Hindsight

In Washington last week South Carolina's James F. Byrnes smilingly exhibited a letter addressed "Senator Byrnes, Expert on the Business Depression." Certainly

Jimmy Byrnes has every opportunity to become such an expert, for the second week's parade of potent businessmen marching up to testify before his unemployment investigations was fully as impressive as the other parade of businessmen who marched through the White House doors (see p. 7). Last week's bigwig witnesses and their opinions:

Wallace. To refute the popular impression that farmers were better off than industry in 1937, Secretary of Agriculture Henry A. Wallace offered a set of statistics: "The 1937 production of 53 crops was 13% greater than the 1929 production and 40% greater than the 1936 production, which was considerably curtailed by drought. The effect of this increase in the face of declining business activity and urban purchasing power has been a sharp drop in farm prices. Since December 1936 they have shrunk from 126% of the pre-War level to 104% of the pre-War level. The present level of farm prices is approximately 30% below that of 1929." Hence, concluded Witness Wallace, U. S. farm income for 1937 fell from five to ten per cent under 1936.

This fact, plus droughts and increasing mechanization of agriculture, he continued, means that the pinch is now being felt among many farm groups, an example being some 300 sharecropping families in Lee County, Texas who "are literally in danger of starvation as every penny of their share of the cotton crop has been required to pay their debts to the land-lords." Ordinarily, said Secretary Wallace, the landlords would carry the sharecroppers until next summer, but because of low cotton prices the landlords are almost as badly off themselves. "Local agencies, likewise, are utterly unable to provide any kind of relief. As a consequence the Federal Government is facing demands for assistance from a group for which it has never before been forced to assume responsibility."

Ayres-Three weeks ago Colonel Leonard P. Ayres, much-touted economist of Cleveland Trust Co., told a convention of his fellows at Atlantic City that the "key log" of the economic jam was the public utility situation (TIME, Jan. 10). Other reasons for the present depression, continued Economist Ayres, which he last week gave Senator Byrnes, included excessive inventories last spring, rising prices due to rearmament programs abroad, fears of labor difficulties, possibly the bonus payment in 1936, possibly some fear of inflation. Mr. Ayres's predictions: that the depression should reach bottom in the first half of 1938 as consumption progresses faster than production, that recovery depends upon continued relatively good times abroad, that if the U. S. pulls Europe down after it the milk may be spilled for fair.

Pelley. As spokesman for U. S. railroads, worst hit of all U. S. industries, President J. J. Pelley of the Association of American Railroads declared: "During the first nine months of the year 1937 railway employment was consistently greater than in 1936. During the final three months, however, a reversal . . . brought the average for that period down to 3% below 1936. The decline was an accelerating one, amounting to 32,000 men in November and 73.500 in December."

Asked whether the proposed 15% freight rate increase would drive business to trucks, Mr. Pelley said succinctly: "They want a raise too and they are a party to our request. If the requests are granted it will put us in a position to open the doors of our purchasing agents. No railroad is buying anything today except what is necessary to keep going."

Whitney. For railroad labor President Alexander F. Whitney of the Brotherhood of Railroad Trainmen seconded Witness Pelley's plea for higher freight rates. But, he grumbled, if the increase is granted railroad managements "will not have much to say about it, as the bankers will grab it."

Aldrich. Having a few days before told his stockholders what was wrong (see p. 57), Chairman Winthrop Aldrich of Chase National Bank was introduced by Chairman Byrnes who said he had encountered Banker Aldrich and asked him to drop in for a few informal questions. Sample informal replies:

"I always try not to make prophecies about an economic situation and I rather hesitate to say that I believe any economic situation is temporary. But I do feel this, that if we could get the budget into balance and if we could get sincere and mutually trustful co-operation between the government and not only business but the investing public, I see no reason why this country should not go ahead in a wonderful way. . . .

"On the tax side, the high income taxes, the capital gains tax in its present form, and above all other things, the undivided profits tax, were the things which have slowed down the capital market. . . .

"To tell you the truth, at the time when the stock market first dropped we [the Chase bank] did not see any signs of a recession of business and it did not appear in the figures. It did not appear anywhere until well into September, in my opinion. I think some people might, by hindsight, say they had seen some signs of it from the middle of August on; but I certainly did not appreciate it myself until well along in September. ..."

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