Evening star., 1937-10-27


alarmed or pam
icky about buSi-
ness recession which can be and will
be corrected If public opinion really
asserts itself
The first requirement is that there
should be an understanding of the
true causes of the downward turn in
business. The Governments own ad-
visers are fairly united in their memo
randa to the effect that the Govern
ment's curtailment of spending and
the withdrawal from purchasing power
of vast sums of tax money operated
together to cause change which set
in early last Summer and now has
been reflected in growing unemploy-
ment and widespread diminution Of
orders and contracts for the future.
What the Government experts are
not agreed upon is what shall be done
TO correct the situation. Some of them
are inclined to attribute a great deal
of Importance to the psychological
effects of the stock market itself. Thus
the drop of S25,000,000,000 in values
is naturally something that causes
thousands of business men to take
their cue from market conditions. and
1t is most unfortunate that several
officials think further regulation of
the markets in stocks so as 30 narrow
the margin of fluctuations would tend
to improve matters.
Investment Channels.
Maybe too much money has gone
into speculation. but it will be asked
what the public will do or can do II
channels of sound investment are
clogged. 1t has been said so often
that it sounds trite to repeat. A
capitalistic system is based on the
constant investment and reinvestment
of capital in productive enterprises
with the hope of getting fair profit.
The get-rich-quick type Of speculation
plays a part in every boom, but basl-
cally values are determined by the
earning capacity of the enterprises
themselves.
What future has any American en-
terprise when it cannot make plans?
There's only one big industry which
has been able to work out over pc
riod of years a balanced production
in relation to sales and prices, and
that's the automobile industry. But
today even that industry cannot plan
because it faces uncertainties in cost
developed directly or indirectly out of
Government action.
If ever there was a time for real
economic planning" it is the present.
But to plan effectively all the major
influences, including government it.
self. must do their share. Today labor
costs and tax costs are at the mercy
of a presidential whim. That's why
whether critics of Mr.. Roosevelt like it
or not, they are forced to concede
that Mr.. Roosevelt alone can prevent
major depression from approaching
1929 severity. He alone has power
over various economic factors. The
American people looked to their Presi-
dent in 1880 and 1881 and 1932-they
urged him to do something" They
will soon be urging their President
again to "do something"
President Aware of Pressure.
aware of the pressure. To save the
economic situation he may have to re-
verse himself on some important poll
cies that have been pet subjects of agi-
tation. Will he do it? Nobody knows,
but the rumors are flying thick and
fast that Mr.. Roosevelt isn't going to
let the present depression develop on
~, Ia hot be Rra
beyond control.
To understand the nature of the
proposed shift in emphasis-if one
does not wish to call it change of
policy"-it is necessary to state some
fundamentals-the difference between
businesses engaged in making what
are called consumer goods and those
engaged in making durable goods"
The consumer goods are such as arise
In food industries, amusement busi-
nesses and the like where no products
of a durable nature are made The
other group includes machinery, au-
tomobiles, trucks, railroad cars, rub
ber and metal articles, building ma
terials, ETC.
Government spending helped to stim-
ulate the consumer goods businesses
and that when the spending ceased,
these businesses instantly felt the drop
in purchasing power Stimulus of this
kind is temporary and can only be
made lasting if there goes on at the
same time real improvement in the
durable goods industries. At one time
in the depression period--1s32t-it was
said by the experts that a substantial
majority of the persons on the un-
employment list were once engaged in
the durable goods industries and that
the drop off in their purchasing power
in turn had caused falling OF of
employment in the consumer goods
industries.
Durable Goods Impetus.
1t is natural, therefore, that Govern
ment economists should be urging now
that the durable goods industries be
given an impetus. The public works
program, of course, has been helpful,
but it cannot go on indefinitely because
it means subsidies and too heavy a
drain on the budget
Private spending for durable goods is
the alternative. To stimulate this, it
is essential that unnecessary restric-
tions on financing be removed. Also
Government officials say the Federal
Housing Administration loans can e
beneficially resumed on basis where
by the Government guarantees for an
insurance fee the lending done by
banks. Then, too, the utilities can be
encouraged to spend if market for
their securities can be opened up.
The biggest demand for durable
goods is in the form of new housing,
replacement of worn out machinery,
remodelling of plants and replacement
OF used cars, trucks buses etc.