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Evening star. [volume] (Washington, D.C.) 1854-1972, September 24, 1937, Image 11

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Fiscal Crisis
Is Feared
"Day of Reckoning”
Within Two Years
Held Likely.
FOR several days there has been
a steady barrage of inquiries
directed to newspaper men here
asking if they could furnish
any clue to the steady downward
trend of the stock market and the
surface signs of a slow-up in business.
The theory that Washington knows
the answer to economic riddles has
grown apace since
‘ planned econo
my” and govern
ment control of
numerous factors
in the business
world began to be
60 far-reaching.
But the truth
Is that most of
the economists in
the government
and most of the
officials whose
work brings them
In contact with
the economic side „ .. ¥
. . , , , David Lawrence.
of things frankly
confess they cannot find any one
thing as the cause of the latest turn
of events in the markets of the
There is a general disposition to say
the situation of today is the result of
many factors, both national and in
ternational. Naturally the tendency
is to appraise the recent happenings
as indicating only a temporary re
cession and to discount the possibili
ties that a major readjustment is
under way.
Decline Seen Temporary,
My own feeling is that the New
Deal officials are right in their esti
mate, that the decline in the markets
is temporary and that very soon the
inflationary trend will be resumed.
The best answer I can find to what
is happening today was written by the
man who ought to know from the in
side what is going on in the economic
and financial world. He is the governor
of the Federal Reserve System. What
he said last March is just as true
today. It was then he issued a state
ment in which occurred the follow
ing paragraph:
“The way to control unjustifiable
price advances is by increasing. pro
duction. This can be done so long as
there is idle labor willing to work, so
long as there are unused natural re
sources and an abundance of money
at reasonable rates. All three of these
conditions are present at this time.
“Increased wages and shorter hours,
when they limit or actually reduce pro
duction, are not at this time in the
Interest of the public in general or in
the real interest of the workers them
“When wage increases are passed
along to the public and particularly
when industries take advantage of any
existing situation to increase prices far
beyond increased labor casts, such ar
> tion is short-sighted and an indefensi
ble policy from every standpoint.
Effect of Pay Boosts.
“Wage increases and shorter hours
are justified and wholly desirable
w’hen they result from increasing pro
duction per capita and represent a
better distribution of the profits of in
dustry. When they retard and restrict
production and cause price inflation,
they result in throwing the buying
power of the various groups in the en
tire economy out of balance, working
a particular hardship upon agriculture,
the unorganized workers, the recipients
of fixed incomes and all consumers.”
For the last several months since :
Mr. Eccles made that pronouncement
labor costs have been rising. The New
Deal has bestowed upon labor a power
of holding up employers so that many
of them merely capitulate to labor
demands and pass the cost on to the
consumer. The same administration
which cries out against higher prices
does nothing to restrain arbitrary de
mands especially when unjustified by
production figures.
Thus the National Industrial Con- j
ference Board in its report issued only
last week declares that between July,
1936, and July, 1937, labor cost per
man hour has increased 14.9 per cent
and that “this increase in labor cost ,
has not been offset by increased pro
ductivity, either on the part of labor
or through mechanization and im
proved methods.” The conference
Board adds:
"The number of man-hours per unit
of output increased 3.8 per cent while
output per man-hour in July, 1937,
was 3.7 per cent below that for July,
1936. As a result labor cost per unit
of output has risen 19.3 per cent dur
ing the past year and labor cost per
each *100 value of output, which takes
into account the rise in prices, has
Increased 9.6 per cent.”
Production Not Gaining.
From the foregoing it will be ob
served that labor costs are definitely
rising but production isn’t. Just how
any democratic economy can operate
nn tho thflrtrv rvf
for less worlf, higher prices for less
goods is a mystery which the new
fangled economists have not yet ex
plained. Mr. Eccles certainly warned
against it last March, but like the
famous warning of the Federal Reserve
Board in April, 1929, it has been given
little attention.
That the American economic sys
tem at the moment is out of balance
is conceded on all sides. Business
men say arbitrary increases in labor
costs are forcing them to push prices
Upward. Consumer resistance hasn’t
started yet, but wholesalers are plainly
cautious and apprehensive about price
increases for commodities and raw
materials and sudden shifts in the
entire base of the price structure.
Uneasiness Over Policy.
