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John G. Wright

Hard Economic Reality Makes
Pollyanna Forecasts Absurd

(28 March 1949)

From The Militant, Vol. 13 No. 13, 28 March 1949, p. 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

Highly optimistic economic forecasts for 1949 continue to emanate from Washington, with Mr. Nourse, chairman of Truman’s economic brain trust, cast in the role of Pollyanna.

Nourse’s latest assurances are no more well-founded than were the earlier predictions this year that by mid-March there would be an upswing in employment. Even New York railways, it will be recalled, in announcing their layoffs, promised that they would start rehiring by March 16.

Instead there have been further layoffs. Unemployment is now officially admitted to be “around 3,500,000,” with the actual total being larger by at least another million. As serious as spreading unemployment are the continued cutbacks in production, with workers in one industry after another working fewer shifts and less hours weekly per shift.

Outweighing all the Pollyanna forecasts is the admission by the Commerce Department that metals and auto remain today as the only two relatively strong props of industry.

What the Commerce Department omits to say is that this has been true since last November. Moreover, it refrains from taking into account that developments in metals and auto are not sealed off hermetically from what is taking place in the rest of the economy. And these afford least grounds for optimism.

Mounting Inventories

Suffice it to single out two factors in the existing situation which are bound to play a decisive part in the months ahead. First is the top-heavy condition of lousiness inventories. Despite production cut-backs, stepped up sales and generally lower prices, these inventories continue to pile up. The reductions recently effected by large retailers have simply resulted in. swelling the inventories in the hands of wholesalers and manufacturers. Officially these inventories are estimated at the 55 billion dollar mark. How large they really are no one knows.

By means primarily of credit manipulations, large-scale liquidation of inventories has thus far been avoided, except in isolated instances. But how long can such a highly unstable condition last? On the other hand, liquidation of such huge inventories can prove nothing short of catastrophic. They can’t hold on and they don’t dare let go – such is the vicious circle in which many businesses now find themselves.

Purchasing Power Sags

The second key factor is the steadily dwindling purchasingpower of the mass of the people. Inability to buy necessities has for some time now found its expression in declining retail sales. Nourse and his colleagues continue to cite imposing figures of “national income.” Meanwhile, high living costs combined with spreading unemployment and shorter work weeks have slashed still more savagely into mass purchasing power.

No official statistics are kept on this score. But we may get an inkling from such items as sales of staples like meat. According to Business Week, March 19, as recently as last November, when prices were higher, weekly sales of beef, pork, veal and lamb, used to average 330 million pounds, but in recent weeks these sales have dropped to 290 million pounds. In this decline we get a hint of how sharply living standards have been lowered since November.

How is it possible to sell as much in 1949 as before when the main sections of the population are able to buy only less and less? This obvious impossibility is only another of the many vicious circles created by “free enterprise.”

Sign of Weakness

The officially admitted fact that this country’s economic life hinges today directly on what happens to auto and metals is thus not a sign of strength but of weakness. It is, of course, beyond anyone’s ability to predict how soon these two closely interrelated industries will collide head on against the limits of the shrinking home markets.

Nevertheless, it is already evident that these industries have likewise passed their peaks. First signs of weakness are becoming manifest here as well. This is particularly true of metals, where the market for steel scrap, lead, copper and zinc has turned shaky. As for the auto market, it too has become “soft” in relation to higher priced cars and the critical test for the lower priced models still lies directly ahead.

The optimism of Nourse and his colleagues rests in actuality on the arbitrary assumption that metals and auto will continue to hold up. But a sharp break in both auto and metals, far from being excluded this year, looms, in the existing circumstances, as the direst threat of all. And such a culmination, barring a sudden shift to full-scale war production, would unfailingly bring to a close the prevailing transitional economic phase and usher in a new stage – the definitive downswing of the economic cycle.

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