U.S. EXPERIMENT

Hawke's Bay Tribune, Volume XXIII, Issue 210, 18 August 1933, Page 5

U.S. EXPERIMENT

DANGERS POINTED OUT WARNINGS BY THE ADMINISTRATION. A NEW DISEQUILIBRIUM. (London “Times” Correspqndent.) NEW YORK, July 9. Warnings and threats to industry and to the country at large which administrators of the new economic policy put forth in profusion last week, and the appeal, too, which the President was constrained to make to cotton-growers, have given new emphasis to the difficulties and dangers inherent in the attempts to produce prosperity by force. For the first time since the experiment was launched there has been public admission of the possibility that it might fail. Speaking on Friday with his habitual candour, General Johnson, who is the head of the Industrial Recovery Administration, said outright that unless there was soon an effective increase in purchasing power to catch up with the recent increase in production there would be grave danger of a new collapse. He “shuddered to think” what would be the outcome of such a collapse. A day or so before Mr Donald Rich berg, general counsel for the administration, had spoken in similar vein, telling industry that this was probably its last chance to preserve its self-government. If it failed to bring itself under the discipline indicated by the Government there would be no return possible to “gold-plated anarchy that masqueraded as rugged individualism.” The only choice left now was that between “private and public election of the directors of industry.” The concern of these officials and of all supporters of the administration’s price-raising policy is due to several causes. One of these is what General Johnson described ns “speculative production.”

ENORMOUS INCREASE IN SPECULATION.

There has been an enormous increase in speculation throughout the United States since the Government cast loose from traditional economic practice. It has not confined itself to trading in securities and commodities, but has extended into innumerable other activities besides, and has invaded every stratum of society. So widespread has it become, indeed, that it is beginning to bear a close likeness to the speculation of 1928 and 1929. Commerce and industry have felt it as well as more volatile activities, and while it has assumed alarming proportions almost everywhere, there is particular anxiety over what it is doing in these fields. Production in some industries, speeded up to anticipate the raising of costs through wage increases and the shortening of hours of labour, has mu so far ahead of consumption that the danger of a collapse of prices which will bring the whole superstructure of business improvement down with • crash is a definite reality and not any longer a mere apprehension of the timid. With this increase in production there has been a “wild catting” of prices of some goods while others have remained at depression levels.

THE PRODUCTION INCREASE.

Although there has been a much larger rise in prices of farm products and commodities generally than in manufactured goods—taken as a whole —so that some of the disparities precluding a free exchange of goods have been reduced, new disequilibna in prices of goods and services have arisen both as between great groups of producers and of labour ana within them. But even without going into this it is evidence that a situation that is far from healthy has developed when, as the American Federation of Labour recently noted with regard to the period from March to May, factory produetion has increased 85.6 per cent, while workers’ incomes have increased only 7 per cent. There have been only slight murmurings thus far from consumers over the hardships imposed on them by a rising cost of living at a time when their incomes are increasing but little, if at all, but they have yet to feel the real force of inflation and of schemes for raising prices by limiting production. However, there has been a beginning of complaint with a proposal by bakers in various parts of the country to raise the price of a pound loaf of bread from five cents, to eight. This is to offset the rise in the price of flour, which must come from the addition of the Processing Tax and to offset besides higher wages and shorter hours, which the baking industry will have to include in the code which it draws up under the terms of the Industrial Recovery Act. The Processing Tax on wheat—3o ceflts a bushel —went into effect at midnight on Saturday, and with it the increase from 42 cents a bushel to 72 cents on wheat imports.

POWERS OF PERSUASION.

Now, while it is true that N.I.R.A. (National Industrial Recovery Administration) has the power and is determined to prevent profiteering it cannot help but permit some relatively large increases being made in the □rices of goods to ultimate consumers. In this situation it is of interest to note that while N.I.R.A. can theoretically force many industries to increase wages, and so expand public purchasing power, by denying them licenses to continue in operation unless they comply, the only power it could hope to make effective on any large scale is the power of persuasion. The expectation is almost universal here now that the President will go to great lengths in the exercise of the powers granted to him bv the Thomas Amendment to the so-called “Inflation Act.”