Evening star., 1936-04-27
PRESIDENT W|DENS|
RIFT IN ECONOMICS
Brookings Report Quoted to
~ Dispute Theory Of High
er Prices.
BY DAVID LAWRENCE.


affords a better opportunity to ex-
anime the quality of Mr.. Roosevelt's
own argument than those presidential
speeches the authorship of which Is
proudly claimed in whole or in part
bv various members of the brain
trust"
Mr.. Roosevelt frankly says: I am
not a professional economist but I
think I know" He then proceeds to
give as the principal cause OF the
depression the fact OF group selfish
ness" Later on he gives his OBJ
1ections Ito lower prices by cheapen-
Ing the costs of production"
The President apparently was not
reminded by any one at his side when
he finished writing his speech that
the latter doctrine he expressed was
Numerically opposite to the findings
of a distinguished and disinterested
group of professional economists in
the inquiry and report made by the
Brookings Institution Of Washington
In recent months.
Quoted by New Dealers.
The Brookings report will go down
IN economic history as the greatest
piece of economic writing since the
DAYS of Adam Smith, 100 years ago.
pA To understand the conflict between
Mr.. Roosevelts comments and the
Brookings survey it is first necessary
10 quote what the President said:
You can cheaper the costs Of in
dustrial production by two methods.
One is by the development OF new ma
chinery and new technique and by in
creasing employe efficiency. We do
not discourage that. But we do not
dodge the fact that this means fewer
men employed and more men unem-
ployed.
- The other way to reduce the costs
Of industrial production is to estao-
iish longer hours for the same pay
or TO reduce the pay for the same num-
ber of hours. If you lengthen hours
you will need fewer workers. More
men will be out of work. II you
choose lower wages for the same num-
Der of hours, you cut the dollars in
the pay envelope and automatically
cut down the purchasing power OF
the worker himself.
~. Reduction of costs Of manufacture
does not mean more purchasing power
and more goods consumed. It means
Just the opposite.
The history of the 1929 to 1888 Pc
riod shows that consumption Of goods
actually declines with declining price
level. The reason is that in such pc
riods the buying power goes down
faster than the prices. If you increase
buying power. prices will go up, but
more goods will be bought. Wages
ought to and must 60 up with prices
Now let us read what the Brookings
report says:
THE price reduction method of dis
tributing income has en- outstanding
advantage over other methods, in that
the benefits are extended automatical-
ly to the entire population. An in
crease in money wages, with prices
remaining stationary, will enlarge the
buying power of the wage-earning
group, but it will not directly improve
the position of the equally important
portions of the population which dc
not work for wages. Similarly, profit
sharing may bring higher standards
of living to that particular section of
the population which is in a position
to share the profits, but it will be of
no direct value to the agricultural
population or to persons whose in
comes are derived from salaries. But
a reduction of prices gives to every
purchaser a larger return for his
money"
Limited Benefits.
What happens often is that salaried
workers like school teachers and
white collar" workers generally, to
say nothing of the rural population,
must pay the increased costs of ad-
yancing industrial wages, and they
get no benefit in return in the form
of increased wages for themselves. For
1t is a well established fact that their
income is only slowly increased, and
meantime their real wages go down,
because they cannot buy as much Of
the higher-priced articles.
: The Brookings report emphasizes
that the 54,000,000 persons who live
on farms cannot be ignored, and that
they would be if the money-wage
method were followed, and then points
out that population of about 20,000,-
900, comprising the professional group,
domestic and personal servants, en-
ployes in State and city and Federal
service, small shopkeepers and trades
men fall outside the wage system" ."
The report is entitled, Income and
Progress"
The Brookings report Is Just as much
opposed as is Mr.. Roosevelt to reduc-
ton in costs by reducing wages, be-
tause it frankly says this only reduces
the aggregate buying power.
Mr.. Roosevelt's point that buying
power goes up with increased wages
and prices Is contradicted by what
happened to the consumption of bread.
II went down as processing taxes were
added to the cost and as wage costs
were increased.
The best illustration Of the Brook
lngs theory of economics that can be
given is one that actually is working
today, namely in the automobile in
hustry. Better automobiles are now
HNdl1dDlC dG AOWCl pi iICCo UlldI1 CNcI
before. Each year since 1929 the au-
tomobile industry has increased its
sales and its employment. AS conse-
nuence of the efficiency in the auto
industry, the people who used to pay
,Sl,500 for a car now get as good
b vehicle for $500, and have $7OO ad-
ditional to spend on other things.
Whatever those "other things" may
be, from clothing to radios, the de-
mand for them increases as an indi-
vidual is able to buy more. The prin-
ciple Of the Brookings philosophy is
'"more for your dollar" In this way
real wages are actually increased.
An unequal distribution of the tax
burden may force the selling price of
articles up more rapidly than the
'wage-earning public can absorb them
at the higher prices. Mr.. Roosevelt
may then find consumption halted at
present levels or even reduced IL the