Evening Star Newspaper, October 20, 1935, Page 35

Editorial Page Part 2—10 Pages EDITORTAL SECTION he Sunday Star WASHINGTON, D. C, LEAGUE MOVING TOWARD MAJORBATTLEIN EUROPE Observer Sees War Under Britain’s Leadership in Sanctions Against Italy. BY FRANK H. SIMONDS. Now that the League of Nations, having failed in its preventive efforts to halt Italian aggression, has passed on to purely punitive activities it must be clear to all who look beneath the surface of current events that Europe is moving steadily toward another general war. The reason is simple. In his African adventure Mussolini has embarked not alone his own per- sonal fortunes, not merely the future of the Fascist regime, but the fate of his country as well. He cannot go back without insuring his own fall, the collapse of his party and revolu- tion in the peninsula. Under such circumstances any at- tempt by the League of Nations to prevent I1 Duce from bringing his Ethiopian war to victory must end in a fight or a fiasco—a fight if the enterprise proves effective, a fiasco if it does not. But if it should prove a fiasco, then the blow to British prestige generally and the diaster to the Baldwin government which has dictated English policy must be heavy. In one word, if Italy, despite the un- precedented energy of the British government in trying to stop her, should be able to triumph and to establish herself in Ethiopia, British prestige must suffer to the point where British security may be com- promised. Italy Will Not Retreat, Behind the facade of the League of Nations what is developing is the shock between two purposes which are irreconcilable and are becoming immutable, Italy cannot and will not retreat now. It is sheerest moon- shine to imagine that a man of Mus- solini’s temper and nature will calmly accept political extinction rather than face the risks of ultimate de- feat by inviting British attack. All calculations based upon the assump- tion that I1 Duce will yleld peace- fully to foreign pressure are un- founded. They ignore the implica- tions of the Fascist religion of na- tionalism which Mussolini has been preaching for half a generation and they overlook the fanatical point he has awakened. As long as financial and economic sanctions are limited to the refusal of League states to trade or traffic with Ttaly, she can, in Mussolini’s own words, tighten her belt and go for- ward. Such sanctions, too, can have little practical effect because, unless it be assumed that the United States and Germany will associate them- selves with the League undertaking, Ttaly will still be able to get as much of what she really needs as she can pay for. Not until an actual naval blockade of Italian ports is under- taken can real pressure be exerted. And at that point,” Mussolini has warned the world, he will fight. In the meantime, as days pass and Italian armies go forward from battle to battle and the League sanctions are disclosed ever more completely to be ineffective, the pressure upon the British government from within to re- sort to a blockade must become more difficult to resist. A general election 1s at hand in England, a still recent plebiscite disclosed 11,000,000 voters favorable to the League and 6,250,000 ready to support even military sanc- tions. The British Labor party, al- though its leadership is divided, has by an overwhelming majority signi- fied its approval of forcible coercion. Baldwin Dares Not Falter. If the Baldwin government falters now it will be exposed to deadly at- tack in the forthcoming election. If it goes forward, even though the con- sequence be war with Italy, it will be secure against any criticism by an opposition which has already com- mitted itself to force. And the truth is that British labor is today even more ready than the Tories to go to war with Italy because of its hatred of Pascism. In one word, it has be- come for reasons of domestic politics almost impossible for Baldwin to stop even if to continue leads eventually %o war. On this side of the Atlantic no small part of the public is still con- fused by the events at Geneva. And they are further handicapped because of the very general belief that Musso- lini can be frightened into abandon- ing his imperialistic program. In the back of their minds lingers the mis- taken conviction that there is a peace- ful means of preventing a war like that in Ethiopia, and on that assump- tion they are aiding to promote a European war, The American people should, how- ever, ask themselves what would have been the reaction on this side of the Atlantic when we embarked upon our war with Spain, if the rest of the world had atempted to restrain us. In point of fact the majority of the nations held us the aggressor. But if, for example, the British, acting with the support of France, Germany, Italy and Russia, had concentrated its fleet in the Caribbean in a fashion which constituted a direct threat to Amer- ican ships and armies acting against Cuba and Puerto Rico, what would the United States have thought and done? [3 Reaction Is Obvious. * ‘Again, suppose America had taken the lead in mobilizing the opinion of the world against the British war in South Africa. And suppose, also, we had sent all our ships to some African port with the direct purpose to hold over England the threat of our forcible intervention. What would British reaction have been? Is there any reason to