December, 1932 



THE I. A. A. RECORD 



Page Thirteen 





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It will be seen that notwith- 

 standing the wage reductions made 

 between 1929 and July, 1932, aver- 

 age rates in the above-named in- 

 dustries, including the railroads, 

 this year are more than 100 per 

 cent above the 1914 level. 



The primary industries, produc- 

 ing foodstuffs and raw materials, 

 were very much stimulated outside 

 of Europe during the war, to make 

 up for the loss of supplies that had 

 previously come from Russia and 

 Central Europe. Since the war this 

 new production, largely in the 

 United States, Canada, Australia 

 and Argentina, has been maintained 

 and with the recovery and increase 

 of production in Russia and Cen- 

 tral Europe, an excess of supplies 

 has resulted, which has broken 

 down prices. It is needless to say 

 that these scattered producers of 

 primary products have no way of 

 controlling the prices of their prod- 

 ucts as the workers in the highly 

 organized industries are able to con- 

 trol wages. Adjustments in produc- 

 tion must be made, but these re- 

 quire time. 



' . Farmer Hit First 



The American farmer has been 

 selling his products this year at 

 about one-half the average prices 

 of 1913. In contrast with this the 

 railroad employes have been insist- 

 ing that they should not be asked 

 to accept wages less than 157 per 

 cent above their wages in 1913. In 

 the principal American industries, 

 as shown above, average wage rates 

 are now 100 per cent above the 

 1913 level. An exchange of services 

 on this basis would mean that the 

 farmer must give nearly four times 

 as much of his products for an 

 hour's factory or railroad wage as 

 in 1913. . . . With this heavy handi- 

 cap upon him the farmer has had 

 no alternative but to cut his pur- 

 chases to the lowest possible point, 

 and employment in factories and on 

 railroads was reduced accordingly. 



Purchasing Power Down 



While the loss of purchasing 

 power began with the farmers and 

 other producers of primary prod- 

 ucts, of course it did not end there. 

 For as these consumers, under the 

 pressure of necessity, reduced their 

 purchases of the products and serv- 

 ices of the other industries, and the 

 latter cut down their working 

 forces, the purchasing power of 

 these groups also declined. The en- 

 tire industrial organization slowed 

 down. 



It is urged that the remedy for 

 the situation is to cease reducing 

 wages and promptly restore those 

 which have been reduced. If every- 

 body was a wage-worker, and there 

 was any assurance that all employ- 

 ers were in position to follow this 

 advice, there might seem to be 

 some plausibility in the proposal, 

 (Continued on page 14) 



O'Neal States Policy 

 On Foreign Debt Situation 



Opposition to any scaling down of 

 foreign debts unless compensatory 

 trade agreements are made by 

 which European countries agree to 

 buy our products, was expressed by 

 Edward A. O'Neal, president of the 

 American Farm Bureau Federation 

 in a recent letter to Alfred P. Sloan 

 Jr., chairman of national debt com- 

 mission. 



"The moratorium on the pay- 

 ment of European debts to us, so 

 generously granted by the President 

 and the congress," O'Neal wrote, 

 "has not during the past year suc- 

 ceeded in stimulating this trade 

 (between America and her debtors) , 

 and I am wondering if a permanent 

 reduction in these debts would have 

 any different effect from that which 

 we have observed during the past 

 year. If we could make a condition 

 incident to the scaling down of these 

 debts a provision that the nation 

 so benefited should agree to buy 

 certain quantities of goods from 

 this country, then it seems to me 

 there might be some justification 

 for a scaling down of these debts." 



But O'Neal said he felt the prob- 

 lem is "not only a problem of inter- 

 governmental debts, but of all debts, 

 public and private." He asserted 

 that the mortgage indebtedness of 

 American farmers is no less than 

 the inter-allied war debts which 

 now concern the debt committee. It 

 was his judgment that the same 

 factors rendering payment of gov- 

 ernment debts difficult were also 

 making impossible the payment of 

 the debts of farmers and other pro- 

 ducers of wealth in America. 



/ 



Farm Dollar Drops 



"Of much more importance than 

 consideration of any settlement of 

 the foreign debt," the farm leader 

 wrote Sloan, "must be consideration 

 of ways and means whereby com- 

 modity values can be raised to a 

 point where we will be enabled to 

 pay off our farm indebtedness 

 without being obliged to suffer fore- 

 closure and loss of properiy." Farm 

 indebtedness incurred when prod- 

 ucts brought reasonable prices 

 must now be paid off while those 

 products bring less than half the 

 price they formerly commanded, he 

 said. 



O'Neal made three suggestions: 



Says Deflation Is 



The Ultimate Remedy 



Charles Benedict, writing under 

 the title "Deflation is the Ultimate 

 Remedy" in The Magazine of Wall 

 Street says: "The problem of defla- 

 tion is world-wide. It has every- 

 where wrought two evils: (1) It 

 has indisputably made the world's 

 burden of debt beyond the world's 

 capacity to pay; (2) It has resulted 

 in a great inequality of current 

 prices, which disastrously impedes 

 the exchange of commodities. 



"There are three ways of ap- 

 proaching the problem. One is stub- 

 bornly to resist all price declines, 

 another is to let prices crash to new 

 levels and scale down and write off 

 debts with all possible speed; the 

 third is monetary or credit infla- 

 tion or a combination of the two. 



"The United States, together with 

 England and Germany, is at present 

 inclined toward resistance to price 

 reductions and toward inflation In 

 one form or another. France ad- 

 vocates noninterference with prices 

 and opposes inflation. She pro- 

 poses to allow wages and produc- 

 tion costs to come down to the price 

 level rather than attempting to 

 bring the price level up artificially 

 to meet costs. Her reasoning and 

 her policy are sound. 



"There has been no greater calam- 

 ity in the present series of calam- 

 ities than that of the artificial peg- 

 ging of prices in all lines where 

 such control was possible. Beyond 

 a doubt this perverse rear-guard 

 action against the inevitable has 

 accentuated and prolonged the de- 

 pression and will still further pro- 

 long it. It is mainly responsible for 

 the fact that as the depression has 

 advanced the spread between urban 

 and manufactured products and 

 rural and raw materials has become 

 greater and greater. 



"While surpluses have increased 

 farm products have fallen 47 per 

 cent in the past three years while 

 urban products have gone down but 

 25 per cent. Only recently have our 

 export agricultural products sur- 

 rendered to world price levels — and 

 the surrender is not yet complete. 

 . . . We might far better have rec- 

 onciled ourselves at the outset to 

 the fact that deflation is the nat- 

 ural corrective to inflation — ^the 

 correction of abnormal prices and 

 maladjustments of supply and de- 

 mand. . . ." 



devaluation of the American gold 

 dollar to offset commodity price de- 

 cline ; world conference on adequate 

 international mediums of exchange, 

 and tariff revision to promote 

 "freest possible interchange of com- 

 modities." 



