Show I Broad Economic P Progress Progress T. ogres The Way It Can C n Be Achieved By HAROLD G. G MOULTON President The Brookings mt Institution Washington Was D. D C. C UCH current discussion of economic economic eco eco- MUCH problems Is focused too Intently on the depression to shed real light on our fundamental dim Today's troubles obscure our view of oC what happened yesterday yesterday yester ester esterday day and what Is likely to happen tomorrow Actually our economic structure was being undermined by bygrave bygrave bygrave grave maladjustments long before beCore the depression In our prosperity years ears millions of oC American families were poor Farmers and people In the small towns scarcely need to be told this In 1929 and aud before agriculture was as not prosperous Farmers had to pay high prices for the things they bought but got little for what they sold They were In a depression even then caught then caught between what looked like irresistible le Ie forces and an Immovable bod body There are about 54 64 million farmers farm ers and people living in the small towns In addition professional more more mOle money That would just raise prices And we cannot accomplish much by sharing wealth or income In in- come Such a program would entail taking Income from skilled workers man many farmers small shopkeepers government clerks etc It would woud not merely soak sonk the rich Purchasing power can be Increased Increased Increased In In- creased only as we learn how to produce goods and services more efficiency and pass the benefits of oC that efficiency on to the masses If w j devise lse a way to make two articles articles ar ar- where we formerly made one I and we pass puss on this gain to the tho people purchasing pow power r is actually created the created the extra article can be besold sold sod Higher Wages and the Farmer Organized labor for many years has tried to obtain the benefits of Increased efficiency b by pressure for tor higher wages This pave gave certain groups of ot workers more inure purchasing power but the effect on tanners farmers has hns not nol been favorable fa It has forced PRODUCTIVE CAPACITY AND ACTUAL PRODUCTION 33 1922 ni a DOLL IS jt I L I aoa r l uK i ti v vY Vl Y r. r g Y 1 a al N rr M er nu nr l nu This chart Illustrates the extent to which we have failed to utilize our full productive capacity The black area represents what we we produced the shaded area the additional amount that could have been turned out Over most of this period our plant as a whole could have produced about 20 per cent more than it did but after 1929 this percentage of utilization non became much larger men men domestic workers small shopkeepers shop keepers and others living in the cities were similarly affected Inasmuch Inasmuch inasmuch Inas Inas- much as they could not utilize organized organized or or- pressure to force Coree upward the return on their services These with their dependents total about 20 million While their standards s of ot living perhaps were not actually glowered lowered most of oC them realized little gain gain from the great advance In productive productive productive pro pro- efficiency made wade In that period The diminution In purchasing power of these groups or its failure to rise In turn reacted on others Business men sold less goods and workers everywhere found round it harder to get Jobs The forces that were retarding the farmers farmer's prosperity were by no means helping the man manin t in the city t Progress Progress But But Not Enough It is true that tho t our economic tern tem has brought us living standards higher than those existing anywhere anywhere any any- I where else in the world Between 1900 and 1930 as an example per capita Income in terms of what it would buy increased about 38 per percent percent percent I cent at al the same time working hours were reduced about 13 pr per I cent But Dut the fact tact of idle plant capacity capacity ca ca- ca indicated that we could have produced more goods and thus raised living standards Studies we have bave made at the Brookings Institution aided by a agrant agrant agrant grant from the Falk Foundation of Pittsburgh throw significant light lighton on this We made a detailed survey of productive capacity in manufacturing manufacturing turing mining farming and all the theother theother theother other major divisions of ot Industry resulting in the finding that our productive plant could have turned out about 20 per cent more than It did IUd If IC nobody had wanted to buy anything any thing the Idle plant would ha have va been easily explained But millions of ot families were not getting ne nearly rb enough to satisfy their wants Nearly 6 million farm and anti cit families received incomes of less lesa than 1000 16 millions recel received vel less than 2000 and 19 millions or orn 71 n per cent of the total less than 2600 2500 More than 64 per lIer cent ot of farm families gut got less than 1000 Of Ot course cOUlse In considering farm In Income Income come the lower living costs of rural areas should be kept In mind But no matter where they lived families trying to pay for food tood clothing medical service education etc on 1000 were not prosperous The Tho extent of unfilled wants mabe mad mav be Judged by the fact tact that nearl nearly all aU family Income In the 2000 class or lower Is spent for tor ordinary consumption goods goods food food shelter clothes education etc Fifteen million mil lion families got less than this tig rig ure Purchasing Power Must Expand Our productive efficiency Is ts Increasing Increasing In creasing year by year In normal times That is 18 we are arc learning how to mako make things more mure cheaply But If It the people are arc to buy the added products thus made possible their purchasing power must grow with production Expanding purchasing power cannot cannot can can- not be bo created simply by printing them to pa pay higher prices for manufactured manufactured manu manu- goods or has prevented them from obtaining lower ones The same was true tine In large degree of or the city dw dwellers llers mentioned above who do not work for wages numbering 20 million An economic disparity was creat created d between two great segments of our population raising a serious barrier to economic economic eco eco- progress But if It we permit tho the fruits of mans man's Inventive Iu genius and technologIcal technological technological techno techno- logical advance to reach the people In the form lorm of price reductions no such barriers are raised All classes benefit alike to the extent that they are arc consumers rs the chief gain is Inthe in inthe inthe the low income groups grouts where It is most needed To the farmer It means better houses tools toots food too clothes cothes and in general a steady rise in his standard of living that he be can get no other way Price reductions of course must not come from wage cuts if It they are areto areto areto to increase purchasing power But Dut we must reduce prices as we learn to make things more cheaply This is the way we can expand cons consumption consumption mp- mp tion solidly year after atter year ear which in turn will call forth Corth larger pro uc tion Increased e efficiency makes makei price reductions possible competition competition tion must Insure that they actually take place Price Stabilization Tendencies Whereas the period of great technological technological tech tech- advance between 1870 and 1890 brought notable price reductions reductions reduce contributing much to raising living standards there was little reduction reduction re re- of prices in the similar period of 1922 Productive efficiency ency In manufacturing in tile the latter era as measured by output per worker Increased about 25 p per r cent But forces of ot price had become so strong that retail prices In the aggregate remained practically stationary Of Or course courso there thele was competition in many lines and antI prices declined accordingly But this was not true of all producers Many 1 neglected to face the fact that In the long run they could prosper only as the masses could buy an expanding volume volume vol vol- ume time of their goods This fact must mast be faced We must remove a the obstacles to price reductions reductions reduce which now exist whatever they thoy are arc It Ii Is the only way that people leople who live In small towns or on farms or otherwise do not work for wages can fUll fully participate In our economic pi progress ogress An And unless these do participate we wc can ha have hae e eno no broad broad continued pi progress ogress progress The failure of Industrial Industria prices to decline Is primarily responsible for forthe forthe forthe the movement in recent years ears to attempt an 11 Improvement In the farm situation by artificial methods of restricting production with a aview aview aview view to restoring price parity with Industry However helpful such policies may be temporarily agriculture turo ture and Industry combined obviously obviously cannot annot expect to Increase the total production of goods and services services ser sere vices for Cor the American people as a whole by restricting output and raising rais rals raising ing prices National cooperation Inthe in inthe inthe the expansion of output giving to all the people the largest possible consumption Is the tho paramount ne nee |