THE AMERICAN CRISIS

Otago Daily Times, Issue 21544, 16 January 1932, Page 13

THE AMERICAN CRISIS

FAMOUS ECONOMIST’S SURVEY / ARTIFICIAL PROSPERITY BID FOR FINANCIAL POWER. Everyone knows that America leapt, thanks to the war, into a position of commanding financial strength which but for it, it might have taken her some generations to reach; that after the war she built up an edifice of well-distributed material wealth such as no country had ever attained; and that this edifice has tumbled with a crash that has shaken the whole world's economic fabric to its foundations. What we all want to know is, whether the wealth was as unreal as its amazing collapse seems to indicate; why the collapse happened; and what America is going to do next. No one can answer these questions better than Dr Bonn, one of the most human of living economists, who has studied American problems on the spot in all parts of the country, and has been, since his earliest youth, in close touch with important groups of the American world (says The Times Literary Supplement) in reviewing the English translation of his latest book, which ia published under the title of “ Prosperity: Myth and Reality in American Economic Life.” EXPANSION OF INDUSTRY.

At the end of the war America had suffered little loss of population by it (the total number of her dead being 56,618), but immigration, which formerly brought in over a million persons a year, had come to a standstill, and the most important result of these changed conditions was a very substantial rise in wages. Money was poured in from impoverished counttries whose inhabitants found in the dollar the only currency whose stability they could trust: and the establishment of the new central bank system of the Federal Reserve Board had_ eliminated the danger of money stringencies, and had permitted an immense expansion of credit—from 21 milliard dollars in 1914 to 58 milliards in 1929. High wages, by making labour dear and diffusing purchasing power, promoted mechanisation, mass production and standardisation; and, during the after-war years, the scarcity of goods in Europe made it possible to dispose of existing stocks and of new output. At the same time ; however, the lessened stream of immigration and the exhaustion of available free land had stopped or diminished the increase of consumers which had hitherto made the home market expand almost automatically—“ industry, in order to sell more, had to gratify and provoke new and refined demands. It had to push the consumers’ industries into the foreground.” DOMESTIC MECHANISATION.

Among these consumers’ industries, the most revolutionary was the motor ear trade, as democratised by Mr Henry Ford. ’ It transferred a large part of American family life to the road, creating a close network of asphalt streets by which the whole country is intersected, and lining them with a host of refreshment booths, camps, chalets, restaurants and hotels and a multitude of subsidiary consumers’ industries. And then there was the mechanised house or apartment, planned so as to make domestic service superfluous:— “The kitchen is tiled throughout and has an electric cooking machine with an electric cooking clock. One wall is covered with temperature charts specifying how much heat and how much time are required for every dish and every quantity. There is a refrigerator which serves both for cooling purposes and for producing ice. An electric stove furnishes heat when required, and a special plug is provided for the coffee-making machine. There is, of course, an electric vacuum cleaner. A specially-constructed wire arrangement, into ■which cups and plates can be thrust in rows, facilitates the washing up. There are no cupboards and no cosy alcoves; all space is put to practical use. . . . Tinned Californian peaches and Alaska salmon a standardised, almost communistic, diet, by the aid of which it is still possible to lead a private personal life.”

TIME PAYMENTS’ AFTERMATH. These new wants were the more easily satisfied, and were made more profitable to those who fed them, by the systematic development of the hire-purchase system, which quickened the pace of the boom by enabling the poorer classes to spend future income, and intensified the depression by the legacy that it left of instalments to be met by the debtors, at the expense of their consumption of other goods. And, finally, the industrial boom was maintained by the Stock Exchange boom, the profits of which were, if not employed for fresh speculation, used as

current income and spent for current purposes. This “ led to a continually expanding market —until one day the crash came and not only their extra income vanished but their other assets as well, which they had been obliged to put up as security were attached by the banks. If they still kept their jobs they had, out of an income which now seemed doubly slender, to pay instalments for luxuries which they had long ago consumed.” OBLIGATIONS OF WEALTH. Dr Bonn takes a serious view of the psychological effects of the crisis—its real significance, he thinks, “ consists in the fact that to-day it is not merely the present American economic leadership or economic policy that is being questioned, but the capitalistic system itself.” As to the future, and the relations of the United States with the . rest of , the world — “Viewed from the standpoint of world economy, the most important feature of America’s financial development had been her desire to enter upon the financial inheritance of England., She attempted this without having created the necessary conditions on which it was founded. . . . The world’s banker _ must realise that wealth entails obligations; that the banker who wants to .be something more than a mere moneylender must help to guide the economic development of the world, and that the business of Empire is something quite different from the empire of business. _ . . . Yet hopeful signs are not wanting. American organised labour, narrowly nationalistic when immigration questions are at issue, has sensed the importance of the problem of international indebtedness. The farmer is realising that the Farm Board can control home prices only if it can dispose of surplus stocks abroad. Politicians are beginning to put their ears to the ground to listen to the first rumblings of a mighty convulsion.”