suppose that Italy would resent coercion less bitterly or resist it less uncompromisingly? Think of the feeling in the North during the War Between the States when there was & prospect of Anglo-French intervention to end the strife by assuring the in- dependence of the Confederacy. Stanley Baldwin has endeavored in public speeches to give the impression that the present Anglo-Italian dispute is in some way related to the struggle between democracy and dictatorship. And that patently paves the way for perial Germany and now they have a National Socialist Reich in its place. The profit for democracy or peace is hard to discover. Great Britain with such aid as it can muster among League nations can doubtless crush Italy as Germany was crushed in the last World War. But the ultimate consequence of such an operation must be not to restore a democratic Italy but to insure a Com= munist nation. And while this proc- ess of destruction is going on Europe will be shaken by a fresh German enterprise designed to undo the effects of that war which was to end war and autocracy at a single blow. Moving Toward Major Cenflict. As long as any part of American public opinion harbors the delusion that there is any peaceful way to coerce a nation at war, which has staked its all upon the outcome of that war, so long judgment upon this side of the Atlantic will be obscured. What has to be faced today is the fact that in order to punish Italy for precipating a minor war, the League of Nations, under the leadership of Great Britain, is moving steadily toward producing a major conflict. As to what Fascist Italy has done and is doing in Africa it is easy for the moralist to find unlimited reasons for indictment and condemnation. Nevertheless the realist is bound to recognize the problem of whether the League of Nations, which was estab- lished to prevent war, should be em- ployed to make war even in order to punish what it could not prevent. Moreover, this situation arises from the fact that two governments, the Italian and the British, have em- barked their domestic political for- tunes upon conflicting policies and are now committed to the point where withdrawal must produce a crisis of regime for the former and an elec- toral disaster for the latter. In the earlier stages of the present affair completely mistaken view pre- vailed in London and Rome. The British were unable to believe that Mussolini would dare to go through with his enterprise once the British had taken a stand against it. The Italians did not even suspect that British opposition would go beyond the limits already traced in the Man- churian episode. Accordingly when Sir Samuel Hoare indulged in his significantly warning speech before the League, England was astounded because Mussolini did not stop and Italy was unmoved because it ac- cepted the utterance as words and only words. 11 Duce Unable to Retract. On this point Italian public opinion was quickly disillusioned when the British fleet was rushed to the Medi- terranean. But British astonishment was not less complete because Il Duce, even in the face of the most colossal threat of post-war history, continued with his enterprise. And he con- tinued because the time had long passed when he could conceivably re- tract. If the British had been able to bring themselves to take Mussolini’s Ethiopian enterprise seriously last Winter and had made their warnings sufficiently explicit without putting Mussolini on the spot publicly, some- thing might have been accomplished. Then he might have held the risks too great and dismissed his dream. But when he had established 250, 000 troops on African soil, strained the slender financial resources of his country to the breaking point, roused the nationalistic spirit of his people to the point of frenzy, then there was no longer any possibility of his giving way, for surrender then would have revealed imperial and Fascist TItaly as no more than the servant of British policy. Now such hope as exists in the situation—hope that punitive opera- tions of Geneva will not, thanks to British impulsion, end in another world war must rest with France. Only the French in all this confused situation are actually working for peace. But their efforts are fright- fully handicapped by the fact that they are so anxious to insure British suppert in the war with Germany which they see just over the horizon that they are not ready to interpose decisive opposition to British policy in respect to Italy. Again and again the French are being tempted by fresh British concessions in the way of promises of co-operation against Germany in return for French sup- port against Italy. But when all is said and done I do not believe that the French will permit themselves to be dragged into an Anglo-Italian war fought in the name of the League of Nations, If the British continue to push the League forward along the pathway of coercion Italian resentment and pas- sion will be correspondingly exacer- bated and the chances of an incident will be steadily increased. So far Mussolini has been able to keep the situation admjrably in hand. But if privation and distress in the penin- sula follow the application of sanc- tions, the Italian people will charge the responsibility for their sufferings to the British and hatred of Eng- land will rise to a dangerous pitch. In the same way delay or defeat in Ethiopla will be charged to