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A R T E S S C l E N T I A V E R I TA S









RECENT ECONOMIC CHANGES

SIGNIFICANT ECONOMIC
REPORTS
WASTE IN INDUSTRY
By the Committee on Elimination of Waste in
Industry of the Federated American Engineering
Societies, with a Foreword by Herbert Hoover.
BUSINESS CYCLES AND UNEMPLOYMENT
By a Committee of the President's Conference
on Unemployment, including an Investigation
made under the auspices of the National Bureau
of Economic Research, with a Foreword by
Herbert Hoover.
SEASONAL OPERATION IN THE CON-
STRUCTION INDUSTRIES: THE FACTS
AND THE REMEDIES
By a Committee of the President's Conference
on Unemployment, with a Foreword by Herbert
Hoover.
CIVIL AVIATION
By the joint Committee on Civil Aviation of the
U. S. Department of Commerce and the Amer-
ican Engineering Council.
RECENT
ECONOMIC CHANGES
IN THE UNITED STATES
REPORT OF THE COMMITTEE ON RECENT ECONOMIC CHANGES,
OF THE
PRESIDENT'S CONFERENCE ON UNEMPLOYMENT
HERBERT HOOVER, CHAIRMAN
INCLUDING THE REPORTS OF A SPECIAL STAFF OF THE
NATIONAL BUREAU OF ECONOMIC RESEARCH, INC.
VOLUME II
FIRST EDITION
THIRD IMPRESSION
McGRAW-HILL BOOK COMPANY, INo.
NEW YORK: 370 SEVENTH AVENUE
LONDON: 6 & 8 BOUVERIEST., E. C. 4
1929

CoPYRIGHT, 1929, BY THE
CoMMITTEE on RECENT EconoMIC CHANGES, of THE PRESIDENT's
CoNFERENCE ON UNEMPLOYMENT
PRINTED IN THE UNITED STATES OF AMERICA
CHAPTER VI
LABOR
BY LEO WOLMAN
The labor situation both reflects underlying economic conditions and
helps to account for them. In this field, as in others, adequate explana-
tion of puzzling phenomena is delayed by the lack of comprehensive and
continuous statistical series. Many relationships that unquestionably
exist among the various forces of the labor market will remain concealed
as long as the data that might throw light upon them are incomplete and
in a measure unreliable. The organic character of the American labor
market is often suggested, if not proved, by placing in juxtaposition the
best available measures of the elements of the labor market. Such a
procedure is employed in this chapter, where what appear to be the signif-
icant items in the labor situation are examined with regard to their
postwar and prewar manifestations.
I. POPULATION AND LABOR SUPPLY
Probably the outstanding feature of the population question in the
United States since 1920 has been the marked drop in its rate of natural
increase. In the period from July 1, 1920 to July 1, 1925, the average
annual increase in population was 1,800,000, whereas in the years follow-
ing, from July 1, 1925 to July 1, 1928, the average annual increase had
fallen to 1,545,000. The factors making for a slackening rate of growth,
immigration restriction and a birth rate that appears to be falling more
rapidly than the death rate, are apparently not temporary ones. They
may, in view of the present trends, be expected to exert a similar influence
for many years to come."
Changes in the rate of growth of the total population do not neces-
sarily reflect like changes in the supply of labor. The rising productivity
of industry may from time to time produce an increase in the surplus of
labor in the face of a stationary population. Within a given population,
moreover, a larger or smaller proportion of the people of a country may
seek gainful employment in industry, trade, and service. Again, the
inhabitants of an undeveloped area may, through the development of
industry, become employed for the first time and thus add to the available
supply of labor. In the United States, forces such as these are continu-
ously and simultaneously in operation. From 1870 to 1910, the
* W. S. Thompson, “Population,” American Journal of Sociology, July, 1928, p. 3.
425
426 RECENT ECONOMIC CHANGES
percentage of women in the total number of workers of the country
advanced from 14 to 20.6 per cent.” The industrialization of the South
has likewise acted to increase the available labor supply. The northward
migration of the negro has represented in part a net addition to the total
labor supply of the country and in part a redistribution of it.”
All of these items are significant, but since 1920 the striking changes
in the American labor market have been associated with the policy of
immigration restriction, the growth of industry in the South, and the
falling birth and mortality rates of the country.
Immigration.*—While the effects of the war on European political
and economic conditions may have reduced the postwar emigration of
European labor into the United States, the fact remains that war embar-
goes and restrictive legislation have produced a condition in this country
in marked contrast to that existing before the war. The natural restric-
tions arising out of the war, and the later legislation, combined to change
radically both the volume and the character of American immigration.
The first legislation designed to affect the quantity of immigration
was the Quota Act, of May 19, 1921. This law limited the number of
aliens of any nationality, to be admitted in any fiscal year, to 3 per cent of
the number of foreign-born persons of such nationality resident in the
United States, as determined by the Census of 1910. The law of 1921 was
later made effective to June 30, 1924. A new quota law, known as the
“Immigration Act of 1924,” became effective July 1, 1924. By its terms,
the annual quota of any nationality is reduced to 2 per cent of the number
of foreign-born of that nationality in the United States, as determined,
not by the census of 1910, but by the census of 1890. The native-born
citizen of Canada, Mexico, Newfoundland, Cuba, and the independent
countries of South and Central America, is exempt in this as in the
earlier law.
TABLE 1.-CoMPARISON OF PREwAR IMMIGRATION AND QUOTAS"
Northern and Southern and
Western Eastern
Europe Europe and Asia
Average annual immigration, July 1, 1907 to June 30, 1914. . . . . . . . 176,983 685, 531
Quotas for year ended June 30, 1922. . . . . . . . . . . . . . . . . . . . . . . . . . . 198,082 158,367
Quotas for year ended June 30, 1925. . . . . . . . . . . . . . . . . . . . . . . . . . . 140,999 21, 847

a Compiled from the annual reports of the Commissioner General of Immigration, United States
Department of Labor. The prewar figures include all immigrants from Asia, not merely from the areas
to which the quotas apply; the maximum in any one year for Asia outside the quota areas was less
than 20,000.
* J. A. Hill, forthcoming Census Monograph on Women in Gainful Occupations.
3 J. A. Hill, “Recent Northward Migration of the Negro,” Monthly Labor Review,
March, 1924.
* The material for this section was prepared by Harry Jerome, of the National
Bureau of Economic Research.
LABOR 427
The purpose of these restrictive measures was to reduce the volume
of immigration in general and that from southern and eastern Europe
in particular. The expectations under the two acts, compared with
conditions prevailing before the war, are indicated in Table 1.
Comparisons between the actual flow of immigration in the prewar,
war, and postwar periods show that there has been a drastic reduction
in the net inflow. In the prewar period, the average recorded annual net
immigration was 664,000; in the war and early postwar period, 179,000;
and in the quota period, 312,000. At the present time, then, the annual
net immigration rate is less than half of that before the war.”
TABLE 2.-NET IMMIGRATION, JULY 1, 1907 To JUNE 30, 1927°

Period Immigrants Emigrants * Net.
immigration”
Prewar period (July 1, 1907 to June 30, 1914) . . . . . . . . 6,709,357 2,063,767 4, 645, 590
War and early postwar period (July 1, 1914 to June 30,
1921). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,407,908 1, 154, 256 1, 253,652
Quota restriction period (July 1, 1921 to June 30, 1927) 2,473,348 600,037 1, 873, 311
Year ended June 30:
1908. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 782,870 395,073 387,797
1909. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751,786 225,802 525,984
1910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,041, 570 202, 436 839, 134
1911 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 878, 587 295,666 582,921
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838, 172 333,262 504,910
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 197,892 308, 190 889,702
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 218,480 303, 338 915, 142
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I 326,700 204,074 122,626
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298,826 129,765 169,061
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 295,403 66,277 229, 126
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,618 94, 585 16,033
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141, 132 123, 522 17,610
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,001 288, 315 141,686
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 805, 228 247,718 557, 510
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 309, 556. 198,712 110,844
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 522,919 81, 450 441, 469
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 706, 896 76,789 630, 107
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294,314 92, 728 201, 586
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304, 488 76,992 227,496
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335, 175 73,366 261,809
* Compiled from the Annual Reports,
Commissioner General of Immigration, United States
Department of Labor, for the years ended June 30, 1908–1927. Citizens of the United States and
“nonimmigrant” and “nonemigrant” aliens are excluded from the data in this table.
* Net immigration equals immigrants less emigrants.
The reduction, as it was intended, was felt largely by the groups com-
monly described as the new immigration. Table 3, in which comparisons
* The clandestine immigration is estimated to have averaged about 85,000 per
year during the six years of quota restriction and is believed now to be diminishing.
The bulk of this immigration are probably residents of our neighboring countries.
428 RECENT ECONOMIC CHANGES
are made for the same three periods and the immigration is classsified by
country of origin, shows that the reduction in European immigration has
taken place mainly among the immigrants from southern and eastern
Europe. At the same time, net immigration from both Canada and
Mexico is in excess of the prewar rate.
TABLE 3.-DECLINE IN NET RECORDED IMMIGRATION INTO THE UNITED STATEs,
CoMPARED witH PREwAR RATEs, BY Country of ORIGINo
(In thousands of persons)

{
War and early postwar period Quota restriction period
(July 1, 1914–June 30, 1921) || (July 1, 1921–June 30, 1927)
Country -- - - - - - - - - - - - ––– ---------------------
Actual Deficit Excess Actual | Deficit Excess
| |
All countries”. . . . . . . . . . . . . . . . . . . . 1,254 3,392 . . . 1,873 2,100
l — — . . . | --- - - - -
All Europe”. . . . . . . . . . . . . . . . . . . . . . 555 3,672 . . . 888 2,735
“Old”d. . . . . . . . . . . . . . . . . . . . . . 292 774 s sº gº 710 203
“New ''d. . . . . . . . . . . . . . . . . . . . . 263 2,898 tº - e. 177 2, 532 & & &
Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . 122 . . . . . | 16 297 | . . . . . 206
Canada and Newfoundland. . . . . . . . 433 . . . . . 242 628 ...;; 465
Asia”. . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 | . . . . . ſ 16 13 | 15 e
Other countries. . . . . . . . . . . . . . . . . . . 94 | . . . . . 5 48 28
| |

* Compiled from the Annual Reports of the United States Commissioner General of Immigration.
The “deficit" or “excess” is computed by subtracting the actual net immigration (immigrants less
emigrants) from the net immigration which would have taken place if the annual average for the seven
years ended June 30, 1914, had been maintained.
* The totals were computed from the full figures before reduction to thousands, hence there is an
apparent small discrepancy in each column between the totals and the constituents thereof.
* Turkey in Asia is included with Europe and excluded from Asia.
* The so-called “old” sources of immigration include the countries of northern and western Europe,
namely: Belgium, Denmark, France, Germany, the Netherlands, Norway, Sweden, Switzerland, and
the United Kingdom. The “new” sources include the countries of eastern and southern Europe
now known as Austria, Hungary, Czechoslovakia, Jugoslavia, Bulgaria, Finland, Greece, Italy, Poland,
Portugal, Rumania, Russia, Spain, Turkey in Europe, and certain other small European countries
designated as “other Europe,” also Turkey in Asia. Owing to boundary changes, the prewar and
postwar figures for the “old” and “new” sources are not strictly comparable, but these discrepancies
are not large enough to affect materially their comparability for present purposes.
In occupation, the immigration of recent years is radically different
from what it used to be. The cutting off of immigrants from the south
and east of Europe has meant stopping the flow of unskilled labor, which,
before the war, was the preponderant element of the immigration into the
United States. The group of unskilled workers shows, in the war and
early postwar period, a net immigration of only 4,000 and of 191,000 in the
quota restriction period, or a decline of 1,544,000 in the war and early
postwar period, and of 1,136,000 in the quota restriction period.
These changes in number, origin, and occupation have been accom-
panied by equally important changes in the demographic constitution
of the recent immigrants. The proportion of males has dropped from
60 per cent before the war to 52 in this latest period. The proportion
LABOR 429
TABLE 4.—DECLINE IN NET RECORDED IMMIGRATION INTO THE UNITED STATES
COMPARED witH PREwAR RATEs, BY OccupATION AND SEx”
(In thousands of persons)
War and early postwar period Quota restriction period
(July 1, 1914–June 30, 1921) (July 1, 1921–June 30, 1927)
Occupation and sex
Actual - Deficitº Excess * net Deficitº Excess
Total net. . . . . . . . . . . . . . . . . . . 1, 254 3,392 tº º & & 1,873 2, 109
No occupation. . . . . . . . . . . . . . . . . . . 688 814 * g e 9 798 490
All workers”. . . . . . . . . . . . . . . . . . . . . . 565 2,578 * & © tº 1,075 1,619
Unskilled workers”. . . . . . . . . . . . . . . . 4 1, 544 * * * * 191 1, 136
Servants. . . . . . . . . . . . . . . . . . . . . . . . . 213 450 * e º e 214 354
Skilled. . . . . . . . . . . . . . . . . . . . . . . . . . 288 442 & © tº º 4.17 209 s a tº
Professional. . . . . . . . . . . . . . . . . . . . . . 50 11 tº gº tº ge 71 . . . . . 18
Other occupations. . . . . . . . . . . . . . . . 10 131 * * * * 183 | . . . . . 62
Both sexes. . . . . . . . . . . . . . . . . . . . . . . 1, 254 b3, 392 * * * * 1,873 b2, 109
Males. . . . . . . . . . . . . . . . . . . . . . . 463 2,317 tº s is a 976 1,407
Females. . . . . . . . . . . . . . . . . . . . . | 790 1,075 sº tº sº tº 898 701
* The “deficit’’ or “excess” is computed by subtracting the actual net immigration (immigrants less
emigrants) from the net immigration which would have taken place if the annual average for the seven
years ended June 30, 1914, had been maintained. For example, the total net immigration in the seven
years ended June 30, 1914, was 4,645,590. Taking six-sevenths of this we have 3,981,934 as the
“expected” net immigration for the six years of the restriction period (July 1, 1921 to June 30, 1927).
In these six years, the actual net immigration was 1,873,311, leaving a “deficit” of 2,108,623.
* For the prewar net immigration, 71,970 emigrants for whom occupation is not known were dis-
tributed among the occupations in the same proportions as those for whom occupation was given.
Likewise, 29,708 emigrants in 1909 for whom sex is not known were distributed between the sexes in the
same proportion as those for whom sex was given.
• Computed by subtracting “No occupation” from “Total.”
d The classification by occupation used by the United States Bureau of Immigration has no group
designated as “unskilled.” We have taken the sum of “laborers” and “farm laborers” as representa-
tive of the unskilled element.
of the married appears to be slightly less now than before, and children
and elderly persons seem more numerous in the recent than in the prewar
immigration.
It has already been seen that our changing immigration policy and
the fall in the birth rate have resulted in a slackening of the natural rate
of increase of the American population; and it is clear that these factors
will tend, if they have not already done so, to produce a tighter labor
situation than one to which we have been accustomed. It has been
pointed out in this connection, however, that compensating influences,
such as the opening of unworked industrial areas or the progressive fall
in mortality rates, may act as mitigating factors. To measure the
accretions in population arising out of these last sources is not a feasible
task. Over long periods of time, the extent to which industry draws on
the population of an area is in Some degree a measurable phenomenon.
Thus the per cent of factory wage earners in the total population of
430 RECENT ECONOMIC CHANGES
North Carolina was 2.1 in 1889, 4.2 in 1904, 5.6 in 1909, and 6.5 in 1925,
and the probability is that little of this relative increase in factory
employees was made at the expense of other employments. The same
type of computation might also be made with regard to the entry of
women into gainful work. But except for pointing out the existence
of such changes within the population of the country, the elaboration of
such measures would add little to our present knowledge.
There remains, then, some slight reference to the magnitude of the
fall in mortality rates which has been a striking feature of American
vital statistics of the past decades. Dr. A. J. Lotka, of the Metropolitan
Life Insurance Co., has computed the figures of the number of lives saved
per annum through the lowered death rate in this country by taking
the United States population, as constituted in 1925, applying to it, at
the several ages of life, the death rates that prevailed in 1900–1902, and
then comparing the total number of deaths that would have been pro-
duced by these death rates with the actual deaths in 1925. The results
of these computations are given in Table 5.
TABLE 5.—ACTUAL DEATHS IN 1925 COMPARED witH DEATHS INDICATED IF COM-
PUTED ON 1900–1902 DEATH RATES

Lives
saved
per annum
Actual Hypothetical deaths,
deaths, 1925, on basis of
1925 1900–02 death rate
|
Total, United States. . . . . . . . . . . . . . . . . . . . . 1,389,673 1,962, 999 573, 326
White, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 172,251 1,655, 467 483, 216
White, males. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 634, 785 887, 793 : 253,008
White, females. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 537, 466 767,674 230, 208
Colored, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,422 307, 532 90, 110
Colored, males. . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,871 163, 735 50,864
Colored, females. . . . . . . . . . . . . . . . . . . . . . . . . . . 104, 551 143,797 | 39, 246
While it is interesting to compare these figures of current saving of
lives with the estimated deficits in immigration, it should be noted that
the fall in mortality rates has been accompanied by a drop in the birth
rate and that future improvements in mortality may be more difficult
than they have been in the past.
II. WAGES, HOURS, AND LABOR COST
Wage rates are, for many purposes, the most useful measure of the
changing position of labor. Piece or time rates represent in one number
both the price of labor and its potential earning power. Actual earnings
whether by the week, month, or year, measure not only the price of labor,
but unemployment and the flow of work as well. Even full-time earnings
for any unit of time are affected by the productivity of labor and by the
LABOR 431
volume of employment, but this last factor does not affect full-time
earnings nearly as much as it does actual earnings. While it is important
to measure employment and unemployment and their effects on earnings,
both the incidence and the extent of employment and unemployment are so
complex that they can be best studied directly, and not indirectly through
their effect on earnings."
The most satisfactory measure of wages, then, is the rate of wages,
time or piece. Where the actual rates are not available, the next best
measure would be a record of the changes in the time and piece rates.
Unfortunately it is impossible to obtain a reliable series of either rates
or changes in rates. Statistics of changes in wage rates published
by the United States Bureau of Labor Statistics for a part of the postwar
period and for an important group of industries cannot be used because
of the inadequacy and uncertainty of the sample.” We are, therefore,
thrown back on full-time earnings. Of the various measures of full-time
earnings, hourly earnings are, for the purpose of finding changes in wage
rates, the best. It is true that hourly earnings reflect not only changes
in the rates of wages but the rise and fall in the productivity of labor as
well. But they do not reflect unemployment, except in the minor degree
in which rise and fall in unemployment increases or diminishes the flow
of work, and hence increases or reduces even hourly earnings. Where,
finally, hourly earnings are not available, it becomes necessary to use
full-time weekly earnings whose course is affected not only by the factors
already enumerated, but also by changes in the nominal or full-time
week. Over short periods of time, however, these variations in the
length of the nominal week can be measured and their influence partially
discounted.”
For all studies of wages during the period from 1914 to 1927, nearly
all available series are defective in one or another respect. The list of
industries included in each series varies from year to year and particu-
larly from 1914 to 1920. The samples for the industries reported are
not in each year equally representative. In general, the statistics appear
to improve after 1920, both by the inclusion of a greater number of
industries and through the gathering of more adequate and more repre-
sentative samples. The material on wages, here presented, is the
result of the examination of a mass of American wage statistics, collected
and interpreted by a number of independent agencies. Whatever
methods of interpretation are applied to the basic data, the final results
* See Henry Clay, “Unemployment and Wage Rates,” Economic Journal, March,
1928, p. 1.
7 *onthly Labor Review, July, 1928, p. 133. Similar figures are published monthly.
* The questions of definition and sampling, and the meaning and reliability of
American wage statistics will be considered in detail in a study, by the present
author, of the statistics of the American labor market, to be published by the
National Bureau of Economic Research in 1929.
432 RECENT ECONOMIC CHANGES
show so many signs of agreement in the various series as to inspire
considerable confidence in the raw statistical materials.
The Manufacturing Industries.—The most complete series of hourly
earnings in the manufacturing industries is that compiled by the National
Industrial Conference Board for the period from 1920 to date. The
series includes some 23 representative industries and is, with interruptions
in 1920 and 1922, published monthly for each industry and for all indus-
tries combined. A figure comparable with the later series is also given
for July, 1914, so that it is possible to make comparisons with prewar
conditions. For the years between 1914 and 1920 the Board series is
incomplete and is, for that reason, not comparable with the series for
the later period. Because the 1920 figures are given only for the last
seven months, and the 1922 figures only for the last six months, it is
impossible to pick with certainty the high month of the boom and the
low month of the depression. The trend is such, however, that this gap
appears to introduce no substantial error. The hourly rates for all
industries combined are shown in the following statement:
July 1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(). 25
Average:
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .61
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Hourly earnings for this group of industries advanced 149 per cent from
1914 to September, 1920; fell 22.3 per cent from September, 1920, the
known peak, to July, 1922, the known bottom; rose again more than 20
per cent from July, 1922 to September, 1927; and stood in 1927 at 128
per cent above 1914.
It is impossible to match the Board series with a similar series from
any other reliable source of information. By assuming, however, that
the week of highest actual per capita earnings was also the week of full-
time earnings, it has been possible to compute, from monthly data pub-
lished by the United States Bureau of Labor Statistics, the average
full-time weekly earnings for 12 important and representative manufactur-
ing industries for each year from 1917 to 1927 and for 42 manufacturing
industries from 1923 to 1927. The 12 industries employed, according to
the census of manufactures of 1925, 2,856,160 wage earners, and the
42 industries 5,832,302, out of a total of 8,384,261 wage earners. The
results of these computations are shown in Table 6. In this series, full-
time weekly earnings increased 58 per cent from 1917 to 1920; fell 20
per cent from 1920 to 1922; and were, in 1927, 16.8 per cent below 1920.
LABOR 433
TABLE 6.—AVERAGE FULL-TIME WEEKLY EARNINGs

Full-time weekly earnings
Year
Twelve Forty-two
industries industries
1917. . . . . . . . . . . . . . . . . - $20.65 . . . . .
1918. . . . . . . . . . . . . . . . . 26. 37 * * * * *
1919. . . . . . . . . . . . . . . . . 28.78 . . . . .
1920. . . . . . . . . . . . . . . . . 32.57 | . . . . .
1921. . . . . . . . . . . . . . . . . 27.62 . . . . .
1922. - 26.04 | . . . . .
1923. . . . . . . . . . . . . . . . . 27.58 $27.67
1924. . . . . . . . . . . . . . . . . 27. 51 27.48
1925. . . . . . . . . . . . . . . . . 27.45 27.75
1926. . . . . . . . . . . . . . . . . 27.03 27. 66
1927. . . . . . . . . . . . . . . . . 27.00 27. 74
But changes in full-time weekly earnings are obviously not comparable
with changes in hourly earnings, since full-time weekly earnings vary with
changes in the length of the work-week. To put both series on a com-
parable basis, there was derived the weighted average full-time hours per
week for the 12 industries. The full-time week, from these computations,
was found to be 56 hours in 1917, 53 hours in 1920, 53 hours in 1922, and
51 hours in 1923 and thereafter.” Applying these weighted averages of
full-time hours per week to the statistics of full-time earnings per week in
the 12 industries, hourly earnings in the crucial years are found to be as
follows:
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.37
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
To make the same conversions for the 42 industries would require com-
puting the average full-time hours per week for that group, an extremely
laborious task. All of the available data appear to indicate that the
prevailing average nominal week since 1923 in all manufacturing industry
has fluctuated around 51 hours. Average hourly earnings in the 42
industries, then, were approximately 54 cents in each year since 1923.
Comparisons between the hourly earnings reported by the Conference
Board and the hourly earnings computed by this method show that,
whereas the first fell 22.3 per cent from September, 1920 to July, 1922,
the second series fell in the same period 20 per cent; while the Board's
hourly earnings increased 16 per cent from 1922 to 1927, the increase in
* There are from year to year fractional differences in the full-time hours per week,
but they are so slight that they may be disregarded.
434 RECENT ECONOMIC CHANGES
the computed hourly earnings was 8 per cent. At the close of the whole
period, however, the difference between the two series of between 3 and
4 cents an hour might easily be accounted for by differences in sampling,
by minor, but undiscoverable, errors in computing the average full-time
hours per week, and by the fact that comparisons of the Bureau's series
were between averages for the year and not between high and low months.
Among the many industries that make up the group of manufacturing
industries, there have been great divergencies in the rate of increase over
prewar levels and in the movement since 1920. Table 7, showing hourly
earnings in a few selected industries, throws some light on the behavior of
wages in different industries. Increases in wages in the boot and shoe
TABLE 7,-HourLY EARNINGS IN SELECTED INDUSTRIES

Per cent
increase,
Industry 1913 1920 1921 1922 1923 1924 1925 1926 latest
i year over
. 1913
|
Boots and shoes. . . . . . $0.31 $0.56 | . . . . . $0.50 | . . . . . $0.52 | . . . . . $0.53 71
Clothing, men's . . . . . . , 26 | . . . . . . . . . . . . 73 | . . . . . . 76 . . . . . . . 75 188
Cotton goods. . . . . . . . . 16 .48 . . . . . .33 i. . . . . . 37 | . . . . . .33 106
Hosiery and knit
goods. . . . . . . . . . . . . . 17 | . . . . . . . . . . . . 35 | . . . . . . 41 | . . . . . .44 159
Iron and steel. . . . . . .... • . 30 .75 | . . . . . . 51 | . . . . . . 64 | . . . . . . 64 113
Lumber. . . . . . . . . . . . . . 19 | . . . . . $0.33 | . . . . . $0.36 | . . . . . $0.36 | . . . . . 90
Woolen and worsted. . 20 .63 | . . . . . .47 | . . . . . . 53 | . . . . . . 49 145
industry appear to have lagged throughout the whole period, although
the rates recovered from their fall in 1922. Both cotton goods and woolen
and worsteds hardly recovered from the low of 1922. Iron and steel on
the other hand had a rise of 13 cents an hour. Important industries not
included in this table, because no data are available for most of the
period, have had substantial increases in their hourly earnings since 1922.
Hourly earnings in the automobile industry are reported as 66 cents in
1922 and 72 cents in 1925; and in foundries and machine shops as 56
cents in 1923 and 63 cents in 1927.10
The Building Trades.—The building industry in the United States is
probably at the present time more than 50 per cent unionized and is, in
the large cities, except for the outlying districts, almost completely
organized. For this reason, the movement of union rates of wages gives
a fair representation of the general movement of wages in the industry.
Union rates of wages in the building industry, as in all industry, exag-
gerate the inelasticity of prevailing wage rates, since many concessions
in rates commonly made during periods of depression and slack business
* All of the figures in this paragraph are taken from the reports of the United
States Bureau of Labor Statistics.
LABOR 435
are not adequately reported. In general, it is fair to say that union rates
actually paid rise higher in periods of prosperity, and fall lower in periods
of depression, than the recorded rates indicate. But there is no statistical
evidence for this suspicion.
Union rates of wages in the building industry show an almost unin-
terrupted rise from 1914 to the present. In the war and early postwar
TABLE 8.—WEIGHTED UNION HourLY RATES OF WAGES IN THE BUILDING TRADEs”
|
Year Rate Year - Rate
|
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.53 1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1.03
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .96
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 07
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 15
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 20
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.28
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 02 1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 32
• United States Bureau of Labor Statistics. The actual rates from 1914 to 1920 are not published
by the Bureau, but were computed from the Bureau's index numbers. -
period, wages rose, from 1914 to 1921, 94 per cent. They fell from 1921
to 1922 only 7 per cent and rose again from 1922 to 1927 by 38 per cent,
leaving the building trades union rates 149 per cent higher in 1927 than
they were in 1914. It must be remembered, of course, that the American
building industry has had since 1922 an unusual and prolonged wave of
prosperity.
As in all American wages, there are wide geographical divergencies in
the union rates in the building industry. A compilation of the rates of
wages in 1927 of five important occupations in various cities of the country
shows that the high rate is sometimes nearly twice the low rate. These
differences, moreover, persist over a long period, but the relative position
of the cities does not remain unchanged. In all five occupations, for
TABLE 9.—RATES OF WAGES IN FIVE IMPORTANT OccupATIONs, 1927
g & º Plumbers and
City Bricklayers Carpenters Painters Plasterers gas fitters
Atlanta. . . . . . . . . . . . . . . . $1.40 $0.80 $0.85 $1.25 $1.25
Philadelphia. . . . . . . . . . . 1.63 1. 25 1.05 1. 75 1.15
St. Louis. . . . . . . . . . . . . . 1, 75 1. 50 1. 44 1. 75 1.50
Los Angeles. . . . . . . . . . . . 1. 38 1.00 1.00 1.50 1.13
Seattle. . . . . . . . . . . . . . . . 1.45 1. 13 1. 13 1. 38 1. 38
New York 1. 75 1.50 1.63 1. 75 1. 50
Chicago. . . . . . . . . . . . . . . 1.63 1. 50 1. 50 1.63 | 1. 50
example, the rates in Seattle were, in the years 1917, 1918, and 1919,
always higher than those of New York City and nearly always higher
436 RECENT ECONOMIC CHANGES
than the rates of Chicago. Such variations in the rank of these cities
have, however, been rare.
Union Rates of Wages.—An index number of union hourly rates of
wages for all reporting trades, prepared by the United States Bureau
of Labor Statistics,” pursues much the same course as that taken by
union rates in the building trades. They rise 105 per cent from 1913
to 1921; drop 6 per cent in 1922; increase 35 per cent from 1922 to 1928;
and stand, in 1928, 161 per cent above 1913. At the end of the period,
also, the rates are probably higher than they are in industry generally,
although it must be remembered that the union rates are almost without
exception rates of wages for male workers. Changes in the rates for
specific occupations, shown in Table 10, exhibit no startling divergencies
from the movement of wages in the building industry. But the freight
handlers have a much greater drop in 1922 than the others. The striking
feature of this tabulation, as indeed of the index number of all union rates,
is the slight decline in rates during the severe depression of 1920 to 1922
and the decided upward movement since 1922.
TABLE 10.-CHANGES IN HOURLY RATES OF WAGES IN SPECIFIED OCCUPATIONs
Per cent change in hourly rate
* Hourly
Occupation rate, 1928 } -- - -
1913–1921 1921–1922 1922–1928 1913–1928
|
Bakers. . . . . . . . . . . . . . . . . . . . . . . . . . $0.95 | + 179 f — 4 + 7 —H 186
Compositors (book and job). . . . . . . . 1, 12 + 120 + 2 | +12 : + 150
Pressmen, cylinder (book and job). . 1. 13 + 106 — 2 + 16 + 133
Compositors, day (newspapers). . . . . 1. 18 + 75 + 1 + 17 + 107
Chauffeurs. . . . . . . . . . . . . . . . . . . . . . . . 71 + 103 — 6 i +27 —H 143
Freight handlers. . . . . . . . . . . . . . . . . . . 86 + 137 – 17 +27 + 149
It cannot be said that the index of union rates of wages is a satisfac-
tory measure of the movement of union wages in the United States. It
is, in the first place, heavily weighted for the building and printing indus-
tries, which together comprise 73 per cent of the total Bureau sample.
Both industries are notoriously in large measure sheltered or noncompeti-
tive industries, in which wages are not nearly so sensitive to changing
market conditions as they are elsewhere. The large drop in the rate of
wages of freight handlers has already been noted. The rates of pattern
makers and of iron molders dropped, likewise, 11 and 18 per cent respec-
tively, from 1920 to 1922. It is clear that a more representative sample
of union rates would yield a measure showing more frequent and wider
fluctuations than the present one.
The Bureau index, also, is by no means a measure of union rates of
wages in the category of manufacturing industries. An examination of
11 United States Bureau of Labor Statistics, Bulletin No. 457.
LABOR
437
the union membership covered by the Bureau report shows that, except
for the printing and publishing industry, practically no representation
at all is given to manufacturing industries. The following statement”
shows a list of trade groups and the total number of union members in
each group.
Bakers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 170
Building trades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,423
Chauffeurs, teamsters, drivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,260
Granite and stone trades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,796
Laundry workers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,876
Linemen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,464
Longshoremen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,212
Printing and publishing:
Book and job. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,832
Newspaper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 586
Street railways: motormen and conductors. . . . . . . . . . . . . . . . . 57,289
Bus drivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,730
Barbers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,670
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862,308
Unskilled and Common Labor.—Wages of this category of labor will
vary with the nature of the statistical sample and with the definition of
the terms “unskilled” and “common” labor. It is indeed clear from the
available data that the category is far from homogeneous and includes
classes of labor that work at a great diversity of rates. In general, the
designations appear to apply to low-priced, usually manual male labor,
TABLE 11.-WAGEs of UNSKILLED or CoMMON LABOR, 1914–1927
National Indus- New York United States
Year trial Conference Federal Reserve Bureau of Labor
Boarda Bank" Statistics”
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . cš0. 20 $0.20 $0.34
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 .34
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 . 35
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 . 39
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 .46
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 . 52
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 51 . 75
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 47 . 76
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 37 . 71
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 46 . 73
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 48 . 81
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 47 .77
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 49 | .85
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i9 49 , 85
* Average for the year.
b May 1 for the years 1914 and 1915, and May 15 for each year since 1916. The actual rates from
1914 to 1920 are not published by the Bureau, but were computed from the Bureau's index numbers.
* July. -
* United States Bureau of Labor Statistics, Bulletin No. 457, p. 1.
438 RECENT ECONOMIC CHANGES
and if they are so understood the statistics of wage rates for the class
follow a consistent course. Table 11 presents three independent series
of the wages of common or unskilled male labor from 1914 to the present.
One series, that of the National Industrial Conference Board, represents
the average hourly earnings of unskilled labor in more than 20 manu-
facturing industries throughout the United States. The second is the
hourly hiring rate for common labor in the New York Federal Reserve
district, compiled by the Federal Reserve Bank of New York; and the
third is the average hourly union rate of wages for building laborers
throughout the whole of the American building industry, published by the
United States Bureau of Labor Statistics. In this case, as in general,
the use of annual averages conceals somewhat the range of fluctuation
of the rates of wages, but it is often impossible to find more than a single
figure for a year. In Table 12, showing the changes in the wage rates of
unskilled and common labor, some attempt is made to find the high and
low points and to compute the percentage changes from them, but this
procedure does not produce striking modifications in the final results.
TABLE 12.-CHANGES IN WAGE RATES OF UNSKILLED AND COMMON LABOR
Changes in rates (per cent)
Period - -
National Industrial New York Federal U. S. Bureau of
Conference Board Reserve Bank Labor Statistics
1914 to 1920. . . . . . . . . . . . . . . . . . . . . . . a + 175 b -H 165 + 124
1920 to 1922. . . . . . . . . . . . . . . . . . . . . . . c — 27 d — 32 — 7
1920 to 1927. . . . . . . . . . . . . . . . . . . . . . . e – 11 e — 4 + 13
1914 to 1927. . . . . . . . . . . . . . . . . . . . . . . e -H 145 e -- 145 + 150
a July, 1914 to September, 1920. d October, 1920 to April, 1922.
b Average for 1914 to October, 1920. • Average for the year.
• September, 1920 to July, 1922.
A new series of hourly entrance rates for adult male common labor,
compiled first quarterly and later semiannually by the United States
Bureau of Labor Statistics since January 1, 1926,” runs from 6 to 8 cents
an hour lower than both the Conference Board and Federal Reserve
Bank rates, and, of course, considerably below the union rates of building
laborers. Not only is the Bureau sample larger than the others, but its
geographical diversity tends to reduce the average hiring rate for the
country. Even within any single area, the difference between the high
and low rate is occasionally as much as 80 cents an hour. If, further,
the rates for common labor employed in general contracting are excluded,
the Bureau hiring rate for common labor is often reduced by several
cents more. From January 1, 1926 to January 1, 1928, this hourly rate
13 Monthly Labor Review, February, May, September, December, 1926; March,
October, 1927; Arilp, 1928.
LABOR 439
for the whole country has increased from 40 to 43 cents an hour. On
January 1, 1928, when the average rate for the United States was 43
cents an hour, the rates in various sections of the country were as shown
in the following statement:
New England. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.47
Middle Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49
East North Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
West North Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
South Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
East South Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
West South Central. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Mountain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Pacific. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47
With the full employment of labor during the war years, and the
restriction of immigration, first by the war and later by legislation, it
has been commonly believed that the differentials between the wage rates
of skilled and unskilled labor or between high- and low-paid labor have
TABLE 13.−DIFFERENCE IN WAGE RATES OF SKILLED AND UNSKILLED LABOR
Per cent average Per cent average
hourly earnings of hourly union rate of
Year male unskilled are building laborers is
of male skilled.” of bricklayersb
1914. . . . . . . . . . . . . . . . . 72.5 47. 6
1920. . . 79. 0 62. 4
1921. . 75.1 63. 7
1922. . 7.2. 6 61.3
1923. . . . . . . . . . . . . . . . . 73. 2 55. 1
1924. . . . . . . . . . . . . . . . . 73. 8 57. 9
1925. . . . . . . . . . . . . . . . . 73. 8 52.4
1926. . . . . . . . . . . . . . . . . 73. 6 54. 4
1927. . . . . . . . . . . . . . . . . 75. 2 53.3
|
• Computed from the statistics of the National Industrial Conference Board for 23 manufacturing
industries.
* Computed from the statistics of the United States Bureau of Labor Statistics.
been, since 1914, appreciably reduced. This belief is only partially
supported by the available facts. Inspection of the wage statistics of
many individual industries yields much the same conclusions as can be
drawn from Table 13. The margins between the wage rates of skilled
and unskilled labor narrowed considerably from 1914 to 1920 and then
tended to widen, but were left somewhat narrower in 1927 than they were
before the war. The slight variations that appear from year to year are
probably the accidental results of changing samples and should be
considered of little significance.
The Coal Industry.—Wages in the bituminous coal industry have
followed a different course during the period under review because of
440 RECENT ECONOMIC CHANGES
factors peculiar to the soft coal industry. The industry has for a long
time been partially unionized. During the war, organization spread very
fast and the union extended its control over parts of the non-union area.
Those coal fields which remained unorganized possessed great powers of
expansion in output which they were able to exploit whenever they
received a competitive advantage over their unionized competitors. Such
competitive advantage non-union operators usually enjoy in periods of
depression, when both working conditions and wages are more elastic
in the unorganized than in the organized mines; and also whenever
their organized competitors are shut down by strikes. Conditions such
as these, which prevail in varying degrees in all industries that are part
union and part non-union, have in this industry played the determining
rôle in the years since the war. Rigidity in union rates has been accom-
panied by great elasticity in the non-union rates, with the result that the
area of union control has, since 1920, steadily contracted. Although
factors such as freight rates and differences in the efficiency of manage-
ment have, without a doubt, exerted a strong influence on the situation,
they have probably acted to reinforce trends created by the wage
Structure. -
In both the union and non-union mines, wages rose steadily from 1914
to 1920. The trend of union rates of wages for tonnage men and for
day labor is shown in Table 14.44 The first class increased from 1914
to 1920 by 77 per cent and the rates for day labor, 162 per cent. Aside
from the marked divergence between the rates of increase of tonnage
and day labor, the significant item in the table is the fact that the rates
TABLE 14.—TREND OF UNION RATES OF WAGEs
Index numbers of Day rates for day labor
tonnage rates for -
pick miners at
Year Illinois and Indi- Date Index numbers
ana basing points Actual (Apr. 1,
(1914 = 100) rate 1914 = 100)
1914. . . . . . . . . . . . . . . . . . 100 April 1, 1914. . . . . . . . . . . . . . $2.86 100
1915. . . . . . . . . . . . . . . . . . 100 April 1, 1916. . . . . . . . . . . . . . 3.00 105
1916. . . . . . . . . . . . . . . . . . 105 April 15, 1917. . . . . . . . . • s : * * 3. 60 126
1917. . . . . . . . . . . . . . . . . . 121 October 6, 1917. . . . . . . . . . . 5.00 175
1918. . . . . . . . . . . . . . . . . . 138 November 26, 1919. . . . . . . 5. 67 198
1919 . . . . . . . . . . . . . . . . . 138 April 1, 1920. . . . . . . . . . . . . 6.00 210
1920. . . . . . . . . . . . . . . . . . 177 August 16, 1920. . . . . . . . . . . 7. 50 262
1921. . . . . . . . . . . . . . . . . . 177 August 15, 1922. . . . . . . . . . . 7.50 262
1922. . . . . . . . . . . . . . . . . . 177 April 1, 1923. . . . . . . . . . . . . . 7. 50 262
1923. . . . . . . . . . . . . . . . . . 177
14 The data in this table are adapted from Isador Lubin, Miners' Wages and the
Cost of Coal, pp. 230, 236.
LABOR 441
reached at the peak of 1920 remained unchanged through the period
from 1920 to 1923.
Non-union rates also rose from before the war until 1920 and probably
at a more rapid rate than the union rates, since the prewar base rates
were lower in the non-union mines. But for the few years immediately
after 1920, the non-union rates reacted swiftly and violently to changing
business conditions. They fell, as is here indicated, in the first half of
1921, again in the second half, once more in 1922, and then rose sharply
in 1923. From the peak to the low point, in this period, pick-mining
rates in West Virginia fell 28 per cent, in Kentucky 27 per cent, while
rates for machine cutting were reduced 25 per cent and 34 per cent in West
Virginia and Kentucky, respectively. Much the same thing happened
to the rates of day labor. While the going rates of union day labor were
from $7.25 to $7.50 a day, the non-union rates fell as low as $4.10.”
TABLE 15.—PICK-MINING AND MACHINE-CUTTING RATES, IN WEST VIRGINIA
AND KENTUCKY”
Index numbers of non-union rates (Jan. 1, 1912 = 100)
- * : *---------º
Year Pick mining Machine cutting
West Virginia Kentucky West Virginia Kentucky
1920 (first half). . . . . . . . . . . . . . . . . . . . . . 211 215 210 196
1920 (second half). . . . . . . . . . . . . . . . . . . . - 225 225 214 213
1921 (first half). . . . . . . . . . . . . . . . . . . . . . 219 209 214 193
1921 (second half). . . . . . . . . . . . . . . . . . . . 205 170 204 173
1922 (first half). . . . . . . . . . . . . . . . . . . . . | 163 164 160 141
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 222 212 212 183
a The data in this table were computed from the statistics published in the reports of the United
States Coal Commission, 1925.
In 1923 the United Mine Workers entered into a new agreement with
the operators, the famous Jacksonville agreement, by which terms the
rates of wages then prevailing were made effective for five years. As
15 See Lubin, op. cit. p. 211, from which the following table, showing the day rates
paid to inside labor in the non-union Winding Gulf District of West Virginia, is taken:

Sept. 1, 1921 Jan. 1, 1922 Aug. 16, 1922
Machine runners. . . . . . . . . . . . . . . . . . . . . $7. 6.08 $4.68 $7.58
Trip riders. . . . . . . . . . . . . . . . . . . . . . . . . . 6.92 5. 55 4. 10 6.77
Drivers, one mule. . . . . . . . . . . . . . . . . . . . 6. 72 5. 40 4. 15 6.65
Track layers. . . . . . . . . . . . . . . . . . . . . . . . . 7.37 5.92 4. 55 7.37
Timbermen. . . . . . . . . . . . . . . . . . . . . . . . . . 7.37 5. 92 4. 10 ; 7.05
Bratticemen. . . . . . . . . . . . . . . . . . . . . . . . . . 7.37 5. 92 4. 10 : 7.05
6. 64 5.33 4. 10 6. 60
Unclassified day labor . . . . . . . . . . . . . . . . |
442 RECENT ECONOMIC CHANGES
TABLE 16.-HourLY EARNINGS IN THE BITUMINoUs CoAL INDUSTRYa
Hourly earnings
Union fields Non-union fields
Selected occupations -
| |
- !
| Penn- -
Illinois ; Indiana; Ohio Ala syl- Ken west
i bama º tucky | Virginia
V8, Ill 8,
---—— - –– ----------------- *- :-
Pick miners:. . . . . . . . . . . . . . . . . . .
1922. . . . . . . . . . . . . . . . . . . . . . | $0.81 $0.78 $0.84 $0.49 $0.70 || $0.77 $0.95
1924. . . . . . . . . . . . . . . . . . . . . . .85 1.01 .91 .53 .71 .71 . 76
1926. . . . . . . . . . . . . . . . . . . . . . . 85 .97 .81 .49 .70 . 60 . 73
Machine cutters: |
1922. . . . . . . . . . . . . . . . . . . . . . 1. 41 1, 75 1.28 .58 .99 1.09 1. 29
1924. . . . . . . . . . . . . . . . . . . . . . 1. 38 1.61 1. 18 .78 1.05 . 87 1.06
1926. . . . . . . . . . . . . . . . . . . . . . 1. 36 1.51 1. 11 . 83 1.04 .91 1. 11
|
Inside mine: .
Trackmen—
1922. . . . . . . . . . . . . . . . . . .94 .94 .94 .47 .75 .71 . 78
1924. . . . . . . . . . . . . . . . . . .94 .94 .93 .46 . 81 . 61 62
1926. . . . . . . . . . . . . . . . . . .94 .93 .92 .45 . 74 . 57 . 61
Motormen—
1922. . . . . . . . . . . . . . . . . . 1.01 1.01 .94 43 93 69 78
1924. . . . . . . . . . . . . . . . . . 1.01 1.02 . 92 47 85 62 62
1926. . . . . . . . . . . . . . . . . 1.01 1.01 . 81 45 77 60 62
Bratticemen—
1922. . . . . . . . . . . . . . . . . . .94 .94 .94 .42 . 70 , 69 76
1924. . . . . . . . . . . . . . . . . . .94 .94 .93 . 44 , 80 . 62 . 61
1926. . . . . . . . . . . . . . . . . . .94 . 92 .98 . 45 . 75 60 . 61
- |
Outside mine:
Blacksmiths— -
1922. . . . . . . . . . . . . . . . . . .97 .88 .96 . 55 ... 79 .77 .85
1924. . . . . . . . . . . . . . . . . . .97 . 88 .96 . 51 . 82 62 . 69
1926. . . . . . . . . . . . . . . . . . .97 . 88 .94 . 52 . 76 . 59 . 69
Engineers— .
1922. . . . . . . . . . . . . . . . . . .96 .90 .86 . 50 | .75 .78 . 61
1924. . . . . . . . . . . . . . . . . . .97 . 87 .93 .54 .82 57 . 59
1926. . . . . . . . . . . . . . . . . . .96 .84 .92 .45 .81 . 57 . 62
Laborers— |
1922. . . . . . . . . . . . . . . . . . .86 .85 .85 . 33 . 57 . 53 . 58
1924. . . . . . . . . . . . . . . . . . .86 .85 .86 . 28 . 63 .47 . 48
1926. . . . . . . . . . . . . . . . . . .86 .83 .85 . 29 . 56 . 44 . 48
a Figures taken from United States Bureau of Labor Statistics, Bulletin No. 454.
these five years passed, the union rates were progressively less observed
because operators broke their agreements with the union and opened their
mines under non-union conditions, and because an increasing number of
union members took work at rates below the union scale. Wages in the
LABOR 443
industry accordingly fell through 1926. Hourly earnings of tonnage
workers throughout the industry were 85 cents in 1922, 78 cents in 1924,
and 75 cents in 1926; and the average hourly earnings of inside and out-
side day workers were, for the same years, 75 cents, 70 cents, and 66
cents, respectively."
Throughout this period, hourly earnings were persistently lower in
the non-union than in the union fields. The salient facts of this condition
are shown in Table 16. The division between union and non-union
area is not so sharp as appears in this table. Pennsylvania, which is
partly unionized, is included in the non-union group because it has in the
past few years become increasingly non-union and because rates of wages
in the state are now more determined by conditions of the competitive
market than by the union scales of wages.
It is probable that wages throughout the industry are lower now than
they were in 1926. In the late summer of 1928, the union for all practical
purposes abandoned the scales of the Jacksonville agreement, authorized
the district organizations to make their own agreements with the opera-
tors, and is reported to have settled with the union operators of Ohio
for rates 33% per cent below the 1923 scale and in Illinois at a reduction
of 18.7 per cent.
Anthracite Coal.-The anthracite coal industry is localized in one
small area in Pennsylvania and is practically altogether unionized.
Wages are fixed almost exclusively by negotiations between the union,
the United Mine Workers, and the anthracite operators, and occasionally
by the awards of arbitration boards. The movement of wage rates in the
industry shows none of the vagaries of the confused and demoralized
soft coal industry. Statistics collected independently by two agencies,
the United States Bureau of Labor Statistics” and the National Industrial
Conference Board,” come to much the same conclusions. Hourly
earnings for all workers in the industry, excluding contract miners’
laborers stood in April, 1927, 194 per cent above the hourly rate in June,
1914. While the Bureau figures indicate a greater rise from 1920 to
1924 than do the statistics of the Conference Board, the discrepancies
are mainly attributable to the fact that the Bureau pay roll period was
the last half of March, 1920, and the Board's October, 1920. Again the
lower average hourly earnings for all workers in the Board's report is in
part explained by the omission of the hourly earnings of contract miners'
laborers, who, in 1924, had average hourly earnings of 97 cents. The
hourly earnings of contract miners are reported by the Board as $1.20 in
December, 1924, and by the Bureau as $1.43 during the last quarter of
the same year.
16 United States Bureau of Labor Statistics, Bulletin No. 454.
17 Ibid., Bulletins No. 279 and No. 416.
18 Wages in the United States, 1914–1927, New York, 1928, Chap. W
444 RECENT ECONOMIC CHANGES
TABLE 17.--HourLY EARNINGS OF ALL WAGE EARNERS IN THE ANTHRACITE CoAL
INDUSTRY
|
National Industrial ||

Conference Board
United States
|
Period, last half of L (less contract Year Bureau of Labor
miners' laborers) | Statistics
|
|
June, 1914. . . . . . . . . . . . . . . . $0.28 1919. . . . . . . . . . . . . . . . . . . . . . $0.60
October, 1920. . . . . . . . . . . . . . . .76 1920. . . . . . . . . . . . . . . . . . . . . . l .63
March, 1921. . . . . . . . . . . . . . . . . 76 1922. . . . . . . . . . . . . . . . . . . . . . .80
June, 1921. . . . . . . . . . . . . . . . . 75 1924. . . . . . . . . . . . . . . . . . . . . . .92
October, 1921. . . . . . . . . . . . . . 74
July, 1923. . . . . . . . . . . . . . . . . 75
December, 1923. . . . . . . . . . . . . .83 t
December, 1924....... . . . . . .83 |
April, 1927. . . . . . . . . . . . . . . .
Full-time Hours of Labor.—Measurement of the length of the full-
time or nominal work-week is likely to involve some error because of
the confusion between the nominal and actual hours of work. In busy
periods the two figures will closely approximate one another, but in
slack times they may be far apart. In reporting full-time hours per week
there is some evidence that accurate allowance is not always made for
short time and for overtime. Comparison between various series of
full-time hours per week does not indicate, however, that the errors so
introduced are large or that they have any discernable bias during periods
of rising and falling business. As the basis for the computation of piece

TABLE 18.-FULL-TIME HOURS PER WEEK
e National Industrial | United States Bureau of Labor Statistics
United States -
Conference Board
Year Census of Manufacturing . Union buildi
Manufactures” Industries All union” * 1Ing
1909 . . 57.3
1914. . . . . . . . . . . . 55.6 c55. 0 48.9
1919 . . 51.2 * - * * * *
1920. . . . . . . . . . . . & © - 50.0 45.8
1921. . . . . . . . . . . . 50.7 49.7 45.9
1922. . . . . . . . . . . . 50. 0 46. 1
1923. . . . . . . . . . . . 51. 1 50.0 46. 1
1924. . . . . . . . . . . . . 49.8 45.9 43.9
1925. . . . . . . . . . . . 49. 9 45.5 44.0
1926. . . . . . . . . . . . . 49.8 45.4 43.8
1927. . 49. 6 45.2 43.7
| |
* Computed from the census classified statistics of hours, by assuming from 1919 to 1923 the
group over 60 hours to be 60 hours and the group of 44 and under to be 44 hours; for the census years
1909 and 1914, the group over 72 hours is assumed to be 72 and the group 48 and under to be 48 hours.
The error so introduced is slight and has the effect of understating the nominal week in the early years.
* Computed from index numbers published by the United States Bureau of Labor Statistics, Bulle-
tin No. 457, for the years 1914 to 1920.
* July, 1914.
LA BOR 445
and time rates of wages and as a measure of the volume of available
leisure for the working population of the country, full-time hours per
week is a statistical series of considerable importance and interest.
Changes in the nominal week since the war are presented in Table 18.
They show, for manufacturing industries, a reduction in the nominal
week of roughly five hours from 1914 to the present and they also show
that prevailing hours are now around 50 a week. The union full-time
week is nearly four hours less a week than in 1914, and started in that
year much below the nominal week in all manufacturing industries.
The union nominal week in the building industry appears to be about
two hours less than in 1914, and is still falling as a result of the 40-hour
movement in that industry. A large part of the building trades was
already on a 44-hour basis in 1914, so that the reduction in their nominal
week has been slower than for the remainder of industry. The nominal
week of the bricklayers was 44.6 hours in 1913 and 43.8 in 1927; of the
painters, 45.1 in 1914 and 42.6 in 1927; and of building laborers, 47.2
and 44.8 in the same two years.
The largest reduction in hours seems to have been in the iron and
steel industry, where the nominal week was 66 hours in 1913, 63 in
1920, and 54 in 1926. Hours in the men’s clothing industry dropped
from 52 in 1913 to 44.3 in 1926; and in cotton goods they fell from 57.3
in 1913 to 51.8 in 1920, but rose again to 53.3 in 1926.”
Labor Costs.-Statistics of labor cost are not available in any useful
quantity. Light on the probable movements of labor cost can best be
obtained from, an examination of the data on per capita output presented
in the following section of this chapter. The matter of labor cost is,
however, so closely connected with that of wages and hours that it
merits some additional slight discussion at this point. From the peak
of business activity in 1920 to the bottom in 1922, there was a substantial
reduction in labor cost owing to the increased per capita output of labor
and to a reduction in the rate of wages in manufacturing industries that
must have been greater than 25 per cent.” After 1922, hourly earnings
in the manufacturing industries rose until 1927, probably between 10
and 15 per cent. But this rise in earnings was accompanied by an
uninterrupted rise in the per capita output of labor, at a rapid rate until
1925 and more slowly in the years 1926 and 1927. Since 1922 it is more
than likely that labor cost has continued to fall through further reductions
in the rates of wages, but that earnings have been sustained by the increas-
ing per capita Output.
19 Bulletins, United States Bureau of Labor Statistics.
* Hourly earnings in the manufacturing industries decreased between 20 and 25
per cent from 1920 to 1922; but, since hourly earnings are a function of both the rate
of wages and of output, it is clear that, in a period of rising per capita output, rates
must necessarily have had a greater reduction. How much, it is impossible to
determine.
446 RECENT EconoMic changes
These conclusions appear, in some degree, to be supported by what
may be regarded as an indirect measure of relative labor cost. The
percentage that total wages are of value added by manufacture seems,
particularly in the period since 1919, to move up and down with changes
in the output of labor. The category of “value added by manufacture”
is itself composed of so many items that changes in the relation between
wages and value added may in part be due to variations in constituents
other than wages.
appear to be the case.
tabulation.
For the period since 1919, however, this does not
The two series are presented in the following
Per cent Per cent
wages of Per capita wages of Per capita
Census year value added output Census year value added output
by manu- (1899 = 100)b by manu- | (1899 = 100)b
facture” factured
|
1899. . . . . . . . . . . . . . . 41.6 100.0 1919. . . . . . . . . . . . . . 42. 1 104.5
1904. 41.5 104.0 1921. . . . . . . . . . . . . . 44 . 8 107.3
1909. . . . . . . . . . . . . . . 40. 2 109 . 6 | 1923 42.7 132. 5
1914. 42.0 108.5 | 1925. . . . . . . . . . . . . . 40. 1 145.4
| 1927. . . . . . . . . . . . . . 39. 3 149.5
* United States Census of Manufactures. * See next section.
The data in this table are clearly not comparable over long intervals,
since so many factors in the situation have changed to an unknown degree.
From 1919 on, they appear to run true to form. It is at first surprising
that the percentage that wages are of value added by manufacture
should have stood so high in 1921. Per capita output did not have its
substantial rise until 1922, and it was, probably, not until 1922 and 1923
that industry had fully adjusted itself to more efficient methods of
manufacture.
III. THE PRODUCTIVITY OF LABOR21
The measures of the per capita output of labor considered in this
section are not measures of the specific productivity of labor.” They
are the results of comparisons between the total physical output of
industry and the number of wage earners employed in producing it.
They are not indicative of the changing efficiency of labor. Such
measures could be derived from comparisons between the output of
industry and the number of man-hours worked by labor. But
* The material for this section was collected and prepared by Woodlief Thomas,
formerly of the Division of Research and Statistics of the Federal Reserve Board.
* For an interesting attack on this aspect of the problem, see C. W. Cobb and
P. H. Douglas, “A Theory of Production,” American Economic Review, Supplement,
Vol XVIII, No. 1, March, 1928, p. 139.
LA BOR 447
statistics of man-hours are not available until very recent times and then
only for a limited number of industries. Where both measures are to
be had, they show wide discrepancies. Thus railroad traffic volume per
worker increased by 56 per cent from 1899 to 1925, but traffic units per
man-hour have been estimated to have increased in the same period
by 100 per cent.”
Changes in the per capita output of labor, as in total output, may
clearly be due to a variety of factors.” In the long run, the levels of
education and skill of the working population of a country, the growth
of capital and the use of machinery, the alertness and ingenuity of man-
agement, and the state of science may determine both the direction and
the rate of change of industrial production. During shorter periods,
accidental or abnormal factors, such as apparently operated from 1916
to 1921, like sudden changes in the length of the work-week, marked
variations in the efficiency of labor, resulting either from the state of
mind of the workers, from the carelessness of management, or from the
replacement of experienced by inexperienced workmen, may conceivably
not only interrupt the prevailing trend of production, but also change its
direction. The segregation and weighing of all of these factors, or even
of the most important of them, are not possible in the present state of
knowledge. The most that can be done is to appeal to reasonable
hypotheses and to informed common knowledge.”
28 United States Bureau of Labor Statistics, Monthly Labor Review, March, 1927,
p. 1.
* See Productivity per Worker, Chap. II, Industry, Part 1, p. 81; Part 2, p. 103;
Chap. III, Construction, p. 248; Chap. IV, Transportation, Part 1, p. 285; Chap. VII,
Management, pp. 512-514; Chap. VIII, Agriculture, p. 602.
* Both of the elements of the formula for deriving per capita output have serious,
if irremediable, defects. The measures of the total output of industry are better for
the mining and transportation industries than they are for manufacturing and agri-
culture; and they do not include the highly important construction industry, for which
there are no satisfactory statistics of either physical output or employment. They
cannot, by their very nature, take into account changes in the character and quality
of the products of industry. Since the statistics of the production of raw materials
or of commodities in their early stages of fabrication are more numerous than statistics
of highly fabricated goods, the measures are too heavily weighted for raw materials
and, consequently, underestimate the rise in total output. In general, there is less
material for the new and growing industries than for the old established ones, whose
rate of growth has probably already slackened before the compensating influence of
the growth of the young industries can make itself felt in the measure of total output.
And it is, finally, not always certain that the changing importance of industries is
adequately allowed for in the weights used for the computation of average changes in
total production.
The employment indexes are probably superior for the manufacturing and trans-
portation industries than for the rest. For manufacturing they are much more
reliable in the later than in the early years, although one important series, that of the
United States Bureau of Labor Statistics, appears to exhibit a downward bias even
during the latest years. All of the series, finally, register the amount of work done
448 RECENT ECONOMIC CHANGES
Index Numbers of Production.—The most comprehensive index of
production now available is an index of manufactures compiled on the
basis of data taken from the biennial censuses of manufactures.” Cur-
rent measures of the growth of manufactures are also provided by the
annual index of the Harvard Economic Committee and by the monthly
index of the Federal Reserve Board. Both of these indexes have been
used with the census index as a basis for interpolation for intracensal
years and for extrapolation for the years since 1925, the date of the last
published census. It is believed that the resultant series, shown in
Table 19, is a reasonably accurate measure of annual changes in manu-
facturing output. The census index is made up of 138 different products
Series, representing production in 55 industries, with an aggregate value
added by manufacture equal to nearly 50 per cent of the value added
for all industries. Both directly and indirectly the series represents
groups of industries with 90 per cent of the total value added by manu-
facture. The indexes used for the noncensus years represented about
40 per cent of total production directly and another 40 per cent indirectly.
Making index numbers of agricultural production involves difficulties
that cannot always be overcome. Shifts from the production of dairy
and other animal products on a small scale to large-scale commercialized
operation, the increasing output of commercial fruit and vegetable crops,
by the number of people employed and not by the time worked, and this procedure, as
it has already been indicated, may involve misleading conclusions.
The commodities that enter into the aggregate production of a country cannot all
be recorded in the same unit. The simplest method of reducing all goods to a common
denominator is to express them in pecuniary units. Variations in the resultant aggre-
gates, however, would then reflect changes both in physical output and in prices.
Correction for price changes, for many well-known reasons, raises as many problems as
it solves. Resort must then be had to the device of the index number, which is an
average of the measures of relative changes in the items of a heterogeneous series.
In place of aggregates of incommensurable units, such as bushels, feet, tons, trucks,
and so on, the index number registers the weighted average of all changes in the num-
ber of units of output of the commodities under consideration. Even the construction
of index numbers involves the difficult problem of discovering the importance of each
industry, so that the changes in the output of each product may be properly weighted.
In making the index numbers of this section, value added by manufacture or total
value of output were used as weights.
For descriptions of the methods of constructing production indexes, see Day and
Thomas, The Growth of Manufactures, United States Census Bureau, Mono-
graph No. IX, Chapters I and II and Appendix A; Woodlief Thomas, “Construction
of an Index Number of Production,” Journal of the American Statistical Association,
September, 1927; Walter W. Stewart, “An Index Number of Production,” American
Economic Review, March, 1921; E. E. Day, W. M. Persons, and E. D. Coyle, “An
Index of the Physical Volume of Production,” Review of Economic Statistics, Sep-
tember, 1920–January, 1921.
* Compiled for the Census Bureau by E. E. Day and W. Thomas, continuing the
similar index constructed for the quinquennial censuses by Persons and Coyle. See
Census Monograph No. IX.
LABOR 449
TABLE 19.-INDEX of PRODUCTION OF MANUFACTUREs, 1899–1927°
|
Index | Index Index Index
Year (1899 = Year (1899 = Year (1899 = | (1919 =
100) 100) 100) 100)
i
1899b. . . . . . . . . . . . . 100. 0 || 1909b . . . . . . . . . . . 159.2 || 1919 b . . . . . . . . . . . 213.7 100.0
1900. . . . . . . . . . . . . . . 101 1910. . . . . . . . . . . . 162 1920. . . . . . . . . . . . 221.4 103.6
1901 . . . . . . . . . . . . . . 112 1911 . . . . . . . . . . . . 155 1921b. . . . . . . . . . . 169, 7 79. 4
1902. . . . . . . . . . . . . . . 122 1912. . . . . . . . . . . . 179 1922. . . . . . . . . . . . . 222.2 104.0
1903. . . . . . . . . . . . . . 124 1913. . . . . . . . . . . . 185 1923b . . . . . . . . . . . 260. 7 122.0
1904b. . . . . . . . . . . . . . 122. 2 || 1914b . . . . . . . . . . . 169.4 || 1924. . . . . . . . . . . . . 244.7 114.5
1905. . . . . . . . . . . . . . 144 1915. . . . . . . . . . . . 188 1925b. . . . . . . . . . . 274. 6 128.5
1906. . . . . . . . . . . . . . . 154 1916. . . . . . . . . . . . * | *… . . . . . ...? 133.0
1907. . . . . . . . . . . . . . . 153 1917. . . . . . . . . . . . 224 || 1927....... . . . . . 278.7 130.4
1908. . . . . . . . . . . . . . . 129 1918. . . . . . . . . . . . 220
a Compiled from index for census years (1899, 1904, 1909, 1914, 1919, 1921, 1923, 1925), computed
by Day and Thomas, with interpolations based, 1899–1919, on Day's (Harvard annual) index, and
1919–1925 on the Federal Reserve Board’s index, and extrapolations, 1926 and 1927, based on the
Federal Reserve Board's index with allowances for slight downward bias noted between 1919 and
1925.
* Census years.
the decrease in home gardens in towns and cities, and the volume of
farm products consumed by farmers' families are some of the items for
which it is not easy to account. The index of agricultural production
here used was adapted by Dr. E. Dana Durand, of the Department of
Commerce, from indexes compiled by the Department of Agriculture.”
It is probable that this series understates the growth of agricultural
output over long periods of time.
Annual indexes of mining production are more comprehensive than
those for any other branch of industry, owing partly to the adequate
statistics furnished by the United States Bureau of Mines, partly to the
fact that comparatively few products make up a dominant portion of the
aggregate output of minerals, and finally to the relative simplicity of
the products. The present index of mineral production was constructed
by Dr. Durand. It covers 10 products—6 metals and 4 fuels—with an
aggregate value in 1919 equivalent to nearly 95 per cent of the total value
of all minerals produced in the United States.
Measures of railroad performance can be obtained from the elaborate
statistics published by the Interstate Commerce Commission. The
index of railroad performance used here is an average of relatives for
passenger-miles and freight-ton miles, weighted on the basis of the respec-
tive revenues received from these two types of traffic.”
27 The index from 1899 to 1920 was constructed by Mordecai Ezekiel, from statis-
tics of physical production of crops, livestock, and animal products, and that from 1924
to 1926 by Louis H. Bean, from statistics of gross farm income, adjusted for price
changes per group.
28 This index was prepared by Dr. E. Dana Durand, of the Department of
Commerce.
450 RECENT ECONOMIC CHANGES
Employment.—For the manufacturing industries there are now
available a great mass of current data on employment which, together
with the material contained in the biennial censuses of manufactures,
affords an adequate view of fluctuations in employment. For the period
before 1914, the supply of information is not so plentiful, and conclusions
regarding the earlier period are, consequently, less certain. The annual
index of the number of persons engaged in manufacturing from 1899 to
1927 is shown in Table 20. This index, based on data for the census
TABLE 20.-NUMBER of PERSONs ENGAGED IN MANUFACTURE, BY YEARs, 1899–1927."
(In thousands)
Year Wage earners sº Total (1 º 100)
— — — — — — — — — ---. -- - - - - -
|
1899b. . . . . . . . . . . . . . . . . . . . . . . 4, 713 577 l 5, 290 100.0
1900. . . . . . . . . . . . . . . . . . . . . . . . 4,968 612 5, 580 º 105
1901. . . . . . . . . . . . . . . . . . . . . . . . 5, 184 647 5,831 110
1902. . . . . . . . . . . . . . . . . . . . . . . . 5,554 683 6, 237 118
1903. . . . . . . . . . . . . . . . . . . . . . . 5,784 713 6,497 123
|
1904°. . . . . . . . . . . . . . . . . . . . . . . 5,468 746 6, 214 - 117. 5
1905. . . . . . . . . . . . . . . . . . . . . . . . 5,906 820 6,726 127
1906. . . . . . . . . . . . . . . . . . . . . . . . 6, 251 894 7, 145 135
1907. . . . . . . . . . . . . . . . . . . . . . . . 6,483 967 7, 450 | 141
1908. . . . . . . . . . . . . . . . . . . . . . . . 5, 714 1,000 6, 714 i 127
1909" . . . . . . . . . . . . . . . . . . . . . . . 6, 615 1,064 7,679 145.1
1910. . . . . . . . . . . . . . . . . . . . . . . . 6,807 1,079 7,886 149
1911. . . . . . . . . . . . . . . . . . . . . . . 6,855 1,095 7,950 150
1912. . . . . . . . . . . . . . . . . . . . . . . . 7, 167 1, 109 8,276 156
1913. . . . . . . . . . . . . . . . . . . . . . . . 7,277 1, 123 8,400 1.59
1914". . . . . . . . . . . . . . . . . . . . . . . 7,036 1, 127 8, 163 154.3
1915. . . . . . . . . . . . . . . . . . . . . . 7, 200 1,270 8,470 160
1916. 8, 550 1,410 9,960 187
1917. . . . . . . . . . . . . . . . . . . . . . . . 9, 220 1, 550 10,770 204
1918. . . . . . . . . . . . . . . . . . . . . . . . 9, 420 1,700 11, 120 210
1919b “. . . . . . . . . . . . . . . . . . . . . . 9,096 1,717 10, 813 | . . . . .
1919° . . . . . . . . . . . . . . . . . . . . . . . 8,990 1,679 10, 669 204.4
1920. . . . . . . . . . . . . . . . . . . . . . . . 9,080 1,620 10,700 205. 0
1921”. . . . . . . . . . . . . . . . . . . . . . . 6,938 1, 313 8, 251 158. 2
1922. . . . . . . . . . . . . . . . . . . . . . . . 7,630 1,400 9,030 172.9
1923°. . . . . . . . . . . . . . . . . . . . . . . - 8,768 1,499 10, 267 196.7
1924. . . . . . . . . . . . . . . . . . . . . . . . | 8, 120 1,480 9,600 184.0
1925°. . . . . . . . . . . . . . . . . . . . . . . 8, 384 1,474 9, 858 | 188.9
1926. . . . . . . . . . . . . . . . . . . . . . . . 8,500 1,475 9,975 191. 1
1927. . . . . . . . . . . . . . . . . . . . . . . . 8, 260 1,470 9,730 186.4
* Census year figures, with interpolations based on annual indexes of employment, compiled 1899–1914
by Professors Cobb and Douglas, 1914–1919 by Woodlief Thomas, and 1919–1925 by Federal
Reserve Board, and extrapolations, 1926 and 1927, on basis of Bureau of Labor Statistics index, with
allowance for downward bias.
* Census years.
• One set of figures includes data from establishments with product valued at over $500, and the other
from only those establishments with products of over $5,000. Index numbers are computed from
comparable figures.
LABOR 451
years 1899, 1904, 1909, 1914, 1919, 1921, 1923, and 1925, was con-
structed for the period 1899 to 1914 by Cobb and Douglas.” The
index from 1914 to 1919 was prepared by Woodlief Thomas from data
collected by the United States Bureau of Labor Statistics and the New
York State Department of Labor. From 1919 on, the index of the Federal
Reserve Board was used.*0
The statistics of the number of workers in railroad transportation
were taken from the reports of the Interstate Commerce Commission and
represent total employees of railroads in the United States. In some
years estimates were made on the basis of reports for Class I roads.
In agriculture and in mining, no such long and continuous series of
employment data are to be had. Actual counts of the number employed
can be obtained only for the census dates and these are less frequent
than for manufacturing industry. For agriculture and mining, therefore,
the use of the employment data are more valid in long than in short-
time comparisons.
Per Capita Output.—Per capita output for each of the four main
divisions of industry, and for all combined, is shown in Table 21 for the
periods indicated.” From 1899 to 1925 the physical volume of produc-
tion of farms, factories, mines, and railroads in the United States increased
by 136 per cent while, population grew by slightly over 50 per cent. Thus
production per capita of population is now nearly 60 per cent greater
than it was in the final years of the nineteenth century. The volume of
output for each worker engaged directly in production has, during the
same period, increased by 76 per cent. The increase was not an even one
over the whole of the period, since output per worker increased 18 per
cent in both the first and second decades, and 27 per cent in the six years
from 1919 to 1925. -
The greatest rise over the whole period was in the per capita produc-
tion of minerals, which increased 99 per cent. This rise reflects chiefly
the rapid increase in petroleum output. The process of producing
petroleum requires a relatively small supply of labor, and the value of
output per person is greater than that for any other mineral product.
The rapid growth in petroleum production, consequently, has added
proportionately more to the total output of minerals than it has to the
* Op. cit., p. 147.
30 For the method of constructing this index, see Federal Reserve Bulletins, Decem-
ber, 1923, and May, 1925. Since 1923 the Board's index has been made from practi-
cally the same data as that of the Bureau of Labor Statistics and the fluctuations of the
two indexes are in substantial agreement.
* Production in agriculture and in mining fluctuates widely from year to year, in
the former because of the weather and in the latter largely on account of strikes. To
level out these wide fluctuations and to make the statistics of all four groups compar-
able, the statistics are presented in the table in the form of three-year averages.
452 RECENT ECONOMIC CHANGES
TABLE 21.-INCREASE IN PRODUCTIVITY OF MAJoR BRANCHEs of INDUSTRY
sº- of * Index for end of period Weight
(thousands) (beginning = 100) value at
º | begin- º
Period and branch . wº
Begin- End of Outputb |(millions (end)
ning of na o | Workers | Outputa per of dol-
! - period
period worker lars)
––– - - - - - - - -- - - - - -----— |
|
1898–1900 to 1908–1910:
Agriculture. . . . . . . . . . . . . . 10,700 11,400 || 106.5 113 106 3,500 3,955
Mining. . . . . . . . . . . . . . . . . 600 | 1,010 || 168.5 190 112.5 600 || 1 , 140
Manufactures. . . . . . . . . . . 5,300 7,430 || 140 150 107 4,830 || 7, 240
Railways....... . . . . . . . . . 970 1, 575 || 162.5 185 114 1,300 2,405
Total or average. . . . . . . 17, 570 21,415 122 144 118 10, 230 14,740
1908–1910 to 1918–1920: |
Agriculture.............. 11,400 | 11,300 99 119 120 6, 100 || 7, 259 .
Mining. . . . . . . . . . . . . . . . . 1,010 1,050 104 145 140 1, 240 1,798
Manufactures. . . . . . . . . . . 7,430 c 10,930 147 145. 5| 99 8, 530 | 12,410
Railway..… 1, 575 2,035 129 162 125.5 2,390 3,872
Total or average. . . . . . . 21,415 25,315|| 118 139 117. 5 18, 260 25, 339
1918–1920 to 1924–1926:
Agriculture. . . . . . . . . . . . . . 11, 300 | 10,700 95 114 120 15,700 17,898
Mining. . . . . . . . . . . . . . . . . 1,050 | 1,050 || 100 127 127 3, 175 || 4,032
Manufactures. . . . . . . . . . . c10, 780 cQ,810 92.5 122.5 134.5 24, 750 30, 320
Railways................ 2,035 | 1,860 91.5 100 109 5,040 5,040
Total or average. . . . . . . . 25, 165 23,420 93 118 127 48,665 57, 290
1898–1900 to 1924–1926:
Agriculture”. . . . . . . . . . . . . 10,700 | 10,700 || 100 153 153 3,500 5,355
Mining. . . . . . . . . . . . . . . . . 600 1,050 || 175 348 199 600 2,088
Manufactures. . . . . . . . . . . 5,300 c9,950 || 189 268 142. 5 || 4,830 | 12,940
Railways. . . . . . . . . . . . . . . . 970 1,860 || 192 299 156 1,300 || 3,887
Total or average. . . . . . . 17, 570 || 23,560 134.5 236 176 10,230 24, 270
Mining, excluding petroleum... 576 858 150 244 163 | . . . . . . . . . . . . . .
Petroleum. . . . . . . . . . . . . . . . . . . 24 192 800 1, 268 158 | . . . . . . . . . . . . . .
* Averages for all branches computed by weighting component indexes according to the relative
importance of the several branches in 1899, as determined by value of product, given in next to last
column of table.
* Averages for all branches computed by dividing the average index of increase in output by the
actual ratio of total workers at end of each period to total at beginning. The figure exceeds the weighted
average of the indexes of output per worker in the several branches, because the largest increases in
number of workers occurred in those branches in which average value of output per worker was relatively
larger.
* The differences in the figures given for number of persons employed in manufactures for 1919
and 1925 are due to changes in the size of establishments covered, and to certain exclusions of industries
formerly reported. The 1925 figure, for comparison with 1899, was estimated from the percentages of
change from census to census.
number of persons engaged in mineral production, and thus accounts for
the rapid increase in the per capita production of minerals.
The general trend of agricultural production during the century has
shown practically the same rate of growth as population and has not
varied widely from this rate for any long period of time. The number of
LABOR - 453
CHART 1-GROWTH IN PRODUCTION PER WORKER, 1899–1925
Index numbers for 1925 with 1899 equaling 100
OUTPUT AND WORKERS
O 100 200 300 400
|
MANUFACTURE-É% Paºl
—
AGRICULTURE ---- sº m ºf
zz”
M | N | N G - * * * * -e ºs º º ºs ºft
T RA N S PO RTAT | O N ſ?!
zz”.
TOTAL - - - - - - - - - - %
OUTPUT PER worker
O 100 200 3OO 400
MANUFACTURE ---
AGRICULTURE----#3
MINING ----------É%
TRANSFORTATION
TOTAL ----------
farm workers increased slightly in the first decade of the century, but
has subsequently decreased by about the same amount. The produc-
tivity of agricultural workers had its smallest growth in the decade from
1899 to 1909 and its largest in the postwar years.
Over the whole period, railroad traffic volume per worker increased
56 per cent, a rise slightly in excess of the increase in agriculture and
manufacturing. Both the number of workers and the volume of traffic
increased very rapidly during the first decade, while per capita output
rose 14 per cent. In the second decade, traffic volume and number
employed grew more slowly, but per capita output rose 25 per cent.
From 1919 to 1925, there was a decrease in the number of employees
and practically no change in traffic volume. -
Productivity in Manufactures.—With regard to the postwar period in
American economic history, beginning in 1919 and ending in 1925, the
most striking changes in the productivity of labor took place in the cate-
gory of manufacturing industry. In the first decade of the whole period,
the increase in the per capita output of labor in both mining and railroads
exceeded that of manufactures. The next decade witnessed an actual
drop in manufacturing per capita output at the same time that there
were notable advances in agriculture, mining, and rail transportation.
But in the latest period the rise in manufacturing productivity was far
in excess of that in the remaining three groups. .




















454 RECENT ECONOMIC CHANGES
Much light can be thrown on the nature of the course of total and per
capita output in manufacturing industries by an examination of the
annual statistics given in Table 22. It is seen here that both production
TABLE 22.-PRODUCTIVITY OF MANUFACTURE, BY YEARs, 1899–1927
(Index numbers, 1899 = 100)

Persons Volume of Output
Year *
engaged production per person
1899°. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ." . . . . . . . . . . . . . 100 100 100
1900. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 101 96. 2
1901 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 112 101.8
1902. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 122 103.4
1903. . . . . . . . . . . . . . . . . . . . . . . . - - - - - - - - - - - - - - - - - - - - - 123 124 100. 7
1904*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117. 5 122.2 104.0
1905. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 144 113. 3
1906. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 154 114. 0
1907. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 153 108.5
1908 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 129 101.5
1909". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145.1 159 - 2 109.6
1910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 162 108.7
1911 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 155 103.4
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 179 114.6
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.59 185 116. 3
1914*. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156. 2 169.4 108.5
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 188 117. 5
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 223 119.2
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 224 109 . 8
1918. . . . . . * * * * * * * * * * * * * * * * * * * * * * * * * * * * * . . . . . - - - - - - - 210 220 104.7
1919°. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204.4 213. 7 104.5
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205. 0 221.4 107.9
1921°. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158. 2 169.7 107.3
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172.9 222.2 128.5
1923°. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196. 7 260, 7 132. 5
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 184.0 244. 7 133.0 .
1925°. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188.9 274.6 145.4
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191. 1 284. 2 148. 7
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186.4 278. 7 149.5
* Census years.
and employment dropped in years of industrial recession—1904, 1908,
1911, and 1914—and reached new maximum levels in years of unusual
activity—1903, 1906, 1907, 1909, 1913, and 1915. In 1915 both produc-
tion and employment began to expand rapidly. Production reached
its maximum in 1917, but remained at a high level until 1920. After
1916, however, employment began to increase more rapidly than produc-
tion, and per capita output began to fall. From the peak of per capita
output reached in 1916, productivity receded through 1917 and 1918,
and reached its low in 1919, when per capita output was smaller than in
any year of ordinary industrial activity since 1903. All of the rise since
LABOR 455
1904 was lost in two years, 1918 and 1919. During 1920 and 1921
productivity rose, but only slightly.
CHART 2.—THE GROWTH OF MANUFACTURES, 1899–1927
Index number, 1899 = 100
O INDEX NUMBER(1899-100)
350 - *
O - CEWS/MS YAAAZS - * _ćr
300 /*T e”
#ss 2^ /~
HORSEPOWER
250 > v
^.PHYSICALOUTPUT
Aſ
e' e”
2OO *
150 TI
PERSONS ENGAGED
OUTPUT PER PERSON
"Yº || ||
Q
#4. A Y \,\ |__
|OO © ^y y-
~/
75
{899 |904. { 1909 1914. 1919 192] 1923, 1925 1927
The startling and unexpected change came in 1922. Total manu-
facturing output was then as large as in 1920, but employment was much
Smaller than in any year since 1915. Output per person then increased
by 20 per cent. Not only was this the largest increase that had ever
occurred in any single year, but it also brought the productivity of
manufacturing to a level higher than any reached in the years preceding.
In 1923 the rate of increase of productivity slackened and there was a
rise of 3 per cent. In 1924, a year of recession, both total output and
employment were reduced and there was no change in productivity.
But 1925 was again an exceptional year, showing an increase in per
capita output of 9 per cent. Thus the total increases in the four years
since 1921 amounted to more than 35 per cent. Changes in 1926 and
1927 were slight.”
*In view of the probable error in the estimates for 1926 and 1927, since there are
no census figures for any year after 1925, the changes recorded for these two years are
too small to be significant.



456 - RECENT' ECONOMIC CHANGES
A satisfactory interpretation of the unusual increases in productivity
in 1922 and in 1925 should, of course, take into account the fact that they
represented, in part at least, the recovery from a condition of abnormally
low per capita output, and that the drop in productivity in 1917, 1918,
and 1919, in a measure interrupted an upward trend. The figures indi-
cate, however, that had the rate of increase of the period 1899 to 1916
continued, output per worker in 1922 would have been below the level
actually achieved in that year. In 1916, the peak year in the period
beginning 1899, per capita output was 19 per cent greater than in 1899.
This rise took place over an interval of 17 years. From 1916 to 1925, a
period of nine years, productivity increased 22 per cent. The increase,
likewise, for the 16-year period from 1909 to 1925, was 33 per cent, as
compared with 10 per cent from 1899 to 1909. The average annual rate
of increase for the later period is twice the annual increment during the
first decade. Again, by regarding 1922 as a year of recovery, and by
comparing the increase in output in 1922 over the year preceding with
increases in other years of recovery, it is found that the year 1922 stands
by itself. Thus, after depression years there were increases in produc-
tivity of 9 per cent in 1905, 8 per cent in 1909, 11 per cent in 1912, and 9
per cent in 1915; whereas the rise in 1922 was 20 per cent.
Productivity by Industries.—Much that is obscure in accounting for
the variations in total and per capita output may be clarified by inspec-
tion of the course of production in some of the branches of the general
category of manufacturing industry. It has already been seen how
breaking up the mineral group into its parts revealed the important rôle
played in the growth of mining as a whole by the development of the
petroleum industry. Similar data for the analysis of manufactures are
presented in Table 23.
This table gives indexes of production, persons engaged, horse power
installed, and output per person, for census years by major groups of
manufacturing industry. The group indexes are not computed from the
total figures reported by the census for these groups, but for selected
industries in each group. The industries selected are those for which
statistics of physical volume of product are available. About 50 per
cent of all industries, measured either by number of persons engaged or
by value added by manufacture, are included in the index, but among the
several groups this proportion varies from 20 per cent for paper and
printing to practically 100 per cent for tobacco products.” In a few
cases the index is not typical of the entire group, but the data on physical
volume of production, persons engaged, and horse power cover the same
industries and are, consequently, comparable with one another. In
general, the indexes for the tobacco, textile, vehicles, nonferrous metals,
* These percentages for each group, together with other information regarding the
representativeness of the index, are given in Day and Thomas, op. cit., Appendix A.
LA BOR 457
TABLE 23.−PRODUCTIVITY OF MANUFACTURE, BY INDUSTRIAL GROUPs IN CENsus
YEARs, 1899–1925
Index numbers: Base, 1919 Per cent
of in-
crease,
1925 1923 1921 1919 1914 1909 1904 1899 |1899–1925
All industries:
Physical volume of production. . . . . 128.5' 122.0|| 79.4|100.0| 79.3| 74.5| 57. 2 46.8 174. 6
Number of persons engaged. . . . . . . . 92.4| 96.2 77.3|100.0|| 76.4| 71.0|| 57.5| 48.9 89.0
Primary horse power . . . . . . . . . . . . . 121.8||112. 8] . . . . . 100.0|| 76.0| 63. 3| 45.7| 34.2 256. 1
Output per person engaged. . . . . . . . 139. 1' 126.8|102.7|100.0|| 103.8'104.9 99.5| 95.7 45.3
INDUSTRIAL Groups
Iron and steel:
Physical volume of production. . . . . 131. 5, 131.2| 56. 6 100.0|| 71. 1 75.3| 51.8| 43.2 204.4
Number of persons engaged. . . . . . . . | 95.6|102. i 65. 5 100.0| 68.2| 58.3| 46.3| 38.9 145.8
Primary horse power . . . . . . . . . . . . . 114. 1|110.3| . . . . . 100. Q| 71. 1,59. 1.43.Q. 28.0 307.5
Output per person engaged. . . . . . . . 137. 6 128.5 86.4|100.0|104.3' 129.2|111.9|111.1 23.9
Nonferrous metals: |
hysical volume of production. . . . . . 129. 8 125. 7| 66.5|100. 0 64.9 60.6|| 44.5| 31.4 313.4
Number of persons engaged. . . . . . . . ſ #3 91.2| 53.6|100.0| 66.4| 61.2| 51.6| 43.3 87.5
Primary horse power . . . . . . . . . . . . . 114.0|117. 5 . . . . . 100.0| 53.8| 44.1 28, 3| 19.8 475.8
Output per person engaged. . . . . . . . 159.9 137.8, 124. 1|100.0| 97.7. 99.0| 86.2| 72.5 120.6
Chemicals and allied products:
Physical volume of production. . . . . 140. 6|125. 1| 94.5/100.0| 70.7. 58.8| 42.9| 30.2 365.6
Number of persons engaged. . . . . . . . 91.8| 95.7| 77. 6|100.0|| 70.3| 60.5| 49.5 42.3 117.0
Primary horse power . . . . . . . . . . . . . 147.1||134.8] . . . . . 100.0|| 72.6|| 49.6|| 35.0 21.9 571.7
Output per person engaged. . . . . . . . , 153.2|130.7; 121.8/100.0|100.6 97.2| 86.7| 71.4 114.6
Stone, clay, and glass products:
Physical volume of production. . . . . . 179. 1 || 155.6| 93.3|100, 0, 113. 5|104.3| 78.9| 67.3 166. 1
Number of persons engaged. . . . . . . . .115. 1|115. 7| 84.1|100.0|110.4| 95.4 81.8 68.4 68.3
Primary horse power . . . . . . . . . . . . . 151. § 124.7| . . . . . 100.0 98.4| 74.9| 44.6| 28.0 441. 1
T Sºput per person engaged. . . . . . . . º 134. 5||110.9|100.0|102.8||109.3| 96.5, 98.4 58. 1
All II, Oer .
Physical volume of production. . . . . 113. 6 110. 1 || 79.9|100.0|110.6|137.3|104.0/106.4 6.8
Number of persons engaged. . . . . . . . 94. 1 98.9| 73.9|100.0| 99.5||113.9| 83.0| 87.4 7.7
Primary horse power . . . . . . . . . . . . . 86.9| 81.9| . . . . . 100.0 92.9| 98.2. 63.2 58.3 49. 1
Output per person engaged. . . . . . . . 120.7|111. 3 108.1|100.0||111.2|120. 5|125. 3|121.7 — 0.8
Paper and printing:
Physical volume of production. . . . . 152.8|137. 1 93.4|100.0| 87.5 69.8 51.9| 36.6 3.17. 5
Number of persons engaged. . . . . . . . 108.8|106, 5 92.4|100.0. 76.5| 65. 2, 56.1| 42.4 156.6
Primary horse power . . . . . . . . . . . . . 131. 1|117.7| . . . . . 100.0| 87.6 70.5| 59. 1 || 41.2 218.2
T ºput per person engaged. . . . . . . . 140.4|128. 7|101.1|100.0%.114.4107.1| 92.5| 86.3 62. 7
eXUlleS : -
Physical volume of production. . . . . 119. 3|122.9} 96.8/100. O. 96.8| 91.9| 71.9| 60.7 96.5
Number of persons engaged. . . . . . . . 104. 5||111.1| 95.0|100.0 89.3| 85.2| 71.7| 63.9 63. 5
Primary horse power . . . . . . . . . . . . . 126.6||116. 7 . . . . . 100.0 83.7| 70.0| 53.9| 43.6 190.4
Output per person engaged. . . . . . . . 114.2|110. 6 101.9 100.0; 108.4|107.9|100.3| 95.0 20. 2
Leather and its remanufactures:
Physical volume of production. . . . . 93.4|105, 6|| 85.2 100.0| 87.4| 87.7| 81.5 69.8 33.8
Number of persons engaged. . . . . . . . 90. 6.. 99.8| 81.8 100.0| 85.7| 84.7 70. 1 || 65.4 38.5
Primary horse power . . . . . . . . . . . . . 106.9|105.9. . . . . . 100. Of 80.5| 69. 1 || 51.2| 40.8 162.0
Output per person engaged. . . . . . . . 103.1 | 105. 8, 104.2|100.0|| 102.0|103.5' 116.3|106.7 — 3.4
Food and kindred products:
hysical volume of production. . . . . 116.4|111. 6] 93.5|100.0, 80.8| 74.8| 65. 1 | 53.0 119.6
Number of persons engaged. . . . . . . . 81. 3| 83.5| 76. 1|100. 0 71.1| 62.7| 53.8| 49.2 65. 2
Primary horse power . . . . . . . . . . . . . 115.8|107.6 . . . . . 100.0| 81.5| 70.4| 60.7| 49. 1 135. 8
Output per person engaged. . . . . . . . 143.2||133. 7|122.9|100.0|113. 6||119. 3|121.0|107.7 33.0
Tobacco manufactures:
Physical volume of production. . . . . 124.4|109.8 95.3|100.0; 76.4| 66.6| 57.8| 46. 3 168. 7
Number of persons engaged. . . . . . . . 79.9| 91.2| 93.4|100.0|116.3|108.9|103.4 86.6 — 7.7
Primary horse power . . . . . . . . . . . . . . 97.0|100.3| . . . . . 100.0, 80. 5| 65.7| 56.7| 51.4 88.7
Output per person engaged. . . . . . . . 155.7|120.41102.0|100.0|| 65.7| 61.2| 55.9 53.5 191.0
Rubber products: |
Physical volume of production. . . . . 158. 8||130.8| 80.0|100.0 32.3| 21.0 . . . . . . . . . . . tº a 9
Number of persons engaged. . . . . . . . 79.7| 80. 5| 62.7|100.0 41. 5. 25. 2. 21.9| 18.7 326.2
Primary horse power . . . . . . . . . . . . . 152.8|140.9| . . . . . 100.0| 46.4. 28.5| 20.2| 16.6 820. 5
Output per person engaged. . . . . . . . 199.2|162.5|127.6/100.0| 77.8 83.3 . . . . . . . . . . . . . . . . . . .
Vehicles for land transportation:
Physical volume of production. . . . . 238. 3 199.5| 76.8; 100.0|| 36.0 15.6 8. 2 4.4, 5, 315.9
Number of persons engaged. . . . . . . . 108.3||114.8| 65.2 100. O. 54.9| 42.5 29.9| 25.4 326.4
Primary horse power . . . . . . . . . . . . . . 182.5|148.9| . . . . . 100. O 51.2| 35. 6 19.5| 13.4|| 1 , 261.9
Output per person engaged. . . . . . . . 220.0|173.8||117.8|100.0; 65. 6. 36.7 27.4| 17.3; 1, 171.7
Ship building:
hysical volume of production. . . . . 7. O 7.9| 30.7|100. O. 7.3| 7. 2; 10.0 9.0 — 22.2
Number of persons engaged. . . . . . . . 13.5| 16.5| 27.8|100. Of 11.8; 10.9| 13.2| 11.9 13.4
Primary horse power . . . . . . . . . . . . . 54.8| 57.4] . . . . . 100.0 20.8 15.9 14.1| 11.2 389.3
Output per person engaged. . . . . . . . 51.9| 47.9|110.4|100.0 61.9 66. 1 75.8 7s.6 — 31 .. 3
|
458 RECENT ECONOMIC CHANGES
leather, chemicals, and stone, clay, and glass groups are more representa-
tive of their whole groups than the indexes for iron and steel, food
products, lumber, and paper and printing.”
In Table 24 changes in the productivity of these groups of industries
during various periods of time are shown. No comparisons are made with
the years 1904, 1914, and 1921 because they were years of industrial
recession in which production per worker was temporarily reduced.
From the beginning of the century to 1925, the greatest advances came
in the automobile, tobacco, smelting and refining, and chemical industries.
TABLE 24.—CHANGES IN PRODUCTIVITY OF MANUFACTURE, BY INDUSTRIAL GROUPs,
For SELECTED CENSUs PERIODs, 1899–1925
(Per cent of increase or decrease (–))

