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Jack Ranger

Tapping the Wall Street Wire

A Close-Up of the Economy

(31 March 1947)

From Labor Action, Vol. 11 No. 13, 31 March 1947, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

The National City Bank of New York, in its March monthly bank letter, notes that commodity prices have resumed their advance and expresses fear lest the unions will have to launch a new series of strikes to catch up to the inflated prices. Rising prices are deferring hope for a downturn in the cost of living, the bank says, adding that the situation is fraught with danger for big business. But warnings like this do not restrain the profiteers from squeezing the last cent out of the market.

The Commerce Department, too, is concerned lest the rampant greed of big business pushes commodity prices beyond the reach of the masses and thus paves the way for a depression. Advising business men to get busy right away on lower prices, the Commerce Department warns that unless they “start reviewing their pricing policies now, they may find themselves faced with making drastic price changes.”

Though the Commerce Department puts the matter as delicately as possible so as not to hurt the feelings of the tender industrialists, there is no mistaking what it meant. “The old wartime formula of price of goods plus operating costs plus desired profits (that is, all the traffic can bear – J.R.) is no longer sufficient. In general, mark-up policies must be directed toward a reasonable net profit,” says the government.

You see, what has happened is that almost all industries got so accustomed to super-profits during the war that they just can’t bring themselves to adjust their appetites to a “normal” meal. When the profiteers fall out, we get a little of the truth.

For, instance, recently the carpet buyers for the big department stores have been complaining that the carpet manufacturers have upped their prices too high. The carpet manufacturers are answering right back and. according to an item in a recent issue of the New York Journal of Commerce, told the buyers to compare their store mark-ups with pre-war levels. According to the manufacturers, “many retail stores have increased markups on cost from 60 to 75 per cent since 1941. A carpet costing the store $100 used to be sold for $159.50 and is now selling for $175, a sales increase of approximately 9 per cent. This boost in retail mark-ups, moreover, has been taken at a time when inventory turnover is at record levels, nearly four times greater than the pre-war rate.” Usually store mark-up is partly determined by turnover, but now stores worry if they have carpet in store for a week.

Now you begin to see why profits all up and down the line are the highest in history. Here are just a few recent reports: The A.S. Beck Shoe Co. reported record sales and earnings for 1946, net profits rising to $2,112,235 or $4.49 a share, compared with $886,113 or $1.55 in 1945. Hart, Schaffner & Marx reported all-time record profits last year, with net income of $3,423,126 or $9.44 a share, compared with income of $1,645,860 or $4.63 a share in 1945. Butler Bros, says the net sales last year were the highest in history. This company, operating several retail chains, more than doubled profits over 1945, itself an exceptional year.

All the mail order houses are rolling in dough. Montgomery Ward’s profits last year are reported at approximately $52 millions, more than double the 1945 figure. “The increase in net profits of Sears, Roebuck may be even more spectacular,” says the Wall Street Journal, estimating that Sear’s net profits will be about $100 millions, nearly three times the $35 millions reported in 1945. Preliminary reports show Spiegel’s profits have increased tenfold during the year, and Alden’s has already reported profits have increased four times over 1945.

But such profiteering only tells a part of the story. A recent survey by the New York Journal of Commerce shows that “manufacturers have set aside in reserves against inventory price decline larger sums than have ever before been used for this purpose.” One meat packer alone shoveled $9,500,000 into such a reserve fund against possible price declines. The Journal slyly observes that “some cynics have argued that managements were desirous of reducing their net income in order to forestall demands of labor leaders for increased wages and of stockholders for higher dividends.”

Though industry continues to price its goods as though they were scarce, the Commerce Department reports that the manufacturers’ dollar value of inventories is still climbing, and in December reached $20.2 billion, the highest point in history, and $300 million more than in November. In 1946, industry invested $11.5 billion in new plant and equipment.

In order to obtain the necessities of life, the masses are, more and more having to mortgage their future wages. Total consumer credit outstanding at the end of January was $9,790 million, as against $3,363 million a year before. Installment sale credit on automobiles was $581 million, up $346 million from a year ago. Charge accounts outstanding totaled $2,758 million, higher by $1,057 million than a year ago. However, the volume of consumer credit outstanding dropped back $174 million during January from the December peak. The first decline in 12 months, it was attributed to seasonal factors by the Federal Reserve Board.

The National City Bank reports that a preliminary tabulation for 1946 of 840 manufacturing companies shows combined net profits of approximately $2,049,000,00, A GAIN OF 37 PER CENT OVER THE $1,491,000,000 EARNED IN THE PRECEDING YEAR. It would be difficult to present a more impregnable argument for a new round of wage increases.

A.W. Zelomek, economist for the International Statistical Bureau, believes that we are in for a depression such as that which occurred in 1920. Here is his reasoning: “Inventories have gained sharply. During the past six months of 1946, the average increase was slightly more than a billion a month. Prices and production are now much higher than they were last year, and the high consumption period of the holiday season is gone. I believe that inventory figures, when they become available, will show the current rate of increase to be around two billion dollars a month. You know as well as I do that this cannot go on indefinitely, any . more than it could in 1920-21. When anyone tells you that minor readjustments will eliminate current distortions, take another look at inventories. Today’s major distortion is that we are producing more goods than can be absorbed at current prices.” Zelomek believes that the depression will be short lived and “will be followed by four or five years of high level activity.”

Labor Lobbyists

Of 544 lobbyists who have registered under the 1946 lobbying act, 121 represent organized labor. The rest represent big business and the farmers. Congress itself is one huge big business lobby – indeed, among the lobbyists for big business are a number of ex-Congressmen, such as Robert Ramspeck, Clifford Woodrum, Clyde Ellis, Albert Carter and Fritz Lanham. The reason big business maintains lobbyists in Washington, in addition to its Congressmen, is that the bosses are forever quarreling among themselves as to how to divide the profits that they scrouge [sic!] from the hides of the masses.

For years the AFL and CIO. and the railroad brotherhoods have tried to buck this system by maintaining their lobbies in Washington and at the state capitols. That this is a waste of dough is shown by the legislation against the interests of the people that continues to pour out of Congress. If we had a lick of sense, we’d tell the union leadership to fire all these ineffective, broken-down labor lobbyists and take the dough to finance a great national labor party that would elect labor’s own representatives to Congress. How about introducing resolutions to this effect in your union?

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