Evening star., 1937-09-24


in contact with
the economic side n.s
of things frankly
confess they cannot find any one
thing as the cause of the latest turn
of events in the markets Of the
country.
There is general disposition to say
the situation of today is the result of
many factors, both national and in
ternational. Naturally the tendency
Is to appraise the recent happenings
as indicating only a temporary re-
cession and to discount the possibili-
ties that major readjustment is
under way.
Decline Seen Temporary.
My own feeling is that the New
Deal officials are right in their esti-
mate, that the decline in the markets
Is temporary and that very soon the
inf1ationary trend will be resumed
The best answer I can find to what
is happening today was written by the
man who ought to know from the in
side what Is going on in the economic
and financial world. He is the governor
OF the Federal Reserve System What
he said last March is just as true
today. 1t was then he issued a state
ment in which occurred the follow
ing paragraph:
"The way to control unjustifiable
price advances is by increasing pro-
duction. This can be done so long as
there is idle labor willing to work, so
long as there are unused natural re-
sources and an abundance of money
at reasonable rates. All three of these
conditions are present at this time.
Increased wages and shorter hours,
when they limit or actually reduce pro-
duction, are not at this time in the
interest of the public in general or in
the real interest of the workers them
selves.
when wage increases are passed
along to the public and particularly
when industries take advantage of any
existing situation to increase prices far
beyond increased labor costs, such ac-
tion is short-sighted and an indefensi-
BILE policy from every standpoint.
Effect of Pay Boosts.
Wage increases and shorter hours
are justified and wholly desirable
when they result from increasing pro-
duction per capita and represent a
better distribution of the profits of in
dustry. When they retard and restrict
production and cause price imitation,
they result in throwing the buying
power of the various groups in the en-
tire economy out of balance, working
particular hardship upon agriculture,
the unorganized workers, the recipients
OF fixed incomes and all consumers.
For the last several months since
Mr.. Eccles made that pronouncement
labor costs have been rising. The New
Deal has bestowed upon labor a power
of holding up employers SO that many
OF them merely capitulate to labor
demands and pass the cost on to the
consumer. The same administration
which cries out against higher prices
does nothing to restrain arbitrary de-
mands especially when unjustified by
production figures.
Thus the National Industrial Con-
ference Board in its report issued only
last week declares that between July,
1886, and July, 1887, labor cost per
man hour has increased 149 per cent
and that this increase in labor cost
has not been Offset by increased pro-
ductivity, either on the part of labor
or through mechanization and i'm
proved methods" The conference
Board adds:
THE number of man-hours per unit
OF output increased 38 per cent while
output per man-hour in July, 1887,
was 3.7 per cent below that for July,
1896. As a result labor cost per unit
OF output has risen 1913 per cent dur
ing the past year and labor cost per
each 500 value of output, which takes
into account the rise in prices, has
increased 9.6 per cent"
Production Not Gaining.
From the foregoing it will be OBJ
served that labor costs are definitely
rising but production isn't. Just how
any democratic economy can operate
successfully on the theory of more paw
for less work, higher prices for less
goods Is mystery which the new
tangled economists have not yet ex-
planned. Mr.. Eccles certainly warned
against 1t last March, but like tn,
famous warning Of the Federal Reserv,
Board in April. 1929, it has been given
little attention.
That the American economic sys.
tenn at the moment is out of balance
Is conceded on all sides. Busines.
men say arbitrary increases in labo
costs are forcing them to push price
upward. Consumer resistance hasn'
started yet. but wholesalers are plainl,
cautious and apprehensive about pric,
increases for commodities and raw
materials and sudden shifts in tn,
entire base of the price structure.
Uneasiness Over Policy.
On top of this is the general un
easiness about administration policy
its evident contempt for propert,