October 25, 1921 



HARDWOOD RECORD 



17 



Forward to Normalcy 



*By W. A. Babbitt 



The objective of this article is limited to the single task of attempt- 

 ing to convince business men that the time has come to take counsel 

 of their guts instead of their heels. We have been running until 

 winded. Let 's turn and fight. There is more to fight than to flight. 

 We are not trying to discuss ' ' the problem of post-war reconstruc- 

 tion. ' ' We are hunting for a ' ' better 'ole. ' ' We are looking for a 

 good place to start a fight — the long, forthfaring fight to Normalcy. 

 Not a trench raid, with a few below-cost contracts as spoils, but a 

 genuine counter-offensive. 



A Pl.\ce to St.vrt: .\ i)rominent manufacturer recently put before 

 the writer the original quotation he had made to one of his largest cus- 

 tomers. Across the face of this quotation, in big red letters, was 

 stamped the legend — 



THE WAE IS OVER 

 The official who was responsible for this dirty work is both a liar and 

 an ass. He knows costs. He knows that my friend quoted a price, "to 

 keep the wheels moving ' ' that was far less than cost of iiroduetiou. 

 He knows that the war is not over — that the economic war is just 

 fairly begun. He is an ass, because he does not know that a con- 

 certed policy which de-stabilizes and demoralizes his source of'supply, 

 inevitably comes home to roost. 



This ex])erience got me. It led to an investigation of the sound- 

 ness of the current buying policy. It raised this question — "By what 

 •WARR.\NT DO THE ORIGINATORS OF THIS POLICY ACTUALLY 

 DO THE THINKING AND THE DECIDING FOR INDUSTRIAL 

 AMERICA IN THIS ANXIOUS ZERO HOUR? For more than a 

 year, they have been pounding their tom-toms and shouting their bat- 

 tle ery of ' ' Back to Normalcy and 1914 price levels. ' ' For more than 

 a year we have been hypnotized by the potent suggestion of this battle 

 cry. Because the whole American Public has been carried off their feet 

 by this movement, let's dig in and start the fight RIGHT HERE. 

 Let 's stop the clatter and do an honest job of honest thinking. Have 

 we been licked by a noise ? 



What About "Back to Nonnalcy?" 



One sane moment of reflection tells any man that we can never GO 

 BACK to that epoch of history, whose last page was finished an<l 

 saled forever in 1914. A New World and a new system of governments 

 has emerged. All old forms of government have passed or are passing 

 away. The stable governments of the English speaking races have 

 changed almost beyond recognition. The British Empire is a. new 

 institution, its former dependencies new nations. The changes in our 

 own governmental system are almost unbelievable — with further changes 

 in plain sight. One big fact sticks up like Pike's Peak over the West- 

 ern plains. That fact is that Xormalcji to wliicli business must attain, 

 or perish, is not behind us hut ahead of tis. It will have to rest on a 

 new series of economic conditions of which 1914 knew nothing. 



How ABOUT THE NORMALCY OF 1914 f: It is to laugh. The goal which 

 this buying slogan sets up is a goal which only a fool or a lunatic 

 could approve; and which no man, sane or insane, did approve in 1914. 

 What section of 1914 normalcy would you want to bring back? What 

 went with "Normalcy and 1914 Price Levels?" Universal stagna- 

 tion of business! General Unemployment! One great financial crash 

 after another! The almost universal bankruptcy of railroads, for 

 which we are now paying in addition to our other grievous burdens 

 of taxes! What particular item of the economic history of 1914 ap- 

 peals to you, outside of a low tax rate? You know that the country 

 was nearer a greater panic THEN than now. 



Whatever may be true of "Normalcy," the normalcy of 1914 is 

 something that we cannot have, and that will ruin industry com- 

 pletely if it returns. 



How ABOUT 1914 Price Levels?: If 1914 price levels were normal, 

 then those of 1913 were not, according to the theory of the price 

 bolsheviki, Ijecause 1913 prices were higher than 1914 prices. But 

 1914 price levels were not normal, nor those of 1913, because these 

 price levels did not make sufficient returns to permit Industry to 

 function. In fact to a less degree but of the same kind, the story of 

 1914 is the story of 1920-21. 



Mob Psychology and 1921 Business 

 It is a well known fact that the collapse of the buying power of 

 the domestic market came when the buyers of this country were at 

 the peak of the biggest buying power of any people in the world's 

 history. Secretary Hoover says ' ' the hard times which come knock- 

 ing at the door of American Homes come from Europe. ' ' This may 

 be the remote cause, but the immediate cause is something else, and 

 almost entirely domestic in origin and scope. 



Here is the story. Deflation had become a crying necessity. The 

 announr-ement of stringent measures by the Federal Reserve Bank and 

 its branches and members was enough to secure deflation at the highest 

 possible speed consistent with safety. But at this critical juncture, 

 along came this slogan, "Back to Normalcy and 1914 Price Levels." 



The "Back to Normalcy" Chart 



•ffencrol Secretary of Xational Association of Wood Turners 



This slogan was picked up by the press, and touted from every pos- 

 sible angle, of fact and fancy. The Public accepted the slogan !as 

 Gospel, and stopped buying. Tho' they had forgotten the hard 

 times that went with 1914 prices, they remembered the prices, which 

 looked very good on the basis of 1920 wages. We quit buying in 1919 

 because we wanted 1914 price levels. We continue this policy because 

 we cannot do otherwise. Contrary to popular opinion, the boom period 

 was marked by sub-normal production, measured by volume. Measured 

 in dollars, it was enormous. It was an orgy of dollar spending, not 

 an orgy of absorbing commodities. It was a debauch of profiteering, 

 an insane hocuspocus of reckless buying and reckless cancellations. We 

 were all caught by the buyers' mob psychology. The buying nerve 

 of tho American Public was paralyzed. It was not Deflation, but the 

 ACCEPTED FALSE GOAL OF DEFLATION, viz., 1914 Price Levels, 

 that wrecked the buying market. 



The Collapse of Industry followed immediately. Production crashed 

 down to 25 per cent of normal, and still flounders in this bog of losa 



