Evening star. [volume] (Washington, D.C.) 1854-1972, 1939-05-29

Charles G. Ross. trusters" and
now an Assistant Secretary OF State.
Mr.. Berries thesis, which is bril-.
liantly worked out. is that private
finance is unable to provide a sufi-
cient flow Of wealth-producing cap
ital: the Government therefore must
do large share Of the Job. This
is the coherent philosophy" Of
spending, as one Of Mr.. Berries COL
leagues in the Government has
phrased 1t, that Is now being ad-
vanced in place Of the earlier
"pump-priming' theories. The
Berle statement of the case, as It
seems to this writer, is that by which
proposals of further large scale ex-
tensions of Government credit
should stand or fall.
There is, as Mr.. Berle says, a
tremendous issue" behind his tech
nical title of capital credit" He
puts the issue thus. bluntly: THE
private financial system as at pres
ent constituted does not work 1t
has, accordingly, to be supplemented
by vast amounts of Federal credit
which make up in some measure. but
inadequately, for the difficulties in
the existing system Of private
finance. Use Of the Federal credit
by providing relief, and by taking
care Of certain necessary social re-
quirements through public works in
limited field, does keep the eco
nomic machinery of the country
running, but it is not a permanent
solution. There is always the dan
ger that an economy so organized
will reach the end of its tether. We
should be getting about the process
Of reorganization now"
Showdown in a Decade,
Why now? Because unless there
is some distortion such as that
which might be caused by general
war the next major downturn
Of the business cycle (due in any
case within four or five years. might
present all the factors for an ex.
plosive situation. In any event
the next decade will, I think, prob
ably force showdown"
The point is made that American
private markets are now putting
capital funds into capital construc-
ton at no more than one-third to
one-half the rate that obtained in
the l920-l930 decade. Government
financing has taken up the slack.
This was inevitable, for 'irrespec.
tive of political complexion, any
government faced with substantial
closure of the capital markets would
be forced to take measures to keep
the heavy industries and the capital
goods markets sufficiently active to
provide employment. If the only
available method was use of Gov
eminent credit. that method would
necessarily be used. To attack Gov
eminent spending as such in this
situation is simply to ignore real
tiles
The real danger from heavy Gov
eminent expenditure to create
wealth lies not, as Mr. Berle sees 1t,
in any threat to Government credit,
but elsewhere"
Drifting to Change in System?
Here we begin to see how tremen-
dous is the underlying issue For
the traditional things on which the
Government spends money-roads,
parks. public buildings and the like
can serve as the market for only a
/ small fraction of the capital goods
production of the United States.
So if wealth is to be created by the
creation of Government debt. "the
Government will have to enter into
the direct financing of activities now
supposed to be private. and con-
tinuance of that direct financing
must (mean) inevitably that the
Government ultimately will control
and own those activities" If the
Government uses its own credit In
this manner at the rate of $4,000
000,0 900 year, the Government over
a period of years will gradually
come to own most of the productive
plants of the United States"
This" says Mr.. Berle, "is GER
tainly so fundamental a change IN
the course Of American life that the
decision to make it should be taken
for reasons other than relief Of a
series of temporary difficulties. II
the country desires to make wealth
creation a function of Government
q personally believe it must do so
in larger measure than it has here
tofore) the choice should be the con-
sidered choice of the country, and
not the result of policy Of drift"
Must Be Done Honestly.
The conclusion is drawn that
either we are on the eve Of a change
in our financial system, or We are
on the eve of a change in our social
system" Is Mr.. Berle advocating
Socialism? He says explicitly that
he is not. though he confesses he is
frankly biased in favor Of public
ownership of certain forms Of
wealth.
Mr.. Berle cites what has been
done in New York by Mayor La
Guardia, who has been able through
"non-political administration" to
overcome the fears of private inter-
ests and put through a large pro-
gram of useful public works. The
result there would seem to indicate
that an extension Of Government
creation of wealth is indicated; and
that it can be done without danger
to our political or social system
provided the development is done
with honesty and character"
We may take 1t for granted, I
think, that whichever party wins
the next election, Government
spending to supplement private in
vestment-whether it be called
pump printing" or Government in
vestment"-willc continue. The real
issue before the country is one Of
degree: 1t is whether or not this
spending shall be carried to the
point where new economic system
will begin to take the place Of the
one we now have.