Evening star., 1949-03-20
Economy Ills
Need Antidote
Economists Concerned
Over Diminishing
Buying Power
By Clarke Beech
By Clarke Beech

ne NaClOH GOp eCoIlOlllloIo
have identified the germs which
they believe will ultimately cause
a major depression if antidotes
are not developed in time.
The views of these men, the
Presidents Council of Economic
advisers, have been backed up
publicly by the President and are
widely approved by other admin.
istration economists and officials.
Their general theory has not as
YETI been broadly disputed by
business leaders and economists
outside the Government. But the
remedies they suggest have al
ready met violent opposition both
in Congress and among business
men.
They have recommended imme-
diate measures which they say
will head off any further imitation.
They have also proposed long
term projects, such as a program
to increase production capacity in
certain lines.
The council members and those
who support them see little chance
of a serious recession this year.
The bacteria which will eventu-
ally threaten our prosperity, they
say, are the various maladjust-
ments now developing in our econ
omy.
Consumer Buying Drops
The deadliest, as they see it, is
the steadily diminishing buying
power of individual consumers.
Consumers bought in 1948 a
smaller share of the Nations
goods and services than ever be-
fore in a peacetime year for which
statistics are available. Consumer
expenditures last year were only
10 per cent of the national total.
In 1889 they were rs per cent. In
1929 they were rs per cent.
Business and industry account
ed for 1874 per cent of last years
expenditures - investments in
plants and facilities. This was
we'll above 1889, but approximately
the same as in 1929.
The third category of expendi-
lures, termed "all others" by the
council, consists almost entirely Of
Government spending. Most Of
that money went for military pur-
poses and foreign aid. 1t account
ed for 14.7 per cent of the Nations
expenditures. This was a little
less than 1889. But it stood at
only 9 per cent in 1929.
Thus since 1929 consumer ex-
penditures have taken big drop
with Government expenditures
accounting for almost the entire
share that the consumer lost.
The crisis will come. in the
opinion of members of the coun-
Gil, when Government expendi!
lures drop drastically-when and
If foreign aid and the cold war
end.
Keyserling's Views
A new reconversion could be
comfortably managed then if in
dustry, which had been produc-
ing for the Government, just
turned to consumer production.
But council members think that
for consumers to buy the large
new supply, they would need high
er wages and lower prices,
Leon H. Keyserling. vice chair
man of the council, recently told
the Congressional Joint Commit
tee on the Economic Report that
the business outlook at that time
will be dampened by the decline
in Government demand. Industry
then will not be likely to expand.
he said, and added:
Experience indicates. rather.
that the delay of adjustment un-
til that time would result in cur
tailment of employment and pro-
duction, followed by disorderly
price breaks and a general eco
nomic decline-the spiral Of de-
preston"
The council sees no chance for
increasing business investment
taking up the slack. The ratio Of
business expenditures is already as
high as it should be for a healthy
economy. in the opinion Of the
council.
The wages of employees have
dropped from $50 per cent OF the
national income in 1889 to 61.5 per
cent in 1948. It is coming close
to employees income in the depres-
sion year of 1929. which was 5S.1
per cent. (Most students OF our
economy, said Mr.. Keyserling,
think that the low ratio OF en-
ploye compensation in 1929 helped
bring on the depression them
distributed By the Associated PressSe