Evening star., 1937-03-21
Warnings of the Future
Fill the Air
BY OWEN L. SCOTT.

new 1879. Inc Dig boss OF the cOuntry'S
banking system, Mariner Eccles, shouts
a demand to beware of initiation. Gloomy
| forebodlngs are heard among the Gov
ernment's principal advisers on eco
nomicS.
All OF this at time when the outlook
seems unusually bright. Business is
humming in spite of the wave of labor
trouble. The Treasury has just collected
a huge total OF revenue, suggesting a
definite end to the need for further
Government borrowing from bankers.
Wage rises are sweeping the country.
Profits are at boom levels. Farmers have
not been SO prosperous in many years.
In the midst of apparent recovery,
the cry is raised that prices threaten to
get out OF hand. But not long ago
President Roosevelt was telling the
country that he was determined above
all else to force prices higher Just
when he seems to be succeeding, official
ShlVers over price rises are beginning to
be noted all over the place.
What's up? Are there dangers lust
ahead, or is this just another cry of
wolf, wolf" when there is no wolf?
1t might be SO regarded except for
oiiC liliilS IbcStI We bOdTQ CHAIRMAN
EcCles is leading the shouters. Mr..
EccleS is a former Utah banker and
buSlneSSman-one who weathered the
depression with his chain of banks and
his large fortune intact. But, unlike
most other bankers, he became fed up
on the orthodox depression remedies as
early as 1881, and at that time sold
himself on the idea of Government
rf H0r
late recovery. That was long before Mr..
Roosevelt had given the theory any
thought.
Events brought Mr. Eccles to WASH
lngton in 1888, and here, as Assistant
Secretary Of the Treasury and then as
chairman Of the Federal Reserve Board
OF Governors, he guided the application
OF the theory he had espoused Chair
man EccleS now is convinced that ex-
perlence has proved the success of the
Spending-for-recoVery theory as means
of stirring up business activity.
Borrowed money to the extent Of about
twelve billion dollars was paid out to
relief workers, to boys in c. c. c.
camps, to farmers and to workers on
P. w. A. projects. These dollars quickly
were translated into food and clothing
and other goods. They stimulated trade
directly and, in turning over between
merchant and wholesaler and manu-
facturer and raw material producer.
stimulated trade indirectly Then they
landed in the banks to add to deposits.
thereby tending to make credit money
plentiful and cheap.
That IS just as it should be under the
ECCleS theory.
But now new problems enter TO COM
pllcate the working of that theory. The
warning shouts from the President and
from Mr.. Eccles are the result.
The idea at this stage of the spending
theory is that the plentiful supply of
bank credit is going to seek investment
in homes and factories and machinery
and business enterprises to supply the
vast wants and needs of the people of
the Nation, That investment. in turn,
is expected to lead to jobs for those still
unemployed and to bring back real
prosperity. With that prosperity, the
Government would hold taxes high and
get back the billions of dollars it had
spent in the first place to start the
ball rolling. Then. if another setback
threatened, Government credit would be
in good shape to repeat the spending
venture
The theory sounds almost perfect.
Even those who are skepucal of it
admit that. to date. its application has
surpassed expectations. But suddenly
danger signals are raised.
The point is that, if the remaining
millions OF unemployed are to get back
TO work in private industry, then in
duStry must find markets for a vastly
greater quantity Of goods than it now
is producing. Business activity will need
to increase far above it's present level.
Actually. the trend is sharply higher.
x
But: War preparations in Europe are
causing foreigners to offer fancy prices
for copper and pig iron and cotton and
other commodities.
John Lewis is leading a bandWagon
movement for the organization Of workers
in mass production industries. Under de-
mands Of these workers, wages are being
advanced sharply in some industries and
hours of work are being shortened.
Businessmen and industrialists, feeling
the demand for goods as well as the de-
mands for wage increases and the in
creased cost Of raw materials, are kiting
prices in many cases to a point far beyond
that represented by the increased labor
costs and the increased raw material
costs.
All OF this is occurring at time when
banks are bulging with loanable funds
and are beginning to take an interest in
making loans to businessmen.
The result is that something is hap
penlng which Mr.. Eccles said could not
happen and on which part of his original
theory was built. He contended that
there could be no imitation in this coun-
try so long as there were idle men and so
long as there was idle productive plant.
But today both he and President Roose-
velt are warning against an initiation
which they see at hand.
More than that: Millions of the unem-
ployed, millions of workers who have not
shared IN wage advances-most have not
and millions of farmers are finding that
the dollars they receive will not buy as
much in the way of things they need as
the same dollars would only few months
ago. They will find in the months Just
ahead that their dollars will buy even less.
Right there is the danger point.
While some wages and most prices are
engaged in chasing themselves up in an
inflationary spiral, other wages and some
prices will not be able to follow. This
will mean that the workers and farmers
tagging behind will be able to buy less
instead of more. The vast market that
industry needs to provide full employ
ment may not grow rapidly enough to