The Washington times. [volume] (Washington [D.C.]) 1902-1939, 1904-05-15
DEPRESSION DUE
TO OYERGROWTH
Foreign Competition Prevented ard
Foreign Markets Closed-Selling
Cheaper Outside United States.

A review of the iron and steel situation
Indicates a less cheerful outlook than
that which appeared a month or two
ago. says the New York Journal of
Commerce and Commercial Bulletin" It
directs kttention TO the fundamental
malady of the whole industry in this
country, the combinations by which
prices are prevented from responding
TO the law of supply and demand, and
by which in consequence the relation
between supply and demand is violently
dislocated.
When the demand for iron and steel
products was at its highest, from two
to four years ago, the barrier against
foreign competition in supplying Il fur
nished the opportunity for putting prices
at an Unfortunately high level. The enor-
nous profits thereby promised led TO
the consultations and combinations by
which capitalization was inflated. on the
presumption that a fair rate Of dividend
could be earned upon several times the
actual investment of capital, while for
tunes could be made In the issue and
distribution of securities"
This same urgent demand and possible
large profits induced a multiplication
and extension of plants 70 take adyan-
tage OF the immediate situation, which
prepared the way for oyerproduction
when the demand should again fall off
as II was sure to do as soon as the large
requirements of the time had been sub
stanually met The high prices them
selves. making costly all sorts of con-
struction and equipment with iron, steel
and machinery, would in time restrict
consumption and thereby check the de-
mand. The large profits which they i'm
piled also stimulated labor to exact
high wages. adding TO the cost of pro-
duction both in the raw material and
the processes of manufacture.
Fever Ran It's Course.
The fever produced by the stimulation
OF greed through protection against for
eign competition ran its natural course.
New furnaces We're built and old ones
were enlarged manufacturing plants
were multiplied and extended. and a pro-
ducing capacity was established TO meet
a demand that was altogether excep-
tional and could not last. At the same
time a large amount OF capital was OBJ
sorDed from other uses by speculation
in inflated stocks, and much of 1t was
dissipated through their subsequent
shrinkage in market value
As this condition of stimulated over
doing was in large part due to excluding
the lIt lesome restraint of foreign CON-
petition. so the high level of pricrs ana
of actual cost thai vas artihcialiy es-
.Eblisi ed obstrlcl - the outlet To fir-
cign ma rkets when the domestic demand
fell away and t,s2=e was a surplus of
production 10 be disposed OF.
Thus. when the inevitable reaction
came there was an unhealthy dropsicai
condition 10 deal with IN the iron aud
steel industry. There were facilities for
producing more than the domestic ma r
lsets would take at the prevailing prices,
on, the most restricted markets cou's
found elsewhere. and these could only
be reached By sacrifice OF pricas.
Controlled Whole Industry.
The same corporate combinations had
largely gained control of the supplies OF
ore and other materials OF the fur
naces. the foundries. the steelmaking
plants. and the works for manufacture
ing finished products. and they strove To
keep up domestic prices all along the
line. They had not secured a sufficient
power OF monopoly at the base Of the