Evening star., 1939-05-21
Experts Analyze Economic Ills
And Advocate Possible Cures
Monopoly Committee Is Striving to Meet Challenge
and Submit Program Designed
to Restore Prosperity
BY John C. Henry.
By John G.. Henry.

Through minutely detailed study of
savings and investments-their creation,
their destination and their subsequent
productivity - Government economists
and the financial leaders of Americas
key industries during the past week have
combined to diagnose for the Monopoly
Committee the fundamental economic
ailment of the Nation and to indicate
some of the possible cures.
1t is not a concise and simple presen-
tation but rather one which must be
fitted into much other theorizing and
multitude of other facts, some of which
will appear in the full record of this
committee and some of which may not
be discovered until added thought has
been given to the riddle Of what makes
an economic system function.
Its translation into legislation or into
policy of either government or industry
may not occur Immediately, or may
never occur. But it may sooner or later
provide foundation for an improved
functioning of our economy.
Streamlined Expansion.
1t has been fundamental to our ma
tional economic system through the
years of its development and expansion
that it was a high-speed structure
streamlined if you will, nourished by in
creasing population, chronological prog
ress at rate surprising that of any
other nation, new industries and new
frontiers in every direction.
In it's pell-men progress, the momen-
tum of our economy quickly carried it
over temporary obstacles; venture cap
ital could always find a ready outlet and
losses in one direction were quickly out
distanced by magnificent profits in an
other A high rate of savings was ac-
companied by high rate of invest
ment, the effective part of which was
that going into the capital outlays of
plans, equipment and construction. I'M
portant employment with its direct in
fluence on the national income and con-
sumption expenditures accompanied
these capital outlays.
1t was natural, of course, that our
whole society should be geared to this
robust economic system and that when
an accumulation of forces finally slowed
1t down and revised some of its char
acteristics with seeming permanency we
would be just short of the panic stage.
That this happened back in the late
twenties and that its effects are still
with us is hardly debatable question.
DIR. Hansen Explaining Props.
Seeking to segregate the elements
which mark this contrast between to-
days economy and that of the twenties,
the committee called first during the
past week upon DR.. Alvin H. Hansen,
professor of political economy at Har-
yard University
In summarization, he outlined as fol-
lows the five main props on which the
prosperity of the previous decade rested,
but which have subsequently disap-
peared in large part:
First, industrial and residential
building, which reached in this decade
(of the twenties) an all-time high. 1t
fed an accumulated backlog of housing
requirements caused by the virtual ces-
sation of house building during the war.
1t fed, moreover, on the great growth
of population in this decade.
In the second place, there was high
volume Of public construction financed
heavily by State and local borrowing.
Large capital outlays were made on
roads, schools and other public improve
nents.
I'm the third place, there was the
outlet for savings in foreign loans and
investments, which in part provided
foreign countries with the purchasing
power to buy from us an excess of ex-
ports over imports.
Fourth, there was the growing i'm
portance of consumer credit which
reached the quite extraordinary level of
I'll 900 900, 900 by 1929.
Fifth, there was the prodigious growth
OF the great automobile industry, to-
gether with all the related industries
which it fostered and sustained, includ-
ing rubber oil, glass, steel, road equip
ment machinery, cement and other ma
terials"
Opportunities for Saving.
In short, there were here presented
important and adequate opportunities
for the high savings of the Nation to
re-enter productive enterprise.
With the high-saving habits of the
Nation relatively unchanged in the last
decade-in 1887 the percentage of gross
national income going into savings was
1872, exactly the percentage saved in the
years 1928 1929 the effect of disappear
ing opportunities for productive invest
ment was Illustrated to the committee in
a chart prepared by DR.. Lauchlin Currie,
assistant director of research for the
Federal Reserve System.
Using the years 1925 and 1887, in both
OF which the gross national income was
approximately $4,000 100000 and the
aggregate savings about 5000 100000,
DR.. Currie presented picture break
down of the channels into which this
latter sum flowed. Significantly, the
greatest contrasts found in the two years
were in the categories of expenditures
for housing and construction by nom
profit institutions and in the proportions
of funds going into inventories.
Acknowledged to be an important field
OF employment, private housing and nom
profit institutional construction provided
an outlet for $5,585 900 900, or 329 per
cent of savings in 1925. But in 1887 this
figure had shrunk to $1,670 100000, or
only II per cent of total savings of the
year. In other words, an outlet which