CHART 2 Change in Composition of Output, 1952 to 1956 Lower national security purchases allowed a larger proportion of The growth of income received by individuals is another indication of the increased economic activity of the last four years. Personal income disbursed to individuals rose from $276 billion in 1952 to $331 billion in 1956. Despite some contraction in the flow of incomes in the latter part of 1953 and early 1954, the total for each year during the four-year period was higher than for the preceding one. Personal incomes after taxes also rose rapidly, reflecting both the increase in incomes received and the 1954 reduction in personal tax rates. This expansion resulted in a clear improvement in income per person. The 1956 average weekly earnings of production workers in manufacturing, for example, were $80.13, a rise of $12.16 a week over 1952. Even after allowance for the 2.3 percent increase in consumer prices which occurred between 1952 and 1956, the gain in weekly earnings amounted to over $10.50. Not only did those who work for wages and salaries make substantial absolute gains during the period; their share of income also rose. Labor income-that is, the sum of wages, salaries, social security benefits, and related payments-constituted 75.8 percent of total personal incomes disbursed in 1956, compared with 73.8 percent in 1952. The income of business proprietors and professional people also expanded. Farm income continued to decline through 1955, but some improvement took place in 1956. Dividend payments increased each year, although corporate profits fluctuated more than other forms of income. This record of expanding employment, production, and incomes shows that we do well to place primary reliance for economic growth and improvement on competitive enterprise. It demonstrates anew that such an economy, operating in an environment that provides the incentives needed for the full utilization and improvement of economic resources, has vast potentialities for advancement of material welfare. The competitive economy's growing productiveness is based on the fact that it provides increasing amounts of capital for the use of each worker and encourages the maximum use of the energies and talents of the individual. Through the organizing influence and discipline of competitive markets, these powerful forces are employed to meet the needs and preferences of the consumer as expressed in the market place. And all this is accomplished within a framework of free institutions and individual choice. Essentially, the record reveals the opportunity that a free economy affords for the betterment of well-being. The period has also been one of improvement in the economies of other nations of the free world. Vigorous economic growth has characterized the industrialized countries of Western Europe and also Canada and Japan. In each of these, the flow of goods and services to consumers and the additions made to productive plant and equipment have increased materially. Substantial progress has also been made in many of the nations that are economically less developed, although the rate of growth has varied widely among them. A remarkable strengthening of international trade and finance has taken place. Trade among the nations of the free world rose from less than $74 billion in 1952 to approximately $93 billion in 1956. Responding to economic expansion at home and abroad and to the gradual relaxation of trade controls, our foreign trade and investment have increased markedly; both exports and imports were at record levels in 1956. Following a decline for a short time after the termination of the Korean conflict, nonmilitary exports of goods and services increased during 1954, thus helping to sustain business activity in this country. The expansion of these exports was extended in 1955 and 1956, in the latter year reaching about $23 billion, approximately 28 percent more than in 1952. Imports of goods and services followed the trend of domestic business activity more closely, falling in 1954 and rising in the next two years. In 1956, they totaled almost $20 billion, some 25 percent above their total four years earlier (Chart 3). Although Government grants and credits still financed a sizable amount of our exports, increasing reliance was placed on private trade and investment during the past four years. Net private investment abroad of United States funds was at a new high in 1956. While expanding their purchases of goods and services from the United States, other countries have added about $7 billion to their gold and dollar reserves since 1952. The increase in these reserves, which were severely depleted during and after World War II, is traceable largely to our imports of goods and services and to our mili CHART 3 U.S. Balance of Payments on Current Account, U. S. foreign trade reflected economic expansion at home and SOURCES: DEPARTMENT OF COMMERCE AND COUNCIL OF ECONOMIC ADVISERS. 