Ending the Depression Through Planned Obsolescence By BERNARD LONDON

 

FRANK A. VANDERLIP, former President of the National City Bank, of New York, characterized this as a stupid depression. He emphasized the fact that millions were suffering amidst glutted markets and surpluses.

The new paradox of plenty constitutes a challenge to revolutionize our economic thinking. Classical economics was predicated on the belief that nature was niggardly and that the human race was constantly confronted by the spectre of shortages. The economist Malthus writing in 1798 warned that the race would be impoverished by an increase in population which he predicted would greatly exceed gains in the production of foodstuffs.

However, modern technology and the whole adventure of applying creative science to business have so tremendously increased the productivity of our factories and our fields that the essential economic problem has become one of organizing buyers rather than of stimulating producers.

 

The essential and bitter irony of the present depression lies in the fact that millions of persons are deprived of a satisfactory standard of living at a time when the granaries and warehouses of the world are overstuffed with surplus supplies, which have so broken the price level as to make new production unattractive and unprofitable.

Primarily, this country and other countries are suffering from disturbed human  elationships. Factories, warehouses, and fields are still intact and are ready to produce in unlimited quantities, but the urge to go ahead has been paralyzed by a decline in buying power. The existing troubles are man-made, and the remedies must be man-conceived and man-executed.
In the present inadequate economic organization of society, far too much is staked on the unpredictable whims and caprices of the consumer. Changing habits of consumption have destroyed property values and opportunities for employment. The welfare of society has been left to pure chance and accident. In a word, people generally, in a frightened and hys-
terical mood, are using everything that they own longer than was their custom before the depression. In the earlier period of prosperity, the American people did not wait until the last possible bit of use had been extracted from every commodity. They replaced old articles with new for reasons of fashion and up-to-dateness. They gave up old homes and old automobiles long before they were worn out, merely because they were obsolete. All business, transportation, and labor had adjusted themselves to the prevailing habits of the American people. Perhaps, prior to the panic, people were too extravagant; if so, they have
now gone to the other extreme and have become retrenchment-mad.
People everywhere are today disobeying the law of obsolescence. They are using their old cars, their old tires, their old radios and their old clothing much longer than statisticians had exp ected on the basis of earlier experience. The question before the American people is whether they want to risk their future on such continued planless, haphazard, fickle attitudes of owners of ships and shoes and sealing wax.
What the people can afford is very different at a time
when the majority are gainfully employed than it is in a
period when perhaps ten million are without gainful em-
ployment. The job of modern management is to balance
production with consumption—to enable one large group,
like the factory workers in the cities, to exchange the
products of their hours of labor for the output of farmers.
The prevailing defeatist assumption that depression and
unemployment must continue because we have too much
of everything, is the counsel of despair.
Society is suffering untold loss in foregoing the work-
power of ten million human beings. The present dead-
lock is the inevitable result of traveling along blind alleys.
Chaos must unavoidably flow from an unplanned economic
existence.
In the future, we must not only plan what we shall
do, but we should also apply management and planning
to undoing the obsolete jobs of the past. This thought
constitutes the essence of my plan for ending the depres-
sion and for restoring affluence and a better standard of
living to the average man.
My proposal would put the entire country on the road
to recovery, and eventually restore normal employment
conditions and sound prosperity. My suggested remedy
would provide a permanent source of income for the Fed-
eral Government and would relieve it for all time of the
difficulties of balancing its budget.
Briefly stated, the essence of my plan for accomplish-
ing these much-to-be-desired ends is to chart the obsoles-
cence of capital and consumption goods at the time of
their production.
I would have the Government assign a lease of life
to shoes and homes and machines, to all products of manu-
facture, mining and agriculture, when they are first
created, and they would be sold and used with the term of
their existence definitely known by the consumer. After
the allotted time had expired, these things would be legally
“dead” and would be controlled by the duly appointed
governmental agency and destroyed if there is widespread
unemployment. New products would constantly be pour-
ing forth from the factories and marketplaces, to take the
place of the obsolete, and the wheels of industry would be
kept going and employment regularized and assured for