On top of this is the general un
easiness about administration policy,
its evident contempt for property
rights and protection in the courts
[or all classes as against confiscatory
xilicies and bureaucratic excesses,
rhen the tax policy of the admin
stration has proved very inequitable
and destructive, especially the so
called undistributed surplus tax which
is a flop as a revenue getter and s
machine gun so far as business ex
pansion or stability is concerned. Th<
uncertainties abroad add to the un
easiness but the basic trouble ir
America is "unplanned” as well a:
■planned” economy and with th<
a’hole economic system threatened bj
a Government that keeps an unbal
anced budget.
Certainly unless communism 01
fascism is introduced, demoeracj
aroceeds on the notion that there i;
'ree competition and that the Gov
ernment can collect taxes frorr
business in sufficient sums to paj
■xpenses. But the Government now
adays believes in killing the goose thal
ays the golden egg, in stifling in
lustry, strangling the producers anc
iistributors and forcing more anc
nore workmen out of jobs even ai
prices rise and the poor people oi
America find themselves unable U
juy food products or articles of ne
lessity from their meager incomes.
If prices continue to rise, the one
third of our population who are "ill
nourished, ill-housed and ill-clad"
will have nothing but Mr. Roosevelt'*
words to eat. and they will find also
that they will be joined by a larger
Dart of the DODulation than one-third
But the days of hardship and the
! climax of fiscal unsoundness are not
1 yet. The hypodermic of printing press
bonds and Government funds pumped
into the business world can still fur
nish considerable stimulus—enough,
at any rate, to buoy the stock market
soon and keep the inflation going for
another year or possibly two before
the Nation faces the days of reck
(Copyright. 19,'iT.)
Leap Year Problem.
LOUISVILLE. Ky„ September 24
(yp.i.—The leap-year birthday question
gave Louisville's social security office
a puzzler.
The subject was Prank C. Bray,
born February 29, 1872; age, 16. if you
count birthdays; 65, if you count just
The office decided it by entering
Bray's birth date as February 28 and
granting him the lump old-age benefit
payment he asked.
THE opinions of the writers on this page are their own, not
mu Jie^stcH^V T^ta Star’s. Such opinions are presented in
The Star’s effort to give all sides of questions of interest to its
Solving the People’s Ills
No State Can Meet Masses’ Demands if They Set
the Standards, Writer Says.
HV nADOTUV TUAtmcavt ii «_ At. _ * .. ....
THE President again suggests
that the European democratic
governments broke down be
cause the people failed to ob
tain under them the material benefits
they demanded. This is a highly
challengeable statement.
The German Republic represented
the New Deal concept of the social
state. It was the
providential state
par excellence. It
had universal old
age. sickness
and unemploy
ment insurances
and benefits. It
had universal
trade unionism,
and for many
years it was
largely governed
by the trades
unions. It per
ished not because
it failed to meet D#rothy Th#Blp,01|
human needs, but
rather because it guaranteed to meet
them, and found that the democratic
mechanism is incompatible with the
blanket mandate to establish the mil
No state can meet the demands of
the masses for wealth and security and
let the masses themselves set the
standard of what constitutes their
welfare and security. For what every
one wants is to work less for more re
muneration, and there is a vanishing
point to this process. Mr. Hitler sue*
ceeds, where the republic failed, in
actually increasing total production
because he has persuaded, hypotized
or cudgeled the people into working
more for less remuneration and taking
a bonus in national glory. Mr. Hitler
i could have done no more and prob
ably a great deal less than the repub
lic accomplished if he had not had
the dictatorial weapon—concentration
camps, espionage, force, suppression of
all criticism. The suggestion implied
in the President's speech that we can
do all the things the dictatorships do
without dictatorship has been demon
strated to be false over and over again
in the last 20 years. There is not a
single example of democratic socialism
in the world today, whether it is the
Marxian socialism of Soviet Russia
or the national socialism of Nazi Ger
As far as Germany is concerned
it is the classic example of what
happens if you encourage a whole
people to believe that the state can
solve all their ills. There comes a
point where the state, in order to
carry on at ail under such a load,
must assume complete power, total
power, and be able to tell every man,
woman and child exactly what he
shall do, for what remuneration and
under what circumstances.
♦ * * *
As for the Italian dictatorship—
it came about as a direct result of a
deadlock between capital and labor,
brought about by political policies
not unlike those of Mr. Roosevelt.
