Manawatu Evening Standard. SATURDAY, JAN. 15, 1938. AMERICAN ECONOMICS.

Manawatu Standard, Volume LVIII, Issue 40, 15 January 1938, Page 8

Manawatu Evening Standard. SATURDAY, JAN. 15, 1938. AMERICAN ECONOMICS.

America’s five-year economic recovery plan, 1932-37, has, expert observers believe, proved a failure. It was a plan for a managed recovery, and the theory behind the plan was that lavish public spending (free use of the public credit) would supply farmers and urban dwellers with consumer purchasing power which would result in a great demand for all sorts of consumption goods, and industry would increase its facilities in order to meet the demands. The result would be the restoration of prosperity, carried forward by private enterprise. But “the best laid schemes of men and mice gang aft agley.” In the American autumn, that is about August last, the recovery plan came to an end in a spectacular manner. As one authority observes: “Probably it is true that no country stricken by a depression ever before faced a recovery problem that was so simple in its economic terms and so complex in its political terms.” But we need not dally with the causes of what now passes under the expression of “business recession.” The setback is much more than that, but it would be more profitable to consider the immediate future economic prospects of the United States. The Cleveland Trust Company in its December “Business Bulletin,” dealing with the prospects for 1938, points out that much depends on the decisions and policies made and adopted in Washington, and adds: “We have all the economic requisites for recovery. We have the men, money, materials and markets. Our difficulties are political, not economic.” The bulletin anticipates that the bottom of the present depression will be reached during the first half of this year.. The reason for this prediction is that factory operations have been curtailed so rapidly, that in many lines production is less than the consumption demand, but the recovery from the low point may be much slower than the descent to it. Wholesale prices are expected to be lower than in 1937, when the average was about 86, while this year it is not expected to be more than 80. The average of security prices is likely to be lower than in 1937 or 1936, and not far from the average levels of 1935 and 1934, the early years of the recovery plan. Motor-car production is expected to be lower, and the recession is expected to amount to 25 to 35 per cent. It is also considered probable that the production of coal and iron and steel, cement, freight-car loadings, and the value of departmental store sales will all be lower this year than last. Among the series which will probably show increases this year over last year are petroleum refining, because of the pressure of world demand, unemployment and business failures.

Recovery in the United States, it is contended, depends on the raising of new enterprise capital by private financing, and on the closely related matter of new corporate and private construction. The Bulletin says: “This is a time for courage, co-operation, tolerance and ' goodwill between Government, business, and labour.” That, no doubt is perfectly true, but co-operation between business and politics is almost impossible, for politics insist upon being the dominant influence in the co-operation and to determine the policy. President Roosevelt recently announced that his war with capital would be carried on to the bitter end, and if that be so the “business recession” in the United States may become worse. The plan for a managed recovery has failed, as all such efforts must fail, for there are too many restrictions and controls. America has tried the theory of spending its way back to prosperity by using public funds and the plan has collapsed.