Evening star., 1936-09-13
Birth and Mortality
in Business
BY FREDERIC J. HASKIN.

years, especially as a result Of the great
depression which followed the 1929 coll
lapse. Every year sees changes In the
business structure. There are, to be sure,
some small towns where the same
handful OF little stores has been rum
ming for a generation or even several
generations without appreciable change.
In New England. for instance, and in the
South, one can find country stores which
have been run by successive generations
OF the same family.
Over the country at large, however,
and especially in the cities, there is a
constant ebb and flow Of business. Fail
ures occur, but new enterprises are
started and so the cycle keeps on. In
good times there Is normally an expan-
sion Of the total number in business
and In lean times a contraction. Always
the rule is change.
The best way to obtain a comprehen-
sive view Is to take the figures covering
two depressions, one of brief duration
and one long. In 1919 the country was
booming. This was the silk shirt era.
Farmers had been receiving unprece-
dented prices for their wheat and other
produce and the wages of labor were
good. Employment was full and prices
ruled high. 1t was grand period for the
storekeeper. In that year there were
fewer failures than there had been for
decade. The Withdrawals from busi-
ness numbered only 100000.
That sounds like large number, but
this is large country. The figures in
clude many types of business. Manu-
"a {v1r1 Ial nL
sale and retail establishments Bankers,
lawyers, and other professional men are
not included. Even with so many as
100000 failures in that year. general
business looked so good that there were
308,000 new businesses established.
These include all manner of businesses
from large corporations TO little hole
in-the-wall stores.
Then fell the depression of 1920-21.
1t will be recalled that this was pre-
cipitated in large part by what was
called the buyers strike. Prices rose TO
such heights that thousands of people
all over the country simply refused to
buy. The overall movement was a pro-
test against the prevailing high prices
Of clothing and 1t became a short-lived
fad for men to go to business Offices
and even to evening parties in overalls
This agitation had its effect, although
the price structure had grown so tall
that it was due to topple soon anyway.
In 1920 346,000 business establishments
failed and were forced to withdraw from
business. But very odd phenomenon
Of the period is that 900 new enter
prices were started. This is difficult to
explain. With so many failures, one
would not expect people to be encour-
aged to begin new ventures. Perhaps
most of the new ones mark reorganiza-
tions. In 1921 the depression had be-
come intensified and 388000 businesses
failed but the same phenomenon per-
sisted and there were 433,O00 new enter.
prises.
The country passed into a period of
great prosperity after the rapid recovery
from the 192o-21 depression. There was
great activity in every line. and where
activity is great it follows that vicissi-
tudes shall be great.
The year 1929 has been called the
year Of highest prosperity in the entire
history of the United States. Certainly
the national income reached its record
height and wages and profits were good.
Nevertheless. in the year there were
431 900 business failures. This was
scarcely more than balanced by the
starting of 45300 new business enter
prises. In 1882 there were 433 900 husi-
ness failures with $4,000 new ventures
and in 1888 there were $4,000 failures
with 345,000 new ventures. The follow.
ing year saw turn in the trends. fall
ures dropping to 100000, while new en-
terprises numbered 379 ,000
Losses to creditors caused by these
failures are smaller than might be ex-
pected. For one thing, the numbers Of
failures are greatly swelled by the small
stores which fail. Some of these are
very short-lived. They have not been
able to obtain much goods on credit or
otherwise establish liability. So when
they fail the losses to creditors are small
whatever the losses to the small pro-
prietors themselves may be. Over 90
year period it seems that losses to cred-
itors have amounted to less than / per
cent in about half the years.
-
Here are some interesting figures on
the loss in number Of establishments en-
gagged in different lines of business as
between the years 1929 and 1888. These
years give a swing from the height of
the prosperity to the depth of the de-
preston. There was a loss in automo-
bile dealers of 5.4 per cent of the total.
Such companies are likely to be fairly
well financed and, often, to be backed
by manufacturers who tide them over
bad times. In sharp contrast may be
considered dealers in clothing and fur
nishings. The loss in that field was 45.3.
One of the interesting facts concern
ing a serious depression is that dealers
in food products, grocers, meat men,
and the like, come through in better
shape than almost any one else. In this
case, the loss of establishments through
failures amounted to only 152 per cent.
Taking all of the businesses in exist
ence in 1929 and comparing with the
number in existence in 1888, it is found
that there was a shrinkage of 25.6 per
cent. Already a change has set in and
a short time will show that enough new
businesses have been started to make up
the loss.
Some wholesalers, jobbers, manufac-
turers and bankers probably would be
Just about as well pleased not to see the
birth of so many new businesses. There
always Is a risk entailed In granting
credit to new and perhaps unknown
business men who come to a town and
start an enterprise. Yet business is
business and 1t is difficult to turn q GUS
toner away.
There are a great many reasons for
the failures OF businesses. Dishonesty