Evening star., 1941-01-05
Discusses Problems of
Defense Boom
By OUen L. Scott.

oo5hio ilSh' ouiS. Ollly Ollt year dBU dli
of the expenses of the National Govern
ment, including those for defense,
amounted to less than nine billions.
Now those total expenses will pass Is
billions and will go higher
These immense figures are only sam
pie of the expense figures that would go
with actual war If the United States
expended an effort for defense COM
parable to that of Great Britain the
total would be between 35 and 40 billions.
Plans call for this country to exert itself
only about one-fourth as much as the
British are exerting themselves. To Go
even that is to impose a strain upon key
sections of American industry and to
create labor problems.
The fact is that American industry
remains skeptical of the prosperity being
thrust upon it by defense demands.
The reason for this skepticism is that
only year or so ago the Government
was telling industry it had too many
productive facilities. A tax law was
enacted to force companies to pay out
their earnings in the form of dividends
instead of retaining an important part
OF those earnings to build new plants.
only few months ago the steel in
dustry was able to find use for barely
30 per cent of the equipment and the
labor supply 1t possessed. The same was
true of industry after industry.
Now, all of sudden, the steel industry
hnds itself inundated with orders and in
need of far more plant than it possesses.
Inc same is true of the machine tool
industry and the shipbuilding industry
and the aluminium industry and many
other industries. The Governments
nine billion dollars worth of arms orders,
coming on top of British demands and
demands of consumers for other than
war goods, is just too much. If war
should come the problem would be much
more acute
INDUSTRY, however, remembers its past
experience and is not yet enthusiastic
about making the sort of expansion effort
the Government wants it to make
AS result, 1t begins to look as though
the consumers of this country are going
to face some new problems in the
months ahead The reason is this: As
work gets under way on the vast war
and defense orders employment will rise
and the size of pay envelopes will in
crease. The masses of the people will
have more money to spend than they
ever had TO spend before. At the same
time, however, American industry will
find itself harder and harder pressed to
NIL both Government orders for defense
equipment and civilian orders for more
motor cars and refrigerators and houses
and the multitude of other things that
people with money in their pockets will
want.
Something will have to give, and It
aIready Is evident that industries supply
ing civilian wants are going to be forced
to give way to industries supplying mill
tary wants whenever there is not enough
raw materials or labor or machinery to
go around. This. in turn means the
masses of consumers with an increasing
competing with one another for the
available goods. Once that competition
starts there follows price rise that
tends to feed upon itself and to get out
of hand
There are two ways to deal with the
situation now developing in this coun-
try even before the real effect of the
armament program has been felt.
First of those ways is to expand the
productive facilities of industry so that
enough goods can be produced to supply
both the greatly expanded civilian de-
mands and the demands of the military
and naval forces of this country and
Great Britain. Theoretically, this could
be done. Actually, American industry
at key points is opposed to it because it,
fears an after-war period when the new
plant that is built will only create new
problems as markets tend to shrink.
American industry has learned how to
get along On relatively small volume and
relatively high prices that yield a
moderate profit. Consequently, much of
industry is found on the side of the
other way of dealing with today's situa-
ton.
Second OF the ways is to ration the out
put OF existing facilities, thereby cutting
Gown on the amount of goods available to
civilians. This means that some method
must be found to siphon off more of the
dollars in consumers pockets if a clamor
Tor available goods with an attendant
runaway price situation is to be avoided.
The method used in Britain and probably
TO be used here is that of greatly in
creased taxes on smaller incomes and
some means of forced savings. Workers
may be offered savings stamps. which
they would be under patriotic pressure to
buy, thereby giving up part of the money
tney otherwise would spend on new car
or new refrigerator or new house. It then
would be necessary to put barriers in the
way OF the use of these savings bonds or
stamps as collateral for bank loans.
The desire of the Governments plan
ners has been to fit the vast arms plan of
this country and Britain into the Amer
lean industrial system in a way that
would give both civilians and military
establishments what they want. These
planners are convinced this can be done
with a little foresight and effort on the
part OF all concerned. However, an i'm
portant part of industry is not sold on
the idea, recalling the experience of the
last war when system of civilian ration
ing still left industry loaded with ex-