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From The Militant, Vol. XII No. 10, 8 March 1948, p. 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
MARCH 2 – Increasing nervousness and tension characterize the economic situation as the domestic market heads for its major test in the next four weeks (the Easter sale season).
The closing weeks in February established no clear trend in retail trade, with the sales for the month as a whole recording a “6% increase” over last year. The commodity market fluctuated at levels near or below those of last year, with little indication that the existing agricultural price structure can be stabilized. The stock market continued to scrape bottom after suffering an estimated loss of some 3 billion dollars in February. But this decline has not penetrated the low marks of the last two years and the major test of the stock market is likewise still to come.
While the economy is passing through this transitional phase, the debate over what lies ahead grows more and more heated in capitalist circles. Among the super-optimists is Sumner H. Schlichter. a Harvard economist, who in his survey (N.Y. Times, Feb. 29) concludes that all the existing elements of weakness are far outweighed by the elements of strength, leaving the economy very strong – “stronger than most Americans and foreigners realize.”
This professional survey is typical of the capitalist school of economic thought and is well worth analyzing. Schlichter begins his catalogue of economic strength by pointing to agriculture. This feat of converting a major current source of weakness into a factor of vitality is accomplished by a twofold operation.
On the one hand the Professor coolly states that the sharp break of agricultural prices has “greatly strengthened the economy.” And on the other, he points to the hoped-for “shortages” in meats and dairy products, which will presumably safeguard agricultural prices from a “general weakness.”
As the second sign of strength Schlichter singles out the “money supply.” Ironically enough he points to high “hourly earnings” as a safeguard against depression. He omits to mention 1. that prices have far outstripped wages; 2. that an increasing share of the “money supply” has been siphoned off as profits into the coffers of the monopolists; and 3. that the purchasing power of the mass of the people has been dwindling while industry has kept piling up more and more goods into warehouses.
Third on the professor’s list is the mounting private debt, which has soared to record heights, amounting to more than 170 billion dollars. Schlichter hopes that if people can continue to go into debt, business can keep booming. He bases this hope of further debt expansion on the fact that in 1940 the private debt was much bigger than the annual national income, whereas today “it is over 10% smaller.”
But in 1940 the national income was below 100 billion dollars and the country was just entering its war boom. Today the national income must be sustained at a level of 200 billion dollars, in order to keep industry running, not to mention the need of maintaining the huge public debt and the record “peacetime” federal budget. Under these conditions, further increases in private debt add to the strains on the economy and tend to drag it down, and not to reinforce it.
Schlichter’s next four points are all devoted to “backlogs” and unsatisfied needs. There is still a great need of housing, a shortage of automobiles, etc. The industrial plant is still in need of expansion and re-equipment. States and cities need “streets, roads, schools, hospitals and other public works,” etc., etc.
To be sure, these needs exist, as they always have under capitalism. But they count for exactly nothing when the capitalists find it no longer profitable to maintain production.
Schlichter’s final point is that the “capacity of consumers to expand their demand for goods is still large.” In other words, he takes it for granted that the domestic market has not been impaired by the inflationary orgy and remains as strong today as it was last year and the year before. But this is precisely what has to be proved.
Obviously, the professor is just whistling in the dark to keep his spirits up. This is shown clearly by his own remarks in which he summarizes his optimistic balance sheet: Here they are:
“The many strong features in the economic situation do not assure that the country will not escape an early recession, but they make an early recession unlikely and indicate that, if one occurs, it will be mild.”
Just the contrary is true. It is precisely the “many strong features” cited by Schlichter that bring the depression closer and render quite unlikely its being “mild” in character.
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Last updated: 7 October 2020