Evening star., 1948-03-28

w II lAAOkSC al t11C44 btl uS8lC 4O1
consequent upon the fall in COM
modify prices.
From the viewpoint of the econ
omy as whole, that might well be
a good thing, for if the nonfarm
population is getting its food cheap
er, it may spend more on other
things.
/ Pessimist-But the farmers will
have less to spend. You can't dis
miss the action of the markets quite
so easily. Prices don't fall of their
own accord. They fall because the
consensus Of the shrewdest minds
in the business says demand will
fall relatively to supply.
Look at the stock exchange. Set
alongside today's prosperity and
today's profits, the present prices
of industrial common stocks are just
plain silly. 1t isn't as if security
prices were fixed by a set of market
traders who had no contact with
business conditions. They are fixed
:. by the buying and selling by busi-
nessmen who know the state of in
dustry intimately. If stocks were
really cheap, the men who know
would bid them up. Since they
don't, the obvious conclusion is that
they don't think them cheap.
Cites Price of Stocks
Optimistic that is so, it is
strange that businessmen are pessi-
mists only when they are thinking
of the stock exchange. Ask them
about their own business and most
of them will talk in terms of cau-
tious optimism-or at least not in
terms of Wall Street gloom. And
there Is widespread confidence that
the Government, whatever party is
in Office, simply cannot afford to
allow recession In trade.
Pessimist-Grantedt that the Gov
t-administration and Con-
gress both-would certainly be
stirred into action once any sizable
degree of unemployment appeared,
wouldn't that be far too late? The
time to take action is before it hap
| pens -that7is, nov. And Washing
ton hardly presents a picture of
perfect agreement on what should
be done now.
Optimist-The European Recov-
cry Program will be in operation in
few months, perhaps a few weeks.
That should be powerful support
ing influence.
ERP's Worth Debated
Pessimist-It Is far too small for
this purpose. The Marshall Plan
expenditures asked for by the ad-
ministration-and Congress may
vote smaller sum-are not much
over $4,000, ,000, 900 year. The pres
ent rate of the gross national
product is not far short of $780,
900, 100000 year.
If a recession starts, and if it is
to be halted in Its tracks by Gov
ernment spending, the spending
might have to be something like
s25,O00, 100000 or $4,000, ,O00, 900 a
year more than at present. Is it
likely that Congress would agree
to that? Or that the administra-
ton would find projects to spend
1t on? Harry Hopkins never spent
as much as that.
Optimist-But at least you will
agree that even If a recession does
get started, it is unlikely to 60 as
far as the great depression Of 1929
and the following years? There
aren't nearly as many soft spots in
the national economy as there were
in 1929. The cities are not over
built as they were then. The banks
are liquid and sound. The markets
are not puffed up by speculation on
borrowed money.
Pessimist-All that is true, and I
certainly foresee no 1929. Another
1921 Is more what I have in mind
But all economic movements, wheth-
er up or down, have a nasty habit
OF going much further than anybody
expects them to.
Some Conclusions
I wish I had had the pessimist
and the optimist with me on my
travels. They might have made my
mind UP for me. AS it is, have to
content myself with some very ten
tative and timid conclusions. Let
me list them-with the more con-
fident ones first.
First, am certain that a down.
ward turn in all the curves-of
prices, of production and of en-
ployment-is coming sooner or later.
Economic trends simply do not 60
on forever; they generate within
them the seeds of their own re-
versal. Moreover, I am reasonably
sure that the curves will not go any
higher before they turn down.
Second, though I do not think
anything really serious is to be ex-
pected (anything serious enough to
bring true Mr.. Stains dream of
collapse of the Vest, there might
well be recession serious enough
to worry about. Once the curves
start falling, shall be surprised If |
the national income does not shrink
by considerably more than 10 per
cent.
But third-that still leaves the
$64 question-when? simply don't
know. My reason, based on study
of the available facts, saws not inst