Imperial Valley press., 1924-08-30

Go.-f we car never nave any pro
longed period of prosperity in this
country unless all important groups
have fair purchasing power and tic
disposition to use it," according to
Roger w. Babson, the statistician.
who today gave his Interpretation of
the ultimate effect of the recent
rise in farm prices.
eff industrial conditions are
good, work plentiful, and wages
high in the large cities, many think
this to be the basis of real pros
perity; but such is not the ease un-
less the agricultural sections are
also prosperous. If the crops are
good, land values increasing, and
grain prices high, many think that
prosperity is assured; but this is
not true unless city wage workers
are prosperous also. 1t is impossible
for the country to be prosperous
without both the industrial and ag-
ricultural groups happy. One is
the hatchet and the other the hand
le;.. one is the lock and. the other
the key; one group cannot maintain
the present standard of living with
out the other group enjoying it
likewise. Moreover, both are like
team of horses. The speed of the
team is determined by the slower
horse. When either farm prices arc
abnormally low, compared with city
wages, or when period of indus
trial unemployment exists with sat
isfactory farming conditions there
is brake on prosperity. This in
the situation during the past two
years and is one reason why I was
so bearish year ago when every
one else was optimistic. Any real
prosperity must be founded on an
active demand and adequate pur-
chasing power on the part of all
large groups.
"It is in the light of this eco
nomic principle that ene recent rise
in farm prices is most significant
and hopeful. Beginning in 1913 we
had fair adjustment between agri-
cultural and industrial prices. Farm
prices rose rapidly and for the
greater part of the war they main
tanned a level above that of indus
trial commodities. By June 1920
prices were 200 lper
cent above the 1918 levels. Indus
trial prices meantime had risen to
$50 per cent above pre-war aver
ages. Then the greatest price de-
cline in modern business history set
in and if we compare prices on
these two groups one year later or
in June 1921, we find agricultural !
products only 10 per cent, above /!
1913 prices while industrial COM
modities rested at point 55 per
cent higher than the pre-war fig |
ure. This gave us maladiustment |
of almost so per cent and farm pro- !
ducts have labored under this hand |
leap until this spring.
"The loW point was established !
during the closing months of 1921, !
when crops went even under the !
1913 base. In 1922 agricultural /
products and commodity prices in /
general climbed upward and the 4
spread between the two groups re-
nsained badly strained. However, I
in 1928 commodity prices turned (
downward while the trend of lead \
ing farm products continued to I
climb upward, closing the gap the |
narrowest margin since 1921. Agri- |
cultural products had climbed toA
40 per cent while industrial pro- \
duets slumped to so per cent over
the 1913 base.
"It is evident that legislative
credit measures, cooperative mar
keting. and other means of buoy
ance failed to readiust the radical
discrepancy between the price level
of what the farmer bought and sold |
However, since June new conditions
have brought the agricultural price
level to the highest point since !
1920 Expanding agricultural pur-
chasing power has automatically !
stimulated business. Practically |
every agricultural product has par
ticipated in the recovery.
"The Babson Grain Price Index |
of wheat, corsl, oats, bar
lev and rye is now los, or practi-
cally 6s per cent over the extreme
low of 1921. The reason for the /
current price level is easily trace
able to the sharp contraction in
output. The total production of
the same five grains on tonnage 1
basis is the lowest since 19l7 and l
based on the August ! government
report is 7 per cent under the pre-
vious five year final average. The
world production of leading grains
is low compared with the bumper /
crops Of a yeag ago, yet the total isl