Bay of Plenty Times. TUESDAY, JUNE 7th, 1938 DEPRESSION IN U.S.A.

Bay of Plenty Times, Volume LXVI, Issue 12369, 7 June 1938, Page 2

Bay of Plenty Times. TUESDAY, JUNE 7th, 1938 DEPRESSION IN U.S.A.

The greater mimber of the motor plants in the United Slides are to he closed down lor at least two months owing to the slackness in business. The Corporations involved are General Motors, Ford and Chrysler. This seems to be a reply to the indictment of Sti executives of Ford, General Motors land Chrysler for violation of the Sherman Anti-trust Act. Among those involved are Edsol Ford, Alfred Sloan of General Motors and "Walter Chrysler. "Whatever the real cause of the closing- down of the motor plants, there is no question of its having serious world-wide repercussions. Several ] hundred thousand workers will be | out of jobs, and their purchasingpower will be seriously curtailed. The domestic trade of the country will be hard hit, and there will bo J less importation of foreign goods. 1 1 >iit serious economic consequences I will be felt in other countries, I particularly in Britain and throughout the British Empire. America is the world’s greatest purchaser of raw materials, which come from all parts of the world, but mainly from the British Empire. Apart from this America is responsible for about 45 per cent, of the world’s manufactures and for that reason has to import raw materials in large quantities. If the producers of raw materials cannot sell they cannot buy, and so international trade is affected. There must follow a slowing down in the exchange of goods, together with an appreciable drop in values of commodities. Indeed this has already begun, and this unfortunately is progressive and spreads. "What is the cause of the setback in business in U.S.A. ! It cannot be for lack of the means of payment for there is an abundance of real money in the shape of I gold, while credit is available at cheap rales and is in excess supply. The position seems to be due to politics rather than to economics. President Roosevelt has shown a strange disposition to unduly Interfere in the relations between the workers and their employers, and one outcome has been a rise in wages. The wage scale in America is the highest in the I world, and a further rise carries the wage scale very high. This, it is contended is giving to workers a larger proportionate share of the National income. But this is not all—Congress has passed an Act, (axing the undistributed profits of the Corporations. Usually a company builds up a reserve fund out of profits. Here we speak of it as a general reserve fund. In addition a certain amount of the profits is held over from distribution and is carried forward. In the United Elates the carry forward is invariably large, and is used in the business, maybe for additional plant, or fresh equipment, that is, it is, as the American says, ploughed back into the business. Owing to the tax there is very little undistributed profit ami the result is that the concerns are suffering from financial anaemia, that is there is a deficiency in the flow of business capital. The recession in business in U.E.A. began last August, and there followed a general decline in production. In the first quarter of this year then' were further decreases, but they were small. In February and March it became apparent that the spring demand for automobiles was not developing, and there was very little new construction. Unemployment had greatly increased in the ' first quarter of the year. Railroad freight loadings declined, that is, there was no internal movement of goods. The position has become worse since, and Americans themselves realise that they are not: dealing with a temporary business recession.