Evening star., 1939-10-23

important opin-
Charles G. Ross. ion has been set
up in warning against the evil ef.
fects of general price imitation.
Just as the fight for the admins
tration's neutrality bill has brought
together conservative and liberal
groups who are ordinarily at one
another's throats, so the need for
preventing a war boom has made
such strange bedfellowship AZ
that OF the United States Chamber
of Commerce and its vehement jour.
nalistic critic, the New Republic.
When the New Republic approx.
ingly quotes the Chamber of Conn
merce, and the Chamber of Com.
merce reproduces an editorial from
the New Republic. that's news. It's
news, in this case, of the highest
significance to the country, for 1t
betokens agreement between two
widely separated schools of thought
on subject that bears vitally on the
national welfare.
Leveling Follows Bulge.
What has happened in the price
field up to now? The chambers fig
ures show that since the bulge in
prices early in September, there has
been a leveling of, turning into a
downward inclination by the middle
OF this month. At the end of the
seven weeks up to that date, the
price level stood at a figure repre-
senting per cent increase duringS
the period. The chamber contrasts
this with the 10 per cent increase
that took place between May and
July of 1888. when there was no
European war.
In the relatively moderate nature
OF the increase this fall, as well as
in the salutary efforts of the cham
Der and other agencies to head of
a speculative boom, there is large
measure of reinsurance for the fu.
ture. There is ground, it appears,
for the optimism of Undersecretary
of the Treasury Hanes in believ.
ing. as he said in a speech to Q
business group the other day, that
the business leaders of the country
are forewarned by the price col.
lapse after the close of the last war
and will act on that experience TO
prevent "a pinnacle of price levels
which will inevitably lead to an
other collapse"
The danger, however, is not past.
Too many warnings cannot be is
sued that there can be no solution
for our economic ills. at the bottom
of which lies the great volume Of
unemployment, through a boosting
of industrial prices.
This thesis has nowhere been bet.
ter set out and expounded than in
recent speech by DR.. Harold G.
Moulton, head of the Brookings In.
stitution of Washington. 1t is to
certain parts of DR.. Moulton's argu-
ment-for it is impossible to review
it fully in this brief space-that this
column would draw special atten.
! ton.
1886 Experience Cited.
In leading up to his conclusion
that advances in industrial prices
at this time should be resisted to
the utmost" he says there has been
general tendency to overlook the
bearing OF the volume of output on
unit costs. In other words-the
present writer's-there has been a
disposition in fixing the prices Of
manufactured goods to ignore the
fact that as volume goes up the
production cost per unit tends to
come down.
To show the significance of in.
creased volume DR.. Moulton cites
the 1886 experience of a group Of
companies whose increase in tho
scale of operations from SO per cent
in the first quarter to SO per cent
in the second quarter meant more
than a threefold increase In net
earnings. Again. 10 companies which
operated in 1885 on a 47.9 per cent
basis earned SAL 900 900. They in.
creased their operations to 81 per
cent OF capacity the next year and
earned $128,000,0 900, despite the fact
that during this period both raw.
material prices and wages were ris-
ing. In the first half of 1887 q
still increasig scale of operations
raised profits still higher.
In the case of the railroads and
the public utilities, DR.. Moulton
says, it is not assumed that in
creases in the cost of fuel labor and
equipment will promptly necessitate
higher rates, but in the case of
manufacturing there is a tendency
to assume that increases in operat-
Ing costs must be followed by some.
If not a proportional, advance in
price" This is true although "the
difference between manufacturing
industry and railroads and public
utilities is only a difference Of
degree"
DR.. Moulton hastens to warn
against too sweeping generalizations
from his data. He points out, for
one thing. that the gains from ex-
pansion Of output tend to diminish
as less efficient plant and less efiici-
ent labor are called into operation.
But" he adds, "even this tendency
may be offset by the prompt in.
stallation of new and more efficient
plant and equipment"
1t is such considerations as these,
among others, which have prompted
DR.. Moulton to conclude that "a
general advance In the price Of
manufactured goods at this time
would be distinctly unfortunate"
and should be resisted.