Labor was becoming more and more
irresponsible, because labor leaders at
the top had an eye on political power,
and the leaders of the rank and file
WPTP wif.hnilt. »rfpmiat.P pvr»«»ri*nr>® nr
the discipline of long union training
The Italian employers became panic
stricken, both at the strikers and at
a government whom they considered
hostile, and were afraid to take old
fashioned methods of dealing with
strikes which demoraliied not only
their own industries but the whole
country. Nor were they furnished
with any new, legal arbitration meth
ods. Instead the Oiolittl government
was trying to be clever and was us
ing the militant workers as a means
of extending its own power over
mighty economic interests. So the
deadlock continued until a man who
had been advocating the most radical
methods of the workers. Including
that of occupying the factories, went
and offered his services to the em
ployers and promised to establish or
der. That man was Benito Musso
* * * *
It is certainly a challengeable state
ment that dictatorship* have replaced
“democracies which failed to func
wvbuoc W»cj 1BUCU Kl y 1C1U UJ
every popular demand and caprice.
The only Important failure of the
late European democracies, their
tragic and enormous failure, was that
they failed to defend themselves
against the encroachments and ag
grandisements of ambitious men,
seeking to center all power In the
hands of a state which they eould
Neither the Italian nor German rep
resentative governments were destroyed
by an authoritative act of the people.
They were the victims of coups d'etat,
in which the leaders of powerful
political parties interpreted election
returns as blanket mandates to amend
or overthrow existing constitutions.
The greatest test of democracies is
their ability to defend themselves
against such aggrandizements, and
that ability is measured by the public
sensitiveness to unconstitutional usur
pations. If the German Reichstag had
not permitted Bruening to suspend the
law and govern by decree, under a
misuse of a certain paragraph of the
constitution, it might never have
yielded to Hitler. If the Prussian state
government had been willing to use
its own police to defend itself against
the absolutely illegal encroachments of
Chancellor von Papen, it might have
been on hand to oppose Hitler some
months later.
Democracies, being extremely vul
nerable forms of government, must be
formal, must insist upon the scrupulous
observance of constitutional principles
and must observe the disciplines of
law. Without a high degree of popular
sensibility to principle, procedure, and
law, and a great jealousy of liberty,
they live in constant threats from a
coup d'etat.
And, of course, in democracies
that coup d'etat will always seek to
legitimize itself by the support of the
These—if the President had cared
to point them out—are only a few
of the object lessons that might be
drawn from the recent demise of
democratic governments. Nowhere
did they perish because they failed
to bring the millennium, or be re
sponsive to popular pressures.
And why this apology for the dic
tatorships anyhow? What material
demands have they fulfilled? The
German people, the Italian, the Rus
sian, do not eat as well as the people
in the democracies, nor are they as
safe in their persons or property—
leaving the matter of civil liberties
wholly out of consideration. They
have unity, and a very tense sort of
unity; they have no unemployment—
because a large part of the popula
tion is bearing arms or spades on work
for the state at subsistence. The
countries with a high standard of
living are those countries where
energies are released and allowed to
function and produce, not bound hand
and foot by bureaucratic organization.
(Copyrisht, 1837.)
Coal for 4,000 Years.
The United States is estimated to
have coal enough in the ground to
last 4.000 years.
This Changing World
Johnson Would Not Have Left Embassy if Hull
Had Been Here, "Insiders" Say.
THERE is little likelihood Secretary Cordell Hull will leave Wash
ington again while the International crisis continues to remain as
tense as It Is now.
Insiders In the State Department say that had Mr. Hull been
In Washington goon after the Japanese sent their notification asking for
eign diplomats to leave Nanking before the air raid, which was to rase
Chiang Kai-shek’s capital. Ambassador Johnson would have never left the'
Embassy for the comparative safety of the gunboet. These insiders assert
that Johnson had been "advised” by one of the Secretary’s many special
advisers to avoid anything that might bring about a serious incident with
the Japanese. And Johnson reluctantly took the hint.
Secretary Hull did not lose time In re-establishing the situation and
wiping out another blow to Ameri
can prestige in the Par East. The
strong note sent to Tokio plainly
told the Japanese that the Govern
ment of this country is not pre
pared to comply with the destruc
tive desires of the military leaders
in the Par East.
How this country could force
jlapan to make good any damage
American citizens might suffer in
China is another matter. Presum
ably, at first, by diplomatic notes and urgent demands for reparations.
Such action would give undoubtedly a severe headache to the Tokio
While the Japanese prime minister and his foreign secretary are
compelled now to take sleeping potions and headache medicine be
cause of the music they have to face from London and Washington,
the military and naval commanders are having a nice, peaceful time.
