Evening star., 1940-08-01
Sloan Warns AGAINST
Inevitable RECKONING
Of Arms Spending
National Income May
Near Pre-Depression
Peaks Under Stimulation
BY J. G.. DONLEY.


NEW YORK, Aug. 1-As a re-
suit partly of normal recovery, but
more largely due to activities of war
and defense-stimulated industries,
national income is rising, and some
observers predict that during the
next two or three years the ag-
gregate may get back close to pre-
depression peaks.
Defense expenditures are expected
to play a larger part in boosting
national income late this year and
early in 1941. Commenting upon the
likely effect of such spending, Chair
man Alfred P. Sloan, jr., of the Gen
eral Motors Corp, says that many
will be lulled into a sense of Sc
curity by the stimulation of business
resulting from these expenditures.
They will think good times have
arrived in fact, but when the in
evitable accounting is made un-
fortunately the picture will look
quite different"
II past experience is any guide.
it seems entirely probable that the
public will concentrate on the "stim-
illus" and skip the inevitable ac-
counting" That is, increasing pur-
chasing power by reason of war
orders and defense spending seems
likely to keep the retailers busy all
along the line from apricots and
automobiles to washing machines
and zithers.
Sums Lifted Sharply.
The aggregate sums involved in
defense spending have been lifted
sharply from early mentions of a few
billions to the point where funds
already appropriated or in prospect
now total some s14,O0O,O 900, 1000. All
that money cannot be spent, of
course, in one or two years, but as
much as s4,00000O,0OO to s5.O0O,-
900 900 of it may be disbursed within
single fiscal year once the wheels
are oiled and the work has gathered
momentum.
How much of an increase that
means IN armament expenditures
becomes apparent when we compare
with recent years. In the five year
period from 1885 to- 1899, inclusive.
the United States spent an estimated
S5,10O0 100000 for armament, or ONLY
slightly more than $1,000, 900 900
annually. on the average. During
the same five-year period Germany
spent an estimated equivalent of
Sl9,l00, 900, or an average of So
820,000,000 annually, with consider
ably more than that average actually
spent in 1888 and 1899 when the
''War-economic" machine was going
full blast.
The Department of Commerce has
| just reported income payments to
individuals totaling s35,338, 900 900
during the first six months of this
year, which is a gain of S1,650, ,00O,-
600, or 5 per cent over the corre-
spending period of 1899. Although
payments were l per cent less than
during the first half of 1937--the
peak of the best recovery the Nation
mas seen since the big craSh-living
costs were lower during the first half
of this year, so that real income. !"
or buying power, probably hit new
recovery peak.
One-Eighth of Efforts.
Some observers have estimated
that under the stimulus of such an
ambitious arms program as is now
slowly getting under way, our ma
tlonal income may we'll rise to the
$50 1000, 100000 levels. or higher. if
annual production for defense
reaches the annual peaks mentioned.
about one-eighth of our productive
efforts will be concentrated upon
arms manufacture.
The possible loss of a large slice
OF our foreign trade because of
blockades, embargoes and an after
the-war shift of allegiances. has be-
come something of national bug
bear in recent months. But our
| total merchandise exports in recent
years have averaged no more than
$3,200,OO0,OO0 annually.
Offset by Arms Spending.
If all such trade were lost-which
would be impossible-it would be
more than offset by arms expendi-
lures which may eventually exceed
such total by more than sl,oO0,-
100000 annually. Moreover, it NAV
be reasoned that when goods are ex-
ported for wholesale and retail dis
trlbution abroad there is lost to us
the continuing turnover of each dol
lar involved. But the full effect of
the money put into circulation
through the defense program will
spend itself, accumulatively, within
this country.
If arms spending attains the size
now contemplated, the eventual diff.
ficulty will be to keep consumer
spending and the production of con-
sumption goods within bounds. In
a period of intensive preparations
for defense, durable goods will
eventually have to be given the
right OF way by some means or other.