the masses.
I am not advocating the total destruction of anything,
with the exception of such things as are outworn and use-
less. To start business going and employ people in the
manufacture of things, it would be necessary to destroy
such things in the beginning—but for the first time only.
After the first sweeping up process necessary to clean away
obsolete products in use today, the system would work
smoothly in the future, without loss or harm to anybody.
Wouldn't it be profitable to spend a sum of—say—two
billion dollars to buy up, immediately, obsolete and useless
buildings, machinery, automobiles and other outworn
junk, and in their place create from twenty to thirty bil-
lion dollars worth of work in the construction field and
in the factory? Such a process would put the entire coun-
try on the road to recovery and eventually would restore
normal employment and business prosperity.
An equally important advantage of a system of
planned obsolescence would be its function in providing a
new reservoir from which to draw income for the opera-
tion of the Government. The actual mechanism involved
would be briefly something like this:
The people would turn in their used and obsolete goods
to certain governmental agencies, situated at strategic
locations for the convenience of the public. The indi-
vidual surrendering, for example, a set of old dining room
furniture, would receive from the Comptroller or Inspec-
tor of such a Station or Bureau, a receipt indicating the
nature of the goods turned in, the date, and the possible
value of the furniture (which is to be paid to him in the
future by the Government). This receipt would be
stamped in a receipt book with a number, which the in-
dividual would have received when he first brought in an
obsolete article to be destroyed. Receipts so issued would
be partially equivalent to money in the purchase of new
goods by the individual, in that they would be acceptable
to the Government in payment of the sales tax which
would be levied as part of my plan.
For example, a consumer purchasing a $100 radio, on
which the sales tax is 10 per cent or $10, the purchaser
would pay cash for the radio, but could offer $10 worth
of receipts for obsolete merchandise turned in, in payment
of the sales tax. The merchant or manufacturer would
have to accept these receipts for this purpose, and would
turn them back to the Government in payment of the sales
tax, which must be borne ultimately by the consumer in
any event.
Under this system, the purchaser would feel he had
been paid for the used-up article which he turned in to
the Government, yet the Government would not have had
to pay a cent of cash for the goods so surrendered. As a
result of the process, nevertheless, the wheels of industry
would be greased, and factories would be kept busy supply-
ing new goods, while employment would be maintained at
a higher level.
I maintain that taxes should be levied on the people
who are retarding progress and preventing business from
functioning normally, rather than as at present on those
who are cooperating and promoting progress. Therefore
I propose that when a person continues to possess and use
old clothing, automobiles and buildings, after they have
passed their obsolescence date, as determined at the time
they were created, he should be taxed for such continued
use of what is legally "dead.” He could not deny that
he does not possess such goods, as he might hide his in-
come to avoid paying an income tax, because they are
material things, with their date of manufacture known.
Today we penalize by taxation persons who spend their
money to purchase commodities, which are necessary in
order to create business. Would it not be far more desir-
able to tax instead the man who is hoarding his money
and keeping old and useless things? We should tax the
man who holds old things for a longer time than originally
allotted.
Under the present estate and inheritance tax system,
the State has to wait an indefinite period, and allow the
owner of a building or commodity to keep on earning and
adding more to his fortune until he dies, before it can
collect its inheritance tax. With obsolescence of mer-
chandise computed in advance, the Government will col-
lect when the article dies, instead of when its owner dies.
Moreover, the present method of collecting revenue
under the income tax is speculative and uncertain, because
the profits of industry and business, upon which the in-
come tax is based, are subject to vast fluctuations.
If the plan i propose is adopted, there will be a source
of permanent income to the State from goods and mer-
chandise in existence, and which are bound to continue to
exist. Through a process of checking control of what
the manufacturer sells to the dealer, and through reports
by retailers of what they sell to the consumers, the Gov-
ernment will know by the end of the year just what income
it will be sure of getting, and this amount it will be paid
irrespective of whether people are making big profits or
not.
My plan would rectify the fundamental inequalities
of our present economic system, in which we follow a hit-
or-miss method, one getting much more than he needs or
can use, and another less or nothing. We should learn to
use our material resources so that all can partake of them,
yet so that none will be any poorer or worse off than today.

