Evening star., 1924-08-30
AIDED
PRICE EQUALITY
Babson Finds Better Balance
Between Industrial and
Farm Commodities.
BY ROGER w. BABsON.

BY ROGER w. BABsoN.
Special Dispatch to The Star
WELLESLEY HILLS. Mass, Au-
gust 30.-We can never have any
prolonged period OF prosperity In this
country unless all important groups
have fair purchasing power and the
disposition to use 1t.
If industrial conditions are good,
work plentiful and wages high in the
large cities. many think this to be
the basis of real prosperity. but such
is not the cause unless the agricul-
tural sections are also prosperous. II
the crops are good. land values in
creasing 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 indus
trial and agricultural groups happy.
Two Go Hand in Hand.
One is the hatchet and the other
the handle; one is the lock and the
other the key; one group cannot
maintain the present standard OF liv-
ing without the other group enjoying
it likewise. Moreover, both are like
a team Of horses. The speed of the
team is determined by the slower
horse. When either farm prices are
abnormally low, compared with city
wages, or when a period of industrial
unemployment exists, with sattsfac-
tory farmings conditions, there is
brake on prosperity.
This inequality has been one trou-
BILE with the situation during the
past two years, and Is one reason
why / was so bearish year ago
when every one else was optimistic.
Any real prosperity must be founded
on an active demand and adequate
purchasing power on the part OF all
large groups.
Rise In Farm Prices Vital.
It is in the light of this economic
principle that the recent rise in farm
prices Is most significant and hopeful.
Beginning in 1918 we had a fair ad-
justment between agricultural and
industrial prices. Farm prices rose
rapidly, and for the greater part OF
the war they maintained level above
that of industrial commodities. BY
June, 1920, agricultural prices were
200 per cent above the 1913 levels.
Industrial prices meantime had risen
to $50 per cent above pre-war aver
ages.
Then the greatest price decline in
modern business history set in. and il
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 indus
trial commodities rested at a point
55 per cent higher than the pre-war
figure. This gave us a maladjust-
ment of almost so per cent, and farm
products have labored under this
handicap until this Spring.
The low point was established dur
ing 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 spread between the
two groups remained badly strained.
However, in 1928, commodity prices
turned downward, while the trend of
leading farm products continued to
climb upward, closing the gap the
narrowest margin since 1921. Agri-
cultural products had climbed to 40
slumped to 60 per cent over the 1913
base.
Levels Highest Since 1920.
1t is evident that legislative credit
measures, cooperative marketing and
other means of buoyance failed to re-
adjusted the radical difference be-
tween 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. Ex-
panding agricultural purchasing pow
er has automatically stimulated busi-
ness. Practically every agricultural
product has participated in the re-
covery.
The Babson grain price index, COM
W ha ri
and rye, is now 16S, or practically 68
per cent over the extreme low of 1921.
The reason for the current price level
is easily traceable to the sharp con-
traction in output The total produc-
ton of the same five grains on a ton
mage basis is the lowest since 1917,
and based on the August l Govern
ment report is z per cent under the
previous five-year final average.
The world production of leading
grains is low compared with the
bumper crops of a year ago, yet the
total is not far from the normal COM
pIement. AS, however, there is no in
dication of any world shortage of ag-
ricultural products, there is no basis
for now expecting any further marked
advance from the present price level.
More Normal Balance.
The only serious condition is in con-
nection with corn. The crop has been
handicapped by late Spring, inclement
weather, retarded growth, and now
the possibility of early frosts. With
out question this product is the
strongest of the grain group. The
main point is this, after nearly four
years of hardship the farmers in
como is now showing signs of ex-
panding to the point where there Is a
more normal balance between the
price of products sold and the price
Of products purchased.
General business. as reflected on the
Babson chart, still stands at IA per
cent below normal, and while 1925
will be a better year than 1924 it
does not promise any great boom.
This better adjustment between
prices, however, is corner stone Of
the foundation for our next period of
prosperity. Construction has begun.