1899 1923 1909 1919 1909 1899
to to to to to to
1925 1925 1925 1925 1919 1909
All industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45. 3 9. 7 32.6 39. 1 — 4.7 9.6
Iron and steel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.9 7. 1 6. 5 37. 6| – 22.6 16.3
Nonferrous metals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120. 6 16.0 61. 5 59.9 1.0 36.6
Chemicals and allied products. . . . . . . . . . . . . . . . . . 114.6|| 17.2 57.6 53. 2 2.9 36. 1
Stone, clay, and glass products. . . . . . . . . . . . . . . . . . 58. 1 15. 7 42.4 55. 6| – 8.5 11.1
Lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8 8.4 0.2 20. 7 – 17.0 — 1.0
Paper and printing. ... . . . . . . . . . . . . . . . . . . . . . . . . 62.7 9. 1 31.1 40.4| – 6.6 24. 1
Textiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. 2 3.3 5.8 14. 2 – 7.3 13.6
Leather and its remanufactures. . . . . . . . . . . . . . . . . — 3.4| – 2.6 | — 0.4 3. 1 — 3.4 — 3.0
Food and kindred products. . . . . . . . . . . . . . . • e s = - - 33.0 7. 1 20.0 43. 2. — 16.2 10.8
Tobacco manufactures. . . . . . . . . . . . . . . . . . . . . . . . . 191.0| 29.3 154.4 55.7 63.4 14.4
Rubber products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 139. 1 99.2 20.0 . . . . . .
Vehicles for land transportation. . . . . . . . . . . . . . . . . 1, 171.7| 26.6 499. 5, 120. Of 172.5 112.1
Shipbuilding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 31.3 8.4 – 21.5 – 48.1 51. 3 – 12.6
If the changes from 1909 to 1925 and from 1923 to 1925 are examined,
it is clear that rubber products should be included among the industries
showing the most rapid rise in productivity. Out of these five industrial
groups, then, three (automobiles, rubber products, and chemicals) are
directly or indirectly associated with the automobile industry, since
much of the growth of the chemical industry may be attributed to the
development of the industry of petroleum refining. The striking increase
in the tobacco group reflects the growth of cigarette production and the
substitution in consumption of the machine-made cigarette for the
hand-made cigar. The rise in the group of stone, clay, and glass products
is, no doubt, associated with the great increase in building construction
* Representativeness is here tested by comparing the change, in census periods, in
the number of wage earners employed in the industries included in the index with
corresponding changes in the industries in the group not included in the index. This
is not necessarily a conclusive test, particularly where increased elaboration of manu-
facture or improved technique has characterized the excluded industries, as, for
instance, in the iron and steel group.
LABOR 459
and consequently in the use of building materials. Thus, in the period
from 1909 to 1919, both the total and per capita output of lumber and
stone, glass, and clay products decreased because of Government restric-
tions on building during the war. But in the following years, 1919 to
1925, the per capita output of both increased.
The advance of nearly 40 per cent in productivity for all manu-
facturing from 1919 to 1925 was shared by all industries, except leather
and shipbuilding. But the shipbuilding industry, which had grown to
large proportions during the war, was, of course, violently reduced in
size after the war. For the rest, the greatest growth was in those indus-
tries—nonferrous metals, chemicals, paper and printing, tobacco, rubber,
and vehicles—which had been growing rapidly in all other periods. It
is interesting to note that, in the period of general decline in per capita
output from 1909 to 1919, productivity increased 63 per cent in tobacco
manufactures, 20 per cent in rubber products, and 173 per cent in vehicles
for land transportation. Again, from 1923 to 1925, when the per capita
output for all manufactures advanced by 9.7 per cent, tobacco manu-
factures increased 29 per cent, rubber products 23, automobiles 27, and
chemical and allied products 17 per cent.
The Period 1925 to 1927.-Until the statistics from the census of
manufactures of 1927 are available, it would be unwise to place too much
weight on the estimates of manufacturing production in those years and
on the changes in per capita output by industry, recorded in Table 25.
It appears from the figures in this table, which represent an approxima-
tion of the course of productivity after 1925, that the precipitate rate
of advance, begun in 1922 and continued through 1925, has perceptibly
slackened and in the latest two-year period was 4 per cent. This was
due, in large measure, to the fact that total production declined toward
the end of 1927 and was, for the whole of the year, only slightly greater
than in 1925.
Most of the decrease in output occurred in automobiles, lumber, and
iron and steel. The textile and leather industries were more active in
1927. The expansion in the production of cigarettes and of petroleum
products continued. Employment declined in every group shown except
shipbuilding, paper and printing, and petroleum refining. Output per
worker rose for most of the groups, with the largest increases in the ship-
building, tobacco, and petroleum industries. The altogether surprising
drop of more than 12 per cent in per capita output in the automobile
industry is unquestionably to be explained by the existence of an unusual
condition in the industry. During most of the last half of 1927, the
Ford plants were not producing automobiles. Although the number
of employees was then reduced, many were retained in the manufacture
of parts, which do not appear in the available records of production. The
operations of many other automobile companies were also consider-
460 RECENT ECONOMIC CHANGES
ably curtailed in the last part of the year and the marked recession in
the activity of this industry had its customary depressive effect on
productivity.
TABLE 25.-PRODUCTION AND EMPLOYMENT, BY INDUSTRIAL GROUPs
(Percentage of increase or decrease (–) 1925 to 1927)
Production Employment Output per
wage earner
Total manufacturing. . . . . . . . . . . . . . . . . . . . . . a0.8 a — 3.0 a 4.0
Iron and steel—group. . . . . . . . . . . . . . . . . . . . . . . . . . . b – 2.5 — 1.8 b – 0.7
Iron and steel industry. . . . . . . . . . . . . . . . . . . . . . — 2.5 — 5.1 2. 6
Nonferrous metals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 — 6.4 8. 0
Petroleum refining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 2 0.6 17. 4
Stone, clay, and glass. . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 — 3.. 6 3. 3
Lumber-group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b11 .. 2 — 10.4 b – 0.9
Lumber industry. . . . . . . . . . . . . . . . . . . . . . . . . . . . – 11.2 — 12.1 0.9
Paper and printing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 1 2.9 4.0
Paper and pulp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 7 — 1. 1 4.9
Textiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b8, 7 — 2.4 b 11.5
Fabrics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 8, 7 — 1. 1 10. 0
Products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * e — 4.6 | . . . . . .
Leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6, 8 — 4.4 11.7
Food. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 , 5 — 1.8 0.3
Tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 8 — 8, 7 28. 5
Automobile tires and tubes. . . . . . . . . . . . . . . . . . . . . . . 4, 5 — 4.9 10. 0
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 19 , 6 — 7.9 — 12.7
Shipbuilding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70, 4 13. 1 50. 5
|
* Without adjustment for bias shown in Table 23.
* Comprehensive group indexes of production not available.
The Nature of the Data.--It has already been noted that the raw
statistical materials used in measuring productivity possess inherent
limitations and peculiarities which merit further consideration. In
general, the indexes of productivity appear to be considerably affected
by temporary factors, particularly by cyclical swings in production.
When total output in industry is relatively large, output per worker is
usually also large. While this concurrence is partly the result of full-
time operation and the free flow of work, it is in larger measure due to
the failure to allow for changes in the number of working hours.” The
unit of employment is the individual worker whose name appears on the
pay roll, regardless of the amount or nature of the work he does. As a
result of this method of measuring productivity, the index of output per
person tends to fluctuate with the index of production. In long-time
comparisons the effect of temporary influences relative to the total
change that has occurred may be small, but in short periods the tempo-
rary effects are probably dominant. Considerable evidence of this
* Investigations have been made by the United States Bureau of Labor Statistics
of changes in the productivity of labor in specific industries, with allowances for
changes in working hours. See Monthly Labor Review, January, 1927, pp. 35–49.
LABOR 461
peculiarity of the method can be found in the variations in productivity
for many industries over periods of only several years. Wherever there
are measures of production per man-hour, the increase in productivity
is almost invariably greater than the increase in productivity measured
by the rise in output per man-year. This is universally the case in the
United States, since the number of working hours for all American manu-
facturing industry has had a great decline in the past quarter-century.
Inherent in the preceding measures of productivity are evidences of
the changing structure of industry which, on the one hand, account for the
increases in productivity in the past and, on the other, forecast like
advances in the future. For those industries in which total output and
Output per worker have grown most rapidly in the past decades, such as
motor vehicles, petroleum refining, rubber tires, cigarettes, cement,
chemicals, electrical machinery, printing and publishing, butter, cheese,
condensed milk, and manufactured ice, the actual value added to output
for each worker by the processes of manufacture is greater than in those
industries that have expanded more slowly. Expansion in output in
these types of industries, therefore, requires a relatively smaller addition
to the total number of workers than in the others. If, at the same time,
the first group of industries, or others like them, become relatively more
important in the total industry of the country, their influence on raising
the productivity of all industry becomes correspondingly greater. This
is, in substance, what has happened. Measured by value of product, the
motor vehicles industry was the most important of all manufacturing
industries in 1925; in 1919 it was third; and in 1909, twenty-second.
In 1909 petroleum refining ranked twenty-fourth in the list of manu-
facturing industries; in 1919 it ranked seventh, and in 1925 fourth.
Similar striking changes have taken place in the position of the rubber
tire, electrical machinery and supply, canning and preserving, chemical,
and cement industries.
The Causes of Changing Productivity.—Aside from factors such as
have been just discussed, whose effects are clear and determining, there
remain many circumstances that influence the course of total and per
capita production. The prevailing systems of wage payment, the rela-
tions between management and employed, the state of the industrial
arts, and the cost of investment funds are only a few of the many factors
that deserve to be studied and weighed. But they are hard to disen-
tangle and, when separated, to measure. Even such an apparently
simple concept as the mechanization of industry does not yet lend itself
to satisfactory statistical analysis. According to the census of manu-
factures, for example, the amount of primary horse power installed in
factories showed a relatively smaller increase between 1919 and 1925
than in any previous census period, and the expansion from 1923 to 1925
was not unusual. The record of machinery production for the same
462 RECENT ECONOMIC CHANGES
periods, likewise, fails to show any noteworthy increase. In fact,
decreases were common in some lines, although the manufacture
of electrical machinery, apparatus, and supplies did increase. None of
these figures, however, indicates changes in the degree of utilization of
either machines or existing power equipment. With this as with other
central economic problems, the supply of the available statistical
materials must be progressively increased; but at the same time, the
statistical analysis needs to be supplemented by detailed field examina-
tions of the processes of industry.**
IV. EMPLOYMENT AND UNEMPLOYMENT
The extent of fluctuation in what are generally called employment
and unemployment depends often on the definition of these terms. If
employment be defined as the number of people attached to an industry,
or the number seeking a livelihood in an industry, the movement in
employment may vary markedly from the employment that registers
changes in the number of people actually on the pay rolls of an industry.
This latter figure, in turn, may, and often does, differ substantially from
employment, expressed in terms of the number of man-hours worked by
those on the pay roll. Comprehensive data for the comparison of three
such series are not available, but it is known from the observation of
samples that their range of fluctuation is unequal and that they move
generally, but not necessarily always, in the same direction.
Obviously, each of these three series may be put to different uses.
Attempts have been made to estimate unemployment from changes in
the number on pay rolls. In the section on productivity, the average
number employed each year was used in estimating per capita output.
For more elaborate estimates of unemployment, it is sometimes the
practice to compare the numbers attached to an industry with the
numbers on pay rolls. Most frequently, however, monthly statistics
of the numbers on pay rolls have been used as measures of the stability
of employment, and monthly statistics of the total wages paid to those
on pay rolls as measures of the stability of the purchasing power of wage
earners. It is in this last sense that the statistics of employment and
income are used in this section.”
Employment since 1919.”—Discussion of the monthly fluctuations
of employment and pay roll must be confined to factory and railroad
36 For an example of this type of inquiry, see forthcoming study by Harry Jerome
on the mechanization of industry in the series of the National Bureau of Economic
Research.
87 For more comprehensive discussions of the employment data, see W. A. Berridge,
“What the Present Statistics of Employment Show,” in Business Cycles and Unem-
ployment, 1923, Chap. IV; R. G. Hurlin and W. A. Berridge, Employment Statistics
for the United States, Russell Sage Foundation, 1926.
* The material for this section on employment was prepared by W. A. Berridge, of
the Metropolitan Life Insurance Co.
LABOR 463
employees. In the other important branches of industry, mining and
quarrying and building construction, in retail and wholesale trade, in
the group of personal services, and in agriculture there are at present no
adequate data for the study of employment and income. While this is
a serious gap, the railroad and particularly the manufacturing data are
important enough to be valuable in themselves.
The great instability in both the employment and income of factory
workers from 1920 to 1922 is shown in Chart 3.39 Income dropped from
its high in March, 1920, to its low in January, 1922, by 42 per cent, while
employment declined from a high in March, 1920 to a low in July, 1921,
by 31 per cent, the variations in the two series being due, of course, to a
CHART 3.−FACTORY EMPLOYMENT AND PAY ROLLS
Base: 1923–1925 average = 100 per cent

..]30 r- |30
|20 — * |20
W \
\
| |O vá ~\ ||0
| º -\
• & r M /** A ^
|00 W \ ! / VR & {\\/\ (\ All |00
} | | \ WSA ||YYSºlºſ D. T.",
H. * f W
à || || \ ſ Vº'ſ EMPLOYMENT §
C les-- *
C. 90 f ++ 90 p.
§ l 2/w | W #
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1 PAYROLLS
80 kN/ . 80
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V-4."
TO 70
60 - T 60
L––––––––––––J–~~|~|~~
|919 1920 |92] 1922 1923, 1924 1925 1926 1927 1928 1929
drop in wages during the period and to the further reduction in income
from short time, not revealed in the employment index. Thereafter,
both curves move within a much narrower range. Employment drops
14 per cent from the high in May and June, 1923, to the low in July,
1924; and again approximately 8 per cent from March, 1926 to
January, 1928.
Comparisons of the prewar and postwar course of employment in
manufacturing industries are impaired by changes in the character of
the underlying data over a long period of time. The rough comparisons
in Table 26, however, would appear to show no startling differences
* Both series charted here have been adjusted to all four censuses (1919, 1921,
1923, and 1925) by Woodlief Thomas. For individual industries, Mr. Thomas has
thus far worked out such adjustments only through the Census of 1923.
464 RECENT ECONOMIC CHANGES
between the normal stability of employment before the war and the
condition after the collapse in 1920.4%
TABLE 26.-Course of EMPLOYMENT IN MANUFACTURING INDUSTRIES
Approximate decline
Bottom of depression
of employment
Peak of boom
Per cent
Middle of 1903. . . . . . . . . . . . . . . . . . . . . Middle of 1904. . . . . . . . . . . . . . . . . 5
Middle of 1907. . . . . . . . . . . . . . . . . . . . | First quarter, 1908. . . . . . . . . . . . . 15
Early 1910. . . . . . . . . . . . . . . . . . . . . . . Middle of 1911 . . . . . . . . . . . . . . . . . 5
Early 1913. . . . . . . . . . . . . . . . . . . . . . . Late 1914 and early 1915 . . . . . . . . 10
Third quarter, 1918. . . . . . . . . . . . . . . . . Second quarter, 1919. . . . . . . . . . . 15
March, 1920. . . . . . . . . . . . . . . . . . . . . . July, 1921. . . . . . . . . . . . . . . . . . . . . 30
May and June, 1923. . . . . . . . . . . . . . . July, 1924. . . . . . . . . . . . . . . . . . . . . 13
March, 1926. . . . . . . . . . . . . . . . . . January, 1928. . . . . . . . . . . . . . . . . 8
Measures of labor turnover* in manufacturing industries, available
for the period since 1919 but not before the war, confirm the impression of
stability shown by the indexes of employment and income. Since 1921,
and particularly since 1923, both the accession or hiring rates and the
lay-off rates, corrected for differences in the length of the month, have
fluctuated much less violently than in the first part of the postwar
period. In the 1919–20 boom, accession rates rose in some months as
high as 220 per cent; while the average” lay-off rate was at or near zero.
In the following severe depression, accessions fell to about 15 per cent,
and lay-offs rose to a peak of 50 per cent.
In the strong revival of industry in 1922–23, accession rates rose,
but this time only to about 155 per cent, lay-offs falling meanwhile to
about 1 per cent. The depression of 1924, and the ups and downs since
then, have at no time forced accession rates below 25 or above 85 per
cent; lay-off rates in these five years have been confined within the range
of 3 to 12 per cent.
Monthly statistics of railroad employment and wages paid were not
available until July, 1921. The great decline in employment and pay
rolls of manufacturing industries between 1920 and 1922 was matched
in the experience of the railroads. During the busiest quarter of 1920,
the monthly income of railroad workers was $350,000,000. This fell
to the rate of $190,000,000 per month in the early part of 1922. Since
40 See Berridge, op. cit., p. 59.
41 Published by the Policyholders' Service Bureau of the Metropolitan Life Insur-
ance Co. The canvass is not limited to group policyholders. Although the figures
cover no more than 10 per cent of the factory workers of the country, they are obtained
from a wide variety of factory industries and are regarded as a sound Sample. For a
description of the measures, see W. A. Berridge, “A New Set of Labor Turnover
Indexes,” Personnel Journal, Vol. VI, No. 1, June, 1927.
* The form of average used in constructing these indexes is the median.
LABOR 465
CHART 4.—HIRING AND LAY-OFF RATES, 1919–1928
HIRING RATE (EQUIVALENT ANNUAL BASIS)
2 25

... "WWII./
...] Aſ
| | ſ\
5 O AJ eſ)
25
O
LAY-OFF RATE (EQUIVALENT ANNUAL BASIs)
5O * -

4-5
4ol
35
3 O
º W]
; O Uy A ra/Wha
Aº.
5 V Ux J
| 9 || 9 || 92O | 92 | 1922 1923 1924 925 1926 1927 1928
early 1922, these money incomes have fluctuated within the range from
$220,000,000 to $270,000,000 per month, being for three-fourths of this
last period within a range one-half as great.
An interesting measure of the stability of employment is one derived
from statistics published monthly” since 1920 by the National Industrial
48 For the last seven months of 1920 and for the last six months of 1922.
466 RECENT' ECONOMIC CHANGES
Conference Board. This presents for more than twenty representative
manufacturing industries the average per capita full-time hours per week
and the average per capita hours actually worked. Comparison between
these two figures should yield a useful measure of what may be described
as unemployment within employment. Such measures were computed
by taking the percentages that the number of hours lost are of the nominal
hours per week. Where these percentages are positive, the actual work-
week fell short of the nominal; where negative, the actual work-week
exceeded the nominal, probably due to overtime. The average percentages
for all of the manufacturing industries included in these computations are,
of course, always positive, but individual industries occasionally show a
negative percentage. The averages for all industries and for those
showing the best and worst employment are given in Table 27.
TABLE 27.—PER CENT HOURs LOST ARE OF NOMINAL Hours PER WEEK

Average
Year Best industry Worst industry all
| industries
1920. . . . . . . . . . . . . . . . . . . . . . . . — 0.8 (paper and pulp). 12.9 (woolens and silk). 5. 7
1921. . . . . . . . . . . . . . . . . . . . . . . . 2. 7 (meat packing). 18.4 (agricultural implements). 10.4
1922. . . . . . . . . . . . . . . . . . . . . . . . –2.5 (chemicals). 16. 6 (fertilizers). 3.. 6
1923. . . . . . . . . . . . . . . . . . . . . . . . –2. 1 (chemicals). 11.0 (fertilizers). 3. 3
1924. . . . . . . . . . . . . . . . . . . . . . . . — 1.6 (meat packing). 15. 6 (cotton, North). 6. 6
1925. . . . . . . . . . . . . . . . . . . . . . . . — 2.9 (chemicals). 11. 6 (hosiery and knit goods). 4.8
1926. . . . . . . . . . . . . . . . . . . . . . . . – 5.0 (paper and pulp). 11.6 (hosiery and knit goods). 5. 2
1927. . . . . . . . . . . . . . . . . . . . . . . . —3.6 (paper and pulp), 9.6 (hosiery and knit goods). 5. 1
The averages for all industries unquestionably give the impression of
greater stability than was to have been expected, and confirm in a measure
the findings of an earlier investigation by W. I. King, covering the period
from 1920 to 1922.* In both 1920 and 1922, however, the averages
for the year might have been modified if the statistics for all 12 months
had been available.
Unemployment.**—Estimates of the volume of unemployment will
vary, as we have often seen in this country, with the method of measure-
ment used and with the definition of unemployment.”
* “Changes in Employment in the Principal Industrial Fields,” in Business Cycles
and Unemployment, 1923, p. 95,
* All of the material in this section was prepared by Meredith B. Givens, of the
Social Science Research Council, and of the National Bureau of Economic Research,
formerly of the United States Bureau of Labor Statistics.
* For this reason, some general machinery for registering the unemployed is likely
to yield the most satisfactory statistics of unemployment; first, because such an
agency of registration can make use of a definition of unemployment that is simple
and universally understood, and second, because registration, if compulsory, catches
the great bulk of the unemployed. These are, indeed, the characteristics of the
LABOR . 467
In the United States, where there is virtually no adequate, continuous
registration of the unemployed, measures of unemployment have been
derived in one way or another from the statistics of employment. Where
this procedure has been used, it may be said to measure not unemploy-
ment, but the shrinkage in employment. Under limited ideal conditions,
the two may amount to the same thing, but under the conditions of
measurement prevailing in this country, as will be seen later, they are
usually not the same thing; they may, indeed, be very far apart. The
possible divergencies can be best seen by examining recent estimates of
the volume of unemployment in the United States for either the year 1927
or for early 1928.
An estimate by the United States Bureau of Labor Statistics places
the numbers laid off the pay roll by early 1928 at 1,874,500.47 This
number is described as “a shrinkage between the average of 1925 and
January, 1928.” It was assumed in making this estimate that there
was no “noticeable unemployment question” in 1925. The estimated
shrinkage, moreover, was derived from the known reduction in railroad
employment, taken from the reports of the Interstate Commerce Com-
mission and from the drop in manufacturing employment reflected in
the monthly employment statistics compiled by the Bureau.
TABLE 28.-UNEMPLOYMENT ESTIMATED BY LABOR BUREAU, INC.
Plus Minus
Estimated number unemployed in 1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
Estimated increase in supply of employable persons through population
growth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000
Estimated number of farm workers moved to town. . . . . . . . . . . . . . . . . . . . . . 1,000,000
Estimated possible increases of employment in certain lines. . . . . . . . . . . . . . . . . . . . . . . . . 2, 100,000
Professions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Amusements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Public utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,000
Automobile sales and service. . . . . . . . . . . . . . . . . . . . . . . . . . . 750,000
Other distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000
Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Estimated declines in employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 200,000
Manufactures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000,000
Railways. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Coal mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Net unemployment, 1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000,000
statistics of unemployment wherever there is an inclusive machinery of registration,
either as a part of the system of unemployment insurance or in the form of a compre-
hensive chain of public employment bureaus. Even such estimates of unemployment
may be defective in not indicating the volume of short time or in omitting important
occupations whose employment experience is not recorded, but in spite of their short-
comings they are generally superior to measures of unemployment that rest on no
registration basis whatsoever.
47 United States Sen. Doc., No. 77, 70th Cong., 1st Sess., pp. 3, 5.
468 RECENT ECONOMIC CHANGES
A second estimate, by the Labor Bureau, Inc., rests not only on
shrinkage in employment but involves measures of increases in employ-
ment in expanding industries and in the total number of persons available
for work. The various steps in this estimate are shown in Table 28.
The Brookmire Economic Service, following a still different method,
has estimated the number unemployed each year from 1910 to 1928.
These estimates are shown in Table 29. They represent the difference
in each year between actual employment and probable maximum employ-
ment. Five years during this period, 1912, 1917, 1920, 1923, and
1926, have been regarded as years of exceptionally high business activity
and, therefore, of full employment. In such years, there is assumed to
be no unemployment.
TABLE 29.- UNEMPLOYMENT SHOWN As THE DIFFERENCE BETwREN PROBABLE
MAXIMUM EMPLOYMENT AND ACTUAL EMPLOYMENT
(In thousands)
Full employment.”
Year United States Actual” Un-
population employment employed"
; Per cent Number
.
1910d. . . . . . . . . . . . . . . . . . . . . . 92, 267 41.5 38, 167 - 38, 167 . . . . .
1911. . . . . . . . . . . . . . . . . . . . . . . 93,628 41.5 38,856 38, 360 496
1912°. . . . . . . . . . . . . . . . . . . . . . 95,097 41. 5 39, 445 39, 445 | . . . . .
1913. . . . . . . . . . . . . . . . . . . . . . . 96, 512 41 .. 6 40, 149 39, 882 267
1914. . . . . . . . . . . . . . . . . . . . . . . 97,928 41. 7 40,875 38, 848 2,027
1915. . . . . . . . . . . . . . . . . . . . . . . 99, 343 41.9 41, 585 40, 106 1,479
1916. . . . . . . . . . . . . . . . . . . . . . . 100, 758 42. 0 42,318 42, 206 112
1917d. . . . . . . . . . . . . . . . . . . . . . 102, 173 42.1 43,016 43,016 | . . . . .
1918. . . . . . . . . . . . . . . . . . . . . . . 103,588 41. 5 42,989 42, 931 58
1919. . . . . . . . . . . . . . . . . . . . . . . 105,003 40. 8 42,841 42, 766 75
1920d. . . . . . . . . . . . . . . . . . . . . . 106,422 40... 2 42,809 42,809 | . . . . .
1921. . . . . . . . . . . . . . . . . . . . . . . 108,445 39.8 43, 161 39, 508 3, 653
1922. . . . . . . . . . . . . . . . . . . . . . . 109,893 39. 3 43, 189 40,622 2, 567
1923°. . . . . . . . . . . . . . . . . . . . . . 111,693 38. 8 43,284 43, 284 . . . . .
1924. . . . . . . . . . . . . . . . . . . . . . . 113,727 38. 0 43,216 i 41, 826 - 1, 390
1925. . . . . . . . . . . . . . . . . . . . . . . 115,378 37. 1 42,805 42,418 387
19264. . . . . . . . . . . . . . . . . . . . . . 117, 136 36. 2 42, 433 42,433 . . . . .
1927. . . . . . . . . . . . . . . . . . . . . . . 118,628 36.2 42,943 | 41,477 1, 466
1928 (March) . . . . . . . . . . . . . . . 120,013 36.2 43,445 40, 813 2, 632
* The percentage of total population employed was computed for the years of full employment, and
percentages for intervening years interpolated on a straight line and used in computing full employment
for those years.
* Actual employment, for each year, was computed by the Brookmire staff from official data taken
from the following sources: Census; Department of Agriculture; Department of Labor; Interstate Com-
merce Commission; Bureau of Mines; and the Federal Reserve Board; also National Industrial Confer-
ence Board, Russell Sage Foundation, New York Times Annalist, and Paul Douglas in the American
Economic Review.
* Unemployment, as shown, is the difference between probable maximum employment and actual
employment. It does not allow for numbers idle, even during years of exceptionally high business
activity.
* Assumed to be years of full employment owing to the high level of business as shown by the
Brookmire Business Index.
LABOR - - 469
Lewis Corey,” finally, estimates total unemployment in 1927 at
3,500,000. His estimates rest on the assumption that a surplus of
industrial workers was created during the period from 1919 to 1926 as
the result of technological improvements in industry.” The size of this
surplus is determined by the estimates of the number of gainfully occupied
persons reported by the National Bureau of Economic Research, by the
reduction in farm employment, and by the decline in the average number
of persons employed in manufacturing, mining, and transportation, as
shown by the current indexes. The depression of 1927 is estimated to
be responsible for a further reduction in employment of 1,000,000
persons. To the aggregate so obtained are further added an estimated
permanent labor reserve of 750,000.
No check of the underlying data in the elaborate estimates of Corey,
the Labor Bureau, and the Brookmire Service is possible because the
details of the methods and assumptions used are not available. In the
first two of these estimates it is clear that much of the basic material is
in the form of round numbers and that more refined methods might
materially modify the totals. They both also neglect or underestimate
the extent of diversion of employment and such an item as the increase
in school attendance. The Brookmire assumption that there are years
of no unemployment is one rarely held. Finally, the method employed
by the United States Bureau of Labor Statistics is too obviously limited
to constitute an acceptable measure of unemployment.
A New Estimate of Unemployment.—This latest estimate is based
on the definition of the volume of unemployment as the difference between
the number of persons actually employed and the number desiring and
habitually dependent upon employment. In making this measure,
accordingly, the average number of persons actually employed annually
in the United States has been determined by aggregating the number so
employed in the various occupational and industrial groups composing
the total. This average annual employment has been compared to the
estimated total number of persons dependent upon employment, or
“attached” to industry; and the difference between the two sets of figures
has been defined as the estimated average annual unemployment. Such
estimates were made for each year, beginning in 1920 and ending in
1927.
The resultant measures of the volume of unemployment are probably
minimum estimates. Actual unemployment during any year has doubt-
less exceeded the figure shown. The material on which this and other
estimates of unemployment rest is not all of the same quality and a large
* Lewis Corey, “An Estimate of Unemployment: Cyclical Idleness Added to
Technological,” The Annalist, March 9, 1928. …”
* See Technological Unemployment, Chap. II, Industry, Part 1, p. 92; Chap. W,
Marketing, p. 328; Chap. VII, Management, p. 514.
470 RECENT ECONOMIC CHANGES
amount of inference and estimate is unavoidable. Only additional
information to be collected in the future, such as a comprehensive census
of distribution, can uncover the errors hidden in the material now
available. With the information we now have, the present estimates
may be held to throw light on the direction and structure of total employ-
ment and unemployment since the war, and no more. They could
hardly serve as the actuarial basis for the fixing of unemployment
insurance premiums.
The basic figures of the numbers gainfully employed in agriculture,
industry, trade, service, and the professions, and in their major sub-
divisions are taken from the elaborate estimates made by W. I. King in
connection with the inquiries of the National Bureau of Economic
Research into the national income. Substantially, King's estimates of
the numbers attached to industry are made by discovering in each year
the highest month of employment and by inflating this figure by an
arbitrary percentage to allow for illness and other known factors.
In the present study, those forces that are believed to have affected
the structure of the working population of the country since 1920 have
been examined, and King's estimates have been slightly revised in
several particulars to allow for certain changes. The total school
population of the country has, for example, increased by 4,000,000 from
1919 to 1926, exclusive of kindergarten enrollment. One-fifth of the
total population were in school in 1919. Assuming the percentage in
school to have remained constant, the King estimates have allowed for
a normal increase of 2,500,000 in school enrollment during this period
as a result of an increase of 12,000,000 in the total population of the
United States. This leaves 1,500,000 to be accounted for as growth
owing to greater popularity of Schooling. This figure, which represents
pupils of all ages from primary age through the colleges, has been prorated
to determine what fraction of the increase not accounted for by King's
estimates is composed of full-time students of 16 years of age and over.
It is thus discovered that about 500,000 students have been withdrawn
from the ranks of the employed, beyond the number accounted for in
the normal growth of population and School enrollment according to the
trends during the preceding decade.
The King estimates were made on the assumption that the increased
school enrollment was offset by the increased employment of women.
This was true during the years 1909 to 1919, but what evidence there is
for the more recent period indicates that the proportion of women
among the gainfully occupied has remained about constant. Statistics
on the matter are available only for limited samples. In Ohio, the
proportion of women gainfully occupied has increased by 2 per cent from
1919 to 1926. Conditions in Ohio should be representative of conditions
in the country, since Ohio is a large agricultural and also a highly diver-
LABOR 471
sified industrial state. Scattered data for Iowa and Illinois fail to
reveal any trend, and while women have strengthened their position as
a permanent factor in the industrial and commercial life of the country,
it appears that they have not increased in relative numerical importance
in gainful pursuits during the postwar period. While definite evidence
must be delayed until the census of 1930, the King estimates have been
here modified for increased school enrollment on the assumption that the
proportion of women gainfully occupied has not canceled the effect of
more popular education.
There are no data with which to test the general impression that
the average age of industrial employees has been declining during the
past decade. A small sample, covering some 14,000 employees carry-
ing group insurance with a large insurance company, appears to show
that the average age is slightly higher in 1925–1927 than in 1917–1920.
In the absence of accurate data, this factor is not considered in the
estimates.
Since 1920 the cumulative loss in farm population has been more than
3,000,000 persons. Of this number, certainly a large part should be
added to the available supply of nonagricultural labor, since many
farmers, migrating to the cities, are in search of jobs in industry and
trade. It has been here estimated that at least as large a proportion of
those leaving the farm will be gainfully occupied as among those remain-
ing.” While this procedure probably leads to an underestimate of the
farm population absorbed in urban employment, the discrepancy is not
likely to be large. King's estimates of gainfully occupied agricultural
population, while showing an appreciable shrinkage, do not drop so
rapidly as the farm population, as estimated by the Bureau of Agricultural
Economics. A correction has therefore been made in King's estimates
to allow for migration from farm to city of those desiring nonagricultural
employment. This correction and the allowance for increased school
enrollment partially offset each other.
The most interesting and probably one of the most important changes
in employment since the war has been the expansion in nonindustrial
employment. This trend is examined with reference to the fields of
public and mercantile employment and in a category of miscellaneous
occupations. The total number of public employees is much less in
1927 than in 1919, but slightly greater than in 1920. Federal civil
service employees were in 1927 more than 100,000 fewer than in 1920,
but in the same period the number of state and municipal employees
increased by more than 200,000, owing largely to the increase in the
number of teachers. Mercantile employment, as shown in Table
50 Bureau of Agricultural Economics, Bulletin, “The Agricultural Situation,” Vol.
XII, No. 4, pp. 22–24, April 1, 1928, Washington, D. C.
472 RECENT ECONOMIC CHANGES
30," was roughly 1,500,000 greater in 1927 than in 1920. Very little
information on the growth of employment in particular lines of mercan-
tile enterprise is available and the figures in the table are the best, and
sometimes the only, estimates that could be had.
TABLE 30.—MERCANTILE EMPLOYMENT
(In thousands)
1920 1921 1922 1923 || 1924 1925 | 1926 1927
Attached to mercantile pursuits, total employees
(King). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 2153,298,3,6944, 2374,015|4, 2974, 4124,623
Employees in specified groups (included above):
Two large mail order houses. . . . . . . . . . . . . . . . . 24 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Tire dealers and salesmen". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 95 95
Auto dealers and salesmen". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181 | 181 196 225; 363
Automobile supplies, parts, etc.”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135|| 135 140|| 135. 160
Oil heating”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Radio”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * | . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Electric refrigeration” . . . . . . . . . . . . . . . . . . . . . . . * | . . . . . • * * * * * * * * * * * * * * | * e º 'º e e º e s & 20
• Estimate taken from Facts and Figures of the Automobile Industry, National Automobile Chamber
of Commerce.
b Estimates for radio distribution obtained from Department of Commerce.
* Negligible.
The group of miscellaneous occupations likewise shows a great
increase over the period under discussion. The details are shown in
Table 31. The estimates for artists, authors, and musicians are probably
a gross understatement. They were made on the assumption that
these groups increased at least as rapidly as the number of teachers and
professors. The increase in the number of insurance agents, estimated
from reports of insurance companies, represents the only approximation
of employment in the financial group aside from banking. There is no
method available for estimating the numbers employed in real estate,
home insurance offices, brokerage, mortgage, loan, and specialty financing
companies, although it is a commonplace of everyday experience that
many more persons are so engaged than before the war. The large
growth of the medical and allied professions has come not through a
material increase in the number of physicians and surgeons, but through
the great growth in the number of nurses, hospital attendants and those
associated with public health activities.”
King's statistics of the gainfully occupied population of the country,
with the modifications referred to above embodied in them, are shown in
Table 32. The industrial groups of mining and quarrying, transporta-
tion, construction, and manufacturing are separated from the groups of
public and mercantile employees and miscellaneous occupations, since
* The increment of gainfully employed from farms has been arbitrarily divided
equally between the mercantile and miscellaneous groups.
* See Chap. I, Consumption, pp. 17–22.
LABOR 473
TABLE 31.-MISCELLANEOUS OCCUPATIONAL GROUPs
(In thousands)

1920 | 1921 || 1922 || 1923 || 1924 || 1925 | 1926 || 1927
Attached to miscellaneous groups,” total. . . . . . . . . . ** 6,8516,682'8,0308,31618,3108,338
Employees in specified groups (included above): J |
Professional and allied groups"—
Medical and allied professions. . . . . . . . . . . 795; 815 995. 1, 1601, 200 1,235. 1,240, 1,300
Lawyers and judges. . . . . . . . . . . . . . . . . . . . 125; 128 131|| 134|| 136|| 139|| 142|| 145
Clergymen". . . . . . . . . . . . . . . . . . . . . . . . . . . . 195| 199| 214, 220 218: 216 d216 d215
Religious, charitable, penal workers”. . . . . 53 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Librarians and assistants”. . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Artists, authors, musicians”. . . . . . . . . . . . . 210. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Financial groups—
Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 246 252| 265 271; 277| 287| 291
Insurance agents”. . . . . . . . . . . . . . . . . . . . . . 120l. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216
Miscellaneous—
Hotels, restaurants, etc.ſ.. . . . . . . . . . . . . . . . 1,500 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,025
Barbers, hairdressers, manicurists/. . . . . . . 216 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 385
Moving picturesſ. . . . . . . . . . . . . . . . . . . . . . 2001. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350
Amusements, lodges”. . . . . . . . . . . . . . . . . . . 85 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Garage employees”. . . . . . . . . . . . . . . . . . . . . . . . . . . • * * ... • * | * * * * * 110| 1.10: 115|| 125 125
Automobile, repair shops”. . . . . . . . . . . . . . . | * * * * * | * * * * * * * * * * | * * * * * : * * * * * 480; 450 300
Dyers and cleaners”. . . . . . . . . . . . . . . . . . . . 18 . . . . . . . . . . . . . . . . . . . . . . . | - - - - - || - - - - - 33
|
* These figures are not adjusted for the slight revisions of King's estimates made in this study.
Entrepreneurs as well as employees are included.
* Teachers should logically be included here, but they cannot conveniently be separated from the
public employees group. -
* Figures published in Yearbook of the Churches. Estimates are doubtless too high, including minis-
ters otherwise gainfully employed, and otherwise classified in the United States Census of Occupations.
* Groups taken according to United States Census of Occupations, 1920, and increased slightly over
the period.
* Increase since Census of Occupations, estimated by Lawrence B. Mann, Department of Commerce.
f Estimated by Lawrence B. Mann, Department of Commerce.
0 Number shown in United States Census of Occupations, 1920, increased to correspond with moving
pictures.
* Rough estimates given in Facts and Figures of the Automobile Industry, N. A. C. C., New York
(published annually).
* Estimated by Lawrence B. Mann, Department of Commerce.
it is in the former that the problem of unemployment is generally regarded
as significant. There is, moreover, no method for estimating the volume
of unemployment among public employees, those of mercantile estab-
lishments, and those engaged in professional or personal service. The
estimates of the number unemployed in these categories are, therefore,
largely arbitrary minimum estimates, and are regarded as underestimating
the actual volume of unemployment.
Estimates of the numbers attached to industry and the average
numbers employed or unemployed for each of the four industrial groups
are shown in Tables 33, 34, 35, and 36. For each group there is a con-
siderable mass of statistical material which cannot be described in detail
here. It should be noted, in connection with Table 33, that the employ-
ment figures for metal mining and quarrying represent the total number
TABLE 32.-CLASSIFICATION OF GAINFULLY OCCUPIED PERSONS IN THE UNITED STATES.”
(In thousands)
| 1920 1921 1922 1923 1924 1925 1926 1927
|
Total population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,422 || 108,370 | 109,742 111,478 || 113,466 | 115,004 116,442 | 117,980
Cumulative increase in school attendance, pupils sixteen years of
age and older. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390 629 843 1,028 1, 185 1, 342 1,430
Total gainfully occupied. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,008 40,429 40, 701 41, 313 42,095 42,659 43, 218 43,943
Cumulative increase in nonagricultural gainfully occupied, resulting
from migration from farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 224 336 486 608 802 861
Total nonagricultural gainfully occupied. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31, 137 31, 681 32,382 33,024 33,909 34,621 36,491 36, 372
Total employees attached to nonagricultural pursuits (entrepreneurs
omitted). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27, 558 27,989 28, 505 29,293 30, 234 30,941 31,808 32,695
Public employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,719 2,689 2,618 2,633 2,674 2,736 2,785 2,819
Mercantile employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,215 3, 298 3, 694 4, 237 4,015 4,297 4,412 4,623
Miscellaneous groups”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,057 4,931 4, 576 4,488 5,852 6,043 6,318 6,603
Employees attached to major industrial groups. . . . . . . . . . . . . . . . . . . . . . 17, 567 17,071 17,617 17,935 17,693 17,865 18, 293 18, 650
Mines, quarries, oil wells. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,217 1, 234 1, 250 1,254 1, 196 1, 182 1,278 1, 285
Transportation and communication". . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,235 4, 151 4,431 4, 691 4,658 4, 582 4,744 5, 204
Construction (excluding highways). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 932 932 1, 199 1,277 1, 352 1,613 1, 594 1,563
Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 183 10,754 10,737 10,487 10,488 10,677 10, 598
|
l
* This table represents a slight revision and an array of the King estimates of the number of persons gainfully occupied and attached to various industrial
10,713
and occupational groups.
* Including banking and other financial employments, the professions, etc.
* Bus, truck, and taxi transportation have been added to the original King estimates, and deducted from items for miscellaneous groups.
§
i
;

TABLE 33.−EMPLOYEEs—MINEs, QUARRIES, OIL WELLs
1920 1921 1922 1923 1924 1925 1926 1927
Attached to the industries (King): -
Salaried. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,000 74,000 75,000 65,000 68,000 70,000 70,000 70,000
Wage earners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 142,000 | 1, 160,000 | 1, 175,000 1, 189,000 | 1, 128,000 | 1, 112,000 | 1,208,000 1,215,000
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,217,000 | 1,234,000 1,250,000 1,254,000 | 1, 196,000 || 1, 182,000 1,278,000 | 1.285,000
Employed: .
Coal mines”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,000 465,000 400,000 550,000 490,000 470,000 547,000 495,000
Metal mines”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,000 94,000 106,000 123,000 123,000 127,000 128,000 120,000
Quarries”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,000 77,000 79,000 92,000 94,000 92,000 91,000 92,000
Oil and gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,000
Unemployed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 274,000 470,000 520,000 329,000 326,000 308,000 323,000 380,000
- Average number days worked by mines:
Bituminous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 149 142 179 171 195 215 191
Anthracite. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271 271 151 268 274 182 244 225
Production: Coal (thousands of net tons)— * -
Bituminous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569,000 416,000 422,000 565,000 484,000 520,000 573,000 518,000
Anthracite. . . . . . . . . . . . . . . . . . . . . . . . . . . . e s s = e s 90,000 90,000 55,000 93,000 88,000 62,000 84,000 80,000
Petroleum (thousands of barrels). . . . . . . . . . . . . . 443,000 472,000 558,000 732,000 714,000 764,000 767,000 901, 000
Natural gas (thousands of cubic feet). . . . . . . . . . 798,000 662,000 762,000 | 1,007,000 | 1, 142,000 | 1, 189,000 | 1,313,000 | 1,445,000
Indexes of production:"
Bituminous”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 79 78 108 92 100 110 98
Anthracite”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 112 65 115 108 77 105 100
Petroleum”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61 64 75 100 97 103 104 122
Natural gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 72 60 69 91 103 107 118 130
• Averages of estimated monthly employment based upon available production and employment statistics for both bituminous and anthracite mines.
b Figures compiled from reports of the United States Bureau of Mines.
• 1923–1925 base.
d Federal Reserve Board.
476 e RECENT ECONOMIC CHANGES
of workers employed at any time during the year rather than the average
monthly employment, as, for example, in the case of manufacturing
industries. Therefore the employment totals for these groups are some-
what too high. The figures for coal mining represent the best approxi-
mation of the average number of men actually at work daily. This
means that men employed at a given mine are regarded as out of work
whenever the mine is not operating.”
TABLE 34.—TRANSPORTATION AND COMMUNICATION.—NUMBER of EMPLOYEEs
ATTACHED TO THE INDUSTRIES”
(In thousands)
Total employees attached to the industries”. . . . . . . 4, 2354, 1494,431|4,691 ** 4,744/5, 204
Subdivision of the industries:
Steam railroads,
switching and terminal companies . . . . 2, 1632, 1222,0972,080|2,041 1,891|1,903 1,856
1920 | 1921 1922 1925 | 1926 1927
1923 1924
Street railways. . . . . . . . . . . . . . . . . . . . . . . . . 307 308 308 319| 318, 317| 319| 322
Pullman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 23 21 22 25 26 27 28
Express companies. . . . . . . . . . . . . . . . . . . . . 91 82 77 75 70 68 68 65
Water transportation . . . . . . . . . . . . . . . . . . 399| 39.4| 392| 388 369|| 355| 354 341
Bus and truck transportatione. . . . . . . . . . . . 750 700 1,000||1,2201,220 1,275||1,400 1,900
Telephone. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 311' 318 322 350 370, 377 381 385
Telegraph. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75 75 75 76 77 86 86 86
Electric light and power. . . . . . . . . . . . . . . . . nº * 139|| 161 * 187 * 221
* Based principally upon King's estimates.
* Including bus transportation.
• Estimates from Bus Facts, 1927 and 1928, Bus Division, American Automobile Association.
Includes bus drivers and professional chauffeurs.
The results of the various steps in the process of estimating unemploy-
ment are shown in Table 37. These figures are limited to unemploy-
ment among the nonagricultural employed, since it is impossible to
estimate the agricultural unemployed. As has been pointed out before,
the figures of unemployment in the mercantile, public service, and miscel-
* In all cases, estimates of average employment and unemployment have been
arrived at by the study of employment and unemployment data and, in many cases,
of other series, such as indexes of production or of value of output. It is impossible
to reproduce all of the relevant data involved in estimating the numbers occupied and
unemployed in the industrial category of transportation and communication. A
great variety of data is used for both estimates: for steam railroads, the reports of the
Interstate Commerce Commission; for street railways, local reports on numbers
employed; for the Pullman Co., the number of revenue passengers; for the tele-
phone industry, the United States Census of Electrical Industries and figures from the
American Telephone and Telegraph Co.; and so on. The percentages of unemploy-
ment used in computing the number of unemployed in the building trades were derived
from comparisons of the value of building contracts and statistics of unemployment for
Ohio and Massachusetts, and for the whole country from the reports of trade union
unemployment as compiled by the American Federation of Labor, in relation, of course
to the King estimates.
i
5
TABLE 35.-EMPLOYEES IN THE CONSTRUCTION INDUSTRY (ExCLUDING HIGHwAY CONSTRUCTION)
1920 1921 1922 1923 1924 1925 1926 1927
Attached to the industry (King):
Salaried. . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,000 83,000 108,000 115,000 122,000 146,000 145,000 142,000
Wage earners. . . . . . . . . . . . . . . . . . . . . . . 850,000 849,000 1,091,000 1, 162,000 1,230,000 1,467,000 1,449,000 | 1 , 421,000
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . 932,000 932,000 1, 199,000 1,277,000 1, 352,000 1,613,000 1, 594,000 1,563,000
- |
Employed”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 702,000 684,000 969,000 1,057,000 1,002,000 1, 268,000 1,314,000 1, 141,000
Unemployed”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,000 248,000 230,000 220,000 350,000 345,000 280,000 422,000
Total value of building contracts awarded in
the United Statese (000 omitted)... . . . . . . . $3,337,647 || $3,068,983 || $4,329,750 || $4,768, 100 $5,237,080 || $6,662,000 $6,901, 580 $6,786, 580
|
• Estimates obtained by subtracting the estimated number of unemployed from the estimate of the number attached, except 1924-1926 inclusive, for which
years the estimates were interpolated on the basis of fluctuations in total value of building contracts.
* Estimates obtained by applying the following estimated percentages of unemployment to the number attached: 1919, 25 per cent; 1920, 24.60 per cent;
1921, 26.7 per cent; 1922, 19.0 per cent; 1923, 17.2 per cent; 1927, 27.0 per cent. Figures for 1924–1926 inclusive were derived by subtracting estimated actual
employment from the number attached.
• Figures furnished by the F. W. Dodge Corporation.
478 RECENT ECONOMIC CHANGES
TABLE 36.-EMPLOYEES IN MANUFACTURING INDUSTRY”
(In thousands)

1920 1921 1922 1923 1924 1925 1926 1927
Attached to manufacturing
(King):
Wage earners. . . . . . . . . . . . . . . 9,735, 9,330 9,334|| 9,328 9, 112| 9,118 9,290. 9, 100
Salaried. . . . . . . . . . . . . . . . . . . 1,448. 1,424; 1,403| 1,385; 1,375] 1,370; 1,387| 1,498
Total. . . . . . . . . . . . . . . . . . . 11, 183| 10,754| 10,737| 10,713| 10,487| 10,488 10,677 10,598
Employed:0
Wage earners. . . . . . . . . . . . . . c3, 207 7,042 °7,744, 8,909 c8,266 8,544 c8,729 es, 510
Salaried. . . . . . . . . . . . . . . . . . . d1,489| 1, 158 d.1,232 1,372 d1,297| 1,366 di , 396 di , 361
Total. . . . . . . . . . . . . . . . . . . d10,696, 8, 200 d8,976|| 10, 281 d2, 563 9,910 d10, 125 dg,871
Unemployed. . . . . . . . . . . . . . . . . . . 487| 2, 554, 1,761 432 924 578 552 727
* Including grist mills, custom saw mills, and power laundries.
b Based upon United States Census of Manufactures.
• Estimates and extrapolations based upon computations by Woodlief Thomas.
d Number of salaried persons estimated on basis of percentage of salaried in total employment for
adjacent years.
laneous groups are the least reliable of all and are probably much too
low. All of the estimates are approximate measures of the average annual
minimum volume of unemployment and are more adequate as indicators
of the trend of unemployment than as measures of the actual number
unemployed in any year.
By these estimates it appears that unemployment in 1927 was less
than half that of 1921 and considerably below 1922. The depression of
1927, measured by the volume of unemployment, appears to have been
not so severe as the recession in 1924. Throughout the whole period
it is surprising to find a persistent and large volume of unemployment
even in the very active years, 1920, 1923, and 1926.
TABLE 37.-ESTIMATED AvH.RAGE MINIMUM VoI.UME OF UNEMPLOYMENT, 1920–1927
(In thousands)
1920 | 1921 | 1922 | 1923 || 1924 1925 | 1926 || 1927
Total employees attached to nonagri-
cultural pursuits. . . . . . . . . . . . . . . . . . . . . 27, 55827,989|28,505|29, 293|30, 234|30,941|31,808132,695
Minimum number of unemployed:
Manufacturing. . . . . . . . . . . . . . . . . . . . 487 2,554|| 1,761 432 924 578 552 727
Construction. . . . . . . . . . . . . . . . . . . . . . 230 248 230 220 350 345 280 422
Transportation and communication. . 170 598 580 251 340 184 144 152
Mines, quarries, oil wells. . . . . . . . . . . . 274 470 520 329 326 308 323 380
Public service, mercantile, miscel-
laneous. . . . . . . . . . . . . . . . . . . . . . . . . 240 400 350 300 375 360 370 374
Minimum total unemployed. . . . . . . . . . . . . 1,401 4, 270, 3,441. 1, 532 2,315| 1,775. 1,669 2,055
LA BOR 479
V. ORGANIZED LABOR
The historical development of trade unionism in the United States
follows in its essentials much the same course as that pursued by foreign
labor movements. Beginning with small spontaneous uprisings and
becoming gradually a systematic movement for the spread of organiza-
tion, labor unions here, as elsewhere, have grown with the rise of modern
industry. They have made use of the weapons of the strike, picketing,
and boycott, either in defense against attack or in carrying organization
into unorganized areas, and have thus slowly and over a long period added
to their numbers and influence. From 1900 to 1910, American labor
unions gained nearly 1,200,000 members and, from 1910 to 1915, a half
million more. Immediately before the war their total membership was
two and three-quarters millions.
This moderate trend upward, which has persisted with only slight
occasional recessions since 1897, became greatly accelerated during the
war. American unions, in common with labor organizations all over
the world, responded promptly to the economic and political forces
associated with the World War and rose to new heights. By 1920 union
membership was nearly double that of 1914 and stood at 5,100,000.
The gains of the period, moreover, were scattered over a wide industrial
area. Not only did the old, strong organizations grow, but unions were
established where there had before been little or no organization at all.
Effective trade unions sprang up among the shopcraft and maintenance-
of-way employees on the railroads; in the manufacturing industries
unorganized strongholds like the textile, metal and machinery, leather,
food, and men's clothing industries were all unionized; and organization
took root among many clerical and semiprofessional occupations in both
public service and private business.
Labor organization proved to be as sensitive to the business depression
and unemployment of the period following the middle of 1920 as it had
just been to prosperity and a favorable labor market. By 1924 the
American labor movement had lost nearly 1,500,000 members. The
bulk of these losses was precisely in those occupations and industries in
which the growth during the war had been greatest. Of a total drop in
membership from 1920 to 1923 of 1,330,000, the transportation and metal
unions together lost 800,000 members.”
With the turn in the business situation in 1922, followed by years of
considerable business activity and prosperity, the labor movement was
commonly expected to retrieve its early postwar losses. This expecta-
tion was not realized. Although the statistics of membership show a
* For a detailed discussion of the movement of trade union membership in the
United States, see Leo Wolman, The Growth of American Trade Unions, 1880–1923,
National Bureau of Economic Research, 1924.
480 RECENT ECONOMIC CHANGES
TABLE 38.-MEMBERSHIP OF AMERICAN TRADE UNIONs”
Year Membership Year Membership Year Membership
1897. . . . . . . . . . . . . 447,000 || 1908. . . . . . . . . . 2, 130,600 || 1918. . . . . . . . . . 3, 508, 400
1898. . . . . . . . . . . . . - 500,700 1909. . . . . . . . . . 2,047, 400 1919. . . . . . . . . . 4, 169, 100
1899. . . . . . . . . . . . . 611,000 1910. . . . . . . . . . 2, 184,200 1920. . . . . . . . . . 5, 110,800
1900. . . . . . . . . . . . . | 868, 500 1911 . . . . . . . . . . 2,382,800 1921. . . . . . . . . . 4,815,000
1901. . . . . . . . . . . . . | 1 , 124,700 1912. . . . . . . . . . 2,483,500 1922. . . . . . . . . . 4,059,400
1902. . . . . . . . . . . . . 1,375,900 1913. . . . . . . . . . 2,753,400 1923. . . . . . . . . . 3,747, 200
1903. . . . . . . . . . . . . 1,913,900 1914. . . . . . . . . . 2,716,900 1924. . . . . . . . . . 3, 746,600
1904. . . . . . . . . . . . . 2,072,700 1915. . . . . . . . . . 2,607,700 1925. . . . . . . . . . 3,817,900
1905. . . . . . . . . . . . . 2,022,300 1916 . . . . . . . . . . 2,808,000 1926 . . . . . . . . . . 3,900, 500
1906. . . . . . . . . . . . . 1,958,700 1917. . . . . . . . . . 3, 104,600 1927. . . . . . . . . . 3,903,800
| r
1907. . . . . . . . . . . . . 122,800
|
a The figures since 1923 were collected by Ruth Budinoff, of the Labor Bureau, Inc.
rise of about 150,000 from the low point in 1924, a considerable portion
of the increase may be attributed to overstatement by many of the smaller
unions and in particular by the large United Mine Workers. This
organization reports its membership in 1927 as 400,000, or about 64,000
in excess of its membership in 1920. It is common knowledge that the
United Mine Workers have lost heavily since 1920, not only in the non-
union areas of Kentucky and West Virginia, but in the union fields of
Pennsylvania, Ohio, and Indiana, as well. It would do no violence to
the facts, therefore, to consider the present membership of the United
Mine Workers as closer to 300,000 than to 400,000. When these factors
are taken into consideration, it is clear that the downward movement
which began late in 1920 has not yet been effectively stopped.
As matters stand now, the movement has about 1,000,000 more
members than it had in 1913. Very little of this increase, however,
represents the war growth in manufacturing industries, where, in fact,
trade union membership is probably less now than it was before the war.
As Table 39 shows, the net increase of 1,000,000 is made up almost
TABLE 39.—INCREASE IN MEMBERSHIP OF TRADE UNIONs

Membership
Industry Gain
1913 1927
Building trades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553,000 1,014,000 461,000
Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,000 283,000 119,000
Theaters and music. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,000 171,000 89,000
Transportation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557,000 950,000 393,000
Paper, printing, and bookbinding. . . . . . . . . . . . . . . . . . . . 107,000 161,000 54,000
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,463,000 2,579,000 | 1,116,000
LABOR 3. 481
exclusively of gains in the nonmanufacturing industries. Only in the
printing and clothing industries, in the manufacturing group, is there a
steady growth over 1913. The rest of the unions in the manufacturing
industries either show slight increases, like 6,000 in the textile industry
and 14,000 in metals, machinery, and shipbuilding, or actual decreases,
like 6,000 in leather, 57,000 in food, liquor, and tobacco, and 15,000 in the
chemical, clay, glass, and stone industries. Meanwhile, the great basic
manufacturing industries of the country, iron and steel, metals and
machinery, food, automobiles, and textiles, are less organized now than
they were before or during the war.
In the absence of a new Census of Occupations, little would be gained
by attempting to convert these figures of growth and decline into more
precise estimates of the present strength of the American labor move-
ment.* Allowing for some increase in the total working population of
the country since 1920, it is probable that all American wage earners,
excluding agricultural labor, were roughly one-fifth organized. In
view of the marked increases in membership in the building trades and
the transportation industry, organization in both has probably grown
to nearly 50 per cent. In coal mining, on the other hand, the extent of
organization has dropped from about 50 per cent in 1920 to well below
40 in 1927; and in the general category of manufacturing industries, from a
bit more than one-fifth in 1920 to a figure closer to one-sixth at the present
time. Women membership is difficult to measure. But such figures as
there are indicate that most of the gains of the war have been lost and
that there is substantial organization among women only in the clothing
industry and among the railway clerks.
The uneven growth of trade unions has profoundly affected the inter-
nal constitution of the American labor movement. From 1913, and even
from 1920 to 1927, the position of the transportation and building unions
has become increasingly important in the movement. In 1927, the two
groups represented one-half of the total membership of American trade
unions. In the next years their relative position is likely to improve,
both because they show signs of continuing to grow and because the
remaining groups in the movement show no signs of swift recovery. It is
interesting to observe that, in the main, American unions have grown in
those industries where the conditions of business competition are quite
different from those prevailing throughout the manufacturing and coal
industries. The rail transportation industry is under extensive public
control, while the competitive area of the building industry is, by its very
nature, highly restricted.
In consequence, perhaps, of this experience since the war, many parts
of the labor movement have devoted serious attention to their economic
policy and have, in some instances, subjected it to drastic revision.
55 Wolman, op. cit., Chaps. III and IV.
482 RECENT ECONOMIC CHANGES
TABLE 40.-PER CENT OF TOTAL MEMBERSHIP IN EACH GROUP

Group 1913 1920 1927
All groups. . . . . . . . . . . . . . . . . . ... a s = e < * * * * * * * * * * * * * * * * 100.0 100.0 100.0
Transportation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20. 2 24.6 24.0
Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20.1 17. 4 26. 0
Metal, machinery, and shipbuilding. . . . . . . . . . . . . . . . . . . . . . . . . 8.0 16.8 6.0
Food, liquor, and tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 2.3 2.0
Paper, printing, and bookbinding. . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 3.2 4.1
Chemicals, clay, glass, and stone. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 1.0 1. 1
Mining and quarrying. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15. 7 8, 2 10.4
Leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 2.2 1. 3
Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.9 7. 1 7.3
Public service. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 1 3.2 6. 1
Textiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 1 2.9 1. O
Theaters and music. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 1.9 | 4. 4
Restaurant and trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.3 2.8 1. 6
Lumber and woodworking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.9 0. 5 0.4
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 5.9 5.9 4.3
Substantially, changing trade union policy has manifested itself in a
greater preoccupation with the problems of production. In the widely
heralded experiment in union-management co-operation, known as the
“B and O Plan,” the essence of the experiment is the assumption by the
union of responsibility for efficiency and output. The developments in
the men's clothing industry have been even more far-reaching. Here
the Amalgamated Clothing Workers has gone so far as to undertake for
manufacturers the opening of new units of manufacture and to share with
the management, in both the new and the old shops, the burdens of super-
vision, thus reducing overhead costs directly and many items of labor cost
indirectly. Similar beginnings are said to be taking place in the
full-fashioned hosiery industry. The latest arrangement of this
nature was recently made through an agreement between the Mitten
Management and the Amalgamated Association of Street and Electric
Railway Employees, whereby the Mitten Management may agree to
union recognition on its properties if, by Secret ballot, the employees
choose the union as their representative, and if the same co-operation and
efficiency is achieved as now prevails within the Mitten Management
enterprises in the cities of Philadelphia and Buffalo.
Traditional trade union attitudes toward restriction of output and
the introduction of machinery have unquestionably been severely
modified in these past years. A growing number of unions have come to a
clearer notion of their stake in the prosperity of the industry over which
they claim jurisdiction; and the recent experience of the United Mine
Workers will no doubt contribute to strengthen the view that labor
organizations cannot successfully and to their own ultimate benefit
obstruct technical progress in industry. At the same time, the American
Federation of Labor and its constituent unions have sought to adapt
LABOR 483
organized labor's principles of wage fixing to the conditions of a
mechanized and more efficient industry, by enunciating the doctrine that
wages should rise proportionately with the increased productivity of
labor.
The course of American industry since the war has, likewise, given a
new turn to labor's concern with unemployment. The belief that the
introduction of machinery has led to extensive displacement of labor
and to persistent unemployment has led organized labor to demand the
progressive shortening of the work-week and the acceptance by industry
of its responsibility for such displaced labor. Except in its discussion of
the five-day week and of the device of a public works reserve for times of
unemployment, the proposals of the labor movement for handling the
problem of industrial unemployment have not yet passed much beyond
the elementary stage. In the various branches of the needle trades,
Several unions, by agreement with the organized manufacturers, have,
since 1920, set up unemployment insurance funds, that are based on
contributions made either by the manufacturer and union together, or by
the manufacturer alone. The contributions to these funds run from 1%
per cent to 4% per cent of the total weekly union pay roll of the firms
under agreement with the union. At present the largest of the unem-
ployment funds is that under the Amalgamated Clothing Workers of
America, which covers some 70,000 workers in the men's clothing industry
of Chicago, Rochester, and New York.
These postwar developments in trade union policy and in the methods
of collective bargaining have been accompanied by the widening of the
general economic activities of organized labor. While the experiments
in workers’ control, born during the war in the form of workers’ manage-
ment in the Rock Island Arsenal or of the Plumb Plan on the railroads,
have since been abandoned, American unions have shown an inclination
to engage in collateral enterprises quite novel in the history of American
labor. The first of these began in 1920 with the organization of banks
owned by unions and their members. It was assumed at the outset
that these institutions would be limited dividend corporations, owned
or controlled by organized labor. The movement of labor banking grew
rapidly until it reached its peak in December, 1926, when 36 labor banks
had accumulated resources of $127,000,000. Meanwhile the banks of
the Brotherhood of Locomotive Engineers, the largest link in the move-
ment, ran into difficulties of management and were forced to dispose of a
part of their large holdings. Several of the smaller banks changed hands
or closed down. At the last accounting, on December 31, 1928, there
remained 27 labor banks with combined resources of $116,300,000.
The method of the limited dividend corporation has also been carried
by organized labor into the business of life and health insurance. Both
the Electrical Workers’ Union and the American Federation of Labor
484 RECENT ECONOMIC CHANGES
itself, have organized life insurance companies, whose ownership is
entirely in the hands of unions and of union members, to sell all forms of
insurance to the general public as well as to members of labor organiza-
tions.” Finally, the same principles of business organization and labor
control have been adopted by various unions for creating investment
trusts and for the building of co-operative houses for working men.
Whatever promise these new activities of labor hold, and what influ-
ence they will have on the position of American labor in the future, it is
too early to estimate. The enterprises are all young. Some have already
changed their character and retain hardly any of the distinctive features
with which they started; while a few have gone far in exploiting the poten-
tialities of labor enterprises. At the moment, however, they are no more
than an evidence of a fresh orientation in the outlook of the labor
movement.
Much of this new attitude of organized labor may be attributed to
the peculiar industrial situation that has prevailed in the United States
since 1922. The quick recovery of business in 1922, and its comparative
stability since, failed to have the anticipated effects on the growth of
trade unions. In the light of all past experience it was to have been
expected that the labor movement would, by 1928, more than have recov-
ered its earlier losses. This it has not done, and the failure to do so has,
without doubt, turned the attention of the movement toward an estimate
of its own methods and outlook.
Adding further complexity to the situation has been the growth of
devices and institutions which, in their present magnitude at least, are
quite foreign to the American scene. The foremost of these is the com-
pany union, or employee representation plan, or works council. While
such organizations of labor are not all alike, they all differ from the trade
union in fundamental respects. They are organized through the initiative
of the employer. Their jurisdiction is not spread over the whole of a
competitive area, as is that of a labor union, but is limited to a single
plant or single ownership. They do not, therefore, regard the standard-
ization of wages and working conditions throughout a competitive area
as one of their principal functions. They differ from the trade union, and
among themselves, in the degree in which they enjoy freedom of action.
They are not a new institution in American industrial relations, but they
have grown very rapidly since the war and may at the present time claim
considerably more than 1,000,000 members. Organized in some instances
to replace existing labor unions, either during or after a strike, and set
up elsewhere in plants where there has been no trade union, these plans
5° On August 31, 1928, the Union Labor Life Insurance Co. had insurance outstand-
ing of $37,523,000, of which less than $2,000,000 was ordinary and the balance group
insurance. At the same time, the Union Co-operative Life Insurance Co., the Electrical
Workers’ company, had written more than $50,000,000 of insurance.
LABOR - 485
of employee representation have so far had the effect of retarding the
growth of organized labor. -
Of like effect have been the so-called welfare features established in
many industries, either in connection with company unions orindependent
of them. The content of welfare plans differs widely, but nearly all now
make some provision for workers’ insurance, principally against death,
but in increasing measure against total disability, sickness, and old age,
as well. The form of workers’ insurance which is most significant in
this connection is that commonly known as group insurance, which is
clearly distinguishable from other existing forms of personal insurance.
The coverage is a group and not an individual; membership in the group,
for insurance purposes, begins and terminates with the acquisition or
loss of a job; the term of the insurance is usually one year; contracts are
made without physical examination; the rates are low; insurance ceases
with the loss of a job, except that the individual may, without physical
examination, buy ordinary life insurance at the regular rate for his age;
and the premium is paid either in whole or in part by the employer.
Group insurance of this type, a very small item in the insurance business
before the war, is now a business of very considerable magnitude.
Both the plans of employee representation and group insurance are
assumed to tie workingmen closer to their shops and factories and to
establish a new and more binding relationship between them and their
jobs. The same ends, it is believed, are being served by the increase in
workers’ purchases of industrial investments. In view of the importance
which is now generally attached to these developments in the United
States and of their significance on their own account, it is essential to
examine their size and rate of growth.
Workers' Insurance.”—It is impossible among the many types of
life insurance sold in this country to segregate the precise amount bought
by workingmen. Some examination of the total volume of life insurance
now in force and of the distribution of this total among the various classes
of insurance will, however, yield a rough measure of the order of magni-
tude of workers’ insurance and throw considerable light on its growing
importance.
Life insurance as a whole has, in the United States, been growing
without interruption and at a rate much faster than the population of the
country. Table 41, which shows the total and per capita amount of life
insurance in force in commercial companies from 1911 to 1927, reveals
the striking rate of increase for all of the combined forms of life insurance
and the contrast between the growth before and after the World War.
In the five years from 1911 to 1915, the increase in per capita insurance
57 The material on this subject was compiled by Elizabeth Steele, of the Metro-
politan Life Insurance Co.
486 RECENT ECONOMIC CHANGES
in force was 19 per cent; in the next five years, 62 per cent; from 1921 to
1925, 47 per cent; and from 1926 to 1927, 9 per cent.
TABLE 41.--ToTAL AND PER CAPITA LIFE INSURANCE IN FoRCE

- Amount in force—all classes
Population,
Year continental
|United States Total insurance Per capita
1911 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,682, 189 $17,730, 128,000 $189
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,097,298 18,955,471,000 199
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96, 512,407 20, 204,437,000 209
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - 97,927,516 21, 202, 140,000 217
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99, 342,625 22,360,475,000 225
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100, 757,735 24, 211,590,000 240
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102, 172,845 26,659,071,000 261
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,587,955 29,250,471,000 282
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,003,065 35, 120,630,000 334
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,421, 621 41,364, 115,000 389
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,444,777 44,991,807,000 415
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,893,003 49, 225,064,000 448
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,693,474 55,653,480,000 498
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113,727,432 62, 531,016,000 550
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,378,094 70,261,274,000 609
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117, 136,000 76,973,268,000 657
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118,628,000 84,801,409,000 715
|
Ordinary life insurance is still the most popular form and accounted
in 1927 for roughly three-fourths of the total amount in force. It
appears also to be growing at no diminished rate, and its present absolute
annual increase is greater than that of group and industrial life insurance
combined. No material is available that would permit the distribution
of the ordinary life insurance now in force among wage earners and low-
salaried workers, and other economic classes. But it is known that a
substantial and growing volume of ordinary insurance is held by the
former group.” - -
* A study of the average amount of ordinary life insurance held in 1927 by the
members of various occupations was recently made by the Phoenix Mutual Life
Insurance Co., of Hartford, Conn. Their analysis, based on some 20,000 cases, shows
the following very interesting figures:
Average per
capita insurance
Occupation held, 1927
Office employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $4,043
Retail clerks in stores. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,450
Skilled workers in manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . 4,594
Unskilled workers in transportation. . . . . . . . . . . . . . . . . . . . . . . . . 3, 163
While these amounts appear large, they are for the past few years by no means
Improbable.
LABOR
487
TABLE 42.-AMOUNTS OF LIFE INSURANCE IN FoRCE, BY CLASSES
(In thousands of dollars)

Amounts of life insurance in force
Year
: Ordinary Group Industrial
|
1911. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,374,539 . . . . . . . . . 3,355, 589
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 315,802 13, 172 3,626,497
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,304,966 31, 202 3,868,269
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,091,561 64,468 4,046, 111
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,956,463 99,049 4,304,963
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,396,661 152,859 4,662,070
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 261,234 346, 525 5,051,312
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23, 122, 510 627,008 5, 500,953
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,611,252 1, 135,036 6,374, 342
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,827, 156 1,614,387 6,922, 572
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,710,348 1, 575,821 7,705,638
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,861,734 1,808, 211 8, 555, 119
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,476,206 2,430, 829 9, 746,445
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,457, 565 3, 133,620 10,939,831
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,671, 545 4, 228, 345 12, 361, 384
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 58, 117,778 5,338,655 13, 516,835
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,052,576 6, 274,636 14,474, 197
With this growth in insurance outstanding, the income arising out of
the payment of death claims, matured endowments, annuities paid, and
TABLE 43.−PAYMENTS TO POLICYHOLDERS
Total payments to policyholders
Year
Industrial Group Fraternal and Total
assessment
1911. . . . . . . . . . . . . . . . . . . . . $ 74,275,662 | . . . . . . . . . . . $ 89,665, 297 $163,940,959
1912. . . . . . . . . . . . . . . . . . . . . 81,287,041 | . . . . . . . . . . . 101, 163,921 182,450,962
1913. . . . . . . . . . . . . . . . . . . . . 89, 138,370 | . . . . . . . . . . . 105,919, 898 195,058, 268
1914. . . . . . . . . . . . . . . . . . . . . 102,711, 514 | . . . . . . . . . . . 103,033,658 205,745, 172
1915. . . . . . . . . . . . . . . . . . . . . 113,591,045 | . . . . . . . . . . . 102,863, 175 216,454, 220
1916. . . . . . . . . . . . . . . . . . . . . 119,843,381 | . . . . . . . . . . . 111,874, 449 231,717,830
1917. . . . . . . . . . . . . . . . . . . . . 131, 107,031 | . . . . . . . . . . . 102,088, 575 233, 195,606
1918. . . . . . . . . . . . . . . . . . . . . 187, 170, 711 . . . . . . . . . . . . 124,010, 149 311, 180,860
1919. . . . . . . . . . . . . . . . . . . . . 168,962,217 $ 6,595, 261 148,366,992 323,924,470
1920. . . . . . . . . . . . . . . . . . . . . 172,743, 541 10,762,470 114,440, 177 297,946, 188
1921. . . . . . . . . . . . . . . . . . . . . 195,494, 551 10, 591, 889 112,794,046 318,880,486
1922. . . . . . . . . . . . . . . . . . . . 244,029, 395 11,498,920 115, 264,376 370,792,691
1923. . . . . . . . . . . . . . . . . . . . . 292,322,353 15, 544, 620 115,091,446 422,958,419
1924. . . . . . . . . . . . . . . . . . . . . 331, 342, 194 19,415,437 125,612,037 476,369,668
1925. . . . . . . . . . . . . . . . . . . . . 385,572, 212 25,772, 140 131,426, 104 542, 770,456
1926. . . . . . . . . . . . . . . . . . . . . 441,449, 574 34,462,608 134,355, 300 610,267,482
1927. . . . . . . . . . . . . . . . . . . . . 505, 166, 137 40,749,476 184,758, 547 730,674, 160
488 RECENT ECONOMIC CHANGES
disability, dividends, and payments for lapsed, surrendered, and pur-
chased policies has become a substantial addition to the incomes of
policyholders. The known streams of insurance income are shown in
Table 43. All fraternal and assessment insurance may not be workers’
insurance, but since the average amount of such insurance held is small,
the bulk of it must be insurance of the lower income groups. The
figures for workers’ health insurance and old age pensions cannot be
segregated, but they are said to be small. Adding to the figures that
are clearly workers’ income from insurance the further income that flows
to workers from their holdings of ordinary life insurance and from
workmen's compensation, it is clear that the present annual income to
the wage-earning and lower-salaried groups from insurance must be
more than one billion dollars.
Workers' Investments.-The growth of personal insurance in all of
its forms finds its counterpart in the widening diffusion of corporate stock
ownership in this country. In part, this phenomenon is nothing more
than one of many features in the development of the American invest-
ment market; in part it is the result of the deliberate policy of many
business enterprises designed to encourage their workingmen to share
in the ownership of the business. Particularly since 1920 a growing
number of large and small businesses have made arrangements with
their employees whereby they may purchase a limited number of the
firm's shares of stock, usually on the condition that the shares so pur-
chased are paid for by weekly or monthly installments deducted from
wages.”
On the whole matter of the diffusion of stock ownership it is still
difficult to obtain reliable and useful information. That ownership is
more general than it used to be, and is constantly becoming more so, is
reasonably clear. But that this movement has radically affected the
distribution of wealth and income in the country, or that it is an evidence
of marked changes in distribution, is doubtful. An elaborate investi-
gation by the Federal Trade Commission of the situation in this regard
in 1922 led that agency to the conclusion that the “data indicate a very
wide distribution of corporate stock among individuals” but “it was not
possible from the information supplied by the corporations (4,367
corporations were studied by the Commission) to analyze the proportions
owned by different individual stockholders or the extent to which stock
was held by a few individuals.” The Commission did find, however,
* There are a great number of such arrangements now in force in American indus-
try and they are described in detail in R. F. Foerster and E. H. Dietel, Employee
Stock Ownership in the United States, Princeton University, 1926, and in Employee
Stock Purchase Plans in the United States, National Industrial Conference Board,
New York, 1928.
LABOR 489
that “nearly one-third of all corporate stockholders in 1922 held not
more than $500 worth of stock each.” -
In estimating the volume of securities held by employees, there are two
fundamental statistical difficulties; first, that it is impossible to procure
a frequency distribution of individuals’ holdings of securities, and second,
that the term employees is so used as to include not only wage earners and
lower-salaried employees, but executives and higher-salaried employees,
as well. Thus when the Federal Trade Commission found for the year
1922 that the “average holdings per person for employees” was $1,419
of common stock and $2,803 of preferred stock, the group of employees
must obviously have included many in the higher income classes.**
But the evidence that there has been a marked growth in stock owner-
ship by workingmen is too strong to be disregarded. A recent study of
plans of employee stock ownership, made by the National Industrial
Conference Board, comes to the conclusion that a minimum estimate of
such employee holdings would place their volume in 1927 at more than
a billion dollars. A summary of their findings on stock ownership is
given in Table 44, taken from the Board's report. But with reference
TABLE 44.—ExTENT OF EMPLOYEE Stock Own ERSHIP AMONG 315 COMPANIES IN THE
UNITED STATEs, 1927°

Number of employees
* * * * * * Number of Market value
Type of plan and eligibility of employees companies Stock- of shares”
. Total holders and
subscribers
Active purchase plan. . . . . . . . . . . . . . . . . . . . c253 2, 439,844 736,641 $936, 140,941
Rank and file of employees. . . . . . . . . . . d230 2,397, 298 733, 112 909, 134,425
Selected employees. . . . . . . . . . . . . . . . . . 23 42, 551 3, 529 27,066, 516
Inactive purchase plan”. . . . . . . . . . . . . . . . . . 51 236, 207 30, 582 60,466,372
Rank and file of employees. . . . . . . . . . . 46 230,788 30,322 59,327,862
Selected employees. . . . . . . . . . . . . . . . . 5 5,419 260 1, 138, 510
Profit sharing, bonuses, etc. . . . . . . . . . . . . . . 11 60,392 38,845 e48, 543,097
All plans. . . . . . . . . . . . . . . . . . . . . . . . . d315 2,736,448 806,068 eś1,045, 150,410
* This estimate is probably a minimum. Moreover, it does not include $10,825,000 worth of securi-
ties of two companies known to be owned by the employees jointly, in addition to those which are owned
by them individually.
* These values relate for the most part to the middle of 1927, when prices of some shares were unusu-
ally high. In many other cases, however, there had been no such unusual inflation. For thirty-five
companies, book or par value was used, in the absence of data regarding market value.
• Plans that have been discontinued.
d Includes four companies, whose plans were not analyzed in detail.
• Includes $11,550,000 jointly owned by 11,500 employes of the Philadelphia Rapid Transit Co.
60 National Wealth and Income, United States Sen. Doc., No. 126, 69th Congress,
1st session, Washington, 1926, pp. 148, 151.
*1 Ibid., p. 148.
490 RECENT ECONOMIC CHANGES
to the degree of control exercised by these stockholders, the Board
comes to much the same conclusions as those reached by the Federal
Trade Commission for its study of the year 1922. At that time the Com-
mission found that while “employees comprised 7.5 per cent of the com-
mon stockholders reported and 3.5 per cent of the preferred stockholders,”
they “had only 1.5 per cent of the common stock and 2 per cent of the
preferred.” Similarly, the Industrial Relations Section of Princeton
University, reviewing employee stock ownership in 20 large corporations
in 1926, found that employee stockholders comprised 21 per cent of all
of the stockholders of these companies, but that their holdings repre-
sented only 4.3 per cent of the market value of the total stock
outstanding.”
VI. INDUSTRIAL DISPUTES
The bare statistical records of strikes and lockouts cannot always give
a true picture of the prevalence of peace or conflict in industry.
Industrial disputes differ in intensity, in the degree to which they succeed
in interrupting production, and in the effects produced by their settle-
ment. Considerations such as these are not measurable, but a knowledge
of them will qualify many patent conclusions drawn from a study of the
number of industrial disputes.
Measured by any standard, the period since 1922 has been remarkably
free of upheavals in industrial relations.” Although the reporting of
the number of persons involved in disputes was more inclusive after
1922 than before, yet in the six-year period from 1922 to 1927 both the
number of disputes and the number of strikers show a sharp decline over
the preceding years from 1916 to 1921. These average figures, moreover,
TABLE 45.-NUMBER OF DISPUTES AND EMPLOYEES INVOLVED
Annual average
Period
All disputes Number of
employees involved
1916–1921 . . . . . . . . . . . 3,503 1,798,301
1922–1926 . . . . . . . . . . . 1, 164 688, 538
distort the picture somewhat, partly because the year 1922, one of large
strikes, more properly belongs in the earlier period, and partly because
62 Ibid., p. 160.
* Employee Stock Purchase Plans in the United States, National Industrial Con-
ference Board, p. 39. -
* The statistical material in this section was compiled, from the reports of the
United States Bureau of Labor Statistics, by Ben M. Selekman.
LABOR 491
they conceal the steady decrease in disputes since 1922. This decline
is shown in Table 46. Unfortunately, the record of industrial disputes
is not available for the years immediately before the war, but comparison
of these war and postwar figures with the elaborate statistics from 1881
to 1905 would appear to indicate that the number of disputes has since
1922 been less than then, whereas the number of employees involved was
relatively slightly greater in the late than in the early period.
TABLE 46.-INDEX NUMBERS OF INDUSTRIAL DISPUTES AND NUMBER OF EMPLOYEEs
(1916 = 100)
Year ſ Industrial Employees Year . Industrial Employees
disputes involved disputes involved
1916. . . . . . . . . . . . . . . . . . 100 100 1922. . . . . . . . . . . . . . . . . 29 101
1917. . . . . . . . . . . . . . . . . . 117 77 1923. . . . . . . . . . . . . . . . . 41 47
1918. . . . . . . . . . . . . . . . . . 88 78 1924. . . . . . . . . . . . . . . . . 33 41
1919. . . . . . . . . . . . . . . . . . 96 260 1925. . . . . . . . . . . . . . . . . 34 27
1920. . . . . . . . . . . . . . . . . . 90 91 1926. . . . . . . . . . . . . . . . . 27 21
1921 63 69 1927. . . . . . . . . . . . . . . . . 19 22

