Toledo union journal. [volume] (Toledo, Ohio) 1942-current, 1949-10-21
Depressions Always
Start When Profits
Are Highest, Report
Points Out
By NATHAN ROBERTSON


randum submitted this week to the Joint Con-
gressional Economic Committee provides
powerful support for the argument long ad-
vanced by labor and liberal economists that
high wage-low profit policy is the way to
(keep our economic system going so there
will always be plenty of jobs for all workers.
This is not the way big business tells the
story Every time wage earners force an in
crease the managers of big business push up
their prices to maintain or increase profits.
Then they spend millions of dollars telling the
public high profits such as they have been
enjoying in recent years are necessary to fl
nance the expansion of business and to main
tain employment.
The best answer to this argument is con-
tanned in single short paragraph buried in
the 200 pages of the factual memorandum
submitted to the Congressional Committee
which says
"The proposition is sometimes defended
that all that is needed to guarantee high-level
production is profits and that depressions are
due to LACK of profits. Yet depressions always
start in years of highest profits"
The memorandum is filled with other an
sWers to the arguments of big business. For
instance, the document notes that in boom
and bust" economy prosperity profits are
needed to weather depression losses" But it
ADDS that these prosperity profits undermine
the very type of high-volume, high wage, low
profit margin economy needed to sustain high
level employment
Another section of the memorandum de-
scribes how high profits in 1929 may have
operated in just this way. 1t describes how the
big depression came at time when profits
were at the highest point in history, when la
Dor unions were comparatively weak when
taxes were low, when the government budget
was balanced and the administration was en-
trely favorable to business
While the cause of the 1929 depression is
listed as one of the big unanswered riddles
of economic history" the memorandum con-
cludes 1t probably started with a feeling
among businessmen who had been breaking
all records in plant expansion that they had
all the production facilities needed to meet
demand. Productivity was increasing rapidly,
but the benefits were going into profits, rather
than wages. Farm income was declining "As
a result" the memorandum notes. "there was
inadequate purchasing power for the nations
product"
This suspicion that depressions start when
businessmen suddenly curtail their invest
ment in plant expansion is what caused the
Joint Congressional Economic Committee to
make its present investigation of investments.
Much data is presented to indicate that in
good times, when profits are high, business
men engage in an orgy of expansion, but fight
off wage increases that would provide pur-
ed production. Then they suddenly get scared,
find that production is outrunning consump-
ton, and cut their spending. This throws the
whole country into depression
How few men have TO suddenly change
their minds to throw the whole country into a
cruel and devastating depression is indictaed
by the following sentence in the memoran-
dunn:
There is widespread consensus that in
vestment policy for a substantial part of
American industry may depend primarily on
the information, attitudes, and decisions of as
few as 800 business executives who with soli-
darity of selfish interest act more or less as a
unit, move in the same social circles, belong
to the same clubs read the same newspapers
and trade journals, and by and large share the
same economic ideology and political con-
victions."
This, the memorandum points out is
the danger of such highly concentrated indus
trial control we have in our country today
A comparatively few men can control prices
and production. If they guess wrong the
whole country pays the cost If control were
not so centralized the wrong guesses of a few
men would not make so much difference.
When competition, instead of monopoly
control prevails, there is no such power con-
centrated in a few hands Prices and produc-
tion are controlled by the market place Each
producer makes as much as he can sell and
sells at the lowest possible price in order to
get as much of the market as possible. If we
could break up some of our big concentrations
of monopoly power as the antitrust division
is now trying to do, there would be more such
competition-and therefore less danger of de-
preston.
When businessmen have the power to fix
prices, they naturally tend to fix them too
high, to make all they can in good times so
they can last through the depression their ac-
tons cause That is why, if there is any power
TO fix prices anywhere outside of the market
place, 1T should be in the hands of govern
nent which is responsible to the people and
presumably acts in the public interest rather
lhan have that power in the hands of busi-
nessmen.
Government might also guess wrong, but
{ would not have the selfish interest that eff
Fects the judgment of businessmen. The course
ot business during the past year indicates that
businessmen guessed wrong, and started the
country toward depression-but government
vas able to counterbalance their mistake and
lvert real catastrophe.