British aid—moral and material—rendered to the Ethiopians. That is the direction in which events are now headed, that is what will happen if the Tory government in England, driven on the one hand by its electoral anxieties and on the other by its imperial concerns, goes to the length of forcing the imposi- tion of really effective sanctions upon Italy. So far it has left a door open for retreat. Once it has established in the minds of the British champions of the League the belief that it has done its best but, owing to the re- fusal of the United States, Germany and Japan to join in economic pres- sure, such coercion cannot be effec- tive—then the government can de- cline to go on and can use its fleet to blockade Italy, which would in- ] | sure & war. Stch & course becomes daily more- difcult to avoid. H SUNDAY MORNING, OCTOBER 20, 1935. ands Across the Channel France and Britain, Despite Differences, Expected to Present United Front. BY THE RIGHT HON. LORD STRABOLGI, Former Admiralty War Staff. London: ‘author of “The Real Navy." Eic. HE relationships between the government of Britain and France are of particular im- portance during .the present world crisis, and that there is a crisis is undoubted. It is a crisis that needs cool handling, even bold handling. And probably the greatest responsibil- ity rests upon the shoulders of Brit- ain, France and the United States— not necessarily in that order. You in the United States know what your views are on both British and French policies, and your general at- titude toward both these European nations, but what of the bearing to- ward each other of England and France and their mutual relations? In the last resort the policy of any government depends on its own pub- lic opinion. This is, at any rate, true of the democratically governed na- tions. It is on the sentiments and general feeling of the ordinary people in the mass that the policy of the government of the day eventually rests. Must Be Fundamental Basis. Public opinion can be molded and colored by propaganda, but there must be some fundamental foundation for any strongly felt sentiment. Thus, there was some anti-German propa- ganda in Britain prior to the Great War, principally caused by trade rivalry. The suspicion and uneasi- ness this propaganda aroused in Eng- land was accentuated by the foolish utterances of the Kaiser and some of his principal advisers, but there was s fundamental feeling of hostility toward Germany caused by the threat to British sea power, the maintenance of which has become almost instinc- tive among the British people. When the situation developed which led to the World War there was a violent outburst of hostility in Britain against Germany. This had not a little to do with the decision of the govern- ment of Westminster to stand by France. Similarly, a deliberate propaganda had much to do with the friendly feelings of Britain toward France which developed between 1904 and 1910, the years during which the es- tablishment and consolidation of the entente cordiale was effected. Sup- this propaganda was a general feeling that France no longer threat- ened Britain’s position and would be a useful ally in case the threatened World War broke out. This entente, which in effect was a military and naval alllance, ended an ancient and almost hereditary enmity - between these two near neighbors who had fought each other at intervals for centuries. But what of the present-day atti- tude of the British toward the French, tween the end of the Great War and this present year. Former Allies Always Cool. ‘There is always coldness between & war. The British armies it to France came into con- excep! prisoners, fit objects for pity; or, in attack, as huddled, dodging figures advancing in rushes behind their shell bar- percentage of British sol- ‘who saw Germans with arms in survived was com- , but the whole army into contact with the French By the end of the war there was ) \ no love lost between the British sol- diery and the French people. The French have many virtues, but the peasantry and petty bourgeois are usually grasping. They drove hard bargains with their British allies without any compunction, just as they did with their own soldiers when they got the opportunity. They made the British Tommies pay heavily even for their drinkink water. Charged Rent for Trench Land. The French government charged us, as they did the American Armies, a heavy price for the use of their railways and even for the rent of the land in which the trenches were dug— trenches which were guarding the very heart of Prance from the enemy, It was only as a result of strong pro- test that no rent was charged, or is charged now, for the war cemeteries for the British and American Armies. There was the inevitable friction be- tween the staffs, and at the end of the war the returning soldieys de- clared themselves quite freely as ence on public opinion generally. The allied and associated armies of occupation in Germany were wel- comed as deliverers, if they were Brit- ish or American, if only because it was believed that they would behave better than the French troops in occupation. It was quite common for British soldiers, and I expect they were in the majority, to declare after the Great War that England had “backed the wrong horse,” that we ought to have been on the side of Germany, and that they would never again fight for