Dodging Readjustment Facts

by C. T. REVERE

IF certain usually reliable indices are to be accepted at approximately their face value, it would seem that one is justified in taking the view that we have reached the bottom of the depression, unless fresh complications result from some unexpectedly disturbing international developments. This, of course, is a broad statement, and is subject to a few qualifications represented largely by certain phases of liquidation in commodities that probably have not worked out their supply-and-demand problems. It also should take into consideration the discounting of unfavorable earnings and prospects by a number of corporations which are suffering disproportionately from trade maladjustment. With these exceptions, therefore, it would appear that we are warranted in assuming that we have reached the bottom and that the problem ahead of us is largely one of determining the beginning and extent of the upward turn.

Recovery undoubtedly has been delayed by unwillingness to face courageously the steps necessary to bring about a healthier situation. This is true in the case of nations and industrial groups, as well as of individuals. Dislocation will persist until facts are recognized and inequalities ironed out.

An important factor at this time is public, or mass, psychology. As usual, there is a general tendency to seek for an ‘alibi’ instead of confessing our own shortcomings. A typical example of this is represented by the charge that‘capitalism is on trial.’ One does not have to hold a brief for capitalism to point out the fundamental fallacy of this pat phrase. Practically every constructive proposal advanced by economists and industrial leaders has encountered the opposition of politics in one form or another. Tariff revision to meet new conditions and readjustment of inter-governmental debts, it might be pointed out, are sanctioned by the leading economic thought of the country, confessedly capitalistic. Political expediency stands in the way of these remedial steps. On the other hand, politics, not capitalism, has given us the staggering bonus burden, the Federal Farm Board, and other bureaucratic agencies which have disrupted business and placed a crushing load upon the taxpayers of the country. Railroad and industrial leaders find their efforts continually hampered by the restrictions of commissions and bureaus.

In other words, capitalism should not be blamed until it is given a reasonably free hand. Some day we may come to the inevitable conclusion that it is our political system, not capitalism, that is on trial.

A striking illustration of the cleavage between economic thought and political expediency is furnished by our attitude toward the wage question. Our political leaders arc opposed strongly to wage reduction. It would be interesting to have this position explained. Non-contractual wages have been cut in the most drastic fashion. Those are the wages represented in the prices of commodities, and they have affected producers and distributors in every line. Wage returns have been cut because they were all involved in the prices of declining commodities which responded to the working of supply-and-demand forces.

In the case of contractual wages, where the issue is squarely between employer and employee, these also have been cut in the salary division, and in all but the most strongly organized groups, the chief examples being the building trades and the railroads. The very fact that these wage scales have been left untouched has prevented a general reduction in rents, a most important item in the cost of living, and also has stood in the way of a reduction in freight charges, thus affecting every producing group in the country, particularly agriculture and manufacturing.

The inconsistency of the political attitude toward the wage problem is gradually dawning on the public mind. The writer quotes from a letter written by a Southern cotton grower: —

‘The Farm Board proposal to plough up every third row of cotton is certainly no more foolish than the present insistence on the maintenance of high industrial wages, when commodities have declined in value from 50 to 75 per cent. How can our political leaders figure that a farmer selling wheat at 25 to 55 cents per bushel, and cotton at 5 to 6 cents per pound, should pay skilled laborers in the steel industry, building trades, and railroads wages of 8 to 16 dollars per day, when a funner cannot even earn 25 cents per day on the present prices of commodities?’

There is no fundamental objection to a lowering of the wage scales in these groups, as a fair reduction still would leave real wages higher than they were when the commodity index was higher. There is no reason in civic morals why any group should be immune from the pangs of general readjustment.

The situation, however, is not without its hopeful side. Public sentiment shows a willingness to face some of these incontrovertible facts, and the disposition to do so may be gradually communicated to the political mind. There is a veering in public sentiment toward the wisdom of a change in the tariff policy of the United States and the advisability of a reduction, and possible cancellation, of political debts, as well as evidence of a growing opposition to governmental panaceas as a cure for economic ills.

Another development is well worth watching. That is the clear indication of a demand for consumption goods — commodities needed by the people themselves. We find evidence of this in woolen manufacturing, the boot-and-shoe industry, and the revival in various textile groups. In all probability, cotton manufacturing would be on a decidedly active scale were it not for the fear that the large crop this season — forecast by the Crop Reporting Hoard at 15,584,000 bait’s might depress raw material prices substantially, and thus affect the market for the finished product.

In previous serious depressions, recovery has been manifest, first in the increased purchase of the prime essentials of life. People begin to buy things because they need them more than they need money, because they have run out of them, and because replenishment is imperative. Demand for these necessities is the first harbinger of recovery. It is a phenomenon that starts the wheels of industry. Later on, the development takes the form of purchases of equipment to turn out more goods. This has not yet made its appearance.

At present, no one is willing to risk even the shred of a reputation by predicting when we shall be out of this depression. It should be kept in mind, however, that hundreds of millions of people all over the world are making their individual readjustments that, lay the basis for recovery. Of one thing we may be certain, if seasoned experience is a guide: We shall be past the worst stages and well on the way toward better times before most of us have learned that we have even turned the corner.