Evening star., 1939-12-17
No War Prosperity
at Present
BIZ Otcen L. Scott.

Europe's war simply is not yet resulting
in the orders that American industry
must receive If it is to continue its pres
ent high level Of activity.
In the week just past this country's
industrial machinery turned out more
goods than In any other week in his
tory, surprising any similar 1929 period.
The rise in production since September
has been sensational and has been based
upon the expectation that war would
bring with it rising demand and rising
prices.
This expectation is not being sup
ported.
People in this country are not buying
much more in the stores than they
bought last August. Foreigners, other
than nations at war, did buy little
more in September and October than
they bought in August, but in Novem-
ber they reduced their purchases OF
American goods.
The result is that goods turned out
by the feverish activity In industry are
piling up on shelves. Prices that had
started to skyrocket are showing more
restraint
OF course, with war under way abroad,
businessmen will want to have more
goods on hand than they otherwise would
think necessary, because 1t always Is
possible that there may be war-inspired
demand that will cause price rise. But.
even in the face Of this fact, the prospect
is that industry is going to be forced to
slow down in the months just ahead
This slowing down will continue until
consumers at home and abroad can con-
sumo currently the products that indus
try is producing. A drastic decline is
not to be expected at this time, however.
owing to the fact that people do have
more income to spend and the Govern
ment is going to continue to bolster this
income with large spending of its own.
In the longer view. any new and sus-
tanned recovery will depend either upon
the opening Of broad new fields for in
vestment at home or upon demands for
American goods from abroad.
Business expected that war would gen.
crate that foreign demand.
This expectation to date has not been
realized either in the United States or
in Canada. The reason is that Britain
and France are geared to business
as-usual" policy so far as possible. When
. special war demands do arise that can
not be met at home, those demands are
f1lled-where they can be-within the
empires and at buyers prices.
It can be said that the deliberate pol
icy of these two warning nations is to
buy just as little as possible from the
United States
Reason for this policy is obvious.
Both Britain and France buy more
from the United States than they sell
to the United States. To settle the diff
ference, they either must give up some
Of their gold or they must sell some of
their securities. In either case, they are
using their capital assets-their inner.
itance-to meet current operating ex-
penses. That capital, in the form Of
gold and securities and cash in the bank.
is last reserve that may be needed
later in time of greater danger. Con-
sequently. the policy of the British and
French is different from what it was in
1914
Then there are other reasons why
American businessmen cannot look for
the volume of war business that came to
them before.
One reason, of course, is that this war
to date-is war of siege that tends
more to stif1e industry than to create
new demands. Another reason is that
the new war is occurring after more
careful preparation, in which both sides
took time to establish exact needs But
the main reason is that the British and
French simply do not have the money
to squander that they had last time, and
the United Sttaes is less in the mood to
provide the money to be spent
In the last war, Britain and France
spent about $4,000 100000 in this coun-
try for things that they needed to fight
the war. To get that s12 900 ,00O,0 they
shipped $1,000000 900 in gold, sold $2OOO,-
100000 in securities and borrowed the
remaining s9,000,0000oo from American
individuals and from the American Gov
ernment.
What happened was rather clearly ex-
planned by a recent colloquy before the
Monopoly Committee meeting here Will
lard Thorp, Commerce Department ad-
wiser, was on the stand. DR.. Thorp
pointed out how credit was created inside
the United States to pay for allied war
orders. At this point. Leon Henderson,
S. E. c. commissioner, interrupted 20
suggest that the United States really
paid for those war orders itself. The
witness said that was right, and Sena-
tor Borah took up the questioning:
Senator Borah-We furnished the
goods.
DR.. Thorp-We furnished the goods:
yes, sir.
Senator Borah--And we furnished the
money to pay for them.
DR.. Thorp-We furnished the money
to pay for them.
Senator Borah-And we have never
gotten the money back
DR.. Thorp-And we have never gotten
the money back.
The witness explained that this coun-
try had enjoyed form of entertainment
in making loans to foreign governments
that then were turned into goods that
never were paid for in exchange or in
other goods.
In the present war, a repetition of that