SLUMPITES AND PESSIMISTS

Te Awamutu Courier, Volume 56, Issue 4043, 4 May 1938, Page 4

SLUMPITES AND PESSIMISTS

THE WORST KIND OF DISEASES.’ “ ‘Slumpitis’ and ‘pessimitis,’ ” said Sir Kingsley Wood recently, “are two of the worst kind of diseases. They badly affect the state of the patient and are highly contagious. Few things are more likely to produce a slump than continual and unfounded talk about it. . Industrial recovery largely depends upon confidence.” Mr Reginald McKenna, chairman of the Midland Bank and former Chancellor of the Exchequer, denied that Britain was heading for a slump. Speaking at Birmingham to the National Union of Manufacturers he said: “There is no evidence of any ground for belief that we are on the downward graph of the trade cycle. It is true that in certain sections of trade there has been a setback in the last few weeks or months. “We know the cause. There has. been an almost complete cessation of expenditure by the big industrial companies in U.S.S.R., and when they cease to buy raw materials, raw materials fall in price. “But the returns I receive from all over the country give no indication that the decline is general. There is no reason to anticipate that decline extending to industry as a whole. “We understand how it has come about that the American industrialists are declining to spend their resources in laying down new plant and in extending their businesses. We know they are very angry with legislation in U.S.A, and the fear of what may happen to them in the future. “We have no such conditions in this country, and we have nothing similar. We need not anticipate any similar decline here. “We can hardly blame that state of mind and conflict in U.S.A. It won’t go on for ever, and, on the contrary, we shall see once again the big American industrialists on the market. “The cheapness of money has been of real value to British industry. It is said that our trade to-day is only maintained by exceptional expenditure on rearmament. “Let anyone study the figures for themselves and see if the expenditure on rearmament is really so important to British industry as it is made out. “As part of the total value of our trade it is insignificant.” “There are one or two satisfactory pointers,” observes the “Financial News.” “Most important is the absence of setback in the constructional trades other than building and public works contracting, in which the seasonal factor is a very significant one. The steel and engineering industries are still making satisfactory progress, although export orders are apparently falling off rather sharply. “This position, however, is at any rate different from that of the United States, where the constructional industries suddenly dried up with hardly any warning. But here, if the demand for steel and machinery is maintained—and in its maintenance rearmament should help there should be relatively little recession. “In the past, the traditional slump has been created by the effect of increased costs upon the incentive to embark upon new capital construction. This has in the past caused unemployment in the capital-goods industries, and has consequently reduced workers’ and shareholders’ power to consume and thus the depression has spread from the capital-goods industries to the consumption-good industries.

“The decline in employment this November is serious, but there is cer- • tainly no sign of this process at work. At the same time, however, investors will watch the next few months unemployment returns with some care. And they will watch the state of affairs in the United States with even greater care. For the two countries’ fates are inextricably combined.

“If American business recovers, then there will be a recovery of commodity prices and then the revival of British exports, coupled with the rearmament programme should substantially offset the falling-off of private constructional work; if America did not recover—a possibility which now looks unlikely—then the domestic outlook would definitely be grey.”

“Thera is no questioning the reality of the set-back,” says the “Yorkshire Post,” “but neither is there any reason to interpret it as the precursor of a major reverse. Generally, business activity in this country is being well maintained in the face of adverse influences, notably those transmitted from America. Conditions in this country are, in fact, so sound that a good deal of ‘punishment can be taken, not without effect, but certainly without endangering the foundations of our industrial activity.

“Probably the most we can say from the figures,” comments the “Manchester Guardian,” is that there is a more cautious feeling about, which is leading a number of industries making consumers’ goods to go slow and to stop temporarily a small portion of their workers. “How far this is the reflection of a wider slowing down of the pace it is early to say. Next month’s returns should show more clearly.”