The comparative quiet of these last years is all the more marked in
contrast with the state of affairs before 1923, when there took place some
of the largest and longest strikes in the history of the country. In 1919,
more than 1,000,000 workers were involved in strikes in the coal, steel,
and railroad industries; disputes in the building trades of Chicago and
New York resulted in a strike of 250,000; 100,000 longshoremen along
the Atlantic Coast stopped work; a strike in the stockyards of Chicago
brought out 65,000 strikers; and strikes in the clothing and textile
industries several hundred thousand more. Altogether, the reports to
the United States Bureau of Labor Statistics indicate more than 4,000,000
persons involved in industrial disputes in 1919. The following years
were quieter but by no means free of strikes. In 1920 there were the
large “outlaw” strikes of railway switchmen and yardmen and the strike
of the anthracite miners; in the year following, a strike of the marine
workers in all principal ports, and conflicts in the clothing, building, and
packing industries; and in 1922, when the number of reported strikers
rose to 1,600,000, there took place the great strikes of the coal miners
and of the railroad shopmen.
Major industrial disputes during these latest years have been largely
localized in the coal, textile, and clothing industries. In the coal industry,
strikes have been almost continuous and appear now to be stopping,
at least temporarily, with the abandonment by the United Mine Workers
of the Jacksonville agreement and with a recent decision of the union
authorizing the district organizations to negotiate their own agreements
with the operators. Unsettled conditions in all branches of the New
492 RECENT ECONOMIC CHANGES
England textile industry, accompanied by frequent attempts to cut
wages, have precipitated bitter strikes, particularly in Passaic and
New Bedford; while the movement to introduce the 40-hour week,
Organization campaigns against non-union manufacturers, and a struggle
for control of unions between the administrations of several organizations
and the Workers' Party have been the principal causes of conflict in the
many branches of the clothing industry.
VII. SUMMARY
Since 1920, the most striking changes in the supply of labor have
been associated with the policy of immigration restriction, the growth
of industry in the South, and the falling birth and mortality rates.
Wage rates are a useful measure of the changing position of labor.
The most striking feature is the slight decline in wage rates during the
severe depression from 1920 to 1922 and the recovery since 1922.
In manufacturing industries there has been a reduction in the nominal
work-week of roughly five hours from 1914 to the present, and the
prevailing hours of labor are now around 50 a week. Since 1922 it seems
likely that labor costs have continued to fall.
Production per capita is now nearly 60 per cent greater than it was
in the closing years of the nineteenth century. The output per worker
engaged directly in production has increased 80 per cent during the same
period. The precipitate rate of advance in productivity, which began in
1922 and continued through 1925, has slackened.
Comparisons of prewar and postwar employment in manufacturing
industries show no startling differences between the normal stability
of employment before the war and the condition after the recovery from
the depression of 1920–21. Measures of labor turnover in manufacturing
industries confirm the impression of stability shown by the index of
employment and income.
Lack of machinery for compulsory registration makes difficult a
determination of the amount of unemployment. Estimated average
unemployment, is arrived at by taking the difference between the number
of persons actually employed and the number desiring and habitually
dependent upon employment. The most interesting and probably one
of the most important changes in postwar employment has been the
expansion of nonindustrial employment. Measured by the volume of
unemployment, the recession of 1927 does not appear to have been so
severe as that in 1924. Throughout the whole period there is a large
and persistent volume of unemployment, even in the very active years.
It is probable that American wage earners, excluding agricultural
labor, are about one-fifth organized. Since 1920, the position of the
transportation and building unions has become increasingly important.
In 1927, these two groups represented one-half of the total union member-
LABOR 493
ship. In general, American unions have grown in those industries where
the conditions of business competition are quite different from those
prevailing throughout the manufacturing and coal industries.
Union policy is much more preoccupied with problems of production,
as shown by the experiments in co-operation and the relaxation of the
traditional trade union attitude toward the introduction of machinery.
The American Federation of Labor has initiated the doctrine that wages
should rise proportionately with the increased productivity of labor.
Labor is much more preoccupied with unemployment, and has demanded
the progressive shortening of the work-week and the acceptance by
industry of its responsibility for labor displaced by improved machinery
and methods. Unemployment reserve funds of various sorts have been
set up. Unions have shown an inclination to engage in such enterprises
as banking, and life and health insurance. Company unions have grown
rapidly and claim more than one million members. The increased
number of corporate stockowners has been important.
The period since 1922 has been remarkably free from strikes and
lockouts.
CHAPTER VII
MANAGEMENT
BY HENRY S. DENNISON
In this chapter" are recorded the methods of management found in a
Survey of American manufacturing and marketing. For the most part,
they represent what can be called average good practice, though in some
cases methods too significant to omit entirely, but used in too few com-
panies to warrant the broader title, are described as methods of the
exceptional few.
The survey first examined managerial methods used in keeping up
and building up the organization itself; then in meeting the problems of
manufacturing, marketing, selling, merchandising, and clerical control,
The order followed in this chapter is the order of the topics in the
Field Interview Schedule printed in Appendix A.
To get the facts upon which this chapter is based, some 500 people,
employed by 100 different companies, were interviewed. Advice was
sought from professional consultants, bankers, and other men in contact
with the business world. Advantage was taken of many public and
private inquiries which have been carried out during the past few years
into special phases of managerial technique. And close study was made
of business articles and books, going back in many cases, for purposes of
comparison, to those of a dozen years ago to give indication of the impor-
tant trends of effort and attention. By these means it was sought to
present as broad and true a picture as possible.
From a list of several thousand companies, out of which the most
nearly typical were selected by trade association officials and others well-
acquainted with the field, 100 were chosen as nearly as possible to be fair
samples of normally successful, established businesses.
The sampling, therefore, and the chapter do not actually cover the
whole field of American business. They leave out the failures and that
large group of the Babbittry of business, whose methods are safe and
dependable, but whose ways change slowly and only after learning of the
well-tested practices and of the more aggressively successful. They
leave out also those not yet settled-down enough to have established
management practices.
1 The author was assisted in the direction of the survey and the drafting of this
chapter by Ernest R. Burton, John S. Keir, Richard H. Lansburgh, Erwin H. Schell,
and Donald S. Tucker.
495
496 RECENT ECONOMIC CHANGES
The survey, however, did not confine itself merely to the ultra-success-
ful; it included small and large companies making moderate to notable
successes in a variety of businesses in different sections of the country.
Among them, all the main divisions of the census, except lumber, tobacco
manufacture, musical instruments, and railroad repair shops, are repre-
sented by two or more companies. It is believed to be a fair sample of
the group of American business men whose management practices would
by any practical man be considered the “prevailing” practices. Its
results check well with the considerable number of surveys into specific
methods which have been made in the last few years.
Earlier standards were characterized by the phrase “business is
business,” with the implication that whatever means succeeded were
right ones. Muckraking and regulative law followed, not only as the
effects of the first changes of attitude but also as the causes of further
changes. A specific and widespread assertion that modern business
has obligations beyond the law appeared in July, 1915, as the “Rotary
Code of Ethics.” In 1921, 1922, and 1923, dozens of trade associations
adopted ethical codes;” in 1924 came publications of the United States
Chamber of Commerce code and of Hoover's Principles of Business
Conduct; and in 1926 there was almost an epidemic of books on business
ethics.
But the course is no more run when codes are formulated than when
evils are first exposed. Codes may be little more than words or may, on
the other hand, through their effect on consciousness and subconscious-
ness, develop a professional pride or a powerful social demand for decency.
This survey gave evidence that a growing number of business men
care a great deal for something more than what they can get out of
business for themselves. To the organization itself, and to its investors,
there is a decided sense of responsibility. Toward customers, also,
there is such a sense; at least, caveat emptor as an alibi is dead. Toward
employees there is less feeling of responsibility; yet there is some. Busi-
ness morals may be called more or less rudimentary according to the
standards by which they are judged; they certainly exist and seem to be
evolving. Progress toward higher intellectual standards for management
is clearly indicated by the survey. The values of training in the material
sciences are widely granted.
A large majority of the companies in this survey expressed it as their
aim to work for progress in the next few years through perfection of
physical facilities; only 20 per cent included the bettering of the skill
and morale of the employee. It is, therefore, obvious that there are as
yet only the beginnings of scientific thinking on the more human
problems. But the marked tendency toward the scientific rather than
* For many examples, see Codes of Ethics by E. L. Heermance, 1924.
MANAGEMENT 497
the opportunist type of mind, and the growing belief that training for
general business management is worth while, make it possible that the
human problems will some day get a larger share.
Of characteristic and weighty influence upon American business
management as a whole, and often of saving influence upon those who
prefer to follow rather than to pioneer, are the business publications and
the business meetings which, each in its own way, lift managerial noses
off grindstones and help each manager to see his problem as one of a group
of problems from a study of which he may learn much. A considerable
majority of companies belong to one or several sorts of business associa-
tions, and a much larger number take one or many of the business publi-
cations whose circulation aggregates 11,000,000.*
The Department of Commerce published, in 1926, a list of nearly
9,000 business associations, 6,500 of which were local, 1,100 state-wide,
and 1,200 interstate, national, or international. Their activities ranged
over almost the whole field of management, including especially statistical
service, cost accounting, industrial and commercial research, simplifica-
tion, standardization, credit information, traffic and transportation
studies, and trade ethics. It is significant that several hundred business
executives are members of some national association of the social sciences.”
The last few years have been extremely favorable in many ways for
the development of those intellectual, moral, and social attitudes which
lead toward high professional standing. The situation of to-day holds
all the opportunity any one could desire for the wholesome development
of business management into a great profession.
I, ORGANIZATION
To find the better forms of internal structure has commanded the
increasing attention of American business during the last few years.
The natural course of evolution away from absolute one-man manage-
ment, aided by the financial shake-ups of 1921, gave to good organization
structure a growing importance. A mere increase in the number of the
departments and divisions of a straight line organization has not been
sufficient to meet the demands of modern complexity, since it has required
of each of a large number of executives too wide a range of knowledge.
Certain especially difficult and important functions have, therefore, been
more and more set aside for the particular consideration of one man or a
group of men, who are expected, in one way or another, to guide, direct,
or supplement the actions of line executives in these fields. It has been
* The Market Data Book lists 1,111 business and 524 professional publications.
The total of such circulation figures as are there given for business publications is
11,333,078. -
* See details of membership in the American Statistical Association in their Journal,
June, 1927.
498 RECENT ECONOMIC CHANGES
more and more generally recognized that the conquest of a special
problem requires not only the ability and will to win, but also the devotion
of men who have sufficient time for its solution.
Functionalization.—When the word is used in its strictest sense there
can be found few organizations which are not formed partly along “func-
tional” lines; to separate selling, or accounting, or buying, is to depart-
mentalize with respect to the type of activity or function rather than
the type of goods to be handled, equipment to be used, or territory to be
covered, and hence to functionalize. These more obvious and inescapa-
ble divisions of labor, however, have been so long settled as to be
considered normal “line” departments; an organization must have gone
somewhat deeper in its specialization of types of activity to be generally
described as “functionalized.”
The more fully functionalized type of organization has been experi-
mented with and written about for more than a score of years, but until
recently its significant applications have not been many. To-day there
is to be found a definite trend toward the development of such func-
tional departments as “Planning,” “Material Control,” “Personnel,”
“Methods,” “Sales Promotion,” “Styling,” and “Merchandising,” as
well as some less sharply defined advisory positions like “Economist.”
and “Statistician.” Companies well-functionalized some years ago
have continued to develop their organizations in the direction of further
functionalization. New companies have often set up their organizations
along functional lines, while new general managers of old companies,
when they have reorganized, have almost uniformly done so on a func-
tional basis. Many of the organizations which do not use the functional
structure are operated by heads who have held their positions for a
long time. That the trend is the result of a broad change in the ideas
of management is indicated by the fact that the size of the company,
or the nature of its work, bears little relation to the extent of its
functionalization.
Managers have found that, when functions are newly set off, their
performance usually requires more personnel than when they have been
fully developed. When the work is better known it can be simplified,
and sometimes certain functional and line responsibilities may both be
assigned to the same executive. Or a functional responsibility may reside
in a committee of line executives. The more important and exacting
functions, however, remain in charge of a staff executive, sometimes
aided by a large number of assistants.
In marketing, the employment of functional specialists is new and
hence its development to-day is extensive rather than intensive. Among
the separate functions which have evolved, are the development of
merchandising policies and practices, sales promotion, marketing research,
style bureaus, and product improvement. With rare exceptions, all
MANAGEMENT 499
have been created since the war, and show a marked acceleration during
the last five years. Particularly noticeable are the undertakings of the
Association of National Advertisers and of some advertising agencies in
market analysis, and the extension of the field of management consultants
into marketing.
An important by-product value of the use of functional specialists
has been found in the chance it offers for making fuller use of the widely
ranging variety of natural aptitudes among executives. The kind of
man too “one-sided” to make a good line executive has been found
capable of excellent work in a functional or staff position.
Research.-Research through the material sciences got a great start
during the war, and much support during the days of excess profits
taxation which followed. It has now progressed so far that many kinds
of organization have been set up for it;" there are company, joint, con-
Sulting, and trade association" laboratories, and co-operating research
Services in universities. Some manufacturers have combined in main-
taining laboratories to conduct researches covering basic process problems
interesting to all. It is widely believed by business managers that the
research activities of leading companies are among the primary causes
of their success. Prosperity has really come to mean a rate of advance
rather than a state of affairs. Even pure research—formerly thought
uncommercial because related to no designated commercial purpose—is
now supported by a few American concerns.
Functionalizing and the establishment of organized research both
arise to meet the same need—that of finding out more about some parts
of the total job of management than can be found out in the odd moments
of a line executive’s life. There has been rapid progress by chemical
and physical research into processes generally believed twenty years ago
to be understandable only by practical men “skilled in the art.” Since
1921, a similar invasion into those business processes which are more
subject to human than to mechanistic influence has been begun by
departments of methods research, statistical research, and market
analysis.
Co-ordination.—The greater complexity of business problems, and of
the organization necessary to cope with them, have forced attention upon
better methods of co-ordinating the plans and the work of specialists
and executives. Where there are research men, staff men, and operating
men, a close mutual understanding and counseling among them has been
found necessary, whether it is effected by formally arranged conferences
and committees or, as one executive put it, “by a great use of shoe
5 There are 999 listed in the Bulletin of the National Research Council, July, 1927,
No. 60, as compared with 300 in Bulletin, No. 16 of 1920.
° The United States Chamber of Commerce, in November, 1925, published a list of
327 specific research projects of 68 different trade associations.
500 RECENT ECONOMIC CHANGES
leather.” Under a pervasive one-man control, where the chief executive
disposes of all important questions, such co-ordination is, in theory,
effected through that man. But the trend is definitely away from control
by one man; and, even where it exists, his absences may force department
heads into conferences so frequently that they have, in effect, a system
of regular operating committees.
The use of the conference as a co-ordinating device is widespread.
Conferences, occasional or frequent, and systematic interchange of infor-
mation among executives, form the two steps first taken by those com-
panies which are tending away from one-man control. They do not
change the responsibilities of men or departments, or affect in any way
the visible structure of the organization, but often become slowly crystal-
lized into committees. Committees seem to be a normal evolution of the
consultation necessary to co-ordinate a complex organization. Irregular
conferences among executives and their subordinates, however, are still
the most common means of co-ordination.
After first trials, committees have often seemed wasteful of time, and
frequently first trials are ill adapted to their ends or are led by unskillful
chairmen. Some companies have found committees too unwieldy and
have returned to the appointment of an operating head, who calls such
conferences or consultations as he desires. Yet for every plant abandon-
ing them, there were found eight which added to their number. Com-
mittees, where favorably regarded, are looked upon as methods of
education and cross-fertilization of ideas, as valuable sources of counsel,
and as opportunities to gain co-operation in the effecting of constructive
changes.
There seems to be less use of committees in very large and very small
companies than in the medium-sized. So-called “executive committees,”
or committees dealing with general matters, are the most frequent type
found. In a few companies, such committees actually control the opera-
tions of the business, but there is evidence to indicate that committees
which are clearly understood as advisory to a responsible executive sur-
vive better than those whose votes constitute in themselves executive
decisions. Where complete committee control is found, the reason for
it seems to be that some leading executive has passed out of the company,
no choice to succeed him seems possible among the remaining executives,
and to bring a man in from the outside is not desired.
A list of typical committees most commonly found in the Survey
follows:
SMALL PLANTs, UP To 500 EMPLOYEES PLANTs EMPLOYING 500 TO 1,000
General Committee. EMPLOYEES
Quality Committee. General Committee.
Scheduling Committee. Cost Committee.
Committee for Purchasing Control. Budgeting Committee.
MANAGEMENT
501
Estimate Committee.
Finance Committee.
Scrap Committee.
Labor Committee.
Wages Committee.
Power Committee.
Suggestion Committee.
MEDIUM PLANTs, 1,000 To
EMPLOYEEs
5,000
General Manager's Staff.
Advertising Council.
Competition Committee.
Cost Committee.
Budget Committee.
Design Committee.
Executive Committee.
Foremen’s Committee.
Manufacturing Betterments Committee.
Merchandising Council.
Management Committee.
Inventory Control Committee.
Personnel Committee.
Safety Committee.
Service Committee.
Standards Committee.
Sales Committee.
Production Meeting.
PLANTs, 5,000 To
EMPLOYEEs
LARGE 10,000
Intercompany Committee.
Waste of Material Committee.
Usual committees above.
VERY LARGE PLANTs, ABOUT 10,000
EMPLOYEES
Future Demands Committee.
Public Relations Committee.
Industrial Relations Committee.
New Work Committee.
Special Committee for Parts Problems.
Co-ordination Committee.
Works Committee.
Usual committees above.
Organization charts are maintained by relatively few companies,
and fewer still keep them up to date. Yet the interest in developing
effective organization is much alive. The chart as an aid seems to have
its principal value to each company in the earlier stages, and to picture
the status of organization rather than its living relationships. In business
literature of ten years ago it was frequently to be found, but seldom indeed
to-day. Careful job specifications, including the beginnings of a descrip-
tion of the working relationships among jobs, seem to be taking the place
which the chart once held as an aid to organization building. The setting
forth of an organization form, as if it were capable of being fitted down
over a going concern, hardly appears now in the business publications in
which it was common fifteen years ago. It is the principles of organiza-
tion rather than the forms which are to-day being discussed.”
It might be assumed that increase in the size of an organization would
demand that greater attention be given to organization form. This
has, of course, occurred in some cases, but in general there is a striking
lack of relation between the size of a business and the methods used to
operate it. A dominating one-man control is to be found in one of the
7 See, for example, Oliver Sheldon, Philosophy of Management, 1923; Scientific
Foundations of Business Administration, by H. C. Metcalf, editor, 1926; Psychological
Foundations of Business Management and Business Management as a Profession, by
H. C. Metcalf, editor, 1927; David R. Craig, “Measuring Morale and Leadership
Ability,” Personnel Journal, October, 1927, p. 155 (publication of the Personnel
Research Federation).
502 RECENT ECONOMIC CHANGES
very large organizations of the country; and highly decentralized,
functionalized, and co-ordinated forms are to be found in relatively small,
though not, of course, the Smallest companies. The characteristics and
tendencies of the man or men “at the top” are still the pre-eminent
influences in determining what shall be the form of an organization.
In these days of mergers, it is to be expected that many articles upon
organization and reorganization would appear, but so far it would seem
that the financial aspect rather than the structural aspect of mergers has
held the center of attention.
Executive Technique.—Handling functional and research specialists—
men who must themselves originate and create—has brought into
prominence a technique of consultation, persuasion, and inspiration, as
against a technique of order-giving. It is the man who can lead rather
than domineer who is now chiefly desired in executive positions. The
large organization needs an able head, but must have much more brains
at the top than one head will hold; the organization pyramid is being
rounded at the peak.
Just what the qualities of creative leadership are—just what is
involved in the position of the chief executive—has been the subject of
several discussions and articles in the past few years.” It appears in
business publications, in the proceedings of the Taylor Society, the
American Management Association, the Society of Industrial Engineers,
the Personnel Research Federation, the American Society of Mechanical
Engineers, and crops up in many discussions with business executives.
The idea that even the chief executive's job admits of analysis and
comparison of methods is in sharp contrast to the older ideas that its
fulfillment could not be described further than as an expression of the
personality of the holder, and that it was only results that could be
counted.
It is impossible to know whether or not changes in managerial per-
sonnel have been more than normally rapid during the last decade. We
must rest with the presumption that ups and downs among different
lines of business, shifts in ownership since 1921, and changes in business
technique have combined to make them so. The newcomers into each
managerial grade appear to have come from outside the organization
rather more often than one would expect who knew how common is the
praise of “promotion from the ranks.” But a majority still come from
within; and in the larger and long established companies a big majority.
The specialists who are being used in increasing numbers come more
often from outside.
8 For example: H. P. Kendall, “The Problem of the Chief Executive,” Taylor
Society Bulletin, April, 1922; M. P. Follett, “The Illusion of Final Authority,”
Taylor Society Bulletin, December, 1926; and Ordway Tead, “Nature and Uses of
Creative Leadership,” Taylor Society Bulletin, January, 1927.
MANAGEMENT 503
There is probably a real increase in the care with which the younger
men hired are being looked over for those qualities which fit them for
later promotion. College graduates are being taken more frequently, as
would almost necessarily be the case, since the numbers of baccalaureate
degrees increased from 38,500 in 1920 to 71,500 in 1926; of professional
degrees from 8,000 to 20,000; and of graduate degrees from 4,850 to
11,450.” Some prejudices against the college graduate still remain, but
among an unimportant minority; the rating of technical graduates is
generally high.
Selection for promotion rests as yet almost wholly upon the general
judgment of “results.” In a small but growing number of cases where
budgets have been carried through in considerable detail, they have been
found to furnish a useful standard against which “results” can be checked.
A considerable number of companies—in this survey as many as
one-half—make bonus payments, in one form or another, to their execu-
tives. The bonuses are paid in cash, in stock, or the right to buy stock,
and are apportioned according to individual or departmental showings.
to Saſary, or to some combination of factors.” The amounts depend in
most cases upon profits, but in a few are based on departmental showings
independent of company profit, thus partaking rather of the nature of
piece rates or commissions. They have come rapidly into vogue in
recent years, supplementing the straight salary which is now to be found
in a decreasing number of companies.
Planning.—Until recent years, it has not been at all the common
practice among business concerns to attempt to plan their courses on
paper in advance. The form of organization and quality of men had to
be such as were best able to meet emergencies. The distinct trend now,
begun in a small way well before the war, is to try to avoid emergencies,
by making and examining pictures of the possibilities the future may
contain. With some truth it can be said that modern hand-to-mouth
buying has made hand-to-mouth thinking impossible. The length of
time for which plans can be laid vary, of course, from style goods to staple
goods, every step in simplification of product or standardization of parts
allowing a longer planning period. In the factory, a manufacturing
schedule based on orders has often of necessity been replaced by a schedule
based on prospective business. The planning of sales effort, found
necessary as manufacturing plans develop in accuracy and detail, has
only begun.
Budgeting.—A plan for the whole organization is coming to be called
the master plan, one condensation of which is the budget. Budgets,
though known years ago, have made extraordinary progress in the
* Figures given by the American Council on Education, Washington, D. C.
10 Many varieties described by C. C. Balderston, Managerial Profit Sharing, 1928.
504 RECENT ECONOMIC CHANGES
business world since the publication of McKinsey’s book” in 1922.
They have come in more rapidly than any other management device
of parallel complexity which has ever been introduced. Of the companies
which now have budgets, it is estimated that four-fifths have introduced
them since 1921, while many budgets which existed prior to that time
have since then been bettered in operation or expanded to cover more
phases of the business. Originally starting as expense budgets, they
extend themselves almost necessarily to cover estimates of sales, of
probable operating improvement, and of needed enlargements and
replacements. Consulting accountants say that where they used to
start with cost accounting, now, starting with budgeting, they find
costing and planning follow naturally.
The first two or three years of budget making have been frequently
reported as yielding unsatisfactory results, but usually by the fourth
year enough lessons have been learned, and enough skill gained, to
produce a good budget. From then on, it is not uncommon to hear
stories of uncanny accuracy. The reponsibility for the preparation
of the budget is ordinarily put into the hands of some special officer,
who in a large organization will devote himself to the budget but in
smaller ones will have other duties. He gets department heads to work
up their own figures, in close consultation with him; for the acceptance
by operating officials of the budget as reasonable—in a word their consent
to the budget figures—has been found essential to its most effective use.
As might be expected, therefore, the budget is used chiefly in those
companies which attempt to have an organized plan of operating take
the place of a continuous issuance of orders from headquarters, and it
forms for them a valuable addition to their methods of co-ordination.
The common period of budgets is a year, though they are made for
as short a time as one month. In some companies both short- and
long-time budgets are used, the one for routine operating, the other to
aid in such problems as reinvestments and financing.
Bankers' Influence.—There are only a few banks in the United
States which are as yet paying much attention to the budgets of the
companies which are borrowing from them, and hence budgets so far
have seldom been shown to the banks. In fact, the interest in and the
influence of commercial bankers upon practices of business management
have not been disclosed by these studies to be as strong as was thought at
the beginning. In a few cases they have taken over or greatly influenced
management; in most they have not concerned themselves with man-
agement methods, or have confined their interest to the encouragement
of better accounting and statistical information.
Investment bankers seldom interest themselves in the Smaller
companies. The fees and other gains of reorganization and merger,
* J. O. McKinsey, Budgetary Control, 1922.
MANAGEMENT 505
however, have brought them to the forefront in hundreds of the large
recent incorporations. In them, their influence upon management is
often dominant, but the directions in which it is exerted vary so widely
from banker to banker, and even from case to case, that no prevailing
trend can be reported; the typical influences common to all radical
financial changes are there, of course, but show few elements which are
peculiar to the banker. There is a recent tendency among investment
houses to employ men who are expert in different lines of business to
look into possible opportunities for reorganization or merger, and to
sit upon the board of directors of those companies in which the house
has an important interest.
Upon the management of the older corporations the influence of the
financial world seems to be growing less. There is, therefore, some
evidence for the theory that financial domination increases when changes
are rapid and decreases as business affairs stabilize.
Forecasting.—Forecasting services in the United States are many
and varied. With the help of several institutions, a list of 132 was
compiled, but there is no reason to believe it includes all there are.
For the purposes of this chapter, however, many can be left out of con-
sideration, for some carry only special trade information, and a large
number have as their predominating purpose to serve those who want
information concerning stock market investments or speculations. Those
which relate themselves to business management reduce to small numbers.
One of these was kind enough to analyze its circulation list and reported
that even of these selected customers, 60 per cent were clearly using
the service only as an aid to investment.
Two years ago, the combined circulation of five of the best-known
forecasting services was reported as 35,000.* Allowing one-half for
the large number who take more than one, and eliminating 60 per cent
estimated as investors only, there remain about 7,000 which go to
business managers. In addition to this relatively small number, there
must be taken into account the great general circulation which reports
of business facts have had in recent years. These reports appear in
newspapers, trade papers, business magazines, reports of the Depart-
ment of Commerce, and in monthly publications by banks. The com-
bined monthly circulation of two among the best known of the bank
bulletins is 275,000. The use of forecasting by business management
cannot as yet be called widespread; but the knowledge of the facts
upon which forecasting must be based would seem to be much larger,
and growing.
Among the companies of this survey, the most serious use of forecasting,
as an aid in management, was made by the few who had established a
statistician to study all reports and information pertinent to their
particular problems.
12 Cox and Hardy, Forecasting Business Conditions, p. 41, 1927.
506 RECENT ECONOMIC CHANGES
The organizations forecasting business conditions use principally
the following three methods in different combinations: -
(a) The setting forth of differences above and below the so-called normal
and the use of the theory of business cycles.
(b) A study of recurring sequences, on the theory that what will happen
will usually resemble what has happened under comparable conditions.
(c) A cross-section balance-sheet analysis of all the forces working either up
or down at the moment.
No one of the larger organizations relies exclusively upon any one of these.
The business weather is, at any given moment, the resultant of a
confusing combination of forces. At the present stage of our knowl-
edge, it is sometimes difficult to say with preciseness what that weather
is. Exactness in prediction can hardly be expected as yet, though careful
forecasting should have chances in its favor over random guessing,
just as weather forecasting has.
In testing accuracy, few services can be used, because, of the few which
are left after investors’ and speculators’ services are eliminated, only a
part are definite enough in their month-to-month statements to be
checked by the outcome. Even then, there are logical and statistical
difficulties in the way of a dependable test.
In 500 forecasts of general prices, just over one-half were found correct.
just over one-quarter were incorrect, and about one-fifth negative, that is
to say, neither harmful nor helpful in their results. The ratio of helpful
to injurious predictions was 18 to 10. In 433 forecasts concerning the
volume of general business, nearly two-thirds were correct, one-sixth
incorrect, and one-sixth negative. The ratio here of the helpful to the
injurious was 37 to 10. Five hundred forecasts on individual prices
were tested. As with the predictions of general prices, these ranged
a little better than one-half correct, a little better than one-quarter
incorrect, and one-fifth negative.
The forecasts tested above were spread over the whole period from
1921 to 1927. Accuracy, however, does not run evenly over this period.
It was distinctly better before 1923, during which year it suffered greatly.
with the result that forecasters grew more and more cautious, and many
qualified their predictions out of all definiteness. This whole period,
moreover, was marked by relatively slight changes in total business
volume or average prices. The prediction of “slight or no change,”
therefore, predominated during the period. When the few changes did
come, accuracy of prediction was distinctly less.
It was as difficult a period on which to test forecasting as has recently
occurred. The few general services that were issued in the extreme days
of 1920 make a better showing. All of them gave general and early
warnings, though not always as solemn as events proved warranted. One,
MANAGEMENT 507
which started early and emphasized its warnings strongly, was rewarded
by a sharp though temporary drop in the number of its subscribers.
At the opposite extreme there are to-day some fly-by-night services which
make a specialty of enthusiastic and favorable prediction. All services
must feel the pressure in this direction, and it is to their credit that so
many are resisting it, and, against the difficulties of insufficient knowledge
of facts and causes, are helping to develop what should some day become
an important aid in business navigation.
However specific results in its chosen field may be judged, forecasting
must be credited with having done a considerable share toward develop-
ing a desire in the American business manager to look farther and farther
ahead, a growing faith in the possibilities of doing so, and, finally, a
habit of mind which has shown its influence not merely in forecasting
for the guidance of general management but in departmental budgeting,
production planning, far-sighted research, and longer-range planning
of capital expenditures.
II. MANAGEMENT OF MANUFACTURING
Purchasing.—Most manufacturing companies have a sharply differ-
entiated purchasing department, with full and elaborate purchase records.
Purchasing is naturally always in close contact with the manufacturing
division, but is not often subordinate to it.
Orders may be placed through competitive bidding or exclusively
with tested vendors. Quite commonly a combination of these methods
is used by calling for competitive bids, from tested companies only.
On account of the growing emphasis upon uniform quality, it is probable
that there is a slight trend at the present moment toward buying of
tested vendors, checking their service from time to time by placing
orders out for competitive bids. A minority use competitive bidding
only. The policy of splitting orders among two or more vendors and
that of maintaining a single supply are found in about equal numbers,
but those who use competitive bidding, added to the former group,
definitely set the going practice against buying exclusively from a single
supplying house.
The responsibility for buying certain principal materials is sometimes
in the hands of other officials than the purchasing agent. In the smallest
plants, particularly, is this true; while in the largest there are few cases
to be found where the purchasing agent does not do all of the buying.
Not uncommonly, however, the purchasing agent is strongly influenced
by the selling department, or board of directors, toward certain customers,
thus taking part in what is called reciprocal buying.
An interesting development of recent years is the attention given by
some purchasers toward the saving of Salesmen's time and convenience,
508 RECENT ECONOMIC CHANGES
and, in general, cultivating their constructive goodwill. It was not to be
expected that this sort of trend would occur in times like these, when the
buyer controls the market, and yet it is to-day a trend and indicates that
purchasers are developing a broader conception of their function than
that which ruled some years ago. Buyers are taking their part in working
out annual contracts with price adjustments, and in placing repeat
orders without salesman's call, each primarily for the purpose of saving
time for the visiting salesman. Sometimes this time is again used up,
but in somewhat more productive ways, by asking intimate and con-
structive assistance from the salesman himself, having him go into the
plant, see its problems, and make such suggestions as he can toward
their solution. The changes in buyer-salesman relations are doing more
to lower inventories and co-ordinate production without vertical combina-
tion than is generally realized. There is real evidence that a widening
knowledge of facts is reducing the area of dickering.
In one company which takes its job of purchasing in a seriously
professional spirit, there was appointed some years ago, at the request of
the purchasing agent, a special “auditor,” who reports directly to the
executive officers. He examines all orders, quite independently of the
purchasing agent, being sure that the proper amount of competition has
been secured, that no favorites are being played, and that consideration
is given to all new sources of supply. In general, there will be found
among purchasing departments a drift away from the old notion that
placing an order constitutes a great and personal favor.
Purchasing agents are more and more keeping in touch with the
general market through commodity indexes and business publications,
among which trade journals prevail. The economic behavior of specific
commodities in the last decade has varied so widely from the curves of
average economic activity that general statistical services are not so
widely used in purchasing departments as are the journals and reports
which publish all of the significant facts concerning each of the separate
important commodities.
Inventory Control.-The shortage of materials during the war and
the boom, and their excess during the 1921 depression, both resulted in
a great increase of concentration upon inventory control. The wider
use of planning and budgeting has since then added its influence. Con-
trol of raw materials, goods in process, and finished stock is obtained
through a close checking of card records, or the use of maxima and minima,
and in some companies is entrusted to an independent stores department,
to special committees, or, in a few cases, to the budget department itself.
This control is not now chiefly for financial reasons, but rather more to
reduce the risks of depreciation and obsolescence of material, which the
lessons of 1921 proved to be considerable, and to save the wastes of cart-
MANAGEMENT 509
ing materials unnecessarily in and out of warehouses,” which the more
recent studies into production costs have disclosed.
One of the dramatic developments of the last year or two is to be
found in some automobile plants, where the average inventory has actu-
ally decreased from several months' to a three or four days' supply. A
reserve stock of all materials used in three or four days’ production is
placed in a convenient warehouse, but daily deliveries from vendors are
arranged according to the production schedule. Materials are, therefore,
planned to be taken directly from the freight cars and placed in the
manufacturing departments where they are used, thus eliminating han-
dling and the expense of stores control. Obviously, such a tight system
can be successfully managed only with very dependable railway freight
Service and in a business where a large part of production is carried out
on a uniform daily schedule.”
Production Management.—Production is managed either by sending
all orders into the works as fast as received and leaving the sequence of
their production to be arranged by each department head, or it is planned,
to a greater or less degree, on the basis of known standards of output and
quality, of known inventories of raw materials and parts, and known or
estimated demand for finished products.
Complete production planning, as it is found to-day, includes routing,
or the determination of the path of an order through the plant; scheduling,
or the determination of the time at which each operation shall be done;
dispatching, or the actual assignment of orders to the production agent
for the work which he is to do next.” In this survey, the majority of
plants was found to have functionalized their production planning.
Most of them had done so under the spur of war times; some, especially
in the metal trades, started even before that. Most of those which have
not yet done so are laying plans to give it special attention. Like other
functions, planning, when first isolated, was heavily centralized and over-
elaborated, later it was simplified and partly decentralized.
Production planning varies greatly in complexity. In a jobbing
shop with diversified product, large and expensive planning departments
are to be found; in a one-product shop, making by continuous process a
standardized quality, production planning once installed is simple of
Operation.
13 Eugene G. Grace, in the Saturday Evening Post, September 6, 1926, traces
broad and wholesome effects of close inventory control, emphasizing especially reg-
ularization of employment.
14 See Inventory, Chap. II, Industry, Part 1, p. 91; Chap. III, Construction, p.
242; Chap. IV, Transportation, Part 1, p. 302; Chap. W, Marketing, p. 350; Chap. IX,
Price Movements, p. 637.
15 A fuller description can be found in the Production Control section (beginning
p. 597) of Management's Handbook, L. P. Alford, editor, 1924.
510 RECENT ECONOMIC CHANGES
Costing is found closely associated with planning. Both use much
the same facts and both serve the needs of general management in con-
trolling production. Like planning, costing is found in a majority of
plants, but in a variety of forms. Until the last few years, costs were
“actual costs” almost exclusively, though kept with great differences
in accuracy and detail. Actual costs vary with each lot and with every
season; their use as a check on selling prices or for budget purposes is,
therefore, limited. A few years ago there was a strong movement toward
standard costs” worked out either roughly from past averages, or more
carefully from standards of quantity production per hour and of materials
used. The purpose to which these costs are put, in the largest single
number of cases, is to show profit margins, but an almost equal number
use them to check departmental performance; some use is made of them
to determine the actual losses involved in part-time operation, or as
aids in working out special economies. Most companies using standard
costs are also keeping actual costs, but much simplified in detail and
reduced in expensiveness. Where production is fully serialized, costing
as well as planning is greatly simplified.
Quality Standards.-One factor upon which production planning
depends is uniformity in the quality of materials. If automatic machines
are regularly to produce parts capable of being assembled without slow
and painful hand fitting, the raw material or parts fed into them must be
of standard and uniform quality. Or if effective systems of wage pay-
ment are to be installed, the materials furnished to the worker must
have a dependable uniformity.
Buying upon specification and checking by testing laboratories has
become the going practice. Most of the larger companies, and many
of the smaller ones, have their own laboratories; and commercial labo-
ratories are freely used by them, as well as by those which cannot afford
their own. Practically all managers report that they are increasing the
precision of their specifications, which in the larger companies comprise
several printed volumes. Some work out their own specifications, as
must be done in special cases; but, for the more staple items, the large
majority are using the published standards which leading trade associa-
tions have been active for several years in developing. The American
Society for Testing Materials and the American Engineering Standards
Committee” have had large shares in this development, and a consider-
able number of companies are using to an increasing extent the Specifica-
tions of the United States Bureau of Standards.”
* T. H. Sanders, Problems of Industrial Accounting, 1923, gives a chapter outlin-
ing in brief form the principles of standard costs. See also several bulletins of the
National Association of Cost Accountants.
17 See their Year Book for 1928.
18 See Standards Year Book, 1928.
MANAGEMENT 511
Uniform standard quality in parts to be assembled, and in final prod-
uct, is being provided for by similar methods. Special inspection depart-
ments, often under or closely connected with the engineering department
or the laboratory, are maintained in a considerable proportion of com-
panies; and parts and product specifications are set up with the same
care as material specifications. The processes themselves have been
studied by engineers to eliminate chances of variation. Automatic
thermostatic control, perfected mixing devices, elaborate jigs, highly
accurate gauges, and electrical tempering are found in increasing num-
bers.” The field survey clearly showed the greater pressure for quality
output which increasing competition has exerted upon manufacturers.
Quality demands have, in fact, been giving executives more concern
than have quantity demands. In some goods this machine-made age
is giving us better and more dependable quality than was possible in
the age of handicraft. The progress of engineering toward objectified
control of quality is certainly one of the significant trends of our tech-
nical progress.
Since the publication of Waste in Industry, in 1921, more and more
attention has been given to the problem of gaining continuous co-opera-
tion from the whole body of employees toward the maintenance of
standard quality and the avoidance of the waste of rejections. Some
form of financial incentive to this end has been set up in a fair number
of plants, which has been supplemented in some of them by otherinfluences
intended to develop a favorable group habit of thought. Suggestion
systems, periodical quality meetings, and publications have all been
used, and the maintenance of quality and the elimination of material
waste have been subjects frequently appearing in the consultations of
employers and employees in union relationships or works councils. There
is an increasing tendency to install special departments which study
the causes of every sort of waste and the better utilization of such wastes
of materials as cannot be prevented.
Maintenance Standards.-The maintenance of machinery in standard
condition, which is as necessary to standard quality as is uniform material,
has not been given the same attention. It is in the newer plants that
more specific machine maintenance standards seem to be most often
found. A few factories schedule maintenance, so planning as to get
replacements made ahead of actual need and at such times as will least
interrupt production. In most companies there is no such planning,
and maintenance departments are expected to act only in response to
the calls of producing department heads.”
19 See Mechanization, Chap. I, Consumption, p. 52; Chap. II, Industry, Part 1,
p. 84, Part 2, p. 104; Chap. III, Construction, p. 234; Chap. V, Marketing, p. 328; Chap.
VI, Labor, p. 483; Chap. VIII, Agriculture, p. 557.
20 The Society of Industrial Engineers, Bulletin, December, 1927, p. 7, and June,
1928, p. 5.
512 RECENT ECONOMIC CHANGES
Quantity Standards.-Control of production is found to increase
with the specification of standards of quality and quantity, and with
the accuracy and fullness of planning. For many years after Frederick
W. Taylor first set forth his ideal of a true control of production proc-
esses,” its acceptance as a practicable goal was slow, but of late years
it has been rapid. It is now common practice to have some sort of
quantity standards, and once established, even crudely, there is a
distinct tendency toward their continuous improvement; for efforts
toward the advance planning of production and the developing of
incentive wage payments encourage progress toward greater accuracy
of quantity standards.
Methods for determining standards range from a rough analysis of
past records through the study of machine speeds and some crude and
sometimes harmful over-all time studies, to careful elemental time and
motion studies. The more laborious but more substantial methods seem
to be gaining slowly.” Employers find that the cruder forms carry with
them evils which become more serious as time goes on. Over-all time
studies which fail to analyze and standardize the process, and which,
therefore, set a time standard for an unstandardized process, result in
piece or bonus rates only roughly accurate. Some are too high and Some
too low, causing fluctuations in earnings not corresponding to effort, and
complaints of favoritism. Readjustment without analytical time study
results in bickerings or feelings of resentment. Any readjustment, or
threat of readjustment, of rates downward that is not convincingly
supported by facts, and some that are, will inevitably result in output
restriction. The full power of a standard of output is not realized
unless the standard can be accepted as just.
A detailed report of scores of cases of restriction, which strikingly
illustrates the variety of circumstances under which this practice will
arise, is to be published by S. B. Mathewson and William Leiserson. This
study finds incentives double-acting. Before, during, and after over-all
time studies, there are strong influences at work to limit production,
sometimes in most ingenious ways. Men commonly are convinced, and
often correctly, that management has in mind a figure of “excessive
earnings” at which it will cut rates or make other vital changes. These
figures are played up to with great skill by employees in a wide variety
of situations, not confined to the manufacturing field. The motives
are, in a very large majority of cases, motives of simple self-protection.
Increased Output.—Within such limitations as individuals and groups
have set for their protection, output per man per year has, nevertheless,
* See Frederick W. Taylor, Shop Management, pp. 94–124.
* See for Results of Society of Industrial Engineers’ survey, “Development of
Standard Practice for Time-Study Engineering,” Society of Industrial Engineers,
Bulletin. November, 1927.
MANAGEMENT 513
increased notably. Such plants as could be found in this survey with
man-hour productivity figures running back several years show con-
siderable increases, but the fact that they were few, and that, because
they were careful enough to keep such figures, they were probably among
the most interested, precludes the use of their experience as anything
more than corroborative evidence. Thirty-five, which furnished informa-
tion going back to 1919, showed a man-hour productivity increase of 74 per
cent; and a few who can compare 1927 with 1924 show an average increase
of 39 per cent.”
This increase is the result of the interplay of several causes. Among
them are the introduction of new machines,” the better internal arrange-
ment of factories through which, by “serialization,” supermachines are
made out of groups of machines, production control, more rigid specifi-
cation of quality of materials, change in methods of wage payment and
in the basic attitude between employer and employee, shortened learning
periods, and reduced labor turnover.” Many of the technological
changes have been made possible by simplification of product or stand-
ardization of parts. In the companies where style has made the prod-
uct less standard than before, there was less evidence of increased
productivity.
There could be found no single impelling force which drove manage-
ment to its recent rapid technical progress, though well up in the list
stands the influence of higher wages. A great many changes have
originated from attempts to get low costs in spite of high wage rates, and
then have been continued and have spread into fields where wages were not
high. Changes to reduce manufacturing costs have, in fact, become the
fashion. They are becoming less and less casual, less dependent upon
the good ideas and ingenuity of operating men, and more upon the work
of research and accounting departments, specially set up to increase the
frequency of improvements in method.
Whether and to what extent there is to-day an overexpansion of
industrial facilities are questions which may be answered only by a deter-
mination of the correct amount of equipment for a given output and of the
true extent of demand. The opinion of industrialists is about evenly
divided on the subject. There is general agreement that the war times
and 1920 saw heavy overexpansion, the lessons of which were costly
23 For further details of output per man, see Chap. II, Industry, Part 1, p. 81,
Part 2, p. 103; Chap. III, Construction, p. 248; Chap. IV, Transportation, p. 285;
Chap. VI, Labor, p. 447; Chap. VII, Management, p. 512; Chap. VIII, Agriculture,
p. 602.
24 It must be noted that the production of machinery from 1922 to 1927 shows no
noteworthy increase. For a complete description of mechanization in four industries,
see G. E. Barnett, Machinery and Labor, 1927.
25 A clear case of what can be done by management alone, with only slight changes
in mechanization, is set forth in Chapter V, pp. 350–1.
514 RECENT ECONOMIC CHANGES
and not easily forgotten; but few managers regard their own equipment
as too extensive for normally active times. The Department of Com-
merce is at the present time making a survey of the industrial equipment
of the country, which should constitute a sound beginning of better
knowledge on this subject.
Effect upon Workers.-The effects of these great changes upon the
worker is a matter of considerable controversy. Some men believe that
the present changes are merely a continuation and accentuation of those
which began with the Industrial Revolution, and that reabsorption of
the unemployed into activities made possible by the increased producing
power of the world has been constantly going on, though, of course,
more slowly during the inactive sectors of the business cycle than during
the active.
Others believe that we are facing a wholly new problem, which they
call “technological unemployment,” and that there is now and will
continue to be an unemployment of serious proportions unless something
is done about it.” The thing that is certain is that our information
concerning the extent, nature, and reasons of unemployment in this
country is inadequate.
The inadequacy of public information is, unfortunately, equaled by
the inadequacy of information in individual companies. Few of them
know exactly what numbers have been released or transferred on account
of technical improvements; and almost none knows anything about what
has happened to the men who were released.” It is not a new problem
to industry, but in former times it was none of the manufacturer's business
what happened to workers after he laid them off. He is now begin-
* Studies of the extent of unemployment will be found in Chap. VI, Labor, pp. 462–
478, and reference to technological unemployment in Chap. II, Industry, Part 1, p.
92; and Chap. W, Marketing, pp. 321–331.
* A recent study of cutters in the Men’s Clothing Industry in Chicago, by Robert
J. Myers, a graduate student at the University of Chicago, shows what has happened
to displaced workers in one industry. (Dr. B. M. Squires, Chairman of the Trade
Board, Men's Clothing Industry, Chicago, and Professor at the University of
Chicago, included a reading of the survey in an address before the American Associa-
tion for Labor Legislation, December 26, 1928.) A detailed description appears in
the accompanying table.
Further data on the problem appear in a study, “Measuring the Mobility of Ameri-
can Labor and The Absorptive Power of American Industry,” made by Dr. Isador
Lubin for the Institute of Economics of the Brookings Institute, Washington, D. C.
(Part of the findings in this study were presented before the American Statistical
Association at the December, 1928, meeting in Chicago.) The second tabulation here
given, made by Dr. Lubin, shows the periods of unemployment of a sample of 754
discharged workers.
From a group of 820 discharged workers, of those who found jobs 273 went to
work in new industries, and 221 in new jobs; 188 returned to their old jobs and 134
to the old industry. In this case, nearly half of the workers on new jobs received
lower incomes than in their previous permanent employment.
MANAGEMENT
515
NUMBER AND PER CENT OF ToTAL OF 217 CUTTERs FROM HART SCHAFFNER & MARx, AND 153 CUTTERs
FROM OTHER FACTORIEs ENGAGED IN SPECIFIED Occupations, EARLY SUMMER, 1928
Number Per cent of total
Occupation Hart, Hart,
Schaffner Other Schaffner | Other
& Marx & Marx
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217 153 100.0 100.0
Total cutters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 25 22.6 16.4
Men's clothing—
Chicago, regular work, union. . . . . . . . . . . . . . 10 7 4.6 4. 6
Chicago, regular work, non-union. . . . . . . . . . 4 3 1.8 2.0
Chicago, temporary work. . . . . . . . . . . . . . . . . 16 2 7.4 1. 3
Chicago, job permanence unknown. . . . . . . . . 0 9 0.0 5.9
Out of city. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 3 2.8 2.0
Allied trades. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1 6. 0 0.6
Professional men. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 2 2. 3 1. 3
Tailors and cleaners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 14 1.4 9. 2
Skilled workmen, not elsewhere classified. . . . . . . . . . . . 14 10 6.4 6. 5
Grocers, confectioners, etc. . . . . . . . . . . . . . . . . . . . . . . . . 17 9 7.8 5, 9
Politicians. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4 2.8 2. 6
Office clerks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 2 1.4 1. 3
Real estate and insurance agents. . . . . . . . . . . . . . . . . . . 13 11 6.0 7.2
Drivers, truckers, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 24 7.8 15.0
Firemen, police and letter carriers. . . . . . . . . . . . . . . . . . 2 O 0.9 0.0
Farmers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 0. 5 0.0
Salesmen, not elsewhere classified. . . . . . . . . . . . . . . . . . 34 20 15. 7 13. 1
Bartenders and bootleggers. . . . . . . . . . . . . . . . . . . . . . . . 4 I 1.8 0.6
Factory and industrial workers. . . . . . . . . . . . . . . . . . . . . 9 7 4. 2 4.6
Caretakers, janitors, messengers, etc. . . . . . . . . . . . . . . . 11 4 5. 1 2.6
Day laborers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 4 1.8 2.6
Not employed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 16 11. 5 10.4
Dead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 2 2.8 1. 3
Retired. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 3 0.9 2.0
Ill, unemployable. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1 1.4 0.6
Unemployed, seeking work. . . . . . . . . . . . . . . . . . . . 14 10 6.4 6, 5
PERIOD OF UNEMPLOYMENT OF 754 DISCHARGED WORKERS
Num- Number Per cent Cumula-
Cumula- • 1 g º
ber Per cent tive per still unem- still unem- | tive per
Length of time unemployed who who found cent who ployed ployed cent still
- found jobs found jobs when in- when in- unem-
jobs terviewed | terviewed ployed
Under 1 month. . . . . . . . . . . . . . . . . 47 11.5 ! . . . . . 43 12.5 gº º º is tº
1 month – 2 months . . . . . . . . . . . 66 16. 1 27.6 40 11. 6 24. 1
2 months— 3 months. . . . . . . . . . . 66 16. 1 43.7 37 10.8 34.9
3 months— 4 months. . . . . . . . . . . 60 14.6 58. 3 34 9.9 44.8
4 months- 5 months. . . . . . . . . . . 43 10.5 68. 8 26 7.6 52.4
5 months— 6 months. . . . . . . . . . . 30 7.3 76.1 22 6.4 58.8
6 months— 7 months. . . . . . . . . . . 28 6.9 83. 0 27 7. 9 66.7
7 months— 8 months. . . . . . . . . . . 23 5. 6 88. 6 . 18 5.2 71.9
8 months— 9 months. . . . . . . . . . . 18 4.4 93.0 31 9.0 80. 9
9 months—10 months. . . . . . . . . . . 10 2.4 95.4 19 5.5 86.4
10 months–11 months. . . . . . . . . . . 7 1.7 97.1 7 2.0 88.4
11 months—12 months. . . . . . . . . . . 3 ... 7 97.8 8 2. 3 90.7
Over 1 year. . . . . . . . . . . . . . . . . . . . 6 1.5 99.3 29 8.4 99.1
No data. . . . . . . . . . . . . . . . . . . . . . . 3 ... 7 100.0 3 .9 100.0
410 344

516 RECENT ECONOMIC CHANGES
ning to see the matter in another light.” The new attitude is well
expressed by Ernest G. Draper, of Hills Bros. Co., who says,
It is now time for the modern business man to give up thinking of this hazard of
industry (unemployment) as a charitable problem and begin thinking of it as a business
problem which directly affects his company's net income . . . Unemployment is not
only harmful from a social point of view. It is wasteful from a business point of view.
When enough industrial leaders can become sufficiently interested in this serious
maladjustment of society, the chances are that it will succumb to their ingenuity just
as many other so-called insoluble situations have done in the past.”
A remark of Professor Tugwell is also to the point.”
One difficulty which runs all through attempts to get control of the modern forces
in the interest of a better world is that the old rate of change has been superseded by
a greatly accelerated one.
This comes close to the heart of the present problem. The type of
to-day's change is, in its effect upon the workers, the same that we have
been experiencing for nearly 200 years; the rate of change may now be
such as to introduce new considerations and demand new measures.**
The crucial factor may be the rate of invention of new consumers’ goods,
as compared with the rate of invention in machines and processes of
manufacture.
Besides affecting workers through unemployment and shift of occu-
pation, the last few years have brought important changes in the demand
for skill. During the last century many special “skills” have been made
worthless by process changes; more than once has the work of the skillful
father been displaced by the untrained fingers of his wife and children.
Where technical changes came slowly, the new occupations themselves
soon allowed of the development of new special skills. But where these
changes are as rapid as they are to-day, and bring with them such erratic
fluctuations in market demands, there has been afforded to employers
special reason to work out the newer processes in such form that they
demand the least possible training and hence contain a low “skill con-
tent.” Often by holding raw materials and parts to rigid standards,
the old need of skill in detecting and manipulating variations has been
entirely done away with. Some of the automobile plants in 1927 took
farmers who had been driven out of their homes in Arkansas by the floods
and put them not only on the assembly lines but on specialized machine
tools. They claim that these men in a few days were among the best
* See, for example, article on the five-day week by Clarence W. Barron in Dow's
Financial Bulletin, June 8, 1928. For a full analysis, see Business Cycles and Unem-
ployment, National Bureau of Economic Research, 1923.
* Personnel, American Management Association, August, 1928.
* Industry's Coming of Age, 1927.
* The results reached by Dr. Wolman on page 478 indicate no immediately pressing
problem of this sort.
MANAGEMENT 517
workmen they had ever had. Many companies say they “would rather
have green men with no preconceived notions.”
As the great number of highly specialized machines increases, there is
less and less carry-over of skill from one job to another, and fewer places to
which a worker can put to use any special skills he has managed to gain,
but there are more places in which he can reach average ability in a very
few days.
An important influence in shortening the learning period has been
the higher intelligence of the learners; more have finished grade school,”
more have been in trade schools and high schools, and, since the restric-
tion upon immigration, relatively more have understood English.
Any real knowledge of the extent to which skill has been displaced,
or of the social consequences of such displacement, must wait upon some
consensus of opinion as to what is to be taken as constituting skill. Miss
Bezanson,” in 1922, made one of the earliest studies in the field, but little
has been published since. Meanwhile, general opinion repeats that
“there are fewer highly skilled jobs but fewer really unskilled jobs;”
or that “all of the old really skilled workers can find high place in the new
schemes of things as foremen, tool makers, machine fixers, and the like.”
Effects of the War on Management of Labor.—War times, with
the difficulties in obtaining large numbers of employees, in getting them
trained to wholly new jobs and holding them against temptations to
shift, forced wider recognition of personnel management as a distinct
function. The work of the Army itself in placing, training, and assimi-
lating its millions had no small part in bringing about this recognition.
Up to that time, the problem of personnel management had been recog-
nized by few as one of importance. With free immigration, help was
easy to get, and, though it was not easy to hold, to hold it seemed of no
importance until a highly original article by Magnus W. Alexander,
appearing just before the war, made a powerful case against the extrava-
gances of a high labor turnover.
To meet the extreme war-time situation, men were called to personnel
management who were new to the problem; necessarily so, since not a
half dozen men in the country could be called old to it. Their experience
was academic but their outlook fresh, their sympathies and earnestness
were high, many of them had keen and well-trained minds, and they knew
enough to begin at once to learn from each other by pooling their experi-
ences. They overcentralized and overelaborated the job, as is always
* Between 1920 and 1924, the pupils in public high schools increased from 1,850,000
to 2,950,000; in private secondaries, from 117,000 to 216,000; in industrial trade
schools, from 185,000 to 410,000; in percentage of total school population, from 2, 1 to
3.3 per cent. Statistical Abstract, 1926.
* Quarterly Journal of Economics, August, 1922,
* From the field survey,
518 RECENT ECONOMIC CHANGES
likely at the installation of a new functional department; and in this case
all the more so because of the intense pressures.
With the business stagnation and glutted labor market of 1921, they
were virtually swept away, but they left behind them new practices,
and old ones modified: psychological and trade tests, job analyses and
classifications, rating scales, systematic training, and shop committees.
What is of more importance is that they left a habit in the business mind
of considering personnel management as a difficult, distinct, and major
function of business management. Previously, such little selection,
training, health and safety work, insurance and social contacts, and
joint relationships as had been attempted, had often been administered
with no co-ordination, with disproportionate emphases and accidental
and fluctuating interests—sometimes as frills, sometimes as personal
whims of benevolence, seldom as serious projects of human engineering.
Subsequent Trends.--To-day, though unquestionably greater atten-
tion and interest is given to the materials and machines which an organ-
ization handles than to the humans of which it is made up,” attention
to the problems of personnel management has by no means lapsed, but
appears rather to be increasing. There is not so much said now in the
field or in publications about the personnel manager himself or the
centralizing of the personnel functions. From 1918 to 1920 there was a
great deal, which dropped off into an almost complete silence by 1922.
Since then, attention has been given more to the specific and practical
measures of personnel management, with the implication that they are
among the problems of general management rather than problems apart.
Especially out of fashion to-day are the magazine articles which in 1919
and 1920 described “what we do for our employees.”
Personnel management to-day is now tending to emphasize the
responsibility of line officers—foremen and department heads—for
sound relationships, but to give to staff personnel men the task of
analyzing and criticising results, and devising and installing measures to
make them progressively better. -
Among different-sized companies, personnel work varies, there being
naturally less of it in the smaller plants.” In plants of 2,000 employees,
it is common to find it fully organized, and some Smaller plants do very
complete work. The results of this survey, arranged geographically,
show considerably greater activity in the Middle West than in the
Northeastern section.
Selection.—The routine parts of the job of personnel management,
most widely recognized and functionalized, are selection and placement,
35 Examples of a considerable variety of executives' attitudes toward labor are
given by J. David Houser, What the Employer Thinks, 1927.
* See “Personnel Administration in Companies of 1,000 or Less,” American
Management Association Convention Address, Series No. 10, 1924.
MANAGEMENT 519
maintenance of individual records, medical service, and supervision of
transfers and separation.
The utilization of psychological and trade tests for selection and
placement was given a big start during the war by the work of the
Army Committee on Classification of Personnel. A great deal of the
work which had been so rapidly undertaken, however, was given up
during the depression of 1921; but, even before then, it had become evident
that no single simple method would suffice to discover and test the
subtle and varied qualifications of men. Most companies, therefore,
have now dropped tests completely and only a small minority use them
at all; many of these have specialized them greatly, attempting by
tests to find particular trade skills and different types of aptitude, rather
than general intelligence levels. An unexpected number of companies
were found carrying on correlation studies to discover special uses to
which information in application blanks might be put. They report
fair success in their results so far.
There is a promising field within which the technique of testing is
being developed in the selection of life insurance salesmen,” department
store employees, and employees of street railway and taxicab companies.
Steady work is being done by groups of psychologists,” and by the United
States Civil Service Commission,” which, required by law to use examina-'
tions for selection, is doing outstanding work in inventing examinations
which really examine. Universities which have student personnel
officers, or which are experimenting with methods of meeting the admission
problem, are also making their contributions to the discovery of less
subjective, fluctuating, and capricious methods of selection.
Preceding psychological examination, and now extending in devel-
opment far beyond it throughout industry, is medical examination.”
The majority of companies, large enough to have a clinic of their own,”
are using medical examinations and are steadily improving them in accu-
racy and detail. Few can be found which have dropped medical examina-
tion after once taking it up. -
A systematic understanding of the jobs, among which an employee,
once selected, has to be placed, has made slower headway. Job specifi-
37 Grace E. Manson, “What Can the Application Blank Tell?—Records of 4,000
Life Insurance Salesmen,” Journal of Personnel Research, July, 1925.
38 For example, see Slocombe and Bingham, “Men Who Have Accidents; Indivi-
dual Differences among Motormen and Bus Operators,” Personnel Journal,
December, 1927.
39 L. J. O’Rourke, “Saving Dollars and Energy by Personnel Research,” Journal of
Personnel Research, January, February, and March, 1926.
40 Medical Care of Individual Workers, National Industrial Conference Board,
1926.
41 A few interesting cases of small companies running clinics jointly were found in
the files of the National Industrial Conference Board.
520 RECENT ECONOMIC CHANGES
cations are not common, and those which are more than hasty and
informal generalizations, sufficient perhaps for the rough methods of
selection used, are less common. In the rare cases in which they go
beyond a roughly general description, they seem to have been prepared
for the purposes of classification of wage and salary bases and standards,
and worked out as a thorough-going job study by the personnel officer
and the line officers concerned, in close collaboration.
Where there are functionalized employment departments, there is
often to be found a systematic follow-up of new employees, used both as a
means of checking correctness of selection and placement and as a means
of developing good will during the difficult period of adjustment. Per-
formance and attendance records and the pay changes of new employees
are given special study and checked against standards. During the
adjustment period, employees are frequently talked with in order to
discover, if possible, any special difficulties in their way. Medical
examiners, too, are more and more frequently following up their pre-
liminary work. Few companies have compulsory periodic medical
examination, but a growing number are offering facilities for examination,
under such conditions as will enlist the confidence of the employees and
persuade them to take voluntary advantage of it.
Training.—In spite of the obviously shorter learning periods required
for many of the newer jobs, the interest in training” aroused at the time
of the war has not materially abated. The actual training school, or
vestibule school, has almost disappeared, but it is common to find func-
tional supervisors who give attention to the training which now generally
takes place in the producing departments, though often in special
subdivisions of them. Apprentice training courses are still used in
considerable numbers, though restricted for the most part to a few trades;
but special training for aliens, so common ten years ago, has naturally
fallen off, and, in the few cases in which it exists, is now provided for
chiefly by the community rather than the factory.
For foreman training, there are to be found, and apparently in
increasing numbers, foremen's conferences, co-operation with the
Y. M. C. A.'s and State's departments of education, evening classes at
the plant in special subjects, and discussion groups. A survey by the
United States Chamber of Commerce gave the number of courses for
foremanship training as 105 in 1925 and 933 in 1927. The old doctrine
that a foreman was to learn his job on the job and from the job is not
so often heard.
In a small and growing number of companies, educational oppor-
tunities are offered for those beyond foremanship grade; courses in
cultural subjects having no direct relation to the business were found
42 See H. G. Kenagy, “The Technique of Training on the Job,” American Manage-
ment Association, Annual Convention, Series No. 74, 1928.
MANAGEMENT 521
in a little less than 10 per cent of the companies of this survey. Some
of the larger corporations have carefully arranged job sequences to be
followed through under the guidance of a training supervisor. These
were especially designed for college graduates, but are usually open to
others who can pass an appropriate examination.
An interesting special case of training has been developed by the
public relations departments of some public service corporations. Their
corps of “service samplers” continually test the contact of employees
and public, reporting the especially good cases by name and the unsatis-
factory cases without identification. These latter are made the subject
of discussions by executives and of large group conferences of “contact
employees,” at which methods of improvement are considered.
As a means of general education, the company or plant magazine
stood high ten years ago, but as such it has been quite widely discontinued.
Few other activities related to personnel management have been so
curtailed in recent years as the company magazine. Yet it remains in
a significant number of cases,” ranking now as a method of fostering
good will and promoting better acquaintance among all members of the
organization rather than as a strictly educational device.
To assist in the orderly progress of employees, and to get such objec-
tive help as is possible in selecting men for promotion, a few companies
have continued and developed the rating scales which came into use
during the war. In themselves, rating scales have not gone far, but,
even in some of the places where they are undeveloped or have been
given up, they nevertheless have emphasized the double importance of
correct selection for promotion and the consequent need of the utmost
possible avoidance of the distortions of unaided personal judgment. It
is more and more widely recognized that, while the importance of choosing
the right person for promotion is great in so far as his work in the higher
position will affect the company, it is many times greater in its effect
on his fellow employees, who are bound to set the fashion of their per-
formance by what his elevation led them to believe were the accom-
plishments upon which promotion depends. Rating scales, however
imperfect, have shown an advantage in being a down-on-paper statement,
usually with important qualities so listed that they cannot be over-
looked. They have helped to avoid the day-to-day fluctuations of
personal opinion. -
Several companies provide a small special committee of department
heads to review periodically the rating charts of the entire personnel.
They discuss the relative qualifications of various individuals for eventual
salary increase or for promotion to advanced positions. Then when a
vacancy occurs, the work of this committee is first canvassed to find if
48 The National Industrial Conference Board, in November, 1928, estimated about
700 in the United States.
522 RECENT ECONOMIC CHANGES
any members of the organization can be considered in line for the position.
In a few companies, such job and man classifications have grown after
Some years into a standard promotion schedule. with normal lines of
progress extending on from each position.
Separations.—Discharge is in most companies still the exclusive
prerogative of the foreman, though in some the approval of the personnel
manager is necessary. In a considerable majority, on voluntary sepa-
ration or discharge, an exit interview is carried out in order that special
and remediable causes of misunderstanding may in the given case, or
in future cases like it, be overcome. Many companies circulate the
general information from these exit interviews among their executives, to
disclose departmental differences or trends toward the better or worse.
In spite of reductions in labor turnover rates, indicated by the studies
of the Metropolitan Life Insurance Co. to be not far from one-half,44
interest in turnover does not seem to abate but rather to increase. This
is probably because certain organizations of high standing, such as the
Policyholders’ Service Bureau of the Metropolitan Life Insurance Co.,
the Brown University Bureau of Business Research, the Bureau of
Industrial Research of the University of Pennsylvania, the Ohio State
University Bureau of Business Research, and some trade associations
are issuing current and valuable information on the subject.” A great
many companies, are reporting to them. About two-thirds of the com-
panies covered by this survey were tabulating turnover figures, and a
little less than one-half were reporting their figures periodically to some
Outside organization.
Little evidence can be gathered from the field as to the age at which
workers are being retired.* There seem to be more jobs on which the
vigor of youth is demanded, and fewer on which the sort of skill is needed
which would increase with age. Yet, in examining individual cases,
there is seen to be still a considerable amount of work fit for older men.
On the whole, it seems likely that during depressions there would now
be a somewhat larger number of the men over 55 and a smaller number
of the younger men laid off from factories than in days before the war.
It is not clear as to whether or not this, if true, would result in increased
Social hardship.
Wages.—Rapid shifts in relative skills, new jobs, and new methods on
old jobs, have led many companies to make critical comparisons among
their wage rates and weekly earnings. Where this has been done thor-
oughly, it has disclosed the interest of the worker not only in the amount
* The highest rate, reported in their monthly medians for 1922, is 96 per cent; in
1923, 130 per cent; in 1927, 48.3 per cent; and in 1928 (7 months), 41.5 per cent.
45 W. A. Berridge, Personnel Journal, June, 1927.
* A small sample of employees, carrying group insurance, showed average age
slightly higher in 1925–1927 than in 1917–1920. See Chap. VI, sec. 4, p. 471.
MANAGEMENT 523
he receives but in what he regards as the fairness of its relation to other
amounts. As Whiting Williams found, the wage or salary is to its
recipient not only an income but also a symbol of status.
Personnel departments and operating executives have considered it
important to work toward the elimination of the more serious discrep-
ancies in rates and, if possible, to develop orderly and rational systems
of differentials. In nearly one-half the companies in this survey were
found job and rate classifications, with various basic rates worked out
from union scales or from comparable rates in the vicinity. Interchange
of information on rates has been common for many years. Lately, in the
larger centers, it has become still more common on account of the forma-
tion of local associations of employment managers.
Forms of incentive wages which take into account quantity or
quality of output, or both, have come rapidly into use in recent years,
although they cannot yet be estimated as covering a majority of the
workers.” They are no longer merely piece rates, but have a variety
of forms combining time rates, piece rates, premiums, and bonuses in
many ways. Group rates are now being used increasingly.
Besides direct payments, there are to be found length-of-service
bonuses, attendance bonuses, and suggestion awards.” Pay for vaca-
tions has also come into vogue to some extent during the last ten years.
Of 199 vacation plans described by Mills, 75 had been adopted before
1919, 100 in the five years from 1919 to 1923 (inclusive), and 24 in the
three following years.”
From the discussions of business managers, speeches at their con-
ventions, and a considerable number of articles published by them, it is
obvious that an economic doctrine quite different from that prevailing
among them some years ago has gained a foothold. Instead of believing
that every cent paid as increased wages must come from the investor's
return, or else from ultimate consumers, it is now widely believed that,
where an appropriate increase in productivity can go along with an
increase in wages, the consequent increase in purchasing power results
not only in higher standards of living and better states of health but
also in increases in the quantities and varieties of goods which can be
sold. These increased quantities, by helping to carry overhead and
by making specialized operations possible, tend further to reduce cost
and so again to increase wealth. In 1921, this theory as a business
manager's doctrine cannot be said to have been born. The President's
47 The National Metal Trades Association found in 672 member plants that 307
paid their employees on a straight time basis exclusively. Of the total employees in
all 672 shops, 27.5 per cent were paid on incentive basis. It is wholly probable that
the percentage for industry as a whole is higher than this.
48 For details, see Z. C. Dickinson, “Suggestions from Employees,” University
of Michigan Business Studies, Vol. 1, No. 3, 1927.
49 Charles M. Mills, Vacations for Individual Workers, 1927.
524 RECENT ECONOMIC CHANGES
Unemployment Conference gave out its findings in the autumn, and
one of its members, Roy Dickinson, an editor of Printer's Ink, wrote
several articles on the relation of wages to the volume of trade. But
among operating executives the most frequent subject for discussion
was the necessity for “liquidating labor” before recovery could be
expected from the depression. In 1921, more than 300 articles appeared
telling of methods used in cutting wages and speculating as to how far
they would fall. By 1922, articles of this sort had disappeared and those
about wage incentives had taken their place. In 1923, Mr. Baum, in
the Paper Trade Journal, wrote, “It is becoming a sign of poor manage-
ment and a mark of disgrace to pay low wages.” Since then even more
emphatic statements have been made and by employers of national
reputation.” The high wage doctrine by 1926 had gained its present
standing. Nevertheless, no one can say whether its foothold is as yet
strong enough to stand the strains of a long depression. Not many
popular beliefs gain such strength in a half dozen years.”
Security.—Of all the problems of personnel management none has
had so much attention as those which pertain to the workers' need for
security—regularization of employment, accident prevention, group
insurance, pensions, savings plans, and stock purchase plans.
To judge from the companies of this survey, the beginnings of sub-
stantial progress have been made, since the Unemployment Conference
in 1921, in moderating the severities of seasonal irregularities. In about
one-half of the companies it was found that definite measures had been
put into effect; in 4 per cent especially trying conditions had increased
irregularity; in 5 per cent nothing had been done to attempt to mitigate
the effect of seasonal fluctuations; and in 40 per cent the problem had
never been acute. Among the measures reported are increased stand-
ardization of products, better planning, scheduling production, inducing
customers to buy more regularly, additional or specialized warehousing
facilities, training employees to be versatile, manufacturing to stock,
working repairs in with production, and adding complementary lines of
goods. The ladies' garment industry in Cleveland in 1921, and the
men's clothing plants in Chicago in 1923, took steps toward regular-
ization of employment through guaranteed employment and unemploy-
ment insurance plans. In 1928, the garment industry in Rochester
and in New York City began the establishment of unemployment
insurance funds. All of these arrangements have been worked out
through the co-operation of employers and unions. A few individual
50 Among them, the article by Eugene G. Grace in the Saturday Evening Post,
September 4, 1926, cited above.
51. The birth of this doctrine has been a subject of much interest to foreign observers
Most of them conclude that it gained its place by the force of economic circumstances
Tather than by reasoned adoption.
MANAGEMENT 525
companies in various lines of manufacturing have established unemploy-
ment compensation plans” which have helped to regularize workers'
incomes. -
Under the combined influence of industrial medical departments,
safety engineers, the National Safety Council, insurance companies,
and factory legislation, a broad interest in physical working conditions
has been aroused in the minds of manufacturing executives.” Special
safety inspectors, sanitary inspectors, and committees on health and
safety are often to be found in the factories, and within the past few years
particular attention has been given to the designing of machinery so as to
avoid serious hazards. Beginning at first merely with the posting of
safety rules and the guarding of machinery, safety work has lately pro-
gressed into more difficult psychological fields, and is attempting through
internal advertising, safety contests, and other forms of recurrent
emphasis to establish throughout the whole plant a frame of mind alert to
avoid all accidents whether arising from mechanical or nonmechanical
SOUII'GéS.
Fatigue and monotony have been given some attention as causes of
accidents and of injury to nerves and body structure as well.” Yet
almost nothing is known about them or the conditions which bring them
about. There is wide popular discussion of the effects of modern
mechanization upon decreasing skill and increasing monotony, which is
extremely difficult to bring down to cases even after the examination of
many plants. This is likely to be true so long as we know no more than
we do at present about what precisely constitutes fatigue and monotony
and their relation to skill. The comprehensive changes of the past
few years, running in many directions and in varying amounts, have made
studies in this field peculiarly difficult. For a change in conditions of
work may, merely as change, induce fatigue or interrupt monotony.
There have been many displacements by highly simplified jobs of com-
plex jobs which used to be called skilled and were therefore considered
interesting; and there are jobs of tending new, elaborate, and expensive
machines which are not now called skilled but which demand a high grade
of general intelligence and care. There are thousands of jobs for the
unskilled carrying with them a high interest content and greater oppor-
tunity for self-respect than most unskilled jobs of former days. And
there are thousands of jobs calling for the simplest repetitive effort,
concerning the interest-content or fatigue-effects of which we as yet know
nothing.
* See Herman Feldman, Regularization of Employment, 1925; and Business
Cycles and Unemployment, National Bureau of Economic Research, 1923.
53 A close comparison of 359 companies by the American Engineering Council
showed a drop of 10.4 per cent in accident frequency between 1922 and 1925.
54 See “Mental Hygiene in Industry,” in Psychological Foundations of Manage-
ment, H. C. Metcalf, editor, 1927. -
526 RECENT ECONOMIC CHANGES
A considerably increased satisfaction in the job seems to be pos-
sible through working in teams. Modern methods have greatly enlarged
the use of workers teamed up into organized groups, and there is
some evidence that a given job is less monotonous when it can be
continually seen as a part of a more complex job done by the team of
which one is a member. At the moment nothing final can be said upon
this extremely important subject of job interest. From all the evidence
available, it seems, however, wholly safe to guess that the total fatiguing
effect of factory work has not increased, whether monotony has or not.
The hazards of accident are now generally met, in part at least, by
state laws; the hazards of sickness are met quite commonly by employee
mutual benefit associations, independent of or assisted by employers,
and also to a growing extent by group insurance. Group life insurance
has had the most striking development in recent years—54 per cent of
the companies in this survey, and 40 per cent of 4,655 companies reported
on by the National Industrial Conference Board in 1927, had it in force.
The Board estimates that, by the end of 1926, 4,700,000 employees were
covered by group insurance totaling $5,500,000,000. In October, 1928,
Mr. Graham, of the Equitable Life Assurance Society, estimated 5,800,000
employees covered by $7,500,000,000 of insurance.”
Ten years ago, the argument was generally advanced for group insur-
ance that it would reduce labor turnover, but it is doubtful if it ever did so
in any significant number of cases. To-day it is generally advocated
upon the grounds that relieving the stable and responsible type of worker
from some of the worries of death and sickness hazards results in benefit
to the company through his released energies and enhanced goodwill.
There has been a strong drift toward having employees share in the
costs of those plans for life and sickness insurance which have been
instituted in the last five years. The Conference Board reports that, of
the group insurance plans established in 1919, 6.7 per cent were con-
tributory, and in 1925, 68 per cent.
Pension plans are rarer than group insurance, in spite of the fact that
the pension idea is the older. They are found in a great variety of forms,
among which can be discovered little uniformity of idea. Publications
on the subject have increased since 1921, partly because the failure of
certain pension plans called attention to the ease with which their true
costs can be overlooked, and recently a few group insurance policies with
annuity provisions have been taken out. As the higher costs are realized,
there is likewise a growth of contributory plans. In the report of Bryce
M. Stewart, of the Industrial Relations Counsellors, Inc., it is stated:
“While only 16.7 per cent of the plans recorded in this study are con-
tributory, the proportion of contributory plans has increased steadily
from 10.5 per cent of the total number established in the five-year period
55 Other and fuller figures are included in Chap. VI, pp. 484-487.
MANAGEMENT 527
1906–1910 to 24.6 per cent in the period 1921–1925.” Eighty-five per
cent of the plans covered were set up after 1910. As the case for pensions
from a purely business point of view, it is urged in Mr. Stewart's report:
That, in the absence of formal pension provisions, employees are likely to be retained
on the pay roll beyond their efficient age; that the pension plan affords greater facility
in the retirement of incapacitated employees, and that a modern pension scale is
probably less costly than the retention of aged workers on the pay roll."
The growing belief of workers that employers are opposed to hiring
persons past middle age in order to keep their pension liability low, and
discussions of the difficulties involved in developing adequate private
industrial pension plans, have stimulated in a few states the movement to
establish state pensions supported by taxation.
The study made by Dr. Lubin” shows an unexpectedly large propor-
tion of younger men among the unemployed:
AGE DISTRIBUTION OF UNEMPLOYED
Per cent of Cumulative
Age Number
unemployed per cent
15 to 20 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 9. 5 9.5
21 to 25 years. . . . . . . . . . . . . . * * * * * s a e s 9 & & e º e º e s e e 118 15. 7 25.2
26 to 30 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 16. 2 41.4
31 to 35 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 20.8 62. 2
36 to 40 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 14. 7 76.9
41 to 45 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 10. 2 87. 1
46 to 50 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 4.0 91. 1
51 to 55 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 3.4 94.5
56 to 60 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.9 96.4
Over 60 years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 2. 1 98.5
No data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 1.5 100.0
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.4
Believing that financial and other difficulties will make adequate
pensioning impossible, some companies, by instituting schemes which
offer special incentives for cash savings, or which enable the employee
to purchase the stock of the company upon an installment basis and at a
price below the market, have in recent years encouraged employees to
make provision for old age. Many companies promote thrift in co-opera-
tion with savings banks,” making it easier for employees to save by per-
mitting them to authorize pay roll deductions to be credited to their
56 See also, E. S. Cowdrick, “Pensions, A Problem of Management,” American
Management Association Convention Series No. 75, 1928, and a report on “Pensions
in Trade Unions,” by M. W. Latimer, Industrial Relations Counsellors, Inc.
57 See footnote 27, p. 514.
58 Employees’ savings data from 1917 to 1925 can be found in “Trend of Wage
Earners' Savings in Philadelphia’’ by Margaret Schoenfeld, published in the Annals
of the American Academy of Political and Social Science, September, 1925.
528 RECENT ECONOMIC CHANGES
accounts at the bank. Several varieties of Savings plans, especially
Christmas and vacation savings, have been known for many years,
but, until the war period, were actually in effect in a very small number of
companies. Thirty-three per cent of the companies covered in this
survey have now established savings plans, or co-operate with banks,
building and loan associations, and similar organizations in the effort to
promote thrift among employees.
Stock purchase plans were found in one-quarter of the companies
covered in this survey, appearing in one-third of those having func-
tionalized employment work, and one-fifth of the others. While stock
purchase plans have existed in a few companies for more than a quarter
of a century, the movement as a whole is of comparatively recent origin.
“During the war and the period of prosperity that followed, the move—
ment increased with special rapidity. In 1921, when business was
depressed, and in 1922, there was a distinct falling off in the number of
companies making new or further offerings of stock. In 1923, however,
the movement started with renewed vigor.” Of the 389 plans, con-
sidered in 1928 in the report of the National Industrial Conference Board,
273, or 70 per cent, were established during the period from 1916 to 1925,
and 162, or 42 per cent of the total, during the five-year period from 1921
to 1925. There has been much discussion” as to the possible influence
of such movements upon the future, but they are in fact too new as yet
to afford decisive evidence as to their effects. A few failures which have
wiped out employee savings have pointed the need of special caution.
Company loan funds seem to be of diminishing significance. In a
few plants provision for making loans to employees from company funds
will be found, but a mutual savings and loan fund, and, especially in
some localities, credit unions, have made less frequent the calls of employ-
ees upon employers for emergency aid.
Credit unions, from European models, were adopted by Canada in
1900, through the influence and enthusiasm of M. Desjardins. In 1909
they were established in Massachusetts, with the help of Pierre Jay, who
was then bank commissioner; and under the influence of Edward A. Filene
have since then grown greatly. In 1927 there were 279 in Massachusetts
with assets of $13,500,000; and in other states, with later starts, there has
been similarly rapid growth. Being self-managed, they give training in
business methods to many rank and file employees and hence are of a
broader than financial significance.”
59 R. F. Foerster and Else H. Dietel, Employee Stock Ownership in the United
States, 1926, p. 7.
60 See, for example, the Proceedings of the Academy of Political Science, Vol. II,
No. 3, April, 1925.
* See R. F. Bergengren, Cooperative Banking, a Credit Union Book, 1923.
MANAGEMENT 529
Other provisions aiming at financial benefit to employees are company
stores and special buying privileges. They were found, in this survey,
in one-fourth of the companies having functionalized personnel work,
and in 6 per cent of all others. The movement to establish company
stores was at its height during the war years and until 1921, but their
importance from the standpoint of money savings has greatly diminished
in recent years because of the decreased cost of living. In most com-
panies where there are still special buying provisions, the list of goods
handled has been greatly reduced; it includes sometimes only those
articles regularly carried in stock by the company for its own use.
At one time, the social, athletic, and recreational activities known as
“welfare work” were regarded as inducements which would attract the
better class of employees. Company provisions for these activities, and
opportunities of the same character afforded by various public and private
organizations in most communities, are now so common that their differ-
ential value as special attractions is almost negligible. The results of
this survey showed no recent development along these lines. On the
contrary, there were several companies in which one type or another of
such activities had been discontinued because of diminished interest on
the part of employees and in order to reduce expense. Nevertheless,
social activities, such as picnics, dances, and entertainment for employees
and their families, were carried on in one-third of the plants visited;
athletic teams, partly or wholly supported by the companies, in one-half;
and recreational facilities, such as rest rooms and game rooms, in more
than 40 per cent.
Joint Relations.—While there is no adequate measure of the changed
and changing attitude of management toward joint relations, it is appar-
ent from many indications that executives to-day are more ready than
they were before the war to enter into organized schemes for regularly
dealing with their employees. It is still undoubtedly true that in most
establishments the relations of the management with employees are with
individuals only, and based solely upon supervisory contact. This was
the situation in well over one-half of the companies covered by this
survey. About 20 per cent had active, formal employee representation
plans, 10 per cent dealt occasionally with specially elected employee
committees, and 6 per cent were working under union agreements.
The year 1921 saw the discontinuance of many arrangements for
joint relations, both union agreements and independent employee repre-
sentation plans. The serious unemployment at that time and the
weakened position of the unions resulted in the abrogation of many
arrangements made during the war and boom years. Many plants
closed, and when they reopened the employee committees which had
previously existed were not revived.
530 RECENT ECONOMIC CHANGES
The figures in the following table of the National Industrial Confer-
ence Board show that there have been many changes and a slight net
growth:
GROwTH OF EMPLOYEE REPRESENTATION”

1919 1922 1924 1926
Number of companies with employee repre-
sentation plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 385 421 432
Number of companies establishing new employee
representation plans during the period between
Sllſ Věy S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 317 173 59
Number of companies discontinuing employee
representation plans during the period between
Sllſ Vey8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 137 48
Number of workers covered by employee repre-
sentation plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 403, 765 600,000 1, 240, 704 || 1,369,078
• Adapted from table in Service Letter, No. 359, January 10, 1927.
It does not appear that the success or failure of an employee repre-
sentation plan or of a co-operative relationship with a trade union is
dependent upon the size or nature of an enterprise. The attitude of
the managing officials has more to do with it. An analysis of the cases
of abandonment of works councils” shows the causes reported by the
companies to be “discussion of trivial matters,” “lack of interest in
elections,” “poor selection of representatives,” “plans too cumbersome,”
“improper candidates for representatives,” “fluctuation of employment
demoralized councils,” “business conditions,” “committee would not
respect instructions from supervisor,” and “more time spent in con-
ference than in production.” From these it is apparent that the execu-
tives in the companies which abandoned works councils had not seriously
regarded joint committees as affording employees an opportunity to
participate in the processes leading to decisions affecting them, or thought
through many of the problems of operating in conjunction with them,
but had continued traditional attitudes and methods of control.”
Most employee representation plans, adopted in the years of the war
and the boom, came from mixed motives, ranging from sentimental to
ulterior, and most of them failed.* It is as yet too soon for final judg-
ments of the survivors or of the younger plans. But there is plenty of
evidence that, where built soberly into consistent relationships with the
whole organized structure, they are proving to have deep and many-
sided values.
6% National Industrial Conference Board, Service Letter, No. 364, February 14, 1927.
63 For fuller description and discussion, see Burton, Employee Representation,
Baltimore, 1926.
* See, also, Chap. VI, Labor, p. 484.
MANAGEMENT 531
During recent years there has been an increasing amount of dis-
cussion” concerning the effectiveness, both from the standpoint of
management and of labor, of union-management co-operation, under
arrangements similar to those obtaining on the Baltimore & Ohio,
Chicago Northwestern, Grank Trunk Western, Chicago, Minneapolis &
St. Paul, and Canadian National Railroads. This idea, also, is too new
to judge; with it, as with other radical changes, such as newly installed
piece rates, mergers, and works councils, there is always danger of being
misled by the clean sweeps of a new broom. But certain special areas
of possibility for co-operation have been under test for a number of
years by some of the printing trade unions, and similar work in the
clothing trades is beginning to show something of the opportunities
and limitations of unions as partners of management in working toward
higher productivity.
III. MANAGEMENT OF MARKETING
Since 1920, it is pre-eminently the problem of marketing, and especially
the creation of demand for the product and the development of new
products, which has held the attention of business executives. It is
often said that mass production is forcing selling; it is probably more
accurate to say that the turn of the price curve in 1920, after a score of
years of scarcely interrupted rise, has forced both mass production and
intensive selling.
A widespread interest in marketing methods cannot be said to have
come with the turn of prices, although at that time there was plenty of
talk about the difficulties of getting sales. As early as October, 1920,
however, articles suggesting a more scientific viewpoint on marketing
appeared in the Taylor Society Bulletin. The Joint Committee on
Agricultural Inquiry in 1922 issued a report which attracted attention
to certain high costs of marketing. And the Harvard Business Review,
since 1922, has persistently printed articles analyzing sales problems.
In recent years, interest has increased with great rapidity.” Distri-
bution conferences were held by the United States Chamber of Commerce
in 1925, and commercial surveys and special marketing censuses have
recently been made by the Domestic Commerce Division of the Depart-
ment of Commerce. As yet, however, marketing technique must be
judged primitive both in its planning and in its control. There are a few
important exceptions, but as a whole it must be said that manufacturers,
wholesalers, and retailers alike, in their marketing thinking since 1920,
having passed through the expletive stages, are only just entering the
* See, for example, Bulletin of the Taylor Society, February, 1926.
* Since 1922, a large number of books on all phases of marketing management have
been published.
532 RECENT ECONOMIC CHANGES
explorative. Even to-day, more marketing executives are worrying than
are analyzing conditions and inventing measures appropriate to them.
Among those companies which have made changes, there is appearing
a tendency toward functionalization similar to the tendency which has
been developed in manufacturing. There are being introduced into
their sales departments men to give centered attention to special prob-
lems of progress. It is being found, as was found in the factory, that
those men responsible for carrying on the daily routine of getting orders
should not be solely depended upon to devise and improve the methods
of getting them.
The department to devise methods of selling is most often the “Sales
promotion department.” For the development of new and improved
goods to sell, there are engineering or design departments or committees
who concentrate on merchandising. These companies have sent an
increasing number of specialists into the field, not chiefly to sell but
rather to prepare the way for future sales by learning and teaching the
best uses of the goods. For those who have sold production equipment,
this has meant sending men who have sometimes acted as consulting
engineers for their customers; for those who have sold to retailers, it has
meant sending men expert in display methods or in specialized retail
salesmanship. Measures of this sort have not usually been planned for
permanency, but have been undertaken rather more often to develop a
new market or to consolidate an old one.
Sales Personnel.—Even where, in these companies, special men have
not been sent out into the field, attempts to serve a similar purpose have
been made through an alteration of salesmen's methods or of personnel.
Selection, training, and remuneration have been subjects of increasing
interest in discussions and in business literature.” Something like 50
per cent more articles appeared on these subjects in 1927 than in 1925.
The companies which are reorganizing their sales efforts are taking more
pains with selection, in an attempt to get men not merely of good manner
and persuasive powers, but of quick intelligence. For producers’ goods,
technically trained men have been increasingly sought, and to sell all
sorts of goods there is a growing demand for college graduates. Psycho-
logical tests were tried in many cases, but have persisted only with a few
large companies; interest in them does not seem to have waned, but
sales managers are rather holding off until more satisfactory tests have
had a chance to be developed.
The training of salesman to meet the difficult conditions of the field
is being carried on with increasing elaboration, and always with more
emphasis upon knowledge of the product and its uses, and distinctly
67 “Selection, training, and supervision” stood second on a list of 27 “outstanding
problems of marketing management” in the answers to a questionnaire of the Taylor
Society, published in its Bulletin, December, 1927.
MANAGEMENT 533
less upon the technique of persuasion and what used to be called
salesmanship.
Changed conditions have forced companies to give more and more
consideration to the problems of salesmen's remuneration. Some years
ago, certainly, and probably now, a straight commission on sales was the
prevailing method. To-day, wherever missionary and educational work
are important, this simple method is found inadequate. A number of
other devices are being tried, some of which have been enthusiastically
proclaimed as the one best method. Most of the sales executives who
are working at this problem seem to believe that no one system will be
found; that a variety of devices of remuneration will have to be com-
bined in different ways to meet different conditions.
In the past, there has been a general lack of close management in the
routing of salesmen and in studying their performance through frequent
reports. One frequently heard the complaint that “men do not like
to be held to a definite route,” and “we can not get our older men to
turn in any reports.” This situation is closely parallel to those of an
older day in factory departments, where piece rates or the “highly
skilled workmen’’ were depended upon to keep the wheels going.
To-day, the attempts to get increased sales and more capable sales-
manship, and yet to sell at a lower sales cost, have encouraged the analyti-
cal studies of quotas, which have been widely instituted during the past
few years, and have led some companies to restrict the territories or
lists of customers salesmen are expected to cover.
Sales Costs.-Sales expense is the center of increasing attention.
A number of companies reported that they were now undertaking a
study of this problem, and were setting up new statistical or accounting
precedure for the purpose. The figures of 81 companies, widely dis-
tributed geographically and over different trades, have been carefully
analyzed by Bigelow, Kent, Willard & Co., Inc., of Boston. They are
for the first six months of 1926, 1927, and 1928, as shown in the tables on
page 534.
The general trend of reduction in manufacturing costs has made
selling relatively, even where not absolutely, of greater importance.”
With the encouragement of the Harvard Bureau of Business Research,
accounting for sales expense has been greatly extended and improved.
Sales costing, however, as it bears upon different lines of goods or classes
of customer, has been little analyzed. There has been a certain degree
of broad departmentalizing; but the prevailing custom has been to express
the cost of selling as an over-all percentage applying equally to all goods
and all transactions, thus losing any differentials of cost there may be
* The trends of sales expense among retailers, wholesalers, chains, and department
stores are discussed in Chap. V, pp. 352–374.
534 RECENT ECONOMIC CHANGES
CoSTS ANALYSIs OF 81 COMPANIES
It, Profit-making companies Losing companies
€IIl
1926 1927 | 1928 1926 1927 | 1928
Number. . . . . . . . . . . . . 68 62 51 13 19 30
Sales ratio. . . . . . . . . . . . 1.000 1.039 0.982 1.000 0.949 O. 977
Sales. . . . . . . . . . . . . . . . 1.000 1.000 1.000 1.000 1.000 1.000
Manufacturing costs:
Material. . . . . . . . . 0.491 0.476 0.475 0.602 0. 591 0. 588
Labor. . . . . . . . . . . . 0.182 0. 180 0. 179 0.191 0. 190 0.188
Manufacturing ex-
penSe. . . . . . . . . 0. 107 0. 108 0. 117 0. 153 0. 158 0.142
Total. . . . . . . . . . 0, 780 0.764 0.771 0.946 0.939 0.918
Gross profit. . . . . . . . . . 0.220 0.236 0.229 0.054 0.061 0.082
Commercial costs:
Selling. . . . . . . . . . . 0.082 0. 110 0. 121 0.121 0. 147 0. 156
Administrative. . . (). 054 0.058 0.056 0.099 0.087 0.080
Total. . . . . . . . . . . 0.136 0.168 0.177 0.220 0.234 0.236
| -
Operating profit or loss 0.084 0.068 0.052 –0. 166 –0. 173 –0. 154
|
CHANGE IN RATIOS FROM 1926 BASIS IN PER CENT
It, Profit-making companies Losing companies
eIſl
1927 1928 1927 1928
Materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.06 — 3.26 — 1.83 — 2. 33
Labor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1 — 1.65 — 0.52 — 1 . 57
Manufacturing expense. . . . . . . . . . . . . . . . . . . | + 0.93 + 9.3 + 3. 27 — 7.2
Selling expense. . . . . . . . . . . . . . . . . . . . . . . . . . . + 34.1 +47.6 +21.5 +28.9
Administrative expense. . . . . . . . . . . . . . . . . . . + 7.4 + 3.7 12, 1 — 19. 1
Profits of profit-making companies. . . . . . . . . — 19.0 – 38.1 ! . . . . . . . . . . . . .
Losses of losing companies. . . . . . . . . . . . . . . . . . . . . . - - - - - + 4.2 — 7.2
among them. Significant of a change are two recent articles,” published
by the Department of Commerce at the request of its Advisory Committee
on Distribution.
Reorganizations of the sales force cause temporary extra expenditures
by selling departments, much of the sort which, when spent for tangible
assets, are counted as investments.
reorganizing know this, and count it as a special expenditure.
expect it, when fully completed, to reduce their cost of sales even in spite
of hard market conditions.
Those manufacturers who are so
But they
69 J. W. Millard, Analyzing Wholesale Distribution Costs, and G. E. Bitner,
Analyzing Retail Selling Costs.
MANAGEMENT 535
Advertising —It was commonly believed that, in its day, the excess
profits tax was the cause of a tremendous increase in advertising. During
the depression of 1921, advertising was greatly curtailed, but the indica-
tions of this survey are that, between 1922 and 1924, the amounts spent
in advertising increased at nearly double the rate of other increases in
sales expense.7° Since 1924, this rate of increase has materially
diminished.
High pressure selling efforts of the producers of various forms of
advertising accompanied these great increases in expenditures, and a
large number of advertisers allowed themselves to be governed by plans
originated by the sellers, without taking the trouble to find out for them-
selves all the factors involved in this important part of their marketing
management. As a result, many advertisers have been spending their
money with no definite goal or, if they have one, without knowing whether
they are hitting the mark or not. Among the sellers of advertising are
many highly efficient men, who approach their tasks in a conscientious frame
of mind, who believe that the future of advertising will depend upon the
analytical intelligence with which it is used, and who are working energeti-
cally toward sound practices. There were definite general indications
in the first part of 1928 that advertising appropriations were going to
be looked at with a more discriminating eye, either to reduce the total
amount or to apply it in more effective ways.
Merchandising.—By far the most important occurrences in American
marketing have been the invention and introduction of a wide variety of
new consumers’ goods. These well-known inventions, and the national
success of those who have sold them, easily give the general impression
that every business man in this country is altering his merchandise and
inventing new. As a matter of fact, it is hard to discover in a field survey
that the job of analyzing merchandise and its uses, the every day part
of the job of merchandise invention, is adequately arranged for. The
progressive development of the quality and utility of merchandise, and
its continuously closer adaptation to both market needs and manufactur-
ing facilities, have been the responsibilities of no one in particular and
everyone in general. They were usually found to be expected of the
chief executive or the board of management, in addition to their other
duties. The result has been that such improvements as did occur were
often strokes of good fortune or the consequence of insistent market
pressure. Final results are, therefore, spotty. The known cases of
organized systematic merchandise inventing, outside of the engineering
industries, are few in number as compared to the total business organiza-
tions of the country.
70 For 1927 the total spent on advertising, as estimated by Dr. Copeland, was
$1,500,000,000. See Chap. V, p. 402.
536 RECENT ECONOMIC CHANGES
Those who have taken definite steps to meet the need are specializing
upon research into the make-up of the merchandise and the needs of the
market, and toward a closer co-ordination of the designing, engineering,
manufacturing, and sales departments. They are trying to find out how
to make their products accord in quantity and kind more nearly with the
desire and capacity of consumers to buy, and hence to find savings in
simplifying the movement of goods from shipping platforms to ultimate
consumers, comparable with the savings which have been made in
manufacturing them. The influence of field specialists, demonstrators
and instructors, upon this work is notable. The creation of most mer-
chandise is, in fact, found to be more effectively carried out in contact with
the place where it is used than shut up in a manufacturing laboratory.
The function of merchandising is only partly the developing of new
goods. An integral part of it is eliminating items and standardizing
parts. This task, which under the influence of the Department of Com-
merce has gained the name “simplification,” has won a definite standing in
American industry. It is being carried on both by trade associations
and by individual employers. Where merchandising is to be found
thoroughly organized, the simplification process is being worked out
continuously, going along with the development processes of adding new
goods and improving old. By persistence in pruning out the least desir-
able and adding the better, progressive improvement of the lines to be sold
is accomplished.
Determining the price at which goods were to be sold has, in the past,
been a responsibility of the sales department in most companies. Pricing
is now showing a trend away from exclusive selling influence. It is
carried on in a variety of ways, which most often lead up to an ultimate
board of management for approval; but in the discussions and deter-
minations of price bases there are more and more appearing such other
influences as that of the accounting department or the field specialist.
During the years of greatest upheaval, many manufacturers, to deter-
mine their sales possibilities, undertook thoroughgoing market analyses
which were, however, too expensive to be carried on generally. Some
market analyses of wide usefulness, available to all, have been instituted
by some of the larger advertising agencies. More recently the Depart-
ment of Commerce has undertaken, for the first time in the history of this
country, a census of retail and wholesale distribution. It is experimental
only, covering 11 cities, but has proved to be of such interest that it is
expected to be the forerunner of the first complete national Census
of Distribution to be taken in 1930. While the variety of information
required by different companies is great, there is certain basic information
for the setting of quotas, the allocation of sales territories, the evaluation
of competition, and the checking of performance, which is of definite value
to all.
MANAGEMENT 537
Trade Channels.-The general pressure for sales, intensified and
complicated by the rapid rise of chain stores, has given to those manu-
facturers who sell to distributors for resale some special problems, the
definite solutions for which are as yet hardly to be found. Whether to try
to distribute identical products through all the different trade channels,
or whether to sell through the jobber, or direct, or exclusively to chain
stores, are problems being tried out in many ways. Those manufac-
turers who have experimented the longest believe that the answer does
not lie in any one alternative, but in some nicer adjustment of means to
ends. To them, to rely exclusively upon the chain store, or jobber, or
to eliminate either, offers no solution. They are experimenting to find
what parts of their business are best adapted to the one means or the
other.
Almost any close study of the market reveals one tendency which
must necessarily run with low inventories and hand-to-mouth buying.
Speed and dependability of delivery are of increasing importance in
getting orders. This tendency has worked with the cost of selling as an
influence, slight as yet but probably significant, toward so delimiting
Sales areas as to make the most of territorial advantages.
Wholesalers.-Developments in transportation, in availability of
capital, in advertising, in merchandise, and in chain store and mail
Order retailing have combined to change greatly the traditional manage-
ment problems of the wholesaler—the “jobber” of former days. His
markets are not the same, nor is the competition he must meet. Skill in
making a good “trade” is taking second place before skill in a nice
fitting of varied means to ends. He is accommodating himself but slowly
to these changes; in general it may be said that he has attempted rather
to trade his way out of his troubles. But in February, 1928, a Whole-
Salers' Conference, held in Washington, sought to stimulate frank analysis,
research, and constructive action.
Constructive methods are being tried in a few significant cases. Line
analyses have resulted in lessening unprofitable sales pressures and
removing slow movers and duplicate items. The Department of Com-
merce reported one case where 42 per cent of the sales were accountable
for 14 per cent of inventory, and 17 per cent of the sales for 49 per cent of
inventory.” Analysis of sales by regions and delivery costs have
resulted in radical revisions of territory. Headway has been made in a
few instances, even against the influence of hand-to-mouth buying, in
reducing the number of those orders which are so small that merely
entering and handling them use up their margin of profit.
In specific response to the chain store threat, a few wholesalers began,
with chosen groups of retailers, to work out experiments in joint and
71 J. W. Millard, Analyzing Wholesale Distribution Costs, 1928.
538 RECENT ECONOMIC CHANGES
regular buying to save selling and handling cost, and in advisory specialist
Services for window display, store arrangement, accounting, and stock
control. During the last three years, moves of this sort have spread with
great rapidity,” especially in groceries and drugs. Group buying by
wholesalers themselves has also been started, to enable them to hold
their own with chain stores in buying power.
Small Retailers.--Dr. Julius Klein, of the Department of Commerce,
reported, in his radio talk of September 8, 1928, an estimate of 750,000
retailer in the United States doing an average business of less than
$25,000 each per year. In one of the trial census cities, “over a third of
the retail stores are each doing less than an average of $7 worth of busi-
ness a day.” A great many have been and are being hard hit or actually
knocked out” by chain stores. But it is not the smallest or those of
any other size group which are losing; it seems rather to be those who have
nothing but price to rely upon to make their appeal for patronage.
As offsetting the thousands of retail grocers who have been put out of
business by the chains, the Winnipeg and Western Grocer, on May 15,
1928, calls attention to the “other thousands who have been spurred by
chain competition into running better stores.”
Little information is yet available from which any adequate picture
of these hundreds of thousands of shops can be drawn, or anything more
than a guess made as to their fate. When the department store came,
and again the mail order house, their doom was proclaimed. Yet many
survived and it is likely, therefore, that many will survive the coming of
the chains. The crucial factor seems to be management ability rather
than size or location. Failure stories seem to bear this out. A close
study of 500 grocery failures found 65 per cent accounted for by begin-
ners’ handicaps—chiefly incompetence or lack of capital; 17 per cent were
from character breakdowns; 16.6 per cent, from fire, flood, sickness, and
robbery; and 1.4 per cent directly from competition.” Hardware stores,
to judge from a survey of 1,330 of them, undertaken by the National
Retail Hardware Association, do better in smaller communities than in
large. Those located in towns of less than 1,000 population averaged 9.33
per cent profit on their investments in 1927, while those in cities of 50,000
and over made 5.96 per cent. Rent and salary expense in the smaller com—
munities was 13.5 per cent of sales against 20.25 per cent in the larger.
* “Forty-two wholesale grocery firms, owned by a group of retailers representing
15,000 individual retail grocery stores throughout the United States, have organized
the National Retail-Owned Wholesale Grocers’ Association for the betterment of the
individual retailer and the general improvement of trade conditions.” Journal of
Commerce, New York, January 27, 1928.
7° But then they seem to be always getting knocked out by one thing or another,
as an article by J. George Frederick in the North American Review, October, 1928,
brilliantly and wittily sets forth.
74 Ibid,
MANAGEMENT 539
But even those independents left out of jobbers' chains are apparently
not going to rest content without some of the advantages of group action.
According to the New York Journal of Commerce of October 27, 1928,
“thirteen buying groups of retailers in Canada with a total of 2,724
stores will do an estimated business of 54 millions in 1928. Buying
groups did an estimated business of 42 millions in 1927, while chains did
49 millions.” They claim that at least 50,000 United States retail
grocers, who do a business nearly equal to the chains in their line, are
affiliated in some way with co-operative groups.
With the settling down of chain store development, there has appeared
evidence that a flowing in and out of managers and buyers between small
independents, chains, and department stores, is taking place. To what-
ever extent this spreads, it seems likely to result in a better adaptation
of special abilities to their appropriate jobs and a general raising of retail
management technique. Without such outside influences, the intensely
personal quality of the owner-merchant's job has made him slow to
recognize any but its unique aspects and quick to reject ideas of change as
reflections upon past performance.
To estimate conditions and trends among so large and varied a group
of men is difficult. There would certainly not seem to be as yet sufficient
grounds for the belief that the small, independent retailer is soon to be
relegated to an insignificant share in the whole field of distribution.
Department Store Management.—The beginning of this decade
found department store managers giving most of their attention to
problems involving the procurement of goods and the maintenance of
a satisfactory personnel. With the depression of 1920–21, interest
turned to questions of stock control.” During subsequent years, increas-
ing competition from other department stores, chain stores, and mail
order houses, and the upward tendency of operating expenses have caused
emphasis to be turned to problems of sales promotion, more precise
control over expenses, and more careful selection of merchandise.
The past ten years have witnessed a definite trend toward great func-
tionalization in department store organization. Many had attained
their large size and volume of trade as the result of constantly adding
departments, each under control of a department head or buyer who
carried on the purchase, display, and sale of some new line of merchan-
dise. During the period of abnormal business activity at the close of
the World War, many of these departments were considerably enlarged,
and a wide variety of burdens of administration were placed upon the
buyers. In the general overhauling of organizations which occurred
after the depression, departments were subdivided and buyers given
control over more limited and specialized lines. Beginning with this
period, there has been a small but growing tendency to introduce divisional
540 RECENT ECONOMIC CHANGES
merchandise managers, who have been given charge of related depart-
ments to relieve the buyer of some of his co-ordinating responsibilities.
Paralleling this trend has been a tendency to substitute, for the old-time
floor walker, a section manager who has been given greater jurisdiction
Over personnel. Concentration of attention upon closer stock controls
and increased rates of turnover has led to the functionalization of receiv-
ing, checking, and marking incoming goods. Justification has been
found for giving greater power to such men as the comptroller, publicity
manager, and general superintendent.
In addition to these trends, there has been during the past ten years, as
in manufacturing, a tendency to introduce new functional activities,
requiring the services of specialists, such as store display specialists,
color experts, and traffic managers. Of predominant influence in the
last few years has been the installation of “stylists.”
All of these tendencies have combined to decrease the variety of
responsibilities hitherto assigned to the buyer. In the last year or two
there has been discussion among department store managers as to the
desirability of even further subdivision of responsibility. Chain stores
have always made it a practice to separate the functions of buying and
selling. A similar separation is now being tried in a limited number of
department stores.
In many stores, some of the complexities resulting from growth and
the introduction of new departments have been avoided through the
leasing of some specialty or service departments to syndicates composing
a chain of such departments. A survey” of 88 stores in 1928 showed
one-half the stores to have from one to three departments leased. Nearly
two-thirds leased their millinery departments, and about the same
number their beauty parlors; about one-third leased shoe departments,
one-fifth their candy, and one-fifth their optical departments.
Recent years have witnessed a serious attempt on the part of some
department store managers to standardize the quality of their merchan-
dise. Testing laboratories have been introduced in many of the larger
stores for the purpose of insuring proper quality of goods. Customer
complaints have received attention of a more scientific nature, and
specifications for purchases have been more rigidly defined. For example,
during the last year or two, inspection of size has been increasingly
undertaken.
A striking feature of the decade has been the rapid growth of resident
buyers located permanently at foreign and domestic market centers,
where they purchase for one or several department stores. This can
be accounted for by the decreasing weight of a single department store
buying power in comparison with that of other retailers since the advent
76 By the National Retail Dry Goods Association, conducted by Miss Grace J.
Averall.
MANAGEMENT 541
of the chain stores and mail order houses. The growing importance of
style in an increasing number of articles, and the rapidity of style changes,
have also forced closer contact with the markets. Style has, in fact,
affected nearly every part of the technique of retail store management.
The increased pressure of competition during recent years has thrown
a heavy emphasis upon sales promotion. This activity is being directed
to a greater extent toward the bringing of people into the store and to a
lesser extent toward the selling of specific merchandise. Institutional
advertising is increasing, and there has been a rapid growth of “shoppers
news,” distributed from house to house, thus taking a new place midway
between newspaper advertising and direct mail solicitation. Depart-
ment store window displays are tending more toward beauty and less
toward the presentation of specific merchandise.
The similarity of their problems, and the noncompetitive nature of
those department stores which are situated in different localities, have
made them a particularly fertile field for the development of co-operative
relationships. During recent years, a number of associations of depart-
ment stores have been formed for the purpose of group research through
store comparisons, as well as for the practice of group buying. Another
feature of the period has been the development, through the Harvard
Bureau of Business Research, of comparative statistics of expense ratios
drawn from figures regularly sent to the Bureau by a large number of
stores. These tabulations have developed standards with which con-
tributors can compare their own figures.
Personnel work in department stores has passed through approxi-
mately the same cycles as it has in manufacturing, except that it was
not so generally allowed to drop during 1920–21. With the exception
of the work of training, the trend during later years has been toward
greater functionalization. Training departments, at first highly cen-
tralized, show now a tendency to limit their activity to brief courses in
store systems and procedure and to supervision over the decentralized
training activities in the various departments.
The employment function has been assigned to a specialist in a large
number of stores. The use of psychological tests is showing a slow
increase, and in at least one instance psychiatric studies” have been
undertaken. Rating of employees is a practice which is generally
increasing, and many stores have arranged for a periodical review of
salaries in the light of the more recent ratings. College graduates are
entering retail stores in increasing numbers, and the study of retailing
is included in the curricula of our educational institutions.
Medical service has been for a considerable period quite fully function-
alized in department stores, but physical examinations are required in
a limited number of stores and there is little evidence of their increasing.
77 See W. W. Anderson, “A Psychiatric Guide for Employment,” Personnel
Journal, April, 1928.
542 RECENT ECONOMIC CHANGES
Wage incentives for selling employees are common, and a variety of
salary and commission or salary and bonus plans are in use.” The
seasonal character of the business renders the setting of quota bases for
such plans rather intricate, and there are some experiments with simpler
forms of payment, which, nevertheless, will still be based upon individual
effort. In office work incentive plans are being used more often, and
there has been a determined attempt to install such systems in the
delivery departments, in spite of the difficulties of establishing proper
standards and units of measure. The setting of standards in other
nonselling departments through time and motion study has been under-
taken by a few stores, and there is evidence that increasing attention is
being given to improvements in all nonselling operations.
There seems to be no recent growth in employee representation,
similar to that shown in manufacturing, although a few stores have had
plans of this general nature for a considerable period.
Chain Stores.—The rapid growth of chain store systems,” due to
the trading strength of concentrated buying, to their opportunities to
weigh consumer preferences, to their handling of only quick selling
items, and to their elimination of auxiliary services, forced them promptly
to center attention upon certain special managerial problems and to
functionalize for their continuous handling. The selection of store
location, inventory control, accounting, window display, local adver-
tising, and store management were among the earliest specializations, and
purchasing was subdivided almost from the first. Interchain competition
and the adding of services and slower moving items have hastened the
next stage in organization—the efforts to carry on the functionalized
activities with closer economy and to blend them more thoroughly into
the work of the line organization.
As chains increase in size, problems of warehousing and transpor-
tation come to the forefront, particularly in the cases of those chains
which originated in large cities but whose expansion program is carrying
them into the rural communities. There is some indication that manu-
facturers selling to chains are growing less willing to accept warehousing
responsibilities and small lot shipments. Certain of the large chains
have given much attention to this problem, with the result that their
warehousing and transportation methods have been greatly refined. In
general, however, traffic and warehousing management still offers many
problems to be solved.
* See D. R. Craig, Payment Methods in Department Stores, Retail Bureau,
University of Pittsburgh.
7° See Hayward & White, Chain Stores, Their Management and Operation, 1st ed.
1922, 2nd. ed. 1925; W. J. Baxter, Chain Store Distribution and Management, 1928;
Paul H. Nystrom, Retail Selling and Store Management, 1914; also Chap. W,
Marketing, pp. 362-369.
MANAGEMENT 543
Chain store advertising, the absence of which was originally set forth
as one of their chain store economies, is increasing. The significance to
the consumer's mind of many manufacturers' brands is causing a retarda-
tion of what appeared to be, in earlier years, an overpowering trend
toward the development of private chain brands. There is a growing
number of instances of co-operative advertising between manufacturers
of nationally branded goods and chain store systems.
Judging by articles in the chain store publications, there has long been
a keen appreciation of the importance of the store manager and, on the
other hand, of the difficulty of directing him. In the effort to find
practical integration between the specialists’ contributions and local
managers' individual abilities, between consistency of service and local
needs, and between central policies and decentralized administration,
chain store systems have carried out many valuable experiments. They
have used premium payments, profit sharing, rigidly classified salaries,
and individual salaries unclassified; they have turned traveling inspectors
into supervisors or into teachers; they have had fields in which the store
manager's behavior is rigidly standardized, and fields within which their
own judgment rules. Through it all, there runs a persistent tendency to
raise the average level of ability of store managers.
The original simplifications of lines down to those which sold most
freely allowed problems of sales personnel to become secondary. Now,
wherever lines are becoming elaborate and services are being instituted,
and especially where there are several stores of one chain in a single com-
munity, a few training classes, psychological tests, and sales manuals
are appearing.
A special set of problems for the growing chain system arise out of the
balancing of expansion with intensive development. With some, total
sales have increased, but the sales per store have decreased. The value
of priority in a new market has incited many to expand at a rate which
has jeopardized their effectiveness and resulted in supersaturation of
some markets. There appear to be optimum sizes of chain store organ-
izations, dependent upon the capabilities of the management, which have
in some cases been exceeded.
Within the last few years, there has been a growing tendency to develop
chains through the simultaneous merging of a considerable number of
independent stores. This method of development is different from that
followed by the older chains, and materially increases management
problems.
Close observers agree that management structures, practices, and
abilities in the chain systems have yet to be tempered in the long, hot
fires of extended and vigorous competition.
Office Management.—The number of people in clerical occupations is
distinctly on the increase. The United States Census showed that from
544 RECENT ECONOMIC CHANGES
1910 to 1920, of all men engaged in gainful occupations, male clerical
workers increased from 3.8 to 5.1 per cent; among women, the increase
was from 7.3 to 16.7 per cent. In Ohio, the percentage of males listed
as clerical workers was 5.6 per cent in 1914 as against 6.8 per cent in
1926; of women, 17.6 per cent in 1914 and 26.2 per cent in 1926. These
figures can indicate only a part of the growth of clerical service, since there
has been, also, during these periods a great increase in the sale of mechan-
ical office equipment” which has increased the output per worker.
The development of clerical service has not been accompanied by a
similar growth in the status of clerical management. Frequently office
management is not found to be a separate operating function at all, and
seldom are its duties clearly defined. The title “office manager” is
not common; of 145 members of the national association, only 55 are
listed in the roster of 1926 as having that title. Office management can
be found as a side line of the treasurer or assistant treasurer, the controller,
chief accountant, Secretary, production or sales manager, and even
the purchasing agent. It is not, therefore, surprising that its co-ordina-
tion with other departments is seldom found to be well effected, in spite
of the importance of its work in cost control and in a variety of other
ways to both factory and selling departments.
In the limited way in which conditions allow it to operate, the National
Association of Office Managers has been persistent in cultivating better
management methods. A decade ago, in discussions and business liter-
ature, a standardization or simplification of forms held a prominent place.
Work in this direction still continues, but has been elaborated to cover a
wider field of standardization and to include lay-out of office, routing
of work, salary classification,” standard instruction, and job analysis.
The exchange of information on many detailed parts of office manage-
ment goes on with considerable vitality.
The rapid introduction of office machinery has brought to office
management a new problem, and has created, within the traditional office
workers, a group comparable to those on light factory processes; in fact,
measured production and payment by results have already been estab-
lished in a small way among them.
IV. SUMMARY
The art of management, in almost all its aspects and activities, turned
a corner in 1921. During the up-swing with which the century started,
sheer power and drive could win almost every time over finesse. At the
turn of the tide, amid the confused cross-currents, more depended upon
skillful understandings of the whole situation and nice adjustment of
80 Two books which are no less than encyclopedias have recently been issued,
listing office mechanisms.
81 See article by M. A. Bills in Journal of Personnel Research, March, 1923.
MANAGEMENT 545
means to the immediate environment. The art of management to-day
is in large part the progressive adjustment and integration of conflicting
needs, conflicting influences, and conflicting purposes.
All managers, however, did not turn the corner in 1921. A reor-
ganization of thought has had first to be brought about. Under the new
charter, to manage is not a vested right but the exercise of a special
skill which, through temperament or through training, some have and
Some have not. An English article expresses it strongly:
Nothing is more characteristic of modern business than the way in which control
based on power and ownership is giving place to authority based on knowledge,
qualifications, and skill. Management is no longer a preserve of the owners of capital,
nor is it an hereditary right. Men of ability, without capital or family ties to assist
them, are breaking into the hereditary ranks. Industrial conditions are in their favor
. . . The leveling forces of Nature have been at work, producing the average except
in cases where systematic selection has been exercised. But the average man is not
equal to the strain of a day when conditions are uncertain, when business is growing
more complex, and when nothing but competent administration can enable a firm to
Survive.82
To cope with the growing complexities, the manager type, through
slow processes akin to natural selection, is changing. More men are
being brought within managerial responsibilities, and the co-ordinated
group, each member of which has his own share in the total of responsi-
bilities, is replacing the absolute “big boss.” To release and utilize
all the creative and managerial abilities which any of their members may
possess or develop is the definite goal of organization. There is to-day
not only more production per man, more wages per man, and more horse
power per man, but more management per man as well.
Reinforcing all the other influences which are pressing toward higher-
grade management is the present prevailing doctrine of high wages.
Management is the planning and directing of human efforts, and the
more one has to pay for these efforts, the more worth while is high-
grade direction. So long, then, as that doctrine prevails, it will
continue to be a powerful influence toward progress in management.
There are as yet no signs of its weakening.
The foundations of experience upon which management is built are
broadening. No matter how rich it may be, the experience of one man
or even of one company is seldom broad enough for to-day. Associa-
tions, periodicals, committees, luncheons are all antennae through which
companies become sensitive to current progress. To no small degree
it is co-operative thinking which is to be credited with the present state
of American prosperity. Freer and freer exchange of information, con-
stantly improving lines of communication, are keeping the body of the
American business army marching behind its pioneers.
** In Industrial Peace and Administration, August, 1928, Oxford, England.
546 RECENT ECONOMIC CHANGES
The speed at which changes have taken place and taken effect has
varied as widely as human nature varies, and has varied, also, with the
differences in the pressure of necessity. As a result, the present situa-
tion in the business world is more “spotty” than it perhaps has ever
been. Within industries and among industries, there is a wide spread in
methods of management. To the “prevailing practices,” noted in this
chapter, all sorts of exceptions can be found; in the directions of trend
there is much more uniformity.
Business has, of course, always benefited from discovery, but it has
mostly taken discovery where it found it—as a gift. It is now more often
the case that, by research, discovery is specifically provided for and so
accelerated. Business research does more than invite discovery; it
gives to operating management a chance to base its decisions upon fact;
and research and the habits of mind it engenders are extending beyond
the applied physical sciences into the fields where conditions are deter-
mined chiefly by human desires, impulses, and frailties; into industrial
psychology, labor management, marketing, sales management, merchan-
dising, advertising.
Applied to general management, these habits of mind demand that
long range plans be made, that jams and emergencies be avoided, and
progress itself be scheduled. In a few companies there can be found now
the germ of what is likely some day to be a full-fledged and functionalized
Department of the Future, which will know how to forecast and to make
provisions, within limits, and will know how to estimate those limits.
Finally, such mental habits will bring into business management an
appreciation of the principle of balance, which centuries of military
experience have taught the general staffs of all nations. A factory too
good with relation to its selling force can be a source of weakness and is
always a source of internal strain; a company or a community can devote
itself to invention which reduces cost too much as compared with the
degree to which it devotes itself to invention which increases consumption.
Any step in any direction of progress has so far brought with it an
increased complexity; our economic mechanism is now intricate and
delicate. During the last generation we have many times found that it
pays to get men of better than average intelligence as operators of intri-
cate machines, and to institute careful methods of training for them.
We are seeing now more and more clearly that management—the con-
tinuous adjustment and steering of our business machinery—demands
also its special intelligence and its careful and continuing training.
CHAPTER VIII
AGRICULTURE
BY EDWIN G. NOURSE
The several chapters of this survey thus far have dealt with con-
sumption, transportation, merchandising, manufacturing industries,
labor and management, with only casual bearing on the situation in
agriculture. In those chapters, great emphasis has been laid upon the
radical adjustments, both in technique and in business organization
and practices, which have been outstanding developments of the post-
war period. Turning now from discussion of our national industry in
general to the particular problem of agriculture, one must be struck with
the fact that the adjustments there called for have been no less drastic
in character. Circumstances, however, have conspired to accord to the
farmer a less satisfactory meeting of his difficulties, and therefore a
general situation as to prosperity with which he is by no means satisfied,
and which practically all students of the problem agree leaves him on a
lower level of prosperity than that being enjoyed by the majority of
economic groups.
At intervals during the last few years, Congressional committees,
private institutions, Government workers, and interested individuals
have attempted to formulate quantitative statements of the farmer's
situation, and to measure the extent of his distress or the degree of his
economic disadvantage." Comparisons have been made longitudinally
* One of the most common short-cut methods of statistical comparison has been to
take the index numbers of farm-product prices and divide by the index of prices (whole-
sale) of nonagricultural commodities to produce a quotient which was often labeled
“an index of farmers’ purchasing power.”
“This method of measuring the value of farm products,” says C. M. Purves, of the
United States Bureau of Agricultural Economics (Indea: Numbers of Prices Farmers
Pay for Commodities Purchased, (mimeograph report)) “has not been entirely satis-
factory because farmers do not buy at wholesale nor are index numbers of nonagri-
cultural wholesale prices weighted according to the amount of farmers’ purchases.
. . . Index numbers of prices paid by farmers for what they buy have been con-
structed by the Bureau of Agricultural Economics, United States Department of
Agriculture. These indexes show changes in prices since 1910 of commodities pur-
chased by farmers for the family living and for operating the farm. They are con-
structed with the same base period and as nearly as possible in the same manner as the
indexes of prices received for farm products. The ratio of the index number of prices
received for products sold to the index number of prices paid for commodities farmers
purchase will hereafter be used instead of the ratio of farm prices to nonagricultural
wholesale prices as a measure of the purchasing power of farm products,
547
548 RECENT ECONOMIC CHANGES
with conditions of agriculture in previous years, and in cross section as
comparisons with other economic groups. Such nominally exact cal-
culations have been impaired by innocent errors and partisan distortions
to an extent which has caused them to produce more confusion than
enlightenment. Professor Black has examined many of these difficulties,
and says:”
If any conclusion at all can be safely drawn from these data, it is . . . that the real
per capita incomes of farm people fell behind badly from 1870 to about 1895, improved
“Users of these index numbers of farm prices and of prices paid by farmers are
cautioned against their misinterpretation and misuse. These price index numbers do
not measure changes in farm receipts or in farm expenses, and the ratio of prices
farmers receive to prices paid for purchases is not a measure of the purchasing power of
the farmer. These index numbers do not take into account any variations in the
quantities of crops sold or quantities of goods purchased. Furthermore, the prices
used in constructing these index numbers do not represent all sources of receipts or all
varieties of expenditures. The income from farming is spent not only for commodities
purchased for the family living and for operating the farm but also for interest on
mortgages and loans, rents, railroad fares, and other items which are not represented
by these index numbers. Strictly speaking, the ratio of the index number of prices
received for farm products to the index number of prices paid for commodities pur-
chased merely represents the power of a fixed quantity of selected farm products to
purchase a fixed quantity of goods in relation to the base period.”
These index numbers of farm prices, prices paid by farmers, wages, and taxes
(1910–1914 = 100) are presented in the following table:
|
|
Prices paid Ratio of
Prices
by farmers prices Farm wages Taxes on
Date received for - º paid to hired farm property
| farm products for commodi- received to labor (1914 = 100)
ties bought prices paid
1910. . . . . . . . . . . . . . . . . . 103 98 106 97
1911. . . . . . . . . . . . . . . . . . 95 - 101 93 97 -
1912. . . . . . . . . . . . . . . . . . 99 100 99 - 101
1913. . . . . . . . . . . . . . . . . . 100 100 | 99 104 e = *
1914. . . . . . . . . . . . . . . . . . 102 101 101 | 101 100
- | -
1915. . . . . . . . . . . . . . . . . . . 100 106 95 102 102
1916. . . . . . . . . . . . . . . . . . 117 123 95 112 104
1917. . . . . . . . . . . . . . . . . . 176 150 118 140 | 106
1918. . . . . . . . . . . . . . . . . . 200 178 } 112 176 118
1919. . . . . . . . . . . . . . . . . . 209 205 102 - 206 130
1920. . . . . . . . . . . . . . . . . . 205 . 206 99 239 155
1921. . . . . . . . . . . . . . . . . . 116 156 75 150 217
1922. . . . . . . . . . . . . . . . . . 124 152 81 146 232
1923. . . . . . . . . . . . . . . . . . 135 153 88 166 246
1924. . . . . . . . . . . . . . . . . . 134 154 87 166 249
1925. . . . . . . . . . . . . . . . . . 147 159 92 168 250
1926. . . . . . . . . . . . . . . . . . 136 - 156 87 171 253
1927. . . . . . . . . . . . . . . . . . 131 154 85 170 | 258
* John D. Black, “Agriculture Now?” Journal of Farm Economics, April, 1927,
pp. 151–161.
AGRICULTURE s 549
from then until 1919, especially during the last three of these years, and then fell with
a crash in 1920 and 1921; and if farm people are badly off now, it is principally because
of developments during the war, and the price débâcle since, but to some extent
because agriculture had not entirely recovered by 1916 from the severe retrogression of the
1870–1895 period.” But it is doubtful even if such a conclusion is safe . . . It is still
entirely possible, in spite of these figures, that agriculture's share in the general income
relative to population was somewhat less in 1915 than in 1870. Agriculture made
great progress during this period; but possibly the cities made more progress . . .
[Amended data] strongly suggest that in 1918 and 1919 the per capita incomes of farm
workers were at least equal in purchasing power to those of the average of all other
workers in the same sections of the country, but that from 1909 to 1916 they were far
from being so . . .
The Federal Reserve Board's data show that factory wage earners’ buying power
in 1925–26 was 16 per cent higher than in 1919–20, and that even their money incomes
were 3 per cent higher. The difference between 16 per cent more for city labor and 19
per cent less for farmers is truly stupendous. The year 1926 was the best year that
the corporations in the United States have ever had. Each year of late has shown a
large increase in the number of million dollar incomes. The outward signs of this
rapidly increasing well-being of the already well-to-do and of the somewhat improved
condition of the city working classes are evident to farm people the moment they
enter a city's gates. It is small wonder that they are discontented.
Thus, whatever our devotion to the statistical method, the inadequacy
of data forces the careful student back to statements of the problem
which are qualitative rather than quantitative in character. Whether
a given farmer's reward, when translated from price returns to real
wages, interest, and profits, and the latter suitably adjusted in the light of
psychic income, is more than that of a city worker of equal ability and
expending equal effort, we shall probably never know, nor would the
information do us much good if we had it. Any reasonably acute
observer who examines any large sample of American farm life is pretty
sure to conclude that the price level of agricultural commodities does
not pay production costs on the present plane of efficiency and leave to
the majority of farmers a surplus large enough to maintain standards of
living comparable to those of town and city dwellers, and provide ade-
quate education, recreation, and insurance against sickness and old
age. Whether this condition tends to grow better or worse, and what
measures, if any, are practically available for its improvement, we shall
discuss later in the chapter. First, however, we must get a general view
of the forces which have operated to produce the conditions amidst
which we now find ourselves.
I. DIFFICULTIES CONFRONTING AGRICULTURE
There is always danger of talking about “the farmer” and “American
agriculture” as a unit. In a large and diversified country, differences in
type, activity, and situation are numerous and extreme—so much so, in
fact, that a properly specialized account of the several branches of our
* The italics are the author's.
550 RECENT ECONOMIC CHANGES
agricultural industry involves a diversity of details quite unmanageable
in a discussion of the present scope. We must content ourselves with
the broad outlines of major factors which apply somewhat generally over
the country.
Since most of the interest and attention with reference to the situation
of agriculture during the last eight years has centered on the compara-
tively low level of prices for agricultural commodities, we should notice
first the forces operating to create and prolong this unsatisfactory price
equation.
On the demand side:
1. Since the war, several strong competitors, particularly in
the field of cereals and livestock products, have become increas-
ingly strong contenders for what had been our traditional export
outlet.
2. The possibility of developing in foreign countries a satis-
factory, expanding market for the more intensive types of agri-
culture, coming with the maturer development of our agricultural
industry, has been seriously checked by the slow recovery of the
industrial nations of Europe and the fact that internal disorders
in Russia, China, Mexico, and elsewhere have retarded the progress
of these countries toward the higher type of European commercial
and industrial civilization.
3. Dietary habits, fashions in clothes, and other factors in
domestic consumption have caused this department of market
demand to yield rather disappointing results to the farmer.
4. The rapid and widespread substitution of mechanical power
for draft animals has further curtailed the demand for products
of the soil.4
On the supply side:
1. Additional land has come into use for the first time or land
already in use has been advanced to a more intensive stage of
utilization, while withdrawals have been too slight to afford an
adequate offset.
2. The maturing of methods of disseminating knowledge of
efficient farm practices is beginning to show clear results in the
increase of farmers' efficiency as producers, while declining
fertility, though pulling in the opposite direction, seems a factor
of less significance at the moment, and is indeed checked by
many of the improved methods just referred to.
* The writer has developed these points more fully in American Agriculture and the
European Market, 1924; Journal of Farm Economics, January, 1927, p. 21;
Proceedings of the Academy of Political Science, January, 1928, p. 116; Journal of
Political Economy, June, 1928, p. 330, z
AGRICULTURE 551
3. The process of mechanization has “stepped up” the pro-
ductivity of man labor applied in many parts of our agricultural
industry, while the number of workers leaving agriculture has
only partially offset this increase."
And, finally, the market mechanism by which supplies and demands
are brought together in terms of price has shown:
1. Higher freight rates—only partially offset by the develop-
ment of water transportation or the use of the motor truck.
2. An increase in many handling and selling charges as a result
of higher costs of operation, particularly in the matter of wages
paid.
3. Higher costs of containers and of labor and facilities used in
packing and repacking, storing, and processing products on their
way to the consumer. *
Let us now examine these factors in the order in which they have been
listed.
II. THE DISAPPOINTING DEMAND
It is a matter of common knowledge that the development of western
Canada, Argentina, Australasia, and other countries has contributed
to the decline of American exports of cereals and animal products which
was clearly under way before the opening of the World War, or has
required us to meet a very low price basis in the world markets as the
condition of our continuance in the business.
Canadian wheat supplies have risen from 52 million bushels in 1900
to 232 million in 1913, and 550 million (preliminary estimate) in 1928.
Similarly, Argentina produced 239 million bushels of wheat in 1927–28
as against 169 million in 1913–14, and 78 million in 1899–1900. The
Australasian figures moved up from 49 million to 108 million and 119
million, respectively, during the same years. America's exports of the
five principal cereals declined from 530 million bushels in 1897–98 to
* In some localities, farmers have been constrained to work longer hours and use
more labor of women and children in the hope that a larger output might offset the
unsatisfactory unit price of their product. For example, the issue of Wallaces'
Farmer for October 4, 1926, says editorially: “What part of our bumper crops are the
product of the unpaid labor of women and children? An Iowa subscriber writes:
‘As our boy of thirteen and I stopped to rest our teams in plowing this summer, I
looked around and counted ten of us in sight cultivating. There were three grown
men and seven children, one girl and six boys, all plowing corn. The ages ranged from
eight to fourteen years.’ Farmers like this man are not working their children because
they want to. They are doing it because they see no other way of keeping the farm
going and turning out the volume that seems to be necessary in order to get by. Child
labor on the farms is one of the factors that put real fire into the farm relief movement.
Men will fight harder to save their children from hardship than to save themselves.”
552 RECENT ECONOMIC CHANGES
168 million in 1913–14. From the war-stimulated peak of 533 million
bushels in 1921–22, they again dropped to 210 million in 1925–26. From
this low point, however, they have risen somewhat during the last two
years of heavy production, but on a basis of price unsatisfactory to
American producers, and indicating the outward thrust of heavy home
production rather than the attractive pull of profitable foreign demand.
Beef exports from the Argentine have risen from 54 million pounds in
1900 to nearly 2 billion pounds as an annual average to-day, while
American exports have become negligible." Similarly, exports of pork
products have shown a marked decline, although our pre-eminence in
corn growing enables us to retain a position in the world market, par-
ticularly so far as lard is concerned. The postwar decline in the export
of pork products has brought them to less than 40 per cent of the war-
time peak, but they are still at a level slightly above the immediate prewar
years. This is doubtless owing in part to the redundance of domestic
corn supplies in the face of the sharply declining number of horses and
mules. Great Britain is still our greatest agricultural export market,
but the trend of her interest seems to lie toward fostering imports from
within the immediate family circle of her own empire, or from nations
whose trade relations fit better than those of the United States into this
system of exchange.
Second, as American agriculture has in some sections turned its
attention from the old staples toward newer specialties, such as dairy
and horticultural products (see Table 1) which are in or near the luxury
class, the possibility of developing for these products a profitable export
market to take the place of that for cereals or meat has been curtailed
by the shock suffered by European industrial life, where in the prewar
period consumers for such classes of products were developing at a most
satisfactory rate. The repercussions of Europe's difficulties upon other
nations in a less advanced stage of economic development has tended to
check their economic progress, and thus to prejudice the possibilities of
developing such a market rapidly in non-European countries. Add to
this the internal disturbances of such countries as China and Mexico,
the general tendency for non-European civilization to move at its own
pace rather than at the tempo which was being introduced through
European influence at the height of the imperialistic period, and we have a
situation which seems, in general, to present no very flattering outlook for
export surpluses of the American farmer.
Turning now to the domestic situation, we find standards of lighter
eating and drinking, the use of less voluminous clothing, and an expanded
use of natural and artificial silk and of paper products, where formerly
textiles of agricultural origin were employed, which has brought about a
* Except in the case of oleo oil, which amounts to about 90 million pounds a year,
AGRICULTURE 553
by no means insignificant lightening of the public demand for the farmer's
wares.”
Finally, in the past 13 years there has occurred a decline in the
number of horses and mules on farms from 25.7 million to 19.5 million
head, as an accompaniment of the increase of tractors and trucks. Dur-
ing the same period there has been an even greater decline in the number
of horses and mules in towns and cities. Estimates vary as to the amount
of pasture and crop acreage that has been thereby released, but it seems
clear that demand for at least 15 to 18 million acres of hay and grain
land has dropped away as a result of this transition from horse power to
internal combustion motors. Obviously, there is some offset in the growth
of the market for farm products among those who produce these machines
and the gasoline and oil with which they are fed. Their purchasing
power, however, is largely directed into other channels, and the disruption
of prices owing to the inability to readjust types of farming has been
severe. Throughout much of the corn belt, oats and hay have come
Over a long period of time to a very important and very firmly entrenched
position in standard crop rotations. Farm equipment, the experience
of workers, and the whole farming system have grown up around this
rotation plan, and as yet no fully satisfactory substitutes have been
found to meet the new ratio of demands anywhere nearly as well as did
the old corn, oats, and meadow combination.
All in all, then, the farmer has been called upon to make drastic
adjustments to altered purchasing power abroad, the competition of newer
industrial lands, and several cumulative changes in the volume and
character of domestic demand. The one mitigating circumstance has
been that our domestic industrial population has, in general, been rather
fully employed at comparatively good wages. The national policy, how-
ever, has looked toward restriction of immigration, and hence a smaller
number of mouths to be fed. High wages go not so much to increase the
takings of products raised on the farm as to create a demand for greater
fabrication of products and additional forms of trade and professional
service. The situation thus presented on the demand side has been
one which, in order to keep the various branches of the agricultural
industry stabilized and so far as possible prosperous, would have called
for a large degree of control over the quantity and direction of producers'
efforts. How fully this condition has been met, we must now see.
III. EXUBERANT PRODUCTION
In spite of the fact that the census of 1890 celebrated the passing
of the American frontier, the decades since that time have continued to
witness the bringing of additional farm land into use, and the process did
7 Phases of this matter are discussed in considerable detail under the heading
‘‘Changes in Consumption” in Chap. I (see pp. 530-558).
554 RECENT ECONOMIC CHANGES
not terminate at the outbreak of the World War or with the signing of the
Armistice. Land utilization is not determined by broad policies of
public welfare nor is it under comprehensive state control. It proceeds
largely along lines of individual profit-seeking on the part of private
landholders, reinforcing their own zeal for land exploitation by Govern-
ment reclamation projects wherever possible. As a result of this, addi-
tional areas have been or are being drained, irrigated, or cleared of timber,
brush, and stone to make farms for settlers. Likewise, the extension of
railroads and highways and the coming of the motor truck have increased
the utilization of certain areas of land previously inaccessible.
But more significant than so-called “reclamation” is the process by
which a considerable amount of land, particularly in the western half of
the country, has been raised from range use to that of crop cultivation,
or from extensive crop growing to general farming, stock raising, or
horticultural uses. Millions of acres of Texas, Oklahoma, and Kansas
range land have, since 1920, gone into cotton and wheat, and the vineyards
and orchards of California and other states have been recruited from
One-time grain and hay fields at a rate which has threatened to swamp
certain branches of the horticultural industry. Some of these develop-
ments are clearly apparent in Table 1.
TABLE 1.-ACREAGE of SPECIFIED CROPS IN CALIFoRNIA, 1920–1928
(In thousands of acres)
| |
|
Commodity 1920 1921 1922 1923 * 1925 1926 1927
|
|
l i
Change
1928a. since
1920
Extensive crops. . . . . . . . . . . . . . . . . 4,439 4, 1814, 2594,223,3,316.3,7293,7383,7493,840 – 599
Wheat. . . . . . . . . . . . . . . . . . . . . 714. 557| 712. 748 377 603 653 siz 796
Barley. . . . . . . . . . . . . . . . . . . . . ;1,250, 1, 1881, 1291,095; 765 1,0501,080| 994| 1,083
Oats. . . . . . . . . . . . . . . . . . . . . . º 140 150 162 86 151] 156 147| 144
Hay (tame and wild). . . . . . . . 2,3202,2962,2682,2182,088 1,9251,849|1,796|1,817
Intensive crops. . . . . . . . . . . . . . . . . 1,356|1,2951,447|1,546|1,714, 1,9342,090|2, 1552, 306 +950
Truck. . . . . . . . . . . . . . . . . . . . . 171, 145||19|| 214, 221, 26s 327 356 360
Fruit (bearing) . . . . . . . . . . . . . 1.0351,0951, isºli,2101,3641,491,&oili.giliº
Cotton. . . . . . . . . . . . . . . . . . . . 150
55 67| 83 129 172| 162. 128 221
|
* Preliminary.
Obviously, there is another side to the picture, and some land, utilized
during the World War or before, has been so unprofitable under postwar
schedules of price as to be “abandoned,” either literally or in the sense of
reverting to less extensive uses. In certain of the northeastern states,
some of this land is being reforested by state or private agencies. It
would be futile to attempt to make a quantitative determination of the
ratio which such subtractions bear to the additions already discussed.
The point is that such withdrawals have ordinarily been in sections where
the land is of poor quality, undesirable in climate or topography, or at a
AGRICULTURE 555
disadvantage in terms of transportation or other facilities for production
or social life, whereas the accretions have been of land which is superior
for some technological or economic reason. Regardless of how the area
of “abandoned” land would compare with that of new additions, it is
evident that such withdrawals have not been sufficient to bring produc-
tion into desirable balance with demand, while at the same time additions
to land area or increases in intensity of cultivation have complicated the
problem and tended to delay ultimate adjustment. In spite of repeated
protests from farmers and farm organizations against public reclamation
enterprises during this period of adjustment, Government irrigation
projects have made some addition to our productive plant, and local
interests have pushed private developments wherever their immediate
interest seemed to be served thereby.”
While this factor in the situation must not be exaggerated, an under-
standing of the problem requires that it be remembered that the agri-
cultural resources of the country are by no means all in use, and that
changes in agricultural technique or in other branches of our economic
life frequently result in tapping these latent resources in such a way as
seriously to disturb the adjustment of existing agricultural enterprise.
Probably a larger factor, and certainly one more general in its appli-
cation, is that of the advancing technique of agriculture as a fruition
of efforts toward general dissemination of scientific farming methods
throughout the agricultural group. From the Civil War to the World
War, we had a succession of developments of Federal and state depart-
ments of agriculture, agricultural colleges, agricultural experiment
stations, extension service, and county demonstration agents or farm
advisers. The pressure of war needs and “food-will-win-the-war”
campaigns resulted in a rapid development of the extension service
and the putting of local educational agents in about 4,000 of the principal
agricultural counties, from one end of the country to the other. This has
been followed by intensive development of boys' and girls' club work,
with exhibitions and prizes provided by banks, chambers of commerce,
and other interested bodies, with state and national championships
rewarded with ribbons, cups, cash, tours, and even calls upon the Presi-
dent of the United States. Farm bureaus have developed educational
activities and systematic programs of work, and the teaching of agri-
culture has been widely extended in the high schools, a move facilitated
8 One of the items in the agricultural referendum recently submitted to its members
by the Chamber of Commerce of the United States reads as follows: “The Committee
recommends that the bringing into cultivation of additional areas for agricultural
production at public expense be delayed until such additional production of agri-
cultural commodities as would result therefrom can be demonstrated to be an economic
need of the nation.” There were, according to the preliminary canvass, 2,537% votes
in support of this proposition and 391% opposed. This commits the Chamber in
favor of the proposition.
556 RECENT ECONOMIC CHANGES
by the development of consolidated school districts in many sections.
The pressure upon the farmer to make both ends meet, coinciding as it
did with this forward thrust of educational effort in agriculture, has
resulted in a widespread advance in Sound and scientific farm practices,
which, as such things go, has been phenomenally rapid. While quan-
titative measures of its effectiveness are out of the question, its qualitative
significance is established in the testimony of agricultural leaders in all
parts of the country.
These practices have included wider dissemination of good seed,
better methods of tilling, drainage, terracing, and the like, better sani-
tation for livestock, with better breeding, more intelligent feeding,
record keeping, and the culling of unprofitable animals from flocks and
herds. Its details are almost endless, but in general it may be character-
ized as a move to bring the science of agriculture, as developed by two
generations of laboratory and test-plot work, into the daily understand-
ing and practice of the rank and file of farmers. -
Finally, the most dramatic and probably the most significant single
factor which has entered into the productive situation of agriculture
within the last few years has come with the increased mechanization of
the farm, primarily as a result of the development of the internal com-
bustion engine. This represents the second wave of mechanical
advance in American agriculture, the first having been the sweeping
adoption of horse-drawn implements in the period between the Civil War
and the World War. Some suggestive comparisons may be made
between the two movements.
Prior to 1850, American agriculture, in common with that of all other
countries, was carried on by hand labor, employing only a few simple
tools, and differing but slightly from the methods of the Middle Ages
or ancient times. During the latter years of this period, however,
“Yankee ingenuity” had been busy on the problem of devising machines
which would save labor and improve results in farming, so that from the
steel moldboard plow of 1833 to the Marsh harvester of 1858 a fairly
extensive line of horse-drawn implements had been made available to
the American farmer. Actual adoption of this power equipment was
extremely slow until the pressing demands and shrinking labor supply,
which developed as the Civil War progressed, forced farmers in large
numbers to turn to these labor-saving methods. Immediately after the
war came the homestead movement, and an even more pressing demand
for horse-drawn implements. These were perfected in great variety as the
years went on, but, with few exceptions, were limited in size and character
to the sort of machine which could be moved over the ground and derive
its operating power from a team of from two to five horses or mules.
“Big-team hitches” were developed in some parts of the West, but a one-
AGRICULTURE 557
horse or a two- or three-horse team was the norm of practically all farm
operations up to the time of the World War.
The only notable exception in which the horse gave way to mechanical
power in farming during the nineteenth century was the steam thresher,
and there was a very slight application of steam engines to plowing.
The development of dry-farming methods some twenty years ago accen-
tuated the demand for mechanical power, and internal combustion
engines were employed in tractors of a clumsy and none-too-reliable
sort in the last few years just prior to the World War.
In all this, we see a situation rather strikingly similar to that of
farming during the Civil War period. Technical developments of con-
siderable potential significance had taken place, but pressure had not as
yet been sufficient to force the general adoption of the newer methods.
High war prices, the patriotic appeal that “food will win the war,” the
loss of farm labor through the draft, and the pushing of agriculture out
into regions where extensive methods were employed, strongly stimulated
the adoption of tractors, trucks, and stationary motors on our farms.
The machines available were fairly crude, but they demonstrated the
effectiveness of such forms of mechanical power on the farm and created
a market outlet and a volume of field experience which enabled manu-
facturers to make rapid strides in the mechanical perfection of such
equipment, and in furnishing it at prices and on credit terms which
enabled the farmer to make the transition from the horse-power agri-
culture of his fathers to methods so largely dominated by power equip-
ment that it is hardly an exaggeration to speak of present and prospective
American agriculture broadly as “power farming.” This phase of the
situation now developing in American agricultural production is hardly
less than revolutionary.
IV. THE ADVANCE OF POWER FARMING
The transition from horse power to mechanical power in agriculture,
although it began about twenty years ago, shows its most striking
development during the past ten years. This is revealed in Chart 1,
which is based upon the statistics of horses and mules on farms, and of
tractors in use during a series of recent years. Table 2 presents data
covering the first of these points. It is noticeable that the pressure for
large production caused the number of horses and mules to hold their
own or even increase up to 1919. Thereafter the tide turned, and the
decline in horses on farms has continued down to the present. Far
from abating, it seems now to show signs of further acceleration. In the
South, where mules are almost exclusively employed, the beginning of
the decline was deferred until 1926, but the most recent figures show
that the movement has now clearly begun. Other evidence suggests
that it may proceed at a rapid pace.
558 RECENT ECONOMIC CHANGES
CHART 1,–A COMPARISON OF THE NUMBER OF HORSES AND MULES WITH
THAT OF TRACTOR'S ON FARMS, 1910–1929
HORSES AND
15
1910 - 1915 1920 1925 1930
1000
900
700
TRACTORS
500
400
300
200
100 iOO
1910 1915 192O 1925 1930
TABLE 2.-NUMBER OF HORSES AND MULES ON FARMS, 1910–1929
(Thousands)
January 1– Horses Mules | Total
1910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,833 4, 210 24,043
1911. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,277 4, 323 24,600
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 509 4, 362 24,871
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20, 567 4,386 24,953
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,962 4,449 25,411
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 195 4,479 25, 674
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 159 4,593 25,752
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 210 4,723 25,933
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21, 555 4,873 26,428
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,482 4,954 26,436
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,848 5,475 25, 323
1921 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19, 134 5, 586 24,720
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 564 5, 638 24, 202
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,943 5,702 23,645
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,222 5,730 22,952
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,489 5,725 22, 214
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,830 5,740 21, 570
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15, 145 5, 679 20,824
1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 541 5,566 20, 107
1929. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,029 5,447 19,476
The other side of the picture shows a sharply rising curve of tractor
use. Table 3 presents these data both from the standpoint of current
sales and of accumulating tractor equipment on farms, which is more
definitely comparable to the horse figures previously presented. This


