Evening star., 1950-01-06

accompanying Lne annual eco
11onic reDieU of the Council OF
Economic Advisers:
AS 1850 opens. renewed conf
dence prevails in the American
economy. This confidence is in
itself an element of strength; and
it is justified by the facts.
Late in 1948 we stood at the
peak of the inflationary boom. 1t
was clear that an eventual adjust
ment was inevitable before we
would have firm basis for sta
bility and steady economic growth.
During 1949 we met the test of
that adjustment. Despite rough
going for a few months, we made
necessary changes with much less
distress and difficulty than ever
before. Today we are on firmer
ground than we were a year ago.
Prices are down somewhat, and
show the relative stability on
which firm business and consumer
plans can be based. inventories
of manufacturers and retailers
have been reduced, and now are
better adjusted to the rate of
sales. These changes were ac-
complished with only very small
reductions in dollar incomes and
consumer spending. Allowing for
price changes, the volume of goods
and services purchased by con-
sumers in 1949 was actually larger
than in 1948. Business is proceed
ing with good profit prospects.
Home building in 1949 reached a
higher level than ever before.
More important still, employ
ment and production, which de-
clined during the first few months
of 1949. have in recent months
been moving upward again. Con-
siderably more people now have
jobs than at the low point last
year. Industrial production has
increased by per cent since July.
Holiday sales have hit an all-time
peak.
The relatively safe passage from
imitation to greater stability was
no accident. Businessmen, work
ers, and farmers demonstrated
much greater judgment and re-
straint than in earlier similar
periods. Their actions showed
that they had gained understand
ing of the causes of our economic
situation and what should be done
to improve it. Their efforts were
aided by public policies which had
been developed over the years and
had been improved by experience.
Government measures in such
fields as credit and banking,
social insurance, and agricultural
price supports, proved their worth
in cushioning the downswing and
lending strong support to the re-
covery movement
Economy Continues Strong.
This effective teamwork be-
tween free enterprise and Govern
ment confounded the enemies Of
freedom who waited eagerly, DUR
ing 1949, for the collapse of the
American economy. Our economy
continues strong. We are able to
continue and advance the domes-
tic and international programs
which are the hope of free peoples
throughout the world.
We have succeeded in avoiding
. serious setback in 1949. We
have regained stability: but we
need more than stability. The
great motivating force in our
economic system is the perpetual
will to move ahead, to use our
skills and our resources more cffi-
ciently, to produce more at lower
cost, and to provide a better and
richer life for all our citizens.
The American economy must ex-
pand steadily.
Maximum production and maxi
mum employment are not static
goals; they mean more jobs and
more business opportunities IN
each succeeding year. If we are
to attain these objectives, we must
make full use of all the resources
of the American economy.
During the past year. we did
not do so. Our success thus far
in reversing the forces Of recess
sion cannot hide the high price
we paid for economic instability.
The downturn brought anxiety
and suffering to millions who be-
came unemployed. and to their
families. It brought failure to
many small businesses. 1t re-
duced the opportunities for the
creation of new enterprises. 1t
hurt the free nations whose con-
tinuing revival depends upon
trade with us. It caused our total
output for 1949 to be some
$4,000, 100000 to $4,000, ,000. 900
lower than it would have been II
maximum production and en-
ployment had been maintained.
In earlier reports. I emphasized
the dangers of permitting inf1a-
tionary pressures to continue, and
urged measures to hold them in
check. Most of these measures
were not adopted, and the break
In the economic boom, against
which had warned, came to pass.
Six months ago, the Midyear
Economic Report pointed out the
way to recovery. Additional steps
should now be taken to complete
the process OF recovery. We must
not again make the mistake OF
failing to adopt affirmative poll
cies necessary for continued eco
nomic stability and growth.
Resources Not Fully Used.
At present, our economy is NOV
ing upward again. But we have
not yet reached the point Of fully
employing our resources.
Although output is high, some
resources of plant and equipment
are not being fully used. Although
employment is large. unemploy-
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