Evening star. [volume] (Washington, D.C.) 1854-1972, 1938-11-06
Depression Causes
Battle Economists
By FREDERIC J. HASKIN,

late germs OF various diseases Some Of
their achievements are surprising and
dramatic, as In the case Of the discovery
that the mosquito was the bearer Of
yellow fever. 1t might be said that SCI
entists In the economic field are just as
busily engaged in attempting to isolate
the germ Of business depressions.
There are many different kinds Of
economic depressions, and, perhaps,
many different causes for even a single
kind. So even though the germ of one
depression disease be isolated and a
way found to cope with it., that is no
assurance that the crusade has been won
and workable panacea discovered.
There is one known pattern, one
known germ of depression and that is
war. There never has been a war that
did not bring depression, sooner or later,
in its wake. The pattern is monotonous-
ly definite. On the outbreak of war
there is momentary panic and depres-
sion. This is followed by war prosperity
not only in the winning country, in mod
ern times at least, but in the losing one.
Next comes postwar depression, which
Is likely to be Of short duration. Then,
after an intervening spell OF prosperity,
comes the secondary and usually much
deeper depression.
One would think that when this pat
tern is so we'll known when it has been
repeated like the design of wallpap per,
the people would be forewarned. Most
OF them never are. The wise ones are
forewarned and often reap fortunes to
repay their study of history. For exam
pie, at the time of the World War ths
New York Stock Exchange was so de-
moralHed, so many people, Americans
and aliens alike, were dumping shares
that values fell to almost nothing and
the exchange had to be closed for
months. The wise ones, knowing the
pattern, bought stocks at less than rum
mage sale bargains. In brief time
they saw these stocks rocket upward
100 or 1000 fold. Also, these students
have known when the terminated
depressions were due and unloaded
stocks and inventories which had be-
come overinfated, getting out HARM
lessly whole.
All these matters come under special
consideration at this time because the
germ isolationists of depressions are
equally busy trying to isolate the germ
Of recovery. There are indications
abroad that the country is moving into
period of better times. From the auto
mobile areas comes news of the re-em-
ployment of many thousands of men.
The housing industry shows monthly
gains. Trade is picking up and tens OF
thousands are returning to work in vari-
Gus lines. A difficulty is that one can
be less sure about the indications of re-
covery than the indications of depres-
sion, especially when a depression is
foreshadowed by war.
In the first place, he is confronted
with three we'll defined types of theories
on the subject OF depressions and recov-
cries. One Is that depression is norm
state and that the manifestations {,
hard times are -perpetuating, only &c
lieved by periods of prosperity which e
in the nature OF sports, tangential =
what should be expected. Certain.
there are areas of the world which neve.
have known a period of prosperity e.
prosperity is known in the United State
A second and happier theory Is tha
prosperity is the normal state and thai
depression is the symptom of an eco
nomic disease and indicates that there
is something wrong with the balance OF
supply and demand, with the laws of
the land. with the manner in which they
are administered or otherwise. The pro-
ponents Of this theory are usually ready
with a whole bundle of nostrums to cure
the ills which have brought on the
malady.
Still third theory is that OF the
business cycle. The disciples of this
rhythmic conception believe that pc
RODS of prosperity and depression newt
ably follow like the surges Of the sea or
as night and day. 1t is fatalistic theory
and, perhaps, well fitted to certain types
of mind. There is reason to think that
the seeker after truth might profltably
adopt something from each one Of this
triad of dogmatisms
*x
difficulty in all diagnoses Of these
matters is that different causes work
periods of depression and prosperity in
different parts of the world and that
there are varying conceptions of what
constitutes either IN different chimes.
Americans can make some definite
observations, however, and draw illumi-
mating conclusions. We know that, after
each one of our wars, there has been
period indeed, two periods of depression.
Also we know that, aside from war influ-
ence, periods of overexpansion have
brought reactions into depression. In
some cases there has been more or less
direct tie between these overexpansions
and previous wars.
Also Americans are aware that his
tory, in our case, shows that any tinker
ing with the currency or any great in
crease in public debt or unbalance and
excess of taxation have brought on dis
astrous reactions. Never in American
history has Government borrowing and
spending at huge rate produced pros
perity. Quite the reverse is the lesson
1t has been when the Government hGG
tightned its belt and insisted, at an,
cost, on a sound currency and SOUND
financial management that recovery he
lifted its head and developed into ne