AGRICULTURE 559
table indicates a ratio of one tractor to each 7.8 farms of 50 acres or over
in 1925, as against one tractor for each 16.9 farms of 50 acres or over in
1920. Such a figure is only roughly suggestive of the rapid advance of
the tractor in a period of a very few years, and development has of course
been most rapid in the years since the census of 1925 was taken. It is
TABLE 3.−TRACTORs MANUFACTURED, Sold, AND IN USE on FARMs, 1910–1929
º | In use on
Year : Manufactured sold in the farms,
United States J
| anuary 1
1910. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,000 | . . . . . . . . . . . . . . . .
1911. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 | . . . . . . . . . . . . . . . .
1912. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t 11,000 | . . . . . . . . . . . . . . . .
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000 | . . . . . . . . . . . . . . . .
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 | . . . . . . . . . . . . . . . .
1915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,000 | . . . . . . . . . . . . . . . .
1916. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,670 27,819 . . . . . . . .
1917. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,742 49, 504 | . . . . . . . .
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ; 132,697 96,470 80, 100
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 164,590 136, 162 147,600
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,207 162,988 a246, 139
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 73, 198 | . . . . . . . 354,600
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,692 101,192 381,675
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 134,590 117,701 447,000
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119, 305 . 99,011 498,225
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167,553 121,998 a506, 745
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,995 126,725 585,068
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 200, 504 160,637 643, 825
1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171,137% 99,491 768,825
1929. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852,989

• These figures are from the United States Census.
Association of Farm Equipment Manufacturers.
6 Preliminary.
The others are estimates of the National
perhaps more significant to note the situation in particular states which
bulk large in our agricultural industry, and whose type of farming is
well suited to the utilization of the tractor.” Such a selected list is
shown in Table 4. Obviously this method of presenting data has serious
shortcomings, since tractors vary considerably in size and the larger
farms ordinarily have more than one tractor each.
The snorting, balking marvels which first introduced the gas engine
tractor to the farming community following 1902 were a nine days'
wonder, but during the next decade they were rapidly perfected, and
* It is to be remembered, however, that the use of the tractor is by no means
limited to wheat-farming states, the newer cotton region, and the comparatively large
corn and livestock farms of the Middle West. It has been introduced into the potato
fields of Aroostook County, Maine, and is to be found in respectable numbers in all
the more important farming sections east as well as west of the Mississippi River.
560 RECENT ECONOMIC CHANGES
general adoption proceeded Swiftly and much as a matter of course. In
fact, less thought has been given to the significance of the movement
and its implications for the future of our whole agricultural industry
than would have been desirable. The point alluded to earlier in this
chapter may be here reiterated and developed in more detail, namely,
that the introduction of the tractor implies and necessitates a sweeping
revision of the whole character of our agricultural industry and of our
ideas with reference to farm organization and management, land values,
and other phases of rural economy.
TABLE 4.—NUMBER OF TRACTORs ON FARMS IN SELECTED STATEs, 1918–1929
State 1918 1920 1922 1924 1926 1928 1929
Iowa. . . . . . . . . . . . . . . . . . . . . . . . . . as, 940 a22,319 a26,876 a 32,623 a40,612 b49,695 b59,609
Nebraska. . . . . . . . . . . . . . . . . . . . . . c4, 746 •8,888 c10,886 c11,457 c19,489 b24,486 || 929,062
North Dakota. d e13,006 d b16,000 b18, 177 b21,995 || bg4, 156
Illinois. . . . . . . . . . . . . . . . . . . . . . . . d e23, 102 d b43, 325 b47,893 f61,398 b69,973
Kansas. . . . . . . . . . . . . . . . . . . . . . . . o:5, 415 e17, 177 || 021,717 | 025,019 233,853 b41,275 b49,681
Texas. . . . . . . . . . . . . . . . . . . . . . . . . d eg,048 d h16,905 b19, 103 || bºº, 114 || bg'7, 238
d
Montana. . . . . . . . . . . . . . . . . . . . . . e7,647 d h6,602 || bg, 700 b8, 107 b14,000
a Iowa Monthly Crop Report.
* Estimate. The Montana estimate is clearly too low. There were probably 10,000 tractors in the
state, Jan. 1, 1928.
• Nebraska Agricultural Statistics.
d Information not available.
e United States Census, 1920.
J Illinois Farm Equipment Survey, 1928.
9 Reports of Kansas State Board of Agriculture.
h United States Census, 1925.
One reason that we have given so little attention to this grows, no
doubt, out of the fact that the tractor was first thought of as a mechanical
device which would take the place of the horse in existing methods of
agriculture. But this iron horse, or “steel mule,” as one manufacturer
actually christened his tractor, does not merely take the place of horse-
flesh in the traditional scheme of agricultural production. We are coming
slowly to perceive that it sets a new pace and, rather than fitting itself
unobtrusively into our agriculture, creates a demand that agriculture
be quite drastically readjusted in accordance with its needs and
potentialities.
It was but natural that the tractor in its early days should encounter
a heavy weight of inertia—old methods and old ideas in what has always
been regarded as a highly-traditionalized calling. It was born into a
world of horse machinery, farmers trained to the handling of teams, and
sizes of farms and methods of organization which had been worked out
in response to the needs of horse farming.
As the tractor has established itself, however, farmers have with
great rapidity learned to handle the new type of power with skill and
AGRICULTURE 561
enjoyment. Old implements have been adapted to the larger power
made available through the tractor, or new implements devised to exploit
its possibilities, and farm sizes and farming methods have begun to adapt
themselves to the possibilities of the new source of motive power. Mutual
adjustments of the internal combustion engine to farming and of farming
to the internal combustion engine are now encountering less resistance,
and are gathering such increasing momentum as to cause some agricul-
tural engineers to predict that we stand on the threshold of a new agri-
cultural era, which will be marked by revolutionary changes in the
application of mechanical power to farming. Time alone will tell whether
this is an exaggerated view, but at all events it appears that the period
which we have just passed through is that of the relatively difficult initial
introduction of something new and radically different, and that we are
only now passing into the period of widespread adoption of improvements
thus far developed by the leaders rather than the mass. To see the
nature and appraise the significance of what is now under way, we should
examine separately several of the major fields of agricultural production
in which these changes have been taking place.
W. POWER FARMING AND WHEAT
Wheat growing easily takes its place at the head of the list in any
discussion of mechanized farming. It was in this industry that bonanza
farming developed in the latter part of the nineteenth century. Here also
the steam thresher first blazed the trail of power machinery on the
farm. It was the wheat growers of California, followed by those of
the Pacific Northwest, who developed the combine harvester, which is
one of the most outstanding features of the present development of
power farming.
During the World War, when wheat was a commodity of prime impor-
tance, every effort was directed toward making the most of our productive
possibilities; the now famous Campbell Farming Corporation of Montana
had its inception, and showed what a man trained as an engineer could
make of mechanical methods on some 100,000 acres of dry-farming land.
Since the war, with the vigorous competition of Australia and Argentina
returned to the market, our wheat industry has been constrained to
follow this same line of attack, through greater mechanization, in the
effort to reduce production costs to a point where we can survive in this
competition. With rapid improvement in tractor design and the develop-
ment of smaller sizes of combines, this method of harvesting has become
the standard of modern practice over a large part of the western wheat
belt, and is rapidly pushing eastward, adding the other small grains
to its sphere of operation.
The “combine,” or harvester-thresher, is simply a small threshing
outfit, or “separator,” hooked up with a cutter-bar and elevating apron
562 RECENT ECONOMIC CHANGES
such as are used on the standard grain binder. The binding mechanism
is omitted from the harvester and the grain passed direct from the cutter-
bar to the cylinders of the separator in a loose condition. As first
developed, these outfits were hauled by big teams of from 12 to 20 or
more horses each. This is still done to some extent, but more and more
the tractor has taken the place of the big team. The larger combines
ordinarily derive their power from a separate gasoline motor mounted
on the front of the separator, but smaller outfits often are operated by
a power “take-off” from the tractor which hauls the apparatus.
In some types of this machine, the threshed grain is spouted directly
into a wagon or truck which accompanies the combine harvester over
the field. In other cases, a grain tank is added to the machine, and in
this the grain is collected and dumped, in lots of 50 bushels or in larger or
Smaller amounts, into wagons or trucks at convenient points. In the
matter of disposal of straw, practice differs. Where it is feasible to
plow the straw under, a straw spreader attached at the rear of the combine
will effectively distribute the straw and chaff over the land. In some
cases, however, the growth of straw is so heavy that it is necessary to
remove it from the land. In such event, attachments are available
which will deposit the straw in a continuous windrow for burning or
collection by a hay loader, or gather it into convenient piles or small
stacks for burning, baling, or hauling in the loose state.
The method of converting standing grain into threshed wheat at one
operation first developed in California, then in the Palouse Valley of
Washington and Oregon, and in the Southwest. In all these places
grain ripens uniformly, is not often beaten down by storms or subject
to frost damage. In Montana, the Dakotas, and farther east, however,
all these difficulties present themselves with more or less frequency. If
these sections are to secure the benefits of this cost-reducing method, their
ingenuity is challenged to adapt the combine harvester in such a manner
as to minimize these difficulties and yet secure at least a substantial
part of the economies made possible by eliminating the older method of
binding and shocking wheat. This has resulted in the use of windrowing
attachments, or “swathers.” By this method, grain which is not
sufficiently dry for immediate threshing can be cut and deposited unbound
in a single windrow, where the grain from a swath of 10, 20, or even 25
feet in width may be held until it is in suitable condition and good weather
is available for threshing. Then the combine, with a “pick-up” attach-
ment, similar in principle to the standard hay loader, is drawn over the
field, completing the operation.
Obviously, this method foregoes the saving obtained by completing
the whole process by a single operation. It retains, however, the
economy of twine and power required for binding the grain, and elimi-
nates the heavy labor charge of shocking and handling the bundled grain
AGRICULTURE 563
to the thresher. It likewise leaves the straw distributed in the field
when it is desired to plow it under and, if a bunching attachment is
used, makes field baling or the hauling of straw for bedding an economical
operation.
The extent to which the use of the windrowing method will permit of
the economical use of the combine over the more humid sections of the
country is still in the process of experimental determination. Such
outfits are in use to-day as far east as the Atlantic coast, and seem to be
establishing themselves as standard farm practice in all important
grain-growing sections.” With the present trend of grain prices and
the growth of production in areas where “direct combining” is practi-
cable, it would seem a fair inference that sections which are not able to
compete, at least to the extent of doing field threshing with the windrow
method, are likely to be in large measure forced out of the business of
growing grain commercially.
Some idea of the rapidity of the recent spread of the combine over
the country may be gained from the figures giving the total number sold
in the United States annually during the past six years. These are as
follows:" 1923, 1,099; 1924, 1,590; 1925, 3,563; 1926, 6,277; 1927
11,221.
Likewise, the figures showing distribution by states are interesting
from the point of view both of dispersion and of the apparent direction of
growth. These figures are given in Table 5.
Figures which will show accurately the comparative cost of the three
methods are difficult to secure, both because of the experimental stage in
which the windrowing method still remains and also because of the
diversity of conditions under which the various methods are employed.
A Texas study,” however, computes the cost of harvesting with the
combine as ranging from 14.7 cents per bushel with an 11-bushel yield
down to 7 cents with a 23-bushel yield, and average costs of harvesting
with the binder and stationary thresher at 33 cents per bushel. Nebraska
studies” show combine costs of 9 to 12 cents per bushel with yields of
11.8 to 13.4 bushels, and estimate the cost of the binder method at about
31 cents per bushel. A report made by the United States Department of
Agriculture” shows similar savings, and the writer found it to be the
judgment of careful observers in Montana that the combine reduced
10 More and more, as the combine has moved out of the wheat area, efforts have
been made by manufacturers to increase its range of uses by developing appliances
not merely to meet special conditions, but to facilitate its use on as wide a range of
crops as possible, including particularly soy beans, clover, and peas.
11 United States Bureau of Census figures.
12 “Harvesting Grain with the Combine Harvester-Thresher,” Texas Agricultural
Experiment Station, Bulletin, No. 373.
1° Eactension Circulars, Nos. 811 and 814.
14 Technical Bulletin, No. 70.
564 RECENT ECONOMIC CHANGES
TABLE 5.—NUMBER OF COMBINES IN VARIOUS STATES.”
States i 1926 1927
California. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000 2, 100
Colorado. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800
Idaho. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 800 1, 100
Illinois. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64 310
Indiana. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Iowa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Kansas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 276 12,782
Michigan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Minnesota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Montana. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550 1, 100
Nebraska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000
North Dakota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 200
Ohio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Oklahoma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 189 5, 746
Oregon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,500 1,800
Pennsylvania. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
South Dakota. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225
Texas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,684 2,890
Virginia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Washington. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,500 3, 100
Utah, Nevada, and Arizona. . . . . . . . . . . . . . . . . . 350 500
* As calculated by the National Association of Farm Equipment Manufacturers.
production costs by about 15 to 20 cents per bushel. The cost under the
windrowing method presumably gets about half the savings secured by
direct combining, but has considerable advantage in meeting difficult
conditions of harvesting without the wasting and spoiling of grain which
is unavoidable where the binder method is used.
In order to secure maximum economies, it is necessary to use the
combine outfit to nearly its maximum capacity. For a medium-sized
machine, this means something like 1,000 acres during the season, and it is
generally calculated that no economies are effected unless at least 300
acres of grain are to be handled each year. In the regions of general
farming, this would necessitate custom work or some sort of co-operative
arrangement by which the combine would be used on several farms each
season. The other way of mecting the situation is through the growth of
larger operating units, each capable of utilizing one or more combines and
other machine equipment well up to its maximum capacity. In the
heart of the wheat belt, operating units are so large that “in recent
years many wider machines have been purchased, and 20-, 24-, and even
36- and 48-foot machines are to be found.’” With even a 16-foot
machine, 40 to 50 acres per day may be cut, and the speed with which the
work is completed is an important factor in avoiding waste and getting
the best quality of grain.
These direct savings of as much as 20 cents a bushel on production
costs have brought more farm relief to the wheat grower than has actually
* W. E. Grimes, Journal of Farm Economics, April, 1928, p. 226.
AGRICULTURE -- 565
resulted from tariff protection at a nominal rate of 42 cents per bushel.
The development of the combine and other low-cost methods has enabled
the Pacific coast states to survive in world-market competition, has made
possible the relative stabilization of the wheat-growing industry of
Montana" and western North Dakota, and has enabled the Gulf South-
west to expand its production.
Evidently these low-cost methods are particularly suited to a rather
extensive method of producing rather moderate yields on land which
ranges down to comparatively low grades. This introduces a factor of
competition to be met, for a time at least, by the grain lands farther
east not dissimilar to that which confronted the Northeastern states
when the prairies of the Middle West were rushed into production as an
accompaniment of the coming of the horse-drawn binder. To what
extent and by what measures central and eastern farmers may meet this
competition is one of the interesting phases of the present farm problem.
The prominence which has been given to the combine harvester should
not cause us to overlook the fact that it is but one, though doubtless the
most striking, phase of the mechanization of grain production. Its
coming has been largely facilitated by the use of the tractor, and the
tractor in turn has made possible many other economies and improve-
ments in grain farming. One of the chief of these is that it largely miti-
gates the burden of seed-bed preparation, particularly in the winter
wheat region. “Fall plowing,” so-called, actually is to a large extent
performed in the late summer when weather is hot, moisture not infre-
quently inadequate, and flies and other insects add the last straw to
break the horse's back. The tractor manifests sublime indifference to
temperature, flies, or the condition of the soil, and permits of timely
and thorough preparation of the ground and seeding under the most
favorable conditions. Whether for fall or winter seeding, also, the
tractor can be pushed long hours, even all night with suitable lighting
attachments, and thus overcome almost any crisis, presented by unfavor-
able weather or flood or frost damage, which necessitates reseeding.
In other types of equipment, also, there has been considerable prog-
ress. Ideas of the proper amount and kind of stirring of the soil which
* The accelerated speed of power-farming development in Montana is revealed in
the following table of sales of tractors and combines in that state during the last four
years:
Year Tractors Combines
1925. . . . . . . . . . . . . . . . . . 1, 160 112
1926. . . . . . . . . . . . . . . . . . 1,749 220
1927. . . . . . . . . . . . . . . . . . 3,607 968
1928 (estimate). . . . . . . . . 4,925 2,720

566 RECENT ECONOMIC CHANGES
should take place in the annual plowing and in summer fallow operations
have changed considerably, and the one-way disk, or “wheat-land plow,”
and the “duck-foot” cultivator have been devised to meet this situation,
producing optimum condition with less labor than required by the older
methods.” With a tractor of suitable power, the ground can be covered
very rapidly with these appliances. These implements go far toward
Solving problems of weed eradication and control of soil-blowing in the
land of summer fallow.
Finally, it should be remembered that the achievements of the internal
combustion motor include the development of the farm truck, which
Scuttles about over the fields, taking on grain as it is discharged from the
combine harvester and putting it swiftly on its way to market, at costs
which would have been unbelievable in the old days of horse teams.
Even the so-called “pleasure car” is an important machine, transporting
the farmer and his laborers rapidly over the distance between home and
fields, or between the farm and the town where repairs must be secured in
case of a breakdown. As a matter of fact, the development of the
automobile must be regarded as a condition precedent to much that
has happened in the recently rapid progress of farm equipment. Air
strainers, methods of sealing-in the motor, heat-treating of metal, the
development of alloy steels, and methods of precision as developed in the
automobile factory have been carried over in the making of farm tractors
and trucks to the end that costs have been reduced, performance immeas-
urably improved, and the working life prolonged to a truly remarkable
extent. In a modern tractor factory, methods of testing are as exact and
exacting, and the speed, precision, and economy of the process by which
an evolving machine advances down the assembly line until it moves off
under its own power are as highly perfected as those found in any first-
rate automobile factory.
It has already been suggested that the application of machine methods
introduces new complexities as to the size and organization of the farm.
The acceleration of the harvest period resulting from the use of the
combine has likewise created new problems of marketing—of storage,
car supply, glut prices, and moisture damage. The last is being attacked
vigorously through methods of bin ventilation and weed removal attach-
ments on the combine. The issue as to physical movement and price
behavior challenges the farmer to tackle a whole series of problems.
17 F. A. Wirt, agricultural engineer with the J. I. Case Co., supplies the author
with figures of comparative cost (based in large part on cost studies made by the
United States Department of Agriculture), which indicate that the cost of growing
wheat, using the one-way disk plow and combine, amounts to barely 45 per cent of the
total cost by the old method of plow, harrow, binder, and thresher, and that the cost
of seed-bed preparation with this “wheat-land plow ’’ is only about 55 per cent of the
cost of plowing and harrowing. This implement might itself be called a “combine,”
since it results in telescoping two tillage operations into one. -
AGRICULTURE 567
How much and what kind of storage must he provide on the farm or
(through organization) at the local shipping point or terminal market?
Must he, through co-operative organization, secure a more orderly market-
ing of the crop, or can the machinery of future trading work out a scheme
of differentials between the different months, weeks, and days, which is
just and reasonable in view of the cost of effecting the necessary time
distribution of a highly seasonal crop? Can farms of the present sizes
and types of organization secure an effective and economical utilization
of the size and number of machine units which will secure minimum pro-
duction costs? Must problems such as the elimination of moisture
damage and avoidance of the cost of windrowing be met by changes in
cultural methods, designed to secure more adequate weed control, or by
the popularization of varieties which have shorter and stiffer straw,
earlier ripening, or less tendency to “shatter” when ripe?
The plant breeder and the agronomist seem disposed to match the
brisk pace set by the agricultural engineer and implement manufacturer,
and, at perhaps a somewhat more conservative rate, the actual farmer and
professional students of farm organization and management are effecting
an evolution in the size and set-up of operating units. In both the
northwest and southwest wheat belts, farms 5,000, 10,000, and even
50,000 acres in extent are being operated, some of them with striking
results in the way of efficiency and low unit costs. The subhumid region
was originally granted to settlers in homesteads of 160 acres, and such
grants were only slowly increased to the half-section and finally the
section. Experience shows that in much of this region such a holding
gives a family nothing but a chance at starvation, whereas a block of
four sections, with modern equipment, will produce a very satisfactory
family income, and can, in the region of summer fallow, be handled by
two men suitably equipped with modern machinery, and the possible
addition of a little seasonal labor. Farmers who had sufficient resources
or skill or courage to “stick it out” in the years following the price decline
of 1920 are building up such business units, through the lease or purchase
of lands given up by their neighbors. One four-section farm in Montana
is made up of eight parcels, seven of which went through foreclosure pro-
ceedings. These seven include the farm of the present operator, who is
managing the larger enterprise with so much success as to be fairly on
the way toward eventually owning the whole tract.
The present trend toward modern agricultural efficiency in the wheat
belt gives assurance that America can supply itself with an abundance
of grain at costs commensurate with modern industrial standards, and
even send a considerable surplus abroad over cheap water routes from the
Pacific Northwest and the Gulf Southwest. It is, however, a condition
which affords ruinous competition to wheat enterprise in many of the
568 RECENT ECONOMIC CHANGES
older sections of the central and eastern states,” and rocks the founda-
tions of land values in some of these older sections, much as they in their
turn forced a revision in the agricultural utilization and land prices of
the New England states.
It must be remembered that the very force which is contributing
to the increase of low-cost wheat supplies in the Great Plains of the United
States is also strengthening the chief competing regions in other countries.
Farm implement manufacturers have been aggressive in developing the
foreign market for the new power machinery even as they developed the
export market for horse-drawn implements a generation ago. It goes
without saying that wheat production in the prairie provinces of Canada
is carried on by efficient machinery methods practically identical with
those used in our own western wheat belt. It is perhaps not so well
known that Argentina, Australia, and other wheat-producing countries
are taking our tractors, combines, and tillage implements in considerable
numbers, and seem to be entirely capable of duplicating the same sort
of power-farming efficiency which we have so strikingly developed.
Both these countries, as well as Canada, have considerable areas of level
subhumid land, comparable to our own Great Plains region, among their
advantages for low-cost grain farming.
Sparseness of population has been something of a brake upon the
development of these competing sections, but it is just such a condition
which promotes the rapid introduction of power machinery, and gives
labor and investment such a high productivity as to attract new operators
into the field. Furthermore, Great Britain is definitely attempting to
direct some of her redundant population to the most favored agricultural
TABLE 6.—DOMESTIC AND ExPORT SALES OF SPECIFIED FARM MACHINERY, 1922–1927°
Two-bottom Disk plows Combines i Tractors
plows
Year | |
Domes- For Domes- For Domes- For Domes- For
tic export tic export tic export tic export
1922. . . . . . . . . . . . . . . . . . 54,876 6, 435 | 13, 841 1, 100 1,608 854 100,092] 10, 223
1923 . . . . . . . . . . . . . . . . . . . 67,211 || 19,060 | 15,591 2,985 1,099 2,986 115,040 16,608
1924. . . . . . . . . . . . . . . . . . . 45,866 | 16,681 12,043 3, 694 1, 590 3,671 96, 539| 25, 585
1925. . . . . . . . . . . . . . . . . . . 60,937 30, 290 16, 296 6, 712 3,563 1,878 || 118, 7.39| 46,627
1926 . . . . . . . . . . . . . . . . . . 75, 132 44,617 | 17, 237 6,981 6,277 4,707 | 122,940, 47,605
1927. . . . . . . . . . . . . . . . . . . 62,952 || 25,925 | 15, 174 5,346 || 11, 221 4,701 || 155,843| 43,761
a Bureau of the Census, Department of Commerce, Manufacture and Sale of Farm Equipment.
18 For example, the state of Nebraska straddles the 100th meridian, and thus
exemplifies both types of farming. The study cited above shows a cost of 38 cents
for the production of wheat in Perkins County in the western end of the state, as
against an average of 86 cents in four of the eastern counties.
AGRICULTURE 569
regions of her outlying dominions,” and much of the immigration of
Europe turns toward undermanned regions, now that the immigration
policy of the United States restricts entry here. The preceeding table of
exports of certain types of agricultural machinery as compared with
sales in the United States shows to some extent the manner in which the
strong foreign competitors of the United States are keeping step with
the march of our own technological progress.
VI. THE CORN FARMER
Several of the changes already discussed with reference to wheat enter
into the present situation of the corn industry. Excellent and moderate-
priced tractors, in sizes smaller than those which are ordinarily used for
hauling the combine and doing other wheat-farm work, are available
to the corn grower in the general farming regions where corn is the back-
bone of the cropping system. Even with horses, some of the most
progressive corn belt farmers developed efficient methods of economizing
man labor, such as driving a five-horse team on a two-bottom riding
plow and leading a three-horse team, which followed the plow with a disc
or harrow. Two-row cultivators were first introduced for horse use,
and corn binders and pickers were handled by four- or five-horse teams.
With high-grade tractors of 12 or 15 drawbar horse power, the corn
farmer can prepare his land for planting at a rate practically twice as
fast as was possible even with his efficient team methods. This is because
a tractor can pull an equal or greater load and move at a speed about
twice that of a good farm team. As an experimental beginning, two
double-row planters were hooked together behind the tractor, and now
implement manufacturers are putting out both four-row and three-row
planters. When it comes to cultivation, a similar adaptation of the two-
row riding cultivator to a four-row or three-row cultivator, with tractor
power, is rapidly coming into use. One man with a two-horse team and
riding cultivator could cover 8 to 10 acres a day. With a tractor and
four-row cultivator he can cover 60 to 65 acres.
Corn-husking has always been a labor-consuming operation, fre-
quently calling for outside seasonal help similar to that of shocking and
threshing in the wheat belt. For some years back, this situation has been
partially modified by the increasing use of the silo and the “hogging down”
of corn. The horse-drawn corn picker was introduced nearly twenty
years ago, and showed a constant though moderate increase in use.
The number sold during the last five years about doubles the previous
rate of adoption. Its employment is somewhat facilitated by the avail-
ability of greater horse power under tractor-farming conditions, and also
* “It is officially expected that 6,500 of the 8,500 harvesters sent to Canada will
remain as a permanent addition to the British citizenship of the Dominion.” Britan-
nia, September 28, 1928, p. 9.
570 RECENT ECONOMIC CHANGES
the change of corn sheller design, which makes possible satisfactory
shelling of corn which has a considerable amount of husk remaining.
The silo has become standard equipment on livestock and dairy
farms, and has done much toward extending the corn belt to the north.
The corn binder and the silo filler applied machine power to this process.
The handling of corn, however, from the field to the silage cutter has
always been a disagreeable task because of the heavy labor involved in
handling the corn bundles. Progress is now being made toward lighten-
ing this work by the introduction of tractor-drawn corn harvesters which
gather and shred the stalks directly in the field, dumping the cut silage
into wagons or trucks which haul it to the barnyard. There it is simply
dumped on the feed platform of a silo filler, which blows it into the silo.
This eliminates one of the most costly and disagreeable tasks of the
corn farmer.
Where corn must be husked for dry feeding or cash sale, the modern
type of corn sheller, run by belt power from the tractor engine, makes
possible rapid and economical handling of the work, and permits of
speed and economy in husking, owing to the lessened necessity for
complete removal of the husks. Portable elevators and moderate-priced
feed grinders carry the mechanization of the corn farmer's labors through
to the final disposal of his product.
The tendency of the tractor to displace horse power is at its maximum
in such a one-crop area as the wheat belt, where there is a heavy seasonal
demand for labor, and the maintenance of horses over a 12-month
period presents many and serious difficulties. As we go into the corn
belt and the region of general farming, we find farmers who expect to
remain on the job 12 months in the year and who can provide pasturage
on the rougher parts of their farms and raise feed crops at a minimum of
expense in connection with their other farm operations. While, of course,
the demand for horse labor is not uniform throughout the year, it is
fairly heavy for more than half the year, and teams, if properly managed,
can be maintained quite cheaply during the rest of the time. Those
who are interested in the horse industry are now carrying on an active
campaign to teach farmers the most economical methods of horse manage-
ment and to instruct them in the use of “big team hitches,” whereby
the savings in man labor secured by the use of the tractor can be realized
without turning from horse power. Thus a 10-horse farm might range
from 250 to 320 acres and furnish 8-horse teams for big machinery, such
as is drawn by tractors of the type most popular in this region. Even
12-horse teams are advocated and used to some extent. But eight
horses driven four abreast will handle a three-bottom plow with a harrow
attached behind, preparing 8% acres of ground per day with the labor
of one man. The extent to which this transition is taking place in the
Mississippi Valley is indicated by the figures in the following table,
AGRICULTURE & 57.1
furnished by Prof. O. G. Lloyd, of Purdue University, showing percentage
of acreage worked by teams of various sizes in recent years as compared
with the situation six years earlier.
Discing Plowing Cultivating corn
Size of team .
1919 to 1925 to 1919 to 1925 to 1919 to 1925 to
1921 1927 1921 1927 1921 1927
Per cent Per cent Per cent Per cent Per cent Per cent
2-horse. . . . . . . . . . . . . . . . . . . . * * * * tº gº tº e 1. 8 0.2 80.0 72.4
3-horse. . . . . . . . . . . . . . . . . . . . 1.7 1. 0 60.6 40. 1 19. 1 20.7
4-horse. . . . . . . . . . . . . . . . . . . . 88.9 67. 8 27. 6 33.3 0.9 6.9
5-horse. . . . . . . . . . . . . . . . . . . . 2.7 10. 1 7.3 16. 7
6-horse. . . . . . . . . . . . . . . . . . . . 6.7 19.4 2. 7 9. 1
8-horse. . . . . . . . . . . . . . . . . . . . tº # * 1 .. 7 tº se & gº 0.6
sº-
The repercussions of all this upon the economic organization of
farming in the corn belt are somewhat less striking than the changes in
wheat growing. The type of farming is much more intensive, with
livestock occupying a large place in the program. And yet the effects
of the development of larger power and machine units are highly signifi-
cant. Even under general farm conditions, the 160-acre farm has
become a small farm rather than a large one. The grain and livestock
farm of the corn belt has been able to grow by the addition of “an 80”
or a quarter section at the same time that it has reduced its demand for
hired labor. Close observers of these developments are looking with
more and more favor on the 640-acre tract as a family farm, and even
coming to the conclusion that the better type of business farmers in this
section can and should, for maximum efficiency, operate units of 1,000
to perhaps 2,500 acres. Such a farm permits a reasonable specialization
in the labor force, a full line of modern equipment without excessive
overhead, and the services of a practical manager who devotes his time
fully to supervision of the technical and business operations of the farm
without himself engaging in much, if any, manual labor.
As in the case of wheat, we find in the corn and livestock region of
the great Middle West the gradual evolution of a type of skillful and
adequately powered farming, which follows closely the developments of
scientific research in the agricultural experiment stations. This will
assure an abundant and moderate-priced supply of corn and livestock for
home consumption, and will furnish for export those products for which
this country offers superior advantage, such as lard, cured pork products,
and oleo oil. Under such methods, farming will offer satisfactory returns
to a declining number of workers, each performing the necessary labor
On an increasing acreage with relatively large machine equipment.
The transition is being effected only at the expense of considerable
recasting of the structure of land values and at a great deal of personal
572 RECENT ECONOMIC CHANGES
cost to those who are being forced to change their residence and occupa-
tion in the process. The farmers upon whom the demand falls for
increasing their investment in equipment are finding difficulty in meeting
the situation in a period when farm produce prices are low as compared
to operating and overhead costs. It is extremely unfortunate that the
war profits of the section could not have been more fully diverted into
this channel. In far too many instances they were dissipated in unwise
investments before those who had secured them as a legitimate incident
of war-time developments realized the trend of events which lay just
ahead of them. If a magic wand could restore to Iowa alone the wealth
which was taken out of the state in the years immediately following the
war by fake promoters, oil stock salesmen, and the yeggs who garnered
millions in Liberty Bonds from the none-too-strong-boxes of the country
banks where farmer buyers had left them for safe-keeping, it would make
an appreciable contribution toward equipping farmers adequately for
taking advantage of the possibilities for more efficient production which
lie technically within their reach.
VII. THE COTTON BELT
For a century after the invention of the cotton gin, the cotton industry
expanded itself steadily but with negligible change in its basis of organi-
zation. While the Civil War marked the passing of slavery, it did not
significantly change the methods or equipment by which cotton land
was cultivated and the crop harvested.
It was the boll weevil, introduced about 1892 but not producing wide-
spread infestation until more than a decade later, that marked the begin-
ning of the period of rapid adjustment and readjustment within the
industry. The depredations of the boll weevil, as it spread into the
eastern, moister regions of the cotton belt, were so severe as to call for
additional acreage elsewhere, and this was forthcoming in the western part
of the belt. Expansion was particularly noticeable in Texas and Okla-
homa (Table 7). The World War, of course, produced serious derange-
ment of the world cotton market, with curtailment in several important
TABLE 7.-CHANGES IN COTTON ACREAGE IN SELECTED STATEs, 1918–1928°

(In thousands of acres)
State 1918 1920 | 1922 || 1924 || 1925 | 1926 1927 | 1928b
South Carolina. . . . . . . . . . . . . . . . . . . . . . . . 3,001| 2,964. 1,912| 2,404 2,654| 2,648 2,356 2,487
Georgia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,341| 4,900| 3,418| 3,046| 3, 589| 3,965; 3,413| 3,798
Oklahoma. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,998 2,749| 2,915 3,861| 5,214| 4,676|| 3,601| 4,630
Texas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 233:11,898, 11,874|17, 175|17,608||18,374|16, 17617,631
Arizona, New Mexico, and California. . . . . . 180 380 168 411 438 449 362 527
: |
a United States Department of Agriculture, Yearbooks,
b Preliminary estimates.
AGRICULTURE 573
consuming countries. These years were the period, likewise, in which
boll weevil damage attained its full force. The resultant curtailment of
the crop and high war and postwar prices stimulated such expansion
of the producing area that the present size of the industry induces keen
competition between two sections which show marked diversity in natural
conditions, producing methods, and general economic organization.
The less simple and routine methods of farming called for in the eastern
states under boll weevil conditions have brought out sharply the inade-
quacy of old methods and the shortcomings of negro labor. Meanwhile,
the strong demand for unskilled labor in industrial towns and cities of the
North and, in increasing degree, in the southeastern states, together with
our policy of immigration restriction, has created such a pull upon plan-
tation labor as to bring about the abandonment of considerable areas
previously given over to cotton growing. A study, conducted by the
Georgia experiment station, showed that between 1910 and 1925 whole
counties in that state had lost from 60 to 75 per cent of their negro
farmers.
At the same time, the westward spread of cotton growing had been
effected largely by white farmers of a vigorous pioneer type, who were
vigorously exploiting the possibilities of their topography and climate
to produce cotton with much less man labor, and at a cost which would
yield them a profit even with the decline of prices which has recently
been taking place. The westward movement of the cotton industry
brought it into a region of comparatively cheap and very level land upon
which machine methods could be introduced with a lowering of produc-
tion costs and satisfactory net returns, even where yields were relatively
low and methods of gathering the crop not such as to produce the highest
quality.
The standard of the old cotton belt was an 8-inch plow, pulled by a
single mule and manned by a negro field hand, who worked hard with
crude methods over short periods but who, with his beast, had to be
maintained for a 12-month period both on food and feed products
which were largely imported from outside the cotton-growing section.
This system was hardly conducive to high returns to land, capital, or
management, or to a minimum cost of production. War-time demand
and boll weevil scarcity put cotton prices at a point which made prosper-
ous years for the cotton grower, but prices which were disproportionately
high in an age of scientific achievement, mechanical advance, and high-
pressure management.
Then the stone rejected by the builders became the head of the corner.
The formerly submarginal lands of the Texas Panhandle and nearby
Oklahoma, and the level coastal plain farther south which had yielded a
sparse return as cattle range, were cut up into cotton farms. Moderate-
sized tractors and appropriate tillage implements took the place of the
574 RECENT ECONOMIC CHANGES
mule and 8-inch plow. Cotton was gathered by swifter and “dirtier”
methods, and the product was cleaned by a special apparatus which was
promptly added to the standard gin equipment. In extreme conditions
of late crop or short labor supply, this section even makes extensive
use of the cotton “sled,” which strips the cotton bolls, opened and
unopened, at a single operation. The first crude types of this implement
are gradually being perfected, and have apparently made a permanent
place for themselves in the practice of this region, though by no means
taking the place of hand picking even in West Texas and Oklahoma.
The enormous saving in time effected is indicated by the fact that the
cotton necessary to make a bale can be “sledded” in seven hours,”
whereas hand picking would take at least ten times as long. Making
proper allowance for the cost of cleaning and for some lowering of quality,
the Saving still is enormous. And even where this extreme labor-saving
method is not resorted to, the general installation of cleaning equipment
at the gins permits of much quicker and cheaper methods of snapping
and hand picking.
The general mechanization movement has spread itself in varying
degrees over the whole South,” and old methods have been discarded or
modified in a variety of ways. Mechanical cotton choppers of several
types have been introduced. Some cotton is being “checked in,” accord-
ing to the long-established custom for corn, so that it can be cross culti-
vated. Mechanical cotton pickers of both the suction and the spindle
type have been aggressively experimented with for some years, and it
seems probable that commercially practicable machines will, within a
few years at least, be available and economically feasible on at least the
high-grade types of cotton. Their coming would tend to restore the
competitive position of the eastern cotton section, in which the “sledding”
method of the subhumid West cannot be used because of climatic
difficulties.
What has happened in the cotton industry seems to reveal cotton-
growing resources so abundant under modern methods of cultivation
and harvesting as to put us in a position to continue our predominance
among the world's sources of supply for many years to come. It has
already forced the abandonment of a very considerable acreage in the
*0 United States Department of Agriculture, Yearbook, 1927, p. 224. -
* “Tractor farming is rapidly coming to the front in the South . . . Last year a
solid trainload of tractors went into the Delta section of Mississippi, and they are
being operated successfully all over the South. In many small towns it is nothing
unusual to see a carload of them driven down the streets in different directions and all
of them headed for cotton farms. On a recent trip to a number of cotton farms where
tractors are being operated, I was pleased to learn that every man interviewed was
well pleased with the results. And in every instance the owners expect to cultivate
larger areas with tractors and to get rid of some of the mules.” The Progressive Farmer,
November 3, 1928.
AGRICULTURE 575
eastern part of the cotton belt, and challenged much of the district east
of middle Texas to revise their methods and recast farm organization
if they are to survive in competition with the new born western cotton
belt. This new cotton region presents striking examples of tractor
cultivation and mechanical harvesting on moderate-priced land with
mile-long or half-mile rows, and a 160- to 320-acre family farm in lieu of
the 10-acre patch, planted, chopped by hand, and hand-picked by the
immemorial methods of the old cotton belt.”
Although large areas in the southern and eastern portion of the old cot-
ton belt have gone out of cotton production, it is too much to assume that
cotton growing will pass or become a minor factor in this region. Even
though belatedly, the planters and farmers of the section are adjusting
themselves to meet the new competition. Long-established traditions
of economic organization must overcome a good deal of friction in such
readjustment. There is a large area in the West which still can be turned
to cotton production, if prices are maintained on present or higher levels.
On the other hand, if the eastern part of the cotton belt can get produc-
tion costs down to a point where that section can persist in competition
with newer areas, the prices for the quantity of cotton which will come
forward from the present area of production will probably discourage
any rapid taking over of these new lands.
The South has always maintained a large stock of mules, mainly
on expensive purchased feed, to deliver a small amount of power annually.
Hence, any general introduction of tractors must have an enormous
effect on production costs and incidentally on the northern farmer's
feed market. Likewise, where cotton growing is displaced in the older
sections there is considerable pressure toward the growing of forage
crops, peanuts, and truck, and the development of dairy and livestock
enterprises. Much of the coastal plain section is well adapted to the use
of tractors. Among other things, they have great adaptability to the
work of terracing—an undertaking of much importance in Southern
agriculture. All in all, it would seem that the coming of power farming
holds as much promise, both of betterment and of disruption, in the South
as in any other section.
VIII. OTHER BRANCHES OF AGRICULTURE
What has been said of the sweeping changes coming about in the pro-
duction of cereals and cotton applies in varying, though generally in
22 See L. P. Gabbard and F. R. Jones, “Large-scale Cotton Production in Texas,”
Texas Agricultural Experiment Station, Bulletin, No. 362.
Professor Gabbard writes the author (October 25, 1928): “I was in the Corpus
Christi area recently, and an interview with dealers showed that at least 1,000 tractors
of the farmall type will be in operation for that area this season. Four-row planters
and four-row cultivators are fast becoming standard equipment with tractors. One
dealer had taken up and shipped out eight carloads of mules.”
576 RECENT ECONOMIC CHANGES
less, degree to the other branches of American agriculture. Tractors,
trucks, and other forms of mechanical equipment are widespread in
their sphere of operation. Such appliances (including notably the
milking machine, cream separator, and equipment for making silage)
have been influential in the field of dairying, and it seems possible that,
with the spread of rural electric lines, artificial refrigeration may before
long achieve a rather important place in the picture. Likewise, in local
milk plants, many of them co-operative, the installation of better equip-
ment permitting the utilization of by-products in the form of dried or
powdered skim milk and buttermilk, the building up of the ice cream
business, and the transportation of fresh milk and cream economically
and over long distances in glass-lined railroad tank cars is improving
quality and reducing costs.
In the horticultural field, the introduction of certain new insulating
materials and the development of small electric refrigerating units have
resulted in eliminating a considerable amount of waste and permitting
a longer season of marketing in many instances. The orchardist and
truck grower are likewise benefiting from the use of tractors and better
tillage implements and spray outfits, and from the use of the motor
truck.
In the case of tobacco, sugar beets, and other products which have
always required a large amount of hand labor, relatively little change
has thus far been found possible, although mechanical “blockers” and
the employment of the tractor in tillage, and the truck in harvesting, have
had some value.
In recent years, the producers of electric current have become very
much interested in the possibilities of “rural electrification.” This
move has two major objectives. One looks to the supplying of power
for pumps, feed grinders, and other light farm machinery. The other is
concerned with domestic lighting and household appliances. Where
population density in a country community is fairly high, and the type
of farming such as to make numerous or heavy demands for the use of
the current, service can be delivered at a moderate price and very
satisfactory results obtained. This seems particularly to apply to regions
of intensive agriculture where heavy machine work in the field is at a
minimum and stationary power important. Artificial lighting of poultry
houses, or artificial refrigeration of fruit or vegetables prior to marketing,
are important operating factors in commercial poultry or truck raising
districts, and cause a comparatively large demand for current. In
general farming sections, however, the cost of distribution is ordinarily
so high as to militate against the widespread use of electricity on Ameri-
can farms at the present time.
* See Guy E. Tripp, Electric Development as an Aid to Agriculture, 1926.
AGRICULTURE . 577 .
IX. ADJUSTMENTS OF PRODUCTION TO MARKET DEMAND
It is true that, in the past eight years, American farmers have been
waging a courageous and resourceful battle to readjust their industry to
new and rapidly-changing conditions. In this they have been rendered
a splendid service by the Department of Agriculture, the state experi-
ment stations, the extension service, and other educational agencies.
Even with full appreciation of this effort, and admiration for those
who have made it, the writer cannot find much cause for optimism
or a belief that satisfactory adjustment will speedily be attained. It is
difficult to move men from the farms, to adjust their property interests,
and to absorb them into reasonably satisfactory industrial positions at a
rate fast enough to balance the increase in technical efficiency and the
spread of labor-saving appliances on the farm.
Farmers in a large number of lines have come to the decision that it is
desirable to adjust downward from the present scale of production, but
find it very difficult to select a substitute product or the crop to be
adjusted upward. Shall the livestock man shift from unprosperous
swine production to cattle growing or feeding because for the moment
that industry is enjoying a touch of long-deferred prosperity? Many
have already shifted toward dairying and poultry production, but
poultry profits to-day are precarious, and the dairy industry, in spite
of having developed an astonishing increase in the consumption of butter,
fluid milk, and ice cream, finds itself facing the possibility of an export
surplus and impairment of its whole price structure. Grain farmers
have been struggling to find a profitable substitute for their redundant
oats and corn acreage, while the expansion in wheat is forcing us further
into a low-price world market instead of permitting our withdrawal.
The horticulturist's problem of adjustment is complicated by the fact
that prune acreage is excessive, peaches overdone, vineyard area out-
running the absorptive power of the market, grapefruit far in excess
of profitable demand, and most other branches of the industry so close
to market saturation that the advent of newcomers threatens the pros-
perity of all. Not all the surplus cotton acreage can be put into peanuts,
and the raising of corn and livestock in the South introduces bitter
competition for the harassed farmers of the corn belt.
On the production side, it seems at least dubious whether the Ameri-
can farmer is making or can make, during the next few years, his adjust-
ments fast enough to catch up or keep up with the rate of change in
technique and market situation.
X. COSTS OF DISTRIBUTION
Much is heard of the reduction of distribution costs as a possible
means of improving the situation as to agricultural income. Con-
578 RECENT ECONOMIC CHANGES
siderable agitation and experimentation has turned in this direction
during the past few years, but without fully satisfactory results. Even
those recent changes which have produced positive economies seem to
have a somewhat ambiguous meaning as applied to the farmer's problem.
The speed and economy of truck hauling in certain instances has
already been referred to. As an offset to this, however, the develop-
ment of automotive vehicles and the coming of hard roads has resulted
in the abandonment of a considerable mileage of branch line railways,
and in the disappearance or dwindling activity of many small country
villages such as formerly afforded a local market for many farmers'
products. While this may ultimately effect such a reduction in the cost
of handling goods as to redound to the benefit of the producer, the first
benefits seem to go largely to the carrying agencies, and the effects most
noticeable for the farmer are to require further readjustment of his
business to meet these changed transportation conditions. Frequently
the change in our transportation system means remoter markets to which
a farmer may perhaps not find it feasible to go at all with a small quantity
of his product, or which he must expend additional time and effort to
reach if he does go. On the other hand, it is doubtless true, in some cases
at least, that the concentration of business in the larger towns tends to
give a brisker, more competitive primary market, which reflects more
accurately the trend of values at the terminal.”
In many sections the loss of railroad service through the closing of
stations where business was small, or the entire abandonment of lines,
has worked a hardship on the farmers. They have also complained
that the general level of freight rates upon farm products is unduly
high in view of the present prices of many agricultural products and
in comparison with rates charged on other classes of railway traffic.
In the final analysis, they agree that the quality of service is so important
that the roads must have earnings which will defray not merely operating
costs but permit the installation of facilities which will give to agri-
cultural products a service of maximum speed and minimum possibility
of deterioration.
While the Hoch-Smith resolution has called for a complete review of
this situation, the whole question of the rate structure is so intricate and
involves such controversial issues between economic groups and geo-
graphic localities as to afford little hope of extensive reductions on the
farmer's product. The railroads are already at a level of technical
efficiency which precludes any sweeping changes from that direction,
and the lowering of labor charges, which would be the other chief avenue
of approach, seems clearly out of the range of possibilities.
* The exact character of the shift in town and village population is extremely
difficult to ascertain. A good deal of light is shed on the movement by the discussion
contained in Sect. II, Chap. V, of this volume.
AGRICULTURE 579
The real question at issue involves theories of rate-making on the one
side and some very fundamental issues of agricultural economics on the
other. Traditionally we have leaned toward the idea of making freight
rates on the rather low-priced and bulky products of the farm which
would stimulate the most rapid development of resources, no matter
how remote from consuming centers. Farmers, especially in this period
of agricultural distress, are inclined to urge this traditional policy.
Some serious thought, however, needs to be given to the implications
of this theory under present conditions. Since wheat and cotton are both
depressed industries, and the competition is from the geographically more
remote fringes of the producing areas, it is at least interesting to speculate
on what would be the effect of a stricter application of the cost-of-service
theory of rate making. If, as has been suggested earlier in the chapter,
the present trend of events threatens to undermine values in the older
sections, cost-of-service rates might tend to conserve the interests of a
rather large agricultural section. On the other hand, so far as higher
freight rates on food commodities and agricultural raw materials impose a
burden on the distant consuming centers, the maintenance of higher rates
might conceivably tend to stimulate the decentralization of population
toward the agricultural producing sections to their ultimate benefit.
As a single example, low freight rates on cotton would inure to the advan-
tage of the New England mills; high rates, to the southern mills. Which
do the cotton-growing states want?
Co-operative marketing has been widely turned to as a solution of the
farm marketing problem.” In cotton, dairy products, livestock, and
numerous horticultural commodities, these efforts have been productive
of results of relative and in some cases striking value. Considerable
improvement in standardization, processing, transportation, market
distribution, and merchandising have been effected. In one important
particular, however, co-operative effort has been signally unsuccessful.
This is in the perception of the relation of supplies to prices and in the
devising of any means by which such supplies could be adjusted upon a
satisfactory price basis.
In the case of certain small and strongly-placed groups, the problem
has been reasonably well met, temporarily at least. On the other hand,
it must be recognized that the attempt to organize any large group of
scattered independent producers so as to achieve any effective adjustment
of supplies to market needs is almost out of the question. Co-operation
in agriculture is therefore faced by a serious dilemma. Certain definitely
discernible economies in marketing and increases in efficiency in the
market process can be attained only through the adherence of a rather
large percentage of the producer group. So long, however, as prices of
the commodity remain on a generally unsatisfactory level, and the
* See, on co-operative buying and selling, Chap. V, Marketing, pp. 374-389.
580 RECENT ECONOMIC CHANGES
co-operative organization shows no clear ability to better the farmer's
situation, it appears to be humanly impossible to secure the adhe-
sion and permanently constructive support of the very farmers who
need the half loaf of more economical and efficient marketing, just in
proportion as they are unable to get the whole loaf of market-price
enhancement.
Conceivably, the trends which apparently exist, toward a smaller
number of farm operating units under a higher type of management, and
toward a higher degree of commercial specialization in agricultural
production, will lead to improved distributive conditions for both the
producer and the consumer. Both these trends would facilitate the
progress of co-operative organization, with the added benefits that such
a group movement would make possible. The development, during the
last few years, of buying departments or subsidiaries of chain-store
systems, and the movement toward mergers of distributing concerns,
notably in the dairy industry, sharply raise the question whether what-
ever improvements in condition are destined to take place may not
come mainly with the spread in efficient business organization from the
central markets out to the smaller centers, absorbing many of the petty
buyers, brokers, and traders now operating at local shipping points.
That such a move might be productive of savings in the distributive
process seems quite possible, but to what extent such gains would inure to
the benefit of the consumer, the producer, or of the promoter and stock-
holders of the distributive organization itself, is a matter on which little
more than snap judgment is possible at the present time. Many farmers
are awaiting the outcome of events with no little trepidation. Ordi-
narily, the producer occupies an uncomfortable position in a buyers'
market, and the persistent tendency toward overproduction which has
characterized the postwar years in American agriculture puts a con-
siderable number of farm producers recurrently or persistently into a
buyers’ market.
With the growth of large manufacturing and merchandising units and
a general merger tendency in the market in which they sell, farmers have
become increasingly impressed with the importance of effecting organ-
izations on the selling side, which would be large enough to secure the
maximum economy in handling, storage, and processing, the highest
degree of skill in market distribution and salesmanship, and a bargaining
power which might cope with that which they must meet on the buying
side. More and more the objective has come to be an Organization
coextensive with the boundaries of the given industry. In default of
such organization purely along lines of producer co-operation, efforts
have in the last few years turned toward a horizontal integration of ship-
ping and selling interests which would embrace private dealers as well as
co-operative associations. Since the initial phases of the plan emphasize
AGRICULTURE 581
the assembling of the fullest possible information as to market supplies
and movements, and contemplate the equalization of supplies through
co-ordinated action in the best interests of the whole group, these organi-
Zations pass under the attractive title of “clearing houses.”
How fully they will meet the hopes of their organizers, or how long
their component elements will subordinate individual interest to the
welfare of the whole group, is a question still in the stage of practical
determination. They constitute, however, the latest thrust of organiza-
tional effort. If they fail, it seems a reasonable supposition to expect
that they will be followed by a more determined effort than has thus far
been witnessed to secure legislative authorization for marketing arrange-
ments which would remedy the impotence of voluntary co-operation by
requiring all those engaged in a given line of production to participate in a
common scheme of market distribution.
XI. RURAL CREDITS AND FARM CAPITAL
Great emphasis has been laid on the farmer's credit situation as a
factor in his problem. The question is no doubt important, and yet much
that has been said on the subject has been ill considered. Undoubt-
edly, many rural districts were inadequately served with credit in the
years shortly before the World War, when the rural credit agitation first
came to an acute stage. With the passing of the Federal Reserve Act,
the Federal Farm Loan Act, and the Intermediate Credit Act, the way
has been paved for the removal of many of these difficulties, though
obviously no mere piece of legislation can create a desired volume of
credit or suitable administration of its extension. In practice, “sym-
pathetic” officials in some of these institutions have extended lines of
credit not justified by subsequent events, and credit losses of some
magnitude have resulted. Such losses, however, have had the effect
of cushioning, for certain unfortunate individuals, the shock of a dis-
tressing period in our agricultural history, and will doubtless be absorbed
in our credit structure without serious harm, distributing scarcely
avoidable losses to shoulders more able to bear them than those upon
which they originally fell.
The main point, however, is how the extension of credits is to be suit-
ably adjusted to the productive organization of our agriculture in the
future. Perhaps we may grant in a broad way that the several pieces of
rural credit legislation already enacted have tended to put the credit
resources of the country at the disposal of the agricultural industry, upon
terms as advantageous as those available to other industries, and adapted
to the peculiar requirements of the business and those who are engaged
in it. We must not, however, put the cart before the horse. Adequate
credit facilities will not create a satisfactory credit situation for agricul-
ture, but on the other hand a satisfactory basis of credit must precede
the extension of loans. Even those farmers who, in the years just follow-
582 RECENT ECONOMIC CHANGES
ing the war, laid stress on the ability of liberal credit extension to serve
them in the deflation period have seen the limitations of such relief
measures and coined the phrase, “You can’t borrow yourself out of debt.”
The modern farmer is more of a capitalist than his predecessor, and
needs to develop the art of financial management along with his general
business education. Likewise, the growing mechanization of agriculture
and the tendency toward larger operating units is constantly enlarging
the size of individual requirements, and presumably the business capacity
of individual operators. The passing of many small villages as marketing
centers tends to bring the farmer more in contact with banks which
serve the general business public, which are ordinarily larger in size, and
which are manned by officials who are better trained and are closer stu-
dents of the general business situation than is likely to be the case with the
small country banker.” The farmer who shifts to this sort of banking
connection is likely to find himself held to a stricter standard of procedure
in producing a credit rating and making a showing as to the financial plan
under which he expects to employ the funds which he comes to borrow.
What seems to producers at times a Bourbon attitude on credit
extension has sometimes proved merely the reflection of a sounder
analysis of the trend of market values than that which the interested
borrower could bring himself to accept. The farmer's dependence upon
banks of a general commercial character is likely to curtail the liberality
of credit lines which he can secure, unless these larger town and city
banks include within their executive staff officers who are sufficiently
acquainted with crop and livestock operations to enable them to judge,
without too great conservatism or too slavish adherence to mercantile
banking principles, what are the liquidating possibilities of the prospec-
tive farm operations which are presented to them for financing.
To some extent, there has been a revival of “dealer credit” during the
last few years to enable farmers to purchase machinery, fertilizer, or the
like to an amount which their own resources or their bank credit would not
permit. This is particularly true in connection with the sale of tractors,
combines, and other large machinery equipment. In sections of the
Great Plains states, the tangible basis for bank credit was severely
constricted at the same time that heavy expenditures for power machinery
were needed, if production costs were to be so reduced as to enable farmers
to re-establish themselves on a sound basis. The great farm implement
companies had been going through a period of rather lean sales, and
needed to stimulate demand in every way possible. Under these
conditions, they backed their faith in the section and in the new methods
of power farming to the extent of placing such equipment in the hands of a
large number of farmers on extremely small initial payments. Since
dealers in the locality were not much better able than farmers to carry
* Cf. Chap. V, p. 335.
AGRICULTURE 583
this credit load, it was passed back directly to the implement companies
who, in the main at least, handled it as a part of their general business
rather than by forming subsidiary finance corporations after the manner
of the automobile companies. In general, the method was to take
initial payments of as little as 15 or 20 per cent of the purchase price, the
buyer obligating himself to pay the balance from the proceeds of the
crops of the two following years. The agricultural recovery of the section,
under its new technique of farming, has been such as to justify the faith
of the manufacturers and to reinforce their belief, often proved in the
past, that the farmer is an excellent risk on a “character loan.”
In both the implement and the fertilizer field, it is evident that the
seller, with the profitable operation of his business at stake, may in
difficult times like this be expected to go farther in the extension of
credit than commercial banking agencies. This calls attention to the
fact that a large element in the extension of credit to farmers is the
knowledge which the lender has of technical aspects of the business, and
the faith which he has in the profit-making possibilities of the given line of
agriculture. This point is of considerable importance in connection
with the discussions of branch banking as a possible improvement in
our rural credit situation. In California, where the system has been
tried, it seems clear that a branch banking system tends to be strictly
run on formal rules which make it safe but not very elastic in adapting
itself to the expansion of new sections or types of production. The line
between technically safe banking and aggressive financing of worthy
new developments is finely drawn.
Farmers in general, and not a few of the bankers who serve rural
constituencies, are unable to wrench their minds free of traditional
attitudes with reference to the profitableness of particular farm operations
and to the accepted scale of land values. The number of rural banks
which failed during the deflation period reflects somewhat sadly upon
the professional competence of the officials in charge, or their ability
to keep their minds undisturbed by popular sentiment through the chang-
ing stages of the economic cycle.
Agricultural financing appears to be in a transition period. Federal
legislation has paved the way for agriculture to attain a more advan-
tageous position in the financial structure of the country as a whole.
Banks likewise have manifested considerable interest in better adapting
their practices to the needs of agriculture, at the same time that they
encourage agriculture to put its operations on a sounder business basis.
A third constructive possibility emerges from the side of the co-operative
organizations. They have been influential in mobilizing large blocks
of farm products for safe and economical financing. This in itself tends
to give the farmer a more flexible and advantageous position with refer-
ence to his commercial farm operations. The co-operatives, however,
584 RECENT ECONOMIC CHANGES
have gone still farther in becoming the agency through which production
credit could be made available to their members, at a cost much below
that which had generally been required in the past.
These movements are as yet hardly past their experimental stages.
It would seem, however, that the legislative modification of our credit
institutions, the constructive attitude of many bankers, the progress in
the economic organization of agriculture, and the growth of co-operative
groups should produce substantial improvement in conditions of rural
financing during the coming years.
XII. CREDIT AND LAND VALUES
The sweeping readjustment process now under way in agriculture
challenges the whole capital structure of the industry. Formerly, the
farmer was a man of terrific industry and grinding thrift. Land was
his bank, and an unencumbered title the heaven he sought to attain. In
the process, the right to be his own boss was capitalized at an inordinately
high rate, and frequently residence values of a sentimental and almost
ancestor-worshiping kind were spread over the whole farm, no matter
how meager the yield as a matter of plant operation. The time appears
to be at last drawing near when we shall cease to view land in this exag-
gerated speculative-investment light, when adequate outlays for equip-
ment and working capital become of prime importance in determining
the return to labor and management, and when current income commen-
Surate with that obtainable in other callings will be insisted upon by
farmers and their families. “The fact that we cannot expect a complete
recovery of farm land prices does not necessarily mean that agriculture
will not be prosperous. Prosperity and high land prices do not neces-
sarily go together. It does mean that in the future we shall have to
look to annual profits rather than to increases in land value for farm
prosperity.”
One of the most striking features of the postwar development of
agriculture has been its spread into comparatively low-grade lands with
fairly extensive methods of use, while land values in the older sections
have ceased to advance through the capitalization of a scarcity value
of such sections under the intensive piling up of large amounts of poorly-
paid human labor. For this development to have followed so swiftly
on the heels of the war-time inflation of farm prices has of course involved
a rather lengthy muddle of foreclosure proceedings, credit losses, and
uncertainty as to the equilibrium points toward which the readjustment
was tending. If it has done nothing else, however, it should shake faith
in the time-worn slogan prevalent in many parts of the country that
“our land values have always gone up and they always will,” and
induce a rechecking, on the part both of farmers and of lending agencies,
27 Editorial in The Prairie Farmer, August 18, 1928.
AGRICULTURE 585
of the relations, respectively, of land and of capital goods to the produc-
tion of net farm income.
There is in most quarters only very inadequate realization of the
nature and extent of the decline in land values which has taken place
in the Middle West. Furthermore, the implications and results of this
price decline are still less understood. The land boom broke in 1920,
but many circumstances contributed to prolong its effect through a series
of subsequent disturbances and settlings. Much of the land had been
transferred under contracts, or with second and third mortgages on
which first payments were not due for anywhere up to five years. As
settlement under these contracts or mortgages came due, there was a
succession of defaults which strung along over several years. Land
went back to the seller or to the mortgagee, and in this way banks, trust
companies, insurance companies, and other investors found themselves
the involuntary holders of land on which payments were in arrears.
For some years during the early nineteen twenties, the tendency was
very strongly toward granting extensions and helping the nominal owner
or mortgagor to retain title and, with it, the burden of ultimately paying
up on the capitalization established during the boom period. More
and more, such efforts became ineffective as the period of unsatisfactory
prices for farm products and income to farmers lengthened. Eventually,
supervisory agencies required banks to divest themselves of such proper-
ties or to go into complete liquidation. This brought a wave of fore-
closures, bank failures, and forced selling of lands, which drove prices
to a half or even a quarter of what they had been at the peak. The
significant thing in all this, however, is that prices have shown but little
tendency to recover, and meanwhile a very large number of involuntary
owners are still holding on to this property, uncertain what policy to
pursue. There is probably not a single large insurance company, if it
loaned on real estate in the Middle West, which does not have substantial
holdings of farm land in some of these states, and the total runs to many
millions. That the Federal Farm Loan system has also become deeply
involved in the situation is shown by the following table of farms which
have come completely or practically into their ownership, the data being
gleaned from annual reports of the Federal Farm Loan Board:
|
|
|
Banks Jan. 1, 1926 Jan. 1, 1927 Jan. 1, 1928
| |
Federal Land Banks:
Farms owned outright. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,598 2,763 4,086
Sheriffs' certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . | 1, 160 1,260 1,088
Joint Stock Land Banks:
Farms owned outright. . . . . . . . . . . . . . . . . . . . . . . . . . | 211 440 533
Sheriffs' certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 222 357
Total number of farms owned outright and sub- -
ject to redemption. . . . . . . . . . . . . . . . . . . . . . . . . 3, 145 4,685 6,064
586 RECENT ECONOMIC CHANGES
Such distress selling as has already taken place has enabled the
more provident, well-financed farmers to increase the size of their farms
at reasonable prices. But a large number of the larger holders are
unwilling to take the losses which would be involved in disposing of all
of their land in the present market situation. Should they attempt to
do it, it is inevitable that values would again crumble and their losses
be even greater than they now appear. As a result, many of them are
renting these properties to such advantage as they can and, in order to
bolster up the situation, are not infrequently appointing farm managers
or supervisors to work with the tenants on these farms to assist their
efforts sufficiently so that rent payments may be met and the farm kept
in reasonably good condition.
In some areas, also, individual investors or companies, formed for the
purpose, have looked upon this as a favorable opportunity for securing
lands at bargain prices, to be held speculatively for the “return” of
values. Generally speaking, the farms are too small and too widely
Scattered to permit of effective joint operation or any distinctive
economies such as might conceivably be introduced under modern
conditions of machine operation. The situation, at the moment, seems
to be that these optimistic purchasers or holders of lands are supporting
the general level of land values, have somewhat cushioned the shock of
distress selling, and are supplying farms to tenants on fairly liberal terms.
To some extent, even, such properties are obliged to go tenantless.
As we said at the beginning, the whole structure of capitalization of
the agricultural industry over considerable parts of our country has been
shaken by the events of the last few years, and it can by no means be
said that such recovery as has taken place has yet given a clear indication
of future trends or a firm foundation on which to re-erect any reasonably
permanent and dependable scale of values. This can be clearly seen
in the accompanying table of index numbers of land values in certain
selected states (Table 8). This shows the comparative height to which
prices rose during the war-time boom and the fact that these values are
still declining in some states most severely affected by the advance.
On the other hand, Kansas appears to have stabilized values, and Montana
is one of the few states which shows a slight upturn.
If the changes in technique which are now upon us prove to be of as
revolutionary a character as has been suggested in the present chapter,
the result would apparently be to alter permanently the schemes of
valuation in different agricultural sections, which were built up under the
older traditions of American farming. From the immemorial past, the
predominance of hand-labor methods in farming has given great differ-
ential superiority to those well-watered and fertile lands which showed
the greatest capacity to absorb large amounts of human toil. But
much as in the field of mining the progress of scientific metallurgy and
AGRICULTURE
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588 RECENT ECONOMIC CHANGES
heavy power machinery have made profitable the utilization of low-grade
ores, so the development of scientific and machine agriculture have
brought into cultivation considerable areas of formerly submarginal
land, and have indeed put a premium upon extensive methods of utilizing
lighter soils, the remoter agricultural areas, and regions of scanty rainfall.
Profits are being found by going rapidly over large areas of compara-
tively low-yield land, and the scarcity value of lands in the older sections
has quite possibly lessened as a result. Their differential superiority has
shrunk under the new technique, and market values must ultimately
establish themselves in the light of this fact.
One other factor which tends to affect land values very widely is the
heavier burden which taxation now bears upon farming land. Costs of
government have risen not only with the advance of the general price
level, but in response to the enlarged activities in road building or the
amplification of services in the way of education or otherwise. With the
continued reliance upon the general property tax, these burdens tend to
fall heavily on agriculture.
The farmer's property is of a sort that is readily discoverable by the assessor and
that bears a heavier proportional share of the general property tax than do many other
classes of property. In some sections of the country, an almost intolerable tax burden
rests on the farmer Figures recently compiled for a number of rented farms in several
Michigan counties show that for the last seven years taxes have taken about 90 per
cent of what otherwise would have been the net return to the owners of these farms.
It is believed that this is an exceptionally bad condition, but other studies in various
sections indicate that in recent years a tax burden which takes from one-third to two-
thirds of the return is by no means unusual.” -
As long as this situation continues, it tends to hold down the net
income from land, and hence the sum at which it is capitalized as a
purchase price.
XIII. THE COMPARATIVE IMMOBILITY OF AGRICULTURE
With the basic problem of agriculture to-day one of drastic adjust-
ment to a new technique and an altered commercial situation, one
must be impressed with the fact that these sweeping adjustments are
rendered difficult by reason of the immobility which, to a large degree,
always has characterized the farmer's calling. There are several reasons
why this immobility may be expected to continue.
In the first place, farmers to a much greater extent than mechanics,
clerks, or other wage and salaried workers have their property, whether
large or small, invested in the business in which they are working. They
practically always must be owners of equipment, and almost universally
desire to hold an equity in the plant with which they work. Since such
28 United States Department of Agriculture, Yearbook, 1926, p. 698.
AGRICULTURE 589
investments can be liquidated only slowly, or at heavy sacrifice, the
farmer is peculiarly tied to his job as well as to his locality.
Furthermore, his technical training and experience have always been
wrapped up in a particular type of farming to an extraordinarily high
degree. The carpenter, machinist, salesman, or low-skilled factory
worker can move from one line of city employment to another with
much less struggle of readjustment than farmers as a class can switch
from one branch of farming to another or from farming to town employ-
ment. Agriculture is to many of its followers a whole scheme of life
and not a business in the ordinary commercial sense. A not inconsider-
able number of farmers are concerned with the primary job of producing
subsistence for themselves and their families. Such operators continue
to farm whether prices be good or bad, and their operations tend to
yield persistent but rather unpredictable surpluses of product which are
marketed in competition with the products of those who are attempt-
ing to organize their operations on the basis of reasonable returns to
labor, management, and invested capital. Any attempt to make signifi-
cant readjustments in such lines of agricultural production encounters
sufficient difficulty before it can get a rationalization of operations on the
part of commercial producers, but even their efforts may be checkmated
by the uncontrollable fringe of operators whose activities cannot be
brought within any such scheme of organization. The very success of
the better grade of producers to adjust on the basis of prices which will
yield a reasonable return to that class of operators tends to peg prices
at a level sufficiently satisfactory to attract still more of the cutthroat
competition of the squatter type of farmer.
In the second place, the fact that actual direction of agricultural
enterprise is determined by the decision of a number of operators, which
embraces about 60 per cent of the total number of workers in the
industry and whose capital resources are rather rigidly limited, means
that neither the decision nor the means of making changes rapidly may
be expected. If it had been left to a majority vote of the craftsmen in
any industrial line to decide when they would abandon the tools or the
character of product which they had been accustomed to make in favor
of the manufactured products and the tools and machines by which they
are made to-day, is it reasonable to expect that changes would have
been made with any such celerity as has been the case under the capital-
istic and managerial system which we have in industry?
To-day we are recognizing that “agriculture must be organized as
other industries have been,” but, beyond this platitude, thought divides
sharply as to the direction this process of organization should or can
take. Shall we strive for a maximum of efficiency under a system of
decentralization and individual autonomy, or shall we direct our energies
toward seeing how fully and skillfully efficiency through centralization
590 RECENT ECONOMIC CHANGES
may be brought to the solution of certain of our agricultural difficulties?
Already an enormous number of tasks, which originally were classed as
part of agriculture, are performed in town under industrial methods.
The passing of milling, butchering, and churning from the farm to the
city was long ago effected. The coming of the combine and the truck
are now raising the question whether any storage and processing received
by the grain between harvest and ultimate use can be done economically
and effectively on the farm, or whether cleaning, drying, and storing
shall be centralized at the terminal markets and milling centers. The
Supplanting of horse power by internal combustion engines has been a
striking transfer from country to town of an important process in the
task of getting our living from nature.
The struggle of the older farm management was toward filling up the
valleys between seedtime and harvest peaks of the labor load. It seems
quite conceivable that the newer agriculture will tend to maintain a
skeleton force on the land, and transfer labor from town to country to
meet seasonal requirements. Since the farmer more and more tends to
require labor skillful in the handling of machinery or capable of perform-
ing manual tasks of the most routine character rather than to require
those trained in the ancient lore of farming, the easier way seems the
shift of tractor men and practically unskilled harvest hands into the
country during short periods of special need, with the same groups
productively fitted into industrial callings of the town during agriculture's
slack season.
All in all, it seems that the hard and fast line between agriculture
and other industries, and between rural and urban residence, will tend
to disappear with the program of changes now under way in agriculture.
A tendency is noticeable among some manufacturers to get their plants
distributed in towns and villages adjacent to agricultural land, where
their food requirements can be more cheaply met, where living quarters
are better and lower priced, and where the factory can draw upon the
rural population for part of its labor requirements. The truck and auto-
mobile make it possible for industry thus to supply its needs, and at the
same time afford an opportunity for a considerable number of both
men and women to make profitable use of the time which can be spared
from farm work under modern methods of production. It is impossible
to show this approach of manufacturing toward the agricultural regions
by statistical methods with as much clearness as would be desired.
But it is apparent from the census of manufactures over the last few
years that a drift away from the highly industrialized centers in the
Northeast and toward the smaller towns and villages in the central,
southern, and western states has been under way. In Table 9 there is
shown a marked decline in manufacturing in the larger cities and in
states which we have been accustomed to class as industrial, with a
AGRICULTURE
591
clearly discernible growth of manufacturing in what have been regarded
as agricultural states and in towns of less than 25,000 population.
TABLE 9.—PER CENT OF INCREASE AND DECREASE IN MANUFACTURING, IN SPECIFIED
STATEs, 1919–1925
Middle Atlantic
New England States States Indiana
Size group
Number Number Number Number Number Number
of estab- of wage of estab- of wage of estab- of wage
lishments e8.IIlerS lishments €8. I’InerS lishments e8.IIler S
Total. . . . . . . . . . . . . . . . — 1 1.7 — 16. 7 — 17. 5 — 13.0 — 19.9 + 1 .. 7
Over 250,000 . . . . . . . . . . . . . — 3.3 — 12.6 — 16.6 — 15.5 — 10. 7 — 16.3
250,000–100,000. . . . . . . . . . . . . — 10. 7 —20.0 — 5.4 — 16.8 . . . . . . . . . . . . .
100,000—25,000. . . . . . . . . . . . . . . – 5.4 — 18.2 — 14.7 — 13.6 — 15.6 + 5.0
25,000–10,000. . . . . . . . . . . . . . . — 7.4 — 15.1 — 19. 3 — 7.6 — 10.6 – 6.7
Less than 10,000. . . . . . . . . . . . — 22.6 — 14.8 — 23.5 — 9.2 – 27.2 + 15.0
Michigan North Carolina South Carolina
Size group
Number Number Number Number Number Number
of estab- of wage | of estab- of wage of estab- of wage
lishments earnerS lishments €8. Iſ IlerS lishments €2,I’InerS
Total. . . . . . . . . . . . . . . . — 17.6 + 9.6 — 40. 5 + 17. 1 — 21.0 +27 2
Over 250,000. . . . . . . . . . . . . . . — 16.9 + 3.5 ! . . . . . . . . . . . . . . . . . . . . . . . . . . .
250,000–100,000. . . . . . . . — 5.0 + 8.5 ! . . . . . . . . . . . . . . . . . . . . e e º 'º is tº
100,000—25,000. . . . . . . . . . . . . . — 9.4 — 0.2 — 1.8 + 1 .. 1 — 34.7 — 20 6
25,000–10,000. . . . . . . . . . . . . . . — 1 1. 1 — 15.5 – 10.7 +46.0 — 24.0 + 1 2
Less than 10,000. . . . . . . . . . . . — 24.5 +44. 0 — 47.2 + 7.5 – 17.7 +37.0
In this connection, it may be mentioned that the washing machine
and numerous other farm appliances, together with the use of more store
products in the country home, tend to release the labor of women in a
way somewhat comparable to that which we have discussed with refer-
ence to the labor of men.
Furthermore, paved roads tend to enable city
population to move farther away from their places of employment, and to
cause the main roads connecting cities and larger towns in our industrial
districts to become practically continuous residence streets, lined with
dwellings to which are attached small plots of ground from one-quarter of
an acre to 5, 10, or even 20 acres in extent.
It seems reasonable to sup-
pose that, at least in important agricultural states from Ohio to Iowa, and
including southern Michigan, Wisconsin, and Minnesota, this process
may result in rather considerable diminution of population in the open
country without any undesirable sacrifice in the quantity of the product,
but with a very satisfactory lowering of production costs and more
effective utilization of our total labor power.
592 RECENT ECONOMIC CHANGES
In certain geographic regions and in various branches of agricultural
production, there has been a quiet and very gradual increase in the number
of large farming operations. In conformity with general business prac-
tice, such undertakings, if they pass the size compatible with individual
proprietorship, tend to be organized as commercial corporations. This
has aroused in some quarters unreasonable expectations, and in others
unwarranted fears, of a rapid spread of corporation farming. It is much
too early to attempt to prove conclusively just what this movement may
amount to. Likewise, the space limitations of the present volume do not
permit any extended analysis of what the author believes to be its
possibilities and limitations. It is a matter of common knowledge,
however, that corporate farming enterprises have demonstrated their
ability to organize farming undertakings of moderately large size with
efficiency and economy, and it would hardly be conceivable that agri-
culture, even with its peculiar needs, could completely escape the con-
solidation tendency of the age. Obviously, the technique of corporate
organization and management must undergo considerable adaptation,
if it is to spread in the field of agriculture. It would seem imperative
also that, for its economic success as well as its social value, great atten-
tion must be given at each step of its development to seeing that conditions
of domestic living, hours of labor, wages, opportunity for advancement,
and conditions of community life be better rather than worse than those
obtaining prior to the coming of the agricultural corporation. So much
progress has been made along these lines in other fields of corporate
endeavor that there would seem no real reason why, with alterations to
conform to the somewhat different situation, these lessons should not be
effectively put in practice in agriculture.
Even at its best, however, any trend toward the industrialization of
agriculture is regarded in some quarters as a Social loss and political
danger, because of the decay of that “sturdy yeomanry” which is held to
be the “last bulwark of true democracy.” It is asserted also that such a
transition would bring a larger proportion of our population into living
conditions unsatisfactory from the standpoint of health as well as morals.
But does not this rather sentimental reaction to the problem tend to
idealize the best of country living conditions and to forget its flagrant
shortcomings; to emphasize the city's evil repute in the matter of slum
and sweatshop, without giving full weight to the achievements and
potentialities of modern city efforts for better housing, health, entertain-
ment, and regulation of working conditions?
The farmer may come to take as militant a stand with reference
to an “American standard of living” as the trade unionist has done,
and possibly to invoke the machinery of Government regulation toward
this end. In such a move, the binding power of his own individualistic
traditions would doubtless prove a serious obstacle, if any importance
AGRICULTURE 4 593
may be attached to his repudiation of the child-labor law and his reaction
to daylight saving. However this may be, it seems to the present writer
that the rapprochement of city and country, which appears to be under
way in response to new conditions of auto transportation, and to the
organization of both farm and factory work, holds the possibilities
for improved conditions on both sides. How far we shall fight
the tendency, or how far we shall studiously endeavor to facilitate its
constructive development, remains to be seen.
We have already referred to the sentimental attachment of the farmer
to the soil and his unwillingness to abandon a highly traditionalized
training for types of city employment which are strange to his habits of
thought and mode of life. Even under unsatisfactory conditions, a
farmer is likely to feel that he is in a position at least to provide his
living from the soil where he is already established, and to shrink from
the drastic changes necessary in any throughgoing move toward readjust-
ment. Somewhat anomalously, there is a radical or pioneering group
still to be found, at least in the western part of rural America, which,
after a certain amount of dissatisfaction, is ready to jump to distant
pastures which look green, with only a shoestring on which to operate,
and nothing much more than vague optimism as the basis of its hopes
of prosperity. This ultra group, like the ultra conservatives, gives us
marginal or submarginal areas always offering cutthroat competition
to operators who are attempting to organize their industry on a more
stable and rational basis.
XIV. THE MOVEMENT FROM THE FARM
The process of adjustment to changed conditions which has been
going on since 1920 has stimulated the rate of movement from farms to
cities. Of course, there is a certain amount of movement in this direction
all the time, owing to the excess of the country birth rate over the death
rate and the gradual urbanization of our country which has been under
way for 150 years. During the World War and the two years immedi-
ately following it, this process was temporarily reversed, only to be
resumed at an accelerated rate which even yet has slackened but little.
The most careful studies of the whole matter have been made by Dr.
C. J. Galpin, of the United States Department of Agriculture,” and his
conclusions are summarized as follows:
During 1920 there was a net gain in total farm population of approximately 500,000
people . . . The unusual prosperity attending the farm occupation during 1920
apparently restrained considerably the customary flow to cities of young people between
the ages of 18 and 24, while the annual movement of prosperous retiring farmers to
town was offset by the arrival of persons from cities, drawn to farming by its prosper-
ous condition. The excess of births over deaths on farms resulted in a natural increase.
29 United States Department of Agriculture, Yearbook, 1926, p. 592; 1927, pp. 28–29.
594 RECENT ECONOMIC CHANGES
The year 1921 saw the beginnings of an unusual movement from farms to cities.
While many persons who were tempted to leave farming stayed on farms in the hope
that soon the tide of prosperous times would turn and flow farmward, others who were
close to the margin of livelihood were compelled to go where there was profitable
employment. The result was that though there was a net increase of farm population,
it was only 200,000 instead of 500,000 as during 1920. In 1922 the department survey
indicated . . . a net loss in the farm population of 460,000 persons. In 1923 the loss
to cities continued in full force, causing a net decline in the farm population equal to
or possibly somewhat exceeding that of the previous year. In 1924 forces were at
work sending back from cities to farms a larger number than formerly. The result
was a net loss to the farm population of 182,000. For 1925 a continued decrease in
farm population was reported to the effect that 479,000 fewer people were on farms
January 1, 1926, than January 1, 1925.
The large gross movement from farms to cities apparently still overbalances the
gross movement from cities to farms even when the increase on farms by births over
deaths is added in. In the last seven years the farm population of the United States
has probably declined more than 3 million . . . But the loss is in large measure a
product of natural conditions, which do not necessarily indicate that agriculture is a
declining business but which are quite compatible with its progress in prosperity . . .
As a matter of fact, it is a sign of progress when a given economic result can be achieved
with fewer workers.
In some quarters there has been considerable fear lest the better
classes of the rural population would be driven from the farms by the
recent unprosperous condition, leaving an inferior population to carry on
the industry. Many strident assertions to this effect have been made,
but no statistical proof has been forthcoming, nor would it be easy to
adduce conclusive evidence either in support or in refutation. A few
suggestive phases of the matter, however, are apparent to anyone who
examines actual farming conditions at all widely.
In the South, it is quite evident that the pronounced loss of negro
farmers has taken a relatively poor rather than a relatively good class of
agricultural workers out of the industry. At the opposite end of the
cotton belt, it is equally apparent that those who have entrenched their
position in the reorganized cotton industry of the last few years are a
hardy, resourceful white American stock whose pertinacity in continuing
in the industry and whose ingenuity in devising ways of meeting a critical
situation revive the finest tradition of the American pioneer. In between
these extremes one may find, let us say in the Mississippi delta region,
a splendid group of business men continuing to operate their properties
and holding to their position as successful cotton planters by adopting
machine methods, dispensing with superfluous hand labor, and organizing
their selling through an extremely well-managed co-operative association.
Certainly those who have remained in the business of growing wheat
and are fighting their way back to prosperity are the men who have shown
ability to handle larger farms, reduce costs, and put their finances on a
stable basis. In the general farming region of the Mississippi Valley the
phrase is frequently heard, “You’ve got to be a pretty good farmer to
AGRICULTURE 595
stay in the game these days.” But the good farmers of that section are
staying in the business, are working with extension and experiment
station specialists to keep financial records, analyzing their business with
growing skill and understanding, and adjusting farm enterprises and
operating methods in a manner calculated to win the highest respect.
It is obviously true that the man of highest qualifications for agricul-
ture is likely to be a man whose opportunities for profitable employment
elsewhere are likewise good, and that in the considerable reduction of the
labor force in agriculture many instances will be found where the better-
than-average farm operator is drawn away to some other calling. How-
ever, the writer could not look farmers, as he knows them in all parts of
the country, straight in the face and give assent for a moment to the
oft-reiterated statement that the quality of our farmer class generally is
being lowered or that they are becoming peasants. Those who subscribe
to such an idea must have known only particular groups in certain of the
by-waters of agriculture where the industry as a whole was going distinctly
backward. There are such spots, but a true appraisal must take into
account the main body of the industry where it is effecting necessary
adjustments, and also the inspiring frontier where expansion is taking
place, not merely those spots where the process of adjustment is inevitably
downward.
XV. THE EXPANSION OF NEW USES FOR AGRICULTURAL PRODUCTS
With the unsatisfactory prices which have followed the break of
1920, the suggestion has come forward from many sources that the
farmer's difficulty is, in general, that he has been producing merely to fill
the human stomach or to cover human backs—a highly inelastic market
demand as compared with the expansible field of culture wants to which
manufacturing industry so largely caters. We have already shown in this
chapter that food and clothing wants, so far as they express themselves
in a demand for agricultural products, have tended during the last few
years to shrink rather than to expand. Industrial chemistry has been
a potent factor in substituting raw materials of nonagricultural origin for
those which were formerly produced on the farm. Indeed, the chemist
is regarded not a little in the light of a wonder worker in the present age,
and he is still looked to as the magician whose wand may yet open a new,
expanding, and profitable outlet for farm products in other than food and
clothing uses.
It has been suggested, for example, that the rapid rate of consumption
of print paper might so outrun the rate of forest growth as to create a
demand for paper-making materials from fibrous plants now produced or
which might easily be produced on farms. Experiments along this line
have met with reasonable success, and it has been demonstrated on a
small commercial scale that excellent paper and insulating material may
596 RECENT ECONOMIC CHANGES
be made from cornstalks, and quite striking success has been made
in the utilization of bagasse, or sugar cane fiber from which the juice has
been extracted. This takes the form of a lumber substitute of excep-
tional insulating qualities and great tensile strength. As a nonconductor
of both sound and heat, it is finding a rapidly expanding market in con-
nection with the growth of the radio and artificial refrigeration. It is
argued that its general introduction for use as a building material would
lighten in a substantial way the burden on our coal resources, and might
pave the way for practicable cooling, during the warm season, of even
private residences over the southern half of the United States and in
tropical or subtropical countries elsewhere.
Waterproof glue is now made from both casein and soybean cake, and
the growth of the ply-wood industry and veneering have opened an
encouraging market for these products. The automobile created a
rapidly expanding new demand for linseed oil, but our tariff situation is
such that about half the product used in this country is imported. Like-
wise, the ingenuity of the industrial chemist has developed paint formulas
which introduce many substitutes for linseed oil, and a similar result has
followed in the case of artificial leather, rayon, and numerous other
products. The chairman of the division of chemistry of the National
Research Council says:80
The increased use of pulp from wood of almost the same cellulose content as cotton
will make itself felt all the more seriously during the coming year. We may estimate
that in 1927, for example, the equivalent of possibly a million bales of cotton will have
been replaced in our American markets by the cheaper cellulose from spruce. Evi-
dently the cotton crisis is yet before us . . . Up to the present the home use of cotton
has been dropping, but its somewhat increased industrial use maintains the per capita
consumption of cotton at about normal. New uses of cotton must be developed if we
are successfully to counter the sudden and unexpected rise in the use of silk and the
new form of artificial leather. In this respect the cotton planter dare not run ahead
of the wheels of progress. He must abide that time when the demand for cotton
asserts itself. This may or may not develop soon.
The harassed corn grower has looked with longing toward any one of
half a dozen by-product uses. Technically a number of roads lie open,
but commercially they lead nowhere, or come to an abrupt end after a
very short distance. The chemist just quoted refers to these varied
possibilities of the corn plant in the following words:
The growing of corn for the kernel, whereby only about one-fifth of the total weight
of the corn and stalk in the field is utilized, Smacks of mediaevalism . . . The greater
portion of both corn and stalk must be diverted to industrial use before we can con-
sider this staple as secure for the future.
The real future for the corn kernel itself lies in its adaptation, on the one hand, for
the manufacture of starch and dextrose (corn sugar) together with corn oil and other
30 The Tariff Review, May, 1927, p. 155.
AGRICULTURE 597
by-products; and on the other hand, after degerminating, for direct fermentation into
alcoholic compounds; the germ in this case also finding employment in production of
corn oil. The residual material will be returned to the farmer as food for livestock.
The use of corn sugar, sometimes termed dextrose, glucose, or bearing the trade
name of cerelose, is rapidly increasing. Over 300,000 pounds of this pure sugar is
being manufactured daily in this country. Most of it finds use in bread and candies.
In 1926, the corn products industry consumed only 76,000,000 bushels of corn, repre-
senting, however, an increase of 10 per cent over the year 1925. Our total corn crop
averages 2,714,000,000 bushels annually; but only about 260,000,000 bushels reach
the primary markets. Of this latter only 28 per cent enters the corn products industry.
With the coming into prominence of industrial alcohol, much hope
was entertained by the corn farmers and also by potato and fruit growers
that this might provide a profitable outlet for surplus and low-grade
products. Such hopes have by no means been fully realized, largely
owing to the low cost at which blackstrap molasses, a residue from the
sugar mills of Cuba, can be imported for purposes of distillation. This
provides a concentrated product of uniform quality from a single large
and reliable source, whereas the waste and surplus products of this
country which seek to compete for this market are of rather dilute
character, uneven quality, and are widely scattered in such small quan-
tities as to require undue costs of gathering and transportation, and to be
processed in plants so small as not to compete effectively with the enor-
mous tidewater plants now engaged in the business.
This, in fact, is one of the most serious problems in connection with
the whole problem of by-product utilization. To gather straw or corn-
stalks from the field, bale them, and transport them to a plant for making
strawboard, insulating material, or similar products, involves a cost
generally disproportionate to their value in competition with other raw
materials already available in great quantity. This type of problem
has been solved in certain instances, notably the sugar cane bagasse
already mentioned, and experimental work is being done in the corn belt
with a fair measure of success.
The department of chemical engineering of the Iowa State College of
Agriculture is operating a good-sized laboratory for experimental work on
the industrial uses of cornstalks and cobs, and the agricultural engineering
department of the same institution is working industriously on the prob-
lem of economical harvesting, baling, and delivery to the commercial
user. In that state, and also in Illinois, commercial plants for the
making of cornstalk paper, insulation, and other products, are in opera-
tion. The manager of one of these plants reports” progress as follows:
We have proved on a commercial scale that the process used by this company can
produce from cornstalks all the pulp required for paper consumed in the Middle West.
We have demonstrated that this new industry, now in its infancy, can in time become
a source of sound economic relief to a large part of the corn-growing area . . .
31 Frank K. Gardner, “Paper from Cornstalks,” American Farming, July, 1928.
598 RECENT ECONOMIC CHANGES
Our first output is going into high-grade paper. A little later the company will be
equipped to supply part of the requirements of the chemical cellulose industries—the
raw material for manufacture of rayon or artificial silk, celluloid, motion picture and
photographic film, lacquer, artificial leather, etc. This is a limited but rapidly
expanding market . . .
Our first season's operations have taught us much concerning corn stalks as indus-
trial raw material. We were told they could not be assembled at a price to compete
with wood as raw material for pulp. We have proved, by gathering 10,000 tons of
stalks, that it can be done . . .
The farmer will receive for his stalks all they are worth as fertilizer and a reasonable
amount for his profit, besides a fair wage for his labor in harvesting them. What
cornstalks are actually worth has become a much-debated question since science and
industry discovered for the farmer a better outlet than burning cornstalks or turning
them under for their doubtful soil-building value.
In the case of corncobs, oat hulls, and other milling by-products, the
matter is somewhat simplified by the fact that such products accumulate
in large quantities as a mill waste, and special appliances have been
developed for burning them. Frequently, even in such cases, however,
where the raw material cost is low and the process of reclamation is
commercially feasible, the market for the product is so limited as to
afford little relief to the farm producer. Furfural is readily produced
from either oat hulls or corncobs, but “at the present time a few pounds
of xylose, the parent substance of furfural, will satisfy the entire annual
needs of the United States and, while the market for its derivative fur-
fural is much wider, the present total demands of the entire world are
not sufficient to make a dent in the available supplies of raw materials.”
On this same point, the view expressed by experimental workers in Iowa
stresses in somewhat more optimistic vein the future possibilities of
expanding demand. They say” that furfural bids fair to become an
important commercial chemical, and that quantity production and
efficient by-product recovery will lower the price much below the cost
estimates given by the various workers in the field.
Summarizing the situation, the chief of the bureau of chemistry
of the United States Department of Agriculture says: “Many of the
plans advocated to-day for the use of agricultural surpluses and residues
are simply revivals of former agitations, dressed perhaps in new clothes,
which often tend to hide the economic facts which must be recognized and
be favorable if the industry is to survive.”
One of the outstanding cases in which the market demand has been
sufficient in proportion to the more restricted volume of raw material
** Henry G. Knight, “A Survey of the Industrial Utilization of Farm Products for
Other Uses Than Food and Clothing,” a paper delivered before the Institute of
Chemistry at Northwestern University, July 22, 1928.
* O. R. Sweeney, “The Commercial Utilization of Corncobs,” Iowa Engineering
Experiment Station, Bulletin, No. 73, pp. 41–42.
** Henry G. Knight, in the paper cited above.
AGRICULTURE 599
to be turned to by-product use is that of the citrus industry. The
California. Fruit Growers' Exchange has developed very successful
Salvage plants for off-grade and surplus fruits. They yield a variety of
products, including lemon and orange oil, concentrated juice, citric acid,
pectin, and a residue fertilizer, and yield returns to the grower at rates
of $10, $12, or occasionally even more per ton.
Undoubtedly the labor of the chemist, subsidized to some extent by
both Federal and state funds, will produce further results in this line.
But it is obvious that as an adequate program of immediate agricultural
relief it cannot be much relied upon.
XVI. THE OUTLOOK FOR AGRICULTURE
With these several lines of analysis before us, a few words may perhaps
be hazarded as to their significance for the general situation of agriculture
to-day and to-morrow. What may the rest of the country expect from
its agricultural group, and what may farmers expect for themselves?
We are told that agriculture is the paramount national problem, and
that a fundamental remedy must shortly be forthcoming or the collapse
of this industry will involve the whole nation in economic disaster.
Mark Twain observed that everybody was always talking about the
weather but that no one ever seemed to do anything about it. Agri-
culture threatens to rival the weather as a perennial topic of dolorous
conversation. Obviously, farmers have suffered severely in the years
since 1920 and are still finding recovery slow and rather unsatisfactory.
The process of readjustment is too fundamental and far-reaching to be
accomplished in any short period of time. Furthermore, we must not
forget that the so-called depression of agriculture is not merely a phe-
nomenon of the United States, but is an international problem, and many
another country is as sorely perplexed as ours.
However great our sympathy with either the individual or the group
during this trying period, it must be recognized that after ten years we
can hardly think of the situation as an “emergency,” but must address
ourselves rather to the question of what sort of permanent organization
of agriculture the nation demands and should expect in the modern
economic age. What is actually happening is the slow adjustment of
our farming to drastically changed conditions, a process in which the
efficiency of agriculture bids fair to be sharply advanced, and the pros-
perity of those who can measure up to the larger needs of this new tech-
nique should be proportionately raised. The better farmers, who have
adopted the modern methods, are in a large number of cases already
enjoying this prosperity. For those, however, who are less adaptable
to the new situation and in excess of numerical requirements, there is the
serious problem of writing off their losses, effecting a shift in residence,
and fitting into new lines of employment. Both public and private
600 RECENT ECONOMIC CHANGES
interest should be taken in studying this problem and assisting the
necessary movement and relocation.
Meanwhile, however, the country as a whole has been profiting by
prices of farm products which were too low to remunerate the producer
adequately, and, if the views expressed above are sound, it bids fair to
continue to enjoy relatively low prices for farm products produced from
rich natural resources by a skillful, well-equipped, and constantly
better-organized farming class.
XVII. SUMMARY
While no single measure of the present depression in agriculture is
possible, some idea is conveyed by the ratio of prices received to prices
paid by farmers, as prepared by the Bureau of Agricultural Economics of
the United States Department of Agriculture. With the average index
number of the years 1910 to 1914 taken as 100, this index of rural pros-
perity rose to 118 in 1917, from which peak it dropped to 75 in 1921.
Recovering from that point to 92 in 1925, it dropped to 87 in 1926
and 85 in 1927. Of course there is great diversity between commodity
and commodity and section and section, but certain major influences
may be discerned as being responsible for the rather generally unsatis-
factory economic position of our farmers. These are: (1) Disruptions
of demand through the impairment of foreign purchasing power, the
competition of rival producing countries, and, in the domestic market,
changes in consumers' habits and industrial processes and substitution of
the gasoline engine for horse power; (2) the disproportionate rate of
supply in many lines of agriculture owing to war stimulation, increased
technical mechanical efficiency, and the unregulated exploitation of
land resources; (3) expense factors, such as freight and wages, which keep
distribution costs high in spite of the decline in farm prices.
Possibly the most outstanding factor in the whole situation is the
rapid advance in power farming during and since the end of the World
War. To some extent the use of larger machinery and the development
of labor-saving methods has come through the introduction of “big-team
hitches,” but to a more striking extent this has been an accompaniment
of the rapid increase in the number of tractors. In the decade since the
war, the number of horses and mules has dropped from 26.4 millions to
19.5, and tractors have risen from 80,000 to 853,000. This change has
been particularly pronounced in the western end of the cotton belt and in
the Great Plains wheat-producing areas, but it calls for a sweeping recast-
ing in the economic as well as technological organization of American
farming. It permits enormous economies in the production of staple agri-
cultural products, but its effective utilization demands larger operat-
ing units and a more specialized type of economic organization; it permits
also of a considerable release of man power.
AGRICULTURE 601
Naturally, in an industry with as slow a turnover as agriculture, it
has been difficult to effect these changes with sufficient rapidity to avoid
distress. Business reorganization on sound lines has made substantial
progress, and this seems now to be accelerating in its rate. A con-
siderable shift of population from sections where it had become redundant
has also been effected. Neither process is complete, and it has not
been possible to make these changes without acute distress in individual
instances and widespread and severe depression in regions scattered
practically over the whole country.
Inevitably the impairment of current income has been reflected both
in the ability of the farmer to meet his operating charges and living costs
and of the farm to meet capital charges. This has resulted in an unpre-
cedented rate of farm bankruptcies and financial embarrassments which
have involved a large number of banks in difficulties. It has also rocked
the foundations of the farm land market, and has entangled mortgagees,
insurance companies, and land banks, both Federal and joint stock, in a
baffling problem of revising the structure of farm land values in accord-
ance with the changed and still changing conditions of agricultural
production.
In spite of faith in the ability of our farmers eventually to work them-
selves out of this situation, the prospect of swift or comprehensive relief
of the situation does not seem bright. Individuals are showing their
ability to make profits, and some localities are conspicuously prosperous.
But there does not seem to be in prospect any such sweeping rise of prices
or decline of production costs as will take care of the badly-located or
less efficient producer or of the section which finds itself maladjusted to
the present trend of economic developments. Basic difficulties have not
yet been removed, whereas new complications are continually being
thrust into the situation.
Considerable helpful legislation has already been enacted, and in
only minor details can the program of legislative help be looked to for
further assistance. On the other hand, an aggressive and sympathetic,
but at the same time conservative and intelligent, administrative attitude
within the limits of existing legislation would go far toward facilitating
the continued process of readjustment. Meanwhile, a continuation and
improvement of the extensive educational attack upon the problem,
already highly developed by Federal, state, and private agencies, will be
productive of important results. Farmers themselves will continue to
give a good account of themselves in working out their individual prob-
lems within the possibilities, helpful or harmful, which are supplied by the
general institutional setting.
The country as a whole has been profiting by prices of farm products
too low to remunerate the producer adequately. How long this differ-
ential in favor of the nonagricultural classes will continue, it is impossible
602 RECENT ECONOMIC CHANGES
to say. Obviously, the depression of the country has not paralyzed the
town. On the other hand, abundant and low-priced food and raw
materials of agricultural origin have had a stimulative effect. Inasmuch
as the progress made since 1919 gives promise for the future of even
greater efficiency and lower costs in agriculture,” accompanied by better
economic organization and rising prosperity in the country, it would seem
that the long-run prospect for the nation as a whole is distinctly
favorable. -
* The Secretary of Agriculture, in his annual report for 1927 (United States
Department of Agriculture, Yearbook, 1927, p. 8), discusses the manner in which
“the agricultural industry as a whole has been better adapted to market conditions,”
and sees in this “an augury of its future prosperity.” The report also summarizes the
factors which have contributed to the increased productivity of American farming.
“Technical progress in American agriculture has taken place at an extraordinary
rate since the close of the World War, and in consequence the productivity of the
individual farmer has increased . . . More productive crops have been planted.
Livestock of increased productivity has become widely dispersed. Farm manage-
ment has become more efficient, a better balance has been established among agri-
cultural enterprises, and progress has been made in adjusting production to market
requirements. The result is an increase in farm production more rapid than the rise
in the country's population.
“This augmented production has been obtained on a decreased crop acreage and
with fewer farm workers . . . From 1919 to 1924 there was a decrease of 13 million
acres in crop land in the United States—the first decrease ever shown by census
statistics in the agricultural area of the nation. There occurred at the same time a
decrease in the number of farm animals, a decrease in the number of farms, and a
decrease of farm population. Under such circumstances, one would hardly expect an
increase in the volume of farm production. Yet an increase took place, and a very
substantial one. It is estimated that crop production in the period 1922–1926 was
nearly 5 per cent greater than in the period 1917–1921, although the aggregate acreage
in crops decreased slightly. Likewise, the output of animal products is estimated to
have increased fully 15 per cent. The increased productivity of the farm worker is
estimated at about 15 per cent. This increase in labor efficiency, probably never
before equalled, is attributable in part to the utilization of more productive livestock
and crops, in part to the increased use of machinery and power on the farm.”
CHAPTER IX
PRICE MOVEMENTS AND RELATED INDUSTRIAL CHANGES
BY FREDERICK C. MILLS
There are three points of obvious difference between the price con-
ditions prevailing during the years which have elapsed since the deflation
of 1920–21 and the conditions which characterized the period immediately
preceding the war. The level of wholesale prices is approximately 50
per cent higher. The trend of wholesale prices has not been rising, as
in prewar years; the net movement has been slightly downward during
the last seven years. The slightly declining trend of wholesale prices
has been associated with increasing physical productivity, rising wages,
and increasing profits, an association with but few precedents in prewar
experience. It is the purpose of this chapter to investigate some of the
details of the postwar price situation, to consider the relations among
different elements in the postwar price structure, and to compare tend-
encies prevailing among these elements. In making such a study,
account must be taken, of course, of the relation of prices to industrial
and business changes.
The Postwar Price Situation—lnternational Comparisons.—Eco-
nomic conditions in the United States parallel, to some extent, conditions
in other industrial countries. The data upon which international price
comparisons must be based are not in all respects satisfactory, but a
rough comparison will furnish a background for the study of develop-
ments in the United States. We may compare different countries, first, in
respect to present price levels (measured from a prewar base), and
secondly, in respect to postwar price trends.
It is not possible accurately to compare price levels and price trends
in different countries. Official index numbers differ in their technical
construction and in the lists of commodities upon which they are based.
Certain countries are upon gold bases, while in other countries paper
currencies prevail or have prevailed during part of the period to be
studied. Accordingly, the comparison will not be as accurate as the
quoted figures might indicate.
Table 1 shows 18 countries ranked according to the degree of price
rise between 1913° and 1927. The indexes for countries in which paper
1 W. E. Dunkman and Miss Mabel Lewis rendered valuable assistance in the
preparation of this chapter.
* In a few cases the base is a month, or several months, in 1914.
603
604 RECENT ECONOMIC CHANGES
prices prevailed in 1927 have been expressed in terms of gold prices, the
correction being made in each case by applying the exchange rate on
New York.
TABLE 1.-RANK OF 18 CountRIES According To LEVEL of GoLD PRICEs, Whole-
SALE, 1927, witH REFERENCE TO PREwAR BASEsa
| |
Country Index of wholesale | Country Index of wholesale
prices prices
| ; :
Russia. . . . . . . . . . . . . . . . . . . . . . 171 Sweden. . . . . . . . . . . . . . . . . . . 146
Japan. . . . . . . . . . . . . . . . . . . . . . . 170 Switzerland. . . . . . . . . . . . . . . . b142
Norway. . . . . . . . . . . . . . . . . . . . . 167 Great Britain . . . . . . . . . . . . . . 141
Australia. . . . . . . . . . . . . . . . . . . . 167 Germany. . . . . . . . . . . . . . . . . . 138
Denmark. . . . . . . . . . . . . . . . . . . . 152 Austria. . . . . . . . . . . . . . . . . . . c.133
Canada. . . . . . . . . . . . . . . . . . . . . 151 |Italy. . . . . . . . . . . . . . . . . . . . . . - d.133
Netherlands. . . . . . . . . . . . . . . . . 148 France. . . . . . . . . . . . . . . . . . . . d126
United States. . . . . . . . . . . . . . . . 147 South Africa. . . . . . . . . . . . . . . 124
New Zealand. . . . . . . . . . . . . . . . 147 Belgium. . . . . . . . . . . . . . . . . . . e123
* The base is 1913, except where otherwise noted.
b Base: July, 1914.
* Base: first half 1914. The index, as given, is on a gold basis.
d Gold basis.
* Base: April, 1914. Gold basis.
NOTE.-Following are descriptions of the index numbers quoted in the table: Russia, Central
Bureau of Statistics, 69 commodities; Japan, Bank of Japan, 56 commodities; Norway, Central Bureau
of Statistics, 95 commodities; Australia, Commonwealth Bureau of Census and Statistics, 92 commod-
ities; Denmark, Department of Statistics, 118 commodities; Canada, Dominion Bureau of Statistics,
236 commodities; Netherlands, Central Bureau of Statistics, 48 commodities; United States, Bureau of
Labor Statistics, 404 commodities; New Zealand, Census and Statistics Office, 180 commodities;
Sweden, Chamber of Commerce, 160 commodities; Switzerland, Department of Public Economy, 118
commodities; Great Britain, Board of Trade, 150 commodities; Germany, Federal Statistical Bureau,
400 commodities; Austria, Statistical Bureau, 47 commodities; Italy, Riccardo Bachi, 120 commodities;
France, General Statistical Bureau, 45 commodities; South Africa, Office of Census and Statistics, 188
commodities; Belgium, Ministry of Industry and Labor, 128 commodities.
Accepting these indexes as they stand, they show that the increase
in the level of wholesale prices between 1913 (or early in 1914) and 1927
ranged from 23 per cent for Belgium to 71 per cent for Russia. With
the exception of South Africa, the countries having the smallest increases
in terms of gold prices are those which were in 1927 on a paper currency
basis. (In terms of prevailing currencies these countries showed the
greatest increases.) The indexes for the nine central countries in the
list fall between 138 and 152, a small range of variation. For the 18
countries here included, the median value of the indexes is 146.5, a figure
almost exactly equal to the index for the United States.”
* The figure employed for the United States is the unrevised index of the United
States Bureau of Labor Statistics. The revised index, when the base is shifted to
1913, gives a figure of 137 for 1927. This is substantially lower than the figure of 147
which is cited in the text. Perhaps the chief reason for the difference is that heavier
weight is given to fabricated industrial products in the new index than was given in the
old. For purposes of international comparison it is considered advisable to employ
the old index. In the construction of most of the foreign index numbers highly fabri-
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 605
Perhaps of greater practical importance than the degree of price rise
in the last fifteen years is the direction in which wholesale prices are
now moving. World economic conditions during the several decades
before the war were vitally affected by the rising tendency in commodity
prices, a tendency common to all industrial countries. Postwar trends
are of equal importance. The period which has elapsed since a condition
of relative price stability was generally achieved is too short to enable
the trend of postwar prices to be definitely determined, but tendencies
prevailing during the six years from 1922 to 1927 are of considerable
interest. The nature of these tendencies is indicated by the figures in
Table 2. The movement of the official price index in each country has
been expressed in terms of the average annual rate of increase, or of
decrease, during the period 1922–1927.4
The only two countries which show pronounced price increases during
the period 1922–1927 were on paper bases. When the indexes for these
countries are computed in terms of gold prices, the figure for France is
changed from 14.1 to −2.1, and that for Belgium is changed from 16.4
cated industrial products are omitted. If they were given as much weight, relatively,
as they are given in the revised index of the United States Bureau of Labor Statistics,
the general level of foreign index numbers would doubtless be lower than it is.
A somewhat more exact comparison of price changes in certain fields is made possible
by the use of the special index numbers of wholesale prices in 11 countries constructed
by A. L. Bowley and K. C. Smith (London and Cambridge Economic Service, Special
Memorandum No. 24, “Comparative Price Index Numbers for Eleven Principal Coun-
tries”). The same technical methods were employed throughout, in the construction
of these index numbers, and nearly identical lists of commodities were used. (The
index numbers are based on quotations for 35 commodities—food products and raw
or semiprocessed industrial material.) In the following table these countries are
grouped according to the values of the index numbers in the first month of 1927:
(1913 = 100)
Index, January, t
Index, January,
Country Country
1927 1927
|
New Zealand. . . . . . . . . . . . . . . . 151 Italy, gold prices. . . . . . . . . . . - 136
United States. . . . . . . . . . . . . . . . 145 Germany. . . . . . . . . . . . . . . . . . 132
Canada. . . . . . . . . . . . . . . . . . . . . 143 Sweden. . . . . . . . . . . . . . . . . . . } 132
United Kingdom . . . . . . . . . . . . . 141 Holland. . . . . . . . . . . . . . . . . . . 131
South Africa. . . . . . . . . . . . . . . . . a 139 France, gold prices . . . . . . . . . 123
Belgium, gold prices. . . . . . . . . . o 136 |
a Base, January, 1914. * Base, July, 1914.
* Extensive use is made in the present study of figures which measure the average
annual rates of change in economic series. Each of these figures is obtained from the
value r, derived when a curve of the type y = ar" is fitted to the series in question.
This is a curve which appears as a straight line on ratio paper. In evaluating r, use
has been made of the mean value table constructed by Glover (Tables of Applied
Mathematics, Ann Arbor, Mich., 1923, p. 468).
606 RECENT ECONOMIC CHANGES
to -3. In terms of gold prices only four of the 19 countries listed in the
table showed rising levels of wholesale prices between 1922 and 1927.
In fifteen countries wholesale prices declined, the rate of decline ranging
from -0.1 to −6.5 per cent per year. The most pronounced declines
occurred in the Scandinavian countries, Czechoslovakia, Switzerland, and
India. Prices were approximately stable in Spain, Canada, the United
States, Australia, and South Africa, though the tendency was slightly
downward in the last three of these.
TABLE 2.-RANK OF 19 COUNTRIES ACCORDING TO AVERAGE ANNUAL RATE of
CHANGE IN INDEX NUMBERS OF WHOLESALE PRICEs, 1922–1927°