France. Just Peace Held Ruined. All the ceremonial speeches, the ex- change of courtesy visits, the com- bined festivities to celebrate peace, could not obliterate this fundamental feeling of hostility and even contempt. Britain had the desire to draw up a just peace. We have made it our ci erosity, but the French, neurotic, half | | Francophobes. After any war the | i | returning soldiers have a great influ- ruined, with their vivid memories of actual invasion, insisted on a stern and even a harsh peace. They were blamed for this by the British public and by the British politicians after the first post-war passions had died down in England. The names of Clemenceau, Poincare and other leaders of the French gov- ernments which attempted to dismem- ber and destroy Germany became by- words in Britain, The occupation of the Ruhr, the PFrench insistence on huge indemnities, long after the Brit- ish had begun to see reason; France's failure to pay her own debts—all this added to the causes of hostility. What of the French sentiment toward Britain? During the war there was the same friction between allies, and after the war, owing to Prance's economic weakness, an under] feeling of inferiority which found its expression in a desire for assertion. The British were blamed for prolong- ing the war by not being ready for it, because they had not followed France's example of conscription prior to the conflict. Accused of Taking Spoils. We British were accused of taking the lion's share of the spoils of war in the shape of German shipping and colonies. We were further accused of desiring a revived and strong Ger- many as an offset to France's mili- tary hegemony in Europe, having first of all taken the precaution of arrang- ing for the destruction of the German Navy. These were the accusations leveled against Britain, not publicly so much as privately, and they were echoed by the French people generally. Twelve years after the end of the great war there was little popularity in France for Britain or in Britain for France. Indeed, in Britain this feel- ing found public expression in the demand of the isolationists to make an end of the treaty of Locarno, promising assistance to France or Germany, whichever was the victim of aggression. The old traditional policy of cutting adrift from all entangle- tom to treat a beaten enemy with gen- | ments in Europe, including the system ‘of collective security which it had By the Associated Press. LONDON.—War talk in Europe is booming the price of wheat, that key commodity which exerts such tre- mendous influence “on international politics and commerce. Members of the International Wheat Advisory Commission, estab- lished in London two years ago by 21 nations to seek ways to raise and stabilize depressed wheat prices, warn, however, that this war talk will prove & boomerang unless most of Europe’s armies start marching. A localized conflict between Italy and Ethiopia offers no grounds what- ever for bullish actvity in the wheat markets, the wheat advisers insist. ‘They point out there could be no mar- ket in Ethiopia and their information reveals that Italy, because of Musso- lini’s self-sufficiency campaign, can only be a negligible importer. A general conflict, on the other hand, would revive the golden age of wheat, they believe. The wheat dip- lomats admit in such a case their services as’ guiding spirits for the world wheat pact could be dispensed with by the various governments. Exports Skyrocket. ‘The last World War resulted in sky- rocketing of exports from United States, Argentina, Canada and Aus- tralia and tremendous increases of acreage in wheat in those countries. Attempts in recent years by Euro- pean nations to raise their own wheat frightened the “Big Four.” With their markets slipping away because of this nationalistic economic policy in Eu- rope, they finally persuaded the Euro- pean countries to join in the wheat pact. War rumors, coupled with a poor crop in Argentina after two bumper seasons, had boosted the average par- cels price of wheat in England to 57.8 gold cents for the week ending September 21. This is the price the ‘Wheat Commission watches, because European nations promised to lower tariffs whenever 63 gold cents is reached and maintained. ‘This promise is now on the shelf, with the wheat pact, indefinitely in- operative, although not cancelled, be- cause of Argentina’s refusal last May to renew its commitments. When the Wheat Commisison met in May the price was 48.4 gold cents. The 1934- 35 crop year average was 47 gold cents, the same price as prevailed when the pact was signed in August, EUROPEAN WAR RUMORS BOOST PRICE OF WHEAT Quotations Likely to Be Unaffected if Conflict Is Confined to African Territory, Experts Say. would continue. It is estimated in that event Italy's imports to next Au- gus 1 will not exceed 20,000,000 bush- els. Italy has harvested a bigger crop this Summer than last—284,000,- 000 bushels, compared with 233,000.