Evening star., 1932-07-24
Century and Half of Economic
History Reveals Change
Is Due.
TRADE COLLAPSE OF 1873
RECALLED AS PARALLEL
Slump in Industry of Late SOS
Is Trsceable, Like Present
One, to War.
BY DIR. MAX WINKIFR

Special Dispatch to The Star.
NEW YORK. July 23.-On the basis
Vi past experience covering more than
century and half it appears with
~ reason 10 assert that the prevailing
economic crisis is in its last stages
Conhrmed pessimists refuse to take
cognizance OF this. They adhere to a
destructive doctrine as stubbornlv AS
they refused to abandon their optimistic
utterances three years ago when eco
nom!c canger signals were slowly but
surely making themselves felt. They
were fooled then. They will be fooled
now. oN
VI the rs depressions, both major and
minor IN character, which have oc-
CURED within the past $50 wears. only
one, which occurred in the course of
the past century, lasted for five wears
Two continued for four-year period
while the majority lasted two or. at
most, three years. Those which occurred
IN the course of one single year were
only minor disturbances or furries. OF
the depressions which occurred during
the twentieth century, two extended for
a three-year period; one lasted two
years; and one for about a year.
Crisis of sos.
The mos. severe of these depressions
which bears perhaps the closest resem-
blance to the present crisis. is the ono
which occurred in the late Dos Of the
past century. A contemporary Amer
lcan economist, writing of the crisis,
refers TO 1t as "a most curious
and, in many respects, unprec-
edented disturbance and depression in
trade, commerce and industry which.
manlfesting itself in a marked degree
In 1873, has prevailed with fluctuations
OF intensity. up to the present time"
In other words, the crisis was traced
directly to the war between France and
Prussia. Just as the present disturbance
IS traceable TO the cataclysm of 1914
1913.
Examining reports concerning diff
cultleS during the period referred TO
one finds that prices of nearly all
staple commodities were abnormally
low; that values of precious metals
were undergoing a radical change; that
large amounts of capital were being
destroyed through new inventions anc
| discoveries. and that even larger sunls
were being consumed through extern
Sive reductions in the rate of interest
and profits; that labor was discon-
tented; that the antagonism of ma
tions was increasing; that industrial
and commercial competition was
greatly menaced; that the permanency
Of civilization itself was threatened.
and that the populace was demanding
wise remedial legislation" for the eco
nomic and social ills which existed.
Curious though it may seem, condi-
tions in Germany, victor in the war,
were more depressed than in vanquished
E7ran M o.
anomalous situation weer obvious. The
war indemnity, that is. reparations.
which had been exected from
France resulted in an abundance
of ready capital to such an extent that
banking institutions almost begged for
the opportunity to place loans at rates
as low as l per cent with manufac-
turerS, for the purpose Of enlarg1ng
their establishments.
The whole country was thus enabled
to project and engage in all sorts of
industrial and financial undertakings
Thousands Of new concerns were called
into existence. In Prussia alone. 687
new joint stock companies were organ
lied within l8 months, with an aggre-
gate capital of almost 1000 OOO' 900
marks-a sum unbelievably large for
those days.
uTOWlHs
The growth of industrials was phe-
| nomenal. Hundreds of thousands OF
men and women abandoned agr1cul-
tural pursuits and sought employment
in trades. Prices rose; prosperity was
most pronounced; profits were abnor-
mally large; wages we're high, with
strikes everywhere for higher pay: I'M
ports grew: credits expanded. and the
standard of living improved in proper
tion. Every phase OF life was exag-
gerated. including optimism.
The situation had grown most un-
natural and could not, therefore, con-
tinue. Reaction and collapse came
! with great Suddenness. but without
anticipation on the part OF the multi
tude." An economist. describing the
changed condition in Germany at that
time. informs us that great fortunes
rapidly melted away, industry became
paralyzed and the whole Of Germany
passed at once from condition oi
great prosperity to a depth of financial
industrial and commercial depression
that had never been equaled.'
The crisis was not confined to Ger
many 1t embraced all OF Europe. the
United States and reached as far as
Australia. where "the poverty
was more extreme than at any former
period in the history of the colonies.
AS reasons for the upheaval, econo-
mists advanced the following:
|. Heavy losses occasioned by de-
st-uctive wars.
2. Excessive speculation.
3. Continuance of heavy expenditure
in connection with maintenance OF
armies end navies.
f. High tariffs and restrictive COM
mercial policies OF nations.
5. Unsettled international affairs and
fear of impending wars.
6. Scarcity and appreciation OF gold
7. Depreciation of silver.
8. Unproductiveness of foreign loans
9. Plethora of idle capital.
10. Overproduction.
Lesson of History.
All this happened half century ago
Has the world benefited from earlier
experiences? Hardly. If one were asked
to adduce reasons for the present eco
nomic unsettlement, every one OF the
above points would fit admirably. When
pessimism reached its peak and when
the masses began to despair, the turn
was at hand The recovery OF the con-
tinent was spectacular, as it had been
on other occasions, because the life oi
nations since time immemorial has been
characterized by "series of trade de-
pressions and trade inflations. of conf
dent adventure and utter helplessness
of boom and crisis"
iCopyright 1882. hv North American News
paper Alliance. 1nc.)