Evening star., 1941-08-31
Main Outlines
.0fWar Economy
Now FINISHED
Defense Absorbs u. S.
As Conflict Enters
Third Year
BY FRANK MacMILLEN,
Associated Press Business Writer.

the factory worker the consumer
finished this week the second year
of existence in a War-reft world,
firmly inclosed in the framework of
an economy where guns are first and
butter, if any, secondary.
True, most observers agreed, the
framework of a war economy was
just that-the details were still hazy,
still left to be bricked in one by one.
But, with all the welter of events,
the epic Russo-German struggle,
the battle for oil in Iran, the pos
sibility of a diplomatic deal in the
Far East, reorganization of WASH
ington's defense production setup,
one event signified to many busi-
nessmen that the main outlines Of
wartime business structure had been
completed.
This was the final decision of
Washington authorities to extend
control over all industry to assure
acceptance of defense orders for the
United States and other aggressor-
resisting nations even If the ac-
ceptance prevents or delays delivery
on non-defense business.
This weeks first clear evidence
that Washington had given an un-
conditional green light to the neces-
stiles of defense and war appeared
to many observers here, therefore,
as significant step in the estab-
lishment of actual wartime condi-
tions in American business.
Defense Comes First.
Put it this way: There still Is
enough productive capacity in the
country to provide a good deal of
butter, in the form of consumption
goods for our citizens. But, it is now
clear, the war and defense needs of
this country and those it is aiding
have first call on the COW, the pro-
duction machinery. The more milk
they use, the less there will be for
butter.
Yet some observers think the first
two years of the world struggle,
great as are the changes they have
wrought in the Nations economic
life, have been less disturbing than
might have been expected.
The primary facts, of course, are
these:
l. Industry's production has In
creased about SIS per cent, according
to most indices. 1t may be more,
for some statisticians think the rise
OF new industries, like plane, gun
and tank making, has thrown the
old measurements aSkew.
2. Some 100000 to 5000 900 peo-
pie have jobs now who were not en-
ployed when the war began in Sep
tember, 1889. Here too estimates diff
fer, but the enormous size of the
totals indicates the effect on a coun-
try which had struggled for decade
with unemployment. Probably about
half of these newly employed have
gone directly into the mines and
factories, most of the balance into
building, transportation and the
service trades, and relatively small
number onto the farms
The effects of these two primary
results have flowed out into the Ma
tion's business in thousand
streams, some plain, some still to be
noticed by the average man.
Living Costs Rise.
Closest to home for most men and
women has been a rise in the cost
of living This has been moderate so
far, about 5 per cent in two years.
though economists point out the rate
of rise has been most rapid in the
last three months, and that since
wholesale prices have advanced more
than retail prices, further upping
in living costs shortly land probably
before Congress passes price control
legislation later this year, seems a
good guess.
Clear to every merchant, and to
many householder who has more
money to spend because of a new
job, higher pay or overtime, is the
fact that the retail stores are doing
much more business than two years
ago. More important for the future
is that this has been a gradually
accelerating trend which continues
to speed up as each new monthly set
of figures appears.
Most dependable measure Of this
movement is the Federal Reserve
Board index of department store
sales at a level about 25 per cent
above the outbreak of the war. For
individual merchants in locations
favored by defense work the gain
has been even wider.
For men directing manufactur-
ing concerns, mining enterprises and
many kinds of middle men, the
prime evidence of what has hap
pened to the national economy so
far is the scarcity of many critical
materials, bringing in its train such
new-fangled Government controls
as priorities for defense materials,
price ceilings and the like. The list
of restricted materials has grown
steadily, and most business men
appear agreed that they are only
at the threshold of this new way Of
doing wartime business,
These same men have had to con-
tend, in the two years of foreign
war, with a 20 per cent average rise
in wholesale prices, what they pay
for the raw materials which they
process or turn into finished goods.
Here, too, the significant point ap-
pears to be that the rise has been
swiftest, on the whole, in the last
few months
To investors, looking back over
the war period. it has appeared
chiefly as one in which their hold
ings of common stocks have grad
ually, on balance, slipped lower
in the face of the greatest indus
trial boom in the history of the
world.
The course of stock prices has
been uneven. of course, and dips and
rises have generally followed the
course of events abroad, but the
Associated Press price average of
so common stocks Is now about 8
per cent less than 1t was at the