Average annual Average annual
Country rate of change Country rate of change
1922–1927 | 1922–1927
Per cent Per cent
Belgium. . . . . . . . . . . . . . . . . . . . . . . b - 16.4 New Zealand. . . . . . . . . . . . . . . . — 1.9
France. . . . . . . . . . . . . . . . . . . . . . . . c + 14.1 Great Britain. . . . . . . . . . . . . . . . — 2.4
China. * e º 'º + 2.8 Japan. . . . . . . . . . . . . . . . . . . . . . . — 2.9
Italy. . . . . . . . . . . . . . . . . . . . . . . . . d–H 2.2 Sweden. . . . . . . . . . . . . . . . . . . . . — 3.2
Spain. . . . . . . . . . . . . . . . . . . . . . . . . + 0.3 Switzerland. . . . . . . . . . . . . . . . . . — 3.8
Canada. . . . . . . . . . . . . . . . . . . . . . . + 0.2 Czechoslovakia. . . . . . . . . . . . . . . — 5.2
United States. . . . . . . . . . . . . . . . . . — 0.1 India. . . . . . . . . . . . . . . . . . . . . . . — 5.6
Australia. . . . . . . . . . . . . . . . . . . . . . — 0.2 Denmark. . . . . . . . . . . . . . . . . . . . – 6.2
South Africa. . . . . . . . . . . . . . . . . . . — 0.7 Norway. . . . . . . . . . . . . . . . . . . . . – 6.5
Netherlands. . . . . . . . . . . . . . . . . . . — 1.5
• The index numbers from which these measures are derived are those described in the footnote to
Table 1, with the following exceptions and additions: China, Bureau of Markets, Treasury Department,
Shanghai, 147 commodities; Italy, Chamber of Commerce, Milan, 125 commodities; Spain, Institute
of Geography and Statistics, 74 commodities; Switzerland, Dr. Lorenz, 71 commodities; Czechoslovakia,
Central Bureau of Statistics, 69 commodities; India, Labor Office, Bombay, 42 commodities; Norway,
Economic Review, 100 commodities.
* In gold prices, – 3. “ In gold prices, – 2.1. d. In gold prices, + 1.5.
It is clear that during the years which have elapsed since the drastic
liquidation of 1920–21 the general drift of world prices has been down-
ward. Belgium and France have resisted this tendency by the emission
of paper currency, and China seems not to have felt it. In half a dozen
countries the net movement has been slight, while in 10 of the 19 countries
listed the decline has proceeded at a rate of 1.5 per cent a year, or greater.
This movement stands in sharp contrast to the trend of wholesale
prices in the chief industrial countries between 1896 and 1913. During
this period, wholesale prices in the United States rose at an average annual
rate of 2.3 per cent; in Great Britain the rate of increase was 1.7 per cent
a year, while in Germany prices advanced at a rate of 1.8 per cent each
year. The declining tendency observed in recent years has, of course,
been a factor of great importance in the postwar economic situation.
The wide extent of the decline indicates how pervasive has been the
influence of the forces working toward lower gold prices.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 607
Postwar Price Movements and Business Processes in the United
States—A General Survey.—Price movements have no particular
significance as detached phenomena. They must be considered in rela-
tion to general industrial movements and business processes. Recent
price movements should be studied, therefore, in relation to general
economic tendencies of the postwar period. In this brief survey, we
may disregard month-to-month and year-to-year fluctuations and center
attention on the persistent tendencies which have characterized this
period."
The measure most convenient for the comparison of such tendencies
among miscellaneous economic Series is the average annual rate of change,
which was employed in Table 2. Certain of the distinctive features of
the postwar period are summarized in Table 3.
TABLE 3–Economic Movements IN THE UNITED STATEs, 1922–1927
Average annual
Series” rate of change
1922–1927
|
: Per cent
Primary production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.5
Production of manufactured goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . t + 4.0
Ton-miles of freight carried. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.0
Employment in factories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Factory pay rolls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 7
Per capita earnings, factory employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . t + 2.4
Wholesale prices, all commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Wholesale prices, products of American farms in raw state. . . . . . . . . . . | + 1 .. 2
Prices of commodities at the farm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 1. 1
Wholesale prices, nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
- |
Profits, industrial corporations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b-H 9.0
Dividend payments, industrial and miscellaneous corporations. . . . . . . . . + 6.8
Prices, industrial stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : + 14. 1
a The indexes from which the measures in this table are derived are described in later sections of this
chapter.
b Computed from data for the period 1923–1927.
The first three indexes reflect the sustained increase in the physical
volume of production, which has been the basic factor in the economic
well-being characteristic of this postwar era in the United States. Dis-
regarding cyclical and other fluctuations, the volume of primary produc-
tion (the output of raw vegetable, animal, forest, and mineral products)
5 Strictly speaking, the period 1922–1927 is too brief to justify the use of the word
“trend.” Nevertheless, the purposes of the present investigation are served by
measures of the tendencies which have been evident during the fairly well-defined
period beginning in 1922. It is possible that certain of these apparent trends will be
reversed in the near future, but it is the tendencies which are measured by the figures
in Table 3 which have given this postwar period its characteristic economic features.
608 RECENT ECONOMIC CHANGES
has gone up at an average rate of 2.5 per cent a year. The volume of
manufacture has increased at a rate of 4 per cent a year, and freight
movements (measured in ton-miles) have increased at the same rate."
(The rate of growth of population during this period has been about
1.4 per cent a year.) But accompanying this increase has come a definite
decline in the volume of manufacturing employment, a decline at the
rate of 0.7 per cent a year. Here is one of the anomalies of the postwar
situation—increasing production with declining employment. This
condition is at least in part explained by the next two figures. In the face
of declining employment, factory pay rolls have gone up at a rate of 1.7
per cent a year, and per capita earnings of factory employees have
increased at a rate of 2.4 per cent a year. (Employment, pay roll, and
per capita earnings figures relate to identical establishments.) Output
per man in manufacturing establishments has advanced at a rate of
approximately 3.5 per cent a year" during the period 1922–1927, and it is,
presumably, this gain in output which has permitted the increase in
pay rolls to accompany declining employment.
The next set of figures in Table 3 relates to price movements, and here
again we find a peculiar feature of the postwar economy. The increase
in production and the changes which have been noted in factory employ–
ment and in per capita earnings have accompanied a slightly declining
general price level. This decline has been felt chiefly by nonagricultural
products, which have dropped at a rate of 1.8 per cent a year. Farm
products have risen in price, at a rate slightly above 1 per cent a year.
This is true both of prices at the farm and of prices of raw farm products in
wholesale markets.
The summary account of postwar tendencies which is provided by
these figures is completed by the last three measures in Table 3. Here
are shown the remarkable increase in the profits of industrial corporations
(at a rate of 9 per cent a year), the somewhat smaller increase in dividend
payments, and the unprecedented advance in the prices of industrial
stocks (at a rate of 14.1 per cent a year), an advance which has materially
exceeded the gain in dividend payments and the increase in profits.
* The significance of these measures is, of course, dependent upon the adequacy
of the index numbers from which they are derived. All the index numbers repre-
sented in the above table are based upon comprehensive data, and there is no reason
to doubt that they give a substantially correct account of economic developments
during this period. It may be noted that the difference between the rates of increase
in primary production and in the volume of manufacture is not a necessary indication
of inconsistency. Many primary products are consumed in a raw state. Moreover,
the various raw materials enter in different degrees into manufacturing operations.
Thus the production of raw minerals, most of which are subject to processing opera-
tions, increased at an average annual rate of 5.7 per cent during this period, a figure
greatly exceeding the corresponding measures for the other classes of raw materials.
7 This figure is based upon Dr. Wolman’s statistics (Chap. VI).
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 609
Here, then, are certain of the broad features of the postwar economic
situation. It will be the task of subsequent sections to break up certain
of the averages upon which the above measures are based, and to examine
in greater detail the movements of prices and of other economic series.
I. PREWAR PRICE TENDENCIES IN THE UNITED STATES8
Postwar price movements in the United States can be best interpreted
in the light of tendencies which prevailed during the period preceding the
war. The price revolution which occurred between 1914 and 1921 was
an incident, though a violent one. The effects of this revolution have
not yet entirely worn off, but, for an understanding of enduring tendencies
in American economic life, it is probable that more is to be learned from a
study of prewar movements than from an analysis of conditions during
the disturbed years following 1914. -
Among the conditions and tendencies in the field of prices which gave
to the two decades preceding the war their distinguishing economic
characteristics, the following were of major importance.”
1. A rising price level.
2. A considerable degree of internal disturbance in price rela-
tions, a degree of disturbance which tended to decline.
3. Relatively high variability of prices of individual com-
modities, marked again by a tendency to decline.
4. The existence, between 1896 and 1913, of clearly defined
trends in the prices of most commodities at wholesale and in cer-
tain prices in other fields, trends which differed materially as
among different elements in the price system. (This point will be
discussed in a later section.)
The rising tendency in the level of prices during the two decades prior
to the war, a tendency shared by every important commodity group in the
United States, provided one of the most fundamental of the conditions
under which business men of that era worked. It affected manufacturing
methods and buying and selling habits, and was reflected in numerous
business practices which business men found hard to change when
conditions were altered. But the economic consequences of a rising
price level have been discussed in considerable detail, and require no
elaboration here.
8 Some of the materials presented in this and the following sections have been pub-
lished in The Behavior of Prices, National Bureau of Economic Research, 1927, and
in a paper by the author on “Postwar Prices and Prewar Trends,” Proceedings of
the American Statistical Association, 1928. This paper has been drawn upon freely
in the preparation of the present Section of this chapter. -
9 These were not necessarily causal factors. Certain of the price conditions noted
may merely have reflected other economic conditions.
610 RECENT ECONOMIC CHANGES
The general price index does not tell the whole story of the main price
movements of this period. Such an index measures the intensity of the
force, or combination of forces, which is affecting the purchasing power of
the dollar. There are many specific price-making forces which affect,
primarily, the prices of individual commodities. These forces operate to
change individual commodity prices unequally, and to prevent the
prices of individual commodities from accommodating themselves
promptly to changes in the purchasing power of the dollar. The influence
of these disruptive forces is reflected in the dispersion of prices. The
less direct the incidence of the force which is acting upon the price level,
and the greater the relative importance of specific price-making factors,
the more widely dispersed will prices be. These disruptive forces possess
considerable economic significance, for every inequality of movement
affects the buying and selling relations upon which the movement of
goods depends. Every inequality of movement introduces some element
of instability into the price system.
The index employed in measuring the dispersion of prices defines, in
percentage form, the approximate limits of the zone within which would
fall 50 per cent of the price relatives at a given date, and on a given base.'"
Thus a value of 10 for a given date means that, on that date, approxi-
mately half the price relatives deviated from the geometric mean of all
the relatives by less than 10 per cent. Such measures, computed from
annual link relatives, weighted, for the period 1891–1927, are given in
Table 4, together with geometric means of the link relatives.”
Two facts concerning these measures are of immediate significance.
The first is that this prewar period, particularly the early part of the
period, was marked by a relatively high degree of dispersion, that is, by
relatively severe disturbances in price relations.” The second point of
* This measure is the antilogarithm of a fractional part (.6745) of the logarithmic
standard deviation. The logarithmic standard deviation was first used as a measure
of dispersion by Professor Irving Fisher.
* The commodities employed are those for which wholesale price quotations are
published by the United States Bureau of Labor Statistics. The weights are based
upon the values of the quantities marketed during the period 1920–1923.
* Severe, that is, relatively to similar disturbances at other times and in other
lands. That it was severe during the early part of this period, in comparison with
disturbances in other periods, is shown by certain measures, not given above, defining
the degree of dispersion of fixed base relatives in different periods. The dispersion,
in 1902, of relatives on the 1891 base is measured by an index of 17.6; in 1913 the index
of dispersion of relatives on the 1902 base was 14.1; in 1926, the index of dispersion of
relatives on the 1913 base was 17.4. (The figures for intermediate years of this last
period were considerably higher, but at the end of the period the dispersion was less
than it was in 1902, on the 1891 base.)
That the disturbance was severe in comparison with similar disturbances in
other lands is suggested by certain figures of Lucien March (Metron, Vol. 1, No. 4,
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 611
TABLE 4.—GEOMETRIC MEANS AND MEASURES OF DISPERSION COMPUTED FROM
LINK RELATIVEs of WHOLESALE PRICEs, 1891–1927

Number | Geo- Index Number | Geo- Index
Year of price metric of dis- Year of price metric of dis-
series mean persion series mean | persion
1891. 195 100.0 10.6 1910. . . . . . . . . . . . . . 205 102.9 7. 9
1892. . . . . . . . . . . . . . . . 195 93.8 7.3 1911. . . . . . . . . . . . . . 205 94.5 8.7
1893. . . . . . . . . . . . . . . . 195 101.8 8. 3 1912. . . . . . . . . . . . . . 205 106.8 7.3
1894. 195 89. 8 7. 9 1913. . . . . . . . . . . . . . 205 101.1 8.4
1895. . . . . . . . . . . . . . . . 195 101.3 9.8 1914. . . . . . . . . . . . . . 391 97.9 7.4
1896. . . . . . . . . . . . . . . . 195 95.3 9.8 1915. . . . . . . . . . . . . . 391 101.1 10.6
1897. . . . . . . . . . . . . . . . 195 100. 6 9.7 1916. . . . . . . . . . . . . . 391 125.8 13.7
1898. . . . . . . . . . . . . . . . 195 102.6 7.7 1917. . . . . . . . . . . . . . 391 138. 6 12.4
1899. . . . . . . . . . . . . . . . 195 107.1 10.5 1918. . . . . . . . . . . . . . 389 111.7 14. 2
1900. . . . . . . . . . . . . . . . 195 108.5 8.4 1919. . . . . . . . . . . . . . 389 106.8 11.9
1901. . . . . . . . . . . . . . . . 195 99.2 7. 9 1920. . . . . . . . . . . . . . 391 110. 2 15. 7
1902. . . . . . . . . . . . . . . . 195 107.3 8. 6 1921. . . . . . . . . . . . . . 391 65.4 18. 3
1903. . . . . . . . . . . . . . . . 205 100.8 9. 2 1922. . . . . . . . . . . . . . 391 101.0 11. 7
1904. 205 99.6 10. 2 1923. . . . . . . . . . . . . . 390 105.0 11.0
1905. . . . . . . . . . . . . . . . 205 100. 6 7.4 1924. . . . . . . . . . . . . . 390 97.4 8. 3
1906. . . . . . . . . . . . . . . . 205 103.6 7.7 1925. . . . . . . . . . . . . . 387 105.8 11. 5
1907. . . . . . . . . . . . . . . . 205 106.4 5.7 1926. . . . . . . . . . . . . . 385 94.5 8.9
1908. . . . . . . . . . . . . . . . 205 96.0 8.7 1927. . . . . . . . . . . . . . . 372 97.1 9. 2
1909. . . . . . . . . . . . . . . . 205 106.1 7.6
—e.
importance is that during the 24 years prior to the war there was a
sustained downward tendency in the degree of dispersion of link relatives.
The disturbances of which such dispersion is a reflection were definitely
p. 83). Using relatives on the 1890–1899 base in each case, March gives the
following figures:
Standard devia-
Number of g sº
tion of price
commodities Country and year s
relatives
203 United States, in 1909. . . . . . . . . . . . 31.8
55 France, in 1913. . . . . . . . . . . . . . . . . . . 22.5
42 Great Britain, in 1913. . . . . . . . . . . . 20.0
Although the period was four years longer for France and Great Britain than for
the United States (a condition which would tend to increase the dispersion), the degree
of dispersion was materially greater in the United States than in either of these coun-
tries. Differences in the commodities used, and in the number of quotations employed,
lessen the comparability of the results, but the same general tendencies would prob-
ably be revealed by other samples.
Both these examples relate, not to year-to-year dispersion of the type referred to
in the text, but to the dispersion of prices over much longer periods. The records of
the war years support the reasonable assumption that exceptional disturbance of
fixed base relatives will be associated with high dispersion of link relatives.
612 RECENT ECONOMIC CHANGES
diminishing. I shall discuss the economic significance of these facts in
connection with the next point considered.
The third important characteristic of prewar price behavior is the
high variability of the prices of individual commodities. Such variability
may not be registered at all in changes in the price level. Though price-
level changes and the variability of individual prices are not unrelated,
the one furnishes no accurate index of the other. For each of more
than 200 commodities, we have, for each year from 1890 to 1927, a
measure of the variability of its prices within the year.” The averages
of these annual measures are given in Table 5.
TABLE 5.–MONTHLY WARIABILITY OF WHOLESALE PRICEs. Aver AGES CoMPUTED
FROM MEASURES OF PRICE VARIABILITY FOR INDIVIDUAL COMMODITIES,
1890–1927
Number | Arithmetic Number | Arithmetic
of mean of of mean of
Year e ear *
price measures of price measures of
series variability | series variability
: |
1890. . . . . . . . . . . . . . . . . . . 204 4.8 1909. . . . . . . . . . . . . . . . . . 214 4.6
1891. . . . . . . . . . . . . . . . . . . 204 4.4 1910. . . . . . . . . . . . . . . . . . 214 4.3
1892. . . . . . . . . . . . . . . . . . . 204 4.5 1911 . . . . . . . . . . . . . . . . . . 214 4. 3
1893. . . . . . . . . . . . . . . . . . 206 4.9 1912. . . . . . . . . . . . . . . . . . 214 4.6
is,…, 206 4.6 1913. . . . . . . . . . . . . . . . . . 213 3. 7
1895. . . . . . . . . . . . . . . . . . . 206 6.3 1914. . . . . . . . . . . . . . . . . . 214 4.4
1896. . . . . . . . . . . . . . . . . . . . 206 4. 7 1915. . . . . . . . . . . . . . . . . . 214 5.9
1897. . . . . . . . . . . . . . . . . . . 206 4.8 1916. . . . . . . . . . . . . . . . . . 214 8, 7
1898. . . . . . . . . . . . . . . . . . . | 206 4. 1 1917. . . . . . . . . . . . . . . . . . 214 10.6
1899. . . . . . . . . . . . . . . . . . . 206 6.0 1918. . . . . . . . . . . . . . . . . . 213 7.3
1900. . . . . . . . . . . . . . . . . . . 206 5.5 1919 . . . . . . . . . . . . . . . . . . 212 9.7
1901. . . . . . . . . . . . . . . . . . . 205 4. 3 1920. . . . . . . . . . . . . . . . . . 214 10.8
1902. . . . . . . . . . . . . . . . . . . 214 4. 7 1921. . . . . . . . . . . . . . . . . . 214 8. 5
1903. . 214 4.8 1922. . . . . . . . . . . . . . . . . . 213 6. 5
1904. . . . . . . . . . . . . . . . . . . 214 4. 1 1923. . . . . . . . . . . . . . . . . . 214 4.9
1905. . . . . . . . . . . . . . . . . . . 214 4.5 1924. . . . . . . . . . . . . . . . . . 213 5.4
1906. . . . . . . . . . . . . . . . . . . 214 3.5 1925. . . . . . . . . . . . . . . . . . | 211 4. 7
1907. . . . . . . . . . . . . . . . . . . | 214 4.5 || 1926... . . . . . . . . . . . . . . . 211 4. 2
1908. . . . . . . . . . . . . . . . . . . 214 4. 7 * • * * * * * * * * * * * * * * * * * 209 4.7

The points noted in connection with the dispersion of prices appear
to be true of these measures of price variability. The wholesale prices
of individual commodities in the United States during this period, as a
whole, were highly variable;” this variability was tending to decline.
* This measure is the mean deviation, expressed as a percentage of the mean
price for the year. -
* We have, unfortunately, no similar set of averages for other countries covering
this period, but some indication of the relative variability of American prices and
prices in other countries is afforded by a comparison of measures of variability relating
to individual commodities. In 24 out of 31 such comparisons of individual price
series in the United States and in other countries (Great Britain, France, and Gel-
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 613
A consideration of these measures of dispersion and of price variability
throws some light on the economic characteristics of the prewar period.
1. The prices of individual commodities were subject to relatively
abrupt changes from month to month and from year to year. (There
were, of course, many individual exceptions to this general condition.)
These changes introduced a considerable degree of uncertainty into
business operations, and enhanced the speculative features of business
operations.
2. The relatively high degree of dispersion from year to year repre-
sents a condition of rapidly changing price relations. The specific
price-making forces which affected individual commodities differed
materially in their intensity; the disruptive forces which tended to
alter existing price relations were relatively strong. Here, again, we
have a condition which introduces uncertainty into business dealings,
and intensifies the speculative element in business.”
3. The preceding points may be summed up in the statement that
there was a high degree of price instability in the prewar era. Indi-
vidual prices and the relations among the prices of individual commodities
were both relatively unstable.
4. Finally, and perhaps most important, during the quarter century
preceding the war these measures of instability showed a definite tendency.
to decline. The variability of individual commodity prices was diminish-
ing, and there was less disturbance in price relations. The movement
toward greater stability of individual prices and of price relations was
broken and uneven, but it is clearly present as a sustained trend.”
This downward trend is the more significant in that it accompanied a
rising price level.
In the high variability of individual prices prior to the war, and in
all that that implies, we have, I think, one of the most significant of the
conditions which gave to prewar economic life its characteristic tone,
and in the downward trend of this variability we have one of the most
many), American prices were found to be more variable. Again, measures of price
variability for seven important commodities (coal, iron, sugar, silk, rice, barley, and
wheat) in five countries, for the period 1890–1913, were averaged. The average was
highest for the United States, with Japan, France, Great Britain, and Germany coming
next in order. These are only scattered cases, yet they indicate that our prewar
price system was characterized by a relatively high degree of variability of individual
commodity prices.
** Points 1 and 2 represent different aspects of essentially the same phenomena.
The first depicts the condition with reference to the behavior of individual commodi-
ties; the second involves the relations among commodity prices and the degree of
difference in their changes.
* This trend is apparent not only in the two sets of measures given above, but also
in certain measures of the frequency of changes in the prices of individual commodities
which, because of space limitations, can not be here discussed.
614 RECENT ECONOMIC CHANGES
important of the tendencies which marked the economic development of
this period. The conditions of high price variability and marked dis-
turbance in price relations offer opportunities to business men for those
conjunctural profits which result from faulty economic adjustments
and temporary dislocations. A rising price level, coupled with variable
individual prices, represents a happy hunting ground, indeed, for the
speculative elements in the business world.”
II. THE BEHAVIOR OF PRICES IN THE UNITED STATES, 1922–1928: GENERAL
MEASURES
The upward trend of the price level during the period 1896–1913, a
movement which carried the general index up by 2.3 per cent each year,
gave to that period certain of its most pronounced economic character-
istics. It is apparent from the data in Table 2 that the trend of world
prices, in wholesale markets, has been declining since 1922, and there
is no present evidence that the prewar rise will be resumed. In the
United States there was a slight downward movement (at an average
rate of one-tenth of 1 per cent a year) between 1922 and 1927, but the
degree of departure from actual stability has been negligible. The
significance of this approximate stability need not be discussed here,
except to emphasize its obvious bearing upon the buying and selling
operations of business men. The world in which the business man of
to-day functions is different in many respects from that in which business
was done during the two decades prior to the war. Perhaps the most
important of these differences is found in the changed trend of the level
of prices.
War-time developments gave a sharp check to the downward trend
in the variability of individual commodity prices which was in evidence
before the war. The range of fluctuations of individual prices was
unprecedentedly large during the war years, and this high variability
persisted even after the recession of 1920–21. The average of all the
individual measures of variability for the six years 1922–1927 was 5.
The average for the 14 years from 1901 to 1914 was 4.4. But to judge
postwar conditions by this average alone is to ignore the significant
decline in price variability in recent years as shown by the averages of
the variability measures for individual commodities. From 1920 to 1927,
the average declined from 10.8 to 4.7. (See Table 5 for the figures for
intervening years.)
It is clear that the prewar tendency toward greater stability in the
prices of individual commodities is still present. The average for 1927
is about equal to that prevailing at the close of the prewar period. We
may, of course, expect fluctuations in these annual averages, with move-
17 There is, it is true, a dark side to the picture, for highly variable prices will
present opportunities for conjunctural losses, as well as for profits. •
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 615
ments above the 1927 figure, but the existence of the declining trend in
price variability before the war strengthens the assumption that the
degree of variability to be expected in the future will be no greater than
that which prevailed at the end of the prewar period, with some possi-
bility that the downward movement will continue. If we may anticipate
approximate stability in the price level in the future, the expectation of
greater stability in the prices of individual commodities is strengthened.”
Recent movements of the index of dispersion tell somewhat the same
story as do the averages of the variability measures. The well-defined
downward movement in the degree of year-to-year dispersion which was
in evidence prior to the war was reversed during the disturbances of the
period from 1915 to 1921. (See Table 4.) Since 1922, however, the
average degree of dispersion has been much lower, although somewhat
above the prewar average. The average for the years 1922–1927 is
10.1; that for the years 1901–1914 is 8.7. The figures for 1924, 1926, and
1927 represent a degree of year-to-year disturbance about equal to
that which prevailed during the decade before the war.
In respect, then, to the internal disturbances which are defined by
the above measures, we appear to stand to-day approximately where we
did in 1913. The excessive disturbances of the war years served only
temporarily to check the tendencies toward increased stability of indi-
vidual commodity prices and of internal relations among prices which
were operative before the war. In the last several years, there have been
fewer of those abrupt changes in prices and in price relations which
characterized the nineties of the last century, and which gave the war
and immediate postwar years their distinctive business flavor.
These tendencies toward price stability, which have so definitely
reasserted themselves after the disturbances of the war years, will, if
they persist, materially affect the economic complexion of the years before
us. All that has been said above concerning the slow change that was
taking place in the price conditions under which business was transacted
during the quarter century preceding the war may be applied to the
present and future. A tendency toward greater stability of prices and
of price relations must involve some change in the direction in which
business men look for profits. Something of the speculative element goes
out of business when such a tendency prevails. Profits made from the
fluctuations of individual commodity prices, and from changes in the
relations among prices, tend to diminish. The high conjunctural profits
and the great losses which go with extreme fluctuations in the prices of
individual commodities alike tend to disappear. Business and prices
* Changes in the purchasing power of the dollar are not, of course, the sole factor
affecting the movements of individual commodities, but this factor becomes of domi-
nant importance during periods of violent change in the price level.
616 RECENT ECONOMIC CHANGES
both become more stable. There is evidence that our economic system
is moving in this direction.” -
In this general Survey, attention should be given to the cycles which
have been reflected in prices and in related economic series, as well as
to general tendencies prevailing during this period. Certain postwar
tendencies in industry have been so pronounced that they have in part
Overshadowed the cyclical fluctuations, and in much of the current
discussion it is these tendencies to which chief attention has been given.”
Important as these have been, and important as they will be if they
continue, the persistence of cyclical fluctuations is of equal importance.
Such fluctuations in prices and in several related series during postwar
years are shown by the curves in Charts 1 to 15. These charts have been
constructed in such a way as to reveal cyclical movements, rather than
trends. Each of these curves portrays changes in the values of monthly
relatives, these being secured by expressing each monthly value of
the Series in question as a percentage of its value at a date 12 months
preceding.”
In Charts 1 to 5 appear curves, representing the movements of 12-
month link indexes of this type during the period 1920–1928. The
measures plotted are derived from indexes of general wholesale prices,
* Such tendencies, it is understood, operate slowly, and are subject to numerous
interruptions. New inventions, new processes, may offset these tendencies for
shorter or for longer intervals.
* As to the nature of these tendencies, more is said in the several sections next
following.
* Thus the price (or production) index for January, 1920, is expressed as a percent-
age of the index value for January, 1919; the index value for February, 1920,
is expressed as a percentage of the index value for February, 1919, and so on. These
charts thus differ materially from the usual type, on which are plotted absolute values
or relatives on a constant base, and they call for a somewhat different interpretation.
Seasonal fluctuations, if they are constant, will not appear in the curve. Again, the
measurement of changes with reference to a date 12 months preceding means that the
curve of such an index fluctuates about the base line (i.e. the 100 line). When the curve
crosses the 100 line, it means, of course, that the series has precisely the same value as
it had 12 months before. Points above the 100 line represent rising values of the
original series. If the curve is above the 100 line and rising, it represents a series
which is increasing at an increasing rate; if it is above the 100 line and falling, it repre-
sents a series which is increasing at a decreasing rate. , Changes below the 100 line are
to be interpreted in a similar fashion. The effect of a consistent trend is not, of course,
eliminated, but it appears in a form somewhat different from that to which we are
accustomed. An upward trend serves to increase the number of entries above 100,
intensifying and lengthening the swings of the index above the base line. A down-
ward trend would have the reverse effect. Such an index, based on 12-month link
relatives, has distinct advantages in the following of cyclical fluctuations. Its use
conforms with the common practice of comparing monthly values with the values
prevailing 12 months before. (A more detailed discussion of the nature of measures
of this type will be found in The Behavior of Prices, National Bureau of Economic
Research, 1927, pp. 247–251.)
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 617
CHART 1.—FLUCTUATIONS IN COMMODITY PRICES, AT WHOLESALE
PER_EACH MONTH EXPRESSED IN PER
11
1
COMMODITY PRICES AT WHOLESALE
1920 1921 1922 1923 1924 1925 1926 1927 1928
CHART 2.—FLUCTUATIONS IN PRICES OF NONAGRICULTURAL PRODUCTS,
AT WHOLESALE
pHR
CENT
1
1
1
1
11
MONTH
PRICES OF NON-AGRICULTURAL PRODUCTS, AT WHOLESALE
192O 1921 1922 1923 1924 1925 1926 1927 1928
CHART 3.−FLUCTUATIONS IN VOLUME OF MANUFACTURING PRODUC-
TION
PER
CENT
150
1
1
11
VOLUME OF MANUFACTURING PRODUCTION
1920 1921 1922 1923 1924 1925 1926 1927 1928


618 RECENT ECONOMIC CHANGES
CHART 4.—FLUCTUATIONS IN VOLUME OF INDUSTRIAL EMPLOYMENT
PER
º EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
1
1 1 O
1 OO
VOLUME OF INDUSTRIAL EMPLOYMENT
1920 1921 1922 1923 1924 1925 1926 1927 1928
THART 5.–FLUCTUATIONS IN PAY ROLLS OF MANUFACTURING INDUS-
TRIES
EACH MONTH EXPRESSED IN PER OF MONTH OF NG YEAR
PAYROLLS IN MANUFACTURING INDUSTRIES
1920 1921 1922 1923 1924 1925 1926 1927 1928
CHART 6.—FLUCTUATIONS IN COMMODITY STOCKS
MONTH YEAR
COMMODITY STOCKS
1920 1921 1922 1923 1924 1925 1926 1927 1928






PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 619
CHART 7.—FLUCTUATIONS IN UNFILLED ORDERS
PER
CENT
21
UNFILLED ORDERS
39"T52OTT52TT522T 1925 1926 1927 1
CHART 8.—FLUCTUATIONS IN VOLUME OF TRADE
PER
CENT EACH MONTH
150
1
1
12O
11
1 OO
VOLUME OF WHOLESALE TRADE
1920 1921 1922 1923 1924 1925 1926 1927 1928



620 RECENT ECONOMIC CHANGES
CHART 9.—FLUCTUATIONS IN PRICES OF FARM PRODUCTS
PER. EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
11
1
50
40 FARM PRODUCTS
1926
1921 1922 1923
CHART 10,–FLUCTUATIONS IN PRICES OF FOODS
§ EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
1
11
1
80
FOODS
1927 1
1920 1921 1922 1923 1924 1925 1926
CHART 11. FLUCTUATIONS IN PRICES OF HIDES AND LEATHER PROD-
UCTS
PER
Gºach MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
150
140
130
120
1 1 O
100
90
80
70 N | 1
... TVL/
50
40
Ave
Z\
/
HIDES AND LEATHER PRODUCTS
1920 1921 1922 1923 1924 1925 1926 1927 1928






















PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 621
CHART 12.-FLUCTUATIONS IN PRICES OF TEXTILE PRODUCTS
PER
CENTEACH MONTH EXPRESSED IN CENT OF MONTH OF PRECEDING YEAR
140
1
1
11
1
80
70
60
1920 1921 1922 1923 1924 1925 1926 1927 1928
CHART 13.−FLUCTUATIONS IN PRICES OF FUEL AND LIGHTING
EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
1 OO
80
- FUEL AND LIGHTING
1920 1921 1922 1923 1924 1925 1926 1927 1928

622 RECENT ECONOMIC CHANGES
CHART 14.—FLUCTUATIONS IN PRICES OF METAL AND METAL PRODUCTS
PER
º EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
11
1
METALS AND METAL PRODUCTS
1920 1921 1922 1923 1924 1925 1926 1927 1928
CHART 15.-FLUCTUATIONS IN PRICES OF BUILDING MATERIALS
PER -
C#. EACH MONTH EXPRESSED IN PER CENT OF MONTH OF PRECEDING YEAR
1
1
11
1
30
BUILDING MATERIALS
1920 1921 1922 1923 1924 1925 1926 1927 1928
1 O
of the prices, at wholesale, of nonagricultural (i.e., industrial) com-
modities, of manufacturing production, of industrial employment, and
of pay rolls in manufacturing industries. The recession of 1920–21
and the subsequent business recovery are clearly apparent in all the
indexes.” Thereafter, we find in all series a clear cyclical peak in 1923,
a recession in 1924, a peak in 1925, and a slow but appreciable decline
from 1925 to 1927. The index of manufacturing production has been
above the base line during almost all of the last three and a half years,
which means that the trend of such production has been almost
unbrokenly upward. But the rate of such advance has declined appreci-
ably since the peak of the cycle in 1925, and it is in this decline that the
influence of cyclical forces has been apparent. All the other series,
22 The index of manufacturing production shows only the recovery since, in this
link form, it goes back only to the beginning of 1921.


PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 623
notably the prices of industrial commodities at wholesale, have suffered
more appreciable declines in their absolute values.
In Charts 6 to 8 there are shown similar curves relating to commodity
stocks, unfilled orders, and the volume of wholesale trade, and in Charts
9 to 15 there are plotted, in the same form, price indexes of a number of
commodity groups, at wholesale.”
III. TRENDS OF PRICE GROUPS, PREWAR AND POSTWAR
Reference has been made to the fact that between 1896 and 1913
there existed material differences among the price trends of different
commodities, and it was suggested that a key to certain of the distinctive
economic characteristics of the prewar period could be found in these
differences. Thus, during the 18-year period between 1896 and 1913,
rosin rose in price at an average annual rate of 10.2 per cent, print cloths
rose at a rate of 2.8 per cent, and wood alcohol declined at a rate of 3.4
per cent a year. During the period 1922–1927, hogs rose in price at an
average annual rate of 6.9 per cent a year, while the price of pig iron
declined at a rate of 7.3 per cent a year. It is such differences which
reflect enduring changes in economic relations. The nature and economic
significance of these differences may be best appreciated when attention
is shifted from individual commodities to important commodity groups,
and it is in the differences among groups, in respect to their price trends,
that our present interest lies. The discussion of recent price tendencies
may be introduced by a brief summary of the movements of prices during
the two decades preceding the war.
The relative movements of the commodity groups for which the
Bureau of Labor Statistics has constructed index numbers for prewar
years are shown in Table 6.
TABLE 6.—PREwAR TRENDs of CoMMODITY PRICEs, AT WHOLESALE
(Groups of the United States Bureau of Labor Statistics)

Average annual
rate of price in-
crease, 1896–1913
Average annual
Commodity groups rate of price in-
crease, 1896–1913
Commodity groups
Per cent Per cent
Farm products. . . . . . . . . . . . . +3.4 Cloths and clothing. . . . . . . . . + 1 .. 8
Building materials. . . . . . . . . . +2.4 House furnishings. . . . . . . . . . + 1 g 4
Foods. . . . . . . . . . . . . . . . . . . . . +2.3 Metals and metal products. . + 0. 8
All commodities. . . . . . . . . . . . +2.3 Chemicals and drugs. . . . . . . . + o 5
Fuel and lighting. . . . . . . . . . . +2. 1 e
|
These measures afford one view of the fundamental changes that were
taking place during the years preceding the war. The sustained improve-
23 The group index numbers plotted are selected from those computed by the
United States Bureau of Labor Statistics.
624 RECENT ECONOMIC CHANGES
ment in agricultural conditions is reflected in the margin of more than 1
per cent between the rates at which farm products and all commodities
were rising in price. Five of the eight groups rose less rapidly in price
than did the all-commodities index. That is, fuels, clothing, furnishings,
metal products, and chemicals and drugs were becoming relatively
cheaper during this period.
Additional information concerning prewar economic tendencies may
be gleaned from other classifications of commodities.
TABLE 7.-PREwAR TRENDs of Commodity PRICEs, AT WHOLESALE
(Various groupings)
|
Average annual rate
tº Number of ſº q
Commodity group mmodities of price increase,
COII, IIl O 1896–1913a
Per cent
Cultivated products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 +2.3
Noncultivated products. . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 | + 1 .. 5
Products of American farms. . . . . . . . . . . . . . . . . . . . . . . . 117 +2.4
All other commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 + 1 .. 5
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 +2.6
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 + 1.8
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 +2.5
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 + 1.7
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 + 1.9
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 + 1.9
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 +3.3
Animal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 +2.4
Cultivated vegetable products. . . . . . . . . . . . . . . . . . . . . . . 74 +2.1
Mineral products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70 +0.9
Domestic products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161 +2.0
Foreign products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 + 1.6
Products from both domestic and foreign sources. . . . . . 52 + 1.7
All commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226 + 1.9
* The measures in this table have been derived by averaging equally weighted rates of change in
the prices of individual commodities. The commodities included are those for which the Bureau of
Labor Statistics compiles and publishes price quotations. The difference between the rates of change
for “all commodities,” as given in this and in the preceding table, is due chiefly to the fact that one is
the average of measures for individual commodities, while the other is derived from an index number.
The classifications upon which these measures rest differ materially, it may be noted, from those
employed in the construction of currently published index numbers, even from certain ones having
the same group names. This accounts for certain differences between the rates here given and those
cited in the paper to which reference has been made, “Postwar Prices and Prewar Trends.” In a
later publication of the National Bureau of Economic Research, detailed information will be given
concerning the present classifications.
Certain fairly sharp differences are revealed in Table 7. Products of
cultivation were becoming relatively dearer in prewar years, while non-
cultivated products were becoming progressively cheaper in price.* Raw
* The comparison runs in relative terms, of course. The value of a commodity,
with reference to other commodities, was declining if the rate of its price increase
were less than the average increase for all commodities.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 625
materials were rising in price more rapidly than processed goods. Foods
were becoming dearer and nonfoods cheaper, in relative terms. The
greatest differences are found in the next to the last division of the table.
Forest products were rising in price at a relatively rapid rate, while the
prices of animal products and of cultivated vegetable products were
gaining on the general average. The relative value of mineral products,
in terms of all commodities, was declining at a rate of 1 per cent a year.
Much information is concealed by such broad averages as the above.
Within each of the groups there distinguished, we may expect to find
differences among individual commodities and among minor groups.
With reference to the farm situation, the trend of the prices of raw farm
products is more significant than the movement of the entire group of
commodities which are classed as products of American farms. Here we
find raw materials rising at a much more rapid rate than processed
materials (3.2, as against 2.2). Again, a striking margin is found between
the trends of raw minerals and of processed minerals. The raw minerals
rose at a rate of 1.8 per cent a year, while the processed goods rose at
0.6 per cent. The value, in terms of other commodities, of processed
mineral products declined more rapidly during this prewar period than
did the value of any other important commodity group. This progres-
sive cheapening of major industrial products played an important part
in the economic development of the United States during this era.
In Table 8 is shown a final picture of prewar movements in the field
of living costs and wages.
TABLE 8.—PREwAR TRENDs, Cost of LIVING, AND EARNINGS OF LABOR
: Average annual
Index" rate of increase,
1896-1913
|
Per cent
Cost of living. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Earnings, all groups of employees. . . . . . . . . . . . . . . . . . . . . . - +2.4
Earnings, factory employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.0
Purchasing power of earnings, all groups. . . . . . . . . . . . . . . . . . . +0s 5
Purchasing power of earnings, factory employees. . . . . . . . . . . . +0, 1
a The indexes of living costs and of earnings from which these measures have been derived are those
constructed by Prof. Paul H. Douglas. The rates of change in purchasing power, i.e., in real earnings,
are derived from the rates for cost of living and money earnings.
Costs of living were rising, during the two decades before the war,
at a rate not materially different from that of wholesale prices. The
earnings of all labor, as these are measured by the indexes constructed
by Prof. Paul H. Douglas, were rising at a rate of 2.4 per cent a year,
while the earnings of factory labor rose at a rate of 2 per cent a year
between 1896 and 1913. In terms of purchasing power, or real wages,
626 RECENT ECONOMIC CHANGES
the gains of labor are not so impressive. For all workers, the gain was
at a rate of one-half of 1 per cent each year, representing a slow but
sustained improvement in well-being. The corresponding figure for
employees of manufacturing plants is one-tenth of 1 per cent a year.
The earnings of these workers barely kept ahead of living costs during
this period.
The twenty-odd years preceding the war constituted, from an eco-
nomic viewpoint, a fairly homogeneous period, a period of rising prices,
increasing production, expanding commerce. The brief account pre-
ceding has dealt with the tendencies in the field of prices which helped
to give to this period its distinctive economic complexion. We may turn
now to the period in which our chief interest lies, the period which began
with the recovery following the drastic liquidation of 1920–21. We are
at a disadvantage in attempting to define the tendencies characteristic
of this postwar era, for this period has by no means run its course. There
will doubtless be many reversals of present trends before we arrive at a
point marking a decisive termination of this era. Nevertheless, it is
instructive to consider the tendencies which may now be observed, and
to contrast these with the tendencies which were operative before the war.
In Tables 1 and 2 of Appendix B there will be found numerous
measures of the price changes which have occurred since 1922. From
the groups there represented, certain of the more significant figures may
be selected for comment here (Table 9). The first set correspond to
the prewar figures shown in Table 6.
TABLE 9.—TENDENCIES AMONG COMMODITY PRICEs, AT WHOLESALE
(Groups of the United States Bureau of Labor Statistics)
|
Average annual Average annual
Commodity group rate of change, Commodity group rate of change,
1922–1927a 1922–1927a
Per cent Per cent
Foods. . . . . . . . . . . . . . . . . . . . . . . +2.3 Building materials. . . . . . . . . . — 1. 3
Farm products. . . . . . . . . . . . . . . + 1 .. 2 Textile products. . . . . . . . . . . . — 1.5
Hides and leather products. . . . + 0.2 Metals and metal products. . — 1.5
All commodities. . . . . . . . . . . . . . — O. 1 House furnishings. . . . . . . . . . — 1.5
Chemicals and drugs. . . . . . . . . . — 0.5 Fuel and lighting. . . . . . . . . . . — 2. 7
a The index numbers from which these rates of change have been computed are the revised measures,
on the 1926 base.
The net movement of the prices of all commodities, at wholesale, has
been slightly downward during this period, but the differences between
the movements of the major commodity groups have been even greater
than those which developed during the prewar era (see Table 6). As
for the earlier period, farm products and foods have gained, relatively,
while metals, fuels, and house furnishings have lost. Building materials
and chemicals and drugs have reversed their relative positions. Of
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 627
the nine groups, six have declined (five substantially), two have risen
appreciably, and one has remained practically on a level. *
TABLE 10–TENDENCIES AMong CoMMODITY PRICEs, AT WHOLESALE
(Minor groups of the United States Bureau of Labor Statistics)
Average annual
Commodity group rate of change,
1922–1927a
Per cent
Rubber, crude. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 16.8
Textile products (other than cotton, silk, and wool) . . . . . . . . + 6.0
Livestock and poultry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.5
Meats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.1
Drugs and pharmaceuticals”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.6
Grains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.5
Essential oils”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.7
Butter, cheese, and milk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Nonferrous metals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Crude drugs”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2
Boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.8
Chemicals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.6
Leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Foods (other than butter, cheese, milk, and meats) . . . . . . . . + 0.3
Cattle feed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Furnishings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Woolens and worsted goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
All commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0. 1
Anthracite coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Paper and pulp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Brick. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Farm products (other than grains, livestock, and poultry). . — 1.2
Structural steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.4
Hides and skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Portland cement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Petroleum products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Cotton goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Iron and steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Furniture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.7
Bituminous coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.5
Coke. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.6
Silk and rayon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.8
* The index numbers from which these rates of change have been computed are the revised measures
on the 1926 base.
* Index numbers of the Oil, Paint and Drug Reporter.
* Relative changes in the prices of different commodities are influenced most
strongly by the possibilities that exist, with respect to particular commodities, of
applying to their production mechanical aids and scientific discoveries. To the
ordinary individual, the most significant recent change in price levels is the relative
cheapness of those things that can be turned out in quantity by mechanical processes,
and the high price of personal service and of those things that can be turned out only
by crude hand labor. This differentiation can be seen in traveling from country to
country, when it is observed that in mechanically backward countries, those things
are relatively cheap which are produced by crude hand labor, and those things are
dear which require skilled and highly mechanized production. Note by M. C. Rorty.
628 RECENT ECONOMIC CHANGES
These movements reflect the changes which are generally understood
to have been characteristic of the postwar period. Farm products have
risen in price, while industrial goods have tended to decline. But the
figures for these nine major groups leave untold much of the story of the
price changes characteristic of this postwar period. More detailed
measures, and measures representing classifications other than that
employed by the Bureau of Labor Statistics, are needed to supplement
those there given. Some of the details of the picture are filled in by the
measures in Table 10, defining the average annual rates of change in the
index numbers for minor commodity groups, as constructed (with three
exceptions) by the Bureau of Labor Statistics.
Here we have, as is to be expected, a much wider range of variation,
extending from the crude rubber group, which increased in price at an
average rate of 16.8 per cent a year, to the silk and rayon group, which
declined in price at an average rate of 5.8 per cent a year. The ranking
of groups does not permit such a relatively simple interpretation as did
the division of nine major groups. Something of the complexity of the
general economic situation is revealed by these detailed figures. The
subclasses of certain of the broad groups are found to have differed
widely from each other in their price trends during the past six years.
Thus we find the general group of textile products broken into four
smaller groups, one of which is second from the top, one approximately
at the center of the list, one seventh from the bottom, and one at the
bottom of the entire list of 32 minor groups. From a study of this table,
much may be learned concerning the character of the forces which were
affecting economic processes during this period.
Certain of the broader tendencies of the period may be discerned
when the general list of commodities is divided into groups on different
bases. A number of classifications have been applied by the National
Bureau of Economic Research to the commodities in the Bureau of Labor
Statistics' list, and from the index numbers thus constructed certain of
the measures in Table 11 have been computed.”
The various index numbers measuring the movements of agricultural
and nonagricultural products agree in showing both an absolute and a
relative gain in the prices of the former group.”
* These index numbers will be published at a later date, and details of the various
classifications will be given at that time. The index numbers, from which the rates of
change in the present chapter have been computed, are unweighted geometric averages
of relative prices, on the 1913 base.
* In the discussion of the postwar trends of these groups, one point of some general
importance must be borne in mind. The discussion of prewar trends dealt with the
period from 1896 to 1913; the treatment of post-war trends is restricted to the period
1922–1927. Developments during the intervening years have been ignored. There
is justification for considering developments during the period 1914–1921 as So much
water under the bridge, and for neglecting these in attempting to trace postwar
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 629
TABLE 11.-TENDENCIES AMONG CoMMODITY PRICEs, AT WHOLESALE
(Various groupings)

Average annual
& Number of rate of price
Commodity group commodities change,
1922–1927
Per cent
Agricultural products”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 +0.7
Nonagricultural products”. . . . . . . . . . . . . . . . . . . . . . . . . . 263 — 1.8
Cultivated products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230 + 1.0
Noncultivated products. . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 — 1. 1
Products of American farms. . . . . . . . . . . . . . . . . . . . . . . . 201 : +0.7
All other commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 — 0.5
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 + 1.4
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 298 — 0.4
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 +2.0
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 – 0.9
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 +0.3
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232 +0.0
Animal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 + 1.2
Cultivated vegetable products. . . . . . . . . . . . . . . . . . . . . . 127 +0.5
Mineral products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 — 0.9
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 — 1.6
Foreign products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 +3.4
Domestic products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294 — 0.4
Commodities from both domestic and foreign sources. . 76 +0.5
• These index numbers are compiled by the Bureau of Labor Statistics. Agricultural products
include all the commodities classed as “Farm Products,” and “Foods,” except that hides and skins,
cocoa beans, coffee, copra, fish, pepper, salt, tea, and cocoanut oil are excluded, and bran, cottonseed
meal, linseed meal, and mill feed middlings are included. All other commodities are classed as “non-
agricultural.”
The margin between the two rates of change has been somewhat
greater for the period since 1922 than it was during the prewar period,
for which figures were given in Table 7. As in the prewar period, raw
materials have been gaining, in relation to processed materials, and foods
have been rising in relation to nonfoods. For these three major groups,
recent tendencies have resembled those prevailing in the earlier period.
Animal, vegetable, and mineral products stand also in the same relative
positions, but forest products, which in prewar days rose most rapidly,
have declined at the sharpest rate in recent years. There has been a
slight, but hardly significant, change in the relative positions of producers’
and consumers’ goods. The price trends of foreign and domestic products
have been reversed. Within the last six years, foreign products (a rela-
trends. Yet events during this disturbed period have influenced recent trends. The
fact that agricultural prices have risen in recent years, while nonagricultural prices
have declined, is in part a result of the more severe recession in agricultural prices in
1920–21. Therefore, although we deal with trends since 1922, it is well to remember
that these trends are not set off sharply from the developments of the preceding period.
630 RECENT ECONOMIC CHANGES
tively small group, it should be noted) have risen at a rate of 3.4 per cent
a year, in the face of a practically stable price level.”
More direct evidence concerning the change in agricultural conditions
is afforded by the index numbers of prices at the farm, which are compiled
by the Bureau of Agricultural Economics. In Table 12 are given rates
of change in these indexes, together with rates relating to raw and proc-
essed products of American farms at wholesale, and rates of change in
the prices of commodities purchased by farmers.
TABLE 12.-PRICE TENDENCIES AMONG AGRICULTURAL PRODUCTS AND AMONG
CoMMODITIES PURCHASED BY FARMERS
i
+
*
Average annual
ber of
Number o rate of change,
Commodity group
commodities 1922–1927
- Per cent
Products of American farms, at wholesale:
Raw materials. . . . . . . . . . . . . . . . . . . . . . 58 + 1 .. 2
Processed materials. . . . . . . . . . . . . . . . . . 143 +0.4
|
Farm products, prices at the farm. . . . . . . . . 30 + 1. 1
Meat animals. . . . . . . . . . . . . . . . . . . . . . . . 5 +6.6
Grains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +4.3
Fruits and vegetables. . . . . . . . . . . . . . . . 8 | +4.0
Dairy and poultry products. . . . . . . . . . . 4 +0.2
Unclassified commodities. . . . . . . . . . . . . 5 — 3.7
Cotton and cottonseed. . . . . . . . . . . . . . . 2 — 7.5
Commodities purchased by farmers:
For use in production. . . . . . . . . . . . . . . . +0.6
For family maintenance. . . . . . . . . . . . . . 4 & 8 +0.3
The chief gain in the prices, at wholesale, of farm products, has been
recorded by raw materials. Prices at the farm, as averaged for all farm
products, have gained at a rate of 1.1 per cent a year. This average
conceals important differences between groups. Substantial gains have
been made by meat animals, grains, fruits, and vegetables. Dairy and
poultry products have just held their own, while the unclassified com-
modities (which include horses, hay, flaxseed, wool, and tobacco) and
cotton and cottonseed have declined materially. The agricultural
improvement which is shown by these figures has been spotty. A survey
of the figures for individual commodities, which are given in Table 2
of Appendix B, reveals similar differences between the rates at which the
prices of individual commodities have changed.
Table 13, relating to various subdivisions of raw and processed
materials, sheds further light on the price changes which have occurred
in recent years. -
” The “all commodities” index, constructed in the same way as the index numbers
in Table 11, shows a gain at the rate of 0.08 per cent a year between 1922 and 1927.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 631
TABLE 13.−PRICE TENDENCIES, RAW AND PROCESSED MATERIALs
Average annual
e Number of
Commodity group ! commodities rate of change,
1922–1927
Per cent
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . 106 + 1.4
Commodities not products of American
farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 + 1.7
Products of American farms. . . . . . . . . . 58 + 1.2
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 +3.0
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . 53 !, — 0.1
Consumers' goods. . . . . . . . . . . . . . . . . . . 22 +2.3
Producers' goods. . . . . . . . . . . . . . . . . . . . 84 i + 1 .. 3
Processed materials. . . . . . . . . . . . . . . . . . . . . . 298 — 0.4
Products of American farms . . . . . . . . . 143 +0.4
Commodities not products of American
farms . . . . . . . . . . . . . . . . . . . . . . . . . . . - 155 — 1. 1
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 + 1.4
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . 215 — 1.0
Consumers' goods. . . . . . . . . . . . . . . . . . . 150 0.0
Producers' goods. . . . . . . . . . . . . . . . . . . . 148 – 0.7
The rise in raw material prices has already been commented upon.
Among raw materials, foods have gained materially over nonfoods, and
consumers’ goods have gone up more rapidly than producers' goods.
Of the processed materials, foods have risen, while nonfoods have
declined, consumers’ goods have held steady and producers’ goods have
declined.”
A broader picture of the conflicting movements within the price
system is afforded by Table 14, giving the rates of change of the various
indexes from which the index of the general price level is constructed by
the Federal Reserve Bank of New York.
The movement of the general index has been upward in recent years,
as opposed to the slight declining tendency of the index of wholesale
prices. Among the various group indexes, security prices have shown a
quite phenomenal gain since 1922, the rate far exceeding those at which
other elements of the price system have changed. Wages, as measured
by the present index, come next, having gained at a rate only slightly
below 3 per cent a year. The only material declines are found in trans-
portation costs and the prices of industrial commodities at wholesale.
The relation between the movement of wages, industrial commodity
prices, and certain other price groups has already been commented upon.
28 The revised index numbers of the Bureau of Labor Statistics include indexes of
the prices of raw materials, semimanufactured articles, and finished products. Aver-
age annual rates of change, 1923–1927, have been as follows: Raw materials, +0.5;
semimanufactured articles, – 1.9; finished products, -0.4.
Raw materials and finished products stand in the same relative position as in Table
13. A considerable decline is shown in the prices of semimanufactured articles.
632 RECENT ECONOMIC CHANGES
TABLE 14.—MovKMENTS OF WAGES, RENTs, AND PRICEs.
|
Average annual rate
Group of change, 1922–1927
Per cent
Security prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +9. 1
Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.8
Food prices, retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.4
Equipment and machinery. . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Prices at the farm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1. 1
Automobile prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.9
Hardware prices, wholesale. . . . . . . . . . . . . . . . . . . . . . . . . +0.3
Rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Realty values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Cost of living items, other than food and rents. . . . . . . — 0.3
Transportation costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Industrial commodity prices, at wholesale. . . . . . . . . . . — 1.8
Total (index of general price level) . . . . . . . . . . . . . . . . . . + 1 .. 5
* Following are descriptions of the items entering into the general index:
Security Prices.—Preferred stock (weight 1); common stock (weight 4); inverted yield on 60 high-
grade bonds (weight 5). Federal Reserve Bank of New York, from data of Standard Statistics Co.
Wages, Composite.—Based on agricultural wages (rate), weight 5; railroad wages (earnings), weight
10; teachers' salaries (rate), weight 5; factory wages (earnings), weight 40; building wages (rate), weight
15; clerical wages (earnings), weight 15; unskilled labor wages (rate), weight 10. Federal Reserve
Bank of New York.
Retail Food Prices.—43 articles of food in 51 cities, United States Department of Labor.
Equipment and Machinery.—Federal Reserve Bank of New York.
Farm Prices at the Farm.–Farm prices of 30 commodities, United States Department of Agriculture.
Automobile Prices.—Weighted price index of six makes of passenger cars. Data from Raymond B.
Prescott.
Wholesale Hardware Prices.—Index of National Retail Hardware Association.
Rents.-Cost of housing in 32 cities, United States Department of Labor (monthly changes inter-
polated arithmetically).
Realty Values.—Urban, Federal Reserve Bank of New York (weight 4). Farm, estimated value per
acre, United States Department of Agriculture (weight 1).
Other Cost of Living Items.—Cost in 32 cities of clothing (weight 4), fuel and light (weight 1), house
furnishing goods (weight 1), and miscellaneous (weight 4). United States Department of Labor (monthly
changes interpolated arithmetically).
Transportation Costs.-Federal Reserve Bank of New York. Railway Freight Receipts per ton-mile,
United States Interstate Commerce Commission (1913–1919, inclusive monthly average only, and
current data from United States Department of Commerce, “Survey of Current Business”).
Industrial Commodity Prices, at Wholesale.—Nonagricultural Prices, United States Department of
Labor.
Finally, we may summarize certain figures, comparable to those
given in Table 8 for prewar years, relating to living costs and the earn-
ings of labor.
It is noteworthy that the average annual rates of increase in earnings,
as shown by these various indexes, fall very close to the rates at which
money earnings were increasing during the two decades preceding the
war. (See Table 8.) The great difference between prewar and postwar
conditions, in respect to the present set of measures, is owing to the
difference between the trends of living costs in prewar and in postwar
days. The rise in living costs between 1896 and 1913 accounted for
substantially all of the increase in the earnings of factory labor, and left
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 633
only a small margin of gain for all groups of employees. But in postwar
years living costs have increased at a rate of less than 1 per cent a year,
while money earnings (except for women employees in manufacturing
TABLE 15.-Postwar TENDENCIES, COST OF LIVING, AND THE EARNINGs of LABOR
Average annual rate of
Indexo change, 1922–1927
Per cent
Cost of living. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.7
Wages (general). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.8
Per capita earnings of factory labor. . . . . . . . . . . . . . . . . +2.4
Earnings of factory labor, New York State. . . . . . . . . . . +2.8
Earnings of factory labor, Massachussetts. . . . . . . . . . . . +2.4
Earnings of factory labor, total, 23 industries”. . . . . . . . +2.0
Men. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.6
Unskilled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +3.0
Skilled. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.2
Women. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1. 1
* The measures given are based upon the movements of the following indexes and compilations:
Cost of living.—Index of the United States Bureau of Labor Statistics.
Wages (general).-Index of the Federal Reserve Bank of New York. (See footnote to Table 14.)
Per capita earnings of factory labor.—Derived from data on employment and pay rolls, compiled
by the United States Bureau of Labor Statistics.
Earnings of factory labor, New York.-Compiled by the New York State Department of Labor.
Earnings of factory labor, Massachusetts.-Compiled by Massachusetts Department of Labor and
Industries, Division of Statistics.
Earnings of factory labor, 23 Industries.—Compiled by the National Industrial Conference Board.
* The data upon which these rates are based cover the period July, 1922–December, 1927.
plants) have gone up at rates varying from 2 to 3 per cent. The gain in
well-being is measured, of course, by the margin between the two.
Accepting the measures in the above table as accurate, they show a gain
in the purchasing power of wages in general at a rate of 2.1 per cent a
year, between 1922 and 1927. For factory employees, the purchasing
power of per capita earnings has gone up at a rate of 1.7 per cent.” These
are materially greater than the corresponding values of 0.5 and 0.1,
for prewar years.
The figures in the various tables above give some indication of the
nature of the forces which have been in operation in the United States
in recent years. For a more complete picture, the measures relating to
price movements should be supplemented by corresponding measures
relating to the production and distribution of goods, and certain measures
of this type will be given in the next section. Some of the conclusions
suggested by a survey of the price figures are summarized below:
1. During the period 1922–1927, the general level of wholesale prices
showed a slight declining tendency, but there were pronounced differences
among commodity groups in the direction and degree of price change.
* These rates relate to the actual earnings of employed workers. They should be
read with reference to the unemployment figures cited in Chapter VI, pp. 462–478.
634 RECENT ECONOMIC CHANGES
2. The prices of building materials, textiles, house furnishings, metal
products, and fuels declined substantially.
3. Raw materials rose in price, while processed materials declined;
foods gained, while nonfoods declined; consumers’ goods advanced slightly
while producers’ goods remained substantially at a level. The small
group of products of exclusively foreign origin rose materially in price,
while products of exclusively domestic origin declined.
4. Cultivated products advanced in price; noncultivated, or industrial,
products declined. In the general advance of cultivated products,
the products of American farms shared. The advance in the prices of
cultivated products was greater for raw materials than for fabricated
goods made from such materials.
5. Prices of farm products at the farm advanced at a rate slightly
exceeding 1 per cent a year. There were, however, great inequalities
in the movements of different types of farm products. Meat animals,
grains, and fruits and vegetables scored the greatest advances, gaining at
rates varying from 4 per cent to more than 6 per cent a year. Cotton
and cottonseed declined at a rate of 7.5 per cent a year.
6. When other price fields are included in this survey, still more
pronounced differences are found. Security prices have leaped upward
at an average rate of 9 per cent a year.” Important declines were
registered in transportation costs, and cost of living items, other than
food, fell somewhat.
7. The rate of gain in money wages in postwar years has been very
close to that which prevailed during the two decades before the war.
The advance in the earnings of factory labor has been at a rate of from
2 to 2.5 per cent a year; the advance in general wages has been slightly
above this figure. The postwar gain in the purchasing power of labor
has been at an appreciably higher rate than it was between 1896 and
1913, for living costs have gone up since 1922 at a rate much lower than
that measuring the change in earnings. The purchasing power of earn-
ings in recent years appears to have increased at a rate slightly below
2 per cent a year.
IV. POSTWAR TENDENCIES IN AMERICAN BUSINESS
It is an incomplete view of economic developments which takes account
only of movements in the field of prices. In the tables which follow,
are shown a number of measures defining postwar economic movements
over a much broader field. Space limitations make it necessary to leave
* This figure serves to emphasize the need of caution in speaking of these postwar
movements as “trends.” They are not trends in the accepted sense of that word,
for the period covers but six years. The measures given are significant as indexes of
tendencies which have been operating during this six-year period, but not as measures
of trends. . " . "
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 635
almost entirely to the tables the task of telling the story of recent eco-
nomic tendencies. Considerable information may be gleaned from a
detailed study of these tables, and of additional tables given in the
Appendix.
The first table deals with general tendencies in the field of production.
TABLE 16.-INDExEs OF PRODUCTION
Average annual
Index" rate of change,
1922–1927
P
er
:
t
6
.
Production of raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minerals (9 commodities). . . . . . . . . . . . . . . . . . . . . . . . . . .
Crop marketings” (26 commodities) . . . . . . . . . . . . . . . . . .
Animal products, marketings” (9 commodities). . . . . . . .
Forest products (13 commodities) . . . . . . . . . . . . . . . . . . . .
Production of manufactured goods. . . . . . . . . . . . . . . . . . . . . . .
Chemicals, oils, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Metals, excepting iron and steel. . . . . . . . . . . . . . . . . . . . .
Iron and steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foodstuffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Paper and printing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
S
to
ICl
e
8,
Il
d
C
la
y
D
TO
d
uct
Supplementary indexes:
Petroleum refining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Electric power production. . . . . . . . . . . . . . . . . . . . . . . . . . .
Rubber tires. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
;
:
:
:
a The indexes, with the exception of the last four, are those of the Department of Commerce.
Descriptions and current values of these indexes are to be found in the Survey of Current Business.
Three of the supplementary indexes are taken from those constructed by the Federal Reserve Board,
appearing currently in the Federal Reserve Bulletin. -
b The measures relating to crop marketings and the marketings of animal products are here employed
as indexes of production, although they deal with the distribution, rather than the production, of goods.
Measures of change in the constituent series, from which the above
indexes are derived, together with measures for certain additional
production series, will be found in Table 3, in Appendix B.
The differences among the rates of change of the various production
groups are greater, for the list as a whole, than the differences found in the
study of price groups. - .
Table 17 shows the changes occurring during the last six years in
the transportation and distribution of goods, and in series directly related
to commercial transactions.”
81 Additional measures relating to the movements of goods are given in Table 4,
Appendix B.
636 RECENT ECONOMIC CHANGES
TABLE 17.--THE DISTRIBUTION OF GOODs
Average annual
Series rate of change,
1922–1927
|
- - - - ----- - - - ---- |
| Per cent
General indexes: |
Check payments outside New York City". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.0
Ton-miles of freight carried. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.0
Freight car loadings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.2
Agricultural movements". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 1 .. 5
Sales, wholesale”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.7
Freight car loadings:
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.9
Coal and coke. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 3.5
Merchandise and l.c.l. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.6
Ore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Grain and grain products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4
Livestock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Crops, marketings:*
Cotton products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.2
Fruits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.8
Vegetables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 5
Grains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.6
Wholesale distribution—sales in wholesale establishments:a,d
eat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.9
Drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4. 1
Furniture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - + 2.6
Men's clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.2
Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - + 0.7
Groceries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Dry goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Women's clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.4
Jobbers' sales of iron, steel and other heavy hardware”. . . . . . . • + 7.4
Retail distribution:"...f
Mail order house sales (4 houses). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.2
Ten-cent chain store sales (4 chains, average per store). . . . . . . . . . . . . . . . . . . . . . . - + 4.5
Department store sales (359 stores) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.9
Chain store sales (number of chains constant, but number of stores not constant)—
Groceries (27 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +20.6
Five and ten (5 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 12.0
Drug (9 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 11.7
Candy (5 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.0
Shoe (6 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5. 7
Cigar (3 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.9
Music (4 chains). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.9
Imports". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6. 0
Foodstuffs, crude, and food animals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 10.0
Crude materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.9
Semimanufactures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.6
Finished manufactures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5. 3
Manufactured foodstuffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Exports”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.7
Finished manufactures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 9. 1
Semimanufactures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.1
Crude materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 3. 1
Foodstuffs, crude, and food animals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Manufactured foodstuffs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.4
• Dollar value series.
* Indexes of the Federal Reserve Board.
° Indexes of the Department of Commerce.
d The indexes, as compiled by the Federal Reserve Board, are based upon sales in wholesale establish-
ments, as follows: Meat—61 firms in 51 cities; drugs—92 firms in 60 cities; furniture—87 firms in 36
cities; men's clothing—13 firms in 5 cities; hardware—186 firms in 114 cities; boots and shoes—89
firms in 52 cities; groceries—362 firms in 213 cities; dry goods–146 firms in 84 cities; women's clothing—
40 firms in 1 city.
• Based upon data compiled by the American Iron, Steel, and Heavy Hardware Association. The
index is published in the Survey of Current Business.
/ Indexes compiled by the Federal Reserve Board.
The different index numbers from which the above measures have
been derived represent their fields with varying degrees of accuracy.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 637
Some are based upon exhaustive data, some upon samples of questionable
adequacy. Accordingly, the different measures brought together in
Table 17, and in other tables of the present section, must be compared
with caution.
With few exceptions, the measures indicate that goods have been
moving from producer to consumer in a steadily growing volume. How-
ever, the measures relating to retail distribution do not necessarily
indicate an increasing volume of total retail sales. In considerable part,
they reflect the shifts in channels of retail distribution characteristic of
recent years. This is particularly true of the chain store sales, where
the number of stores is not constant. The figures indicate how rapid
the increase in volume of business has been for certain of the chain stores.
The sales (dollar value) of 27 grocery chains, for example, have increased
during the period 1922–1927 at an average annual rate slightly in excess
of 20 per cent.
TABLE 18.—CoMMODITY Stocks AND UNFILLED ORDERs

