Albert Deane's "American Plan"

[Ron Galea <rgalea@xxxxxxxxxxxxxxxx>]

Friends,

Please forgive me if my posting is inappropriate to pkt.  I recently
read Benjamin Kline Hunnicut's _Work Without End: Abandoning Shorter
Hours for the Right to Work_ (Philadelphia: Temple UP, 1988), and was
intrigued by his account of the "American Plan" proposed to the
Roosevelt administration in 1933-34 by Albert Deane, president of
GMHC.  Here is the gist of the plan as Hunnicut tells it (sorry about
the length):

	Deane ... envisioned the establishment of a revolving fund for
	unemployment compensation supported by a tax on employers.
	this tax would be geared to industry's "excess producing
	capacity" by means of a surcharge on worker "overtime".  The
	overtime would be calculated on the basis of the average
	weekly hours of all workers, *employed and unemployed*, in the
	country over the preceding ten years.  This would represent
	the "highest average employment we have been able to attain",
	and as such would constitute the basic national workweek --
	would define "full employment".  The second step would be for
	the designated Labor department board to ascertain total work
	hours in individual industries by a monthly survey, dividing
	that total by the number of workers in that industry,
	*employed and unemployed*, to find the monthly average
	workweek.  If the monthly average fell below the ten-year
	industry average, this would indicate a slump in economic
	activity, and the countercyclical spending feature of the plan
	would be put into operation.  Workers falling below the
	ten-year average would receive a wage supplement at the rate
	of one-half their normal hourly pay for the weekly shortfall.
	but whenever a worker was employed more hours in any week than
	the monthly or ten-year average (whichever was lower), the
	employer would be required to pay double for the overtime.
	the worker would receive time-and-a-half pay, and the
	remaining half-time wages would be paid as a tax into a
	"National Employment Fund", which would be used as a cushion
	for recession.  All unemployed workers would be paid half
	their normal salary from this fund, but workers with a weekly
	hour deficit would benefit only during an "hours recession".
	(pp. 233-34)

Deane intended his plan to stabilize consumption, redistribute work
(on the assumption that, at some point, employers' interests would be
better served by new hiring than by surtaxed overtime), and limit
"excess production".  There was no attempt to counter long-term cycles
but only work-week "recessions" as they occurred.  If low average
hours persisted, they would gradually become the new ten-year norm;
Deane's plan only worked to spread the work -- and the purchasing
power -- that the economy made available.  On the other hand, Deane
did believe that the State should be the employer of last resort, and
proposed a scheme of public works to complement his plan.  The House
Labor Committee, under Rep. Wm. Connery (Mass.) drafted a bill to
execute the "American Plan", but the draft was shelved in favor of the
Social Security bill, and nothing came of it.

Now, I am not an economist, so I'm putting the question out to pkt's
professional ecos: did Deane's plan have merit, either as drafted or
in its underlying principles?  How far would such principles be
applicable in our day?

Cheers,

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Ronald J. Galea                     E-Mail: rgalea@xxxxxxxxxxxxxxxx
Department of English               University of Toronto, Canada
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