The people's voice. [volume] (Helena, Mont.) 1939-1969, 1941-04-02
War Economy

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unlimited potential capacity to pro-
duce and its already vast industrial
development is the one nation in the
world which could undertake such a
program. But the opportunity Is be-
ing wasted and it is almost too late.
Although the New Dealers are
aware of the problem, the fact that
they are not determining administra-
ton policy was evident a month ago
when President Roosevelt accepted
Gano Dunn's report on the productive
capacity of the steel industry with un-
Questioning cheerfulness. For months
New Deal economists have pointed
out that steel capacity must be in
creased to take care of both military
and civilian demands. The industry
has disputed them, claiming that ex-
listing capacity was sufficient for all
discernible needs. Gano Dunn, now
with OPMs production division, is an
old New Deal foe. Last fall he
worked against the plan to manufac-
ture explosives in a government plant
operated by IVA. His report on steel
production was a restatement of the
industry's case for resisting expan-
sion although it did contain some
little publicized qualifications
Dunn reported that if present ca
pacity for steel-making were used to
the full, the U. s. industry might pro-
duce a 10,000,000-ton surplus this
year, and a 2,100,000ton surplus for
1912 when the armament program
would be going full blast. The report
has been subjected to a good deal
of criticism inside the New Deal and
out by economists who foresaw def
cits, not surpluses. And in it's April
issue, released this week, Fortune
adds its weighty word in denuncia-
ticn. Along with many others, the
editors of Fortune frankly expect
steel rationing before summer. Civil
ian consumption will be cut-notably
in automobiles. Since it would take
the best part of two years to expand
the steel industry appreciably, U. S.
citizens are certain to become used
to reduced consumption of the basic
raw material of modern civilization.
The situation could have been avoided
or at least minimized. The story
of aluminium is somewhat similar.
Fear
One of the potential consequences
of any war economy-be it Britain's,
Germany's or Americas initiation.
Reduced to its simplest terms, infla
ton is an inordinate rise in prices
Cor an inordinate drop in the value
of money!. Wages have to be raised
to match the prices lest living stand
ards drop Immediately. Then prices
rise again. This is the ascending
spiral possible result is printing
press money, such as the Germans re-
sorted to in 1928
Nobody today is predicting print
impress money for the U. S. We
are only just embarking on an arma-
ment economy, and there are numer-
GUS controls that can be imposed to
avoid the extreme situation which
might start the presses rolling. New
ertheless, few government econo-
mists are voicing privately their fear
that the U. S. is due for some kind |
of initiation before 1871 is out The |
basis of their reasoning again is the !
fact that priorities for ornaments
cannot increase total production. |
Priorities mean that guns have been ,
chosen at the expense of butter. AS .
a consequence consumer industries !
suffer, and the ultimate sufferer, of
course, is the consumer himself The
danger already existed during the
winter The lend-lease bill merely
made it greater
Purchasing Power
Here is how it actually could hap
pen. The defense industries are not
consumer industries in any sense of
the word. The materials which they
absorb, and their products are not on
the market. The nations total capac-
ity to produce goods does not in
crease, and as consequence the pro-
duction of consumer goods decreases.
some of the money poured
into the defense program reaches the
public as increased purchasing power
wh!ch increases the popular demand +
for goods and services far in excess
Of the available supply whose produc-
ton has been cut. The natural re-
suit is rise in prices unless the
government holds prices down and "a
ions goods. If the government does
hat, it will presumably follow up by :
absorbing the excess money which [
citizens will not be allowed to spend. [
Cor restriction of consumer produc-
ion and buying will automatically
end to limit investment to the arma-
nent industries and to government ,
,onds-even without coercion. This :
nay result in net increase in I'M >
Employment for there is no guarantee :
hat defense will absorb everybody +
5ho is thrown out of work by curtali- ,
lent of consumer businesses. This 4
hight be called descending spiral" T
d. the net result all around is in @
vitality lowered standard of living. n
Though the possible unpleasant r