Business In I960: Tough Prosperity

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is that while unemployment in the Los Angeles area stands above 170,000, Manhattan newspapers run plentiful ads offering skilled jobs to those who will move to Southern California.

Difficult Years. At the beginning of 1960, the argument over growth had an academic ring, or the sound of a numbers contest between the U.S. and Russia. At year's end the jobless figures turned it into an immediate problem. Most economists believe that unemployment will go well over 5,000,000 this winter—and a few feel it may go to 6,000,000.

The longer-term projections are, in a way, even more discouraging, for the U.S.

is facing a new kind of unemployment problem. The number of workers entering the labor force leveled off during the '50s. But over the next decade the number will rise rapidly; the labor force will grow by 20%, or 13.5 million, the biggest increase in history. The biggest part of the gain—46%—will be in the number of workers under 25. Just to keep unemployment where it now is, the U.S. will have to create more than 1,000,000 new jobs each year.

In the past decade, the U.S., as the world's most prosperous nation, has been creating new jobs at the rate of 694,000 a year. There has been a slowdown in the last three years, when the average fell to 560,000 new jobs a year. The National Planning Association calculates that if the U.S. growth rate continues until 1965 at its recent rate, the result will be 13% of the labor force unemployed.

What Kind of Force? How can the U.S. get more growth? Some economists, mostly of the liberal stripe, believe that Government should force, perhaps even direct, growth by increasing its role in the economy. Led by Harvard Economics Professor John Kenneth (The Affluent Society) Galbraith, they argue that the U.S. has frittered away its vigor on too many frivolous things, such as tail fins, Hula-Hoops and gold bathroom fixtures, should funnel more money into increased outlays for education, public health, transportation, conservation and basic research.

To bolster their argument, they point out that the U.S. has experienced its greatest prosperity since Government spending started its big rise in the 1930s.

Businessmen, on the other hand, insist that the Government is already spending too much, and that the chief source of growth and jobs in the U.S. has always been the power of private initiative. They feel that the excesses that Galbraith deplores are better corrected in the marketplace, point to the birth of the compact car as proof that consumer dissatisfaction can force changes far more effectively than any sort of Government bureau.

"Human Capital." Between these two schools, the new Administration's advisers are likely to take a middle ground.

Walter Heller, new chief of the President's Council of Economic Advisers, like Galbraith, wants more Government spending on "human capital," but he also favors using fiscal tools to spur growth, wants to encourage business expansion as well. One of Kennedy's top behind-the-scenes advisers is M.I.T. Professor Paul Samuelson, a highly respected "neoclassical" economist who has written the nation's bestselling economic textbook and heads the American Economic Association. Samuelson believes in an ambitious two-phase program to shift more of the nation's effort into capital