1956 tary expenditures abroad. Further expansion of nonmilitary exports will continue to depend, fundamentally, upon the volume of our imports and the amount of private United States investment in foreign countries. The sharpest expansion in our exports has been in shipments to industrialized countries with high per capita incomes, which are often competitive with us, and to certain less developed countries in which the rate of economic expansion has recently been high. This fact strongly suggests the economic advantage to this country which can accrue from economic development abroad. When trade is conducted on a nondiscriminatory, multilateral basis, it is natural to expect that prosperity elsewhere will be reflected in an increased demand for the products of our farms, mines, and factories. Such has been the case in the last four years. IMPROVEMENt in Level of Living The rise in real incomes which was described above reached to all income levels. Whereas 27.1 million families, or 54 percent of the total, had incomes before taxes of more than $4,000 in 1952, 30.6 million, or 59 percent of the total, had incomes of this amount in 1955. Data are not yet available on the distribution of incomes in 1956, but other evidence indicates that the improvement continued. Since the cost of living rose only slightly over this period, most of the increase in money incomes represented an actual gain in well-being. Expressed in dollars of constant purchasing power, per capita personal income rose 10 percent after taxes and consumer expenditures 11 percent. Some indicators of the increase and diffusion of well-being in recent years are given in Chart 4 and Appendix D. CHART 4 Improvement in Well-Being, 1952 to 1956 Consumption and other measures of well-being increased more Striking achievements were made in housing. The 5 million dwelling units that were constructed exceeded the number built in any other fouryear period and substantially enlarged the housing stock available to the American people. There were improvements in the size, design, and equipment of new homes, and sizable outlays for repairs and alterations added to the comfort and convenience of existing homes. A growing proportion of our homes were owner occupied-60 percent in 1956, compared with 55 percent in 1950. During the four-year period, 24.5 million new automobiles were bought, and, even though large numbers of old cars were scrapped, the number of automobiles increased 11 million. Consumers also purchased large quantities of other durable goods-especially household appliances. The increase in the ownership of homes and of consumer durable goods entailed a large increase in debt. Short- and intermediate-term consumer debt increased $15 billion, or 53 percent, from December 1952 to December 1956; home mortgage debt rose $40 billion, or 69 percent. On the other hand, American families made large additions to their financial assets. Consumer holdings of bank deposits, savings bonds, and other selected financial assets were about one-fourth higher in 1956 than in 1952. Provisions for personal security were also improved by large increases in the number of persons covered by life and medical insurance and in the degree of protection afforded, as well as by governmental social security programs. Participation in and support of religious, cultural, educational, and civic activities are more extensive than ever before. Church membership has increased markedly, and recent years have witnessed a sharp rise in the construction of church and related buildings. Outlays for library construction have been large, and book circulation and publication have exceeded any previous records. Greatly increased amounts of resources are being devoted to education at all levels. Public and private outlays on construction of educational buildings totaled $3.1 billion in 1956, a rise of 57 percent in four years; and private grants and gifts for higher education are estimated to have increased about two-thirds. This is a gratifying record of the improvement in the level of living that can be achieved through a vigorous competitive economic system. In particular, it shows the capacity of such a system to bring about a widespread participation in the benefits of economic expansion. But much room for improvement remains. Although average incomes have increased substantially, the incomes of many Americans are still inadequate. Some in the low-income group are older persons, beyond the employable age; others suffer from illness or are handicapped by lack of adequate training, education, or knowledge of better job opportunities. Also, some areas have failed to share in the general economic expansion; certain communities have had relatively high levels of unemployment over protracted periods. Considerable progress was made in the last four years, however, under various private and governmental programs aimed at meeting these problems and at strengthening personal security. Proposals are put forward in Chapter 4 for broadening and strengthening these activities of Government. PROBLEMS OF AGRICULTURAL ADJUSTMENT The basic problem of the agricultural sector of the economy in recent years has been a persistent tendency for production to outrun commercial demands. In response to a rapidly advancing technology and remunerative price supports, farm output has risen since 1952 (Chart 5). Consumption and exports have failed to increase correspondingly. Reflecting these facts, and the sharp decline in exports in 1952-53, stocks of surplus farm products have accumulated. Before the 1954 harvest could be affected by acreage |