CONDITIONS IN AMERICA

Evening Post, Volume CXVIII, Issue 96, 20 October 1934, Page 8

CONDITIONS IN AMERICA

ECONOMIC SCHEMES

PALLIATIVES OR STIMULANTS

PROBLEMS STILL UNSOLVED

■ [The following article, written by au exNew Zealandcr, who occupies a prominent financial position in New York, gives an interesting survey o£ the conditions in America.] NEW YORK, September 20. General business in U.S.A. is not improving. There is a great deal of serious labour trouble ahead which means loss to both, employer and employee, and does not 'help the-cause of recovery. It is now nearly iivo years since the depression iirst descended on tho country and the .patience of labour is about exhausted. Unemployment is as great as a year ago-—tho cost of living has risen without any corresponding increase in wages. In the period of socalled prosperity prior to 1929 unskilled labour, which is by far the largest labouring class, had a raw deal here. Skilled labourers were paid high wages, but unskilled workers were miserably paid. In fact, all the talk about the high standard of living of tho American working man at that time was largely nonsense and had no basis in facts. On account of the mercurial temperament of the- American peoplelabour troubles are very serious, as they almost always involve violence. UNCERTAINTY AND CONFUSION. The drought in the mid-west has caused another very serious problem. As a result of it many families are- nearly destitute, and will have to be maintained by Government funds. That, of course, seriously reduces their normal purchasing, power. I cannot help feeling that a good many, perhaps most of tho measures of 'the Roosevelt Administration to cope with the dopression, while excellent in general intent, have been hastily and poorly conceived. The result of them is that the fooling of uncertainty and fear in the business world has become intensified, and there is greater confusion now than ever. Many of tho schemes of the Federal Government have also been economically unsound and poorly thought out. Other schemes have attempted to do too much at once. It would have been infinitely better for the Government to have proceeded with its schemes more slowly, making sure of one step before taking the next one. Its numerous and often conflicting ideas have, I believe, largely been in response to the American demand for action. I do not believe that the United States has attempted to solve the problems which must bo solved before economic conditions improve here. Tho" measures adopted up to the present have been either palliatives or stimulants. Apart altogether from the problems arising out of tho world depression, the.United States has problems of its own to solve. While the British Empire, France, Holland, and the Scandinavian countries are enjoying a period of relative prosperity, tho United States is still in the depth's of the .depression. In tho matter of social legislation the U.S. is ,at least twenty years behind tho rest of tho world. There is no system of unemployment insurance or old age pensions. Labour laws in most States aro conspicuous by their absence. In States where labour laws aro in effect they aro very nominal. Britain faced and solved most of these problems bofore the war. Had the war not taken place, the U.S. would have had to face theso problems many years ago. As a result of the period of war, and post-war prosperity, this country has not really had to face these problems until now. Tho problems have existed all the timo, but it has not been necessary to sit down and solve them. The problems Have now reached the.stage when their solution is moro difficult. It is like the case of a person with a mild attack of appendicitis. If, tho patient rests and takes treatment, an operation can bo avoided. ; If /ho does nothing about it, an operation is inevitable, and if ho waits too long peritonitis develops and a serious operation is necessary to save tho patient's life. The present problems of this country have, in my opinion, reached that last serious stage. Tho U.S. must also decide whether it ■wishes, to bo a creditor nation and follow the principles of any creditor by permitting payment of its debts in the only form that payment can be made —namely, goods. If it decides to realise on its foreign investments it must therefore reduce its tariffs. On the other hand, if the country decides to write off its foreign investments and create a self-contained economy, assuming that wore possible, a major upheaval in the social and economic life Of the country will result. This is .allother unsolved problem. POSITION OF BANKS. Tho banks present a very serious problem. Tho banking system of this country is exactly tho same as it was in years past, when banking failures wore vory numerous. This country has an appalling record of bank failures. At tho present time most of tho banks have an undue amount of their assets in marketable securities, largely Government bonds. That means—among other things —that business is not getting the accommodation from the banks which it might reasonably expect. This situation has arisen partly out of the fears of the bankers and partly through tho fact that the Government, in order to carry out its • enormous spending programme, has had to borrow a very large amount of money which tho banks have supplied them with, by purchasing Government obligations. If tho Government bond market collapsed, which is quite within the bounds of possibility, the banks would bo in a very serious position.' The whole situation is obviously very unsound. » Another problem which is cloaoly related to that of the banks is that of governmental expenditures. \ During 1933 Federal, State, and municipal governments in the United States spent 14,000,000,000 dollars. This amount represents 37 per cent, of tho national income. Of the total amount spent only 8,000,000,000 dollars, or about 60 per cent, of it, was raised by taxation —the balance was borrowed by tho Governments, largely from the banks, as, previously explained. That borrowed money will presumably be repaid some timo in tho future, but in the meantime every dollar borrowed means additional interest charges, which must also bo paid. It is absurd to bequoath tho debt to posterity, because there will be problems' to nioet and solvo in tho futuro just as we have them now. It is also obviously very unsound for governmental expenditures to amount to 37 per cent, of the national income. While that might be necessary in an emergency for a short period, they should vory quickly decrease to more reasonable proportions. In this country, on the contrary, they have been steadily increasing. The spending programmes of the Government have not decreased unemployment or resulted in any general business revival. They have given rise, however, to a very serious financial situation. NATURAL RESOURCES. A very serious matter is that; vory little new capital. ia going into business undertaking" which normally would create unemployment. The greatest reflection of that condition is the extreme dullness of the Now York stock market. During the last month there havo actually been more shares traded, on the Toronto Stock Exchange each day than in New York. There is, of course, a minor boom, in gold-mining shares in