In our present haphazard organization, the product of
the worker's toil continues to benefit and produce income
for its owner long after the one whose sweat created it
has spent and exhausted the meagre compensation he re-
ceived for his labor.
The worker's wages are exhausted in a week or a
month in the purchase of food, clothing and shelter. He
has for himself little that is permanent to show for his
hours of toil, whereas the owner of the building or ma-
chine which the worker's labor helped to construct has
a unit of capital goods which will last for years or even
decades. The man who performed the work received as
compensation only enough to purchase comfort and sus-
tenance for a short time, and he must continue to labor if
he wishes to go on living. The product of the worker's
hand, however, is a semi-permanent thing and produces
income for its owner for an indefinite period of years. In
the end, not only is the original cost of production repaid
and interest yield on the investment, but far more besides.
This very lasting quality of the product of the worker's
toil results to his disadvantage, for a time comes such as
we are passing through today, when there is an excess of
capital goods and the worker is told: “We have enough
production of wealth; we are going to use up what we
have and need no more for the present. You laborer, go
and find work elsewhere. We do not need you now.”
And so the worker, whose sweat wrought this vast
store of material goods, suffers from poverty and want,
while the country is glutted with everything. My plan
would correct this obviously inequitable situation by arbi-trarily limiting the return to capital, to a stipulated period
of years, after which the benefits would revert to the
people.
The situation in which the country now finds itself,
in which there is poverty amidst plenty, is well illustrated
by the analogy of a great giant standing in a pool of fresh
water up to his lips, yet crying out that he is thirsty be-
cause he is paralyzed and cannot stoop to drink. His
muscles must be enabled to relax, for him to bend down
in order that he may quench his thirst. So, too, the
paralysis which prevents our economic society from con-
suming the abundant supplies of raw materials and manu-
factured commodities which glut our markets must be
cured before normal conditions can be restored.
Furniture and clothing and other commodities should
have a span of life, just as humans have. When used for
their allotted time, they should be retired, and replaced by
fresh merchandise. It should be the duty of the State as
the regulator of business to see that the system functions
smoothly, deciding matters for capital and labor and seeing
that everybody is sufficiently employed. The Government
will have the power to extend the life of articles for a year
or two (upon agreed terms), if they are still useable after
their alloted time has expired and if employment can be
maintained at a high peak without their replacement.
If a machine has been functioning steadily for five
years or so, it can fairly be considered dead-dead to the
one who paid his money for it—because he has had all the
use of it during those five years and it will have paid for
its life by its earnings in the five-year period. Then it
.
.
should go to the workmen, through the State; its life can
be prolonged if the factories are already busy and there are
no unemployed. But if by its replacement idle workers
can be given jobs and closed factories reopened, then this
machine should be destroyed and new (and probably im-
proved) apparatus produced in its place.
The original span of life of a commodity would be
determined by competent engineers, economists and mathe-
maticians, specialists in their fields, on behalf of the Gov-
ernment.
In the course of 30 years under this arrangement, most
construction and production would undergo a fundamen-
tal change for the better, as old, dilapidated and obsolete
buildings and machines disappeared and new ones ap-
peared in their place.
During this period some manufactured commodities
would have been destroyed and replaced 15 times, others
10 times, still others 5 times, etc., depending on the span
of life allotted to each, in order for it to earn sufficient for
its purpose before it dies. We must work on the principle
of nature, which creates and destroys, and carries the
process of elimination and replacement through the ages.
There would be no overproduction, were this method
adopted, for production and consumption would be regu-
larized and adjusted to each other, and it would no longer
be necessary to send our surplus goods to find outlet in
foreign markets. We would not then, as we do today,
have to sell these goods on credit and later have to beg for
our money, which in the long run foreign nations do not
want to repay anyway.