They do not care in what kind of hot waters they are placing the
diplomats: that’s why they are paid by the people. But the military
men carry on, regardless of what the other nations may do and think.
* * * *
As In any other major war the press in Japan has given a special
meaning to ordinary words. Thus the "lack of sincerity” means any failure
of the Chinese to comply with the Japanese demands. The Chinese who
have accepted the Japanese domination are sincere, while those who want
to maintain the independence of their country are insincere.
A high official in the foreign office discussing the situation which
has arisen from the attack on Peiping told the foreign correspondents:
“What's the use of negotiating with those sincere fellows if there are so
many insincere ones to upset everything?’’
In the same way the word "legal" has been given by the Jap
anese press and government a special meaning. The defense of
Shanghai by Chiang’s armies is "illegal" as it was illegal for the
Chinese troops to defend Peiping. An official report of the Japanese
headquarters during the recent battle around Nankow stated: "While
one Chinese unit turned and fled, the other illegally attacked
our forces."
* * * *
Haile Selassie has just sued the Italian government in French courts
for the return of 8,000 shares of
the Djibutl-Addis Ababa Railroad.
When the French obtained
from the Ethiopian Emperor the
concession to build that railroad, it
gave Halle 8.000 of the 30.000
shares then issued. The value of
those shares is $100 apiece.
The Italian government
claims that since Selassie is now
only a private Individual those
shares should revert to the Em
peror of Ethiopia, whom, in their opinion, is King Victor Emmanuel of Italy.
Selassie says that the shares are his, not only because he still is the ruler
of the country, in the eyes of the French and British governments, but
also because they were given to him personally, as an individual, by the
French concern. Lawyers undoubtedly will get large fees, but it is highly
improbable that Selassie will get more than a long lawsuit on his hands.
* * * * ,
Hitler wants all German citizens to realize that, as in the days of
the Roman Empire, they can say with pride "Civis Germanus sum" il am
a German citizen). That is why he assured the German residents abroad
at Stuttgart that citizens of the third Reich need not fear any interference
with their activities abroad. Any government touching even a hair of a
Civis Germanus, will have to reckon with the might of the Reich.
Illinois Publisher Preed of Sen
tence by Roosevelt.
The White House notified Attorney
General Cummings yesterday that
President Roosevelt had granted exec- I
utive clemency to John W. Tilton. 24- 1
year-old newspaper publisher, now !
serving a six-month sentence at Syca- j
more. 111., for a probation violation.
Tilton, who prior to his commit-1
ment to prison last June 1 was pub
lisher of a Rochelle. 111., paper, was
found guilty in a Federal Court last
May of violating a five-year probation ■
imposed for violating the Federal auto
theft law in 1932. I
Headline Folk
and What
They Do
Politicians Are Awaiting
President’s Comments
on O’Mahoney.
THE national political seismo
graph will quiver sensitively
today to whatever the Presi
dent saya at Cheyenne about
Wyoming’s Senator Joseph C. O'Ma
honey—who took one of the heaviest
belts at his court plan—and to the
manner of hto saying it, or not sa- -
ing it. Political
railbirds wait for
a word, a ami!?,
a frown to indi
cate to what ex
tent this is a
presidential pu
nitive expedition.
The compact,
vigorous, re
sourceful foothill
Senator has been
an intimate
friend and ally of
James A. Farley
and has been
Senator O Mahoner. ^gbtly geared
into the inner
mechanism of the national Demo
:ratie machine. He got a fast run
ning start in his first four years in
the Senate, a consistent supporter of
administration measures', and his
spostasy in the court fight was a sharp
iolt for the New Dealers. He Is a
ng-time, urban citizen, making one
think of Broadway rather than the
sagebrush country. His political im
portance Is such as to make today s
opener .an important kick-off.
The Senator’s general gregarious*
ness and easy-going Western friendli
ness have been disarming. There were
those who had put him down for just
one more of those Western brass
rail statesmen, and then, in the court
fight, he uncorked amazing legal and
historic erudition.
That may be a delayed score for the
Cambridge Latin School. Columbia
and the University of Georgetown,
where he was prepared for law. A
transplanted Easterner, he broke in
a* a newspaper reporter—incidentally
at tfhe same old pine desk in Boulder,
Colo., where this reporter nearly broke
his arm writing his first newspaper
story, longhand. After work on sev
eral Colorado newspapers, he began
law practice in Cheyenne and pros
pered through the years, in law and
politics. He is 53 years old.
