Evening star., 1937-12-12
Wisconsin Senator Views Needs of Crisis
and Points Lessons of Period When Social
Finance Took Chief Place.

session of Congress since the depres-
sion began" faces the issue of unem-
ployment.
In Nation with vast resources,
with productive capacity second to
none, and with an unusually skilled
man power" he points out, I'VE still
have millions of willing workers unable
to find an opportunity to earn their
living and provide for their families
After eight years of economic crisis,
we still have privation and hardship
in the midst of potential plenty and
abundance.
Now that we experience another
crisis within the crisis, once more the
two conflicting theories which have
divided the Nations councils since 1929
are being advocated with renewed vigor
by their adherents.
THE orthodox economic approach to
swing in the business cycle is
that, once the excesses of the boom
period have been written of by read
justment of the debt and capital struc-
ture, through bankruptcy and fore
closure, and the price level stabilized,
reinvestment of private. capital for
capital expenditure purposes will take
place in surficient volume to cause a
reversal in the downward spiral of
deflation. and ultimately produce
prosperity.
Il grant that in the past this pain
full process has taken place, but from
the beginning of this crisis I have con-
tended that sweeping changes in the
economic environment have made it
impossible for the orthodox theory to
be successful, even if the people would
accept the suffering which its applica-
ton involves in this highly integrated
industrial and agricultural organiza-
tion OF society in which we live.
"The closing of our physical from
tier and the rising tide of economic
nationalism which has swept over the
world, closing other frontiers, has so
drastically reduced, for the immediate
future, the inducement for the REIN
vestment of private capital for capital
expenditure. that it will not take place
in large enough volume. to prevent our
economy from contracting.
Il am not unaware, in making this
statement, of the inducement pro-
vided by obsolescence, nor the mod
crate amount of capital investment
brought about through new techniques
IN industrial processes. but they are
not sufficiently potent, by and large, at
the present level of effective consumer
demand, to keep the level Of business
activity rising, instead of falling"
In the opinion of the dynamic young
Senator from Wisconsin, it seems
tragic that we should have to prove this
all over again when we went through
the bitter experience of the effect of
TINS theory in practice from 1929 to
1888"
Have we forgotten" he asks, what
happened while they tried to let the
depression cure itself? Fifteen mil.
lion unemployed, three million families
put through the demoralizing process
OF pauperization; 5000, 900 farmers
had their purchasing power greatly
reduced or taken away altogether,
and hundreds Of thousands of them
lost their farms: industrial produce
ton fell Of SO per cent, credit was
contracted by billions of dollars
through bank failures; the annual in
come Of the people was more than
cut in two while the theory of letting
the depression run its course was in
vogue. The reinvestment of capital
fell from 10 billions in 1929 to 600
millions in 1882. Don't. we remember
the heroic efforts to restore confidence
by conferences, exhortation and prom
ises that prosperity was Just around
the corner'?"
TT WAS the Government, Senator
La Toilette assured this writer,
that turned the tide and produced