Two-Headed Calf

Ohio's fact-minded Senator Robert Alphonso Taft wanted to find out what lay behind the talk of recession. That was part of his job as chairman of the joint Senate-House Committee on the Economic Report, which is responsible for recommending policies to maintain high employment. So Taft asked Dun & Bradstreet to gather the opinions of manufacturers, financiers, retailers, economists, labor leaders, etc. Last week, Dun & Bradstreet reported the results of its detailed questionnaire.

A majority of those polled agreed that recession would become noticeable in the latter half of 1947. Employment, profits, production, prices and sales would fall. Estimates of price drops ranged as high as 25%, sales decline as much as 20%, profit decline as much as 35%.* Very few expected wages to fall. In fact, most expected higher wages; their estimates of increases ran as high as 15%. When asked how they would cut costs if production declined, most of the manufacturers said they would cut hours as well as payrolls.

Surprisingly, few of the businessmen who expected a general recession in business expected their own business to fall off. This optimism caused The Wall Street Journal to observe: "The . . . recession has the exact characteristics of the standard two-headed calf. As everyone knows, that animal is always in the next county, never in this one. ... A mild recession that dispels the boom psychology will be a welcome guest."

This view, that a recession would do more economic good than harm, was shared by Federal Reserve Board Chairman Marriner S. Eccles. He thought "deflation now inevitable." The sooner it came, "the less painful" it would be. But it was Chase National Bank Chairman Winthrop Aldrich who administered the largest dose of soothing syrup. In Switzerland he told the International Chamber of Commerce, which he had headed for two years: "Europe does not need to fear that an American postwar corrective recession will degenerate into a depression. . . . [Recessions] are necessary to reduce costs and prices to a level which permits an economy to function to best advantage. Moreover, they serve to increase labor productivity and managerial efficiency and lay the basis for further improvements in living standards."

*The Federal Reserve Board announced that net profits of the 629 largest U.S. corporations were $22 million more in 1947's first quarter than last year's fourth quarter.

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