Evening star., 1933-10-08
BY REXFORD GUY TUGWELL.

NJ R. A. and A. A. A are about
N TO enter their second phase
VI one much more difficult
1 than any heretofore encoun-
tered Codes and agree
ments are rapidly going into effect. But
these arrangements have been MADE
rapidly and without the complete
knowledge which will come to admin
istrators as the results are registered
in practice. Each of the emergency ad-
ministrations is eXcellently equipped
with facilities for knowing exactly
what is happening. The best stats
have been called into this work. The
results of their running analysis will
be available to administrators con-
stantly
The information thus collected viii
have a greater influence on coming
policy than might at first be thought.
Facts are stubborn. Windy represen-
tation cannot prevail where facts oc-
cupy the ground. Whether business
margins are too high or too low,
whether employment is increasing or
decreasing, whether wages are going up
or down-all these will be known, and
the problems underlying them will have
to be dealt with.
The blanket-code phase of the re-
covery effort is now nearly completed.
AS much, think has been accom-
plished by it as was expected. Indus
try has been put through first phase
of reorganization. Government has as
serted its right to require order in in
dustrial processes. There is no doubt.
also. that there have been real accom-
plishmentS But the crucial times are
yet to come The working out OF day.
to-day relations. the actual requiring
of businesses to Go what seems to them
against their own interests-these will
be less spectacular than the N. R. A.
campaign But in this daily procedure
there will be built up new law and
new governance for industry.
Test of Low Prices.
One test of the goodness of business
Is the loWness of its prices. This is
an questionable kind of economics
just now, but it is maxim we ought
to hold on to. 1t ought not to be stated
fatty, of course. because low prices
achieved by cutting costs are not al
ways desirable The easiest costs to
cut are often labor costs, and if these
are reduced by lowering wages the
purchasing power of the workers is re-
duced. This kind Of economy returns
to torment its inventors.
in the last decade and a half pretty
consistently illustrates another kind of
economy 1t also illustrates the kind
of difficulty we get into when econ
Omies are not translated into reduced
prices. The greatest gains in efficiency
ever registered in a similar period have
accrued to our industry since the years
Of the war.
New ways of using power, new
processes of manufacture, better control
over operations enabled us to turn out
more than a third more products with
the same effort than We were able to
do Is years ago. This meant that costs
were steadily, almost spectacularly. re-
duced. Prices were reduced somewhat,
but by no means in proportion to the
reduction in costs. The result of this
disparity between costs and prices was
that profits rose enormously. These
profits were used, generally speaking, to
make more improvements and to en-
large productive capacity. But toward
the end of the period the inevitable re-
suits of such a policy began to register
Consumers had not been allowed to
share in the gains from the efficiency
movement, and so the demand for the
goods turned out began to fail.
Protecting Industry.
the failure or demand was con-
cealed for a few years by certain new
devices. Consumers who could not buy
out of their current incomes were given
lnstallment credits. But when debts
had piled up to unprecedented heights
it began to be clear that they could
never be paid, and SO lending was
stopped. There is nothing wrong with
consumer credit if its volume is not
greater than the expectation of income
to pay it off But if it outruns ulti-
mate ability to pay it merely postpones
the inevitable day of settlement. In
way the depression of 1929 can be
described as a stoppage of industrial
operations to permit consumers pur-
chasing power to rehabilitate itself.
1t seems clear enough that if pur-
chasing power had equaled the price
required for our goods there would
have been no failure of demand. And
it is curious paradox of progress that
the situation should have been intensi-
fled by gains in efficiency. Good public
policy seems to require such man
agement of this matter in the future