In the description of things under the present organ-
ization of society, we continually make use of a system of
weights and measures. Thus, a commodity is evaluated
in terms of size-shape, weight, value, etc. The weights
and measures we use are standardized and regulated by
the Government so that they may not be violated. But,
though we may not realize it, this system is incomplete
because in the description of things it omits consideration
of two elements which are equal in importance to those
in everyday use in determining real values. These are life
and time, life with respect to the commodity produced,
and time, the period it should last.
If we add the elements of life and time to our measure-
ment of what we produce, and say that the life of this
automobile shall be not more than 5 years, or the life of
this building shall last not more than 25 years, then, with
the addition of our customary measurement of these com-
modities, we will have a really complete description of
them right from the beginning. And, when capital pur-
chases the automobile or the building, it will be doing so
only for that limited period of years, after which the re-
maining value left in the product will revert to labor,
which produced it in the first place, and which thus will
receive its rightful share in the end, even if it did not do
so in the beginning.
Miracles do not happen. They must be planned in
order to occur. Similarly in this time of economic crisis,
we must work out our own salvation.
If we can afford to sink ships, that cost millions of
dollars to construct, merely for the purpose of giving

target practice to the gunner, then surely we can afford
to destroy other obsolete and useless products in order to
give work to millions and pull the country out of the dire
catastrophe in which it is now wallowing.
At the present time our country has plenty of every-
thing, yet people are in want because of a breakdown in
distribution, an inadequate division of the fruits of labor.
Worn-out automobiles, radios and hundreds of other items,
which would long ago have been discarded and replaced
in more normal times, are being made to last another season
or two or three, because the public is afraid or has not the
funds to buy now. The Government should be enabled
to advance a sum of money to certain Trust Agencies to
purchase part of these obsolete buildings and machines and
clothing. They should be thrown into a junk pile, and
money lent toward creating new buildings, machines and
commodities.
The State can lend money for the erection of new
buildings at an interest rate of no more than 27/2 or 3 per
cent. Suppose, though, that new builders or owners of
the buildings pay 5 or 57/2 per cent interest. Two and a
half per cent of this would go to the Government as in-
terest and 27/2 or 3 per cent for amortization or to a sink-
ing fund, out of which to pay back for the construction
of the building within 25 or 30 years, computed on a
basis of compound interest. At that time, the building can
be destroyed and a new one erected, with resultant stimulus
to employment. The original building in the intervening
years would have served its purpose and fairly repaid its
owner.
Capital should be willing to invest its wealth on a 27/2
or 3 per cent interest basis under such circumstances, be-
cause the investment will be safe, steady and permanent.
In the present economic chaos, investments at great interest
rates are in jeopardy and, while at present lenders are get-
ting large returns for their money, their capital is in con-
stant danger of being wiped out altogether.
The tax-collecting machinery at present used by the
Government could readily be converted into the media for
carrying into operation the system here proposed. It could
be used with the same force and effect, and new laws
passed concerning everything produced, just as our present
excise and tariff laws cover in their fixing of rates thou-
sands of individual items and categories. Such a means of
solving our economic problem could be brought into opera-
tion quickly and in a few months the machinery of ad-
ministration perfected so that thousands of people could
be put back to work within a comparatively short time.
If this plan were in operation, speculators would not
acquire fortunes simply by manipulating and creating false
values or synthetic wealth. If it were decreed that the
life of wheat were to be no more than two years, for ex-
ample, no man would buy the grain solely for speculation,
thus creating an artificial market and holding a club over
the farmer's head, as today. He would not dare because
he would know that he would have to pay the Govern-
ment a tax on the wheat after it had lived its legal life
and this would make it unprofitable or at least highly
dangerous to buy speculatively and hold for the future.
The widespread suffering from unemployment and
want in this country today is a symptom of a fundamental
maladjustment—a sickness, if you like, in our body eco-
nomic. Almost every sickness can be cured, provided we
get the right doctor to diagnose the case and prescribe the
proper medicine, but the patient must take the medicine
in order to get well. My plan is in essence a prescription
for the relief and cure of the ailments from which our
economic organization is today suffering.
Of course, the inauguration of such a system of
planned obsolescence will be opposed by many merely be-
cause it is new, for it is hard for us to abandon our old
notions and adjust ourselves to a new way of thinking.
Unlike most changes for the good of the masses, however,
this scheme need not involve much hardship, strife or
suffering. That is not necessary. With a reasonable
amount of common sense used, the plan ought gradually
to work smoothly without much loss to anybody. In war-
time we conscript the flower of our country's manhood,
and send them to the front to fight and often be destroyed.
If such drastic procedure is deemed wise and necessary
in the crisis of war, would it not be far more logical and
profitable in our present emergency to conscript the dead
things—material, not human—such as obsolete buildings,
machinery and outmoded commodities, and send them to
the front to be destroyed in the war against depression,
thus saving the country from economic chaos by provid-
ing work?
It is far cheaper to destroy useless and obsolete goods
now, and perhaps some of our synthetic wealth as well,
than to risk destroying far more priceless assets, such as
human life, and undermining the health and confidence
of the people, by continuing to fight the depression with
our old, slow and costly methods.
Even in the present organization of our economic so-
ciety, we recognize in many instances the necessity of
destroying some of our wealth in order to increase it. For
example, coal is wealth, but it is burned up and destroyed
daily in locomotives, furnaces and other devices in order
to create power to drive machinery and manufacture
goods. Similarly, oil is wealth, but to serve its purpose
it must be used and consumed in the engines of auto-
mobiles and the whirring wheels of factories. Grain is
wealth, but we destroy it by feeding it to cattle, by con-
suming it ourselves, and by scattering it on the ground as
seed to produce more grain. It is by this process that
people live, function and create material goods.
Wealth may be compared to our language. Although
we use our language every day, it does not get used up.
On the contrary, new words and idioms are constantly be-
ing added to the national vocabulary, and the language
increases in usefulness the more it is spoken, instead of
deteriorating
In olden times, only a few chosen ones, such as kings
and priests and nobles, could read and write. The rest of
the people were kept in ignorance and poverty. Today,
with our standardized and simplified grammar and our
mass education, the benefits of literacy are available to
everybody, to rich and poor alike.
Such a condition should exist also with respect to the
enjoyment of wealth. A minimum standard should be
created for everyone, and rich and poor, old and young
should participate in its benefits, and profit from its use
and management.
Our economic society has advanced little from Medi-
eval times in the distribution of our wealth. We still con-
tinue on the basis of our old theories and notions that only
the chosen ones should enjoy it.
There is as much wealth in existence as there is time,
but people do not visualize it. Wealth, like food, must
be digested for human beings to be able to live, function
and create—in other words, to produce more wealth. If
we want to acquire new wealth, the supply lines must be
drained so that fresh commodities can come in. If there
are stale goods left in the lines, the fresh supply must
force them out.
The cause of our present stagnation is that the supply
line or arteries furnishing the needs of the country are
clogged with obsolete, outworn and outmoded machinery,
buildings and commodities of all kinds. These are ob-
structing the avenues of commerce and industry and are
preventing new products from coming through. There
is little demand for new goods when people make their
old and worn-out things do, by keeping them longer than
they should.
We need to apply better managerial foresight to public
affairs. I contend that any business or corporation, public
or private, which operates and expects to get an income
of several billions of dollars a year from its operations,
deserves much attention, and requires thoughtful plan-
ning, in order to perfect the machinery of its organization.

