Business: Hindsight

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"It was apparent at the end of 1936 . . . that forces were at work which threatened the equilibrium between wages and prices. Then, in the first quarter of 1937, came the development primarily responsible for destroying the existing balance and altering the whole course of events. I refer to the aggressive labor movement. . . ."

Thus last week spoke Dr. Harold Glenn Moulton, president of the Brookings Institution, before the annual meeting of the American Institute of Electrical Engineers in Manhattan. No mere plaint against labor was Dr. Moulton's argument. It was in fact but the converse of a familiar thesis, that higher wages and shorter hours are necessary to compensate for technological progress. The cause of 1937's slump, said Dr. Moulton, was that there had been not enough increase in productive efficiency to compensate for the raising of wages and the simultaneous lowering of working hours.

Other economists last week hastened to point out that while higher costs brought on by labor, technological inefficiency, taxes, monopoly-or other price-raising factors might be the primary reason of depression, a series of deflationary events

preceded it. Among them:

¶ Slashing of Federal "pump-priming"

from $4,000,000,000 in 1936 to below $1,000,000,000 in 1937.

¶ Collection of some $300,000,000 of

Social Security taxes.

¶ Increases in bank reserves ordered by

the Federal Reserve Board in March and

May.

¶Sterilization beginning in December

1936 of $1,300,000,000 of inflowing foreign

gold.

¶ Increases in stock margins in February 1936.

But whatever the causes of the present depression it was last week rounding out six months of acknowledged existence. Looking back, businessmen began at last to recognize milestones of progressive recession that they originally passed unheeded.

A year and a half before the 1929 stock crash, bonds broke. Last March, Business failed tc take the hint, however, when bonds that three months before had been at their highest level in history, broke violently. In one day $23,450,000 of Government bonds alone were traded on the New York Stock Exchange, a 16-year record.

Last April the commodity markets of the world were at seven-year highs when President Roosevelt's announcement that he considered the prices of durable goods excessive, sent copper, lead, wheat tobogganing.

Last June, after a relatively thriving first six months, railroads began to feel the serious pinch of mounting costs, accompanied by revenues that failed to rise, or tapered off. Long before U. S. business was even worried, railroads knew they were facing a great crisis.

Last August the stock market climbed to a peak of 190% the Dow-Jones industrial averages, but trading was extremely thin. While Wall Street was complaining of a shortage of business due to overregulation, prices turned downward.