- 000. But while she imported only 12,000,000 bushels for the year ending last August 1, the current year's amount should be larger because of depleted stocks. Italy recently bought 4,000,000 bushels of wheat from French North Africa. Italy’s maize crop is poor, but she will be able to fill these require- ments cheaply from Argentina. Brazil recently got a large meat contract from Italy. Argentina tried to get this contract but her letting of a shipbuilding contract to England in- stead of Italy apparently destroyed her chances. Barring & general European war, world wheat exports for the year end- ing next August 1 are estimated at between 500- and 540,000,000 bushels as compared with 530,000,000 for the year ending last August 1. This com- pared with 945,000,000 for 1928-29, before the slump set in. ‘The United States is expected to show & net import again this year, anywhere from 10,000,000 bushels up- wards. The lower possibilities are fa- vored by the experts here. Last Au- gust 1, net American imports totalled about 3,500,000 bushels. Canada Sends More. Canada may ship up to 280,000,000 with 166,000,000 e year. This will depend on ?he&:" the large “amount of wheat damaged by rust is sent to the Orient or kept at home, whether the election changes Canada’s wheat policy radi- cally and whether Argentina and Australia ship more or less than e e 19, m%"m to reduced from 19,000, 1'1‘.:)00,000 acres and she is expected to ship about 88,000,000 bushels as compared with 180,000,00 bushels the past year. Australia is expected to export 96,000,000, compared with 110,» 000,000 the year. = are better than Russia’s prospects they have been for & couple years, information been France's policy to foster, became popular in Britain. But then came Hitler, and the Nazis. The suppression of the Ger- man Social Democratic party, the trades unions and, indeed, the whole organized working-class movement in | Germany ar.used the most bitter feel- |ings of resentment among the work- | ing classes of Britain. Almost in a | night, so to say, the working men and those who were too young to have been in the last war ceased being mildly pro-German and became ar- dently pro-French. It was suddenly realized that the very gains of the French Revolution were threatened all over Europe, if not all over the world— was challenged. Last Democracy on Continent. France is now looked upon as per- haps the last great democracy on the mainland of Europe, the last bulwark of the parliamentary system of “gov- ernment of the people, by the people, for the people,” to quote Lincoln’s famous definition. As the attachment to the parlia- mentary system is even stronger in Britain, it is easy to understand this sea-change in opinion. After two and a half years of Nazi rule, this feeling has been strengthened by the alarm caused by German rearmament. Whereas it was a naval threat which so disturbed British public opinion when it came from Germany prior to the war, it was now realized that the air weapon is as great a menace, or even greater. The building up of a great air force in Germany, combined with the general preaching of the doctrine of force and nationalism, caused much perturbation in British public opinion of all sections from the government downward. And this despite the pacific declarations from time to time of Herr Hitler himself. It is true to say that the general feeling in Britain is more strongly Francophile today than at any time in the history of the two nations, save possibly during the actual years of the war itself. France Reciprocates. ‘There 1is reciprocity in France, though certain recent events have acted as a counteracting force. France now has an ally in Russia. It is not a military alliance in the old sense of the word, but from the point of view of the French general staff and the French politicians it comes to much the same thing. France is not so dependent, therefore, on British help. The German rearmament did not come as such a shock to the French; for they had been told for years that it was in progress, No doubt the re- ports of German rearmament were exaggerated in France; nevertheless, when the rearmament became an acknowledged fact French public opinion was not so surprised as Brit- ish public opinion. The Anglo-German naval treaty that the whole ideal of human liberty | Special Articles PRICE ADJUSTMENT HELD KEY TO U. S. Brookings Expert PROSPERITY Sees Market in Unmappe(i Gap Between Potential Supply and Consumption. BY THOMAS R. HENRY. MERICAN agriculture and in- dustry has a potential $50,000,- 000,000 market. It is the greatest market ever dreamed of in the history of the world. The wealth of the Indies was minute in comparison with it. If it could be tapped it would restore pros- perity and place the American people on new peaks of prosperity such as they have not imagined. Where is this market? In the vast, unmapped gap between the country’s potential production and potential consumption. To provide for the en- tire American population the goods necessary for a ‘“reasonable standard of living,” as defined by Government experts, would involve a 75 per cent increase above the production capacity of the country’s farms and factories at the peak of prosperity. Such, essentially, are the conclusions of a searching analysis of the present economic condition of the Nation by Dr. Harold G. Moulton of the staff of the Brookings Institution. The report of Dr. Moulton's research has just been issued. . Offers No Panaceas. How to reach this domain of fabu- lous wealth is another question. The world-famous economist offers no new panaceas. It is as baffling a problem, perhaps, as confronted Columbus look- ing westward from the coast of Europe. He conceived the idea of reaching the Orient with all its fabulous wealth by sailing in the opposite direction. Why