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From The Militant, Vol. 12 No. 48, 29 November 1948, p. 4.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
The key to this country’s economic situation lies in the condition of its internal market. Up to a few weeks ago there appeared to be little question about its stability. The consensus of capitalist opinion has been especially optimistic concerning retail trade prospects in the final quarter of this year. But unexpected developments have now placed a big question mark over all the authoritative forecasts.
Let us briefly review the situation. It was assumed that the critical test of the internal market for the whole, of this year had been successfully passed during the Easter sale season. After the sharp break of farm prices earlier in the year, serious difficulties were indicated ahead, and considerable nervousness and apprehension was aroused at the time.
But when the retail trade withstood the Easter sales test, all these fears were quickly allayed. The internal market was pronounced to be in the best possible health. Confidence in the business circles was further bolstered by the passage of the 7 billion dollar ECA program. This not only propped up foreign trade but also domestic production. Additional billions were pumped into industry by stepping up the arms program. It appeared that all these new billions were the best possible security against any economic troubles for at least 12 to 18 months.
And indeed, during the first nine months of this year retail sales kept rising to new levels, averaging monthly increases of five to ten percent. At the same time, the columns of the press continued to bristle with new peak figures of annual production rates, output of goods and services, number of employed, personal consumption expenditures and so on. In the face of all this, there was not the slightest expectation of any difficulties, least of all in the final quarter of the year with its normally heavy Christmas buying season, the biggest season of all.
On the contrary, the outlook was, as we said, highly optimistic. The prevailing mood was quite accurately summarized by Business Week, one of the authoritative business weeklies, which wrote the following in its leading article, Nov. 20 issue:
“At the moment the retail picture looks brighter than it has at any time for the past year. If the retail sales are no longer carrying the business boom, as they did in 1946, at least the boom is carrying sales. Retail volume has been marching up steadily with the rise in personal incomes. With a half-way decent Christmas, 1948 retail volume will break all records.”
Christmas sales, it was confidently expected, would average five to ten percent higher than last year. One big New York retailer informed Business Week that his store’s sales might even go up 20 percent. In expectation of such sales, the retailers have been expanding their inventories rather briskly. In September alone retail inventories shot up by almost two-thirds of a billion dollars.
But contrary to expectations sales have not been booming in the initial period of the Christmas season. Instead there have been signs of weakness. They first became apparent in the middle oi October when retail sales started falling behind last year’s levels in the Middle West and on the West Coast. By the first week in November similar conditions spread to other areas and reports of declining sales became countrywide.
Federal Reserve figures for the week ending Nov. 6 showed that the Chicago district had passed through its third consecutive week of lagging sales. Another key area, the Cleveland district recorded declines for the second consecutive week, as did the New York district. The West Coast, reported “the most severe decline in retail business activity during the year to date.” From New England came the warning that “extreme caution is warranted.”
The latest figures available at this writing are for the week ending Nov. 13. They show a nationwide drop of 9 percent as against the previous week’s drop of 8 percent. The sales lag has already proved severe enough to show a four weeks’ decline as compared with sales a year ago.
The capitalist press has naturally tended to minimize the implications of this development. The most common explanation is “unseasonable weather” or some ether accidental factor. The truth is, of course, that the internal market is neither so healthy nor stable as the apologists for “free enterprise” pretend. The lagging sales amidst a normally busy season are actually the latest ominous signals of the insoluble capitalist contradictions that undermine the economy.
A recent dispatch from Philadelphia sums up the situation quite well, even if unintentionally:
“Retail distribution has become spotty. The weather has been favorable. Store traffic has been at least as heavy as last month, but dollar volume totals are falling behind the like weeks of 1947. Irregularity in recent retail sales applies to durables as well as soft lines.” (N.Y. Times, Nov. 21)
The need for goods remains as urgent as ever. The people flock to the stores as before. But the distribution of goods is not in ac-cordance with needs but solely in accordance with the pocketbook. Soaring prices have eliminated more and more families from the market. They simply haven’t the purchasing power to obtain the goods they so sorely need.
Under capitalism this contradiction between the available goods and the people’s ability to buy is a chronic condition, it is only a matter of time before it becomes acute and breaks out to the surface in terms of “irregularity” in retail sales.
If the conditions as reported from Philadelphia persist and if they are representative of the country as a whole, then it means a sharp turning point in the domestic market.
With the heaviest weeks of Christmas sales still in the offing, it is too early to say that such a turning point has already been reached. But we shall not have to wait very long for a definitive answer. It will come by Christmas.
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Last updated: 28 March 2023