The Kennewick courier-reporter. [volume] (Kennewick, Wash.) 1914-1938, 1923-01-25
BUSINESS CYCLE A DANGEROUS
IDEA WARNS BABSON

BUSINESS CYCLE A DANGEROU.
IDEA WARNS BABSON
Catch-Phrase will Upset Many Bust
ness Men and Investors
Wellesley Hills, Mass, january 20
1928: 81 don't know which is NOR,
perilous, to disregard the business
cycles altogether, or to get smart
tering of it without really understand
ing it," says Roger w. Babson, in !.
statement issued today. "Many ex
ecutives think they have got the bust
ness cycle by the tail and that Their
fortunes are made. These super
sficial thinkers who have picked III
the business cycle as the latest catcl
phrase, are simply playing with edg.
ed tools and are. going to get badly
cut.
ut is astounding how the public
has taken up the idea. From boot
black stands to international confer
ences, the latest fad is the business
cycle. If it were merely talk, little
harm would be done. But many bust
ness men, bankers, investors, and
government officials, are marking
commitments on the basis of an i'm
aginary cycle. It is high time that
somebody get up in meeting and do
some plain talking, and tell people
that we are all sitting around pow
der keg, if we continue to cherish
this delusion of fixed cycle.
Strictly speaking, there is no
sound thing as business CYCLE" con-
tinued Mr.. Babson. "It is serious
blunder to assume that there will be
three years Tor other fixed interval)
of over expansion and then three
years of depression, followed by an
other three years Of over-expansion
and another three years of depres-
sion. To nine people out of ten this
is what the business cycle seems to
mean, periodic procession of booms
and bumps, each lasting the same
number of years. There is absolute
" nothing in this idea, and any exc
cutive who attempts to base his plan
thereon will probably ruin the enter
prise for which he is responsible. The |
warning applies also to bankers, in
vestors,, and statesmen.
my advice is to get it out of your
head Immediately that business fluct-
yates in three-year periods or any
other fixed intervals. The real prin-
ciple Of the business movement is
hat of action and reaction. Namely,
J period Of over-expansion tends to
,e followed by an equivalent period
4 depression. And when say
equivalent am taking into account
he two factors, duration and inten-
Iity. Moderate business activity
'rolonged for several years is equiv
Ilent to extreme activity Of shorter ,
Duration. 3
TO take the latest example, there (,
vas a period Of over-expansion COW :
ring the years 1915-1919. This would {
end to be balanced by compensat- I
ng period of depression. But this ]
might take variety ,
4 forms. If there had been a pro- 8
igious and excessive crash in 1920, t
ssting only a year, this would have l
,een sufficient compensation. It
gould have offset four years of over t
expansion. Or, if the decline in q
92O had been trifling but dragged t
ut for years to come, there also /
'ould be sufficient compensation. t
Vhat actually happened was a sharp J
ecline, not the worst imaginable, but
ill severe drop. The period has k
lready extended more than two
ears. Considering both the severity
the drop and the time that has
lapsed, it is plain that we have Il
early paid the bill in full. i'll
"By itself, time is meaningless. The Il
uestion whether depression has last II
i month or decade, has no sig II
ificance whatsoever. By itself, in II
snsity means nothing. The ques- II
on whether depression has been II
rastic or trivial has no significance. II
[owever, when these two are COM Il
med, when you get the product of II
me and intensity, you are on sound |!
asis. This and this only is the true Il
leasufe of depression and in the real II
of the business cycle. II
"At the present juncture, what II
Ould be the result of sudden and II
,ckless initiation? This would mean II
lat instead of progressing in an or
erly way up from depression into
we would be attempting
lort-cut. We would be trying to
7ade the tail-end of our quota of
,pression. This would be setback III
hich would last until that quota II
as completed. At the moment,
ere is no sign of such initiation. The
dications are that the remaining
agment of the allotted depression
i'll be wiped out in due course, and II
It'll a clean slate we shall be ready
r the next period of prosperity.
Il