The aim should be to make it function smoothly in order to
satisfy the self-supporting multitudes, by providing them
with regular employment at a living wage which will
assure the American standard of living.
Such a socially responsible system, which is anxious
for the wellbeing of all of its citizens, is on a vastly
sounder and more permanent basis than one which allows
business merely to take out profits without improving the
organization with new methods and without renewing the
equipment.
I maintain that with wealth should go responsibility.
Too many nowadays regard wealth as a license to freedom
and immunity from obligation to the people. Such irre-
sponsible possessors of wealth are shirkers, who tend to
make all of us poorer.
Summarizing the benefits which would accrue to this
nation and to the world at large if my plan were adopted
and put into effect, it would:
1. Bring order out of the chaos now disrupting the
whole economic and social organization.
2. Organize and regularize opportunities for employ-
ment.
3. Obviate the tremendous social waste of making no
use of the workpower of millions of men and women
(who are compelled to stay idle). In this connection, it
is significant to note that "the cost of the present depres-
sion will very probably exceed 50 billions of dollars” (a
staggering amount), according to Malcolm C. Rorty, busi-ness executive and statistician, writing in a recent issue of
the Harvard Business Review.
4. My plan would take Government finances out of
their present speculative status and would put Government
income on a more stable basis, by receiving annually at least
between 25 and 50 per cent of the net income of all the
buildings, machinery and other commodities which have
been declared obsolete after their allotted time, and never-
theless allowed to function longer in the event there is
ample employment.