not, asks Dr. Moulton in effect, sail for the Indies of economic prosperity by taking the westward passage of lower prices? In 1929 the United States supposedly was fabulously prosperous. least, enjoying the greatest prosperity wotld’s history. Something happened which changed this prosperity almost overnight into the profoundest depres- sion of all times. Just what did hap- pen nobody has been able to determine cut through the maze of obscurity. In the first place, pointed out by previous reports in the same series, the prosperity was not so great as it seemed on the surface. Wants Far From Satisfied. Says Dr. Moulton: “The consump- tive requirements, or wants, of the people were far from satisfied during the period of our highest economic achievement. The value of the total national production of goods and services in 1929, if divided equally |among the entire population, would have given to each person approxi- mately $665. There were nearly six | million families with incomes less | than $1,000; twelve millions with in- | comes under $1,500; over 16,000,000 with incomes less than $2,000, and over 19,000,000, or 71 per cent of the total, with incomes less than $2,500. {A family income of $2,500, at 1929 | mitting few of the luxuries of life. | Hence it was clear that the consump- | tive requirements of the people were | far from satisfied. “To raise the incomes of 19,400,000 families receiving less than $2,500 in | 1929 to a $2,500 level, with no changes | in the incomes of those receiving more than that amount, would have required an increase in national production of more than $16,000,000,000. A horizon- tal increase of $1,000 in the income of all families receiving less than $5,000 in 1928 would necessitate an expansion of production to the extent of over $25,000,000,000. To give all the fami- lies of the nation a ‘reasonable stand- ard’ of living, such as is set forth in the studies made by the Bureau of Home Economics of the Department of Agriculture, would have necessi- tated an increase in production over the 1929 level of approximately 75 per cent. The full utilization of our productive capacity, it will be recalled, would have permitted an increase in production of only about 20 per cent, or $15,000,000,000. The desires of the people were vastly greater than could have been satisfied by the productive power then available.” - $20,000,000,000 Gap. At the best, he shows, the Nation's productive power was far above its actual output. There was a gap rep- resented by about $20,000,000,000 in value between the goods produced by American farms and factories in 1929 and the utmost they could have pro- duced. In 1934, after five years of de- pression, this gap had widened to nearly $40,000,000,000. In the year of greatest depression, 1932, the volume of goods and services produced was approximately 31 per cent less than the production of 1929. Assuming that the productive capacity remained sta- tionary during the depression years, the actual output of goods and services in 1934 amounted to only approxi- mately 61 per cent of what might have been produced. In 1929, of course, farmers and manufacturers wanted to run their plants to capacity. They saw the gap —although perhaps not as clearly as it appears in present-day statistical tables. There could be expanded pro- duction only with an expanded mar- ket. Sales had to be increased. There, as Dr. Moulton sees it, was where the manufacturers especially made their big mistake, and this mistake was one, at least, of the outstanding causes of the depression. ‘They started high-pressure sales campaigns. They offered liberal credit terms. Installment buying loaded the American people with debt. The point . | soon was reached where capacity to against treaty viola- tions, in spirit if not in letter. I was felt to be contrary to the system of collective security and the whole program of mutual reductions of armaments by agreement. Disarmament Is Thorn. The French furthermore For example, tain to re- purchase and capacity to produce were far apart. The gossamer bridge of credit stretching over the gulf soon snapped and the national economic structure was precipitated into the o Mistaken Policy. It was, holds Dr. Moulton, & mis- taken policy from the beginning. There was & gap of 20 per cent between po- tential production and actual produc- tion. Had industry departed from its traditional ways and produced this extra 20 per cent—leaving aside sales for the moment—the cost of production per unit would have de- clined, for Dr. Moulton’s analysis shows that the unit production cost, ously as the percentage operat Increases, with the rate of production F It was, at | ever known by any people in the | very clearly. Dr. Moulton set out to | as has been | | prices, was a very moderate one, per- | declining a&s maximum output is ap- proached. Supposing, then, that ine | dustry had cut the saving off the sales price rather than absorbed it in profits. The sales probably would have come anyway. The market was there for far vaster supplies of almost every type of basic goods than could possibly have been produced. Only one ob- stacle stood in the way of utilization— |the income of the potential buyers. Sales would automatically have in- creased as the gulf was narrowed be- | tween this income and costs of living. | This brings Dr. Moulton to what he emphasizes as the fundamental ques- tion