Average annual
Series rate of change,
1922–1927
Per cent
Commodity stocks, all commodities”. . . . . + 5.4
Raw materials, total . . . . . . . . . . . . . . . + 5.9
Textiles. . . . . . . . . . . . . . . . . . . . . . + 7.0
Foodstuffs. . . . . . . . . . . . . . . . . . . . + 6.6
Chemicals and oils. . . . . . . . . . . . . + 4.3
Metals. . . . . . . . . . . . . . . . . . . . . . . — 4.1
Manufactured goods, total . . . . . . . . . . + 4.6
Rubber. . . . . . . . . . . . . . . . . . . . . . . —H 13.8
Stone, clay, and glass. . . . . . . . . . . + 13.6
Iron and steel. . . . . . . . . . . . . . . . . —H 9. 2
Lumber. . . . . . . . . . . . . . . . . . . . . . . —H 5.8
Chemicals and oils. . . . . . . . . . . . . + 5.8
Nonferrous metals. . . . . . . . . . . . . + 3.3
Textiles. . . . . . . . . + 1.0
Foodstuffs. . . . . . . . . . . . . . . . . . . . + 0.8
Paper. . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Leather. . . . . . . . . . . . . . . . . . . . . . . — 10.1
Unfilled orders, all groups”. . . . . . . . . . . . . . — 7.9
Lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1
Brick and glass. . . . . . . . . . . . . . . . . . . . 3.1
Textiles. . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.7
Vehicles. . . . . . . . . . . . . . . . . . . . . . . . . . — 8.5
Iron and steel . . . . . . . . . . . . . . . . . . . . . — 9.4
a Weighted indexes of stocks of commodities held at the end of each month, as compiled by the
Bureau of the Census from data on 65 commodities. The indexes are published in the Survey of Current
Business. Measures relating to the stocks of a number of individual commodities are given in Table 5,
Appendix B.
b Compiled by the Bureau of the Census from data on 17 commodities, weighted. In addition to
the groups named, data are also included in the total for one class of paper. The indexes are published
in the Survey of Current Business.
638 RECENT ECONOMIC CHANGES
The measures showing the changes in the volume and character of
our foreign trade indicate that imports have been growing at a somewhat
more rapid rate than exports, and that our exports of manufactured
articles, other than foodstuffs, have been expanding rapidly. The only
decline among the broad import groups here shown is found among
manufactured foodstuffs.
Because of recent shifts in marketing methods, considerable interest
attaches to changes in the volume of unfilled orders and in commodity
stocks. Measures relating to these series appear in Table 18. It should
be noted that the data on commodity stocks do not relate to mercan-
tile stocks, but, primarily, to stocks in the hands of producers and
manufacturers.
In spite of the emphasis upon hand-to-mouth buying, stocks of both
raw materials and manufactured goods have increased steadily in recent
years. The only three groups to show declines are raw metals, leather,
and paper (in the case of the latter group, the decline occurred in wood
TABLE 19.-BUILDING ACTIVITY AND BUILDING COSTs
Average annual
Series rate of change,
| 1922–1927
Per cent
Construction volume (actual installations)". . . . . . . . . . . . . . . . . . . +6.2
Contracts awarded for building construction”. . . . . . . . . . . . . . . . +5.7
Residential buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.4
Public and semipublic buildings. . . . . . . . . . . . . . . . . . . . . . . . +7.2
Commercial buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +5.4
Industrial buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Educational buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.2
Building costs:
Building material prices".—
Frame buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Brick buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Construction costs (including labor costs)—
Index of Engineering News Record". . . . . . . . . . . . . . . . + 1.8
Index of Associated General Contractors of America” +0.9
Factory building costs, Aberthaw index. . . . . . . . . . . . . + 1 .. 4
Indexes of the American Appraisal Co.—
Brick building, wood frame. . . . . . . . . . . . . . . . . . . | +0.9
Frame building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.8
Reinforced concrete building. . . . . . . . . . . . . . . . . . +0.4
Brick building, steel frame. . . . . . . . . . . . . . . . . . . . +0.2
• From index compiled by the Associated General Contractors of America.
* From the data compiled by the F. W. Dodge Corporation. The original data are in thousands of
square feet.
• Measures based upon price compilations by the Bureau of Standards. For detailed explanation,
see Survey of Current Business.
d Index based upon the costs of steel, cement, and lumber, and the wages of common labor in a num-
ber of cities.
• An index combining wage and material costs, in the proportion of 40 per cent for wages and 60 per
cent for materials.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 639
pulp). It is possible that there have been changes since prewar days
in the agencies holding the stocks, but there is no general tendency for
the total volume of commodity stocks to decline.
In contrast to the increase in stocks is the pronounced decline in
unfilled orders, a decline to which there is no exception among the major
groups listed above. This decline is the more notable in that it has
occurred during a period when the volume of production and the volume
of trade have been increasing steadily. -
The volume of building, which is measured in Table 19, increased at
an average annual rate of about 6 per cent between 1922 and 1927, a
figure materially higher than the 2.5 and 4.0 which measure, respectively,
the rates of increase in primary production and in the production of
manufactured goods during the same period. This increase has been
owing entirely to marked increases in the volume of residential, public,
and commercial building. The volume of industrial and educational
building has declined. This increase in the volume of building has been
accompanied by declining prices of building materials, but general
construction costs, which include labor costs, have gone up slightly
during this period.” -
The measures in Table 20 relate to another and highly important
aspect of the postwar economic scene.
TABLE 20.-EMPLOYMENT, PAY Rolls, AND PER CAPITA EARNINGS IN MANUFACTUR-
ING INDUSTRIES”

Average annual rate of change, 1922–1927
Industrial group
Per capita
Employment Pay rolls earnings
Per cent Per cent Per cent
Lumber and its products. . . . . . . . . . . . . . . . . . . . . . . . . — 2.8 +0.2 +3. 1
Stone, clay, and glass products. . . . . . . . . . . . . . . . . . . — 0.3 +2.7 +3.0
Iron and steel and their products. . . . . . . . . . . . . . . . . — 0.6 +2.1 +2.6
Miscellaneous industries. . . . . . . . . . . . . . . . . . . . . . . . . +0.8 +3.5 +2.6
Paper and printing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +1.6 +3.9 +2.3
Food and kindred products. . . . . . . . . . . . . . . . . . . . . . — 1.4 +0.8 +2.2
Chemicals and allied products. . . . . . . . . . . . . . . . . . . . +0.3 + 1.9 +1.6
Vehicles for land transportation. . . . . . . . . . . . . . . . . . — 0.9 +0.6 + 1.5
Textiles and their products. . . . . . . . . . . . . . . . . . . . . . . — 2.6 — 1.4 + 1.2
Tobacco products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.7 — 4.5 +0.2
Metal products other than iron and steel. . . . . . . . . . — 1.5 — 1.3 +0.2
Leather and its products. . . . . . . . . . . . . . . . . . . . . . . . . — 2.3 — 2.6 — 0.3
All industries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7 + 1.7 +2.4
a The data from which these rates have been computed were compiled by the United States Bureau of
Labor Statistics. The rates of change in employment and pay rolls were derived from the data as com-
piled; the rates of change in per capita earnings were computed from the employment and pay roll
figures. The data cover the period July, 1922–December, 1927.
* See Chap. III, Construction.
640 RECENT ECONOMIC CHANGES
The measures for “all industries” bring out certain important charac-
teristics of the postwar period. There has been a slight but significant
decline in the volume of employment in manufacturing industries in the
United States, accompanied by a material increase in pay rolls and a
Somewhat greater increase in the per capita earnings of factory employees.
In interpreting these figures, it must be remembered that during this
period there has been an increase in per capita production in manufactur-
ing industries at a rate not far below 4 per cent a year. And these move-
ments have accompanied a steady decline in the prices of industrial
commodities. .
In nine of the twelve major industrial groups there has been a decline
in the volume of employment; in four of the twelve there has been a
decline in pay rolls; and in only one of the twelve has there been a decline
in the per capita earnings of employees. A more detailed view of these
tendencies is given by Table 6, Appendix B, where there appear figures
for the 54 industries from which the group totals have been secured.”
Employment has declined in 37 of these 54 industries, pay rolls have
declined in 26, and per capita earnings have declined in only six industries.
In these conflicting movements is found a partial explanation of the
industrial distress which has been felt in some industries and among
Some groups of workers, although general wages and production have
been steadily increasing. The decline in employment in 37 of the 54
industries is an obvious cause of such distress. Important, too, is the
fact that actual wage disbursements have declined in almost half the
industries (in 26 of the 54). It is true that the total volume of wage
disbursements has gone up, but it is the changes in employment and in
wage payments in specific industries which affect individual workers.”
Changes in corporation profits during the postwar period under
review are shown in Table 21.
An important qualification to be borne in mind in interpreting the
figures in Table 21, and, particularly, in comparing them with the meas-
ures given in other tables, is that the profits figures relate only to the
years 1923–1927. Data precisely corresponding to those here employed
were not available for 1922. It is probable that, for most of the groups
represented in the above table, the rates of change would be somewhat
greater if 1922 had been included, for general profits in that year were
not as high as in the following years. Again, it is to be noted that the
* The data for certain industries do not cover the entire period, and figures for
these industries, accordingly, are not fully comparable with the measures for the other
industries.
* There is reason to suspect a downward bias in the factory employment and
factory pay roll compilations from which the above measures have been divided.
Since each comparison of employment or of pay roll disbursements at different dates
relates to identical establishments, figures relating to new plants are excluded.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 641
rates of change are based upon the aggregate profits in each of the groups.
In the computing of such aggregates, large corporations dwarf the
smaller ones. For certain purposes it is desirable that aggregate figures
should be used and that the large corporations should be given pre-
dominant weight. If the data permitted, it would be well to supplement
these figures with others, in which changes in the profits of smaller
corporations could be followed.
TABLE 21.—CORPORATION PROFITS”

Industrial group Number of | Average annual rate
corporations of change, 1923–1927
Per cent
Public utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 —H 14.7
Public utilities other than telephone. . . . . 51 + 15.0
Telephone companies. . . . . . . . . . . . . . . . . . b78 + 14.2
Industrial and miscellaneous corporations. . . . 381 + 9.0
Leather and shoes. . . . . . . . . . . . . . . . . . . . . 9 +28.8
Motors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 —H·22.5
Amusement. . . . . . . . . . . . . . . . . . . . . . . . . . . 6 +18.2
Miscellaneous industries. . . . . . . . . . . . . . . . 58 + 15.0
Machine and machine manufacturing. . . . 18 + 14.9
Metals and mining. . . . . . . . . . . . . . . . . . . . 19 + 13.9
Stores. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 —H 12.4
Chemicals and drugs. . . . . . . . . . . . . . . . . . . 14 + 12.3
Rubber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 + 11.3
Tobacco. . . . . 16 + 9.2
Oils. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 31 + 6.7
Food and food products.… 39 + 4.7
Steel companies. . . . . . . . . . . . . . . . . . . . . . . - 26 + 0.4
Motor accessories. . . . . . . . . . . . . . . . . . . 18 — 1.0
Building supplies. . . . . . . . . . . . . . . . . . . . . . 19 — 2.2
Paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 — 4.4
Railroad equipment. . . . . . . . . . . . . . . . . . . . 12 – 6.1
Clothing and textiles. . . . . . . . . . . . . . . . . . . 24 — 10.5
Coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 – 48.6
Class I railroads. . . . . . . . . . . . . . . . . . . . . . . . . b183 + 4.2
a The data from which these rates have been computed were compiled by the Federal Reserve Bank
of New York.
* The number of telephone companies and the number of railroads represented vary somewhat as a
result of consolidations.
Taken as they stand, these figures reveal an extraordinary increase
in the profits of certain corporate groups. Profits of public utilities have
grown at a rate of 14.7 per cent a year; for nine of the nineteen industrial
and miscellaneous corporations, the rate of increase has exceeded 10 per
cent a year. Six corporate groups have shown declining profits, the
most severe losses having occurred in the clothing and textile and coal
industries.
The tendencies in respect to profits which are shown in this table
are in part explained by a comparison of the rates of change in prices,
642 RECENT ECONOMIC CHANGES
production, and other economic series which were given in earlier tables. 35
Some of the difficulties in the way of such comparison have already been
suggested. To these may be added the final point that the figures for
prices, production, stocks, profits, etc., are representative in varying
degrees of the industries to which they relate. In spite of these limita-
tions, the comparison is instructive.
Supplementary to the data on profits are measures of changes in the
volume of disbursements by corporations, in the form of dividend and
interest payments.
TABLE 22.-DIVIDEND AND INTEREST PAYMENTS”
Average annual rate
Series of change, 1922–1927
t
62
r
C
Total dividend and interest payments. . . . . . . . . . . .
Total dividend payments. . . . . . . . . . . . . . . . . . . . . . . .
Street railways. . . . . . . . . . . . . . . . . . . . . . . . . . . . i
Industrial and miscellaneous corporations. . . . .
Steam railroads. . . . . . . . . . . . . . . . . . . . . . . . . . . .
i
:
i
* The measures in this table are derived from data compiled by the New York Journal of Commerce.
These payments have increased, as is to be expected, at rates some-
what lower than aggregate corporate profits. Yet the rates of growth in
disbursements to bond and stockholders during this period of industrial
recovery and business prosperity have been rapid.
One other aspect of the economic situation in recent years is revealed
by measures relating to bankruptcies among business concerns.
TABLE 23.−BUSINESS FAILUREs, CoMMERCIAL ENTERPRISEs”
Average Average
t annual rate - annual rate
Series Series
of change, of change,
1922–1927 1922–1927
--- - - -- – - - - - –––
Per cent Per cent
Number of business failures. . . . . . . . +0.9 Liabilities of business failures. . . . . — 5.5
Agents and brokers. . . . . . . . . . . . - +8.0 l Trade establishments. . . . . . . . — 2.9
Manufacturing establishments. . +0.7 Manufacturing establishments — 6.4
Trade establishments. . . . . . . . . . t +0.6 Agents and brokers. . . . . . . . . . - — 8.4
* Measures derived from data compiled by Dun's Review.
* The highest of these figures, that for corporations engaged in the production of
leather and shoes, is rather difficult to explain, in view of the tendencies in production
and prices in this industry. In part, the increase is owing to the fact that 1923 was a
year of very low profits for this group of corporations. The profit figures cover only
9 corporations, it may be noted, and are probably not representative of the industry
as a whole.
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 643
In the difference between the tendencies measured above in regard to
the number of business failures and the liabilities of business failures is
found a key to one important aspect of the postwar economic situation
which has not been brought out by the measures in earlier tables. In
this period of expanding production and rising profits, the number of
business failures has increased about 1 per cent a year, yet the liabilities
of business failures have declined at a rate in excess of 5 per cent a year.”
TABLE 24.—INTEREST RATES, STOCK AND BOND PRICEs, AND RELATED SERIES
| Average annual rate
Series of change, 1922–1927
Per cent
Bond prices and interest rates:
Combined index of 40 bond prices”. . . . . . . . . . . . . . . + 2.9
Interest rates on commercial paper”. . . . . . . . . . . . . . — 2. 3
Volume of sales:
New York Stock Exchange sales—
Stocks”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +20.5
Bonds”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Check payments in NewYork Cityd,” . . . . . . . . . . . . . +11.3
Stock prices:d, f
Total stocks (229) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 13.4
Railroad stocks (31) . . . . . . . . . . . . . . . . . . . . . . . . + 11.3
Industrial stocks (198). . . . . . . . . . . . . . . . . . . . . . + 14.1
Automobile stocks (10). . . . . . . . . . . . . . . . . +42. 5
Chain store stocks (11) . . . . . . . . . . . . . . . . . +30.7
Food stocks (9). . . . . . . . . . . . . . . . . . . . . . . . +20.8
Theater stocks (3). . . . . . . . . . . . . . . . . . . . . . + 19.2
Utilities stocks (16) . . . . . . . . . . . . . . . . . . . . + 16.8
Tobacco stocks (7). . . . . . . . . . . . . . . . . . . . . + 14.9
Railroad equipment stocks (10). . . . . . . . . . -- 12.0
Steel stocks (9). . . . . . . . . . . . . . . . . . . . . . . . + 8.9
Machinery stocks (5). . . . . . . . . . . . . . . . . . . + 8.3
Copper stocks (11) . . . . . . . . . . . . . . . . . . . . . + 7.3
Rubber stocks (7). . . . . . . . . . . . . . . . . . . . . . + 2.4
Petroleum stocks (17). . . . . . . . . . . . . . . . . . + 1 .. 5
Textile stocks (5) . . . . . . . . . . . . . . . . . . . . . . — 14.4
* Quoted as per cent of par value of 4 per cent bond. Index compiled by Dow, Jones & Co., from the
yields of the average prices of the bonds for each day of the month. Average yields of component
classes capitalized at 4 per cent to give the combined index.
° Interest rates on 4 to 6 months paper. Data are averages of weekly ranges in the New York
market as published by the Commercial and Financial Chronicle.
* Data refer to number of shares.
d Dollar value series. .
e Check payments are represented by debits to individual accounts as compiled by the Federal
Reserve Board.
f Compiled by the Standard Statistics Co. Indexes are of common stock market values, weighted
by the number of shares of each stock outstanding. The monthly figures are averages of weekly
closing prices or last previous sale prices.
* Business failures during 1922 reflected, in part, the effects of the preceding
business recession. For the period 1923–1927, the rates of change were: number of
business failures, +4.9; liabilities of business failures, -3.4. These are probably
better indexes of recent tendencies than are the measures which include 1922.
644 RECENT ECONOMIC CHANGES
The failures of large concerns, that is, have decreased materially, but for
the rank and file of business it would appear the stress of competition has
not relaxed. These conditions stand in sharp contrast to those prevailing
during the period of war-time prosperity. Between 1915 and 1919, both
the liabilities and the number of business failures declined materially,
the former by 63 per cent, the latter by 71 per cent.
A final set of measures, in Table 24, depicts certain financial movements,
and reflects tendencies peculiarly characteristic of the period.
The decline in interest rates, the corresponding rise in bond prices,
the great increase in speculative activity and the extraordinary advance
in stock prices—these have been outstanding features of the period since
1922. They are summarized, and the several movements are given
definite measures, in the preceding table, to facilitate comparison with
the economic series already presented. As in treating many of the other
sets of figures given in this survey, comparisons must be made with
caution, for precisely the same corporate groups are not represented in the
tables relating to employment, production, profits, and stock prices.
V. COMPARISON OF ECONOMIC TENDENCIES, 1902-1907, 1922–1927
Some interest attaches to a comparison, with respect to prevailing
economic tendencies, of two periods which happen to be just 20 years
removed—the periods from 1902 to 1907 and from 1922 to 1927. Each
of these six-year periods was a time of rapid industrial growth. In these
periods the physical volume of production and trade was expanding at
rates which were exceptionally high. Yet in other respects there were
fundamental differences between the economic conditions prevailing
during these periods. That which gives chief interest to the comparison
is the fact that the expansion of 1902–1907 ended in a major industrial
collapse, while the growth of 1922–1927 appears to have been a sounder
and more normal development. Certain of the resemblances and differ-
ences are revealed in Table 25.
Although the eighteen series listed therein are not in all respects
comparable, they furnish the material for a general comparison. The
increase in the physical volume of production, which was an outstanding
characteristic of each of these periods, is clearly revealed. The rate of
increase in agricultural production was slightly higher in the recent
period (an advantage owing primarily to the pronounced rise in cotton
production), but in the production of raw materials and of manufactured
goods the earlier period shows distinctly higher rates of increase. This
is true, also, in respect to each of the individual commodities listed, with
the single exception of copper. The rates of increase in the production
of cement, petroleum, anthracite and bituminous coal, pig iron, and coke
ranged from 8 to 24 per cent a year during the period of remarkable
industrial growth between 1902 and 1907. Check transactions outside
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 645
TABLE 25.-EconoMIC MovKMENTS IN THE UNITED STATEs, 1902–1907, 1922–1927
Average annual rate of
change
Seriesa
1902–1907 1922–1927
Per cent Per cent
Indexes of production:
Agricultural products (crops) . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4 + 1.8
Mineral products, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.8 +5.7
Manufactured products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.8 +4.0
Production of individual commodities:
Raw and semiprocessed materials—
Crude petroleum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 12.0 +7.4
Pig iron. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.7 +4.1
Anthracite coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.2 +3.3
Bituminous coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.5 +3.5
Copper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6.5 +8.4
Processed materials—
Portland cement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +23.9 +7.5
Coke. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +11.8 +4.5
Check transactions outside New York. . . . . . . . . . . . . . . . . . . . . . . . + 7.5 +7.0
Business failures:
Number of concerns failing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . H 1. 1 +0.9
+
2
Liabilities of concerns failing. . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.5
ICarnings of labor and living costs:
& |
Cost of living. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 1 +0.7
Money earnings, manufacturing industries. . . . . . . . . . . . . . . . + 1.9 +2.4
Money earnings, all groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.4 +2.8
Purchasing power of earnings, manufacturing industries. . . . . — 0.2 + 1 .. 7
Purchasing power of earnings, all groups. . . . . . . . . . . . . . . . . + 0.3 +2. 1
* The series from which the rates of change between 1922 and 1927 are derived are those cited in the
general tables appearing elsewhere in this chapter.
In computing rates of change between 1902 and 1907, use has been made of the following series:
Indexes of the physical volume of production compiled by Edmund E. Day, Review of Economic Statistics,
September, 1920, January, 1921; bank clearings outside New York; wages and cost of living indexes of
Paul H. Douglas.
New York, which furnish a fairly accurate index of the volume of com-
mercial transactions, were rising at practically the same rate during the
two periods here considered—a rate of about 7 per cent a year.
The last two sets of items in the table present sharp contrasts. In
the earlier period, the number of business failures showed a net decline,
at an average annual rate of 1.1 per cent.” The liabilities of business
failures increased between 1902 and 1907, however, at a rate slightly
in excess of 5 per cent a year. In the period preceding the recession of
1908, the figures indicate that the mortality of smaller concerns was
declining, while that of larger concerns was rising. Each of these figures
is reversed in the recent period. The number of concerns failing increased
37 There was, of course, a great increase in the number of failures in 1908, a year
not included in deriving the above figure.
646 RECENT' ECONOMIC CHANGES
at a rate of almost 1 per cent a year between 1922 and 1927, while the
liabilities of bankrupt enterprises declined at an average rate in excess
of 5 per cent a year. It would appear that the recent period was one
marked by fairly severe competition, with increasing failures among
smaller concerns, while the larger enterprises secured the lion's share of
the profits and showed a corresponding decline in business mortality.
More significant are the figures relating to the earnings of labor and
living costs. In the recent period, as we have seen, living costs were
rising slightly, money wages were increasing much more rapidly, and there
was a net gain in the purchasing power of wages at a rate of about 2 per
cent a year for all wage-earning groups, and at a rate of 1.7 per cent a
year for labor in manufacturing industries. During the years from 1902
to 1907, the cost of living (Douglas's index) rose at a rate of 2.1 per cent
a year, while the money earnings of all groups of wage workers rose at a
rate of about 2.4 per cent a year and the money earnings of workers in
manufacturing industries rose at a rate of about 1.9 per cent a year.
TABLE 26.—PRICE TENDENCIES IN THE UNITED STATEs, 1902–1907, 1922–1927
Average annual rate of
change
Commodity group
1902–1907 || 1922–1927
Per cent Per cent
All commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.5 — 0.1
Cultivated commodities and their products. . . . . . . . . . . . . . . . . +2.5 + 1.0
Noncultivated products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | +2.6 — 1. 1
Cultivated commodities and their products, excluding rubber,
processed textiles, leather and shoes. . . . . . . . . . . . . . . . . . . . . + 1 .. 2 + 1.8
All other commodities (i.e., all industrial goods) . . . . . . . . . . . . . - +3.2 — 0.9
Products of American farms in raw state. . . . . . . . . . . . . . . . . . . - + 1.0 + 1.2
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 8 + 1.4
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - +2.7 — 0.4
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ––2, 4 ––0.3
Raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.3 +2.3
Processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.7 +0.0
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.6 +0.0
Raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.3 + 1 .. 3
Processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +2.8 — 0.7
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2 +2.0
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +3. 1 — 0.9
Building materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +4.9 — 1.2
Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +4.6 — 1.8
Metals and metal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +4.4 — 1.5
House furnishings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7 –2.6
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3 + 1.8
Farm products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2 + 1.4
Fuels. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8 — 4.4
Chemicals and drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.2 — 0.2
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 647
The purchasing power of earnings for all groups of workers showed a slight
increase, while the purchasing power of the earnings of manufacturing
labor declined at a rate of about two-tenths of 1 per cent a year during
that period of general industrial prosperity.
Here, perhaps, is the most striking difference between the period
which culminated in the great recession of 1908 and the period extending
from 1922 to 1927. In the earlier period, general wages barely kept pace
with living costs, while the earnings of factory workers actually fell
behind living costs. The purchasing power of employed workers in
this large group of consumers was being impaired, while the volume of
production was increasing at a rate without precedent in recent times.**
In the period following 1922, the volume of production increased, but at
a somewhat lower rate than that prevailing between 1902 and 1907, and
the purchasing power of the earnings of labor has continued to advance
at a rate of from 1.5 to 2 per cent a year.”
The comparison of the two periods may be extended to include
tendencies prevailing within the field of prices. Rates of change in
wholesale prices for a number of commodity groups are shown in Table
26.
* It is important to note that Douglas's index, from which the rate of change in
earnings for the period 1902–1907 has been computed, is based upon the earnings of
employed workers. Prof. Paul F. Brissenden has constructed an index of the incomes
of manufacturing labor, in which account is taken of changes in the volume of employ-
ment. Brissenden’s index shows that the purchasing power of the incomes of manu-
facturing labor increased at an average annual rate of 1.6 per cent between 1902 and
1907. The volume of employment was, of course, increasing during this period, and
it is this fact which accounts for the difference between the rates of change of Douglas's
and Brissenden's index numbers.
** A revealing comparison of the two periods is afforded by certain data given in
Dr. Wolman’s chapter on Labor. The following rates of change have been computed
from his figures.
Average annual rate of
| increase
1902–1907 1922–1927
Per cent Per cent
Persons engaged in manufacturing industries. . . . . . +3.7 +0.9
Volume of manufacturing production. . . . . . . . . . . . +5.7 +4.3
Output per person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . - +2.0 +3.5
During the earlier period there was a much greater increase in the number of employed
workers and a somewhat higher rate of increase in volume of production, but the
increase in output per person was much lower than it was between 1922 and 1927.
The rates of change given above are not based upon the same original sources as
were those cited in earlier pages. This accounts for the slight differences between the
rates quoted.
648 RECENT ECONOMIC CHANGES
The general resemblances between the two periods, which were found
when quantity series were compared, is not found when attention is
turned to price movements. The drift of the general price level was
slightly downward between 1922 and 1927; the movement was upward
at a relatively rapid rate between 1902 and 1907. But the differences
go much deeper. Within each of the twofold classifications set up above,
the relative movements between 1902 and 1907 are exactly the reverse
of those prevailing between 1922 and 1927. In the earlier period, non-
cultivated products rose in price at a slightly higher rate than cultivated
commodities and their products (this group includes all products of
cultivation, animal and vegetable); in the period beginning in 1922,
noncultivated products declined and products of cultivation rose in
price. The contrast is the sharper, if we exclude from cultivated com-
modities and their products, rubber, processed textiles, leather, and shoes,
placing these commodities with noncultivated products in a general
group which may be designated industrial goods. Between 1902 and
1907, these industrial goods rose at a rate of 3.2 per cent a year, as com-
pared with 1.2 per cent for the restricted group of cultivated commodities.
Between 1922 and 1927, the group of industrial goods declined at a rate
just short of 1 per cent a year (–0.9), while cultivated commodities and
their products (with the exceptions noted) rose at a rate of 1.8 per cent
a year. The sharp rise in the volume of industrial production in the
early period was accompanied by an almost equally pronounced advance
in the prices of industrial products. The increase in production in the
later period has been accompanied by declining prices of industrial
products. In the first period, products of cultivation lost in relative
position; in the second period, they gained materially.
One aspect of this last condition is of considerable importance in
relation to the continuation of the state of prosperity. In the earlier
period, the general level of wholesale prices (as measured by the index at
present under review) was increasing at a rate of 2.5 per cent a year; the
prices of products of American farms in raw state (prices which reflect
most closely the receipts of agricultural producers) were increasing at a
rate of 1 per cent a year. The purchasing power of these products was
declining. Between 1922 and 1927, the general price level (wholesale)
was declining at a rate of 0.1 per cent a year; the prices of products of
American farms in raw state were advancing at an average annual rate
of 1.2 per cent a year. It is true that the postwar recession left farmers’
purchasing power relatively low, but for this class of producers as a whole
purchasing power was increasing steadily between 1922 and 1927.
It is not difficult to find roots of trouble in the situation which was
developing between 1902 and 1907. The general purchasing power of
agricultural producers, as a class, was being steadily impaired during that
six-year period, and the real earnings of employed workers in manu-
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 649
facturing industries were declining.” In the corresponding postwar
period, the purchasing power of these two groups was steadily advancing.
In this difference is found one explanation of the relative soundness of
recent economic growth.
The contrast between the two periods here under review might be
elaborated by a discussion of price tendencies among the other groups
listed in Table 26, but this comparison must be left to the reader. The
fundamental difference between the periods in respect to price movements
is revealed in each of the classifications cited. The similarity of quantity
movements in these periods finds no parallel in the field of prices. In
these differing price tendencies, and in the factors lying back of them, is
to be found one key to an explanation of the important economic differ-
ences between these periods, one of which ended in economic collapse, the
other of which has brought a condition of sustained well-being perhaps
never before attained in our economic history.
VI. POSTWAR AND PREWAR PRICE RELATIONS
There is a final question concerning price relations in prewar and
postwar years which is not answered by any of the measures discussed
above. This has to do with the relations among the prices of com-
modities, and of groups of commodities, in postwar years, as compared
with the relations prevailing at an earlier date. When we speak of the
“structure of prices,” we have in mind a more or less enduring system, in
which the prices of individual commodities and of commodity groups
stand in fairly well-defined relations to each other. It is obvious that
there can be no such set of relationships in any absolute sense, that is,
with reference to absolute prices. But relative prices, measured from
a uniform base, may be thought of as constituting a system, and there
may be economic significance to such a system. During a period of
fairly regular economic growth, unmarked by such cataclysms as that
which occurred between 1914 and 1921, there prevail important differ-
ences among the rates at which different commodities and groups of
commodities are changing in price.* Certain commodities are declining
in price (relatively to the movements of the general price level) because
of lowered costs of production, lessened demand, or other causes, and
other commodities are rising in price because of changes in extractive
or demand conditions. These sustained and differing drifts of various
elements in the price system are affecting economic relations, slowly but
appreciably, and it is reasonable to think of the relative prices which
reflect these differing movements as constituting a system of prices at a
* Because of the increase in the volume of manufacturing employment, the
purchasing power of manufacturing labor as a group increased during this period.
* These movements, and their bearing upon the concept of “normal” price rela-
tions among commodities, are discussed in The Behavior of Prices, pp. 165–176.
650 RECENT ECONOMIC CHANGES
given date. Such a “system” has meaning, of course, only with reference
to the particular base from which the relative prices are measured, and
its significance is conditioned by the choice of the base period, and by
the economic significance of the changes which have occurred between
the base year and the year, or years, in which the structure of prices is
being studied.
If, now, we wish to study the relation of the postwar structure of prices to the pre-
war structure, we must define the base with reference to which all price changes are to
be studied, and we must bear in mind the meaning which can be given to the “structure
of prices.” The first problem is that of defining the prewar structure of prices. If
we adopt the base common to most index numbers measuring price changes, we might
base our relatives on the year 1913, and assume that the ranking of these relatives in
the year 1914 served to define a price system typical of prewar conditions. Strong
objections may be brought against this procedure. The changes of prices between
1913 and 1914 reflected only in small part enduring changes, resulting from fundamen-
tal shifts in economic relations. Such changes from one year to the next are due,
primarily, to accidental movements, or to phases of cyclical changes, which have no
significance as symptoms of fundamental changes. The system of prices which may
be accepted as typical of prewar conditions should represent changes over a longer
period. In the present studv two different standards have been employed and two
sets of measures derived.
In the first of these, the base year used in the derivation of price relatives is 1891.
The system taken to be representative of prewar price relations is defined by the
ranking of these relatives in the year 1914. By 1914, the relatives on the 1891 base
may be assumed to have reached fairly stable positions in relation to each other. The
differences among them would reflect, to some extent, temporary dislocations owing
to current cyclical and accidental movements, but the chief cause for differences
among relatives on a base 23 years distant would be variations in underlying trends.
Long-time changes in cost of production, enduring shifts in consumer demand, changes
in styles and habits—all these would be reflected in the ranking of relatives on a base
so many years removed.
But there are some objections to the use of a distant base, and accordingly a
second set of measures has been computed. In this case, relatives on the 1909 base
have been used, and a prewar price system has been defined by the ranking of these
relatives, as averaged for the four years 1911–1914. This is, perhaps, more truly
representative of the conditions prevailing at the close of the prewar epoch than is the
system derived from relatives on the earlier base. .
Changes in systems of prices as defined above are measured by indexes of price
displacement.” The measure of price displacement (the term here used to define shifts
in the relative positions of commodity prices) is one which fluctuates between values
of 0 and 2. The value is zero if, between two dates, there has been no shift in the
ranking of a set of price relatives. (That is, if the commodity which was lowest
relatively, at the first date, is lowest relatively, at the second date, and if all the other
commodities stand in precisely the same relative positions at the two dates.) The
42 The index of price displacement is the value 1 — p where p is the coefficient of
rank correlation.
– 1 — sº
p = N(N2 – 1)
The significance of this index, as employed for the present purpose, is discussed more
fully in The Behavior of Prices, pp. 286-311. .
PRICE MOVEMENTS AND RELATED INDUSTRIAL CHANGES 651
value of the measure is 1, if there is no correlation whatsoever between the relative
positions of the various commodities at the two dates. In this case, the set of relations
prevailing at the first date has been completely shattered by the second date. A value
of 2 for the index of price displacement would indicate an exact reversal of the rankings
throughout, the commodity which was lowest, relatively, at the first date being high-
est at the second date, and all the other commodities having reversed their relative
positions in the same way. Such an exact reversal is not, of course, to be expected
when dealing with price relatives.
Annual changes, during the period 1915–1927, in the two systems of prices
described above, are measured by the indexes in Table 27.
TABLE 27.-MEASURES OF PRICE DISPLACEMENT, 1915–1927°
1 2 3 4
Index of displacement Index of displacement
Years compared computed from rela- Periods compared computed from rela-
tives, 1891 base tives on 1909 base
1915–1914. . . . . . . . . . . . . . . . . . 14 1915—av. 1911–1914 .43
1916–1914. . . . . . . . . . . . . . . . . . 28 1916—a v. 1911–1914 . 57
1917–1914. . . . . . . . . . . . . . . . . - .42 1917—av. 1911–1914 ... 79
1918–1914. . . . . . . . . . . . . . . . . . 38 1918—av. 1911–1914 .75
1919–1914. . . . . . . . . . . . . . . . . . 28 1919—av. 1911–1914 . 62
1920–1914. . . . . . . . . . . . . . . . . .44 1920–av. 1911–1914 .76
1921-1914. . . . . . . . . . . . . . . . . .42 1921—av. 1911–1914 . 78
1922–1914. . . . . . . . . . . . . . . . . .41 1922—av. 1911–1914 . 75
1923–1914. . . . . . . . . . . . . . . . . .47 1923—av. 1911–1914 .78
1924–1914. . . . . . . . . . . . . . . . . .41 1924—av. 1911–1914 . 72
1925–1914. . . . . . . . . . . . . . . . . . 33 1925—av. 1911–1914 . 66
1926–1914. . . . . . . . . . . . . . . . . . 31 1926—av. 1911–1914 . 64
1927–1914. . . . . . . . . . . . . . . . . . . 29 1927—av. 1911–1914 .63
* The indexes in column 2 were computed from 195 series, except for the years 1925, 1926, and 1927.
In these years, 194, 193, and 189 series, respectively, were used.
The indexes in column 4 of this table were computed from 216 price series, except for the years 1925,
1926, and 1927. In these years, 213, 212 and 208 series, respectively, were used.
As is to be expected, the indexes of displacement computed from relatives on the
1891 base are distinctly lower than those on the 1909 base. The system of prices
defined by the ranking in 1914 of relatives on the 1891 base was much more deeply
seated, much more difficult to disrupt, than was the system defined by the ranking
of relatives on the much more recent base, 1909.
The changes in the indexes of displacement, recorded in Table 27, are of
considerable interest. The transition to the war economy brought a
definite swing away from the prewar ranking, a swing measured by an
index of 0.42 in the case of the 1891 relatives, and by an index of 0.79 in
the case of the 1909 relatives. These represent fundamental shifts in
price relations. (A value of 1, it will be recalled, would indicate the
complete destruction of relations prevailing at the date Serving as cri-
terion.) In 1918 there was a minor movement back toward prewar
relations, a movement which was much more pronounced in 1919. The
652 RECENT' ECONOMIC CHANGES
first effect of the end of the war, it is apparent, was to initiate a return to
prewar price relations. (It is possible that this movement is in part a
reflection of Federal price regulation from 1917 to 1919.) Between 1919
and 1923 there was another clear swing away from the relationships of
prewar days. One of the indexes (that on the 1891 base) shows the
situation in 1923 to be farther removed than that in 1917 from prewar
relations. The movements of both indexes between 1923 and 1927
indicate an uninterrupted return toward the relationships prevailing
before the war. The index constructed from 1891 relatives declined in
four years from 0.47 to 0.29, and that based on 1909 relatives fell from
0.78 to 0.63.
Two noteworthy facts are revealed by these figures. The first is
that the postwar price structure differs in important respects from that
prevailing before the war. The decade which included the war and
immediate postwar years witnessed fundamental shifts in the relative
positions of different commodities and of different commodity groups.
Measures of the degree of difference between prewar and postwar price
structures vary in magnitude according to the standard selected as
typical of prewar conditions. The system of price relations which
embodied the results of changes during the five years from 1909 to 1914
has been substantially modified. The price structure which was built
up during the quarter century preceding the war suffered less drastic
changes, although it was materially altered by the price revolution which
accompanied the war. The second point of importance is that during
the period 1923–1927 there was a distinct return toward the relations
which had been built up in prewar years, a tendency of considerable
economic significance. Whether this tendency will continue to prevail
is a question the future must answer.
VII. SUMMARY
This chapter deals with price changes and related industrial move-
ments in the United States during the period 1922–1927. As a back-
ground for the general discussion, brief reference is made to price levels
and price tendencies in other countries, and to prewar price tendencies
in the United States. It is impossible effectively to summarize the
various statistical measures which have been employed in this study, but
certain of the results may be indicated.
1. The degree of increase in commodity prices, at wholesale, in gold,
between 1913 and 1927 ranged, for 18 countries, between 23 per cent
and 71 per cent. In the United States, wholesale prices increased 47
per cent during this period, a figure which is approximately equal to
the median of the measures for the 18 countries.
2. Between 1922 and 1927, the general drift of world prices was
downward. Of 19 countries for which measures were computed, the
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 653
net movement was downward for 15. The rates of decline varied from
0.1 to 6.5 per cent a year.
3. In many respects the postwar price situation stands in sharp con-
trast to that prevailing before the war, but recent tendencies should be
considered in the light of prewar trends:
a. During the two decades before the war, the level of wholesale
prices in the United States was rising at an average rate of 2.3 per cent
per year. This rising tendency affected manufacturing methods and
buying and selling habits, and confirmed business men in many practices
not adapted to conditions under a stable price level or under declining
prices.
b. During the quarter century preceding the war, commodity prices
and the relations among such prices were relatively unstable. The
prices of individual commodities were subject to relatively abrupt
changes from month to month and from year to year, and the forces
tending to alter existing price relations were strong. Both these condi-
tions served to introduce a considerable degree of uncertainty into
business operations, and to enhance the speculative features of business
Operations.
c. Perhaps more important, however, is the fact that these various
measures of economic instability showed a definite tendency to decline
during this prewar period. The variability of individual commodity
prices was diminishing, and there was less disturbance in price relations.
This downward trend is the more significant in that it accompanied a
rising price level. tº
4. Certain of the general economic characteristics of the postwar
period in the United States are suggested by the following figures,
measuring average annual rates of change, between 1922 and 1927:
a. There was a sustained increase in the physical volume of produc-
tion and in the rate of distribution. Primary production increased at a
rate of 2.5 per cent a year, production of manufactured goods increased
at a rate of 4 per cent a year, and volume of distribution, as measured by
ton-miles of freight carried, rose at a rate of 4 per cent a year. These
changes accompanied a population increase of about 1.4 per cent a year.
b. This increase in manufacturing production was accompanied by a
definite decline in the volume of factory employment, a decline at the
rate of 0.7 per cent a year. Per capita earnings of factory employees
increased, however, at a rate of 2.4 per cent a year. During the same
period, output per man in manufacturing establishments rose at a rate of
3.5 per cent a year.
c. The increase in production and in wages noted above accom-
panied a slightly declining level of wholesale prices. The rate of fall
averaged 0.1 per cent a year. The decline occurred chiefly in the prices
of nonagricultural products, which fell at a rate of 1.8 per cent a year.
654 RECENT ECONOMIC CHANGES
Farm prices rose during this period at an average annual rate of 1.1 per
cent. g -
d. Profits of industrial corporations increased, between 1923 and 1927,
at an average rate of 9 per cent a year. Industrial stock prices rose,
between 1922 and 1927, at a rate of 14.1 per cent a year.
5. The following are important general features of the postwar
price situation:
a. The level of wholesale prices in the United States has shown no
definite tendency either to rise or to fall since 1922. The net movement
has been slightly downward. There is no present evidence, either in
domestic or in world conditions, that the prewar rise will be resumed.
b. Important differences among commodity groups in respect to
price trends are developing in the postwar era, differences which are in
many cases more pronounced than those which prevailed before the war.
These group tendencies are shown in detail in the various tables relating
to price movements. Among the differences to be noted are the following
(all statements relate to tendencies during the period 1922–1927):
Agricultural products have been rising in price; non-agricultural
products have declined.
Raw materials have been rising in price; processed materials have
fallen.
Foods have risen and nonfoods have fallen in price.
Consumers’ goods have risen slightly; producers’ goods as a class
have neither fallen nor risen.
Prices of animal products and of cultivated vegetable products have
shown a rising tendency; mineral products and forest products have
declined in price.
Foreign products have risen in price; domestic products have declined
slightly.
Among farm products, the chief gains in prices received by producers
have been recorded for meat animals, grains, and fruits and vegetables.
Cotton and cottonseed have declined materially in price.
c. War-time developments gave a sharp check to the prewar tend-
ency toward economic stability, as reflected in the declining variability
of individual prices and the greater stability of price relations. The
extreme war-time disturbances persisted for several years after the close
of the war, but since 1922 there have been fewer of those abrupt changes
in prices and in price relations which characterized the nineties of the
last century, and which gave to the war and immediate postwar years
their distinctive business flavor. These tendencies toward price stability
which have reasserted themselves after the disturbances of the war
years will, if they persist, materially affect the economic complexion of
the years before us. A tendency toward greater stability of prices and
of price relations involves a change in the direction in which business
PRICE MOVEMENT'S AND RELATED INDUSTRIAL CHANGES 655
men look for profits. Something of the speculative element goes out of
business when such a tendency prevails. The high profits and the great
losses which go with extreme fluctuations in the prices of individual
commodities and with changes in the relations among prices, alike tend
to disappear. Business and prices both become more stable. There is
evidence that our economic system is moving in this direction.
If we may anticipate approximate stability in the price level in the
future, the expectation of greater stability in the prices of individual com-
modities and in price relations is strengthened.
CHAPTER X.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS
BY O. M. W. SPRAGUE AND W. RANDOLPH BURGESS
It is the purpose of this chapter to examine the monetary changes of
the past six years, with a view to discovering the direction, not the extent,
of their influence on business.
The examination of the monetary conditions of the period takes two
forms: first, a fact-finding study attempting to measure the availability
of credit and capital for business use as compared with previous periods
in the past; and second, a description of particular influences which have
operated upon monetary conditions, such, for example, as Treasury
financing, changes in banking organization, and the influence of the
Federal Reserve System.
I. THE MEASUREMENT OF INTEREST RATES
The general characteristics of the period are illustrated by Charts 1 and
2, giving the movement of interest rates. Rates for short-time money
show, in general, a slightly declining tendency through 1927, followed by a
sharp upturn in 1928. Rates for long-time money show an almost
continuous downward trend.
The significance of these tendencies will appear more clearly from a
comparison with the interest rates of preceding periods, both as to the
average level of rates and their direction of movement.
The Average Level of Rates.—The first rough measure of the cheap-
ness or dearness of money during the period may be found in a comparison
of the average level of money rates for 1922–1928, with the average level
for the preceding 24 years. Such a comparison is made in Table 1.'
TABLE 1.-Aver AGE LEVEL OF MONEY RATES
Item 1890–1913 1922–1928
Per cent Per cent
Corporation bond yields. . . . . . . . . . . . . . . . 4.47 4. 72
Common industrial stock yields. . . . . . . . . a 5.43 i 5.97
Commercial paper. . . . . . . . . . . . . . . . . . . . . 4. 72 4. 35
Time money. . . . . . . . . . . . . . . . . . . . . . . . . . 4.04 § 4.58
4.43
Call money. . . . . . . . . . . . . . . . . . . . . . . . . . . 3. 58
a 1900–1913.
NotE.-Sections I, II, VIII, and X of this chapter were prepared by Dr. W. Randolph Burgess;
and Sections III, IV, V, VI, VII, and IX by Dr. O. M. W. Sprague.
1 The selection of somewhat different prewar periods of similar length would not
affect the comparison materially.
657
658
RECENT ECONOMIC CHANGES
CHART 1.—MOVEMENT OF INTEREST RATES IN THE UNITED STATES,
1922–1928
9 PER CENT

/
f
TIME MONEY
5 ge \ *
yº S
/
/
ſ
f A
\ /7 \
\
/ />
ſ
Ša /\ /
\ \ Z N.Z."
4H--ºff \A A&Azt
V \ 7 \v CoMMERCIALYY
\ / PAPER
\ I
3 \ y
V'.
2 \-A-CALL MONEY —l
|
1922 1923 1924 1925 1926 1927 1928
CHART 2.—BOND AND INDUSTRIAL COMMON STOCK YIELDS, 1922–1928
3 PER CENTYIELD
\ INDUSTRIAL COMMON STOCKYIELDS
7 A \
6 Nºſy
5 N_ * \A
TS-TN—
BOND Y|ELDS T-
4. - - \-
1922 1923 1924. 1925 1926 1927

1928
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 659
For the period as a whole, commercial paper rates were somewhat
lower than in the preceding 24 years, but rates for time and call loans
against stock exchange collateral (used primarily in speculation) and
yields on both bonds and common stocks were higher than the average
for preceding years. Rates for bankers' acceptances cannot be quoted,
because the drawing of such bills was not permissible under the law before
the passage of the Federal Reserve Act. Also it is not possible, because
of inadequacy of data, to include completely reliable figures for the rates
at which banks loaned money directly to their customers. From the
scattered data which are available, it seems probable that rates charged
bank customers are represented more nearly by open market commercial
paper rates than the other rates quoted in Table 1, and such rates have
been somewhat lower than the average for preceding years.
The lower level of rates for business money compared with higher
rates for what might be called speculative money—call and time loans—is
CHART 3.−VOLUME OF COMMERCIAL PAPER, 1922–1928
| ofluons OF DOLLARS

COMMERCIAL PAPER N
OUTSTANDING ~
0.5 />\-N
1922 1923, 1924. 1925 1926 1927 1928
perhaps worthy of comment. Two possible explanations are offered.
The first is that under the terms of the Federal Reserve Act commercial
paper is eligible for rediscount at Federal Reserve banks, whereas loans on
stock exchange collateral are not eligible, and under these conditions it is
natural that member banks should discriminate in favor of commercial
paper. The second explanation is found in the relative demand for these
two types of loans in recent years. By reason of considerable acquisitions
of funds through the issuance of securities, business concerns have reduced
relatively their requirements for short-term credit. For this and other
reasons, the amount of funds borrowed through the open market for
commercial paper has been much reduced. This is indicated in Chart 3,
which shows the amount of commercial paper outstanding through
principal dealers reporting to the Federal Reserve Bank of New York.
In contrast with a less active demand for commercial loans, the
demand for time and call money has been very great, accompanying
660 RECENT ECONOMIC CHANGES
active security markets, rising security prices, and a large volume of new
financing.
Direction of Rate Movement.—Of more significance than the average
rates shown in the preceding table is the direction of movement of rates.
This is particularly true of yields on bonds and common stocks, which
CHART 4.—AVERAGE CALL LOAN DATES, 1890–1914 AND 1922–1928
(8 PER CENT 18
AMOAVEY
8 ACTUAL DATA
6 12
O
1890 1895 1900 1905 |9|O 1915 1920 1925 1929
CHART 5.—AVERAGE TIME LOAN RATES, 1890–1914 AND 1922–1928
PER CENT
77/MA A/OA/
2
O
1890 1895 1900 1905 1910 19||5 1920 1925 1929
have moved sharply downward, so that the average is not fairly repre-
sentative of the period.
Charts 4 to 8 show the monthly movement of rates since 1890 of
call money, time money, commercial paper, and bond yields, and since
1900 of stock yields.”
* The figures on stock yields were computed by Col. Leonard P. Ayres.


MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 661
In each of the charts the actual averages for each month are shown
by light lines, and a heavier line shows the 12-month moving averages
centered on the sixth month. These averages indicate the tendencies of
the movements, and smooth out many of the seasonal and irregular
CHART 6.—AVERAGE COMMERCIAL PAPER RATES, 1890–1914 AND 1922–1928
9 PER
A4AE/º
8
ACTUAL
2
O
1890 1895 1900 1905 19|O 1915 1920 1925 1929
fluctuations. Call money, time money, and commercial paper rates
show something of a downward movement during the period, although
this movement was terminated in 1928, when rates rose to the highest
figures of the period. The relative increase in call and time money
during 1928 was much larger than that in commercial paper. Bond
CHART 7.—AVERAGE BOND YIELDS, 1890–1914 AND 1922–1928
PER CENT YIELD
AOAVO ||Y/EZ/OS
5.2
5.0
4.8
12 MONTHS
AVERAGES
4.6
4.4
4.2
4.0 *
1890 1895 1900 1905 i010 I915 1920 1925 1929
yields and stock yields (representing long-time rates) show a much clearer
and sharper downward tendency. In the case of bonds, the figures for
the end of 1927 are slightly below the average of the years from 1890 to
1913, and in the case of stocks the yields in 1928 are well below, not only
the average, but also the lowest yields for any of the months from 1900 to

662 RECENT ECONOMIC CHANGES
1913. These downward movements of bond and stock yields and the
corresponding increases in prices which they represent, continuing for
So long a period, have been accompanied by the purchase of securities
on a large scale. Under these conditions, it has been possible to sell
new issues of stocks and bonds at low rates, and in this way industry
has been in a position to secure funds in the capital markets at rates,
in many instances, lower than the rates at which these same concerns
could borrow money at their banks.
From the foregoing charts, it is possible by inspection to compare
recent rate movements with those of somewhat similar periods in the
past. While comparisons of this sort should not be forced to carry too
CHART 8.—AVERAGE STOCK YIELDS, 1900–1914 AND 1922–1928
a Percent yield

8
stock welds \
|ºus L DATA M
T
|2MONTHS -
MOWING AVERAGES
\ A
5 A \
6
4. 4.
3 B
2 2
l |
O ()
1900 1905 19|O 1915 1920 1925 1929
heavy a load of analogy, they at least indicate that the recent rate
movement has not been unique.
Variation in Interest Rates.—The foregoing charts illustrate also
the month-to-month fluctuations in rates. From an inspection of the
charts, the general conclusion may be drawn that rates in this recent
period have been considerably more stable than was the case in the years
from 1890 to 1913. The comparative variability of rates in the two
periods may be measured somewhat more precisely by computing average
per cent deviations of the actual monthly data from the 12-month
moving averages. This gives a measure of the month-to-month fluc-
tuations in rates, as compared with the general tendency. The figures
in Table 2 are the result of such a computation. -
The figures in Table 2 indicate that the fluctuation of bond and stock
yields has been considerably reduced, that the fluctuation of commercial
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 663
TABLE 2.-AVERAGE DEVIATIONS FROM 12-MonTH Moving AvH.RAGEs
|
Item 1890–1913
1922–1928
i
Per cent Per cent
Corporation bond yields. . . . . . . . . . . . . . . . 0.77 0.62
Common industrial stock yields. . . . . . . . . a 3.00 2. 60
Commercial paper. . . . . . . . . . . . . . . . . . . . . 10. 82 4.33
Time money. . . . . . . . . . . . . . . . . . . . . . . . . . 16.91 6. 12
Call money. . . . . . . . . . . . . . . . . . . . . . . . . . . 33. 10 8.39
a 1900–1913.
paper and time money rates has been reduced to less than half, and that
the fluctuation in call money rates has been only a fourth as much as in
the earlier years. The reduction in rate fluctuations is in part a result of
improvements in the credit mechanism, and particularly the influence
of the Federal Reserve System, but it is also partly due to the absence in
the recent period of any considerable credit disturbance. º
The above measure of variability thus gives us a record of month-
to-month fluctuations, but it does not attempt to measure the relative
extent of the longer fluctuations, which in the past have been a feature of
the business cycle. The period under review is so brief that it seems
doubtful whether any valid conclusions can be drawn as to cyclical
fluctuations. It is, in fact, possible to select a number of other periods in
the past in which the cyclical fluctuations of interest rates were no larger
than during the years from 1922 to 1928, but, so far as the monthly
fluctuations are concerned, the evidence is clear that recent interest rates
have been more stable, and, as a result, the business man or other user of
credit has been more certain as to the price he was likely to pay for
funds in succeeding months.
This discussion of the measurement of interest rates may be sum-
marized by saying that the average level of rates from 1922 to 1928 has
been lower for commercial funds and higher for speculative funds than in
the years from 1890 to 1913, that the direction of movement of rates
has in general been somewhat downward, but that the most marked
change is in variability. The fluctuation of rates has been much reduced;
rates have been more stable.”
II. THE SUPPLY OF BANK FUNDS
The preceding section has pointed out, among other things, that
interest rates in general have shown a downward tendency during the
period. The question may now be asked: What have been the causes of
this decline, and what has been the effect upon business? There are two
principal media through which credit is extended, known roughly as
3 See also Chap. IX, Price Movements, p. 643.
664 RECENT ECONOMIC CHANGES
capital funds (funds derived from saving), and bank funds (funds made
available through the commercial banks). It is the purpose of this
section to summarize the evidence as to the supply of funds made avail-
able through the last mentioned medium, the commercial banks.
There are several kinds of evidence which may be introduced. The
data as to interest rates have already been given and they indicate that
the supply of bank credit was well able to take care of the demand.
From the side of practical experience, the testimony of competent
observers is that the period, for the most part, was one of extremely
vigorous competition between banks to lend funds. It was a “bor-
rowers’ market.” This condition, as well as declining interest rates, may,
however, have been due to a reduced demand for bank funds rather than
to an unusually ample supply of bank credit. Data, which will be intro-
duced later, indicate that business in this period has been financed less
by borrowing from banks and more by borrowing in the capital market
through issues of securities. In this way, individual lenders of funds
have loaned unusually large sums directly to industry and commerce
without the funds going through the form of bank deposits. Industrial
requirements for bank loans have also been lessened by the prevailing
custom of reducing inventories to the lowest possible levels.4
For further light as to whether the comparatively easy bank credit
of the period may be ascribed to reduced demand for bank funds or to an
ample supply, it will be profitable to examine the data for the actual
growth of bank credit during the 1922–1928 period, as compared with
other periods, and also the data as to the supply of bank reserves, which
are the basis for all bank credit.
Growth of Bank Funds.-Chart 9 shows the growth of bank funds in
the United States since 1875. The figures plotted are those for the loans
and investments of all banks, excluding savings banks, on or about
June 30 of each year, as reported by the Comptroller of the Currency.
An inspection of this line shows that some distorting factors have influ-
enced the actual figures, for there is little consistency of movement.
This is particularly noticeable from 1915 to 1922, when a period of
unprecedented increase was followed by a substantial decline. When it
is remembered that this was also a period of violent price movements,
it will be seen that these movements have been the distorting factors.
Before conclusions can be drawn as to the volume of credit available for
business, some consideration must be given to the effect of changes in
prices; and as bank credit is extended for trade in other lines than com-
modities, study must be made of the changes in prices not only for goods,
but for services, rents, and securities as well. For this reason, an addi-
tional line has been added to Chart 9, to show the volume of credit
“See Size of Inventory, Chap. II, Industry, Part 1; Chap. III, Construction, p.
242; Chap. IV, Transportation, Part 1, p. 302; Chap. V, p. 332; Chap. VII, p. 508;
Chap. IX, Price Movements, p. 637.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 665
adjusted to eliminate the influence of price changes. The adjusted
figures were derived by dividing the bank loan and investment data by
the index of the general price level,” which includes prices of commodities
both at wholesale and retail, rents, wages, securities, and other prices
affecting the value at which exchanges of goods or Services are made.
CHARTS 9–10.—LOANS AND INVESTMENTS OF ALL BANKS IN THE UNITED
STATES AND BY GEOGRAPHICAL DIVISIONS, 1875–1928
IOO
80
60
40
30
20
60
30
O LOANS AND INVESTMENTS
$2 DEFLATED BY G. P. L 32
* ADJUSTED FOR s
as a
- 10 º
5 8 O
Uſ) Uſ)
ă 6 à
-: =
co 4 cC
3
AND
2 ALL BANKS EXCLUDING
| ..]
1615 1900 I5 1930 1890 1900 1910 1920 1930 1940
The adjusted line shows the recent period to be one of rapid growth in
bank credit, though not more rapid than a number of other periods in
the past fifty years. The recent growth was notably less rapid than in
the years from 1897 to 1907, when there was an unusually high rate of
TABLE 3.−ANNUAL RATEs of INCREASE IN BANK CREDIT, BY PERIODs
Fiscal years ended June 30 Unadjusted Adjusted for
or nearest call date figures price changes
Per cent Per cent
1875–1880. . . . . . . . . . . . . . . . . . . . . . 0 75 2.79
1880–1892. . . . . . . . . . . . . . . . . . . . . . 6.65 6. 89
1892–1897. . . . . . . . . . . . . . . . . . . . . 0. 56 1. 39
1897–1907. . . . . . . . . . . . . . . . . . . . . . 11. 53 9.04
1907–1914. . . . . . . . . . . . . . . . . . . . . . 4. 57 2.85
1914–1920 . . . . . . . . . . . . . . . . . . . . . 4, 56 2.67
1922–1928. . . . . . . . . . . . . . . . . . . . . . . 16.25 4.36
* Prepared by the Federal Reserve Bank of New York.








666 RECENT ECONOMIC CHANGES
increase, accompanied by rising prices, and culminating in the panic of
1907.
Increase by Geographical Areas.-One feature of the growth in bank
credit since 1922 has been its uneven distribution geographically. This
is shown in Chart 10. The most rapid increases in credit have been in
the Eastern, New England, and Pacific districts, whereas in the Middle
Western and Southern districts there has been only a moderate growth,
and in the Western district a decline." These results are perhaps to be
expected in view of unfavorable economic conditions in a number of the
agricultural states, which have been accompanied by bank failures and
in some cases by public loss of confidence in certain of the country banks.
The retarded growth of bank credit in the three predominantly
agricultural districts followed an extended period of rapid growth from
1900 to 1920, much more rapid than that which characterized the Eastern
or New England districts. A close examination of Chart 10 will raise
the question in many minds whether the rural financial disturbances of
1921 and following years may not have been partly the result of over-
expansion from 1900 to 1920, a period during which too many banks
were organized and during which there may have been a considerable
overexpansion of bank credit." Unfortunately, overexpansion of credit
is very difficult to diagnose, not only at the time of its occurrence, but even
after the event.
Timing of the Increase.—Chart 9 is not on a large enough scale to
allow a close analysis by short periods of the changes in bank credit since
1922. For that purpose there has been added Chart 11, which shows by
months the total loans and investments and total deposits of the reporting
member banks of the Federal Reserve System. These banks at present
include more than 600 of the large banks in principal cities, and have in
the aggregate nearly 40 per cent of the total banking resources of the
country. They are the only banks for which monthly figures for loans
and investments are available, but changes in their condition are suffi-
ciently typical of changes for the country as a whole to make their figures
a useful index of the month-to-month fluctuations of bank credit.
* The states included in each of the several regions mentioned above are as follows:
New England.—Maine, New Hampshire, Vermont, Massachusetts, Rhode Island,
and Connecticut.
Eastern.—New York, New Jersey, Pennsylvania, Delaware, Maryland, and
District of Columbia.
Southern.—Virginia, West Virginia, North Carolina, South Carolina, Georgia,
Florida, Alabama, Mississippi, Louisiana, Texas, Arkansas, Kentucky, and Tennessee.
Middle Western.—Ohio, Indiana, Illinois, Michigan, Wisconsin, Minnesota, Iowa,
and Missouri.
Western.-North Dakota, South Dakota, Nebraska, Kansas, Montana, Wyoming,
Colorado, New Mexico, and Oklahoma (including Indian Territory in earlier years).
Pacific.—Washington, Oregon, California, Idaho, Utah, Nevada, and Arizona.
7 See Chap. VIII, Agriculture, p. 582.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 667
This chart shows that the increase of bank credit since 1922 has been
far from steady and continuous. It was particularly rapid in 1922,
1924, and 1927, with little or no gain in 1923 and 1926. The increase in
1922 was at a time of business recovery from depression, and the increases
in 1924 and 1927–28 were at times of business uncertainty. In general,
the most rapid increases of credit during the period were at times when
business was most in need of the stimulus of easily available credit, and,
contrariwise, the periods of slowest growth were when business was in
large volume and perhaps in some danger from overstimulation. The
CHART 11.-LOANS AND INVESTMENTS, AND DEPOSITS OF REPORTING
MEMBER BANKS, 1922–1928
BILLIONS OF DOLLARS

23
*
/*~ .*
ſ
22 *\,
&
Z
2. A
| A
2O º's ºf Kł
TOTAL LOANS --~~~~
AND INVESTMENTS ,’
gº
4-J - ~~
i8 / J/
º / N->''
M
Z
|T f
e •/ TOTAL NET DEMAND
• *
*
2’---~~~
16 f
** ~/
/ -
2”
AND TIME DEPOSITS
1922 1923 !924- 1925 1926 1927 1928
influence of the Federal Reserve System on the timing of changes in the
volume of credit will be discussed later. -
Movement of Reserve Funds.-The rate of growth of bank credit is
primarily determined by the supply of what may be called reserve funds
—that is, funds which are available for use as bank reserves. In the
last analysis, gold is the reserve upon which the bank credit of any gold
standard country is based, and changes in a country's gold stock are
usually the most important influences upon the volume of bank credit.
This has been true in the United States since 1922; in this period the flow
of gold has been extraordinary. The effect of gold movements has,
however, been modified by other important influences. These modifying
influences include changes in the amount of currency in use, changes in
668 RECENT ECONOMIC CHANGES
practices as to bank reserves, and changes in the position of the Federal
Reserve System.
Between the beginning of the year 1922 and the middle of 1927,
there were gold imports into the United States of $885,000,000, and, when
domestic production and changes in the amount of gold under earmark
are taken account of, there was an increase of about $902,000,000 in
the total gold stock of the country. The increase in the gold supply
in this five and a half year period was greater than in the fourteen years
from 1900 to 1914, and it followed substantial net gains from 1915 to
1921, which had already greatly enlarged the gold basis of our bank
credit. These gold accessions were added directly to the reserves of
banks. Table 4, showing the changes from 1922 to 1927 in the factors
affecting reserve funds, indicates how the banks of the country made use
of the gold they acquired.
TABLE 4.—FACTORs IN SUPPLY AND DEMAND FOR RESERVE FUNDs, JANUARY, 1922
To JULY, 1927
(In millions of dollars)
January, July, Net
Item 1922 1927 change
Increase in supply through:
Monetary gold stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,673 4, 575 902
Monetary silver stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 834 204
Miscellaneous items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | e & e º e i s e º & e 50
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . g º gº tº º & © tº e tº 1, 156
Increase in demand through:
Member bank reserve balances. . . . . . . . . . . . . . . . . . . . * * * * 1,707 2,289 582
Money in circulation. . . . . • a s & ºr a s e º e º e º 'º e < * * * * * * * * * 4, 566 4,851 285
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . tº º e º º 867
Estimated net decrease in demand for reserve bank credit. . . . . . . . . * = & E & 289
Actual decrease in reserve bank credit. . . . . . . . . . . . . . . . . . . . . . 1,304 | 1,026 278
Difference, due to errors and omissions. . . . . . . . . . . . . . . . . . . . … 11
The banks used a part of the additions to their reserves, resulting
from gold imports, to obtain currency from the Reserve banks to put into
circulation, as indicated by an increase of $285,000,000 in money in
circulation; they used part of it to repay borrowing at the Federal
Reserve banks, as shown by a decrease of $278,000,000 in Federal Reserve
credit in use; but the major part, $582,000,000, went to increase the
reserve deposits of the member banks at the Reserve banks. Since each
dollar of these reserves supports on the average well over $10 of com-
mercial bank deposits (including both time and demand), this increase
in reserves, resulting largely from gold imports, was the basis for the
increase of deposits in the member banks over the period.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 669
The effect of gold imports was accentuated by an important change
in practice as to bank reserves. Before the Reserve System was estab-
lished, the law required the same bank reserves against time as against
demand deposits, but under the Federal Reserve Act the requirement
was reduced to 5 per cent in 1914, and to 3 per cent, by amendment, in
1917. Under this encouragement, there has been a rapid growth in
time deposits, including probably some transference of deposits from
the demand to time classification. There was also a reduction in the
reserve required against demand deposits. These changes have allowed
a given amount of reserves to support an increased amount of bank
credit; consequently the imported gold has gone further in supporting
credit expansion than would otherwise have been possible.
These changes may be summarized by saying that the principal
influence from 1922 to 1927 toward rapid growth of bank credit and easy
credit conditions was gold imports, an abnormal influence which cannot
be expected to continue in the future, for the causes which brought us
so much gold are no longer operative. The gold came to this country
primarily because this was the only large country which was operating
on the gold standard with a free gold market. Most paper currencies
elsewhere were subject to wide and unpredictable fluctuations, and in the
endeavor to gain greater security, the citizens of many countries created
and maintained large balances in New York. But now the monetary
affairs of the world are again stabilized, and other countries are again
takers of gold, and may be expected not only to retain their present gold
stocks but to seek to increase them.
TABLE 5.—FACTORs IN SUPPLY AND DEMAND FOR RESERVE FUNDs, JULY, 1927 To
JULY, 1928
(In millions of dollars)
July, July, ) Net
| 1927 1928 change
Increase in supply through:
Money in circulation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . I 4,851 4,746 105
Monetary silver stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 834 839 5
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * - - - - - - - - - - 110
Increase in demand through:
Monetary gold stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 575 4, 113 462
Member bank reserve balances. . . . . . . . . . . . . . . . . . . . . . . . 2, 289 2, 324 35
Miscellaneous items. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Total. . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 569
Estimated net increase in demand for reserve bank credit. . . . . . . . . . . . . . . . . 459
Actual increase in reserve bank credit. . . . . . . . . . . . . . . . . . . . . . 1,026 1,488 462
Difference, due to errors and omissions. . . . . . . . . . . . . . . . . . . . . . . . . . . - 3
670 RECENT ECONOMIC CHANGES
This change in affairs has been illustrated since the middle of 1927.
France and other countries have withdrawn in gold a part of the huge
balances accumulated here. In the 12 months ended July, 1928, this
country lost more than half as much gold as was imported in the pre-
ceding five and one-half years, making it necessary to call into use about
$462,000,000 of additional Federal Reserve credit.
This reversal in the gold movement has changed materially the out-
look for the supply of bank funds. In the first place it has greatly
reduced the country's supply of what may be called “free gold”—that
is, gold in excess of legal requirements as banking reserves and as collateral
for note issues. In 1927, the country's holdings of free gold amounted
to approximately $900,000,000. A calculation of excess gold above legal
requirements of Federal Reserve banks, June 29, 1927, in thousands of
dollars, is shown in the following statement:
Total cash reserves (gold and lawful money). . . . . . . . . . . . . . . . . . . . . . . . . . 3, 183,809
Federal reserve notes issued to Federal Reserve banks. . . . . . . 2,076,382
Eligible paper held as collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . 647, 180
Gold collateral required against Lotes. . . . . . . . . . . . . . . . . . . . . . 1,429,202
Gold redemption fund (equaling 5 per cent of those notes
Secured by eligible paper). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,359
Total gold required against notes. . . . . . . . . . . . . . . 1,461,561
Gold and lawful money required against deposits (equaling 35
per cent of total deposits of 2,398,952). . . . . . . . . . . . . . . . . . . 839,633
Total gold and lawful money required against notes and deposits. . . . 2,301, 194
Excess of gold over requirements (“free gold”). . . . . . . . . . . . . . . . . . . . . . . 882,615
In addition to the gold in the Reserve banks, there has been about
one billion dollars of gold in circulation in the form of gold certificates,
which are often thought of as a potential future gold reserve. These
certificates could be replaced in circulation by Federal Reserve notes, and
the gold be added to the reserves of the Reserve System, thus raising
the reserve ratio. This operation, however, would not release any free
gold. The reason is that the Federal Reserve notes, issued in place of
the gold certificates, would have to be collateral dollar for dollar with
gold. The amount of collateral, other than gold, back of Federal Reserve
notes has not been large enough to cover the total of Federal Reserve
notes outstanding, and many of the notes are in effect gold notes—
secured dollar for dollar by gold. Any additional reserve note circulation
would perforce be so secured, unless there were a large increase in the
amount of borrowing by the member banks at the Reserve banks, or an
increase in holdings of bankers' acceptances, furnishing additional
collateral. But any such borrowing would put a strain on the credit
situation and tighten money rates. For the experience of the Federal
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 671
Reserve System shows a direct correlation between the amount of
member bank borrowings and interest rates. The member banks
properly regard borrowing as a measure for emergencies and for busy
Seasons, and not for continuous use. Hence, when a large number of
banks are forced to remain continuously in debt for considerable periods,
bankers tend to restrict their lending, and money rates rise. Gold
released only at the price of increased rediscounts cannot properly be
termed “free” gold.
Of the $900,000,000 of free gold in June, 1927, about one-half has
been lost, leaving at present (September, 1928) about $500,000,000 of
free gold, assuming a normal amount of member bank borrowing of
about $500,000,000. The present amount of borrowing is larger and
makes possible the release of more gold, but at the price of somewhat
strained credit conditions.
As we look forward to what may be considered normal credit condi-
tions, we cannot safely figure much more than about $500,000,000 of
free gold, under present laws and with moderately easy credit conditions.
In considering the problem of the future supply of bank reserves in
this country, the following are among the factors of importance:
1. Although no withdrawal is in sight as large as the recent French
movement, other countries still hold in this country large liquid balances,
which are subject to withdrawal.
2. With other countries eager takers of gold, it is uncertain how much,
if any, of each year's new output of gold will flow here.
3. The normal growth of credit and currency in the country, to care
for the increasing needs of trade, calls for additions to our reserves of
about $50,000,000 to $100,000,000 a year, although this is very difficult
to forecast.
4. If the $650,000,000 of National Bank notes now in circulation
were retired and replaced by Federal Reserve notes, with gold collateral,
this operation would lock up over $600,000,000 of gold.
5. If the unsecured issue of legal tender notes were retired and replaced
by Federal Reserve notes, with gold collateral, an additional $150,000,000
would be required.
It seems probable that this country must adjust itself to a smaller
annual increase in bank reserves than has been available recently. The
method of adjustment cannot be predicted in advance but may well be
given careful study. It may be that continued economy of currency
circulation will help to solve the problem; perhaps a revision of the law
is desirable to liberalize the provisions of the Reserve Act concerning
collateral for Federal Reserve notes. If these notes were secured by the
general assets of the Reserve banks, rather than specific types of assets,
considerable amounts of gold would be released. It may be that a less
rapid increase in bank credit than in the past five years would be eventu-
672 RECENT ECONOMIC CHANGES
ally more wholesome; for it is yet to be seen whether the recent increase
has sowed seeds of trouble which have not yet fully grown.
III. THE SUPPLY OF FUNDS DERIVED FROM SAVINGS
Preceding sections of this chapter have discussed various aspects of
the question of how far business has been aided by ease in obtaining funds.
The first and perhaps the most convincing evidence introduced was the
data for interest rates, which showed that rates for commercial money
have been reasonable and declining during most of the period. The
next section examined the supply of bank funds, and found that the
available evidence would indicate a larger surplus than in most preceding
periods, though in recent months the supply has been somewhat restricted.
It is the purpose of this section to summarize the evidence as to the supply
of capital funds, that is, of funds derived from savings.
Savings by individuals are made with a variety of motives; they tend
to increase with the growth of real income, and are facilitated by the
diffusion of agencies and recognized opportunities for investment.
Profits retained in both individual and corporate enterprises are also a
large factor in capital formation, and are properly included in the aggre-
gate of savings. During recent years, it is certain that conditions have
been highly favorable to the rapid increase of capital through saving,
both by individuals and by corporations. Real income as well as money
income of the community, taken as a whole, has increased. Saving
motives and habits have become more general. Business profits in
many instances have been large, and investment opportunities and agen-
cies have been readily at hand.
In the absence of any comprehensive measure of capital accumulation,
it is necessary to rely upon a number of individual series of figures, some
of which extend over a considerable period of time and may be thought
of as a sampling of the trend. Even though they are an imperfect meas-
ure, they will help us somewhat in attempting to answer the question
as to whether the rate of capital accumulation has been more than ordi-
narily helpful to business in the recent period. A number of these series
are shown in Chart 12.
The assets of life insurance companies and of building and loan
associations, and the time and savings deposits of banks, represent a
considerable part of the savings of individuals, though no one can say
accurately just how large a part.
The actual dollar figures show a rather steady rate of growth until
1915, after which the growth becomes steeper. It is at once evident
that some allowance must be made for price changes, as, for example, a
dollar savings deposit in 1920 represents considerably less purchasing
power than a dollar in 1913. In making allowance for changes in pur-
chasing power, an index of the cost of living has been used; this index
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 673
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674 RECENT ECONOMIC CHANGES
was chosen rather than the general price level, previously described
because it more nearly represents changes in the prices of the varied
uses to which the Savings might have been put by the individual savers.
The figures, adjusted to eliminate the influence of price changes, show, in
general, an increase at a diminishing rate from 1900 through 1915, with
a decline until 1920. From 1920 to date, there follows a sharper rate of
increase than characterized any of the preceding periods.
In the form as given, the figures may be a little misleading, for they
show what amounts to a cumulation of savings of all previous years.
For example, the 1927 figure represents not the total savings for that
particular year but the net accumulation of savings for that and all
CHART 13–ANNUAL INCREASE OF SAVINGS AND TIME DEPOSITS, LIFE
INSURANCE, BUILDING AND LOAN FUNDS, ADJUSTED TO COST OF
LIVING, 1900–1927
6000
5000
4000
$000
2000
|000
|00
1900 1905 1910 1915 \920 1925 1930
preceding years as well. While it is correct from the point of view of its
purchasing power, at any one time, to use the total divided by a price
index, a misleading picture of each year's accumulation may result.
In order to show the annual net amounts of Savings through these
institutions, the year to year addition to the total figures was computed,
and the latter figures divided by the cost of living. The result is shown
in Chart 13.
It appears that annual savings, in terms of dollars with a constant
purchasing power, from 1900 through 1913, averaged considerably less
than one billion dollars a year, while, from 1922 to 1927, savings averaged
nearly two billions, and for the three years ended with 1927 held steady
at a level somewhat above two billions. Of course, these figures are not






MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 675
inclusive of all types of saving, but at least they give a fair sample.
This, together with evidence that the public has been a heavy investor
in the security markets during recent years, leaves little doubt that savings
have been in unusually large volume.
Other convincing evidence of abundant savings is to be found in
the field of bank credit itself. The volume of bank credit, or of aggregate
deposits, with a possible exception to be noted presently, is, indeed, not
directly related to savings. It expands and contracts with changes in
reserves. But the use which depositors make of bank balances is pro-
foundly influenced by the volume of savings relative to demand for
capital, by the course of interest rates, and by the choice which is made
of investment methods or arrangements. When fears of credit inflation
are expressed, it is not solely the rapid increase in bank deposits that is in
question. There is at least an implication that the increase in deposits
will be accompanied by a corresponding increase in the volume of checks
drawn, and the further implication that this increase in the purchasing
medium will be more considerable than the growth in the physical
volume of trade, and so tend to induce an unhealthy advance in the level
of commodity prices, speculation in inventories, rapid labor turnover,
and extravagant consumption. These are familiar incidents of rapid
credit expansion, but they did not appear during the period under survey.
Although there was a notable increase in the aggregate amount of
bank deposits, there was no corresponding rise in the level of wholesale
commodity prices. In June, 1920, when the wholesale price index of
the Bureau of Labor Statistics registered 167 (on the basis of 1926
prices as 100), individual deposits of all banks in the United States
amounted to 37 billions of dollars. A decline to 35 billions in June, 1921,
accompanied the severe depression of the intervening months, but this
decline was followed by a continued upward movement that brought the
aggregate of individual deposits in June, 1928 to more than 53 billions.
In spite of this 50 per cent increase in deposits, wholesale prices were not
only far below the 1920 maximum, but were less than 5 per cent above the
level to which they had fallen in 1921.
It is evident that if the larger volume of deposits of 1928 had been
used in the same fashion and to the same extent as those of 1920, there
would have been a condition of inflation of bank credit which would have
been patent in its effects. But deposits were certainly not being employed
similarly in the two years, and the nature of the difference can be readily
indicated.
When banks make additional loans or investments, checks are
ordinarily soon drawn against the balances thus created. But after
the initial use, such deposits become merged with the general mass of
deposits, the use of which is determined by the multitude of influences
676 RECENT ECONOMIC CHANGES
that shape the employment of its free funds by the community. One
of these influences is the abundance of savings relative to the demand
for capital. Many individuals, saving from current money income,
rather than make investments on their own account, prefer to maintain
larger balances than formerly with banks, either as savings or time
deposits, or in the form of larger checking balances, i.e., demand deposits.
Corporations do the same thing with some part of current profits, or
perhaps the funds released by a reduction in inventories.
This tendency is further accentuated if, as has happened during the
period under survey, interest rates have declined. Influenced by
the ease with which issues of securities have been marketed, and by the
possibility that rates may turn upward, many enterprises are financed in
excess of current requirements, maintaining for longer or shorter periods
exceptionally large bank balances, either on demand or as time deposits.
Again, when interest rates decline, all readily saleable securities, yielding a
fairly certain return, appreciate in value, and not a few owners convert
their holdings into inactive bank balances in the expectation of lower
quotations at some future time.
Funds in excess of adequate checking balances, which depositors
elect either temporarily or permanently to entrust to banks, appear mainly
in the item of savings or time deposits in bank statements. These
statements indicate that the growth of this class of deposits accounts
for a large part of the increase in total deposits.
When savings or the proceeds of security issues are used to maintain
larger checking balances, the lending power of the banks is unaffected.
But when demand deposits are transferred into time or savings deposits,
the lending and investment power of the banks is enlarged, together with
some coincident reduction of ability to support demand deposits. For
banks that are members of the Reserve System, reserves of 7, 10, or 13
per cent (according to the location of the bank) are required against
demand deposits, and a uniform 3 per cent reserve against time or
savings deposits. A transfer, say, of a million dollars, from demand to
time deposits reduces the reserve requirement from an average of $100,000
to $30,000, leaving $70,000 available to support additional credit. Under
the conditions assumed, the total deposits might be materially increased,
but demand deposits would be reduced from $1,000,000 to $700,000. A
further complication should not be overlooked. Increasingly, general
recognition of the facility with which deposits may be transferred from
one category to the other must tend in Some measure to reduce demand
deposits to a minimum and increase the activity of such balances.
Summing up the influence of widespread Saving upon the banking
position, it may be said that it has tended to increase the aggregate loans
and investments and total deposits of the banks, at the same time reduc-
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 677
ing somewhat the amount of demand deposits. Thanks, at least in part,
to Saving, active business and large additional supplies of bank credit
have not brought about a rapid advance in commodity prices; and the
community has not experienced intense competition for labor and
materials in the production of consumers' and capital goods, analogous
to that between civilian and military demand during the World War,
which in times of peace has appeared in periods of prosperity. *
If now we ask ourselves in what respects the financial situation would
have been otherwise during this period if banks had acquired smaller
reserves, no precise and complete answer can be given. Total bank loans
and investments would have been smaller, and total deposits as well.
But it does not follow that the total amount of funds seeking employment
would have been reduced by the difference between actual bank loans
and investments and the smaller aggregate that would have obtained
with lower reserves. In the earlier years of the period, on the assumption
of a smaller supply of bank funds, the decline in interest rates would
have been less precipitate, particularly on those classes of loans and
investments favored by banks for the employment of surplus funds.
With somewhat less of pronounced ease in the money market, security
issues would have been more exactly related to current requirements, and
a less spectacular advance in bond and share quotations would have
reduced the volume of sales by holders seeking to realize profits. In
* I should question the fact that increased savings have been the primary reason
for the failure of prices to rise. Increased savings involve fundamentally a shift of
purchasing power from consumption goods to buildings, new machinery, etc. They
do not involve a decrease in total purchasing power. It is quite possible that the
large increase in thrift accounts during recent years has been due, in considerable
part, to the prosperity of workers who are as yet not fully accustomed to making
direct investments in mortgages or otherwise on their own account. This has perhaps
to an increasing extent made the commercial banks investing agents for such
depositors, but it is difficult for me to see how this trend or the shift from demand to
time deposits has any material effect on the price level.
It is perhaps necessary to distinguish between true savings and that accumulation
of excess deposits that is characteristic of the later stages of a business depression.
This latter phenomenon is, however, merely an evidence of the fact that prices and
business activity are on low levels—it is not the cause of such low levels. Similarly,
even without a business depression, an excess of money beyond current needs (free
gold) will almost of necessity reveal itself as excess deposits, which may appear
to be, but in reality are not, true savings. These again are the effect rather than
the cause of the price level being below that which the credit machinery could
accommodate.
A further comment, with respect to the relation of the volume of savings to the
general price level and to credit conditions, is that it is almost impossible to measure
the volume of savings over short periods. Actual money movements may be quite
deceptive in this respect, and the only safe index of the volume of savings is the
accumulation of capital goods, buildings, etc., measured over periods long enough to
eliminate the major elements of error in the computations.—Note by M. C. Rorty.
678 RECENT ECONOMIC CHANGES
consequence, there would have been a smaller increase in the amount of
funds derived from these sources placed with banks as inactive balances.
A similar result may be presumed in the case of savings from individual
money incomes. If quotations had advanced less abruptly, the attrac-
tiveness of a purchase of securities relative to that of a time deposit would
have been enhanced for the cautious type of investor. Although it is
not possible to measure the effect of such influences upon the financial
situation, they are not less real on that account. An abundance of bank
credit, in conjunction with ample savings, creates conditions which tend
to modify the character of bank deposits, rendering them less active,
and so, at least in some measure, neutralizing the potential effect of an
enlargement of funds furnished by banks upon the acquisition of larger
reserves. This tendency is greatly accentuated by the inelasticity of the
rates of interest which banks pay on deposits. These rates are not
adjusted quickly to changes in the yield on current purchases of Securities.
In any period marked by declining interest rates, therefore, it becomes
relatively more and more advantageous to leave funds with banks rather
than to purchase securities.
While large and widespread saving has been an influence in
counteracting the upward price tendency of an abundant supply of
bank credit, a number of supporting influences of diverse character have
also been present during the period of the survey. Vivid memories of
losses incurred in 1920 have certainly exerted a persistent restraining
influence against the accumulation of inventories in order to reap profits
or to escape losses from advancing prices. Efficient transportation
service has removed fears of delays in shipment. For many products,
style has become a factor of increasing importance, and there has been
growing recognition of the economy and elimination of risks that may be
secured in merchandising through a rapid rate of turnover.”
These moderating price influences have not been absent in the field
of manufacturing, in which still other influences tending to produce the
same result are also to be observed. In not a few industries, existing
facilities have been available for the production of larger supplies of
goods than could be sold at profitable prices. For industries in this situa-
tion, even a sudden and considerable increase in demand has not been
followed by a decided and maintained price advance. In perhaps a
wider range of industries, increased output, resulting from greater effi-
ciency of management and labor and improved equipment, has made
necessary additional sales effort to stimulate or even create a demand
among wider circles of consumers. The practice of adjusting production
to changes in demand, actual or anticipated, has spread from certain
basic industries, such as iron and steel where it has long been practiced,
into other fields of production.
* See Chap. W, Marketing.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 679
A further price-restraining factor has been the unbalanced economic
situation of the country, evident when account is taken of all of its
various activities. The process of agricultural adjustment has been
slow and painful, and is not yet completed, while producers of such
important products as coal and many of the textiles have experienced
upon the whole a highly unsatisfactory demand.
Finally, the restraining influence of the situation in other countries
on prices in this country must not be overlooked. The advance of gold
prices in any single country is inevitably impeded and finally checked
if prices do not advance elsewhere. Throughout the entire period of this
Survey, no sustained general advance of gold prices in the more important
trading countries has been possible. Sufficient supplies of bank credit
were not available to provide large additions to the purchasing medium,
and in any event the dislocation of industry and markets would have
proved an insuperable obstacle.
These influences, in conjunction with large savings, furnish an expla-
nation of the failure of commodity prices to respond with a decided
upward swing to the impact of an abundant supply of bank credit avail-
able at declining rates during recent years of generally active business.
Evidently, there is no automatic or close mechanical relationship between
the volume of bank credit and the course of commodity prices. Herein
is perhaps to be found the chief significance, both theoretical and practi.
cal, of our financial experience during this period.
IV. GOVERNMENT DEBT REDUCTION AND THE SUPPLY OF CAPITAL
In addition to the supply of funds derived from saving and the
extension of bank credit during the period of this survey, a further supply
of indeterminate amount may be properly attributed to the rapid reduc-
tion of debt by the Federal Government. The amount to be credited
to this policy is by no means to be taken as the full amount of debt
reduction. Had taxes rather than debt been reduced, it is certain that
taxpayers would have saved some part of the larger incomes which
would have been at their disposal. And it may safely be assumed that
the amount thus saved would have been a large part of the total, in
view of the high percentage of Federal revenue that is derived from those
in enjoyment of large incomes—from that group in the community which
regularly contributes largely to the supply of capital. The relationship
between debt retirement and the supply of investment funds is set forth
in the following statement from the Bulletin of the Federal Reserve
Board of July, 1928:
Under existing conditions, the effect of Treasury disbursements in reduction of
debt on the volume of investment funds is relatively limited, except to the extent
that purchases or cancellations of securities are made by the Government with funds
obtained under foreign debt settlements. Under a system of taxation where a
680 RECENT ECONOMIC CHANGES
large number of taxpayers turn over to the Government a part of their income,
which otherwise would have been expended in the purchase of goods, and the
Government uses funds thus obtained in the retirement of securities held mainly by
large investors, the retirement of public debt would result in the conversion of a
considerable volume of current income into investment funds. But since under the
system of taxation in the United States a large part of the contributions to the
Government comes from persons with large incomes, which would normally be
available in part for investment purposes, a relatively small amount of new invest-
ment funds is created by debt retirement. No precise data are available covering
the incidence of the various taxes with reference to the distribution of Government
securities. Customs and miscellaneous internal revenue and corporation taxes are
widely diffused in their incidence, but returns of the individual income tax, from which
about one-fifth of the Government revenue is derived, indicate that more than
one-half of the taxes on individual incomes are paid on incomes in excess of $100,000
and less than 5 per cent on incomes of $10,000 or less. In these circumstances
funds collected through taxation would be available in large part for investment,
whether they previously passed through the hands of the Government or were used
in the first instance by the investing public.
W. FOREIGN INVESTMENTS9
Foreign investments are a manifestation of an abundant supply of
investment funds in a country, and of possibilities or expectations of
securing a higher return elsewhere. They widen the area and oppor-
tunities for the employment of capital, and by so doing tend to equalize
and render more stable interest rates throughout the world. There are
certain financial risks incident to foreign investments, in addition to those
to which investments of all sorts are subject, but there is no fundamental
economic difference between foreign investments and those that are
made within the investor's own country. When the savings of citizens
of the New England states are invested in municipal bonds, or the
securities of corporations, or farm mortgages of communities in the
western states, the economic effects are essentially the same as when
foreign government or private securities are purchased. In both
instances, the purchasing power of the regions in which the funds are
invested is immediately increased, supporting, in one case exports, and
in the other domestic trade. In both instances there are similar possi-
bilities of unwise and excessive investment with similar unfortunate
consequences. Foreign investments are indeed subject to certain
special risks, in particular those arising from war, revolution, and dis-
ordered currencies and dislocated exchange, and on account of these
risks, as well as from unfamiliarity with foreign conditions, the investor
may demand a higher return than upon similar domestic investments.
But qualifications of this character obviously do not involve an essential
economic differentiation between the two classes of investments.
* See Chap. XI, pp. 725–736.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 681
In the absence of the foreign demand of recent years, interest rates
in the United States probably would have declined more sharply, the
problem of placing all funds seeking employment would have been more
difficult, but in some way or other it is certain that uses would have been
found. The employment of a larger part of these funds at home might
have entailed greater industrial readjustments and so have affected
business unfavorably, but the same might be said if some important
domestic demand for funds had not materialized, as, for example, that
for the construction of urban dwellings.
And finally, we may say of recent foreign as of domestic investments
that only the future can determine whether or not they have been
shrewdly made, with advantage to borrowers and with but negligible
losses to those who have supplied the funds.
VI. THE EMPLOYMENT OF INVESTMENT FUNDS
The abundant supply of funds, seeking investment at declining rates,
seems to have exerted an influence favorable to the strengthening of the
financial structure of business during the course of the period covered
by the survey. A larger proportion of the assets of business enterprises
has come to be financed by means of the resources of owners and long-
term obligations; a smaller proportion through current obligations to
banks and merchandise creditors. At the same time, there has been a
wide diffusion of ownership through the sale of securities in many enter-
prises that were formerly closely held by a few individuals, in addition
to those that had long been available for purchase by the public. In
some instances, the capital structure in the course of time will doubtless
prove defective. Initial issues of shares have been so large as to cast
doubt upon the ability of some corporations to secure additional capital
in the future through the sale of stock, and, though less frequently,
there has been a seemingly disproportionate reliance upon bonds. There
is also the possibility that unfortunate results, in the long run, may follow
the separation of management and control from ownership which,
whether by design or not, is apt to be found when a business is owned by
wide circles of investors. But, with all the diversity in policies exhibited
in recent changes in corporate financial structure, there is to be noted
general agreement in a desire and purpose to reduce the volume of
current obligations.
Direct evidence of such a change in corporation financing is obtained
from a study of the statements of a number of large corporations, which
was made by the credit department of the Federal Reserve Bank of
New York. Some of the results are indicated in the following tabulation:
682 RECENT ECONOMIC CHANGES
Bank debt
(thousands of dollars)
Companies
|
1922 1927
|
Six wholesale grocers. . . . . . . . . . . . . . . . . . . . . . . 9,755 9, 235
Seven cotton goods manufacturers. . . . . . . . . . . 17, 725 6, 560
Eight shoe manufacturers. . . . . . . . . . . . . . . . . . 4,458 5, 674
Five dry goods, wholesale . . . . . . . . . . . . . . . . . . 14,890 12, 296
Seven lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 168 5,021
Six drug manufacturers. . . . . . . . . . . . . . . . . . . . 1,618 902
Total 39 companies. . . . . . . . . . . . . . . . . . 51, 614 39, 688
Ratio, capital Ratio, total Ratio, net
funds to current debt to current | worth to total
º debt debt * debt
Companies |
1922 1927 1922 1927 1922 1927
| | |
------—- - --—--------...-- ––– – --- --- - - - - - | – --
Six wholesale grocers. . . . . . . . . . . . . . . . . . . . 2.24 2.40 1.01 | 1.05 2. 18 2. 22
Seven cotton goods manufacturers. . . . . . . . . | 2.58 5. 26 1. 09 1. 18 2. 26 4, 27
Eight shoe manufacturers. . . . . . . . . . . . . . . . 4.33 3.42 1.42 1. 32 2.73 2. 34
Five dry goods, wholesale . . . . . . . . . . . . . . . . 1.23 2, 17 1.02 1, 10 1. 19 1, 88
Seven lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . 2.42 4. 65 1. 09 1. 35 2. 12 3, 18
Six drug manufacturers. . . . . . . . . . . . . . . . . . 5.30 12.82 1.46 2, 35 | 3.31 4, 86
| |
These figures, while not offering conclusive evidence, at least indicate
the general tendency of corporate financing. The first part of the table
shows that, notwithstanding a variation in the different lines, total bank
loans of these companies were reduced about 25 per cent. The second
part indicates that, in a majority of the six lines of business, the tendency
has been away from the employment of bank funds and toward capital
funds.
This preference for permanent methods of financing business is also
reflected in the relatively small increase in the commercial loans of the
banks in recent years, as contrasted with the increase in security holdings
and collateral loans. Between June 30, 1922 and June 30, 1927, in the
case of the national banks, for which alone data regarding the various
classes of loans are available, investments increased from $4,563,000,000
to $7,147,000,000, and collateral loans from $2,907,000,000 to $5,114,000,-
000, a combined increase of $4,791,000,000, or 64.1 per cent. During
the same years, unsecured loans and those secured by merchandise and
warehouse receipts—loans that are mainly commercial in character—
increased only from $7,859,000,000 to $8,575,000,000, or 9.1 per cent.
From the standpoint of those securing capital for actual use, it makes
little difference whether funds are forthcoming through the purchase of
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 683
Securities with cash resources by banks and others, or through purchases
consummated by means of collateral loans. A given investor may either
purchase securities outright or leave funds with a bank, thus enabling it
to purchase the securities or grant loans to would-be buyers. In all
three instances the obligation incurred by the corporation or government
Securing the funds is the same. Indirectly, collateral loans facilitate the
acquisition of bank credit for business purposes on a stock basis, a type
of direct investment by banks that is subject to legal and traditional
restrictions. Thus, it may be said that some portion, of constantly
varying amount, of the capital of the United States Steel Corporation
throughout its entire history has been supplied by the banks, to the
extent that steel stock has been accepted as security for collateral loans.
Since, by and large, a business becomes stronger as the proportion of its
assets financed by shareholders increases relative to its indebtedness,
collateral loans in contributing to this result are performing a most
useful service to the community.
The increase in collateral loans and security holdings relative to
commercial loans may reflect a permanent tendency in the employment
of bank credit. Improvements in methods of production, in general,
involve the employment of increasing amounts of capital in fixed forms;
Seasonal peaks in industry are being reduced, and business organizations
of large size are occupying a widening area in the field of production and
merchandising. These developments favor the financing of the resources
of business in permanent ways, through the issue of stocks and bonds, and
the wide distribution of such securities among investors. This is a
merchandising activity which requires large funds that are mainly secured
from banks by means of collateral loans. When secured for this purpose,
the collateral loan is strictly analogous to a commercial loan. It is Serv-
ing to finance an operation of the borrower which, in the ordinary course
of his business, will shortly be completed, and followed by a succession of
similar operations in the future.
But the collateral loan performs another, less obvious though quite
as indispensable, function in the security field. It makes possible the
development of a continuing market for outstanding securities, in the
absence of which the attractiveness of securities as investments would
be seriously reduced. As the volume of securities in the hands of the
public increases, organized markets and a coincident increase in collateral
loans are needed, if holders are to find a ready sale for such Securities
as they may wish from time to time to convert into cash. -
From the point of view of the banker, collateral loans possess con-
spicuous attractions. When made against a variety of securities, less
trouble and care are requisite than are involved in making unsecured
loans to borrowers engaged in different lines of business. And further,
collateral loans are not, as is often assumed, less liquid than commercial
684 RECENT ECONOMIC CHANGES
loans. For a given bank, a loan is liquid if it can be readily shifted to
another lender, and, aside from discounting from Reserve banks, this
possibility is present for a larger proportion of collateral than of com-
mercial loans. On the other hand, sudden contraction on a large scale
is possible with no class of loans, and under a well-organized banking
system is never necessary.
With the accumulation of wealth and the acquisition of funds from
a widening circle of investors by governments and business enterprises,
banks and banking houses of the larger cities become the agencies
through which an increasing proportion of the Savings of the community
reach those who use them. It does not necessarily follow on this account
that bankers are exercising an increasing measure of control over industry
and trade. Doubtless, greater responsibility rests upon bankers for the
placement of capital in capable hands, and for its balanced distribution
among various uses. But the positive control over the conduct of indus-
try that bankers may exercise is determined more by the abundance or
scarcity of capital relative to demand than by the actual amount of
funds that are made available. A business that is in a weak position,
whether from poor earnings or faulty financial structure, may be obliged
to follow implicitly the suggestions of bankers. When investment funds
are in ample supply, a strong business enterprise occupies a position of
satisfactory independence.
It is, of course, entirely possible that much of the ample supply of
capital may have been placed in feeble hands, and that certain industries
may prove to have been overdeveloped. But when capital is secured
on the basis of more or less permanent financial arrangements, the con-
sequences of errors of judgment disclose themselves slowly with the lapse
of time. For this reason, the years from 1922 to 1928 cannot be con-
sidered a complete or even well-defined period of experience. It would
doubtless have been otherwise, if bank credit had been employed in active
speculation in the commodity markets with a rapidly rising price level.
For the full round of changes in a business cycle in which trading activities
are the major factor, six years may be ample time. A longer period
may be required when the investing of additional capital takes the
leading rôle in the activities of the business world.
VII. STOCK EXCHANGE OPERATIONS
Securities held by the general public are commonly listed on one or
more of the stock exchanges of the country, and this practice has led,
in recent years, to a noteworthy increase in the number and variety of
issues readily available for active trading purposes. Although the busi-
ness handled on other exchanges has increased, the overshadowing
importance of the New York Stock Exchange has suffered no diminution.
The obvious advantages of nation-wide connections and publicity inev-
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 685
itably exert a potent influence toward centralization, and, measured
either by the value of securities listed or by the volume of trading, the
New York Stock Exchange greatly exceeds all the other stock exchanges
in the United States, including its active neighbor, the New York Curb
Market.
The scope of operations on the New York Stock Exchange is evident
from the following table which gives, for the years 1919 to 1928, the
number of issues of bonds and shares listed and the annual volume of
trading measured by the value of bonds and number of shares sold.
SEPARATE Issues LISTED, 1919 To 1928
(At the beginning of each year)
Year Bonds Stocks Totals
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 131 612 1,743
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 114 691 1,805
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 115 756 1,871
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 156 792 1,948
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 234 778 2,012
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 262 889 2, 151
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,332 927 2,259
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,367 1,043 2,410
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,420 1,081 2, 501
1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,491 1,097 2,588
*1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 513 1, 131 2,644
a As of October 1.
VoIUME OF TRADING
(000,000 omitted)
Year Stocks Bonds
(Number of (Face value)
shares)
1919. . . . . . . . . . . . . . . . . . . 312 $3,771
1920. . . . . . . . . . . . . . . . . . . 223 3,955
1921. . . . . . . . . . . . . . . . . . .* 171 3, 504
1922. . . . . . . . . . . . . . . . . . . 260 4,098
1923. . . . . . . . . . . . . . . . . . . 237 2,753
1924. . . . . . . . . . . . . . . . . . . 282 3,828
1925. . . . . . . . . . . . . . . . . . . 452 3,398
1926. . . . . . . . . . . . . . . . . . . 449 3,029
1927. . . . . . . . . . . . . . . . . . . 576 3,321
1928. . . . . . . . . . . . . . . . . . . . 920 2,939
It may first be noted that dealings in bonds play a minor rôle on the
Exchange and that, in spite of a considerable increase in listings, they
have manifested little or no tendency to increase. Purchases and sales
of outstanding and new issues of bonds, as well as of inactive stocks,
continue to be arranged in large measure directly between investors and
dealers in securities. It is only securities that, for whatever reason, exhibit
686 RECENT ECONOMIC CHANGES
decided changes in value that are the objects of Stock Exchange
transactions. -
During the first six years covered by the table, the volume of dealings
in shares was comparatively steady. A shrinkage in 1921, a year of
depression, illustrates the proposition that prolonged activity in security
dealing is always associated with rising quotations. After an initial
stage of more or less enforced liquidation, a declining market becomes
stagnant until an upward movement is inaugurated. It was not until
1925 that the annual volume of dealings in shares exceeded the total
for 1919. A record was then made which was practically maintained in
the following year, was greatly exceeded in 1927, and more than doubled
in 1928.
Unquestionably, Stock Exchange transactions have been the most
conspicuous financial development of the later years of the period under
review, and the causes of the unexampled expansion in trading and its
economic, as well as financial, significance and effects deserve careful
examination.
On the basis of the movement of industrial security quotations, the
years since 1921 divide into two periods; one, of moderate change until
the summer of 1924, and a subsequent period of persistent advances
continuing to the end of 1928. A similar division appears in the case of
brokers’ loans, no decided increase in the first period, very great expan-
sion in the second. The course of call loan rates does not, however,
follow this division. A sharp decline in 1922 was followed by fairly stable
rates until the beginning of 1928. Thereafter, rates advanced sharply,
with, it is to be noted, no accompanying decline but rather a further
increase in the volume of brokers’ loans.
Many influences of varying degrees of importance contributed to
bring about the marked upward movement of security prices and to induce
an exceptional volume of trading. Leaving out of account an initial
advance incident to the recovery of business following the depression in
1921, the abundance of funds seeking investment and the decline in
interest rates provided the basis for a general advance in Security quota-
tions. Other factors have been the more general recognition of the
possibilities of appreciation of common stocks in a growing country,
the organization of many investment trusts, a large increase in the
number of branch offices of Stock Exchange houses, the listing of shares
of many additional enterprises and, above all, the impressively large
profits of a considerable number of companies, giving rise to anticipations
of a further increase in earnings of these and other undertakings. Dis-
counting the future in the security market may be carried to excess with
resulting unhappy consequences, and it is an important limitation upon
the significance of this survey that it covers a period that witnessed only
the economic, social, and financial effects of a rising market for Securities.
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 687
The effects of rising security prices during the period of advance may
here be generally indicated. A rising stock market has a psychological
influence favorable to business activity. It also serves to facilitate
the marketing of securities among investors, and lessens the cost of
additional capital secured through the issue of new stock by many
enterprises. In such markets, large and sudden gains are realized, and
some part of these gains doubtless serves to increase the demand for
many commodities, particularly articles of luxury. Finally, a rising
security market tends to transfer ownership of some part of the accumu-
lated wealth of the country from the cautious to the farsighted and
venturesOme.
An active stock market always involves an increasing volume of loans
to brokers. The rate of increase in these loans since 1923 has been
rapidly accelerated. The funds that are borrowed to finance Stock
Exchange transactions, it should perhaps be noted, are not withdrawn
from use and held in the market. Brokers’ loans are simply one of the
various channels through which funds enter into general use throughout
the community. The broker incurs an obligation to make payment, but
the funds he borrows are at once turned over to those from whom securi-
ties are purchased and are thereafter employed for every kind of purpose,
as are the funds borrowed to finance real estate, the production and
marketing of goods or other transactions. Here and there, it may indeed
happen that a particular borrower has been unable to secure accom-
modation because those lenders to whom he had access had employed
all their available resources in brokers’ loans, but such cases must have
been exceptional, since the funds thus employed have come almost
exclusively from urban sources, city banks, and other large lenders.
Valid criticism of brokers’ loans must rather be concerned with the more
direct effects of this use of financial resources.
In view of the moderate rates on all classes of loans that obtained
between 1922 and the close of 1927, it would appear that the growth in
brokers’ loans in these years served to provide a reasonably safe and
liquid avenue for the employment of surplus funds. It was not until
1928 that the stock market demand for additional funds became so
intense as to exert an influence tending to bring about an advance in
rates on all other classes of loans. That security prices should have
further advanced in 1928, with an accompanying increase in brokers'
loans and in spite of a sharp advance in rates, may perhaps be regarded
as symptomatic of unrestrained speculation. But even though an over-
extended situation in the Security market should not develop and be
followed by a disastrous reaction, it may be said that the recent experi-
ence in the functioning of the money market, as it is affected by the
Stock Exchange demand for credit, raises new and perplexing problems.
In the past, the bulk of brokers’ loans has been furnished by banks and
688 RECENT ECONOMIC CHANGES
bankers. Under the influence of rates for call loans ruling generally
above rates on all other classes of loans, the funds of investors and surplus
funds of business enterprises have been attracted into the market in such
volume that they now provide very nearly one-half of the total supply.
The outcome of this practice remains for the future to disclose.
The recent development of a stock market demand for loans that
seems almost without limit and is impervious to moderate advances in
rates, and the possibility of the recurrence of a similar situation from time
to time in the future, cannot fail to affect unfavorably the development
and functioning of the New York money market as a great and reason-
ably stable national and world financial center. The issue and marketing
of bonds, the granting of acceptance credits and the functioning of the
bill market, have been unfavorably affected by the instability of rates,
occasioned by the absorption of credit in connection with Stock Exchange
operations. The volume of transactions on the Stock Exchange is
immensely greater than that on the exchange in any other country.
Customers are far more numerous and, above all, daily settlements are a
unique feature of trading. The adoption of term settlements has been
suggested, but the proposition has met with but little favor in Stock
Exchange circles. The only other means of securing a reasonable measure
of stability in the functioning of the New York money market would
seem to be through the exercise of a restraining influence by the Federal
Reserve System.
During 1928, efforts to restrain the absorption of credit in the security
markets were indeed made by the Reserve banks, and the conclusion
should not be drawn from the lack of success that attended the measures
taken that restraint could not be made effective through the Reserve
System. Early in 1928, the Reserve banks initiated a policy of restraint
through the exercise of very gradual pressure upon the market. Govern-
ment securities were sold and discount rates were increased by three
successive advances of 33 of 1 per cent, at intervals separated by from two
to three months. The possibilities of effectually restraining intense
speculative activity through sharp and even drastic action have not been
tested.
VIII. INVESTMENT TRUSTS
The investment trust is a development of recent years in American
finance. While this type of financial organization is, in large measure, a
copy of British investment trusts, its rapid growth in this country appears
to be due in part to a new recognition of the value of common stocks as
investments. Statistical studies during the past few years, showing
the relative advantages of investments in stocks as compared with bonds,
together with the recent rise in stock prices, and the unfortunate experi-
ence during the war with the purchasing power of fixed interest Securities,
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 689
have led to widespread buying of common stocks, not simply by specula-
tors but by conservative investors as well.
Since the junior securities of a corporation, in general, carry greater
risks along with the possibility of a larger return, diversification becomes
of increasing importance, and thus for the small investor considerable
advantage is offered by some type of organization which gathers funds
from many sources and invests them over a widely distributed list of
Securities. Moreover, an organization of this sort can command infor-
mation not available to the individual.
The investment trust is not dissimilar in principle from the savings
bank, in that it gathers funds from many sources and employs them in a
diversified list of securities selected by a management group. The
principal differences are (1) that the investment trust is not limited in
its choice of securities by the legal restrictions which surround savings
banks, (2) that the investment trust is not under such close governmental
supervision, and (3) that the investment trust, unlike the savings bank,
usually makes no promise of a fixed rate of return, and indeed has no
set limit of return.
Since the investment trust management exercises a much wider
discretion than the savings bank, and since it deals in securities of much
more speculative character, the important question with regard to its
safety and efficiency relates to the character of management. It offers
an opportunity for small investors to enjoy some of the same advantages
of investment which have heretofore been mainly restricted to investors
with large resources, but it faces the dangers of concentrated control
in the hands of a few men, without, at the present time, any very close
supervision.
The creation of investment trusts has been so rapid in recent months
that it is difficult to estimate the total amount of paid-in capital funds of
these companies, but they are probably in excess of one billion dollars.
The effects of the growth of investment trusts are similarly difficult to
estimate. It has probably furthered the movement toward the purchase
of common stock, though, to a considerable extent, purchases by invest-
ment trusts have simply meant buying in a block Securities which
investors might otherwise buy as individuals.
If the investment trust under competent management purchases
stocks when they are cheap and sells them when they are dear, a stabil-
izing influence upon the security market would result, though the question
on this point is whether the investment trust would conduct its operations
more or less wisely than individual investors.
Another effect would appear to be the placing of large amounts of
funds in the stock exchange money market. The small individual
investor with funds awaiting investment ordinarily carries these funds on
deposit with his bank, whereas the investment trust is more apt to carry
690 RECENT ECONOMIC CHANGES
such funds in the form of loans in the stock exchange money market.
Since such loans tend to support a security market at times when security
prices are high, this activity of investment trusts frequently may have
an inflationary rather than a stabilizing influence upon stock prices.
The investment trust movement, however, is too new to justify
comprehensive conclusions, and the total size of the trusts has not been
large enough to warrant belief that they have exercised any very large
influence upon American finance.
IX. BANKING ORGANIZATION AND PRACTICE
While there have been no changes of great moment in banking
organization and practice during the period of this survey, a number of
tendencies are to be observed that may prove to be the initial stages
of significant modification and development. Particular interest
attaches to the decline in the number of commercial banks throughout
the country, the growth of branch banking and chains of banks, and the
widening range of functions and activities undertaken by a steadily
increasing number of banks.
During the first two decades of the century, to go no further back,
there had been a continuous and accelerating increase in the number of
banks in the United States, the amazing total of more than 30,000 being
in operation in 1921. A conspicuous reversal of this tendency has now
continued for more than seven years, and, taking the country as a whole,
there has been a decided reduction—4,000—in the number of banks. But
with over 26,000 banks still in operation, this reduction still leaves the
banking system of the country unchanged in this its most characteristic
and fundamental feature. It remains a system constituted by a multi-
plicity of local banks, exhibiting extreme diversity in size, in character
and experience of management, and in the surrounding economic con-
ditions of the communties to be served.
Whether there will be a further material decline in the number of
banks cannot be positively predicted, though it seems by no means
improbable. In any event, it may be confidently anticipated that the
decline will be at a far less rapid rate, since the major cause of the
disappearance of banks in recent years—numerous bank failures—reflects
conditions abnormally unfavorable to banking solvency in many
localities, conditions unlikely to reappear with any like severity in the
near future. But other less potent influences tending to bring about a
reduction in the number of banks have also been present, and these
influences may be expected to persist and perhaps assume greater sig-
nificance. As the analysis of these influences will throw some light upon
the bank failure problem, they will be given prior consideration.
Branch and Chain Banking.—Under a system of independent unit
banks, the accommodation that is available to the great mass of borrowers
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 691
is limited to the amount of funds at the disposal of the local banks. But
as any particular business undertaking grows in size, the geographical
range of its borrowing possibilities widens. It is able to resort to the
nearest urban center, and, with further growth, to banks in the larger
cities throughout the country, including New York. The services of
dealers in commercial paper may also be utilized to secure funds from a
large and changing number of scattered banks. Under a unit banking
system, in contrast with a highly developed branch banking system, the
borrower seeks distant supplies of funds, as supplies of funds are not sent
to his neighborhood for employment.
Resort to the money centers by large borrowers is by no means a
recent practice, but it is certain that the practice is being more and more
generally employed and by a widening range of individuals and corpo-
rations. When a number of small producing or merchandising units are
combined into a single organization, dependence on local supplies of
bank credit is eliminated. Finance companies, utilizing credit lines
established with many city banks, relieve local dealers from some portion
of the obligations which they could only finance through local banks.
Co-operative marketing associations of farmers secure acceptance credits
from distant metropolitan banks whose assistance could not possibly
be enlisted by any considerable number of the individual members.
Legislation that fosters this particular development is to be noted in the
system of intermediate credit banks, the resources of which are especially
designed to assist co-operative marketing." In the farm mortgage
field, also, the same situation is to be observed. The Federal Land
Bank System provides a standardized security resting upon hundreds of
thousands of first mortgages, which enables farmers to tap distant sources
of funds, but necessarily at the same time removes from the portfolio
of the local banker a security of the best obtainable character.
Taking all these tendencies into account, it is evident that the character
of the business that many local banks retain must have undergone not
a little deterioration. And these are not the only difficulties with which
in many instances they are beset. The bank in the small village or rural
hamlet, like the neighboring storekeeper, is unfavorably affected by
improvements in transportation, which have greatly widened the area
that is conveniently adjacent to the larger cities and towns.” Banks in
the larger centers have been gaining deposits, and seem likely to continue
to gain, at the expense of the small rural bank in surrounding territory.
Exceptionally capable management will doubtless enable many to sur-
mount these various obstacles, but these conditions are not favorable to
the maintenance of solvency, to say nothing of Satisfactory earnings.
10 See Co-operative Buying and Selling, Chap. W, Marketing, pp. 374-390; Chap.
VIII, Agriculture, pp. 579–581.
11 See Chap. W, Marketing, p. 335.
692 RECENT ECONOMIC CHANGES
To depositors and borrowers alike, a further decline in the number of
banks, in agricultural Sections particularly, would involve no appreciable
inconvenience, and would result in a decided gain in security. But
mergers and voluntary liquidation are the desirable means of accomplish-
ing this result rather than bank failures, and it is satisfactory to note
that these more desirable methods are being freely employed. More
than 50 mergers and voluntary liquidations, during the first seven months
of 1928, in the over-banked state of Missouri furnished a notable instance
of this desirable tendency.
There is also evidence of not a little concentration in banking where
weak and excessively numerous banks are not in question, where the
initiative is taken by strong banks which acquire prosperous neighbors in
order to become still larger and, at times also, in order to secure the services
of experienced and capable officers. Concentration of this general
character is limited by legal restrictions upon the operation of branches by
banks, and one of the notable developments of the period under review
has been the settlement, at least for the time being, of the vexing and
contentious controversy which had arisen over this form of banking
organization. Many of the states prohibit branch banking entirely;
others allowed it within city or county limits; still others, of which
California is the most striking example, impose no restrictions. In
states which allowed branches, national banks were at a disadvantage,
since they were practically limited in this field to the branches of such
state banks as they might absorb. A change in the national banking
law, giving them branch powers similar to those enjoyed by state banks in
their respective states, would have been satisfactory to national bankers,
but this remedy encountered opposition from states in which branch
banking was either prohibited or restricted, since, upon its adoption,
national banks would no longer have unitedly opposed further liberaliza-
tion of legislation regarding branches in those states. Finally, a com-
promise measure was adopted, under which national banks are permitted
to open branches in cities in which state banks enjoyed that privilege
at the time of the passage of the act, but not in wider areas, and not in
cities that might subsequently be opened to branches by state law.
And further, in order to curb the spread of branch banking under state
law, it was provided that state bank members of the Federal Reserve
System might establish additional branches only in localities in which the
act permitted national banks to open branches. This measure places
no obstacle in the way of a nonmember state bank, but it was assumed
that any large bank, operating numerous branches, would desire to retain
its membership in the System.
With the operation of branches narrowly restricted by legislation,
the tendency toward concentration in banking is manifesting itself to an
increasing extent, in a slightly different and decidedly more unsatisfactory
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 693
fashion—in the formation, under a bewildering variety of arrangements, of
chains of banks. Investment in a limited number of shares in scattered
banks does not constitute a chain of banks. Some measure of control
and management is involved. Chain banking overleaps state boundaries,
and may, and commonly does, include both state and national banks.
Chains lack the internal controls of a unified accounting system, and they
escape the simultaneous examinations to which banks with branches are
subject. In spite of these defects, with management in honest and
capable hands, good results will be attained, but it is obviously a form of
organization which lends itself to grave abuse.
Bank Failures.—During the seven years, 1921–1927, according to
information gathered by the Federal Reserve Board, 4,513 banks sus-
pended payment, of which 559 were subsequently reopened. The total
deposits of these failed banks were $1,151,000,000, an average of but
$291,000 for each bank. Even if large allowance is made for heavy
withdrawals of deposits shortly before failure, it is evident that this
epidemic of failures has been confined almost entirely to small banks with
resources of less than $500,000. Since the business of such banks is
ordinarily circumscribed within narrow local areas, these numerous
failures, however grievous to the communities in which the banks were
established, have not been a large factor in the general financial situation
of the country.
These failures do not imply a weak condition and poor management of
the banks generally, but they indicate, as does experience in earlier
periods, that large numbers of banks, which seem to be in a flourishing
condition during years of business activity, are unable to withstand the
stress and strain incident to depression and a downward adjustment of
values in the communities in which they are established. In the territory
served by the Federal Reserve Banks of Boston, New York, and Phila-
delphia, a section which speedily recovered from the industrial reverses
of 1920, bank failures were relatively few—only 43 during the seven years,
1921–1927. The Cleveland district with 61 failures, and the San
Francisco district with 187, also show a comparatively low casualty rate.
In the four southern districts of Richmond, Atlanta, St. Louis, and
Dallas, on the other hand, there were 1,321 failures during this seven-year
period. The three remaining districts present a still less favorable
record; the Chicago district shows 550 failures, Kansas City shows 685,
and finally there is the astounding number of 1,097 failures in the
Minneapolis district.
Dishonesty and gross mismanagement account for a small number of
these failures. The suspension of a larger number was precipitated by
adverse conditions of a purely local character, such as a succession of
crop failures or the sudden collapse of real estate booms in particular
towns and cities. But the great majority of banks failed because they
694 RECENT ECONOMIC CHANGES
were unable to withstand the stress exerted by the persistence of unprofit-
able prices for the products of agriculture and animal husbandry—stress
that was particularly severe because it was experienced after years of
abounding prosperity and extreme appreciation in the value of farm
property, and a large increase in the number of farms mortgaged and
the amount of mortgage indebtedness.
These adverse conditions alone, it can hardly be too strongly empha-
sized, do not furnish a complete explanation of the numerous bank failures
of the last seven years. By no means all, or even a majority, of the
banks in the localities most seriously affected have been obliged to
suspend operations. Financially weak and unskillfully managed banks
have been weeded out; strong, well-managed banks have no doubt
experienced heavy losses, but they survive. Great significance in this
connection attaches to the findings of a special committee on the banking
situation, appointed in 1927 by the legislature of Minnesota, a state in
which adverse conditions have been particularly severe and the number
of bank failures numerous. Analyzing the causes of bank failures, the
committee says:
A survey of the closed bank situation in Minnesota presents an interesting picture.
Certain communities of the state seem to have escaped entirely, or almost entirely,
this epidemic of closed banks, while in other parts of the state the proportion of closed
banks to the number of banks chartered in the community is very great, nor is
this unequal distribution of closed banks due in large measure to different conditions
of soil or condition of the farmers, for in parts of the state where the farming condi-
tions are almost identical one part shows a large percentage of failed banks and
another part almost none. The cause lies deeper than that.
Unqualified agreement with this view of the matter, as seen by the
Minnesota committee, is not inconsistent with recognition that external
conditions during the last ten years, in certain parts of the country, have
been most unfavorable to the conduct of banking along safe lines. In the
agricultural development of the country, however, the stage is apparently
being more generally reached in which farm values will be more closely
related to current net income. Except in the event of a war of major
magnitude, it is not probable that commodity prices will again exhibit
the extreme fluctuations of the last decade, or that we shall again witness
the number of bank failures that has marked the last seven years. If
this anticipation is realized, the bank failure problem assumes more
manageable proportions, but, in the absence of improvements in organ-
ization and practice, it is not to be doubted that a discreditable number
of failures will continue to occur, mainly concentrated in periods of trade
reaction.
There are hundreds of small banks throughout the country which
are ably managed and abundantly strong, and which overcome the handi-
cap of an absence of industrial diversity in the communities which they
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 695
serve by the exercise of exceptional judgment and caution. On the other
hand, while there is no exact relationship between the number and size
of the entire group of banks in a locality and the strength of its banking
position, it is certain that no community can hope to enjoy the benefits
of Safety in banking if the business is organized in units so numerous as
to exceed the available supply of competent officers and responsible
directors, and with insufficient earning power to be able to absorb
inevitable losses. Ample evidence of the unhappy consequences of
excessive numbers and inadequate size in banking is clearly to be found
in the geographical distribution of the failures of the last seven years.
In the Federal Reserve districts of Boston, New York, and Phila-
delphia, there were only 43 failures during these years. These districts
have an area of 150,000 square miles with a population of 33,000,000,
and were served in 1927 by less than 3,300 banks (3,287). The Chicago
district, with a somewhat larger area, 190,000 square miles, but with a
population of only 17,000,000, was still provided with a number of banks
larger by nearly 2,000 (5,175) and had a record of 550 failures between
1921 and 1928. Again, the Minneapolis district, it is true with a much
greater area, 414,000 square miles, but with a population of only 3,500,000,
still had 2,633 banks in operation after 1,087 failures in the same period.
Comparison by states tells the same story only the more forcibly.
The 11,000,000 people of the state of New York, with an area of 47,000
square miles, appear to have been adequately supplied with banking
facilities in 1920 by 1,056 banks, and there were only 10 failures in the
seven subsequent years, while the 2,500,000 people occupying an area
of 55,000 square miles in Iowa were served by 1,763 banks, of which 329
failed. North Dakota supplies an even more extreme instance of the
overdevelopment of banks and its inevitable sequel–349 failures among
898 banks that had been established to meet the need of a population of
650,000 on an area of 70,000 square miles.
No community can possibly provide adequate resources, competent
officers, and experienced directors for one bank to every 750 of its inhabit-
ants as in North Dakota, or to 1,400 as in Iowa. And the situation in
these states was not exceptional; on the contrary, an excessive number of
banks have been established throughout those sections of the country
that are mainly devoted to agriculture. Banking troubles were inevitable
with the advent of adverse conditions, and for the severity of these
conditions the unwise use of credit administered by an inordinate multi-
plicity of banks was in no small degree responsible.
As in earlier periods marked by numerous bank failures, an insistent
demand for greater safety in banking is to be anticipated, and this
demand is not rendered less reasonable by the presence of strong and well-
managed banks in every locality. The public must make use of banks,
but few are in position to distinguish between the strong and the weak.
696 RECENT ECONOMIC CHANGES
Bank statements and other external information relating to banks do
not furnish an adequate basis for intelligent discrimination. Unless
failures become infrequent, it may be expected that all banks will be
subjected to an increasing range of restrictions, restrictions which are
Quite superfluous for well-managed banks, but which are adopted to curb
the weak and incompetent minority.
But safety in banking will never be secured if reliance continues to
be placed primarily and almost exclusively upon legislative restrictions
covering the details of banking operations. A more immediate enforce-
ment of existing legislation would do much, but remedies for bank failures,
to be effective, must be designed to reduce the number of financially weak
banks, secure more competent officers and directors, and above all to
insure that unsound policies will be checked long before solvency is
threatened.
X. INFLUENCE OF THE FEDERAL RESERVE SYSTEM
The assigning of a place in the economic developments of recent
years to the Federal Reserve System can only be done tentatively. The
Reserve System has been one of many influences, and it is impossible
to segregate these various influences. Nor is it easy in dealing with this
question to write without bias for or against the System. Before satis-
factory conclusions can be drawn, more perspective will be required and
longer experience.
Perhaps the most valuable approach to the discussion of the contri-
bution of the Federal Reserve System to business in this period is to
consider it in terms of the major monetary problems of the period with
which the Reserve System has had to deal. Two unusual problems were,
first, that created by huge gold movements, and second, the problem of
international monetary stability. In addition, there were the continuing
problems relating to stability in the money market and the attitude of
the Reserve System to those business fluctuations summarized under
the term “business cycle.”
Gold Movements and Inflation.—As already noted earlier in this
chapter, there was a net gold import into the United States of nearly
$900,000,000 from the beginning of 1922 to the middle of 1927, and, in
the 12 months following, a gold export of about $500,000,000. These
were larger movements of gold than in any period of the past, except for
the abnormal flow during the war and immediate postwar period.
A huge gold import, such as that from 1922 to 1927, ordinarily carries
with it a threat of inflation of credit and of prices. It might have been
expected that the inflationary effect of the gold imports would be accen-
tuated because they followed a huge import movement, in the closing
months of 1920 and during 1921, which totaled over $800,000,000. This
movement of gold had fortunately been absorbed without inflation, by
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 697
reason of the fact that the incoming gold was used by member banks to
liquidate their indebtedness at the Federal Reserve banks. The gold
import, from 1922 to 1927, was not absorbed in any such fashion, save to
a very limited extent, but, on the contrary, was used as the basis for an
expansion in credit and in currency, as was indicated in Table 4 in this
chapter, which shows the changes in the reserve position of the country
over that period. Of the $900,000,000 in gold (plus about $200,000,000
derived from an increase in the silver stock, and $50,000,000 from other
sources), roughly $600,000,000 was used to increase the reserve balances
of the member banks at the Reserve banks, and thus support expansion
in credit of more than $6,000,000,000. About $300,000,000 was used
in an expansion of currency, and the balance of $250,000,000 was used
to decrease the amount of Federal Reserve credit in use. Thus it may
be said that gold imports from 1922 to 1927 exercised much their normal
influence toward credit expansion. This credit expansion was large
and rapid; it was accompanied by an increase in the general level of
prices, as shown by an increase of 9 per cent (14 points) in the general
price index of the Federal Reserve Bank of New York. It is true that
there was no inflation of commodity prices. The change in the price
index of the Bureau of Labor Statistics from January, 1922 to July,
1927, shows an increase of 3 per cent. That the large increase in bank
credit, that is in purchasing power, was not accompanied by a large
increase in commodity prices may be explained in a number of different
ways, some of which have already been dealt with in this report.
1. It was a period of rapid accumulation of savings, and much of the
increase in bank deposits took the form of an increase in savings deposits,
which have a relatively slow rate of turnover.
2. Commodity prices in other important countries of the world were
tending to decline during this period, and hence commodity prices in this
country, which are greatly influenced by conditions in world commodity
markets, met resistance against any upward movement. e
3. The general prosperity of large business corporations made th
securities of those corporations attractive to investors, and much of the
additional credit was employed to finance active dealings in a growing
volume of securities at rising price levels.
4. The period was characterized by increases in wages and Salaries,
and additional amounts of credit were employed for this purpose.
5. Considerable amounts of credit found their way into other employ-
ment, such as financing a huge volume of building and financing real
estate transfers at appreciating prices.
The Federal Reserve System during this period did not prevent a
very large expansion in bank credit which might perhaps be described in
some part as inflationary, to the extent that it was accompanied by
increases in prices of various kinds. The principal influence of the Federal
698 RECENT ECONOMIC CHANGES
Reserve System upon this credit expansion related to the timing of the
expansion. As was indicated earlier in this chapter, the increase in credit
during these years was not continuous, but was more rapid at certain times
than at others. It was more rapid, for example, in the years 1922, 1924,
and 1927, than in 1923 and 1926. The differences among these years, as to
the rate of credit expansion, may be ascribed, in part at least, to the oper-
ation of Federal Reserve policy for, during 1922, 1924, and 1927, Federal
Reserve policy was such as to encourage credit expansion, whereas, in
1923 and 1926, Federal Reserve operations had a tendency to discourage
expansion. The nature of Federal Reserve operations which would
presumably have this effect is illustrated in Chart 14.
CHART 14.—FEDERAL RESERVE BANK CREDIT, 1922–1928
OF DOLLARS DISCOUNT RATE
/ *
|
1922 1923 1924. 1925 1926 1927 1928
It will be seen from this chart that during the first few months of
1922, and considerable parts of 1924 and 1927, the Federal Reserve banks
were purchasing government securities. These purchases had the effect
of putting money into the money market. The money thus made
available was deposited promptly in member banks, and, in 1922 and
1924, was used by them in repaying their indebtedness at the Federal
Reserve banks, as shown by decreases in the total amounts of bills dis-
counted. In 1927, the money made available by security purchases was
used chiefly to offset losses through gold exports. The member banks,
as they found themselves freed from indebtedness at the Federal Reserve
banks, were in a position to extend credit to their customers or to the
market more freely, and as they received additions to their reserves
through gold imports they were able to employ these funds in an expan-
sion of credit.
During the latter part of 1922 and the early months of 1923, the
latter part of 1924 and early in 1925, and to some extent in 1926, the
Federal Reserve banks were selling Government securities. This had
the effect of withdrawing funds from the market and of compelling the
member banks to increase their indebtedness at the Reserve banks.

MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 699
Member banks thus found themselves in a position to lend or invest their
funds less freely, and there was a tendency to check the rapid expansion
of credit. Thus the timing of the employment of gold imports was
determined in some measure at least by Federal Reserve policy.
It is not easy to summarize the purposes toward which this policy
was directed. Any decision of Federal Reserve policy is made from a
consideration of the whole of the credit situation, and it is difficult to
interpret the relative importance of the different phases of that situation,
as they enter into the decisions of the groups of men who determine
policy. But among the factors were certainly the movement of domestic
business and prices, the world credit situation, and the movement of
gold itself.
The relation of the Federal Reserve System to the gold imports of this
period may be summarized by saying that the Reserve System did not
sterilize the imported gold, but allowed the gold to have much its usual
effect in bringing about an increase in the volume of credit. This increase
was limited to a primary credit expansion; that is, the gold was used only
once for a credit expansion at the time when the member banks deposited
it in the Reserve banks. It was not used for a secondary expansion; that
is, the Reserve banks did not utilize the additional lending power which
they derived through their receipts of gold during the period.
In the last year of the period under discussion, from July 1, 1927
to the middle of 1928, the gold movement was reversed, and more than
$500,000,000 of gold was exported. Under the monetary mechanism of
the country prior to the establishment of the Reserve System, any such
export of gold in a single year would have brought widespread disaster;
for so large a reduction in bank reserves would have been reflected imme-
diately in curtailment of the credit based upon those reserves to an
amount many times as large as the gold reserves themselves. The mech-
anism of the Federal Reserve System provided means by which the loss
to reserves from this cause could be repaired by drawing into use Federal
Reserve credit. As their reserves were depleted through gold exports, the
member banks restored their reserves by borrowing from the Reserve
banks against their eligible paper. This increase in member bank bor-
rowing from the Reserve banks did not take place without an effect upon
the credit situation. The member banks are always reluctant to remain
continuously in debt to the Reserve banks and, as usual in such circum-
stances, they endeavored to get out of debt by the sale of securities and
by some reduction in their advances, particularly for speculative purposes.
As a consequence money rates rose. This tendency was accentuated
rather than diminished by Federal Reserve policy. By selling securities
in the early part of 1928, the Reserve banks made necessary a still further
increase in the amount of member bank borrowing, which, in turn,
tended to accentuate the firmness of money conditions. The firming of
700 RECENT ECONOMIC CHANGES
money conditions had the effect of impeding the further export of gold,
and gradually checking the rapid increase in the volume of credit, though
in the year from June 30, 1927 to June 30, 1928, the increase in credit
was larger than in any other year since 1924, despite the loss of gold.
These events may be summarized by saying that the mechanism of the
Reserve System made possible a huge export of gold without serious
consequences to business or monetary conditions, though at the price
of firmer money conditions. In view of the huge growth in credit for
speculative uses, the Reserve System did nothing to prevent the gold
from exerting something of its normal influence in tightening credit
conditions.
International Monetary Stability.—The beginning of the period under
survey found the nations of the world with generally unstable currencies.
War had forced them into such large issues of paper currency that gold
payments were suspended, and currencies were depreciated from their
par values. Under these conditions, world trade had shrunk to about
two-thirds of its prewar volume, and European purchases of American
commodities tended to be restricted. American trade with other nations
was made more precarious by the fluctuations of the foreign exchanges.
Gold, detached from the currencies of these countries, tended to flow
in a steady stream to the United States, and threatened, if long continued,
to bring about credit and price inflation.
Under these circumstances, it was to the interest of the United States
that every possible assistance be rendered to the countries of Europe
in their effort to re-establish themselves on the gold standard as promptly
as possible. The investment bankers and the investors of this country
played an important rôle in this recovery by lending to European coun-
tries as much as $1,000,000,000 a year for several years. The loans
furnished the means for these countries gradually to rebuild their indus-
tries and reorganize their monetary systems and, at the same time, to
continue their purchases of American products during an interval when
they were unable to make payment for goods purchased here.
In two specific ways the Federal Reserve System has been able to
aid in the European financial recovery. First, the Federal Reserve banks
extended credits to the Bank of England, the National Bank of Belgium,
the Bank of Italy, and the Bank of Poland at the times when these
countries were prepared to announce their legal stabilization programs.
In the cases of Belgium, Italy, and Poland, the Federal Reserve credit
was a part of a larger credit participated in by many of the European
banks of issue. The credits took the form of an agreement on the part
of the Reserve banks to purchase bankers' acceptances from those
three banks of issue, at stipulated rates and in specified amounts, if the
need should arise. In the case of the Bank of England, the credit took
the form of an agreement to sell gold to that bank, if desired. In none
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 701
of these four cases was the credit utilized, but the public announcement
that the Federal Reserve banks were prepared to extend this support
to the banks of issue of the different countries provided an important
psychological influence toward the success of the stabilization programs.
The other method, by which the Reserve System exerted some influ-
ence toward facilitating the return of world monetary stability, was its
consideration of world conditions in the determination of its credit
policy at certain periods. While at all times domestic conditions have
of necessity received first consideration in the determination of Federal
Reserve discount rates and open market operations, there have been
periods when some modification of Federal Reserve policy, with the world
situation in view, was not incompatible with domestic conditions.
The two principal occasions of this sort were in 1924 and 1927. The
year 1924 was one of somewhat reduced business activity in the United
States, so that, as far as domestic conditions were concerned, a policy of
low discount rates, supplemented by open market purchases of securities,
was likely to be beneficial rather than otherwise. It was at least a time
when easy money might be expected to do little harm.
For the international money markets, 1924 was a critical year.
London had always been the world's principal money market, and the
stability of the pound sterling was prerequisite to a return of international
monetary stability. While sterling had returned within 4 per cent of
parity early in 1923, it had then receded to 4.25 in January of 1924, partly
because of high money rates in this country.
With every desire to bring their currency to a stable position as
promptly as possible, the British found themselves with their exchange
13 per cent below parity in January, 1924. The other exchanges of the
world were so closely related to sterling that it was almost hopeless to
expect their recovery until the important step had been taken in England.
The experts were working on the Dawes Plan, and a solution was hoped
for. -
In the United States, the need for high money rates had passed with
the subsidence of the speculative and business boom of early 1923.
Under these circumstances, the Federal Reserve System, toward the close
of 1923, adopted a policy of placing additional funds in the money market
through the purchase of Government securities, and, between that time
and September, 1924, purchases amounted to $500,000,000. The first
result of this action was that the member banks were enabled to repay
the Reserve banks much of their indebtedness, so that, by the middle of
1924, the member banks in principal cities had practically liquidated
their borrowings. This placed the banks in a position to advance funds
more freely, and money rates declined steadily. Consequently, money
rates in New York, for the first time in some months, became cheaper
than money rates in London. The amount of new financing in New
702 RECENT ECONOMIC CHANGES
York was increased, and there was a tendency for funds to flow from
New York to London. Sterling exchange began a steady climb, so that,
in the spring of 1925, when Great Britain passed her stabilization legisla-
tion, Sterling was within a few cents of parity, and the transition to gold
payments could be made without serious economic disturbance. The
return to gold payments by Great Britain opened the way for similar
action by many other countries.
It is not possible to determine to what extent the climb in sterling
was due to action by the Federal Reserve banks in making money easier
in New York and to what extent it was due to other causes, but certainly
the recovery would have been more difficult without this Federal Reserve
action. In any such vigorous attempt to ease the money market, bank-
ing authorities always assume the risk of credit and price inflation, and
it may be that there was some inflation as a consequence of the action
taken by the Reserve System in 1924, but the generally retarded condi-
tion of American business in 1924 made this action appear less dangerous
than it might have been at other times. In fact, the probability is that
easy money in 1924 was an influence toward preventing a more serious
business depression at that time and toward stimulating the rapid busi-
ness recovery which ensued.
Another occasion when the world monetary situation was an impor-
tant factor in Federal Reserve policy decisions was in 1927, when the rates
of a number of the Reserve banks were reduced in August and September,
and purchases of Government securities were made. On that occasion,
as in 1924, certain results appeared to be ascribable to the action taken.
As money rates receded, following Federal Reserve action, and reached
lower points than prevailed in London, the gold movement reversed
itself, the exchange on London and a number of other centers moved
upward, and a threatened money stringency abroad, which would have
hampered world trade, was averted.
The economic situations, both in 1924 and 1927, were so nicely
balanced that Federal Reserve policy was probably more effective than
might ordinarily be expected. It is hardly to be expected in the future
that the influence of Federal Reserve policy will be so dramatic or so
effective; nor, in fact, is it likely that, now that the currencies of Europe
are stabilized, Reserve policy need concern itself so much with conditions
abroad. But in the return of the world monetary stability, it seems clear
that the Reserve System, both by its action in granting credits to the
banks of issue in foreign countries and by its credit policy, has exercised
an important and beneficial influence which has reacted favorably upon
American foreign trade.
Stability of the Money Market.—The best thing that the Federal
Reserve System could do for business would probably be to exert its
influence toward a steady flow of funds readily available for business use
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS. 703
at moderate rates. High rates discourage business, while, on the other
hand, low rates tend to overstimulate business and prepare the way for
business disorganization and depression. But it is clear also, from any
study of the course of business over past years, that a rate which may seem
low at one time may seem high at another, or vice versa. Business does
not move forward in a steady continuous stream but moves by long
fluctuations, and its psychology differs greatly from one period to
another. Business is forever tending to be under- or overstimulated.
The problem then, for the Reserve System and for other factors which
influence credit, is not one of preserving rates at a uniform level but of
exerting an influence so that money rates may be adapted to the economic
swing of business. High money rates at times of overstimulation and
low money rates at times of understimulation should, in the long run,
assist in flattening out the fluctuations of business and in bringing about a
more even prosperity.
This may be summarized by saying that the Reserve System's direct
contribution to business stability consists of adjusting interest rates to
the movement of the business cycle, so as, in some measure, to mollify
business booms or depressions.
One marked result of the operations of the Federal Reserve System
is demonstrated by the figures for the average deviation of money rates
from their moving averages, which were shown in Table 2 of this chapter.
The figures appear to indicate that, since the Reserve System has been
operating under anything like normal conditions, the fluctuations in
money rates have been greatly reduced.
A sufficient period has now been covered by the operations of the
System, so that the evidence seems reasonably conclusive that the
presence of the Reserve System has made a substantial improvement in
the stability of the money market. This is in accordance with what one
would expect theoretically, for the Reserve System has provided a
method never before available in this country, by means of which reserve
funds can be drawn into use or drawn out of use in accordance with the
necessity of the money market.
Influence on the Business Cycle.—Since 1922, the fluctuations of
business, which might be termed the movements of the business cycle,
have been moderate, and there have been no long continued booms nor
have there been any deep depressions. It is even difficult to determine
how many business cycles we have had. The best guess is perhaps that
one cycle extended from the middle of 1921 to the middle of 1924, and
another from the middle of 1924 to the end of 1927.” But some students
believe that we have had during this entire period one continuous business
cycle. No matter which conclusion is adopted, it is clear that the
experiment has not been sufficiently long to justify passing judgment as
12 See the concluding Review, pp. 890–909.
704 RECENT ECONOMIC CHANGES
to the influence of the Federal Reserve System upon the business cycle.
Many other causes have been in operation which may account for the
moderation of the movement of business in this period. About all that
One can do, in attempting to draw a conclusion as to the influence of the
System, is to analyze the action which the System has taken at different
times to discover, if possible, whether this action was of a character
which would tend to mollify the fluctuations.
Such an analysis appears to show that Federal Reserve influence
was toward firm money when business was most active, and toward easy
money when business was most depressed. This appears most definitely
exhibited in open market operations. We reached the bottom of a
business cycle in the summer of 1921 and then started up. At about
that time the Federal Reserve System began to purchase Government
securities in large amounts. From the funds thus obtained, member
banks were able to liquidate some of their indebtedness, and were able
to loan somewhat more freely, so that the recovery from depression was
stimulated somewhat by Federal Reserve action. As the cycle began to
reach its peak in the latter part of 1922 and the early part of 1923, the
Reserve System reversed its policy and sold securities, making it neces-
sary for the member banks to borrow more heavily, this condition, in
turn, making them less ready to lend in large amounts. In the spring
of 1923, discount rates were increased and the Reserve System discussed
in its publications the dangers of overexpansion of credit. The peak
of expansion was soon passed. Near the end of 1923, business had
begun to decline toward the low point of the middle of 1924. In
December, 1923, the Reserve banks began to purchase Government
securities, and between that date and the middle of the following
September they purchased $500,000,000. The funds, thus made avail-
able, enabled member banks to reduce their indebtedness, and placed them
in a position to lend somewhat more freely to their customers. Accom-
panying purchases of securities, Federal Reserve discount rates were
reduced. Business recovered rapidly from this period of depression,
and by the early part of 1925 it reached a new high peak. This move-
ment of business was accompanied by a vigorous speculative movement,
and in the early months of 1925 the Federal Reserve System sold $200,-
000,000 of the securities purchased in 1924. During 1925 and 1926 and
the early part of 1927, business went forward confidently, with the
possible exception of a few months in 1926, when a brief period of
hesitation was accompanied by small purchases of Securities by the
Reserve banks and the lowering of the discount rate at New York for a
few months.
In 1927, there was again some evidence of business hesitation, par-
ticularly in the second half of the year. This coincided, as it had in 1924,
with monetary stringency abroad, and the Reserve System purchased
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 705
$300,000,000 in securities between May and December, and the discount
rates of the reserve banks were reduced. Business again recovered
promptly from a period of depression.
Accompanying an outburst of speculation in early 1928, and large
increase in the volume of credit, the Reserve System sold $400,000,000
of securities between the end of December, 1927 and June, 1928. The
outcome of this latest movement both in business and speculation has
not yet become apparent.
This recital of facts carries with it no convincing proof that the
presence of the Reserve System has reduced the swing of the business
cycle, but it does appear to justify the assertion that its influence has
been in that direction.
Test Not Yet Complete.—With regard to all this evidence, it seems
important to emphasize the need for suspending judgment as to final
conclusions. The period has been one of many unusual economic
developments. Business has continued for extended periods above any
computed normal growth line, with only brief recessions. There has
been an extraordinarily large volume of building, of new financing, of
automobile production, and of consumption. There has been a huge
volume of speculation, accompanied by striking increases in prices of
securities. This has been made possible, in part, by gold imports and
the resulting comparatively easy money conditions.
It is possible that in some one or more of these directions an unsound
economic structure has been built up, the dangers of which are not now
obvious. Only the test of a longer period of time can yield convincing
results.
XI. SUMMARY
The average level of money rates from 1922 to 1928 has been lower
for commercial funds and higher for speculative funds than in the years
before the war. Month-by-month fluctuations of rates have been much
reduced. Business has been financed less by borrowing from banks and
more by borrowing in the capital market through issues of securities.
The growth in bank credit has shown more rapid increases in the Eastern,
New England, and Pacific districts; in the Middle Western and Southern
districts there has been only a moderate growth, and in the Western
district a decline. In general, the most rapid increases of bank credit
occurred when business was most in need of the stimulus of easily avail-
able credit, and the periods of slowest growth occurred when business
was in large volume and, perhaps, in some danger from overstimulation.
The effect of gold movements on the volume of bank credit has been
modified by changes in the amount of currency in use, changes in practice
as to bank reserves, and changes in the position of the Federal Reserve
System.
706 RECENT ECONOMIC CHANGES
The principal influence in the period 1922 to 1928 toward rapid growth
of bank credit and easy credit conditions was gold imports—an abnormal
influence which cannot be expected to continue in the future. The
reversal in the gold movement has materially changed the outlook for
the Supply of bank funds. It may be that a less rapid increase in bank
credit than in the past five years would eventually be more wholesome.
Savings have been in unusually large volume. Widespread savings
have tended to increase aggregate loans and investments and total
deposits, at the same time reducing somewhat the amount of demand
deposits. Thanks, at least in part, to Saving, large additional supplies of
bank credit have not brought about a rapid advance in commodity
prices, and the community has not experienced intense competition
between consumers and capital for goods and services. Large and wide-
spread savings have been a primary influence in counteracting the
upward price tendency of an abundant supply of bank credit. Vivid
memories of 1920 have certainly tended to restrain the accumulation of
inventories. Efficient transportation has removed fears of delays in
shipment. Style has become a factor of importance in many lines, and
there has been growing recognition of the economy and elimination of
risks that may be secured in merchandising through a rapid rate of turn-
over. Declining commodity prices in other countries also have been a
restraining factor. These and other influences, in conjunction with
large savings, furnish an explanation of the failure of commodity prices
to respond with a decided upward swing to the impact of an abundant
supply of bank credit available at declining rates during recent years of
generally active business.
Government debt reduction also has contributed to the abundant
supply of capital. Foreign investments have served to widen the
opportunities for funds seeking employment. In general, the abundant
supply of funds seeking investment at declining rates seems to have
strengthened the financial structure of business.
For more than seven years, there has been a progressive decrease in
the number of commercial banks in the United States. This tendency
probably will continue. Banks in large centers have been gaining, and
seem likely to continue to gain, at the expense of small rural banks.
Mergers and voluntary liquidations, rather than bank failures, are
bringing about this result.
The Federal Reserve System, during the period under review, has had
to deal with two unusual problems; first, that created by huge gold
movements, and second, the problem of international monetary stability.
In addition, there were the continuing problems relating to stability in the
money market, and the attitude of the Federal Reserve System to those
business fluctuations called “business cycles.” The mechanism of the
Federal Reserve System made possible a great export of gold in the past
MONEY AND CREDIT AND THEIR EFFECT ON BUSINESS 707
year without serious consequences to business or monetary conditions,
though at the price of firmer money conditions. In view of the huge
growth in credit for speculative purposes, the Federal Reserve System
did not prevent the gold from exercising something of its normal influence
in tightening credit conditions.
Investment bankers and investors played an important part in
European recovery, by lending as much as one billion dollars a year for
Several years. Federal Reserve banks extended credits to the Bank of
England, the National Bank of Belgium, the bank of Italy, and the
Bank of Poland. In none of these four cases was the credit utilized,
but public announcement that the Federal Reserve banks were prepared
to extend this support created an important psychological influence.
The problem for the Federal Reserve System and other factors which
influence credit is not one of preserving money rates at a uniform level,
but of exerting an influence so that rates may be adapted to the economic
Swing of business. High money rates at times of overstimulation and
low money rates at times of understimulation should, in the long run,
assist in flattening out the fluctuations of business and bringing about
a more even prosperity. There is no convincing proof that the Reserve
System has reduced the fluctuations of the business cycle, but its influence
has been in that direction.
CHAPTER XI
FOREIGN MARKETS AND FOREIGN CREDITS
BY JAMES HARVEY ROGERS
I. FOREIGN MARKETS
Exports.-The value of American exports, which increased greatly
each year from 1922 to 1925, declined slightly in 1926; and in 1927,
while undergoing a mild increase, it still remained a little below the
maximum reached in 1925. In 1928, however, the rapid increase was
resumed and during that year reached a total 34 per cent greater than
in 1922. When changes in the aggregate weight of exports are
considered instead of changes in value, the results are different. Thus
measured, the volume of our outgoing trade rose during the period, but
showed considerable declines both in 1925 and 1927.
The explanation of the divergence in 1925 seems to lie in variations in
both prices and quantities, spread over a considerable number of articles.
TABLE 1.--ToTAL ANNUAL ExPORTs of THE UNITED STATES, 1922–1928
(Value in millions of dollars; volume in millions of tons)
Volume in cargo Value with im-
Year Value tonnage of portant price
water-borne changes elimi-
exports nated”
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,971 42.5 4,009
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 343 49. 1 4, 213
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,772 52. 3 4,676
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,093 49. 7 4,976
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,002 67.7 5, 245
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,067 56.9 5,467
1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,321 s & s - I - e º s º
* For exact description of character of the data of this column, see footnote 1.
Sources: Values are taken from Monthly Summary of Foreign Commerce, Bureau of Foreign and
Domestic Commerce, United States Department of Commerce. Cargo tonnage figures for 1922–1925,
inclusive, are taken from the Statistical Abstract of the United States, compiled on the basis of data gathered
by United States Shipping Board, Bureau of Research, Division of Statistics. Data for 1926 and 1927
are taken from Special Report, Division of Statistics, No. 298 of the United States Shipping Board.
Description of data: Value data were gathered by the United States Customs Service and compiled
by the United States Department of Commerce. They are subject to errors of valuation and of other
accidents of declaration.
Data of value in Table 1 include the trade of the United States Customs Area (which includes
continental United States, Alaska, Hawaii, and Porto Rico) with other countries (including the Philip-
pine Islands and the Virgin Islands) plus shipments from continental United States to Alaska, Hawaii,
Porto Rico, Guam, and American Samoa. To give the trade of continental United States alone, it
would be necessary to deduct the small exports of Alaska, Hawaii, and Porto Rico to foreign countries.
709
710 RECENT ECONOMIC CHANGES
In 1926, on the other hand, while a major explanation of the divergence
between weight and value is to be found in the increase of approximately
16,000,000 tons in the export of coal, largely to Great Britain and pre-
sumably to Some of its European coal customers, occasioned during that
year by the British coal strike, perhaps just as potent a separating
influence is found in the drastic decline in the price of our largest export,
raW COtton.
In order to get another approximate measure of the physical volume
of our export trade, as well as for other purposes which will appear later,
price changes of a number of important exports have been eliminated.
This has been accomplished by computing the annual value of each such
export at its average price for the period." The resulting total value,
with the prices of a number of important exports thus kept constant,
are given in the third column of Table 1. So measured, our total exports,
instead of showing a slight decline in 1926 and 1927, increased regularly
throughout the period. This conclusion is confirmed by the calculations
of the Department of Commerce, using a more elaborate method for
eliminating price changes.
The geographic distribution of our outgoing trade has varied con-
siderably during the period from 1922 to 1928. Table 2 gives the total
value of exports, by large geographic divisions and by important sub-
divisions, for the seven years under discussion.
Of our total exports, substantially one-half goes to Europe. The
remaining one-half is divided into three roughly equal parts—one going
to Canada, another to Latin America, and the third to all the rest of the
world combined. Of our exports to Europe, somewhat more than a third
goes to the United Kingdom, about one-fifth to Germany, and consider-
ably less to France, the next in order of importance of our European
customers. Of our total sales to Latin America, Cuba, Argentina, and
Mexico account for considerably more than half; and of those to the rest
of the world, Japan, Australia, and China take the largest portions.
But during the last seven years, the proportions of our total exports
going to various parts of the world have changed greatly among them-
* The exact method used was the following: Of every commodity for which both
values and quantities are given in Table 3, the total value each year was divided by
the corresponding total quantity. Of the resulting prices, simple arithmetic averages
were computed for the six years 1922–1927. These average prices were then multi-
plied by the quantities exported each year. The resulting products were used as the
revised total values of each export thus treated. To get the grand totals by years
and by geographical divisions, these revised values were in turn added to the actual
values of exports of lesser importance and of those for which no quantities are avail-
able. The method is little more than a makeshift but would seem to be generally
valid for procuring the approximate results desired. The results agree fairly well
with those yielded by the more refined index method employed by the Bureau of For-
eign and Domestic Commerce for determining year to year changes in like magnitudes.
FOREIGN MARKETS AND FOREIGN CREDITS 711
TABLE 2.-ANNUAL ExpoRTs of THE UNITED STATEs, 1922–1928
(In millions of dollars)

* * * Average
Division 1910–1914 1922 1923 || 1924 || 1925 | 1926 1927 | 1928
Grand total. . . . . . . . . . . . . . . . . . . . . . . . 2, 243 3,9714,343|4,7725,093 ºw 5, 321
Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 350 2,0832,093:2, 4452, 602 ** 2, 375
United Kingdom and Irish Free State. . . 568 856, 882| 983|1,039| 990 851; 861
Germany. . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 3.16|| 317 440 470 364' 482| 467
France. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139 267 272; 282| 280; 264. 229| 241
Italy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 151 | 168|| 187| 205| 157| 132| 162
Netherlands. . . . . . . . ‘. . . . . . . . . . . . . . . . . . 105 118 109 152| 142|| 136|| 148] 142
Belgium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 102| 101| 1.16|| 120 99; 1.16|| 112
Spain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 71 62 71 79 68. 74 87
Denmark. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 36 39 43 56 51 59 47
Soviet Russia in Europe. . . . . . . . . . . . . . . 24 20 4 41 68 48 64 73
Remainder of Europe. . . . . . . . . . . . . . . . . . 50 146; 139|| 130 143| 133; 159| 183
Canada, Newfoundland, and Labrador. . . . . . . 320 583| 660 634 660 747, 844. 925
Latin America. . . . . . . . . . . . . . . . . . . . . . . . . . . . 302 558, 695; 770 882| 872; 846|| 878
Cuba. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 128, 192; 200| 199| 160 155 128
Argentina. . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 96 113 117| 149| 144|| 163| 179
Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 110| 121 135|| 145|| 135 109 116
Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 43 46 65 87 95. 89 100
Caribbean Region”. . . . . . . . . . . . . . . . . . . . 74 122 143 163| 200; 219, 223| 247
Remainder of Latin America. . . . . . . . . . . 33 59 80 90 102 119 107| 108
Rest of the World. . . . . . . . . . . . . . . . . . . . . . . . . 271 747| 895 923| 949||1,073|1,063|1, 143
Total Asia included above. . . . . . . . . . . . 121 449| 511 515| 487| 565; 560, 654
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 218, 264; 250| 228| 261 258| 288
Australia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 81| 120 125|| 149| 169] 159| 141
China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 100 109 109 94| 110 84| 137
Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 56 61 70 89| 101| 107| 117
Porto Rico”. . . . . . . . . . . . . . . . . . . . . . . . . . 33 58 77 78 78 85 86 82
Hawaii. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 54 66 70 73 76 80 78
Philippine Islands. . . . . . . . . . . . . . . . . . . . . 23 43 49 60 61 69 70 80
British India. . . . . . . . . . . . . . . . . . . . . . . . . 11 31 30 35 38 50 63 54
Remainder of rest of the World. . . . . . . . . 48 106| 119| 126|| 139|| 152| 156|| 166
|
a Includes Central America, West Indies (except Cuba), Colombia, and Venezuela.
b Includes only exports from continental United States to the Territory.
Source: Monthly Summary of Foreign Commerce, Bureau of Foreign and Domestic Commerce,
United States Department of Commerce.
selves. In order to bring out the more significant of these relative
changes, the device of the logarithmic chart has been introduced. By
plotting, for each territorial division, the logarithm of its total takings of
our export trade each year instead of the total takings themselves,
graphs showing the relative changes in the proportions taken by each of
the geographical areas will result.” In Chart 1 are represented on such a
logarithmic scale, (1) the total value of our exports distributed according
to the major geographic divisions to which they were sent; and (2) the
* Since the logarithm of any multiple of a given number is equal to the logarithm
of the number plus the logarithm of the multiplier, equal proportional changes in the
original items are represented by equal absolute changes in the logarithms.
712 RECENT ECONOMIC CHANGES
totals going to each major division in turn distributed among the prin-
cipal receiving countries.
CHART 1.—EXPORTS OF THE UNITED STATES ANNUALLY, 1922–1927
U06ARWTHMIC 50ALE MILLION5 OF
EUROPE EUROPf
Of EUROPE
MEX CO
Of
AMERICA
COUNTRIES
MONTHLY
By reference to this chart, it will be seen that, during the period under
discussion, exports to all three of the other main divisions gained more

FOREIGN MARKETS AND FOREIGN CREDITS 713
largely than did those to Europe. Also, of those to Europe, it will be
seen that, while the United Kingdom, France, and Italy hardly main-
tained their takings, the portions taken by Germany—which, even when
price changes are allowed for, have already reached their prewar level—
increased rapidly, as did those taken by the Netherlands. Meanwhile,
exports to all the rest of Europe moved gradually upward. Of our
exports to Latin America, the increases in the purchases of two of our
three largest customers–Cuba and Mexico–did not keep up propor-
tionally with the increases of the rest of the countries, most of which
greatly enlarged their takings. Finally, an analysis of the changes in
our exports to other parts of the world shows, with the exception of those
to Australia, that the chief increases have come not in the takings of
important old customers but rather in those of new ones. Much, then,
of the recent expansion of our export trade, other than that to Australia
and to Canada, came through the development of new and formerly
little-used markets, rather than through the extension of old ones.
When important price changes are eliminated” (see Chart 2), many
differences appear in the movements.” Exports to the United Kingdom,
instead of showing a nearly horizontal trend, carry a marked upward
trend Likewise those to France and to Italy no longer show declining
trends. In the Pacific, too, the nearly horizontal trend formerly found
for Japan has shot rapidly upward, showing clearly that the general
falling off of our sales in that country was fictitious and a result of price
changes only. Nevertheless, confirmation is found for the conclusion
above reached: that, in volume, our exports to Canada and to Latin
America—as well as to outlying parts of the world including Oceania
and many parts of Asia—have increased more rapidly than those to
Europe. Within Europe, the elimination of important price changes
brings into even bolder relief the preponderant increases to Germany
and to Russia as contrasted with those to our former allies. In Latin
America, the great increases of our exports to Argentina, to Brazil, and
to certain of the smaller countries, as compared with those to two of our
largest customers of long standing, Cuba and Mexico, are in every
sense real and not the results of mere price fluctuations.”
Of more direct importance for American business conditions is the
commodity content of our outgoing trade. Our chief exports were
made up as shown in Table 3.
*For exact description of method used, see footnote 1.
* Reference is here made to the period 1922–1927 only. The data for 1928 are not
yet available.
* This conclusion cannot be drawn directly from the chart, for the reason that price
changes have actually been eliminated only in the case of a small proportion of the
exports to Latin American countries. It is known, however, that the prices of the
highly varied manufactured goods which make up the bulk of the trade have not
fluctuated sharply, and such changes as have occurred have affected the several coun-
tries in roughly similar measure.
714 RECENT ECONOMIC CHANGES
“King Cotton” still holds first place. Nor has there yet appeared
an aspiring rival to dispute its position. In spite of the much-vaunted
CHART 2.—EXPORTS OF THE UNITED STATES ANNUALLY, WITH IMPOR-
TANT PRICE CHANGES ELIMINATED, 1922–1927
Inserted figures indicate per cents actual value of adjusted items are of original total values.
fran(I (13)
ITALY (76)
COUNTRIES
Americanization of world industry, the exports of machinery of all types
combined prove but a poor second to cotton, totaling in value a scant

TABLE 3.—ANNUAL ExpoRTs of DomesTIC Goods of THE UNITED STATEs, BY CoMMODITIES, 1922–1928
The figures for individual
1910–14 1922 1923 1924 1925 1926 1927 1928
Commodity Q Q Quan- Q Quan- Quan..., lo Q
Value º Value º Value * va. º Value º Value * va. º Value *
Total. . . . . . . . . . . . . . . . . . . . . . . . 2,243 . . . . . . 3,971 . . . . . . 4,343|. . . . . . 4,772|. . . . . . 5,093 . . . . . . 5,002 . . . . . . 5,067|. . . . . . 5,321
1. Cotton, raw—pounds. . . . . . . . . . . . 552 4,420 673| 3, 153 807] 2,743 951] 3,483| 1,060. 4,384 814. 4, 692 826 4, 897 920 4, 579
2. Machinery. . . . . . . . . . . . . . . . . . . . . . 154! . . . . . . 239| . . . . . . 288 . . . . . . 317 . . . . . . 385! . . . . . . 400' . . . . . . 435 . . . . . . 497 is ºf e tº
3. Wheat—bushels. . . . . . . . . . . . . . . . . 55 57 206 165 116 99 237 166 149 87 202 138 240 168 120 96
4. Iron and steel. . . . . . . . . . . . . . . . . . . 142 . . . . . . 189| . . . . . . 234 . . . . . . 221 . . . . . . 224| . . . . . . 250 . . . . . . 234] . . . . . . 262
ished light products—gallons. . . . 17 147 127 579 138 846 167. 1, 186 198| 1,290 263| 1,784 210, 1,824 232| 2, 174
6. Passenger automobiles”. . . . . . . . . . . 17 19 51 67 91 127 113 151 185 244 176 239 208 279 264 368
7. Leaf tobacco–pounds. . . . . . . . . . . . 45 388 146 431 152 474 163 547 153 468 137 479 139 506 154 575
8. Cotton manufactures. . . . . . . . . . . . . 45 . . . . . . 139| . . . . . . 1381. . . . . . 1331. . . . . . • 148] . . . . . . 131. . . . . . . 132! . . . . . . 135| . . . .
9. Copper, (refined)—pounds. . . . . . . . b118; . . . . . . 89 653 110 729 138|| 1,010 140 968 121 856 125 922 140 948
10. Fruits. . . . . . . . . . . . . . . . . . . . . . . . . . 28 . . . . . . 74] . . . . . . 67| . . . . . . 96 . . . . . . 101 | . . . . . . 110 ! . . . . . . 120 . . . . . . 128 tº e º &
11. Boards and timber—board feet. . . . 62. 2,709 67| 1,882 103| 2,368 102 2,638 99| 2,508 97 2,694 107| 2,951 108] 3, 119
12. Lard—pounds. . . . . . . . . . . . . . . . . . . 56 501 91 767 130 1,035 126 944 118 689 109 699 92 681 99 760
13. Lubricating oil–gallons. . . . . . . . . . 25 191 77 331 77 348 87 379 91 403 86 389 89 404 92 456
14. Wheat flour—barrels. . . . . . . . . . . . . 51 11 86 15 88 16 91 16 85 11 83 12 85 13 74 12
15. Kerosene—gallons. . . . . . . . . . . . . . . 64 1,056 83 895 77 848 89 916 84 877 100 925 79 810 93 918
16. Chemicals. . . . . . . . . . . . . . . . . . . . . . 20|. . . . . . 52 . . . . . . 57 . . . . . . 53; . . . . . . 58. . . . . . . 65. . . . . . . 73 . . . . . . 75 e & e º
17. Bituminous coal—tons. . . . . . . . . . . 34 14 66 11 105 19 71 15 68 16 156 31 71 16 59 14
18. Meats—pounds. . . . . . . . . . . . . . . . . . 63. . . . . . . 135 799 150 1,037 114 803 118 612 99 481 64 356 61 365
19. All other to outside customs area. . . 617. . . . . . . 1,242 . . . . . . 1,240; . . . . . . 1, 322; . . . . . . 1,446. . . 1,410; . . . . . . 1, 536 . . . . . . 1,616
20. Total shipments to Alaska, Hawaii,
and Porto Rico. . . . . . . . . . . . . . . . 78 . . . . . . 139 . . . . . . 175 . . . . . . 181| . . . . . . 1831. . . . . . 193 . . . . . . 202; . . . . . . 192
|
Source: Monthly Summary of Foreign Commerce, Bureau of Foreign and Domestic Commerce, United States Department of Commerce. Only items
(Value in millions of dollars; quantity in millions of unit specified. For basis of totals, see description of data in note to Table 1.
commodities do not include shipments to Alaska, Hawaii, and Porto Rico)
5. Gasoline, naphtha, and other fin-
aggregating $50,000,000 in at least one year are included.
* Quantity in thousands (passenger cars except electric).
All copper (not stated separately).
:

716, RECENT ECONOMIC CHANGES
half. Nevertheless, the path of cotton has not been consistently upward.
Severe declines below the 1925 level appeared in 1926 and in 1927.
Both are explained by price recessions, as the physical volume of the
exports increased considerably during those years. In 1923 and again
in 1928, when the total value increased considerably, the actual quan-
tities exported were substantially reduced.
Of significance for American manufactures, as contrasted with
agriculture, are the extraordinary and almost uninterrupted increases
in the value of our exports of machinery and automobiles. Since 1922,
total values of machinery have doubled and those of passenger auto-
mobiles more than quintupled, and the quantities exported have increased
in similar proportion. Exports of gasoline and of fruits have also increased
greatly and almost continuously throughout the period, while those of
meats have declined, until in 1928 they were below their prewar level in
value despite much higher prices.
Many shifts in the relative positions of our exports have taken place
in the short period under consideration. In certain cases, the changes
have resulted largely from variations in prices of important articles; but
in others, equally important fluctuations in physical volume have
appeared. In order to distinguish between the two types of changes,
values of each of the major exports, so far as quantities are available,
have been computed at the average price" at which it sold during the
period. These values, with price fluctuations thus largely eliminated, are
plotted along with the actual values in Chart 3.
How much the variations in prices have affected the total value of our
exports is seen in the graphs. The volume of foreign sales of cotton
increased yearly from 1923 to 1927, but declined somewhat in 1928;
on the other hand, the values in both 1926 and 1927 were much below
those of 1924 and 1925, and even in 1928, despite an increase in price, the
value remained somewhat below the values in those years. Exports of
gasoline and allied products increased greatly in quantity throughout the
entire period, but the values in 1927 and 1928 were considerably less
than in 1926. With meats, the quantities from 1923 to 1927 declined
even more rapidly than values, while with automobiles, the rises (tem-
porarily halting in 1926) appear almost equally rapid in quantities and in
values throughout the entire period 1922–1928.
The destinations of the chief items of our export trade are also shown
in Chart 3. Among the foreign purchasers of our cotton, the first place,
formerly held by the British, in 1927 passed to the Germans. The
purchases by the Japanese increased greatly throughout the period up to
* This method of measuring quantities has an advantage over the usual one in that
it facilitates comparisons with corresponding values at the same time that the relative
importance of the export is kept automatically in the mind of the reader. Also the
effects of price changes are brought out more clearly.
FOREIGN MARKETS AND FOREIGN CREDITS 717
CHART 3.−EXPORTS OF THE UNITED STATES ANNUALLY, 1922–1927, COM-
MODITY DISTRIBUTION
10000
9000
Australia
5. Aſ RICA
- * - - -ºs- - - - - - - - * - sº- as - *
TOTALS COTTON (unvarg) | MACHINERY GA5OLINE PASSENGER AUTO'S.
SOURCE OF DATA MONTHLY SUMMARY OF FOREIGN CON4MECE
1927, but fell off in 1928. Of machinery, the wide geographic distribution
of our sales is clearly evident. Canada naturally holds first place.
In spite of its tariff walls, industrially it has long been a part of the
United States; and recently, on account of those same trade barriers

718 RECENT ECONOMIC CHANGES
combined with the “imperial preference” policy of the British Empire,
it has attracted an ever increasing number of American branch plants.
The notable increase in its takings of American machinery during the
period under discussion is to be remarked. Curiously enough, the
United Kingdom, with its pre-eminence in machinery manufacture,
takes second place in our exports of machinery, as a result of an increase
throughout the period hardly less rapid than that of Canada. The rapid
increases to Argentina, especially in the early part of the period, are to be
noted, as are those to Australia. But above all, attention is called to
the extraordinarily rapid advance in machinery sales to the many and
diverse countries included under the caption “All other.” Of auto-
mobiles, the greatly enlarged sales to Argentina, Australia, and British
South Africa (though in the case of Australia some decrease occurred in
1927 and 1928) constitute probably the most phenomenal development,
though the steep incline of the “All other” curve indicates the rapid
increase in exports of these, as of machinery, to all other parts of the
world.
Imports.—While the value of American merchandise imports was
one-third larger in 1928 than in 1922, considerable declines appeared
both in 1924 and in 1927 and a small decline also in 1928. The aggregate
weight, as given by the cargo tonnage, showed similar declines. When
changes in the prices of important articles are eliminated, although the
decline of 1924 again appears, the imports of 1927 remain almost exactly
equal to those of 1926. (There was, moreover, an increase in 1928,
although precise computations are not yet available.)
TABLE 4.—TOTAL ANNUAL IMPORTS OF THE UNITED STATEs, 1922–1928
(Value in millions of dollars; volume in millions of tons)
Volume in cargo || Value with im-
Year | Value tonnage of portant price
water-borne changes elimi-
| imports nated”
*r -—º-º
|
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 298 44. 7 3, 745
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,027 43.3 3,990
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,851 40. 9 3,755
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,479 43. 1 4, 291
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,693 44.0 4, 546
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,442 42.0 4, 551
1928. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 372 e g º º º $ 8 & 3.
• For exact description of character of the data of this column, see footnote 1.
Source: Values are taken from Monthly Summary of Foreign Commerce, Bureau of Foreign and
Domestic Commerce, United States Department of Commerce. Cargo tonnage figures for 1922–1925.
inclusive, are taken from the Statistical Abstract of the United States compiled on basis of data
gathered by United States Shipping Board, Bureau of Research, Division of Statistics. Data for 1926
and 1927 are taken from Special Report No. 298 Division of Statistics of the United States Shipping
Board.
Description of data: See footnotes to Table 1.
FOREIGN MARKETS AND FOREIGN CREDITS 719
The geographic distribution of our import trade shows many interest-
ing characteristics. In Table 5 is shown the total value distributed,
first by major geographic divisions and then by important countries
making up the larger areas. Europe continues to supply the largest
single portion, which, although it shows a considerable decline from the
full one-half of prewar years, still makes up somewhat more than one-
fourth of the total. Latin America comes second with a supply but
slightly less in value than that of Europe. Canada, on the other hand, is
responsible for less than half as much as that originating either in Latin
TABLE 5.—ANNUAL IMPORTs of THE UNITED STATEs, 1922–1928
(In millions of dollars. See also description of data in note to Table 1)
Division 1910–14, 1922 1923 1924 1925 1926 1927 1928
Grand total. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,790 |3, 298|4,027|3,8514,479|4,6934,4424, 372
Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837 991. 1, 157|1,0961,238||1,286|1,276||1,249
United Kingdom and Irish Free State. . . . . . 279 357 404 366|| 414| 385| 360 350
Germany. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 117| 161| 139|| 164| 198| 201| 222
France. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 143 150 148| 157| 152| 168|| 159
Italy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 64 92 75 102 103|| 109| 102
Netherlands. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 64 78 74 93. 102 87 84
Belgium. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 54 68 66 69 78 72 75
Remainder of Europe. . . . . . . . . . . . . . . . . . . . . 125 192| 204 2.28 239| 268 279| 257
Canada, Newfoundland, and Labrador. . . . . . . . . . 119 366 418; 402 458; 485| 484 || 499
Latin America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434 815, 1,050 1,0591,041 1,094|1,019 1,030
Cuba. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 268! 376. 362| 262; 251 257 203
Brazil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 120 143| 179| 222 235| 203| 221
Mexico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71 132 140|| 167| 179| 169| 138|| 125
Argentina. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 86; 115 75 80 88 97 99
Chile. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 60 92 98 89 81 62 75
Caribbean Areas”. . . . . . . . . . . . . . . . . . . . . . . . 57 105 124| 137| 163. 219, 222 266
Remainder of Latin America. . . . . . . . . . . . . . 17 44 60 41 46 51 40 41
Rest of World. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400 1, 1261, 402|1, 2941, 742 1,828; 1,663|1,594
Total Asia, included above. . . . . . . . . . . . . . 259 827|1,020, 931|1,319||1,401 1, 257|1, 169
Japan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 354|| 347| 340| 384| 401| 402. 384
Straits Settlements. . . . . . . . . . . . . . . . . . . . . . . 25 94. 154|| 148| 314|| 384] 278| 204
China. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 135; 188| 118 170 143| 152| 140
British India. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 91| 128| 103|| 144|| 151| 131 || 149
Hawaii. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 73| 101 108: 103 98 109| 117
Philippine Islands. . . . . . . . . . . . . . . . . . . . . . . . 19 62 78 97| 112| 104. 116|| 115
Porto Rico. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 60 80 77 93 90 97 97
Africa. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 65 87 73 92 96 93 90
Dutch East Indies. . . . . . . . . . . . . . . . . . . . . . . 9 34 55 58 96 120 92 86
Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 51 54 55 55 73 51 68
Australia. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 36 41 33 55 46 39 32
Ceylon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 20 28 25 48 56 41 31
Remainder of rest of the World. . . . . . . . . . . . 25 51 61 59 76 66 62 81

* Includes Central America, West Indies (except Cuba), Colombia, and Venezuela.
Source: Monthly Summary of Foreign Commerce, Bureau of Foreign and Domestic Commerce, United
States Department of Commerce.
720 RECENT ECONOMIC CHANGES
America or in Europe. All the rest of the world together accounts for
but little more than that already attributed to Europe.
Within the main geographic areas in Europe, it is the United Kingdom
which purveys the largest single portion of our import trade; and
while before the war and still in 1922 France accounted for the next
larger portion, more recently her part has been greatly exceeded by that
of Germany. In Latin America, Cuba with its great sugar plantations
continues our largest supplier, but, by the end of the period, accounted
for only a slightly larger proportion of our imports than did Brazil with
its vast production of coffee. Mexico, which in 1922 surpassed Brazil in
the value of its exports to the United States, showed in 1928 an actual
decline as compared with 1922, having thus dropped back to its prewar
position. The Caribbean States during each year have shown an increase,
usually very marked. In the rest of the world, while Japan continues our
most important supplier, our great demands for rubber have brought,
during several recent years, the combined imports from the Straits Settle-
ments, Ceylon, and the Dutch East Indies into a position of even greater
importance. China, on the other hand, has little more than maintained
the position which it held in 1922.
In order to bring out more clearly the relative changes in the propor-
tions of our imports coming from the various parts of the world, the
device of the logarithmic chart will again be resorted to. In Chart 4,
the logarithms of the value of our imports from various parts of the
world, instead of the actual value, are represented. Hence, in the various
graphs, equal absolute changes represent equal proportional changes in
the values of the imports.
The values of our imports thus represented and distributed according
to geographic sources show many changes during the period since 1922.
It is immediately evident that, of our incoming trade from Europe and
from Latin America, the values have increased proportionally less than
those from Canada and much less than those from the rest of the world.
Also, of those from Europe, the rapid increase in the value of imports
from Germany, Italy, and from most of the other countries, as contrasted
with those from the United Kingdom and from France, are extremely
noticeable.
In Latin America, the rapid increases of our imports from the newer
and smaller countries, especially from the Caribbean area, as compared
with those from the older and more established markets, are especially
to be noted. And as regards the rest of the world, the extraordinary
increases from the Straits Settlements and other rubber producing
countries, from our territorial possessions, from British India, and from
Africa are to be contrasted with the smaller increases from our older
suppliers, such as China, Japan, and Australia.
FOREIGN MARKETS AND FOREIGN CREDITS 721
CHART 4.—IMPORTS OF THE UNITED STATES ANNUALLY, 1922–1927
OF WORLD of TNE woºl)
EUROPE
KINGOOM
OF EUROPE
COUNTRIES
50URCE OF DATA:- MONTHLY SUMMARY OF FORE16N
With imports, then, as with exports, much of the recent increase
has come from the development of new and formerly little-known markets
rather than through the extension of older ones.





722 RECENT ECONOMIC CHANGES
CHART 5.—IMPORTS OF THE UNITED STATES ANNUALLY, WITH IMPOR-
TANT PRICE CHANGES ELIMINATED, 1922–1927
Inserted figures indicate per cents actual values of adjusted items are of original total
values
|M|| 10000
5000
TOTAL (54)
| 000
KINGOOM (22)
&
(45)
BR. INDIA (56)
* - - - - * - - - sºme sº-e - - - sºme sº- - - smº -- a- -
COUNTRIES
When important price changes are eliminated (see Chart 5), certain
changes in the above conclusions appear, especially in connection with

§

TABLE 6.—ANNUAL IMPORTs of For EIGN MERCHANDISE BY THE UNITED STATES BY COMMODITIES, 1922–1928
The figures for indivi-
} |
1910–14 1922 1923 1924 1925 1926 1927 1928
|
Commodity | | i H –––. – |. |
Quan- Quan- | Quan- Quan- Quan- Quan- Quan- Quan-
Value tity Value tity value tity Value tity Value | tity Value tity Value tity Value tity
+ | - - i
Total. . . . . . . . . . . . . . . . . . . . . . . . 1, 790 . . . . . . 3, 298; . . . . . . 4,027 . . . . . . 3,851|. . . . . . 4,479 . . . . . . 4,693 . . . . . . 4,442 • * * * * * 4, 372] . . . . .
|
1. Raw silk-pounds. . . . . . . . . . . . . . . 77 24, 366 51 392 50, 328 51 396 64 393 66 390 74 368 75
2. Cane sugar". . . . . . . . . . . . . . . . . . . . . 169 612. 329. 1, 156 498 942 483 1,040, 362. 1, 163 337| 1, 201 382. 1, 111; 337| 1,080
3. Crude rubber—pounds. . . . . . . . . . . 86 106. 102 674 185 692 174: .. 73 430 888 506 92 340 955] 245 978
4. Coffee—pounds. . . . . . . . . . . . . . . . . 102 899. 161 1, 246 190) 1,408 249; 1,421 286] 1,284 323, 1,493 264. 1,433 310| 1,457
5. Newsprint paper—pounds. . . . . . . . 5 238. 72| 2,059 98| 2,618 101| 2,714 # 2,897 124 3, 701 131 3,974 139| 4, 314
6. Fruits and nuts. . . . . . . . . . . . . . . . . . 48 . . . . . . | 99" . . . . . . 101 . . . . . . 102'. . . . . . 129 . . . . . . 128. . . . . . . 126'. . . . . . 1341 . . . . .
7. Furs. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23i. . . . . . 68; . . . . . . 88! . . . . . . 88 . . . . . . 115. . . . . . . 118 . . . . . . 124; . . . . . . 109] . . . . .
8. Hides and skins—pounds. . . . . . . . . 105 531 107 551 119 532 75 357 97 362 97 369 113 447 151 506
9. Tin—pounds. . . . . . . . . . . . . . . . . . . . 42 106 41 135 61 154 69 146 ; 172 105 173 101 1.59 87 175
10. Wood and manufactures. . . . . . . . . . 42 . . . . . . 97| . . . . . . 121|. . . . . . 112 . . . . . . 120 . . . . . . 102. . . . . . . 93! . . . . . . . 80 . . . . .
11. Raw wool–pounds. . . . . . . . . . . . . . 39 208 87 376 130 394 93 268 142 329 107 310 83 267 80 245
12. Tobacco–pounds. . . . . . . . . . . . . . . . 37 58 74 81 67 63 34 72 81| 82 70 72 84 ió6, 63. T73
13. Wool manufactures. . . . . . . . . . . . . . 22. . . . . . . 59; . . . . . . 69. . . . . . . 69 . . . . . . 74. . . . . . 71] . . . . . . 79" . . . . . . - 78 . . . . .
14. Petroleum—gallons. . . . . . . . . . . - a - - 5. . . . . . . 70 5,347 54|| 3,445 74 3,267 75. 2,597 79| 2, 536 78] 2,451. 90 3,350
15. Burlaps—pounds. . . . . . . . . . . . . . . . 29 421 49 521 67 59 59 576 85; 626 82 599 67 570 80 620
16. Cotton manufactures. . . . . . . . . . . . . 67 . . . . . . 87| . . . . . . 100 . . . . . . 91 . . . . . . 80 . . . . . . 67|. . . . . . 66] . . . . . . | 6 || . .
17. Oil seeds. . . . . . . . . . . . . . . . . . . . . . . . 15 . . . . . . 44. . . . . . . 68! . . . . . . 50; . . . . . . 65. . . . . . . 72 . . . . . . 64 . . . . . . . 61} . . . . .
18. Vegetable oils. . . . . . . . . . . . . . . . . . . 27] . . . . . . 58i. . . . . . 611 . . . . . . § - e. e. e. e. e. 75 . . . . . . 65] . . . . . . 61. . . . . . . # 5 -s;
19. Fertilizers”. . . . . . . . . . . . . . . . . . . . . . 41 863 45 1, 340 64 1,858 67. 1,893 78] 2,268 69| 2,082 59| 1,819 78. 2, 533
20. Pulp (sulphite)". . . . . . . . . . . . . . . . . 15 472 40 636 49 712 51 834 54 866 61 924 58 925. 56 948
21. Cocoa-pounds. . . . . . . . . . . . . . . . . . 16 142 32 345 34 414 29 378 38 382 43 426 57 42s 47 379
22. Flax and hemp. . . . . . . . . . . . . . . . . . 32 . . . . . . 49 . . . . . . 48! . . . . . . 57 . . . . . . | #3. . .” 53! . . . . . . 54! . . . . . . 511 . . . . .
23. Copper, unrefined. . . . . . . . . . . . . . . . 28, . . . . . . 38 303 56 395 59 471 49 379 56 444 52 439 68 543
24. Raw cotton—pounds. . . . . . . . . . . . . 21 111 48 186 49 187 49 lº; 53 157 46 181 46 206 43 172
25. Diamonds”. . . . . . . . . . . . . . . . . . . . . . 35 . . . . . . 43 454 52 540 47 502 50 514 51 555 41 º 42 440
26. Vegetable fibers”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 187 32 244 38 226 57 238 50 223 39 206 36 216
27. All other outside customs area. . . . . 632: . . . . . . 931. . . . . . . 1,088 . . . . . . 1,001 . . . . . . 1,142. . . . . . 1,302. . . . . . . 1, 299 . . . . . . | 1,300 . . . . .
28. All other receipts from Alaska,
Hawaii, and Porto Rico, other -
than sugar, fruits, and nuts. . . . . 30 . . . . . . 79 . . . . . . 86'. . . . . . 84]. . . . . . º - - - - - - 116 . . . . . . o * * * * - - 107 . . . . .
(Value in millions of doll
ars; quantity in millions of units specified. For the basis of totals see description of data in note to Table 1.
ual commodities, except sugar, fruits, and nuts, do not include imports from Alaska, Hawaii, and Porto Rico)
Source: Monthly Summary of Foreign Commerce, Bureau of Foreign and Domestic Commerce, United States Department of Commerce.
a Tens of millions of pounds.
b Thousands of tons
• Thousands of carats (cut but not set).
724
RECENT ECONOMIC CHANGES
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FOREIGN MARKETS AND FOREIGN CREDITS 725
our trade with the Far East. Thus measured, our imports from the
rubber-growing countries no longer rose more rapidly after 1922 than
did those from Japan and from our insular possessions. The rapidity
of the rise in imports from British India is considerably reduced. It
is evident that the drastic fluctuations in the price of rubber served
greatly to distort the changes in the values of our imports from certain
rubber-producing countries, while the smaller fluctuations in the prices of
silk affected the value of our large imports from Japan.
Of more significance in its bearing on American industry is the com-
modity content of our import trade. The principal items are enumerated
in Table 6.
It will be noted immediately what prominent proportions of the total
are made up of silk, sugar, rubber, and coffee. In fact, in 1926, these
four articles alone made up in value one-third of the total of our imports,
and in 1928, in spite of a drastic decline in the price of rubber, more than
one-fourth. Most of the remainder of those which bulk high in value
are, like three of the above, raw materials admitted with little or no tariff
restriction.
During the period since 1922, important changes have occurred in the
relative proportions made up by the various components. Chart 6, in
which the logarithms of the values of each import, instead of the values
themselves, are plotted, makes clear the relative movements of the
values of the various items. Especially to be noted are the enormous
increases in rubber and in tin down to 1926, and the rapid increase,
scarcely broken to 1928, in copper, newsprint, furs, and cocoa. When
important price changes are eliminated, many of the most pronounced
inclines are much reduced. Rubber and tin show almost unbroken
upward trends throughout the period, but with slopes much less than
those of newsprint and fertilizers, or only about the same as that of raw
silk, the actual value of which followed an almost horizontal trend
throughout the period. Petroleum, although its actual value showed an
upward trend, has, until 1927, a pronounced downward slope when the
changes in its price are eliminated; and although a marked rise occurred
in 1928, the total import was still much below that for 1922.
II. FOREIGN LOANS
Extension of Idea to All Investments.--Any discussion of foreign
loans in their relationships to international trade or to business conditions
in the lending country must necessarily involve the broader consideration
of all credit transactions with the outside world. Whether the advance
of funds takes the form of a public flotation of security issues, a direct
investment in the construction of a foreign plant, or a temporary loan
by a finance institution, there are so many elements of similarity in the
resulting influences set into operation that few advantages and many
726 RECENT ECONOMIC CHANGES
disadvantages might be expected to arise from more narrowly limiting
the problem. Consequently, in this study of the effects of foreign loans
on business conditions in the United States, all kinds of credits will be
considered.
In securing any worthwhile estimate of the volume of such credits,
almost insuperable difficulties are encountered. Although several
compilations by independent investigators are published periodically,
all are subject to grave error. In fact, it is only of the publicly floated
issues that many of the outstanding details ever become generally
known. And even with regard to such credits, important uncertainties
inevitably arise. That an issue was floated in New York may not mean
that all the securities were sold to Americans even in the first instance.
This is especially true in cases of issues by Canadian firms, which are
beginning to use New York's financial facilities much as businesses do
which are located in Michigan or in Ohio. And even when securities
are originally sold here, there is nothing to prevent their being rapidly
resold to people in other countries. Statistics of both these types of
“backwash” are as yet extremely inaccurate.
Our statistical information is even more rudimentary on other types
of credits. Privately granted credits and direct investment, once they
reach the public press, are “caught” as they appear. But what propor-
tion of them receives publicity? And what fraction or multiple of the
actual cash involved in those which do, gets mention in the press dis-
patches? Indeed, in certain direct investments, it is difficult to deter-
mine even theoretically what should be included. For example, an oil
company incorporated in New Jersey, but conducting extensive oper-
ations in Latin America, floats a loan in New York City to provide funds
for the purchase of barges and loading machinery necessary for the
transport of crude oil to its refineries here. What proportion of the
loan represents an investment in Latin America? Finally, credits of
extremely informal character are doubtless continually arranged between
head offices and branches of banks and of other finance institutions both
American and foreign, as well as between banks only partially inter-
connected by stock ownership, and between important correspondents.
Informal credits, too, are likely to be contracted between head offices
and branch manufacturing plants which American firms are fast con-
structing in many parts of the world. Of the amounts of such credits,
little more than the wildest guesses are available.
In the face of all these obstacles, the Finance and Investment Divi-
sion, Bureau of Foreign and Domestic Commerce, United States Depart-
ment of Commerce, has compiled a series of estimates of the various
types of the foreign credits of the United States. While admittedly
subject to a wide margin of error, so many cross-checks have been used in
their compilation, that the gross estimates, which alone are presented
FOREIGN MARKETS AND FOREIGN CREDITS 727
in this study, cannot but command respect. On account of his interest
in the subject, Dr. Ray O. Hall, who for the last two years has been in
charge of the compilation of the Balance of International Payments of the
United States, has kindly consented to reconstruct for this study the
estimates for earlier years, using the method which has apparently given
such excellent results in the handling of the 1926 and 1927 data. His
revised estimates are used throughout the remainder of this chapter.
Facts of Foreign Loans.—Outstanding at the end of each of the years
1922–1927 our total foreign investments are estimated" as shown in the
following statement:
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 8,522,000,000
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,775,000,000
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,589,000,000
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,405,000,000
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 195,000,000
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12, 187,000,000
Similar estimates of the investments of foreigners in American securi-
ties and properties at year-end dates are given in the following statement:*
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,808,000,000
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,052,000,000
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,096,000,000
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,301,000,000
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,469,000,000
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,700,000,000
The estimated service actually paid to Americans by foreigners and
to foreigners by Americans are given in Table 7. In the same table are
added the amounts of the service on inter-government war debts, and
the estimated amounts of Service on short-term obligations of all sorts.
The final balances represent estimates of the net sums entering into
our balance of international payments for each year on account of
indebtedness outstanding during that year.
7 Estimate by Ray O. Hall, Assistant Chief of the Finance and Investment Divi-
sion, Bureau of Foreign and Domestic Commerce, United States Department of
Commerce, Washington, D.C. At the ends of 1926 and 1927, range estimates are
given as follows: 1926, $10,500,000,000 to $12,500,000,000; 1927, $11,500,000,000 to
$13,500,000,000. Estimates for other years are probably not more accurate.
Description of data. In making the estimates of this table the following method was
used: The estimated value of the total American investments abroad at the end of the
calendar year 1925, as given on page 15 of the Balance of International Payments of
the United States in 1925, was taken as a base. For the other years, cumulative
additions to and subtractions from this base were made on the basis of the yearly
investments of Americans abroad, as given in the first “Balance” column of Table 8.
* Description of data. In making the estimates of this table the following method
was used: From the total investments of foreigners in the United States at the end of
1927, as given on page 25 of the Balance of International Payments of the United
States in 1937, have been subtracted the cumulative flotations each year as given in
the “Balance” of “Investments of Foreigners in the United States” in Table 8.
728 RECENT ECONOMIC CHANGES
TABLE 7.—INTEREST AND COMMISSION
(In millions of dollars)
Received from foreigners Paid to foreigners
-
Year Interest on | Short-term War-debt Interest on | Short-term | Balance
long-term interest receipts of long-term interest
private in- and com- |United States private in- and com-
vestments missions Treasury vestments missions
1922. . . . . . . . . . . . . . . 526 25 158 120 24 565
1923. . . . . . . . . . . . . . . 560 30 259 140 40 669
1924. . . . . . . . . . . . . . . 596 35 183 150 42 622
1925. . . . . . . . . . . . . . . 639 45 186 165 - 64 641
1926. . . . . . . . . . . . . . . 678 57 195 190 78 662
1927. . . . . . . . . . . . . . . 738 57 206 203 78 720
Source: Revised estimates of balance of international payments of the United States for calendar
years 1922–1927, inclusive, by Ray O. Hall. Hereafter this reference will be condensed to: Revised
estimates by Ray O. Hall. War-debt receipts of United States Treasury include interest and principal.
TABLE 8.—ANNUAL CHANGES IN PRIVATE FUNDED CAPITAL ITEMs, 1922–1927
(In millions of dollars)
|
American Refund- | Investments Refund- Net export
investments ing and of foreigners ing and of long-
Year Balance in United Balance
abroad, new back- back- term
States *
long-term wash $ 8 º' wash capital
Securities
1922. . . . . . . . . . . . . 1, 220 478 742 80 74 6 736
1923. . . . . . . . . . . . . 581 328 253 308 64 244 9
1924. . . . . . . . . . . . . 1,424 610 814 131 87 44 770
1925. . . . . . . . . . . . . 1,593 777 816 283 78 205 611
1926. . . . . . . . . . . . . 1,653 863 790 709 541 168 622
1927. . . . . . . . . . . . . 1,974 982 992 931 700 231 761

