Title: Ending the depression through planned obsolescence
Author: London, Bernard
Language: English
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  ENDING THE DEPRESSION
  THROUGH
  PLANNED OBSOLESCENCE

  BY

  BERNARD LONDON



  ENDING THE DEPRESSION
  THROUGH
  PLANNED OBSOLESCENCE

  BY

  BERNARD LONDON

  21 EAST FORTIETH STREET
  NEW YORK, N. Y.



COPYRIGHT, 1932, BY BERNARD LONDON



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 relationships.

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 hysterical 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 expected 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 employment. 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 workpower of ten
million human beings. The present deadlock 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
depression 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 Federal Government and would relieve it for all time of the
difficulties of balancing its budget.

Briefly stated, the essence of my plan for accomplishing these
much-to-be-desired ends is to chart the obsolescence 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 manufacture, 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 pouring 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 useless. 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 billion dollars worth
of work in the construction field and in the factory? Such a process
would put the entire country 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 operation 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 individual surrendering, for example, a
set of old dining room furniture, would receive from the Comptroller
or Inspector 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 individual 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 supplying
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 income 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
desirable 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
merchandise computed in advance, the Government will collect 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 income 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 merchandise 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 Government 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 received 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 machine 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 sustenance 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 arbitrarily 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 because 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 consuming the abundant supplies of raw
materials and manufactured 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 allotted 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 improved) apparatus produced in its place.

The original span of life of a commodity would be determined by
competent engineers, economists and mathematicians, specialists in
their fields, on behalf of the Government.

In the course of 30 years under this arrangement, most construction and
production would undergo a fundamental change for the better, as old,
dilapidated and obsolete buildings and machines disappeared and new
ones appeared 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 regularized 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 organization 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 measurement 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 commodities, we will have a really complete description of them
right from the beginning. And, when capital purchases the automobile
or the building, it will be doing so only for that limited period of
years, after which the remaining 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 everything, 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 2½ or 3 per cent. Suppose, though, that
new builders or owners of the buildings pay 5 or 5½ per cent interest.
Two and a half per cent of this would go to the Government as interest
and 2½ or 3 per cent for amortization or to a sinking 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 2½ or 3 per cent
interest basis under such circumstances, because 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 getting large returns for their money, their capital is in constant
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 thousands of
individual items and categories. Such a means of solving our economic
problem could be brought into operation quickly and in a few months the
machinery of administration 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 example, 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 Government 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 economic. 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 because 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 providing 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 society, 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 automobiles and the whirring wheels of factories. Grain
is wealth, but we destroy it by feeding it to cattle, by consuming 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 being 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 Medieval times in the
distribution of our wealth. We still continue 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 obstructing 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 planning, 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 well-being
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 irresponsible 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 employment.

 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 depression will very probably exceed 50 billions
 of dollars” (a staggering amount), according to Malcolm C. Rorty,
 business 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
 nevertheless allowed to function longer in the event there is ample
 employment.



  Transcriber’s Notes

  pg 11 Changed: their alloted time has expired
             to: their allotted time has expired

  pg 19 Changed: for the wellbeing of all
             to: for the well-being of all




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