Evening star., 1946-09-26
Stock Market Slump
Contuins q Wurnino
Signs of Major Change Seen in
Unbalance of Economy
By Dapid Laurence

Onbalance OF Economy
By Dapid Laurence
The steady decline in the stock mar
ket since last month has produced .
healthy spirit of re-examination in busi-
ness and industry generally.
The recession or readjustment which
Is under way in some lines and will not
really begin in earnest until some time
in ls47 will not bring about the sharp
psychological reaction which came in
1929 or in 1888. Rather. the opinion Of
many economists here is that the re-
cession will resemble the postwar re-
adjustment that came in 1921 shortly
after President Harding took ofice 1t
lasted about year.
The elements of q major change in
the national economy are, Of course,
present today, and, while public atten-
ton has often been focused from
long-range viewpoint on imitation due to
the large war debt, the possibilities of
brief period of defiation in industrial
and business operations have been over
looked.
Economy Out Of Balance.
The national economy is out Of bal
ance. Irrespective of what the causes
Of this unbalance happen to be-and
opinions will differ-there is little doubt
about what has to be done. Purchasing
power has been declining due to the
high prices. 1t Is not so important to
determine who started the price spiral
the politicians will blame one another
for this-but it Is important to discover
what can be done to bring back the
purchasing power Of money.
This cannot be done by continued in
creases In wage levels or in hourly earn
ings. What can be done is to bring
prices down by increasing productivity.
II business volume could be attained at
lower and lower unit costs, prices could
be turned downward.
There are evidences that wage unit
costs are being brought down In some
lines and that start has been made
toward increased productivity. This, to
be sure, Is the true answer to the trend
sS"esAN oSPA Coc4OAAs ~ WILL llUI DC
discerned in time by all businesses but
when the peak Of the present price trend
is reached. which is expected to be early
In l947, it will become imperative for
economies to be made in production op-
eratlons SO that more goods can be pro-
duced at less and less cost.
Price Situation Distorted.
The shortages, of course, at present
tend to distort the price situation. Once
an abundance Of a product is achieved,
1t Will be necessary for the producer to
figure out ways and means of attain
Ing continued sales and this may prove
possible only by inducing purchases
through the lure of lower prices.
There are some lines, such as durable
goods, where prices have not gone UP
as they have in other categories. In
such instances, prices can be stabilized
or reduced in due time.
What is most needed at the moment
Is an atmosphere of stability. The un-
certainty because of strikes and the
| Governments control programs make it
difficult to get such stability. With all
due respect to the needs of the CT, it
has been mistake to single out a par
ticular group and attempt to channel
materials into that category. 1t would
be far better to bring about balance
between supply and demand Of materials
at the earliest possible moment and out
Of the general increase in housing the
GIs would get the needed benefit
sooner.
Controls Upset Industry.
The artificial control Of housing ma
terials Is producing the most serious
upset in the construction industry. Un-
less remedied, it may inf1ict damage for
| many years to come on an industry
that should be in the forefront of re-
covery. Most war veterans cannot pay
| for the houses they are expected to
buy and many of them are too unset
tied as to residence to buy houses now.
What is needed is more houses for rent,
but the present program has not thus
far yielded that result.
When Congress gets back here In
January-or perhaps sooner, when the
elections are overt may be that some
Of these controls can be modified. The
era OF readjuStment and repair of un-
sound economic conditions will not be-
| gin however, until next year, when the
| full effects of the imbalance in our eco
| nomic structure are universally recog-
| nized.
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