Evening star., 1938-01-30
Relation Is Now the
Nations Need
BY OWEN L. SCOTT.

Eyebrows were raised in some surprise
recently when John L. Lewis, G. I. o. big
wig. trooped to the White House in COM
pany Of Owen d. Young, leading indus
trialist, and Thomas w. Lamont of j. P.
Morgan & Co.
Here were big labor. big business and
high finance in conference with the most
important OF ruling politicians. Depres-
sion brought them together. 1t now
turns out that, in that conference, the
minds Of all were well agreed on single
very vital conclusion.
The conclusion was this: Recovery can
not be found now, any more than 1t could
be found after 1929, in the forced defla-
ton Of prices and wages.
When President Roosevelt, on January
Is, issued his pronouncement against
wage cuts in industry, he made public
his essential agreement with the view
point Of his famous conferees and called
the turn on basic White House policy for
the period ahead. He accepted publicly
the purchasing power theory OF econom-
les held by New Deal economists. That
theory, as stated briefly by its principal
advocate within the administration, is
this:
Incomes and purchasing power broad
~ speaking, can be increased in two ways
by the disbursements of business and
by the disbursements Of Government.
Business right now is contracting its
spending, thereby putting pressure on
wages and on commodity prices. In
hnsy,
ness is able soon to reverse this trend,
Government must step in with spending
OF its own, and with other devices, to
take the pressure from wages and prices
SO that incomes can be increased again."
In other words, the future calls for re
f1ation" and not for 'deflation." If busi-
ness does not provide this relation by
renewed borrowing and spending and re-
employment, then Government will strive
to provide 1t by borrowing and spending
of its own.
There no longer need be any mystery
about the underlying direction of the
New Deal
Here again the policy of Mr.. Roosevelt
follows the decision he reached in 1893.
AS the President once explained to news
paper men. he was faced at that time
with the choice OF putting the country
through the wringer-to complete the
process that had been going on under Mr.
Hoover-or to try to float the country
out Of depression on a wave OF Govern
ment spending.
The President chose to spend
In that process. he ran the National
debt up from about twenty-one billion
dollars to thirty-seven billions That
expenditure has given the country some
new dams and some more highways and
some school buildings and a variety OF
other improvements. 1t resulted in large
numbers OF jobs for the unemployed and
1t helped to raise the level Of commodity
prices back to the 1886 goal.
But that process also gave labor
strong urge to organize and to demand
high hourly wages. 1t gave employers an
urge to get rich quick by raising prices to
cover the wage advances and more, too.
And 1t gave farmers and other raw ma
terial producers the urge to grab every
thing in the way Of prices that the traffic
would bear.
All was we'll so long as the Government
was pouring out borrowed money in vast
quantities. When Mr.. Roosevelt finally
agreed with his Secretary of the Treas
ury, Henry Morgenthau, that the time
had come to slow down this stream of
Government-created purchasing power,
the whole set-up went into a tailspin. Gre
ating what now is known as the "Roose-
velt depression
So, once again on the Presidents door,
step was this question: Should the Gov
ernment now let some wages and some
prices go through the wringer in
process OF adjustment that might pro-
duce recovery and might. again, only
deepen the depression? Or, should the
Government go back and do over again
what it did after 1888?
There was strong pressure for at least
new try at def1ation as means of
reaching balance. But John L. Lewis
saw that this meant trouble for his
unions. And Owen Young and Thomas
Lamont saw that this meant probable
labor troubles. probable bankruptcy for
more railroads and for many enterprises,
as well as other painful adjustments.
Il
Mr.. Roosevelt was easily persuaded by
them not to put the wringer to work on
that President Hoover had made to wipe
out debt and price Embellishments In
stead, the President is conf1ning himself
to telling business that 1t ought, on its
own responsibility. to find ways to re-
duce prices and to hold up wages, thereby
relieving pressure on the Government to
do something. But business men see in
that advice an almost perfect formula
for going broke in deflationary period.
The alternative is a new "five-year
plan" of recovery through various de-
vices that have had at least q partial
workout in the past five years This
alternative the President is accepting.
That raises the question: How will any
such program be paid for?
The answer breaks down into several
parts. First is the prospect that the
next spending venture is not to be so ex-
pensive as the one after 1888. Mariner
S. Eccles, Federal Reserve Board chair
man, says that it can be done with
billion dollars of borrowed money, care
fully spent. Part of that billion already
Is scheduled for a program of rearma-
ment, after the pattern of Great Britain.
\
Next this time there is the prospect
that the Government can devise many
ways Of attracting private capital to ven
ture and to do the bulk of the spending,
merely by using some Government credit
to provide an added margin of safety,
This is the method of the housing law,
about to take effect in amended form.
and OF variety of other projects now in
the Matching stage.
r11,;.,