Evening star., 1937-10-03
Temperament Plays a Big
Part in Recovery.
BY OWEN L. SCOTT.

0I w EN IL. SCOll.
The New Deal is not to be the long,
sought answer to the riddle of the busi-
ness cycle, with its booms and depres-
sions, its jazz eraS and mornings after.
The very authors of the experiment of
the last four years today look at recent
developments and privately admit as
much.
What they see is an unexpected lag
in recovery and a shake-out in security
markets comparable to that of 1929.
Money controls, reform taxes specua-
ton controls, farm controls, along with
other ventures in planning. are not pre-
venting the same violent swings in senti-
ment and in business and financial ac-
tivity that characterized pre-New Deal
days.
The result among the Government
planners is head-shaking and gloomy
countensnces. Yet President Roosevelt,
on his Western trip, has failed to share
the establishment of his expert ad-
visers. He continues to hold out the
promise of a planned future, filled with
few uncertainties.
A vitally important reason why the
New Deals economists now are ready
to admit that Mr.. Roosevelt's promise
cannot be fulfilled is found by them in
an explanation of the British economist,
j. M. Keynes who had an important
hand in shaping the early Roosevelt
policies.
The Keynes explanation is that
Americans are too prone-for the COM
fort OF planners-to mass action and to
rapidly changing moods. One day, they
decide that all stocks are going to 500 or
that all commodity prices will hit the
ceiling The result is that everybody
buys and almost nobody wants to sell
except at big profit Then, suddenly
some doubt arises about the prospect of
Utopia. Overnight the whole Nations
mood changes. Now everybody wants to
sell and almost nobody wants to buy, in
the belief that the bottom is going to
drop out Of everything. The result is
violent swings in security and commodity
prices.
Or in another field:
Labor organization becomes the thing.
Workers suddenly decide that they want
unions after not showing much interest
for years. There is rush to have COL
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up. Employers granting the wage in
creaseS figure that they can get back the
added money, and more. too, by sharp
price increases. So those who have
raised wages and others, too. promptly
kite prices regardless of need or effect.
Then buying slows, business hits the
toboggan and cries go out for Govern
ment help.
Nov
believe that the Britisher Keynes has
hit the nail on the head in his ex-
planation of the jump nature of this
country's economy. 1t is different than
in Britain, where the nation is less
prone to the influence of mass psychology
and where government long has exer-
cised restraining influence at key
points.
The mystery concerning what has
happened to American markets and to
American business of late can be cleared,
at least in part. by the Keynes theory.
Principal Government economists
agree on what has happened, and they
agree rather closely on what the busi-
nessmen and the people of the country
can expect after the present furry in
business and in the markets has sub
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cause for the mass hysteria that has
dominated recently in some quarters
The picture described by these ex-
perts, in brief, is as follow Depression
cleared away a vast amount of dead
wood in American industry and finance.
The Roosevelt policies toward banking
strengthened the structure of private
finance. Various inf1ationary moves
SorVpd tn hnIctor
to bring those prices back into a more
normal relationship with those of fin
ished products. Then the A. A. A.
syphoned money to farmers and drought
helped to restore the balance of income
between farm and city populations. w.
P. A. and P. w. A. and c. c. C. and the
soldiers bonus, among other things, put
money into the pockets of large numbers
of people, who quickly spent that money
on goods.
When the natural upswing in the
business cycle was prodded by these
Government activities, a recovery got
under way in 1885 that steadily gained
momentum.
John l.. Lewis took advantage of the
situation to start organizing mass pro-
duction labor Fear of labor trouble and
OF prospective price advances led en-
ployers to stock heavily of many types of
goOoS. War preparation in Europe add
ed to the demand for raw materials and
for machinery. Employment rose rap
idly as industry turned out goods to fill
the rising demand. Pay rolls shot up.
Farm income, in buying power, sky
rocketed to the highest point since the
1919 boom year. Home building showed
signs of catching on. Stock markets
zoomed
With unprecedented supplies of money
filled wants, the planners this past
Spring decided that a dangerous boom
was generating. Commodities as we'll as
securities were being marked up. Sharp
price advances were being scheduled in
many retail lines for this Fall 1t
looked like the start of the type of up
surge that feeds on itself.
So President Roosevelt was induced to
tell the country through newspaper men
that prices were too high. The Federal
Reserve Board started to tighten its hold
over credit. Word went out to start
curtailing Government spending where
possible.
But wage advances and price advances
at retail continued. Building labor got
higher wages. Building material prices
moved back not far from their 1929 level.
Stocks continued to move higher. al
though some commodities reacted to the