at issue. | “In the prosperity period of the | 20°s,” he says, “there was a great in- | crease in production efficiency, but |there was no corresponding reduction in selling prices—indeed, retail prices |did not decline at all. Instead of vig- orously reducing prices as costs were | reduced, the practice prevailed over | broad and basically important sections | of American industry to hold prices at |or near existing levels, or even to ad- vance them when the current demand ran strong. Thus the volume of sales was prevented from attaining the di- | mensions it might have reached. Prices Froze Market. “Instead of tapping the vast ree |sources of potential demand residing in the unfilled want of the American people, price policy tended to freeze the markets at existing levels. In= stead of endeavoring to expand sales through price reductions we, sought by high-pressure salesmanship and installment credits to induce people to buy more than they could afford, Despite such temporary stimulation of demands and the expansion of sales abroad by means of credits and dumping policies, American industry in general continued to have a sub- stantial margin of unutilized produce tive capacity. Had the volume of sales been expanded by means of price reductions unit costs would have been reduced and profits might well have been larger. The business mane |ager who progressively reduces selle ing prices as technological improve- |ments are made need have no real }concern over the long-run trend of | profits. The history of business shows that under such conditions profits usually take care of themselves.” Dr. Moulton deals lightly with such |ssues as technological unemployment, American industry hasn't enough mae “chmes. It will not have enough une {til machine power and man power | together can produce enough to bridge that gaping gulf between possible ‘pmductmn of goods and the amount |of consumption required by a “rea- sonable standard of living.” It is not likely to come in our generation. Neither does he consider very seri- |ously such proposed remedies as 30~ hour weeks or the regimented life of subsisterice homesteads, etc. At the best, all they can produce is leisure, | There is no great demand for leisure |on the part of the American people, | The average man wants to better his |lot. He doesn't want to sit around, |even with an assured income at its | present level. And while he is sitting |around he is doing nothing to bridge |the gap. Quite the opposite would | be the result, it is likely. Production | would fall more and more from pos= | sibilities of consumption. Would Lower Prices. The ideal, as he sees it, would be increased production with lowered prices, with the resultant savings ex= pended to still further increase pro= duction with still lower Pprices. “Could we find the means” he | savs, “of closing the 20 per cent gap | between capacity and utilization we ,wm.lld be in the process of doing | something of even greater importance, We should be progressively reaching over the old limit of productive cae pgcity, tapping new sources of effi- ciency, unleashing forces of progress which come to action only as the prospect of profitable use becomes clearly discernible. As this dynamic situation is attained suppressed pat- ents are brought into use, new inven- tion stimulated, obsolescent machines replaced by others of more efficient character. Then integrated processes and mass production may move fore ward as the engineer lights the way and labor-saving machinery may be Introduced without fear that the workers will starve. No actual addi- tion to production can be a harm to the economic body except as our sys- tem fails to provide for distributing the net product fully and promptly into the hands of actual consumers.” Distribution By Price. The ultimate distribution of the national income, Dr. Moulton points out, is to be brought about through an elaborate process of pricing goods; determining wage ard salary paye ments; disbursing premiums and bonuses; operating profit-sharing, ine surance and pension schemes; and carrying out an elaborate system of taxation and Government expendie ture. All must go hand in hand. But the one type of distributive re form which outranks all others, he insists, is gradual but persistent re- vamping of price policy so as to pass on the benefits of the increased pro- duction due to technological process to all the population as consumers. Such a procedure, he says, seems to promise the maximum gain to the masses both in the short run and in the long run. At the same time it does not destroy the profit motive nor jeopardize the winning of such profits as are necessary to maintain capital funds and make possible the financing of improvements. “The underlying purpose of busi ness,” he says, “Is to serve the people, Indeed, only as it serves the people can it serve its own best interests. To serve a small part of the people cautiously, guarding oneself at every turn lest one’s own advantage might be made less by passing on the bene« fits of new knowledge or better meth ods, will give but a cramped life and a stunted development even to one's own enterprise. “Growth in the economic organism must proceed from the deepest and broadest possible rootage. The elab- orately industrialized system known as mass production marks the highe est level agtained under man's pro- (Continued on Third Page.)