Evening star., 1939-05-28
RodicoI Bonking Change
Seen as Possibility
By OtDen l.. Scott.

sponsors as dud. This is the $400O,-
100000 1889 program approved by
Congress last year In the now-shattered
hope that these billions really would
prime the pump OF industry.
At the moment, under that program,
the Federal Government is pouring out
$3.50 000,0 900 of borrowed money a month.
Spending is at its peak. Yet l0,000000
men are out of work, another big crop
OF young workers is about to be gradu-
ated from high schools and colleges and
business is in the doldrums.
Today President Roosevelt is getting
interested in a 1s39-40 lending -for-re-
covery" program in the hope that more
billions advanced as 'loans" in new
year will finally turn out to be the bill
lions that can turn the recovery trick.
This would be the fourth injection OF
big-time money into the Nations stream
OF purchasing power.
Mr.. Roosevelt continues to hope that
Government spending or lending will
prove to be the panacea that can pro-
duce the long sought recovery.
Experience gained since late 1898 fails
to sustain that hope. This experience
reveals that something always happens
at critical moment to upset whatever
recovery Government spending and
lending appear to start. One time it is
an overdose of spending, as happened
with the soldiers bonus Another time
It is runaway price situation, as in
1887. Now it is war scare in Europe
that frightened business men and pros
pective home builders into a run for
cover.
The question now is asked: Is there
an alternative to the Government spend
ing-or-lending -for-recovery policy?
No doubt exists about the financial
base for vast boom. In active bank
checking accounts and in currency out
side of banks are $4,000, 900 900 in
money. The 1929 boom was carried on
with barely $27 ZOO, 1000 900. Bank re-
serves are inflated to $4,000 900 900. or
four times the total that supported the
1929 boom, and there are excess reserves
Or more than $4,000 900 900. There is the
base for fantastic expansion of credit.
Yet no way has been found to get
that money really to 60 to work.
Businessmen long have contended
that, if only Government wouM remove
restrictions; if only Government would
end deterrent taxes" and If only Gov
ernment would balance its budget, then
industry would regain confidence, bor-
rowing by industry would be resumed on
a vast scale and work would be found for
that money.
This viewpoint is widespread and
strongly held. Is it correct? On an
answer to that question may depend
Government policy and the well-being
Of the Nation in the period ahead.
Senator Joseph C. OMahoney and
Leon Henderson, running the Temporary
National Economic Committee, are seek
ing to find out the answer in studies
that If they educate businessmen and
the Nation to the fact that a change has
come over the world, will prove invalu-
able.
Briefly, what the T. NJ E. c. has
brought into glaring focus is the fact
that industry in the United States
both large and small-simply does not
have use for all the savings of the
people.
This fact reveals that there is little
foundation for the belief that industry,
would 60 out and borrow on huge scale
to finance recovery.
But then there are other facts.
If industry does not borrow, individual
savings tend to pile up. Those savings
must be put to use by borrowers who are
engaged in creating capital goods like
houses and utility plants and machin-
cry and other tangible things, or else
they are lost to the stream of purchas-
ing power. Savings that merely go to
buy existing stocks and bonds, raising
prices, or into buying real estate or into
ordinary speculation of one kind or an
other, are not creating new wealth or
sustaining purchasing power.
The conclusion of Government econ
omists of the highest standing is that
what this country needs is an outlet
either private or public or a combination
Of both-for between seven and eight
billion dollars of investment funds over
and above the total of funds that now
are finding work. That volume of addi-
tional investment would, according to
calculations, enable the country to alb
sorb its unemployment and to utilize
the work of individuals now idle and
largely unproductive.
How to get that volume of investment
is the problem.
X X 4
All steps so far suggested are minor
in Importance compared with the sug-
gestion of Adolph A. Berle, jr, Assistant
Secretary Of State and an economic adj
wiser to the President Mr. Roosevelt.
however, is not yet ready to get behind
the present recommendation of this ad-
viser
| Mr.. Berle wants the Government to
set up new banking system charged
with the responsibility of making capital
credit loans both to business and to
Government, with this banking opera
ton to be carried on. not for profit. but
for public service, on a mutual or CO.
operative basis.
A capital credit banking system, as
Mr.. Berle sees it, should direct the saw
ings of the people into active USE These
savings could go to private industry If
industry used the savings actually to
create new productive plants or to i'm