In his court fight Senator O'Mahonev
rehabilitated himself with conserva
tives. His persistent advocacy of the
root-hog-or-die licensing plan for
business had mistakenly tagged him
as one of the wilder and woolier of
sheep range statesmen. He is a native
of Chelsea. Mass.
(Copyright, 1937.)
Fox Turns Table*.
ber 24 (A'i.—When a fox chases a
hound, that’s news.
George Heath owns th# hound
Henry Sanders caught the fox in his
They let the fox out of the cage;
Sanders shouted ’’Sic 'em!”
The fox did. The hound fled.
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I What’s Back of It All
Roosevelt’s Visit Linked to Possibility of More
Favorable Treaty Treatment.
THERE may be more behind President Roosevelt’s visit to the very
British land of Victoria than a mere desire to gaze on the beautiful
flower beds for which British Columbia’s capital is famous.
It is quite within the realm of possibility that his few choice
words to the Canadian people may be a bid for a little more favorable
treatment for the United States. The State Department would like to have
the wheels greased for arrangements in the field of trade and fiscal mat
ters which would put the United States in a better situation than we now
are, as compared with Great Britain.
Two things the State Department is bothered about. One is the fact
that Americans living in Canada don't get as good a break as British resi
dents there, when it comes to the
question of income taxes. A Cana
dian-American tax treaty was
drawn up by Acting Secretary of
State Moore while Secretary Hull
was away in South America. Can
ada was kind enough to give us a
little help in running down our tax
evaders in her borders, but even
that quid pro quo didn't allow Mr.
Hull to relish the job of urging the
covenant on the Senate when he
got back, because it still didn’t come up to the treatment Canada
accords Britons.
More important than this, however, is the matter of trade. Although
we have a reciprocal trade pact with Canada, including the “most-favored
nation clause,” the document is bogged down with reservations which
result in preferential treatment for Great Britain.*
Therefore, State Department officials have been dropping some
hints to the effect that the President might well attempt some of his
well-knoivn charm on the Canadians.
Then, of course, there is a chance for a fine "hands-across-the
sea" gesture as the British trade pact grows warmer and the hopes
for an international economic conference spring in many breasts.
* * * *
Although it hasn't been headlined, there is a ruckus in the making
down Memphis-way that may make the harmonizing job that Secretary
Wallace hopes to do down there a week from next Friday a lot harder.
Secretary Wallace is about to spring his plan for capturing the foreign
cotton market and hopes, incidentally, to solidify the far-from-solid South
under the administration’s banner—or his own.
But just before he speaks on October 1, the Southern tenant farmers
gather in Memphis to be welcomed officially into the arms of the C. I. O.
The Secretary of Agriculture had hoped to win the affection of the small
farmer as well as the big planter with his cotton plans. He put into the
soil conservation program provisions increasing the tenants' share of
But there has been a rift in the lute that may serve to turn the tenant
farmers, or a least some of them, away from the administration.
News has reached the headquarters of the Farmers’ Union in Wash
ington that the mayor of Memphis has announced that any C. I. O.
organizer who comes to the town to organize will be thrown out. One
did—to organize the auto workers—and he was. In fact, it was reported
he was beaten up.
Unless the situation is ameliorated, it will, in all probability, be
seized upon, either by John Lewis, head of the C. I. O.. or other
labor officials, for an attack on the administration which permits
what they consider a breach of the worker’s ‘‘civil liberties.”
* * * *
Hitherto, Wall Street, which loves its “peaks and valleys” (the
Ou That'S * extremes of market fluctuations)
JUSTIN as a yodeler loves his, has looked
CASE., with suspicion on the Washington
experts, especially members of the
Securities and Exchange Commis
sion. The operators were afraid
the economists wanted to “iron
out,” as they call it, all the peaks,
fill up the valleys and reduce
market fluctuations to the dead
AftRs anc* dreary level of a plateau. Or,
in their language, enforce a “thin
ness of the market.” reduce liquidity; and cause less trading.
But when William O. Douglas, new chairman of the S. E. C., flew
down to Washington this week to make his speech of acceptance, he
dropped one sentence of cheer. He said he didn't want to trv to iron out
all peaks. He knew that, in the natural course of events, what goes up
must come down. All he wanted the men who make his market charts
to do was to chart the trends and locate the roots, find out whether the
forces behind the movements were natural or artificial:
“We will interfere only when such forces are artificial,” he said.
So we can still play among our peaks and valleys as long as we have
enough cash to put up lor margins.
(Copyright, 1P37, by North American Newspaper Alliance, Inc.)

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