THE DEPRESSION.

Franklin Times, Volume XXI, Issue 68, 12 June 1931, Page 3

THE DEPRESSION.

IT IS WORLD-WIDE. FIRST SIGNS OF RECOVERY. "Within the past few weeks the clouds or busines depression which for more than a year have enshouded the world have shown indications, if not of lifting, at least of becoming less opaque," stales the Westminster Bank, England, in its March Review, which has jus! come to hand. "For instance, the prices of certain commodities have ceased to fall, and have even risen appreciably from the lowest points in a few cases, such as copper, tin. cotton, wool, and wheal. How much this movement signifies it is impossible to say, the more so as some of the commodities mentioned are subject to artificial control under restriction schemes. Certainly its scope is at present too narrow, and its duration too short to presume an early cessation of depression, though, in conjunction with other evidence (such as the response of retail business to recent price reduction to customers), it suggests that the period of steadilydeclining activity may be terminating, and the much more crucial period of readjustment beginning." The Review adds that it was agreed on all hands that painful disillusionment awaited all who believed that economic prosperity would return, like an incoming tide, merely on the exercise of the passable virtue of patience by watchers on the shore. It was an essential preliminary to any well-thought-out plan of national reconstruction that Britain should know exactly where it stood, both in relation to its own previous standards of prosperity and in relation to conditions in the world as a whole. Within the past few months a considerable body of evidence had accumulated as to the 'extent of the world depression and the reactions of different countries to the forces which it had released. It was now possible to analyse the chief economic consequences of the recession in trade activity, and to measure their extent in different industries and in different parts of the world. A world crisis was inevitably accompanied by all manner of uninformed, exaggerated or partisan statements. Whatever the intentions of those persons responsible for such statements, the effect on their publication could not fail to be unfortunate. "An unduly optimistic diagnosis may involve the postponement of essential, if painful, remedial measures," the Review proceeds. "Over-pessimistic pronouncements provoke extreme discouragement, which tends to paralyse positive action, alike in the individual and in the community. A partial or distorted'view may focus attention on unessential or secondary matters, to the neglect of more urgent questions. Since all the necessary evidence for a sound judgment is available to the conscientious inquirer, there is little excuse for ignorance as to the real nature and incidence of contemporary world conditions."

Originated in Primary Industries

The Review stales that the characteristic feature of the present depression was its origin in the primary, rather than in the manufacturing industries of the world. The earliest signal of its approach was a catastrophic fall in the prices of raw materials and foodstuffs, many oi which declined below pre-war levels, while in some cases selling prices were depressed even below the average production costs of the industries concerned. A second feature of the present depression was its comparatively late arrival in the manufacturing countries as distinct from the primary producing countries of the world. In Great Britain, for instance, although produc-t-lon in the first quarter of 1930 was slower than during the previous quarter, it was not until the late spring and summer that the industrial community was prepared to recognise that the situation contained the elements of more than a purely temporary trade recession. During the remainder of the year, however, the contraction of industrial activity was continuous.

"Broadly, what has happened has been that while raw material prices have fallen very considerably, other industrial costs —wages. transport, capital charges, distribution costs, etc —have shown a strong resistance of anything like a proportionate reduction," continues the Review. "Retail prices for finished goods, consequently, have declined much less than wholesale prices for raw materials. As a result, sales of the former in the home markets have been maintained to a much greater extent than their sales in overseas countries which have been impoverished by the drop in the prices of raw materials forming their own staple exporls. The tendency for the effects of depression !o diminish, the further one goes from the raw material stage, is borne out by the experiences of different branches of world trade. The primary producers have fared worst, then the producers of capital goods (which are another form of raw material for production), then the producers of commodities like textiles (which may be

described as raw materials in the daily life of the individual). Next on the list conic I lie finished foodstuffs industries, including in the more depressed countries have shown, so far. only u modest falling off in activity. Finally, retail trade in industrial countries like Oreat Britain, appears to have suffered least of all."