From The Militant, Vol. V No. 11 (Whole No. 107), 12 March 1932, p. 2.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
In attempting to give a brief economic analysis of the past few months, and a prognosis for the immediate future one should observe the following trends. First, the actual figures on production and general business activity (steel, cotton cloth production, shoes car loadings, electric power production building, etc.), of course, adjusted to seasonal variation. Secondly a study should be made of commodity prices. No break in the declining curve of general business activity can be expected unless a brake can be applied to the precipitant fall of commodity prices. Capitalists will begin to replace worn machinery, and invest the easily obtained credit in new industry only when they feel that they will not be confronted with their competitors purchasing in March at a reduced rate the raw materials that they purchased in January.
In connection with the actual commodity prices, one should attempt to estimate the actual stocks on hand, of raw materials and of manufactured goods, (quantity, not value is the factor to be looked for – most estimates are of present depreciated value, not of quantity). In connection with this item one should also examine the figures for construction contracts awarded and building permits granted. Also important are new capital issues. These of course indicate purchases to take place in the immediate future. Thirdly, the condition of the working class, in the form of wage cuts, numbers employed, total wage, etc., etc., should be considered. Fourthly, there should be taken into consideration any special items that may have arisen, such as the recent government measures, or any special large scale measures planned or advocated by any specific industry. Under this last heading should be included any measures that have some bearing on the subject, but do not properly fall under any of the above headings. The above procedure, although not advocated as a rigid plan, should succeed in giving one a brief yet general sketch of the economic condition and immediate prospects of the country.
To sum up the economic developments of the past two months, one can but say, that as yet there have appeared no signs of any immediate revival. The months of January and February continued the kaleidoscopic decline in production begun over two years ago. The steel industry, which ordinarily shows an improvement during the first quarter, continued to perform at about 26 to 27 per cent of capacity. The hoped-for rise in steel production to be brought on by an increase in automobile production failed to .materialize because of the lack of improvement in the production of new cars. The index of automobile production declined from a high of 52 for the first week of January to one of 36.5 for the last week of February. Despite the streaming headlines to the contrary, Ford has not yet begun any substantial production. Freight car loadings and electric power output showed similar declines, the latter dropping during the two months’ period from an index of 222 to one of 216, registering a rate of decline much greater than that of the past two years as a whole. The latest reports of building activity, one of the most important industries of the country, showed no bettering of its present paralyzed condition, the figures even showing an aggravation of the condition of the industry. The New York Times combined weekly index registered a new low for the depression in the last week of February. The index is now at 60.8 as against 69 for the beginning of the year.
The only figures reporting increased activity of a substantial nature have been those of shoe and cotton cloth production. In the production of cotton cloth, the rise from an index of 91 in the first week of January to one of 96 for the last week of February, had merely an aggravating effect upon the market, the sales in no way being able to consume the increased production. The stocks on hand increased, and despite the temporary rise in price brought on by the Shanghai events, the price trend continued downward for the period. (An interesting feature to be investigated in this so-called consumers’ industry, is the recent statement made by the New York Cotton Exchange Service that 40 per cent in yardage and 60 per cent in weight of all the cotton goods produced go into industrial uses.)
Commodity prices temporarily steadied in the third week of February, the only break in the two months’ period, failed to keep their gains, and again registered a decline for the final week of the month. The Annalist index dropped from 95 to the low of 91.4. In the factors connected with commodity prices no signs leading to the belief that a bottom has been reached can be seen. Although comprehensive figures are difficult to obtain, one is led to believe that stocks on hand of manufactured goods still remain very high. The accumulation of raw materials is growing so rapidly as to become threatening for some, industries. Crop estimates for the coming year indicate even greater yields than the present year. On the field of building activity the hoped for increase remained in the wishing stage. The figures of this year are running about 30 per cent below those of last year. For both contracts awarded and building permits granted, one is forced to use the words of the National City Bank Bulletin, “lowest by far” for any similar period. New industrial capital issues (a portion of which sums will be used for the purchase of goods in the next few months) have been conspicuous during the month of February by their almost complete absence.
The first two months of the year marked a continuation and extention of the general wage slashing campaign this time attacking the organized industries, namely railroads and building trades. A horizontal 10 per cent wage cut to some 1,500,000 workers employed by the railroads, will reduce the total wage for this group, for the coming year, approximately by $200,000,000. The proposed 25 per cent cut in the building trades has this peculiar feature attached to it, namely, that the great majority of the workers in the industry are already receiving much below the scale. The proposed official wage cuts can but mean, not the adjustment of wages to 25 per cent below the present scale (which in many cases would mean an actual wage increase), but rather a further reduction of the already reduced prevailing rate of pay.
According to the latest available reports of the Department of Labor, the number of people employed continues to decline; the total wage paid decreasing even more rapidly. Thus the drop from December to January for factory employment was from 67.9 to 66.3 whereas payrolls declined from 55.8 to 52.4. This ever widening spread between the two curves merely indicates the results of the wage cutting campaign. The worker fortunate to be kept on the payroll is finding less and less in the pay envelope each week.
As special emergency measures, the past two months saw the birth of the two much heralded banking measures, the Reconstruction Finance Corporation and the Glass-Steagall Bill. (In connection with our article on the Glass-Steagall bill, a misleading sentence crept in, due to last minute revision. The sentence reading, “But how can anyone hail as epoch making, a bill that does nothing but make legal that which is actually taking place”, should have been concluded, “namely, the continued withdrawal of gold by foreign countries.”) The entire attempt to increase commodity prices by increasing the available money in circulation is based upon the false assumption that it is possible to inject into the process of circulation, additional money despite the fact that business does not desire the additional sums. The bankers have yet to explain how the possible increase in currency will result in an actual increase. Were the government actually able to inject new money into circulation, then this would be a factor in tending to bring about a temporary rise in prices. But the present measures are valueless in this respect. Actual justness conditions are the determining factor, and not the effect of money in circulation. Summed up in the words of Marx, “prices are not high or low, because there is more or less money in circulation, but on the contrary, there is more or less money in circulation, because prices are high or low.” The complete futility of the present currency measures is summed up in the above sentence.
The danger of America going off the gold standard (inflation in the strict sense of the term) becomes greater daily. Gold continues to be drained from the country. In the first month of the year the total decrease of gold stocks was 37 million, while for February this sum had mounted to 67 million. In addition to the above there exists the ever mounting deficit of the national government, which will probably reach well into the three billions for the present fiscal year, unless new tax measures are rushed through. “The need to balance governmental budgets of all kinds beginning with the Federal Government.” Thus reads the National City Bank report, expressing in their words the fear of the stability of the U.S. government bonds. The financial crisis, rather than being alleviated, is facing much greater stumbling blocks. Private German bonds are now being talked of, in addition to the public debt, in the discussions of defaulting. There is even talk here of a complete shut down of the stock market. The framework of the banking system is rapidly becoming weaker.
All in all, the conclusions to be drawn are, that the prospects for immediate revival are not great. Unemployment and the misery of the working class will most probably become more accentuated. The questions of immediate relief and of unemployment insurance must remain at the forefront of our unemployment campaign. Concentrating on these slogans, and in addition bringing forward that of the six hour day, as well as that of credits to the Soviet Union, the Communist movement should attempt to rally around it the great masses of workers who more and more should become disillusioned with the prospects held out for them by the capitalist system.
Last updated: 17.5.2013