The New Factor

For businessmen who fear that deflation (see above) may lead to recession, Harvard's Economist Sumner H. Slichter had some reassuring words. Said Slichter: "My belief is that during the rest of 1952 the influences making for expansion will be stronger than those making for contraction" (e.g., Slichter expects a rise soon in consumer buying). As for 1953, he added, "if there is a recession, it will be quite mild."

For the long pull, Slichter thought that some economists were slighting a new "X" factor in the economy, which throws old crystal-gazing formulas out of whack. The new variable: research.

With government and industry now spending $2.6 billion a year on research, more than a fivefold increase since 1930, huge new markets are being opened up every day through "new and better goods which would have been undreamed of 30 years ago." Furthermore, said Slichter, industrial research will offer more investment opportunities than there are funds available. "Part of these investment opportunities will be financed by credit. This will permit the money supply to increase about as rapidly as the productive capacity of the country. Hence technological progress will not create unemployment. On the contrary, it will enable the economy to generate demand for goods as fast as it raises its capacity to produce . . . The economy has acquired an important new capacity to grow."

There was plenty of evidence last week to support Slichter's optimism. The appliance industry, shutting down refrigerator plants because the market seemed to be saturated, was in the infancy of a huge new boom, air conditioning. Synthetic fabrics showed signs of breaking the clothing industry's slump (see Modern Living). And the chemical industry, which pulled these fabrics from its test tubes, had new wonders on the way (see below).

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