Laboristic Economy
| Date | 01 March 1951 |
| DOI | 10.1177/000271625127400120 |
| Author | Frank C. Pierson |
| Published date | 01 March 1951 |
| Subject Matter | Articles |
139
Private
Investment
in
a
Laboristic
Economy
By
FRANK
C.
PIERSON
nNLY
a
few
generations
ago
our
so-
V ciety
was
centered
on
the
inter-
ests
of
employers.
Today,
about
three
out
of
four
of
the
gainfully
employed
are
wage.
earners,
many
of
whom
are
members
of
strong
trade
union
organi-
zations.
According
to
Sumner
Slichter,
employees
rather
than
businessmen
are
now
the
strongest
single
influence
in
our
society.
&dquo;The
trade
unions,&dquo;
he
adds,
&dquo;are
the
most
powerful
economic
or-
ganizations
in
the
community-in
fact,
they
are
the
most
powerful
economic
organization
which
the
community
has
ever
seen.&dquo;
1
This
may
be
an
overstate-
ment,
but
few
will
deny
that
the
rise
of
the
labor
movement
has
led
to
a
shift
in
power
relationships
of
great
significance
for
many
aspects
of
modern
life.
One
of
the
critical
issues
is
how
these
devel-
opments
will
affect
private
investment
in
new
capital
plant
and
equipment,
and
attention
in
the
present
discussion
is
focused
on
this
problem.
MAJOR
DETERMINANTS
Whether
private
capital
growth
in
a
labor-oriented
society
will
slacken
is
a
question
which
cannot
be
approached
in
terms
of
any
inevitable
sequence
of
events.
A
society
with
a
high
propor-
tion
of
its
population
in
the
employee
class
and
a
relatively
strong
trade
union
movement
need
not
for
this
reason
alone
experience
either
more
or
less
rapid
ex-
pansion
of
private
capital
than
a
society
in
which
opposite
conditions
obtain.
The
outcome
will
depend
on
surround-
ing
circumstances
as
well
as
on
the
par-
ticular
policies
which
are
adopted.
Not
possessing
prophetic
powers,
one can
only
suggest
how
different
circumstances
and
policies
may
affect
the
outcome.
The
situation
at
the
two
extremes
can
be
dealt
with
at
the
outset.
In
the
one
case,
sales
in
most
lines
are
falling
so
rapidly
and
profit
prospects
are
so
un-
favorable
that
the
cost-increasing
ef-
fects
of
a
general
rise
in
wage
rates
would
be
almost
certain
to
outweigh
its
demand-increasing
effects.
In
fact,
if
prices
are
falling,
even
a
policy
of
hold-
ing
money
wage
rates
unchanged
could
well
have
adverse
results,
since
profit
positions
would
be
worsening.
This
ac-
cords
with
the
view
that
the
stronger
the
forces
working
in
the
economy
to
depress
the
general
level
of
spending,
the
weaker
are
the
demand-increasing
effects,
and
the
stronger
the
cost-in-
creasing
effects,
which
would
result
from
a
rise
in
money
or
real
wage
rates.
If
it
is
assumed
further
that
the
unions
are
determined
to
impose
this
high-wage
policy
and
that
unemployment
does
not
force
them
to
abandon
it,
expansion
in
capital
equipment
by
private
investors
will
definitely
be
deterred.
On
the
other
hand,
if
sales
are
ex-
panding
rapidly,
if
&dquo;easy&dquo;
money
con-
ditions
prevail,
if
no
serious
barriers
to
further
expansion
of
physical
output
exist,
and
if
profit
prospects
are
favor-
able,
a
rise
in
wage
rates
would
doubt-
less
increase
investment
in
the
capital
goods
industries.
This
follows
because
the
rise
in
wages
would
improve
sales
prospects
still
more,
and
risk
takers
would
be
prompted
to
assume
even
heavier
commitments.
Under
these
con-
ditions,
moreover,
costs
per
unit
of
out-
put
would
rise
little
if
at
all,
since
em-
ployers
would
be
securing
the
advan-
1
Sumner
H.
Slichter,
The
Challenge
of
In-
dustrial
Relations
(Ithaca,
N.
Y.:
Cornell
Uni-
versity
Press,
1947),
p.
4.
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