Evening star., 1940-03-17
Short Business
Outlook Held Good
By Owen L. Scott.

~ O1Cen l.. Scott.
For the fifth time in seven years bud
ding boom, In American business has
come to grief. This time the war boom
that started last September now has COL
lapsed with rather startling suddenness.
The resulting decline in the rate Of oper-
attons in American industry is the most
rapid on record.
Strangely, however, very few people
are getting excited over this new busi-
ness upset. President Roosevelt refuses
to Take 1t seriously. He Is told that 1910
is likely to turn out to be better year
than 1889 in spite Of the present decline.
The President, acting on this advice, is
refusing to consider another program OF
} Government spending as q means Of
printing the business pump.
: The reason for optimism In the face
OF this recession is found in the expecta-
ton that the volume Of business growing
directly and indirectly out Of Europe's
war will increase and win serve Is the
1910 pump-priming program.
Many businessmen have been surprised
by what they consider q very small
amount Of war business. Businessmen
generally. with the start OF war, had
expected to be flooded with foreign or
ders OF one kind or another. They re-
membered that in the last war there was
a price rise and sharp increase in the
rate Of operations of industry. What
they forgot was the timing Of the war
boom Of the 1914-19l9 period.
The first months of war in 1914 saw a
decline in foreign orders for American
products and then sudden and sharp
increase In orders for American farm
products. 1t was only gradually that war
demands made themselves felt In the rate
of operations Of industry and in prices.
The peak Of demand and of operations
came early In 1917.
This time there has been q very large
increase In demand from abroad for
American industrial products, but q de-
cline in demand for farm products.
Exports in the first six months Of war
have far exceeded official expectations.
In fact, the physical value of American
goods moving into foreign markets is as
large now as it was in 1929 and is holding
this high level. Much Of the demand is
coming from neutral nations, whose
source of supplies was cut OF when the
British Navy suddenly closed Germany's
foreign market. American businessmen
quickly stepped In to take much of that
market. The result is that exports in
December and January and February ran
about rs per cent above a year ago.
But why the downturn in business in
the face of this big war-created demand?
The answer is, in part, that with all Of
its increase, the volume of foreign buy
ing is relatively small part Of the total
buying Of American goods. Domestic
demand accounts for more than 90 per
cent Of all demand. The rest Of the
answer is found in the fact that business
went on speculative spree when war
started. Everybody, including house.
wives, started to stock up with goods in
the expectation that prices would 60 sky
high. An avalanche Of orders hit Amer
tcan industry all at once In September
and early October. When Europe set
tied down to siege warfare instead Of
to competition in destruction, Americans
quickly lost the idea that this war would
be bonanza. Orders stopped coming.
Industry kept busy until December fill
ing orders that came with the start Of
war. Since December business has been
on the skids.
The President is advised that the
worst is over now and that there should
be some moderate business improvement
during April. May and June that may
carry through the next quarter. This Is
reassuring In an election year.
But there still is very little confidence
In the stability Of the present business
situation and even less confidence in the
ability Of American industry-under
present domestic and world conditions
to move forward to kind Of recovery
that will give jobs for the 100000 un-
employed. The New Deal simply has
not, IN its seven years, provided any real
part Of the answer to the Nations under
lying economic problems.
Then why isn't President Roosevelt
getting ready to try again to devise q
recovery formula? Why no more inter-
est in reviving the spend-lend plan Of
fered to Congress less than year ago?
Why the apparent complacency?
Part of the answer is found tn the
unwillingness Of Congress to try any
thing new. But largely. the answer, is
found In war. Whether foreign war Or
ders reach large totals or fail to, there
still will have to be increasing ex-
penditures on armament at home so long
as the world continues to be the dan
gerous place it Is today. National de-
tense expenditures soon will be running
at the rate Of more than $50, 100000
month or not far from twice the rate of
one year ago. This increase will Offset
in large part the contraction in w. p. A.
spending and the gradual liquidation Of
the Public Works Administration pro-
gram. Mr.. Roosevelt finds that busi-
nessmen do not object to Government
borrowing of money for use in buying
battleships and artillery. He will have
support, and little opposition, for any
plan Of public spending that is based
upon national defense.