U.S.A. TROUBLES

Dominion, Volume 31, Issue 152, 24 March 1938, Page 14

U.S.A. TROUBLES

The Nature Of The Depression DISTRESS IN DETROIT The abrupt descent iu four mouths from a high level of prosperity to a depth only exceeded by the worst monthe of the great depression has left everyone bewildered, wrote the New York correspondent of the “Economist" on February 8. In the post-war collapse, the index of production fell from ite peak of 116 in January, 1920, to its extreme bottom of 74 in July, 1921, in ’lB months, which seemed a violent decline;-in 1929 the index of production fell from 123 in August to 99 in December; and this, too, seemed a violent decline. Yet the fall from 117 in August to 84 in December was larger than that in the autumn of 1929; and in four months was almost as great as iu the post-war collapse. People refuse to believe it, and the commonest way of expressing such disbelief is to resort to euphemisms in desenbiiv it The word “depression” is absolutely’taboo; only such terms as “recession ” “reaction,” or “slackness are allowed. In contrast are such episodes as the great mass protest meeting in Detroit last week, probably the largest demonstration of its kind ever held in the United States; the number of demonstrators being conservatively estimated at 190,000. „ „ The fortunes of Detroit rise and tall with those of a single industry subject to extreme fluctuations. It flourished last year, and hourly wages were pushed to a level which gave its workers hope of a very high standard of living. At present it & stated that some 200,000 of the 300,000 members of the automobile workers’ union are unemployed. . . The situation is aggravated, as it is everywhere, by the fact that in good times enormous purchases are made on instalments, involving small and, in many instances, no cash payments, with the balance spread over many months. The consequence is that unemployment instantly becomes distress, since in good times the worker accumulates a burden of de The meeting unanimously adopted resolutions for a moratorium on debt, rent reductions of 50 per cent, and an increasein relief funds. This incident is cited not only because the magnitude of the meeting is impressive but because the focus of distress is so sharply defined. As late as September the motor industry was booming and workers were almost fully employed at the highest rates in history. Housing, Rearmament and Recovery. The Housing Act has now been signed, but business opinion is mixed rather than enthusiastic. Broadly speaking, there is not much endorsement of the reduction in the cash payment on small homes from 20 to 10 per cent. American experience of home ownership on slender margins has generally been quite unsatisfactory. Furthermore, it is questioned if the greatest housing need lies in the demand for individual dwellings. . . . On the other hand, the provisions for what is called “speculative” building are considerably relaxed, and these may provide some stimulant, although this again is neutralised by the severity of the capital gains tax on “entrepreneurial undertakings. The provisions relative to the construction of multiple dwellings or flats are generally rated as the most promising. But the prevalent attitude .in building circles is to .minimise the importance of the legislation and to emphasise the elements of cost and demand. It was high costa that checked residential building in 1936; and when those costs rose still higher in the. spring ot J 937 they proved to be prohibitive and demand receded. Costa are now lower than they were at last spring’s peak; but.it remains to be seen if they are yet within the reach of potential demand. The armament programme has attracted increasing interest, but it is recognised that the plans outlined can have only a limited effect on this year’s aggregate output and no perceptible influence on the volume of production in the first halt, ot the current year. Except for the Housing Act and the armament programme there has as yet developed nothing that could be described as a recovery programme. Generally speaking, the business community is convinced that prosperity will come of itself in the second quarter of the year at the latest; or that the Government will embark on another large spending programme.