Source: Revised estimates by Ray O. Hall.
Descriptions of data: “United States investments abroad, new long-term" is the sum of “Foreign
security investments of Americans” and “Direct foreign investments of Americans.”
“Refunding and backwash” is the sum of “Refunding to Americans,” “Bond redemption and sink-
ing-fund payments from foreigners” and “Resale of investments to foreigners.”
No allowance has been made for “Discounts on investments abroad.”
Net annual increases in our long-term foreign investments, divided
into “publicly floated” and “direct investments,” are given in Table 9.
Estimates of the reverse items, of purchases by foreigners each year of
American properties and securities, are given in Table 10.
In Table 11 are given estimates of the yearly net balances of the move-
ments of funded and unfunded credits and direct investments.”
° In the first column are entered the direct estimates made by Ray O. Hall. In
view of the admitted unreliability of the “unfunded items” entering into these esti-
mates, the same balances have been recompiled with a method similar to the one in
general use in the British balance of payments. More explicitly, the combined esti-
mates of the movements in the balance of payments of all items—visible and invisible
—except credits of all sorts, are assumed to be accurate in the sense that errors are
FOREIGN MARKETS AND FOREIGN CREDITS
729
TABLE 9.—LONG-TERM FOREIGN INVESTMENTs of AMERICANs
(In millions of dollars)
Publicly Direct
Year floated investments Total
1922. . . . . . . . . . . . . . . . . . . . . . . . . 626 116 742
1923. . . . . . . . . . . . . . . . . . . . . . . . . 206 47 253
1924. . . . . . . . . . . . . . . . . . . . . . . . . 701 113 814
1925. . . . . . . . . . . . . . . . . . . . . . . . . 597 219 816
1926. . . . . . . . . . . . . . . . . . . . . . . . . 550 240 790
1927. . . . . . . . . . . . . . . . . . . . . . . . . 735 257 992

Source: Revise
d estimates by Ray O. Hall.
Description of data: “Publicly floated” is the balance of “Foreign security investments of Ameri-
cans,” “Refunding to Americans,” “Bond redemption and sinking-fund payments from foreigners”
and “Resale of investments to foreigners.”
TABLE 10.-Long-TERM INVESTMENTS IN THE UNITED STATES BY FOREIGNERs
(In millions of dollars)

Net investments ſº
º e Direct
Year by foreigners in g Balance
* * * investments
U. S. securities
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4 10 6
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234 10 244
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 20 44
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175 30 205
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 32 168
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 28 231
Source: Revised estimates by Ray O. Hall.
TABLE 11.-NET AMERICAN INVESTMENTS AND SHORT-TERM CREDITs ABROAD
(In millions of dollars)

Estimate of Ray O. Estimate based on
Hall of net balance of tº 8 tº
Year British balance of
funded and unfunded ayments method
credits pay
1922. . . . . . . . . . . . . . . . . . . 260 198
1923. . . . . . . . . . . . . . . . . . . — 42 — 54
1924. . . . . . . . . . . . . . . . . . . 458 521
1925. . . . . . . . . . . . . . . . . 539 443
1926. . . . . . . . . . . . . . . . . . . 119 34
1927. . . . . . . . . . . . . . . . . . . 641 621
Source: Revised estimates by Ray O. Hall.
Description of data: The estimate of Ray O. Hall is the balance of net “Private, funded capital
items” and net “Unfunded items.” The estimate based on the British balance of payments method is
the balance of the net “Commodity and miscellaneous items” and the “Pure cash items.”
mutually counteracting. The remainder required to establish an equilibrium of
payments each year is accordingly regarded as a net balance of credits extended.
Since the basic assumption upon which the method rests is subject to grave inaccura-
cies both theoretical and practical, only to the extent that all the errors are counteract-
ing in character will the final balance prove valid.
730 RECENT ECONOMIC CHANGES
Data are not available for determining the distribution of our foreign
investments, either according to the uses to which the derived funds have
been put, or even according to the geographic locations of the borrowers.
For publicly floated issues alone these data are available, and in Table 12
such a distribution is given. The reader is warned that no deductions
have been made either for issues only nominally placed in New York or
for repurchases by foreigners of large blocks of issues, the bulk of which
have remained in this country.
TABLE 12.-GEOGRAPHIC DISTRIBUTION OF FoEEIGN CAPITAL Issues PUBLICLY
OFFERED IN THE UNITED STATES FROM 1922 To 1928; NEW NoMINAL
CAPITAL
(In millions of dollars)
Item 1922 1923 1924 1925 | 1926 1927 | 1928
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 682 || 414 928 1,085|1, 135||1, 376||1, 191
Government and official guaranteed. . . . . . . . . . . . . . . . 486 || 295 || 777 649| 583| 852| 624
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 118 152 437| 551 || 524; 568
Europe, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 || 108 530 652| 495 571 597
Government and guaranteed. . . . . . . . . . . . . . . . . . . . . . 136 78 || 508 409 188! 289| 231
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 30 22 242. 307| 282; 366
Latin America, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 223 || 114 | 1.48 133| 355, 359| 268
Government and guaranteed. . . . . . . . . . . . . . . . . . . . . . 161 63 75 87| 284. 296 || 238
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 52 74 46 71 63 29
Canada, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 || 1 18 || 146 150 2.38 268 188
Government and guaranteed. . . . . . . . . . . . . . . . . . . . . . 77 81 | 105 70 80|| 142 73
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 37 40 80 158 127| 115
Far East, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 71 96 142 32, 145 131
Government and guaranteed. . . . . . . . . . . . . . . . . . . . . . 111 71 81 75 20, 113 76
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 | . . . 15 67 12 32 54
|
United States territories and possessions, total . . . . . . . . . . . 3 3 8 10 14 32 Q
Government and guaranteed. . . . . . . . . . . . . . . . . . . . . . 1 3 8 9 12. 11 5
Corporate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 . . . . tº $ tº 1 3. * 4
Source: Special circulars on foreign security offerings, Finance and Investment Division, Bureau of
Foreign and Domestic Commerce, Department of Commerce. -
Description.—The above data are subject to serious inaccuracies. From the total nominal capital
of foreign issues have been subtracted only the estimated refunding to Americans. Thus, no allowance
is made for purchases at a price other than par, or for purchases by foreigners of capital issues publicly
offered in the United States.
In spite of the undependability of the estimates of many of the indi-
vidual items which have appeared in the foregoing tables, the outstanding
fact remains that the expansion of American foreign investments during
the period under discussion has been very large and generally increasing.
What is the explanation of this comparatively new phenomenon in
American economic life? And how important are its effects on American
business?
FOREIGN MARKETS AND FOREIGN cREDITS 731
Reasons for Expansion.—To answer the first question, a comparison
will be made between the interest rates in New York and in the other
large investment centers of the world, during the period under discussion.
In Chart 7 are represented the best estimates available of both long- and
short-term interest rates in New York, London, Amsterdam, and Berlin,
together with long-term interest rates in New York.
Not only were both long- and short-term rates in New York generally
declining throughout the period, but they were usually lower than those
prevailing in other investment markets. In fact, Paris and Berlin have
been completely out of the investment competition, and London, the
long-established center of most of such financing, has generally had the
handicap of tighter money. -
TABLE 13.−SHORT-TERM INTEREST RATES IN IMPORTANT MONEY CENTERS

Long-term
Year and month New York London Berlin Amsterdam bond yield,
- New York
1922
January. . . . . . . . . . . . . . . . . . . . 4.50 3. 60 5. 17
February. . . . . . . . . . . . . . . . . . . 4. 13 3.26 5. 13
March. . . . . . . . . . . . . . . . . . . . . 4. 13 3. 28 5. 07
April. . . . . . . . . . . . . . . . . . . . . . . 4.00 2.62 4. 97
May. . . . . . . . . . . . . . . . . . . . . . . 3.38 2.34 4.94
June. . . . . . . . . . . . . . . . . . . . . . . 3.25 2.40 | 4.93
July. . . . . . . . . . . . . . . . . . . . . . . 3. 38 1.97 | 4.87
August. . . . . . . . . . . . . . . . . . . . . 3.25 2. 27 4. 81
September. . . . . . . . . . . . . . . . . . 3. 50 2. 50 - 4. 77
October. . . . . . . . . . . . . . . . . . . . 3. 75 2.41 4.82
November. . . . . . . . . . . . . . . . . . 4.00 2. 52 ! 4.90
December. . . . . . . . . . . . . . . . . . 4.00 2. 55 i 4. 87
1923
January. . . . . . . . . . . . . . . . . . . . 4.00 2. 27 | 4.86
February. . . . . . . . . . . . . . . . . . . 4.00 2.48 4.89
March . . . . . . . . . . . . . . . . . . . . . 4.00 2. 28 4.97
April. . . . . . . . . . . . . . . . . . . . . . . 4. 13 2. 11 5.00
May. . . . . . . . . . . . . . . . . . . . . . . 4. 13 2.01 4. 98
June. . . . . . . . . . . . . . . . . . . . . . . 4. 13 2. 10 - 4. 98
July. . . . . . . . . . . . . . . . . . . . . . . 4. 13 3.24 5. O1
August. . . . . . . . . . . . . . . . . . . . . 4. 13 3. 18 4.99
September. . . . . . . . . . . . . . . . . . 4. 13 | 3.18 5.02
October. . . . . . . . . . . . . . . . . . . . 4. 13 3.29 | 5.02
November. . . . . . . . . . . . . . . . . . 4. 13 3.30 5. O1
December. . . . . . . . . . . . . . . . . . 4. 13 3.27 - 5. 01
1924
January. . . . . . . . . . . . . . . . . . . . 4. 13 3. 29 4.88 4.95
February. . . . . . . . . . . . . . . . . . . 4. 13 3.54 5. 19 j 4.95
March . . . . . . . . . . . . . . . . . . . . . 4.00 3. 20 5. 13 | 4.96
April. . . . . . . . . . . . . . . . . . . . . . . 3. 88 3. 07 5. 06 4.95
May. . . . . . . . . . . . . . . . . . . . . . . 3.25 3.05 4. 19 | 4.90
June. . . . . . . . . . . . . . . . . . . . . . . 2.25 3.03 3.56 4.84
July. . . . . . . . . . . . . . . . . . . . . . . 2.00 3.59 3. 13 4. 80
August. . . . . . . . . . . . . . . . . . . . . 2. 13 3. 79 2.88 4.80
September. . . . . . . . . . . . . . . . . . 2. 13 3.74 , 25 4.78
October . . . . . . . . . . . . . . . . . . . . | 2.25 3. 72 4. 63 4. 77
November. . . . . . . . . . . . . . . . . . | 2. 36 3.72 4. 44 4. 76
December. . . . . . . . . . . . . . . . . . 2.88 3. 73 4.00 4. 78

| t
732
RECENT ECONOMIC CHANGES
TABLE 1.3.−(Continued)
|
New York
Year and month London
1925
January. . . . . . . . . . . . . . . . . . . . 3.00 3. 80
February. . . . . . . . . . . . . . . . . . . 3. 13 3. 83
March. . . . . . . . . . . . . . . . . . . . . 3.25 4.48
April. . . . . . . . . . . . . . . . . . . . . . . 3.13 4. 30
May. . . . . . . . . . . . . . . . . . . . . . . 3.25 4.59
June. . . . . . . . . . . . . . . . . . . . . . . 3.25 4. 44
July. . . . . . . . . . . . . . . . . . . . . . . 3.25 4. 35
August. . . . . . . . . . . . . . . . . . . . . 3.25 3.94
September. . . . . . . . . . . . . . . . . . 3. 50 3.68
October. . . . . . . . . . . . . . . . . . . . 3. 50 3. 57
November. . . . . . . . . . . . . . . . . . i 3. 50 3. 92
December . . . . . . . . . . . . . . . . . . 3. 50 4.67
1926
January. . . . . . . . . . . . . . . . . . . . 3.63 4.76
February . . . . . . . . . . . . . . . . . . 3.63 4. 31
March. . . . . . . . . . . . . . . . . . . . . 3.66 | 4. 37
April. . . . . . . . . . . . . . . . . . . . . . . 3.38 4.33
May. . . . . . . . . . . . . . . . . . . . . . . 3.25 : 4. 37
June. . . . . . . . . . . . . . . . . . . . . . . 3.25 4. 27
July. . . . . . . . . . . . . . . . . . . . . . . 3. 38 4. 26
August. . . . . . . . . . . . . . . . . . . . . 3. 50 4.45
September. . . . . . . . . . . . . . . . . . 3. 88 4.54
October. . . . . . . . . . . . . . . . . . . . 3. 88 4. 69
November. . . . . . . . . . . . . . . . . . 3. 82 4. 57
December. . . . . . . . . . . . . . . . . . 3.82 4. 53
1927
January. . . . . . . . . . . . . . . . . . . . 3.75 4. 17
February. . . . . . . . . . . . . . . . . . . 3.63 4. 19
March. . . . . . . . . . . . . . . . . . . . . 3.63 4.33
April. . . . . . . . . . . . . . . . . . . . . . . 3.63 4.04
May. . . . . . . . . . . . . . . . . . . . . . . 3.63 3. 88
June. . . . . . . . . . . . . . . . . . . . . . . 3.63 4. 34
July. . . . . . . . . . . . . . . . . . . . . . . 3. 50 4.33
August. . . . . . . . . . . . . . . . . . . . . 3. 13 4.33
September. . . . . . . . . . . . . . . . . . 3. 13 4.32
October. . . . . . . . . . . . . . . . . . . . 3.25 4.32
November. . . . . . . . . . . . . . . . . . 3.25 4.33
December. . . . . . . . . . . . . . . . . . 3.25 4.31
1928
January. . . . . . . . . . . . . . . . . . . . 3.38 4. 19
February. . . . . . . . . . . . . . . . . . . 3. 50 4.18
March. . . . . . . . . . . . . . . . . . . . . 3. 50 4. 12
April. . . . . . . . . . . . . . . . . . . . . . . 3. 75 4.02
May. . . . . . . . . . . . . . . . . . . . . . . 4.00 3.97
June. . . . . . . . . . . . . . . . . . . . . . . 4. 13 3. 82
July. . . . . . . . . . . . . . . . . . . . . . . 4.25 3.99
August. . . . . . . . . . . . . . . . . . . . . 4.63 4. 27
September. . . . . . . . . . . . . . . . . . 4.50 4. 23
October. . . . . . . . . . . . . . . . . . . . 4. 50 4. 35
November. . . . . . . . . . . . . . . . . . 4.50 4.38
December . . . . . . . . . . . . . . . . . . 4.50
Source: London rates for 1922 and 1923 are taken from the London Economist.
the Federal Reserve Bulletin.
| Berlin
Long-term
Amsterdam | bond yield,
New York
8. 38 2.63 4. 78
8.00 2. 14 4.76
8.00 2. 34 4.76
8.00 3.23 4. 72
8.00 3.45 4.67
7.83 3.08 4.66
7.83 2. 72 4. 69
7. 78 | 3. 72 4. 72
7.27 3. 63 4. 72
7. 16 || 3.47 4. 73
6. 78 3.34 4. 74
6. 75 i 3.43 4. 70
6. 28 2.95 4.66
5.46 2. 19 4.63
5.00 2.67 4.63
4.88 2.90 4.61
4.69 2.95 4.58
4. 53 2.83 4.58
4.54 2. 74 4. 60
4. 61 2. 63 4.59
4.88 | 2.78 4. 60
4.82 2.83 4. 60
4.63 3.21 4. 56
4. 72 3. 39 4. 55
4. 20 2.97 4.54
4. 23 3.47 4. 53
4.59 3. 50 4.51
4. 61 3.47 4.47
4.90 3.46 4.46
5. 39 3. 57 4.51
5.90 3.53 4.51
5.82 3.45 4.48
5.90 3.56 4.45
6. 69 4. 11 4.43
6.76 4.50 4.42
6.87 4. 49 4. 40
6. 27 4. 29 4.38
6. 20 3.97 4.38
6. 72 3.97 4. 37
6.71 4.18 4.38
6.66 4. 27 4.42
6. 59 4.18 4.50
6. 74 4. 10 4.54
6. 68 4. 13 4.59
6. 65 4. 39 4. 57
6. 57 4. 40 4. 57
6. 28 4. 44 4. 55
4.59
All others are from
Description of Data.-The rates used are the open-market rates for prime bankers' acceptances.
Although the London rates for 1922 and 1923 are not available in the Bulletin, the same method of
computation has been employed. The rates given are monthly averages of the daily quotations that
The data for the long-term bond yield are taken from the
are published in the London Economist.
“Statistical Bulletin” of the Standard Trade and Securities Service, published by the Standard Statistics
Co., Inc.
FOREIGN MARKETS AND FOREIGN CREDITS 733
With regard to long-term interest rates in absolute values, little can be
said. Bond yields depend so completely on the types of bonds for which
they are computed that, for absolute comparisons, little confidence can
be placed in any of those at present published. There seems little doubt
that during most of the period, long-term funds could be borrowed in
New York more easily than in London. Not only was the available
supply almost always greater, but the stronger competition among
American investment bankers in turn enhanced the position of the
borrowers. Under such circumstances, the plentiful supply of investment
CHART 7.–SHORT-TERM INTEREST RATES IN IMPORTANT MONEY
CENTERS, 1922–1928
PER CENT INTEREST RATE
8 (Monthly Avenage) \,
N-,
\
7 N
Negrun ſ ^ ſº-N
| F. \
6 º **
Zºº BOND YIELD-NEW YORK \ |
_*. **** \ *
5 *-N-PT * * -4 Y’s ^. f
tº e
t AA ! |\-- % Wºº--→ º
4- \\ Nºwosº. - ? • S, , ~/ Y^_1~~f~E~3 4."
!'s
; ,
| *
* ,---,
3 \ IS-> SJ * tº
\ } wº •, } º
\ . M º *
*\ A-Yº ". º *: }
2 Af N-2 ** ** AMSTERDAM
w |
[LONDON
1922 1923 1924. 1925 1926 1927 1928
funds in this country has been sought by eligible borrowers in many
parts of the world. Borrowers in a position to do so have sought the
market where capital could be secured in the amounts desired at the
cheapest cost."
Analysis of Anticipated Effects of Foreign Loans.—The effects of a
flotation of foreign loans or other forms of foreign investments in this
country will differ much according to the disposition of the proceeds of
the sale of the securities. In general, they may be divided into three cases.
19 The abrupt decline in borrowings in this country by foreigners with the rapid
increase in interest rates after the middle of 1928 lends support to this thesis. Also,
it is an open secret that many foreign flotations have already been arranged for and
that their public announcement awaits only more favorable money and investment
conditions.

734 RECENT ECONOMIC CHANGES
Case I.--When all or a large portion of the derived funds are used for
the purchase of American products, the effect is direct and immediate.
The resulting stimulus to business, spreading forward, backward, and
sidewise, while varying in character and in importance according to the
types of goods purchased, is obvious.
Case II.--When the proceeds are shipped in gold, the effects on
American business are altogether different. Not only is there no direct
stimulus, as is the case when an equivalent amount of American goods are
sold, but the shipping of the gold is itself a deflationary influence, and,
except to the extent that the Federal Reserve banks increase their credit
expansion, proves a retarding rather than a stimulating influence.
Case III.--When the funds borrowed are largely transferred and spent
in other countries, the effects on American business, while important,
are less direct, less evident, and much less clearly defined than in the
other two cases just discussed. Nevertheless, irrespective of their
destination, the transfer of the funds acts directly not only on the
international exchange value of the currency of the country receiving
them but also on that of the currency of the lending country itself. The
resulting movements in exchange rates, sometimes involving much of the
world, are largely responsible for all the further indirect effects on
American prosperity or depression.
To the extent that the international value of the currency of the
borrowing country is improved, goods purchasable by its inhabitants
in other countries are correspondingly reduced in price; and, to the extent
that dollar rates are lowered by the transfer, a further impetus is given to
the purchase by all outsiders of American rather than of other foreign
wares, while exports to the United States are correspondingly discouraged.
Between gold standard and other stable exchange countries, these
movements in exchange rates are relatively insignificant; consequently
the resulting stimulus toward the purchase of American and other
foreign goods is correspondingly slight. When the borrowing country
is on a depreciating paper standard, the main influence—operating,
as it does, on the unstable currency—while immediate and great, provides
a stimulus toward the purchase of foreign goods almost as great as
toward that of American goods in particular.
If the transfer of such borrowed funds is at any time so great as to
depress dollar exchange rates to the gold-shipping points, naturally gold
flows out to other countries in sufficient quantities to bring the rates
back within their normal range of the gold parity. The effect of such an
outflow, as explained under Case II, far from stimulating, tends to depress
American trade.
On the other hand, to the extent that the fall in dollar exchange does
not lead to an outflow of gold, purchases of American products are
stimulated by the reduction of their prices in terms of other currencies.
FOREIGN MARKETS AND FOREIGN CREDITS 735
But, as mentioned above, on account of the slightness of the reduction in
exchange rates necessary in order to cause the flow of gold between gold
standard countries, such an influence would necessarily prove slight in
stimulating exports to any part of the world. However, it would
normally be of greater importance in stimulating sales to inhabitants of
borrowing countries on depreciating paper standards. In such cases,
not only would the fund transfers reduce slightly dollar exchange rates
with the rest of the world, but they would very likely improve substan-
tially those of the borrowing country, whose inhabitants would find the
prices of foreign products on that account correspondingly reduced.
Their purchases in the United States and, to a slightly less extent, those in
other countries would therefore normally increase. -
The extensions of credit to silver standard countries have, in certain
cases, other interesting consequences. When the new funds are used for
the purchase of goods in the lending, or other nonsilver standard countries,
or for the procuring of gold to be imported, the effects are not different
from those already discussed in Cases I and II above. If the funds are
transferred for expenditure in the borrowing or other silver standard
country, however, the effects may be different from any of those above
discussed. Virtually the sale of the dollar exchange in the silver standard
country amounts to the “offer” of gold for silver or to the “bid” for
silver with gold. If the size of the credit thus being transferred is large,
it might cause the value of gold to fall considerably in terms of silver,
or of silver to rise in terms of gold, and thus stimulate the buying of all
silver standard countries in gold standard countries while discouraging
that of the latter in the former.
Finally the effects in countries in which gold-exchange standards are
operated may be different still. If the funds are transferred for expendi-
ture at home, the resulting sales of dollar exchange, if large, causing as
they would, rates on all gold standard countries—and with them, those
On most other countries—to weaken, would make necessary the purchase
by the home central bank or other control agency, of dollar, or other,
gold exchange, to approximately the extent of the transfers. Thus
credit would be inflated at home against an equivalent balance held
abroad; whereas, under the gold standard, international shipments of the
monetary metal would have automatically transferred from somewhere
the foreign balance to the borrowing country.
Such a discussion as the above, however, is far too simplified even for
the problem under discussion. As in most fields of economic research,
not only are “cause and effect” relationships inadequate when quantita-
tive results are sought, but very often even the oversimplified logical
reasoning which is used to uncover them proves a perverting rather than a
clarifying means of analysis. A special application of the general idea of
economic equilibrium will therefore be introduced.
736 RECENT ECONOMIC CHANGES
III. COMPARISON OF THE MOVEMENTS OF FOREIGN TRADE WITH THOSE
OF FOREIGN INVESTMENTS
The General Idea of the Balance of Payments.-Even such an
improved device as the statement, now available for the United States,
cannot, for any chosen period, represent an actual balance of international
payments. It is neither a balance sheet nor a profit and loss account.”
In fact, even theoretically, its two sides do not balance. Many goods
and services, and especially securities purchased on margin, are sold on
open account, the required payments being made after varying periods
have elapsed. Also, in certain cases, payments are arranged in advance
of the proposed purchase of goods. Such lags, either way, may cause the
goods, services, and securities exported to appear in the balance of pay-
ments of one year, while the corresponding credit or cash transfers
connected with the payments may show in that of another. Provided
the balances carried over from one year to the next are substantially
equal, no great distortion would appear. Perhaps, with most goods and
services, such as cotton and Canadian electrical power, for example, Sold
regularly and with standardized methods of delivery and of payment,
such balances in general can be relied upon pretty nearly to cancel each
other. With certain others, however, the situation is clearly very
different. Securities bought on margin, for example, might be carried
over the year-end in great or small volume, according to speculators'
judgments as to their future values; and in years of rapidly rising prices,
like 1926 and 1927, the original purchase prices might be entirely paid by
the resale of comparatively small portions of the original totals, thus
leaving a net transfer of securities with no counterbalancing item of
payments. As to how great both these types of distortions may have
proved in years like 1926 and 1927, only guesses can be made. Also, the
Question might be raised as to what should be done even theoretically
with the huge stock-market operations of a great foreign branch bank
located in New York. Are their holdings of securities exported? And,
are the New York funds with which they are carried a form of inter-
national credits? If the securities are counted without the borrowed
funds, the balance is “out” on one side; and if the funds transferred for
margins are included without a corresponding proportion of the Securities
purchased, a reverse lack of balance appears. -
But, what is perhaps of much greater importance, suspended accounts
arising from various sorts of credit transactions provide an additional
source of error even in the theoretical balance. Certain securities are
issued and sold to the American public months in advance even of the
deposit of the derived funds to the accounts of the foreign borrowers, who
* The Balance of International Payments of the United States in 1927, p. 55.
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FOREIGN MARKET'S AND FOREIGN CREDITS 737
may further delay their transfer. Other flotations, on the contrary, are
made for no other purpose than to fund, at varying and extended inter-
vals, Outstanding credits granted earlier, the proceeds of which have
already been expended or transferred. Of neither of these types of lags
can the balance of payments, as at present compiled, take account.
Finally, all the “finance bills” and international money-market loans
made through the drawing and sale of long bills—important as they have
come to be in the adjustment of both exchange and interest rates—are
at present so inaccurately reported as automatically to be eliminated
from consideration. -
When all of these untabulated items are added to the neces-
sarily extremely informal credit arrangements between head offices and
branches of many business firms—as well as of banks, both American
and foreign, and the but slightly less informal ones between industrial
and financial institutions only partially owned one by another—it is seen
that even a theoretically accurate balance could not be expected. And
when, in addition, allowances are made for the inaccuracies necessarily
appearing in the estimates of the amounts of even the visible items of
our international trade, the statement cannot be regarded as holding
except within very wide limits of error.
Nevertheless, the device, as an instrument of analysis, represents a
great advance over those previously in use, and consequently will be
used in this study. In Table 14 are represented, for each year of the
period, the estimated value of each of the major items included in the
balance of international payments of the United States.
In order that the relative magnitudes of the various items may be
more readily seen, the data of this table, in simplified and combined form,
are further represented in Chart 8.”
The statement, it will be seen, has a debit and a credit side. On the
left (or debit) side are entered all items requiring payments to be made
outside the country during the year; and on the right (or credit) side,
all those requiring for their accomplishment payments from outside to
persons living within the country. - -
Facts—Balance of International Payments.-Reference to either the
table or the chart shows how completely the entire balance is dominated
by the loan and investment items. True, either merchandise exports
or imports alone are each year much larger than any other single item.
Nevertheless, the commodity balances of trade, although they have
varied within comparatively wide limits, make up only small portions
of the totals. In fact, if tourists’ expenditures, which in a very real sense
are to be regarded as a type of commodity imports, are included in the
12 This method of presentation is taken from the Monthly Bulletin of The National
City Bank of New York, entitled “Economic Conditions, Governmental Finance,
United States Securities,” Sept., 1927.
TABLE 14.—ConDENSED BALANCE OF INTERNATIONAL PAYMENTS OF THE UNITED STATES, CALENDAR YEARs, 1922–1927
1922 1923 1924 1925 1926 1927
Class of transaction
Credit Debit Bal. | Credit Debit Bal. Credit Debit Bal. | Credit] Debit Bal. | Credit Debit. Bal. | Credit Debit Bal.
Commodity trade except silver...................... 3,927|3,341|-|- 586 4,264|4,032|+232| 4,6913,853|-|- 838|| 5,009|4,471|+ 538|| 4,918|4,668|+ 250 4,961j4,434|+ 527
Silver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63| 71 ||— 8 72| 74|– 2 110| 74|+ 36 99| 64|+ 35 92| 70|+ 22 76|| 55|+ 21
Total of commodity trade. . . . . . . . . . . . . . . . . . . . 3,990|3,412|+ 578; 4,336|4, 106|+230|| 4,801|3,927|+ 874| 5, 108|4,535|+ 573| 5,010|4,738|+ 272| 5,037|4,489|+ 548
Tourist expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95| 493|— 398. 114| 493|–379| 115 576|— 461 110| 661|– 551 142|| 709|— 567| 153| 770 – 617
Return on American investment abroad:
(a) Long-term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 526|. . . . . + 526 560|. . . . . +560 596|. . . . . + 596 639| . . . . . + 639 678! . . . . . + 678 738! . . . . . + 737
(b) Short-term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25l. . . . . + 25 30|. . . . . + 30 35|. . . . . + 35 45] . . . . . + 45 57] . . . . . + 57 57| . . . . . + 58
Interest paid to foreigners:
(a) Long-term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 — 120 . . . . . . 140|–140} . . . . . . 150 – 150 . . . . . . 165 — 165] . . . . . . 1901 – 190} . . . . . . 203 – 270
(b) Short-term...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24|– 24 . . . . . . 40 – 40] . . . . . . 42|— 42 . . . . . . 64|— 64] . . . . . . 78|— 78|. . . . . . 78] – 03
Return on war debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158] . . . . . + 158|| 259 . . . . . +259| 183|. . . . . + 183 186] . . . . . + 186|| 195|. . . . . + 195| 206 . . . . . + 208
Immigrant remittances. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45| 300||— 255 66|| 295|—229| 56| 285|— 229 40 275 – 235' 35| 253|— 218, 35 241|– 246
Charitable and missionary contributions. . . . . . . . . . . . . . . . . . . 75||— 75|| . . . . . . 70|— 70] . . . . . . 55 – 55] . . . . . . 50 — 50] . . . . . . 46|-- 46|. . . . . . 43||— 76
Motion picture royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . 50| 2 |+ 48| 60 3|+ 57| 70| 4|+ 66|| 75|| 4|+ 71 75|| 4|+ 71 || 75|| 4|+ 63
Miscellaneous invisible items. . . . . . . . . . . . . . . . . . . . . . . 329 400 – 71 || 316 403|— 87| 346|| 406 – 60 332, 410 – 78! 366|| 434 – 68|| 410| 416|— 1
Total commodity and miscellaneous items...... 5,2184,826]+ 392 5,7415,550|+191| 6,2025,445|-|- 757| 6,535|6, 164|+ 371 6,5586,452|+ 106| 6,711|6,244|+ 467
Foreign security investments of Americans. . . . . . . . . . . . . . . . . . 1, 104|–1, 104|. . . . . . 534|–534|. . . . . . 1,311|–1,311|. . . . . . 1,374|–1, 374|. . . . . . 1,413|–1,413 . . . . . . 1,717|–1,717
Refunding to Americans. . . . . . . . . . . . . . . . . . . . . . . . . . . 146|. . . . . + 146 82] . . . . . + 82 291 | . . . . . + 291 245|. . . . . + 245 182| . . . . . + 182 208 . . . . . + 208
Discount on investments abroad. . . . . . . . . . . . . . . . . . . . 101 . . . . . + 101 48l. . . . . + 48 125 . . . . . + 125 119 . . . . . + 119 121 | . . . . . + 121| 120 . . . . . + 120
Direct foreign investments by Americans. . . . . . . . . . . . . . . . . . . 116|– 116] . . . . . . 47|— 47| . . . . . . 113|— 113 . . . . . . 219|— 219| . . . . . . 240 – 240] . . . . . . 257 – 257
Bond redemptions and sinking fund payments from
foreigners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92] . . . . . + 92 81 | . . . . . + 81 119| . . . . . + 119 221 | . . . . . + 221 322] . . . . . + 322 304|. . . . . + 304
Resale of investments to foreigners. . . . . . . . . . . . . . . . . . 240 . . . . . + 240 165! . . . . . + 165 200] . . . . . + 200 311| . . . . . + 311 359 . . . . . + 359' 470. . . . . . + 470
Investments of foreigners in United States securities... 70| 74|— 4| 298| 64|+234 111| 87|-|- 24, 253| 78|+ 175|| 677 541|-|- 136|| 903| 700+ 203
Direct investments by foreigners. . . . . . . . . . . . . . . . . . . . 10| . . . . . + 10 10| . . . . . + 10 20|. . . . . +- 20 30|. . . . . + 30 32|. . . . . + 32 28] . . . . . + 28
Total private, funded capital items. . . . . . . . . . . . 659||1,294 – 635 684 645|+ 39 866||1,511|– 645. 1, 1791,671 — 4921,693 |2, 194|— 501| 2,033|2,674 – 641
Unfunded capital items (short-term credit). . . . . . . . . . . 375] . . . . . + 375 31. . . . . + 3 187] . . . . . + 187] . . . . . . 47 – 47 382 . . . . . + 382} . . . . . . . . . . . . . . . . . . . .
ź

§

Pure cash items:
Gold. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * 37| 275 – 238 29| 323|–294 62| 320||— 258 262. 128i-H 134 116 214 – 98 201: 207 – 6
Changes in ear-marked gold. . . . . . . . . . . . . . . . . . . . e 4 . . . . . + 4 5 6 — 1 46 4|+ 42 15 47 – 32 so 24|+ 26 is 234. 160
Currency....... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 * * - - - + 40 50|..... + 50 - - - © tº - 20– 20 - - - - - - 30|— 30 . . . . . . . . . . . . . . . . . . . . . . . . . .
Grand total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,3336,395 – 62 6, 5126,524 – 12| 7,3637,300|+ 63 7,9918,087 – 96, 8,7998,884 – 85| 9, 1289, 148 – 20
Description of data: In this combined balance Hall's “Commodity trade except silver” has replaced the sum of “Merchandise exports and imports (as reported),” “Bunker coal and oil
sales to foreign vessels,” “Ship chandling, ship repairs, and tonnage dues,” “Sale of vessels,” “Unrecorded parcel-post shipments (adjusted for gifts,” and “Other merchandise adjustments;”
“Return on American investments abroad—long-term” has replaced “Yield of long-term private investments received from American investments abroad;” “Return on investments
abroad—short-term,” the “yield of short-term interest and commissions collected from foreigners abroad;” “Interest paid to foreigners long-term,” the “Yield of long-term private invest-
ments—paid to foreign investors in the United States;” “Interest paid to foreigners—short-term,” the “Yield of short-term interest and commissions—paid to foreigners abroad;” “Return
on War-debt” the sum of the items “Principal” and “Interest” under “War-debt receipts of United States Treasury;” “Miscellaneous invisible items,” the sum of “Freight payments and
receipts,” “Ocean-borne passenger traffic (by ‘substitution'),” “Other United States Government receipts; United States Government payments; and foreign representations here,” “Insurance
transactions” and “Miscellaneous minor items;” “Foreign security investments of Americans,” the sum of “Foreign securities publicly offered here (par value)” and “Foreign stocks and bonds
bought from foreigners in small lots;” “Discount on investments abroad,” the sum of “American underwriters' commissions” and “Securities issued below par;” “Resale of investments to
foreigners,” the sum of “Resale to foreigners of direct investments” and “Foreign stocks and bonds resold to foreigners;” “Investments of foreigners in United States securities,” the sum of
“American stocks and bonds sold to foreigners,” “Redemption and sinking-fund payments to foreigners” and “American stocks and bonds bought back from foreigners.” The other items,
whose titles are identical in both tables, are identical in content also.
“In the present survey the geographic limits of the United States . . . include continental United States, Alaska, Hawaii, and Porto Rico. They exclude the Philippines, the Panama
Canal Zone, Guam, Samoa, and Virgin Islands; these are counted as foreign countries.”—Balance of International Payments of the United States in 1927, by Ray O. Hall, p. 56.
Source: Estimated Balance of International Payments of the United States, Calendar Years 1922–1927, Inclusive, as revised for this study by Ray O. Hall, Assistant Chief, Finance
and Investment Division, Bureau of Foreign and Domestic Commerce, U. S. Department of Commerce:
740 RECENT ECONOMIC CHANGES
balance of trade, in three of the six years under discussion the balance
becomes adverse, while in the other three it remains but mildly favorable.
In fact, our numerous travelers abroad furnish almost enough funds for
the payment of the entire interest on all our outstanding foreign
investments.
The largest single item” on either side of the balance for every year,
except 1923, is that of our new investments abroad. Likewise on the
Opposite side of the balance the largest item, except for two years, 1922
and 1924, is the interest received on outstanding obligations held abroad.
Both sides of the account, therefore, are in general dominated by items
growing out of our large foreign investments. Relatively insignificant
in size, when compared with the return on such investments, is the item
made up of both principal and interest payments on the war debt
to the United States of various foreign governments. Gold movements,
on the other hand, make up only minute portions of the totals.
But far more important even than the relative magnitudes of the
Various items of the balance is the degree of their adjustability. In
Other words, which are the magnitudes following independent courses
dominated largely by influences unconnected with the balance or
lack of balance in international payments? And which, on the other
hand, are those readily and sensitively adapting their movements to
changes in exchange rates and related phenomena directly connected
with disturbances in such a balance?
The older theory of international trade assumed that between gold
standard countries, as between other countries on the same metallic
standard, the money metal supplied the one and only immediately adjust-
able element in the balance. Whatever other adjustments appeared
might be traced directly to influences set in motion by the international
movements of the precious metals. The movements of gold out of a
country with that metal as a standard led ultimately to a corresponding
reduction in prices and consequently to an increase in sales (and a decrease
in purchases) abroad of goods and of services sufficient not only to restore
the balance but in general also to recover much of the lost gold. Con-
versely, when gold was shipped into a country, prices would rise by an
amount sufficient to re-establish the balance and to get rid of much of
the unsought gold so recently shipped in. Possible credit adjustments
did not pass unmentioned by the more careful writers, but, even by them,
were usually relegated to a minor position.
In recent years it has been learned that, at least in the United States,
prices are not nearly so responsive to gold movements as had been
Supposed.
* It should be noted, however, that if only balances were represented, as in the
cases of merchandise trade, tourists’ expenditures, and gold, this statement would
not hold.
FOREIGN MARKET'S AND FOREIGN CREDITS 74.1
The adjustability of these various items is difficult to test statistically.
Considerable variations are to be noted in the merchandise balance of
trade; but, as already pointed out, wide differences in the values both of
imports and of exports frequently appear on account of almost purely
accidental movements of prices of such important articles as cotton,
silk, or rubber. Certainly, by no stretching of the imagination could
such adjustments be interpreted as being in any important way connected
with restorations of international balances of payments. Moreover,
payers of international, as of domestic interest, except in the cases of
governments, fortunately continue to pay according to what they owe
rather than according to the effects of their actions on various inter-
national balances of payments; and the declarations of dividends, as
always, depend on boards of directors, if not on the affairs of their com-
panies. Little adjustment in such items can accordingly be expected.*
Furthermore, recently arrived immigrants continue to send money to
their relatives at home, and American tourists continue their expenditures
without regard to the effects of their actions on the American balance of
payments.
A similar review of the numerous items entering into our international
accounts yields the presumption that all except credit items, securities,
and gold are either relatively fixed in magnitude or else move largely
under the influence of forces temporarily almost completely independent
of balance-of-payments considerations.
In total value, the gold movements have been seen to be relatively
very small indeed. Their influence in adjusting disturbed equilibria,
however, is unquestionably great. Nevertheless, in all countries with
highly developed money markets and modern lending institutions, there
is little doubt that it is the operations of the credit mechanisms—some-
times as a result of gold movements, sometimes in anticipation of them,
but perhaps often in response to still other influences—which provide
the most sensitive adjustments in our balance of international payments.
Even when gold is ultimately to be moved, the effects on credit conditions
are apt to precede by months the actual shipments.
With a general tightening of credit conditions, foreign borrowing in
this country is discouraged while American borrowing abroad is stimu-
lated, and vice versa. In general, it is largely through such credit influ-
14 Even in the case of private borrowers in Germany, no disturbance of their own
international accounts can be expected to affect their payments. In spite of laborious
legal opinions to the contrary, such payments take automatic precedence over all
payments by the Reparations' Agent, for the simple reason that there is no way of
stopping them. So long as German exchange is sold freely in any part of the world,
and so long as the German Government does not make illegal the discharge of honestly
contracted obligations, such payments will be made whether international accounts
are thereby thrown out of equilibrium or not.
742 RECENT ECONOMIC CHANGES
ences, combined with the movements of the monetary metals, that the
equilibrium of payments can be maintained.
Nor does the force of the above considerations apply exclusively to
short-term credits. As has been frequently demonstrated, a tightening
of money rates almost invariably” carries with it a rise in interest rates,
a fall in bond prices, and a consequent curbing of security flotations.
Reverse monetary conditions provide a corresponding stimulus to security
flotations.
Moreover, in certain countries, special credits have at times been
arranged for the avowed purpose of correcting exchange or of otherwise
relieving the effects of an adverse balance of payments.
Far from being a fixed item in our balance of international accounts,
credit transactions are usually the most sensitively adjustable of any.
Prices, it is true, tend to adjust themselves, but usually with a consider-
able lag. Only prices of securities, which in the final analysis are an
integral part of the credit structure, and to a much less extent those of
commodities sold on the speculative exchanges, move quickly and rapidly
enough to play any immediately important part in restoring a disturbed
balance of international payments.
Unfortunately, the results just arrived at analytically cannot be
tested satisfactorily with statistics. While the amounts of most of the
long-term obligations are fairly accurately determined, it is not they
which furnish the element most quickly responsive to changes in credit
conditions. Of the short-term credits, on the other hand, which seem-
ingly furnish the most highly sensitive of all the adjustments, available
estimates are the least dependable." Consequently, the wide fluc-
tuations observable in the magnitude of this item may be as much
a result of inaccurate estimates as of changes in the amounts of the
credits themselves. Nevertheless, the large variations would seem to
indicate, in their magnitudes at least, a high degree of flexibility.
But what of the long-run effects? Can adverse balances over an
indefinite period of time be continually adjusted by a resort to borrowing?
Evidently not. Credit represents postponement of payment with a
* Notable exceptions have occurred, especially in periods of great currency
disturbance.
* An exact description of the questionnaire upon which the estimates were based
is given in The Balance of International Payments of the United States in 1925,
p. 45. It includes year-end estimates of total deposits with foreign banks, and of
foreigners with American banks; total loans and advances to foreign banks, and by
foreigners to American banks; and short-term international investments for the
account either of the bank or of its customers.
In 1927 the returns, which were received from 167 leading international banks and
investment houses, proved irreconcilable with certain known facts. The results,
therefore, were ignored in that year. For a full account, see The Balance of Interna-
tional Payments of the United States in 1927, p. 45.
FOREIGN MARKETS AND FOREIGN CREDITS 743
charge in the meantime for the privilege of delaying the day of reckon-
ing. Defaulted debts must be paid, with interest, and, in the final
analysis, such payments, except for insignificant amounts of the monetary
metals utilizable for such purposes, are largely based upon the excess of
exports over imports of goods and services. The same is evidently true
of interest charges on debts and returns of all sorts on other kinds of
investments. The analysis upon which such deductions are based is
irrefutable, and the validity of the results themselves is no longer seriously
questioned. Slowly but surely, and usually very gradually, far-reaching
changes—yet to be described—in the economic systems of both the lend-
ing and borrowing countries make their appearance. New equilibria
are established. Certain elements giving rise to a change in trade
balances make their entrance.
The very accumulation itself of long-continued adverse balances,
thus corrected by ever increasing credits, often sets up powerful forces
operating not only to prevent current maladjustments, but also to correct
the cumulated deficits. The stimulus to increased tourists’ expenditures
and to the migration of American industry are explained in detail below.
Furthermore, if a rare and entirely different sort of influence may be
cited, to certain countries of former greatness and wealth, for which the
adverse balances of trade are but indications of a process of gradual
impoverishment and of chronic business depression, not only are charities
and immigrant remittances stimulated, but in them the incentive for the
sale of international securities as well as of shares in their own enterprises
and in their properties becomes ever stronger. It is under just such a
stimulus that, over a long period of time, a continued import of capital
may take care, for the borrowing countries, of an equally long series of
otherwise adverse balances of payments; and besides, during the interim,
may provide the means of payment of the interest and dividends on the
securities which have been but recently exported. It is in such a period
for certain countries that the United States is playing the rôle of chief
lender and chief purchaser of an ever increasing volume of exported
securities.
There is a danger, however, of overemphasizing the international
character of the transactions under discussion. In essential elements,
an international credit is not different from a domestic one. A primi-
tive and remote state like Florida begins to develop. Funds are borrowed
in the wealthier states to finance the development. Essentially, the
exchange problem is the same as though Florida were a foreign country
under a stable and enlightened government and with a well-regulated
currency system of its own. The credits which are secured in New York
and elsewhere, if wisely granted, will have to be paid. And in order for
payment to be made, money, goods, and services must be exported (or
taken by tourists) from Florida in sufficient amounts to provide the sums
744 RECENT ECONOMIC CHANGES
required, or else new credits must be raised. The raising of credits at
home, for use in making payments outside, would drain the country of
an equivalent amount of cash and would consequently fall under the
first alternative, above cited, of exporting money, goods, and services.
Since, however, the currency available for export could make up but an
insignificant portion of the total outside obligations, payments in this
case, as in those in which foreign countries are involved, would rest in the
final analysis on an equivalent export of goods and of services from the
borrowing state.
Comparison of Movements of Foreign Trade and Foreign Credits.-
In order to test statistically whether or not any observable relationships
seem to exist between the movements of our international trade on the
one hand and those of our foreign loans and investments on the other, a
number of comparisons will be made.* The following are the foreign
loan items:
Annual total of new foreign loans and investments” in excess of refunding
and commissions.
Annual total of new long-term” foreign loans and investments in excess of
refunding and commissions.
Net18 annual new foreign loans, investments, and credits of all sorts in
excess of refunding, commissions, repurchases by foreigners, and purchases by
foreigners of American securities and properties.
Net” annual new foreign long-term loans and investments in excess of
refunding, commissions, backwash, and of net purchases by foreigners of
American securities and properties.
These will each in turn be compared with the following foreign trade
items:
Annual total of commodity exports.
Annual total of exports (visible and invisible).”
Annual balance of commodity trade.
Annual balance of trade (visible and invisible).
Annual balance of commodity trade, including gold movements.
Annual balance of trade (visible and invisible), including gold movements.
In Chart 9 are represented the total trade and total credit items.
Reference to this chart shows, for commodity exports, little observable
likeness either to total or to long-term loans and investments. When
invisible as well as visible items are included in exports, however, the
* An additional comparison of interest is between the net foreign investment in
any year and the estimated yield in the same year from previous investment. Such
a comparison will show that, particularly in the last three years, the relationship
between the two figures is close, but it is too early as yet to determine whether
this is likely to be a continuing relationship.–Note by George O. May, Director.
17 Revised estimates by Ray O. Hall.
18 Compiled with the use of the British method.
19 Includes “total commodity trade,” “tourist expenditures,
royalties,” and “miscellaneous invisible items.”
3 y ( &
motion picture
FOREIGN MARKET'S AND FOREIGN CREDITS 745
series shows considerable similarity in movement (though not in the
absolute magnitudes of the yearly items) with that of total new American
loans and investments abroad. It likewise shows some rough similarity
in movement to new long-term investments. -
Comparisons of met new long-term foreign investments and met
foreign investments and credits of all sorts with each of the series of
exports in turn yield less noticeable similarities.
CHART 9.—FOREIGN CREDIT AND EXPORT, 1922–1927
†M ILLIONS OF DOLLARS
6000
I T
TOTAL COMMODITY
EXPORT-VISIBLE
AND INVISIBLE /r
5000 =-H-I---
2 to ALCOMMOOTY EXPORT
4000
JOOO
2000
TOTAL OF NEW LONG- •º
TERM INVESTMENTS -P2’
*-e-T &
º -zº’." * ~ * ,”
|OOO ziz- * 14
--- N]2%
*>|<oºlof new
FOREIGN LOANS
O | |
1922 1923, 1924, 1925 1926 1927
If, instead of total exports, export balances are considered, as in Chart
10, much more clear-cut similarities make their appearance. Net long-
term foreign credits show, especially in the earlier years, considerable
likeness in movement to balances of commodity trade, both when invisible
items of trade are included and when they are excluded. If gold ship-
ments are included in the visible trade balances, the similarity of the two
series, not only in movements, but in the absolute magnitudes of their
items, becomes somewhat enhanced.
Much more evident, and apparently even more significant, is the high
correspondence in the movements of the two types of balances of trade on


746
RECENT ECONOMIC CHANGES
CHART 10.—COMPARISON OF TRADE BALANCES AND FOREIGN CREDITS,
1922–1927
MILLIONS OF DOLLARS MILLIONS OF DOLLAR5
| 000 | 000
800 /N 800
Q ,”
Kºº.
600 A sº Asoº
sº
Nº.10NG fºº /
400 / 400
& /
\ /
200 & / 200
\%. / s
\* / -
‘. \1/ ;
%. V f
O * −40
\. j/
\ /
^ /
–200 *H.4. –200
'...'Y;
-400 400
-6OO + - -600
1922 1923 1924 1925 1926 1977 g
the one hand and those of the net foreign credits of all sorts placed in the
Moreover, the correspondence is almost
equally high whether the visible balance alone is used or whether invisible
United States on the other.
items are also included.




FOREIGN MARKET'S AND FOREIGN CREDITS 747
Finally, whether the net credits series is compiled by the American”
or by the British” method, the great similarity persists. A more thor-
ough study of these and allied series would therefore seem warranted.
The net credits” curve always (except in 1922 and in 1927) lies
between the two trade balance curves, with the visible balances larger
and with the combined visible and invisible balances correspondingly
Smaller. It will be noted, however, that, in the earlier part of the period,
it was with the items of the lower series that the credit items almost
exactly coincided; while, in the latter part of the period, it was with those
of the upper. In fact, in the year 1922 it was slightly below the lower,
while in the last year, 1927, even the visible commodity balance of trade
was exceeded by the net foreign credits floated. Thus, at the beginning
of the period, American credits were used only in amounts not quite
sufficient to cover our net balance of trade when all of our big invisible
imports were included, while in 1927 they were taken in amounts slightly
greater even than the net commodity balance alone. And when it is
further borne in mind that the spread of the two balances has gradually
increased from approximately $375,000,000 in 1922 to $517,000,000 in
1927, the probable significance of the change becomes even more striking.
The question naturally arises: “How much, if the present extraordinary
method of financing exports continues, shall we lend at the end of another
six years in order to continue our favorable commodity balances of trade?”
The influence of gold shipments has been significant. To understand
its character and importance, two further series have been compiled. The
monetary metal has been regarded as simply another article of interna-
tional commerce, and the two types of trade balances have been recompiled
with its inclusion. The resulting series have been inserted in Chart
10. Reference to this chart will show that, while the inclusion of the
gold has made the fluctuations of each of the balances in turn correspond
more closely with those of the net foreign credits series, it has had very
different effects on the absolute magnitudes of the items. In the visible
balance series, its inclusion has almost invariably tended to bring the
magnitudes of the items of that series into correspondence with those
of the items in the credits series. Its combination with the more com-
prehensive trade balances, on the other hand, has yielded a series with
items more widely different in magnitudes from those of the credits
series than were the original ones. What deductions, if any, can be
drawn from these observations?
20 The American method is that of direct estimates of all constituent items.
21 For detailed description of the British method see p. 728, note 9.
22 On account of the admitted undependability of several important constituent
items used in the compilations according to the American method, these credits have
been computed according to the British method.
748 RECENT ECONOMIC CHANGES
Evidently, during the six year period under discussion, gold generally
moved in such ways as to adjust balances in visible trade to correspond-
ence with the net credit balances. The one exception in 1925, when
there was a net export of gold, seems to be only a partial one; for, although
the recorded shipments increased the difference in the magnitudes of the
items of the two series, it brought into somewhat closer correspondence
the directions of their movements. Is there any plausible explanation
for the high similarity in absolute magnitudes, as well as in movements,
of the two series of net foreign credits and balances of commodity trade,
including gold? §uperficially, the most obvious reply is that, otherwise
than with gold shipments, our favorable balances of commodity trade
may be regarded as being largely financed by the new foreign credits
and other investments placed each year in this country. In fact, in
1922, 1923, 1924, and 1926, when new net credits alone were not sufficient
to pay for the balance of commodity trade, gold was imported in quan-
tities sufficient to make up much of the deficits. Again in 1927, when net
foreign credits were somewhat more than enough to pay for the com-
modity balance, gold was exported in sufficiently large quantities to take
up the excess, and to reverse the relative sizes of the items. In 1925, on
the other hand, a net export of gold widened an otherwise very narrow
difference in the items of the two series.
While the adjustment of the two series is far from complete, and while
the comparatively near approach to equality of most of the individual
items may be accidental and passing, the high correlation of the move-
ment of the two series, even for so short a period as six years, would seem
to indicate some sort of causal interconnection. The question arises,
as to whether the export balances are adjusting themselves to the volume
of foreign credits, or whether, reversely, it is the volume of foreign credits
which is adjusting itself to an otherwise favorable balance of payments.
The fact that, in most of the years, gold moved in such ways as to take
up much, but not all, of the differences indicates that neither trade nor
credits will adjust themselves completely without friction. On the other
hand, the trade balance is the wider mover of the two. And it may be
held, in fact, that the bulk of international commodity exchanges cannot
be regarded as really voluntary. We must, in effect, export cotton and
copper and we must import sugar and coffee. Nor is the situation very
different with many types of highly manufactured articles. But the nar-
rower, and at times apparently lagging, fluctuations in the net credits series
would seem to lend support to the analytical conclusion that it is in the
net foreign credits rather than in the commodity balances of trade that
much of the year-to-year adjustment of our balances of international
payments makes its appearance.
Whether or not such a conclusion is valid, the close correspondence in
the movements of the two series from year to year seems to leave little
FOREIGN MARKETS AND FOREIGN CREDITS 749
doubt that our favorable trade balances are dependent on a continuation
of increasing net foreign lendings.
The question may legitimately be asked whether the close corre-
spondence found between trade balances and net foreign credits is not a
purely mechanical result. At first glance, it might appear to be nothing
else—especially when the net credits are compiled with the use of the
British method. The gross commodity trade items are by great odds
the largest in the balance. But, to get the foreign credits balance each
year, these large dominating items of commodity trade are combined with
the much smaller ones of invisible trade, purely financial items such as
interest, dividends, etc., and gold and currency. The remainder required
to establish an equilibrium each year is, by definition, the net foreign
credit item for that year. If, therefore, errors of a type to affect net
balances of commodity trade were made, while all other errors occurring
in the estimated items of invisible trade, those purely financial, and all
others except credits, were either nonexistent or were counteracted by one
another, the identical errors would appear in the net foreign credits items.
On the other hand, the net foreign credits items also absorb all the errors
in the items other than those of commodity trade. The answer to the
question, whether the correspondence between trade balances and net
foreign credits is mechanical or not, depends, therefore, upon whether
the errors in the estimates of commodity trade or those to be found
elsewhere are the dominating ones. It would seem that the greater
accuracy of the estimates of the commodity trade balances would more
than compensate for their larger size; but upon this question, the writer
is unable to pass judgment. It will be assumed, however, with consider-
able confidence, that the correspondence is not mechanical.
IV. SUMMARY
1. The value of our visible exports makes up approximately 10 per
cent of our domestic production of eacportable commodities. Of our total
production, the percentage is much less. (Visible imports throughout
the period have been slightly less valuable.)
2. While the values, both of exports and of imports, have shown a
general tendency to increase during the past six years, the proportions
which they make up of our total production have, on the contrary, main-
tained a gradual downward trend.
3. Our largest exports, with the proportion which the value of each
makes of total exports, from 1922 to 1927 inclusive, are shown in the
following tabulation:
750 RECENT ECONOMIC CHANGES
Commodity Value Per cent
Total. . . . . . . . . . . . . . . . . . . . $28, 247,000,000 100.0
Cotton (unmanufactured). . . . . . . . 5, 131,000,000 18. 1
Machinery. . . . . . . . . . . . . . . . . . . . . 2,064,000,000 7.3
Iron and steel. . . . . . . . . . . . . . . . . . . 1, 352,000,000 4.8
Wheat. . . . . . . . . . . . . . . . . . . . . . . . . 1, 150,000,000 4. 1
Gasoline and allied products. . . . . . 1, 103,000,000 3.9
Leaf tobacco. . . . . . . . . . . . . . . . . . 890,000,000 3.2
Passenger autos. . . . . . . . . . . . . . . . . 824,000,000 2.9
Cotton (manufactured). . . . . . . . . . 821,000,000 2.9
Copper (refined). . . . . . . . . . . . . . . . 723,000,000 2. 6
Meats. . . . . . . . . . . . . . . . . . . . . . . . . 680,000,000 2.4
Lard. . . . . . . . . . . . . . . . . . . . . . . . . . . 666,000,000 2.4
Fruits. . . . . . . . . . . . . . . . . . . . . . . . . . 568,000,000 2.0
Coal (bituminous) . . . . . . . . . . . . . . . 537,000,000 1.9
Kerosene. . . . . . . . . . . . . . . . . . . . . . . 512,000,000 1. 8
Lubricating oil . . . . . . . . . . . . . . . . . . 507,000,000 1.8
4. Our largest imports, with the proportion which the value of each
makes of the total imports, during the period under consideration, are
shown in the following tabulation:
Commodity Value Per cent
Total. . . . . . . . . . . . . . . . . . . . $24,789,000,000 | 100.0
Cane sugar . . . . . . . . . . . . . . . . . . . . 2,397,000,000
Raw silk. . . . . . . . . . . . . . . . . . . . . . . 2, 265,000,000
Crude rubber. . . . . . . . . . . . . . . . . . . 1,737,000,000
Coffee. . . . . . . . . . . . . . . . . . . . . . . . . 1,473,000,000
5. But perhaps the outstanding change in our foreign commerce in
recent years has been the exportation of American industries themselves.
Newsprint. . . . . . . . . . . . . . . . . . . . . .
Hides and skins. . . . . . . . . . . . . . . . .
Tobacco. . . . . . . . . .
Petroleum . . . . . . . . . . . . . . . . . . . . . .
Wool manufactures. . . . . . . . . . . . . .
Vegetable oils. . . . . . . . .
Fertilizers. . . . . . . . . . . . . . . . . . . . . . .
Oil seeds. . . . . . . . . . . . . . . . . . . . . . .
Pulp (sulphite). . . . . . . . . . . . .
Flax and hemp. . . . . . . . . . . . . . . . . .
Copper (refined). . . . . . . . . . . . . . . . .
Cotton (unmanufactured). . . . . . . .
Diamonds. . . . . . . . . . . . . . . . . . . . . .
Cocoa. . . . . . . . . . . . . . . . . . . . . . . . . .
Vegetable fibers. . . . . . . . . . . . . . . . .
685,000,000
645,000,000
642,000,000
630,000,000
608,000,000
601,000,000
491,000,000
472,000,000
455,000,000
430,000,000
421,000,000
409,000,000
382,000,000
382,000,000
363,000,000
313,000,000
291,000,000
284,000,000
233,000,000
233,000,000
i
FOREIGN MARKETS AND FOREIGN CREDITS 751
Because of the extreme difficulty of exporting to countries with high
tariff walls, many American firms have constructed branch manufacturing
or assembling plants behind the walls. Moreover, the lower and gradu-
ally decreasing foreign price levels have encouraged the migration.
6. The foreign capital issues publicly offered in the United States
have tended to increase from year to year since 1922 absolutely, but not
in proportion to total capital issues so offered.
7. In certain years, especially toward the latter part of the period
under discussion, foreign purchases of American securities and the
placing of foreign funds in the New York money market have largely
counterbalanced the larger foreign lendings of Americans.
8. A striking similarity in the amounts as well as in the movements
of our balance of commodity trade with net foreign credits and other
investments is discovered. These likenesses, while noticeable in the
comparison between long-term investments and commodity balances
of trade, became closer when short-term credits were included in invest-
ments and gold movements in commodity balances of trade.
9. No evidently significant correspondences appear between foreign
credits or investments and the total exports of the United States, though
a slight correlation appears between total merchandise exports to Canada
and Europe, respectively, and the corresponding net nominal long-term
publicly floated credits to each.
10. In the balance of international payments of the United States,
the dominating positions held by credits of various sorts, by interest
payments, and by tourist expenditures were observed.
11. The readily adjustable items—other than gold—in our balances
of payments seem to be largely included in the investment and credit
items rather than in the balances of commodity trade.
In general outlines, the picture seems to be about as follows: In a
period of the world's history characterized by the most extraordinary
technical advances which have yet been known, the United States holds
perhaps the dominating position. Not only have its scientists been
responsible for a large share of the recent mechanical inventions and its
business executives for an even larger contribution of effective operating
organizations, but its citizens as a whole, on account of their wealth and
savings, have been prepared and eager to finance the ever advancing
changes.
In direct contrast to the healthy and stimulating conditions in this
country during the period under consideration are the general poverty
and dejection in many of the countries of central and eastern Europe,
the social and economic unrest and business depression almost uniformly
prevalent in the domain of our former allies, and the disturbed currency,
banking, and debt conditions, only gradually being corrected, in almost
752 RECENT ECONOMIC CHANGES
all of the western European countries alike. Finally, in the newer parts
of the world, as always, are vast regions with their great but perhaps
largely undiscovered resources, many untouched and others in all the
various stages of development, awaiting alike the transforming influence
of modern business organization. Under such circumstances, our
plentiful and generally excellent products have naturally tended to flow
to other parts of the world, while our large supplies of savings have
naturally been pulled away to the countries of central Europe and to
the new and undeveloped countries to the north and to the south.
The flow of goods, however, has met with many obstacles, while the
outflow of capital from the United States to other parts of the globe has
been greatly stimulated by an unusual combination of circumstances.
The resulting flood of new American capital has in turn temporarily
lifted the most formidable barrier to the outflow of goods.
Many of our otherwise best customers live behind high tariff walls,
and most of the rest of them are fast building up theirs. Besides, even
if we succeed in scaling their walls, we require of many of them, in order
to repay us, that they bring their wares over the much higher wall which
surrounds us. Even under such discouraging circumstances, our export
trade during the past six years has in general continued to increase.
What is the explanation? How has the double obstacle been surmounted?
The answer is clear and significant.
The second obstacle, that of our own tariff walls, by the extra-
ordinary set of circumstances already referred to and to be further
amplified, has been temporarily removed for us. -
In order to make payments for the surplus of our exports over imports,
our customers have not been required in the normal way to scale our
high tariff walls with excessively dutiable articles. Whatever portion of
the balance has not been taken care of by the steady growth of our
tourists’ expenditures has been automatically handled in another way.
The low interest rates and the supply of funds in our great money market
have made of New York the cheapest international market, where
funds are sufficiently plentiful for all to borrow. The resulting large
flotations of foreign loans, and of all other kinds of foreign investments
and foreign credits placed in this country, have been sufficient not only
to take care of any excess of exports over imports but, also, when com-
bined with tourists’ expenditures, immigrant remittances, and relatively
small shipments of gold, to provide means of making to us all other
necessary payments. -
The first type of barrier, the high tariff walls erected against Ameri-
can products, are in some cases being scaled; but, what is vastly more
disconcerting, many of these are being permanently avoided by the
establishment of American controlled factories on the other side. Thus,
substantial portions of our most highly developed and most profitable
FOREIGN MARKET'S AND FOREIGN CREDITS 753
industries are actually migrating to foreign countries, carrying with
them not only American organization and methods but also American
talent, with all the resultant loss of purchasing of American domestic
products and of the stimulus to American business in general.
Besides being an era of extraordinary technical advance, the present is
likewise, as in no other stage of history, a money and credit age. In
such a financial world, the rôle of the United States, and of New York in
particular, while not a dominant but rather an aspiring one, is shared by
but a single serious competitor. Moreover, during the special six-year
period under discussion, the older rival has labored under so many serious
domestic handicaps that the younger aspirant has, at least temporarily,
taken first place. Along with the assumption of so prominent and so
powerful a rôle, many significant and perhaps unexpected changes have
occurred. -
Because of the unquestioned stability of the dollar in the foreign
exchange markets of the world, and because of the broad and active
markets for securities and investments of all sorts as well as for short-
term paper and bank credits, New York gradually became a safe and
otherwise desirable place for the deposit, by central banks and other
foreign financial institutions, of temporarily idle but readily available
funds; and, with the deposit of such funds, the breadth and activ-
ity of the New York market in liquid paper of all types inevitably
grew. With this added prestige and with the larger deposit of foreign
funds, came further imports of gold, further loosening of the money market
and an easing of longer-term interest rates. And with the loosening of the
capital market, came larger flotations of borrowers living in all parts of
the world; and with the increase in foreign flotations, New York’s position
as an international financial center became even more firmly established.
Of the more significant financial happenings of the period, many have
seemingly been associated with this extraordinary and ever cumulating
financial development of our great monetary center.
Out of this unusual situation have come many by-products of especial
significance for the purposes of this study. Because of our low interest
rates and plentiful funds available in an indisputably stable monetary
unit, credits to many parts of the world and in almost all approved forms
have been granted in generally increasing amounts. Along with the
increase in foreign credits have come larger purchases of American
securities, larger foreign bank balances maintained in New York, and a
favorable balance of commodity trade actually in excess of the remainder
of the net credits granted. The excess, meanwhile, in a curiously
equivalent amount—if the questionable accuracy of the data permits
their use—has been made up by a net import of gold, which, far from
shutting off merchandise exports, seems temporarily to have stimu-
lated them further. The large imports of gold not only have failed
754 RECENT ECONOMIC CHANGES
to raise American commodity prices, but in the past five years have not
even kept them from taking a mildly downward trend.
Further, since it is only through price changes that gold movements
directly affect merchandise trade balances, the normal checks to American
exports have simply failed to operate. On the other hand, as has already
been mentioned, the gold imports, by further loosening rates in the New
York market, have generally stimulated the placing in this country of
increased foreign credits. These, in turn, have largely removed, both in
this country and abroad, the chief monetary influence toward further
price changes.
Meanwhile, this new situation, because of the failure of the normal
correctives to operate, becomes even more extraordinary. Should our
foreign credits cease now, and with them our entire favorable balance of
merchandise trade, not only would gold probably not cease to come in,
but its import very likely would increase in volume—so great has become
the interest charge annually required.
In conclusion, the outstanding effects on American industry of the
happenings, above outlined, can be summarized under the following heads:
1. Large exports made possible by the great volume of foreign credits placed
in this country.
2. Resulting stimulus to export industries.
3. The continuance of easy money rates in New York resulting from its
developing financial prestige and from the uncertain currency conditions
abroad, causing foreign balances substantially to increase and gold imports to
grow.
4. A resulting stimulus to speculation and to business, arising from easy and
plentiful short-time money.
5. A further lowering of interest rates throughout the country, and a resulting
stimulus to business and to investment in domestic as well as in foreign securities.
6. Finally, the heavy and rapidly increasing payments required of foreigners,
combined with the maintenance of our high tariff policy, are forcing slowly and
gradually, but none the less surely, an ever wider separation in prices at home
and abroad, with a resulting rapid increase in the expenditures of American
tourists abroad and the migration of American industry to many foreign
countries.
The close correlation between the movements of the foreign credits
placed in this country and those of our balances of commodity trade
seems to indicate a close interconnection between the two—even from year
to year. Even if the estimates, upon which the comparisons are based,
were sufficiently accurate to assure the validity of the high correlation dis-
covered, the question as to whether trade followed automatically the
loan or whether, on the contrary, the credits were placed in order to
relieve otherwise severe maladjustments in our international balances of
payments, remains unanswered. During a period when prices in this
country and those in many others were being artificially restrained from
FOREIGN MARKETS AND FOREIGN CREDITS 755
separating, relatively low interest rates prevailed in the United States.
Under such circumstances, the plentiful, generally excellent, and cheap
American products and capital were urgently demanded by the less fortu-
nate but recovering countries of Europe and also by the rapidly develop-
ing countries which make up much of the rest of the world. Between
credits and trade, seemingly minor adjustments took place in both
directions.
What is of outstanding importance is that the large foreign borrow-
ings in the United States made unnecessary for the borrowing countries a
larger export of gold and consequently, in spite of large purchases abroad,
enabled them the more easily to restrict the fall of prices; while to the
United States, the resulting reduced imports of gold made generally
unnecessary the restrictions against a further general price rise. And it
was the failure of prices, in the borrowing countries and others, to fall
sufficiently, and of those in the lending country to rise sufficiently,
which in turn made possible the continued large balances of exports
from the United States. It is clear, therefore, that in the last resort,
our foreign loans and investments, combined with heavy and increasing
tourists’ expenditures, were making possible the continuance of our
favorable balances of trade. .
The resulting stimulus to export industries during the period is
qualitatively immediately evident, though the ultimate effects on Ameri-
can business as a whole are quantitatively obviously impossible to trace.
It must be continually borne in mind that our exports aggregate in
value but little more than 10 per cent of our output of exportable articles
and a much smaller proportion still of our entire production. What
then, it may reasonably be asked, can be the importance to American
industry as a whole of a very large absolute increase in So small a propor-
tion of the total?
In certain industries, it is true, a large increase in the consumption of
its products signifies comparatively little. In others, such as the growing
of cotton, an increase of 10 per cent in consumption might often mean,
for a whole section of the country, the difference between genuine pros-
perity and deep depression. Furthermore, the stimulus to the business
of mail-order houses, and of their suppliers and others throughout the
country, resulting from “good times” in the South, while quantitatively
impossible to evaluate, is beyond question, great. Similarly, an increase
in the foreign sales of machinery or of automobiles, by stimulating activity
in those industries and in turn in those of their suppliers, might confidently
be expected to bring important, but as yet unmeasured, prosperity to
a considerable portion of American industry.
The influences operating through the money and investment markets
are even more difficult to evaluate quantitatively. A comparatively
small import of gold, for example, Serving, as it usually does, as a direct
756 RECENT ECONOMIC CHANGES
inflationary force, and also as a net increase in the reserves of our Federal
Reserve banks, may lead to a manifold expansion of bank credit through-
out the country. Moreover, the extent of the possible, or even probable,
expansion depends very much upon the uses to which the proceeds are
put. Should they be used continually for stock speculation alone, their
influence might be very great indeed. On the other hand, the more
they flow away to less active business uses, the less become the credit
expansion possibilities. It is nevertheless true that, whatever their use
through our banking and credit machinery, the possibilities of their
expansion is several fold.” So long, in fact, as the operations growing
out of the credit expansion do not so upset the balance of international
payments as to cause a reverse outflow of gold or its equivalent, the
expansion in business lending may be at least four, perhaps ten, times
the gold import, while that in lending for speculative purposes might be
much greater still.
The annual imports of gold, therefore, continuing throughout much
of the period, and its exports during 1925 and 1927, in their influence on
American business, may perhaps be ranked as of primary importance.
* For more complete analysis of this subject, the reader is referred to an earlier
publication of the writer, Stock Speculation and the Money Market, 1927.
CHAPTER XII
THE NATIONAL IN COME AND ITS DISTRIBUTION 1
BY MORRIs A. CoPELAND
I. THE NATIONAL TOTALS
Estimates of the national income are useful for many purposes, but
they need to be used with care, both because they are not perfectly
accurate, and because the term “national income” has several different
meanings. The present estimate of the income of the people of the
United States may be in error by as much as 5 per cent; in some years
the error may be slightly more than that. The constituent streams that
combine to make the national income are known less accurately than the
total.
The sense in which the national income will be chiefly considered
here has been called “total realized income.” This includes (1) all pay
rolls (including value of board and lodging furnished), (2) pensions,
benefits, and compensation for accidents received by employees and
ex-employees, (3) net rent (including both cash and payments in kind,
less maintenance and depreciation), royalties, interest, and dividends
received by individuals, (4) profits withdrawn from businesses by indi-
vidual enterprisers, (5) the net rental value of owned homes and imputed
interest on investment in other durable consumption goods, (6) the value
of certain commodities produced by families for their own consumption.
It does not include paper profits, profits from the sale of capital assets,
or the value of housewives’ services. In 1928, the total realized income
probably reached the stupendous total of about 89 billion dollars or
about $745 per capita. -
The reason for excluding profits from the sale of capital assets and
such paper profits as additions to corporate surplus and changes in value
of real estate is that these items depend upon arbitrary accounting
methods or are subject to fluctuations with business optimism and
pessimism. Logically they should be included, but practically their
inclusion may give rise to year-to-year changes in national income which
do not correspond to any changes in the production of goods and services
* The author desires to make full acknowledgment to Dr. Willford I. King,
of the National Bureau of Economic Research, upon whose estimates of national
income and related items this study is based. Where other sources have been employed
they have been so noted.
757
7.58 RECENT ECONOMIC CHANGES
or the capacity of our resources to produce them.* A rough estimate
indicates that the inclusion of these items would increase the national
income for 1925 from 82 to 85 or 86 billions,” but in Some years it is
probable that total accrued income (i.e. realized income plus these profit
items) has been less than total realized income. The value of housewives’
services has not been included in any of the estimates because of the
difficulties of determining a satisfactory basis of valuation.
Another important meaning for the term “national income” is total
income received in money. This excludes items (5) and (6) and also com-
pensation for labor or leased property received in kind. Total money
income in 1925 amounted to about 74 billions.
In none of these three senses does national income measure the welfare
of the population. Only income actually consumed should be included
for this purpose. In years of great depression and depreciation in values,
such consumed income may conceivably be greater than total accrued
* Additions to corporate surplus should be added to “total realized capital.” The
surplus thus set aside is a very definite and permanent addition to the income of
property owners. The relative share of the property-income group and the wage-
earning and salaried group in the product of industry from year to year cannot be
adequately determined when these additions to surplus are not included. I am not
convinced that the reasons set forth above are sufficient to justify the exclusion of these
figures.—Note by H. W. Laidler, Director.
I do not agree with the treatment of corporate surplus. It should be included in
realized income. I do agree with exclusion of profits from sale of capital assets and
exclusion of changes in value of real estate. “Logically” these should be excluded,
whereas Mr. Copeland says logically they should be included. On the contrary,
corporate surplus should logically be included and practically it should be estimated,
like other estimates. He omits it apparently because it fluctuates, and might be a
deduction instead of an addition. This reason is inconsistent. Other quantities
might be excluded on this ground. By taking one year, 1925, he should treat that
year on its own showing, and let other years go off on their own showing. This addi-
tion of corporate surplus would make considerable difference in many parts of his
treatment, especially in comparing corporate income which he hereby minimizes,
with other incomes not minimized.—Note by John R. Commons, Director.
* Total accrued income was estimated from the realized income total for 1925 by
adding estimates of business savings and gain in value of real estate held by individuals.
The estimates of change in urban real estate values are King's. King also has esti-
mates of corporate and individual profits in the merchandizing and unclassified
groups and of total profits in construction and banking. These, and his estimates of
profits withdrawn, yield estimates of business savings for these three groups. Cor-
porate business savings in manufacturing, mining, and the transportation and public
utility group were estimated by assuming that they bore the same ratio to cash divi-
dends in the income tax returns. For mining and manufacturing, individual business
Savings (or withdrawals of surplus) were estimated on the assumption that the ratios
to profits withdrawn were the same as for corporations. Changes in the value of
agricultural real estate, including improvements, were estimated by nine regions from
the 1920 census values and the value indexes, for March 1, of the Bureau of Agricultural
Economics, United States Department of Agriculture, Circular No. 15, October, 1927.
THE NATIONAL INCOME AND IT'S DISTRIBUTION 7.59
CHART 1...—TOTAL REALIZED IN COME, INCOME DISBURSED IN MONEY
AND BANK DEBITS TO INDIVIDUAL ACCOUNTS (WITH BANK CLEAR-
INGS SPLICED AT 1919), UNITED STATES OUTSIDE NEW YORK
- CITY, 1913 TO 1927
BILLIONS OF DOLLARS
6 OO
5 OO
4 OO
BANK Bank, Debits
| 9 || 3 – 19 || 8
3 OO
2OO
| OO
9 O
8O
7O Total Realized
• *
e e " -
• *
5O tº
... '"Money Income
4 O
3O tº e e
2O
1913
| 4 5 |
income, although ordinarily it is substantially less than the latter.
For 1925 it may be set down roughly at 74 to 75 billions, that is, about
one-sixth of total accrued income was “saved.” There are still other
meanings for national income, some of which will be noted shortly.
The total realized income of the United States and the total income
disbursed in money* are shown in Chart 1 and also in Table 1. The
* Consumed income was estimated by deducting from accrued income an estimate
of savings in 1925, made by J. S. Taylor, of the Department of Commerce, revised in
the light of the 1925 tax returns, and with a correction in the capital flotations item to
allow for stock dividends.
* Money income was estimated by deducting from total realized income (1) value
of farm produce consumed by farm population, (2) profits from cow keeping in towns,
(3) profits from urban poultry and gardens, (4) rental value of urban homes, (5) rental
value of owned farm homes, (6) imputed interest on other durable consumption goods,
(7) payments in kind to Army and Navy. Item (1) was a two-year moving average of
Bureau of Agricultural Economics' estimate, 1919–1928. To estimate other years,
farm population was multiplied by an index of farm prices (1927 Agricultural Year
Book, p. 1149), and the ratio of the resulting series to value of produce consumed 1919–
1927 was calculated. The average of these ratios was assumed to be the ratio for the
earlier years. Item (7) was assumed to be the same proportion of total Army and
Navy pay in 1926–27 as in 1925.



760 RECENT ECONOMIC CHANGES
prosperity of the past few years is shown in the rapid growth of national
income since 1921. There is only a slight check in the growth of income
in 1924. The year 1927 also shows a slowing down in the rate of growth.
As a basis of comparison for the income estimates, an estimate of total
debits to individual accounts in commercial and savings banks in the
United States outside New York City" is shown also, together with data
for bank clearings spliced on to debits in 1919. One might expect the
cyclical fluctuations of money income to be more marked than those of
total income, but the difference between the two series in this respect
is small. Both rise to a sharp peak in 1920, and fall in 1921 below the
1919 level. Neither series shows more than a slight check in 1924. One
interesting feature of the relation between these two series is that the
income disbursed in money forms a gradually increasing percentage of
total realized income–88.2 per cent at the beginning of the period and
91.1 per cent at the end. In other words, an increasing proportion of
economic activity is passing through the market place. It should be
noted, however, that the important item, value of housewives' services,
is not included in the total, so that the picture is incomplete. The
increase shown is largely because of the increasing proportion of all homes
that are rented and so receive an annual market valuation.
The volume of bank debits outside New York is nearly five times the
national income. The debits-clearings curve is distinctly more sensitive
to business depressions in 1914, 1921, and 1924, and the upward swings
from 1914 to 1920 and 1921 to 1927 are steeper. There is, indeed, a
general resemblance between the movements of debits (and clearings)
and total income disbursed in money, but not anything approaching a
precise agreement. Debits represent chiefly settlements by check, and
partly because of the large volume of check payments connected with
speculative transactions, partly because collections are slower at some
times than at others, and partly because commodities change hands more
frequently at some times than at others, debits fluctuate quite differently
from national income. But whatever their disagreements, the trends
since 1921 are strikingly alike; both income and debits have shown a
most remarkable growth in the past seven years. The national income
increased by about three-eighths from 1921 to 1927, as against a little over
100 per cent from 1914 to 1920, and in 1927 it was about one-sixth greater
than in the high year 1920.
During this period there have been tremendous changes in prices.
How far do these fluctuations of national income represent changes in the
physical volume of flow of goods and services? How far do they reflect
changes in prices and in the amount of goods which a given sum of
money will buy? We may, following King's method, correct each of
the constituent income streams that go to make up the national income
* Journal of the American Statistical Association, September, 1928, p. 301.
THE NATIONAL INCOME AND ITS DISTRIBUTION 761
CHART 2. —TOTAL REALIZED IN COME IN DEFLATED DOLLARS RELATIVE
TO 1913 AS 100 PER CENT, AND AN INDEX OF COMMO DITY PRODUC-
TION (1913 = 100 PER CENT), UNITED STATES, 1913 TO 1927
| NDEX NUMBERs (1913 = 1 oo)
| 5 O
Production Index-
_, “’
2^ * *
5 O
O - 0 t g º s • *
1913 '14 '15 '16 '17 "| 8 '19 '2O '2| 22 23 24 25 26 |92",
for changes in the prices of goods purchased by the recipients of that
income stream, so that instead of the number of dollars received, say
in 1920, the figure for 1920 will be the number of dollars, at 1925 prices,
that would be required to purchase the same bill of goods the actual
1920 income would purchase for the recipients. In this way we may
correct the total realized income, and express it in dollars of 1925 pur-
chasing power to the income recipients.” Thus, in a sense, income
expressed in 1925 dollars represents the physical volume of flow of goods
and Services. Chart 2 compares the total realized income, so corrected,
with an index of commodity production.” The two series, expressed as
* King's indexes were converted to 1925 as 100, and each income stream was divided
by the index representing cost of living to the income recipient. The basic indexes
represent living costs for: (1) farmers, (2) farm employees, (3) urban employees,
(4) those spending $5,000 on consumption goods in 1919, (5) those spending $25,000
on consumption goods in 1919.
7 The index of the physical volume of commodities produced was prepared jointly
by Dr. Woodlief Thomas and the writer. The annual indexes of the Review of Eco-
nomic Statistics for crops and animal husbandry, indexes of mineral and manufac-
turing production constructed from annual data by Dr. Thomas, and the Department
of Commerce estimate of total lumber cut, were combined by the aggregative method.
Three overlapping sets of indexes were computed: (1) 1909–1919 on the basis of 1909
aggregate values, (2) 1909–1927 on the basis of 1919 aggregate values, and (3) 1918–
1927 on the basis of 1925 aggregate values. In each case the value aggregates are for
value added by the industry. The three overlapping sets of indexes were combined in
such a way as to approximate Fisher's ideal formula with 1919 as the base year.

762 RECENT ECONOMIC CHANGES
relatives to 1913 as 100 per cent, are close together at the end of the
period, but certainly they behave very differently between 1914 and
1925. Commodity production shows a rapid growth in 1917 and 1920,
a sharp drop in 1921, and a distinct fall in 1924. “Deflated” income
shows declines in 1914 and 1921, but none in 1924.8
Whatever the qualifications that are required in interpreting “deflated
income,” it seems clear that there has been a real and considerable gain
in national income every year since 1921, quite apart from any changes
in prices.
Any estimate of income measured in “corrected dollars” is likely to
give rise to misleading interpretations. None the less, we may risk a
further estimate of this sort. Has the national income increased per
capita, changes in prices being allowed for? Table 1, column (6), shows
per capita realized income, in dollars of 1925 purchasing power to the
recipients. There is a decline in 1914, and a peak in 1916–17, followed
by a decline to 1921. The recovery in 1922 brings per capita income back
to the prewar level, and since then there has been a steady gain. Per
capita realized income is not a satisfactory measure of consumers' welfare,
though it gives some indication of what might be done with the productive
power of our present economic system, were it not for voluntary and
involuntary savings. It is difficult, with present data, to estimate con-
Sumed income per capita, but we are probably justified in inferring from
the fluctuations of realized income that consumed income per capita
also increased during the war, then declined (not necessarily as sharply as
total realized income), has been showing a marked yearly increase now
for several years past, and was considerably higher in 1927 than during
the war.
Conditions in different countries are so dissimilar that international
comparisons are fraught with danger. And the United Kingdom alone
* Because production indexes corrected for price changes have been used to esti-
mate the national income, the striking differences between these two series are signif-
icant. For one thing, it should be borne in mind that commodity production does
not include all production. Indeed, only a little more than one-third of our national
income is disbursed by enterprises engaged in commodity production in agriculture,
mineral extractive industries, and manufacturing. It is not surprising, since goods
can be stored more easily than services, that commodity production should fluctuate
more widely than service production. Another possible explanation of the differences
between the two series lies in the process of “deflating” the income. The prices used
in converting income to “1925 dollars” were for consumption goods used by the
income recipients, not prices or costs for the producing enterprises. Deflation is a
process that requires cautious use. The method of deflation employed by King, which
we have just discussed, is probably the most generally useful type for correcting the
national income, but it is not well adapted to the particular purpose of comparing
income with output. And it is possible, even for general purposes, that some of the
years are overcorrected. For example, both 1919 and 1920 have probably been made
too low, relatively to 1918, by the deflation. -
THE NATIONAL INCOME AND ITS DISTRIBUTION 763
TABLE 1.--TOTAL REALIZED INCOME OF THE UNITED STATES COMPARED TO CERTAIN
RELATED SERIES, 1913 TO 1927 -
(1) (2) (3) (4) (5) (6) (7) (8)
Bank Bank Realized income in
Year Total Money clearings debits 1925 dollars P* Ratio of
realized g (U. S. out- (U. S. out- * money to
income “” side New | side New index total
York City)|York City)' " Per º T income
| | capita .r (per cent)
Billions of dollars
1913. . . . . . . . 35.7 31.5 75.4 60. 3 $621 100 88. 2
1914. . . . . . . . 35. 6 31. 3 72.2 59.5 601 99 87.9
1915 . . . . . . . . 37.2 32.8 77.3 61.7 615 108 88. 2
1916. . . . . . . . 43.3 38.5 102.2 66.7 655 111 89.0
1917. . . . . . . . 51.3 44.9 129. 5 67.7 656 117 87.4
1918. . . . . . . . 60. 4 51.9 153.8 | * * * 67.9 651 116 85.9
1919 . . . . . . . . 65.9 57.2 181.9 322 64. 2 611 114 86.7
1920. . . . . . . . 74. 0 65. 5 209. 0 370 63.9 600 121 88.5
1921 . . . . . . . . 63.4 55.8 161.9 293 62.4 576 97 88.0
1922. . . . . . . . 65.9 59.0 | . . . . . 305 68. 6 625 117 89.6
1923. . . . . . . . 74.3 67. 1 | . . . . . 344 75.7 679 132 90.2
1924. . . . . . . . 77. 1 69.6 | . . . . . 348 79. 1 697 127 90.3
1925. . . . . . . . 81.9 74. 3 | . . . . . 391 81.9 712 137 90.6
1926 . . . . . . . . a85.7 a 77.9 | . . . . . 411 a85.3 a 733 142 90.8
1927 . . . . . . . . a87.5 a79. 7 | . . . . . 431 | . . . . . e is a s 141 91. 1
1928. . . . . . . . a89 .0 a81.0 . . . . . . | 468 ; : * * * * & © s is tº º i
a Preliminary estimates.—The preliminary estimates for 1926–1928 in this and the following tables
were prepared, so far as possible, on a basis to make them comparable with King's estimates for preced-
ing years. The general procedure was to select some standard series which could be taken as a yearly
index for the years 1925, 1926, 1927 and 1928 of each item or group of items to be estimated, and, with
King's 1925 estimate as a base, to estimate the other two years. Income tax data were available for
estimating income in 1926 but not in 1927 and 1928. The estimates for 1926 are therefore distinctly
more reliable than those for 1927 and 1928. -
among the great European powers affords a satisfactory postwar estimate
to make comparison possible. The attempt at such a comparison raises
two further questions regarding the meaning of national income: (1)
Is interest on the war debt properly a part of national income? (2) Are
we speaking of income received in the country, or income produced in
the country?
Stamp has argued that interest on internal national war debts should
be excluded in reckoning national income:
Suppose that we had not elected to tax ourselves severely during the war, but had
borrowed a very much larger sum, then the interest to be paid on the debt to-day
would be very much greater. Are we to assume, therefore, that the “invisible income”
that we shall each receive in future years, in the way of services in conquering the
Germans many years ago, would have been greater than it is under present actual
conditions?”
9 Sir Josiah Stamp, Current Problems in Government and Finance, London, 1925,
p. 138.
764 RECENT ECONOMIC CHANGES
In other words, to include interest on war debts is to include an item
the size of which depends upon a past policy of government finance—
an item which might have been a great deal larger without producing any
material increase in present flow of goods and services. The point is a
disputed one, and it is by no means clear that the entire interest on the
national debt is, as Stamp seems to imply, a mere transfer from one indi-
vidual to another, being precisely offset by tax payments and so not
properly included in the consolidated national income total. But it
will probably improve the comparability of the income totals for the two
countries, if we eliminate interest on the national debt. We shall call
the balance “accrued social income.”
With regard to the second question, it seems obvious that both income
received and income produced are of interest. Table 2 sets forth a
comparison of the national income of the United Kingdom and the
United States. The English estimates are those of Bowley and Stamp.
The American figures, for gross accrued income received, represent King's
estimates of realized income plus a crude allowance for the profit items,
added in order to make the totals comparable with those for the United
TABLE 2.-NATIONAL INCOME OF THE UNITED STATES AND THE UNITED KINGDOM
CoMPARED, 1914 AND 1924
United Kingdoma United States
Item
1914 1924 1914 1924
Gross income produced at home (billions of dollars) 9.7 17.7 37.2 79. 4
Interest on national debt (billions of dollars). . . . . . . . . . 1 1. 2 O 9
Accrued social income produced at home (billions of
dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 16.5 37.2 78.5
Net received from abroad (billions of dollars). . . . . . . . + 1. 1 . 7 — . 1 ... 6
Accrued social income received (billions of dollars). . . — 10.7 17.2 | 37. 1 79. 1
Accrued social income received per capita (dollars). . . 248 384 375 697

* The income estimates for the United Kingdom are"from Bowley and Stamp, The National Income,
1924, Oxford, 1927, especially pp. 45 and 46. “Accrued social income” includes pensions (Bowley and
Stamp have excluded this item). The 1914 figures were estimated by multiplying the 1911 data by
2,250 divided by 2,090 (see Stamp, Current Problems in Finance and Government, p. 291). The con-
versions to dollars were made at the average daily rate for cable exchange. In making allowances for the
exclusion of southern Ireland in 1914, it was assumed that this section received none of the income from
foreign investments and 4 per cent of other income. The deduction for net interest received from
abroad by the United States includes interest received by the Federal Government, banks, and insurance
companies, and is therefore larger than the item in the miscellaneous income statement. For the esti-
mates of accrued and saved income for the United States, see footnote 2, p. 758.
Kingdom. The total accrued social income of the United States is
apparently about four and one-half times that of the United Kingdom
for 1924. Making allowance for price changes, our national income
has increased about one-third in the decade, while, according to the esti-
mates of Bowley and Stamp (whose method of deflation is not entirely
THE NATIONAL INCOME AND ITS DISTRIBUTION 765
comparable to King's), the income of the United Kingdom was approxi-
mately the same in 1924 as in 1911, and so possibly a trifle smaller than in
1914. According to Bowley and Stamp, the deflated total accrued social
income of the United Kingdom per capita declined 5 to 10 per cent in
this 13-year interval, while the deflated per capita income of the United
States shows an increase of about one-seventh in the decade 1914–1924.
The English estimates indicate that about one-eighth of the total social
income was “saved” in 1924, as against nearly one-sixth in 1911. Accord-
ing to J. S. Taylor's estimate of savings in this country, the proportion
was about one-tenth in 1924 (a mild depression year), and one-sixth in
1925. About three-fourths of 1 per cent of our income came from
abroad in 1924, while 4 per cent of the income of the United Kingdom
came from outside, and an even larger percentage before the war. In
using these comparisons, it should be remembered that the year 1914
was one of depression in this country, and partly so in England. In
1924 there was a mild depression in the United States, while in England
there was a slight lessening of a prolonged depression. But in spite of
these and other qualifications," it seems clear that the average individual
is considerably better off in this country than in England, and that the
difference to-day is distinctly greater than before the war.
For further light upon recent changes in the national income, we may
turn to a consideration of the major income streams of which it consists.
First of all, we may analyze the national income on a functional basis into
wages, Salaries, and pensions; rent, interest, and dividends; and profits
withdrawn by individual enterprisers. It may be broken up also among
the principal disbursing industry groups, agriculture, construction,
mineral extractive industries, manufacturing, public utilities, merchandis-
ing, commercial and savings banks, all branches of government, and
unclassified enterprises and occupations. The national income was
estimated by adding together wages, salaries, etc., for each of these
groups, so that it is fairly easy to obtain estimates for each of these
streams of income. But when we come to assign the national income to
different parts of the country, we encounter a great many difficulties.
And the attempt to determine how the national income is distributed
among the higher and lower income classes will prove even less satis-
factory, but some light can be shed upon this problem. We shall consider
these four types of income distribution in order.
* Especially in comparing the absolute amounts of the national totals or per capita
incomes, a number of qualifications are necessary. Price differences between countries
are more difficult to allow for than price differences between two dates for the same
country, but the allowance would presumably make the showing appreciably less
favorable to the United States. A factor suggesting an opposite correction is that
nearly 23 per cent of all English females were gainfully employed in 1921, as against
16% per cent of American females in 1920; a smaller proportion of women's services
are priced in this country.
766 RECENT ECONOMIC CHANGES
It has already been noted that the total realized income of the
United States is known more accurately than are many of the income
streams that make it up, for it is improbable that all the errors of estimate
for the constituents are in the same direction. In dealing with the con-
stituent income streams, then, we shall do well to remember that we are
On less Secure ground. There is one redeeming feature. An estimate, say,
of mining wages, may be wrong in absolute amount, and still the year-
to-year percentage changes in the estimate may be approximately correct.
Again, we may not have an accurate estimate of total pay rolls, but if
the ratio of estimated pay roll to all income shows a decrease between
1923 and 1925, that decrease may still be a correct portrayal of events.
Since the basis of estimate from year to year is similar, it is likely to lead
to similar errors in each year. Our information about year-to-year
fluctuations in income streams, then, is more reliable than our information
about the absolute amounts of those streams. **
II. THE SHARES OF LABOR AND PROPERTY
The bulk of the national income falls into two chief classes, income
going to labor and income going to property holders. But there is an
important part of the national income which the available data do not
permit us to apportion between these classes with any great confidence.
Profits withdrawn by individual business enterprisers represents a mix-
ture of labor income and income from property. Labor income of
employees may be subdivided into wages; salaries; and pensions, benefits,
and compensation for accidents. Property income includes rents and
royalties, interest, and dividends. Table 3 shows total realized income
for 1925 and 1913, and total money income for 1925 apportioned to these
classes.
It appears that employees received about 57 per cent of realized
income and 63 per cent of money income in 1925, and that their share in
the national dividend has increased over the prewar figure. About two-
thirds of the employees’ share goes to wage workers. The chief gain as
against prewar proportions has, however, come in the field of the salaried
employees, which, according to King's classification, includes all of govern-
* A general word of caution should perhaps be entered at this point regarding the
interpretation of year to-year variations in many of the income streams. One would
expect that the variable income streams, particularly, would fluctuate up and down
with the ups and downs of business conditions. But to find that a given income
stream does fluctuate as one expects it to, is not always precisely an empirical verifica-
tion of one's hypothesis. This hypothesis may have been used in making the estimate.
For example, there are no satisfactory annual data on pay rolls in merchandising, and
the pay roll estimates depend on estimates of number of employees on the pay roll.
In making this estimate, a fluctuation with business conditions was assumed. In cer-
tain other lines, manufacturing and railroads, for example, there are annual pay roll
figures, and the fluctuations of these income streams are not due to the method of
estimate.
THE NATIONAL INCOME AND ITS DISTRIBUTION 767
TABLE 3.—DISTRIBUTION OF ToTAL REALIZED INCOME OF THE UNITED STATES IN
1925 AND 1913 AMONG WARIOUS LABOR AND PROPERTY GROUPS"

a) || @ | @ | @ | @ | @
Total realized M Total realized
income º oney income Money
Item Income, 1In COme,
1925 1925
1925 1913 1925 1913
Billions of dollars Per cent
1. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.8 13.0 30.8 38 37 42
2. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.0 5.5 14.9 18 15 20
3. Pensions, benefits, and compensations 1. 1 .3 1. 1 1 1 1
4. Total share of employees. . . . . . . 46.8 18.8 46.8 57 53 63
5. Rents and royalties. . . . . . . . . . . . . . . . . . 10.6 5.2 5.8 13 15 8
6. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.9 1.5 3.9 5 4 5
7. Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . 4. 1 2. 2 4. 1 5 6 6
8. Property income . . . . . . . . . . . . . . . 18.6 8.9 13.8 23 25 19
9. Entrepreneurial profits withdrawn. . . . . 16.4 8.0 13.7 | 20 22 18
10. Total realized income. . . . . . . . . . 81.8 35.7 74.3 100 100 100
|

• On the extent to which the omission of additions to corporate surplus, etc. understates the share
of property, see Table 4, note a.
ment and banking. The growth of pay rolls in these two lines has been
extremely rapid, but the increase of salaries in the public utility, mer-
chandising, and unclassified groups of industries has been large also.”
With the increasing importance of labor and of plant and equipment,
financed by the issue of securities as the country has developed indus-
trially, rents became a smaller proportion of the national income in 1925
than they were in 1913. While there have been definite declines in the
importance of the interest item in several of the industry groups, this
item has shown a great increase in the case of the government group (an
increase measured in per cent of the total national income) nearly equal
* The chief differences between total realized income and income disbursed in
money are brought out in Table 3. Item 5 includes the most important noncash
items, net rental value of owned homes and “interest” on the value of other consumers’
durable goods. No attempt has been made to exclude agricultural “share rents” in
estimating money rents, although this would have been desirable, if the basic data
had permitted it. Item 9 includes profits withdrawn by farmers in the form of agri-
cultural produce consumed, and urban garden produce and “profits” from cow and
poultry keeping. The only important nonmoney employees’ labor income included
in these estimates are those for food and board of the Army and Navy and of agri-
cultural employees. In calculating money wage income, only the former of these
two has been deducted from total disbursed income, the entire amount of agricultural
produce consumed by the farm population being deducted from farmers’ profits because
of the difficulty of apportioning it between farmers and employees.
768 RECENT ECONOMIC CHANGES
to the net increase of the interest percentage of total national income for
all groups combined. The decline in the proportion of total realized
income going to stockholders is fairly evenly distributed among the
different types of enterprise. In the case of profits withdrawn by indi-
vidual enterprisers, the decline in relative importance is partly owing to
the shift from the individual to the corporate form of organization, but
the chief decline is in agriculture, where this factor is not of consequence.
Considerable interest attaches to determining the proportion of total
realized income which goes to labor and that which goes to property.
If we attempt to estimate the amount of labor income included in profits
withdrawn by individual enterprisers, on the assumption that the average
enterpriser in each of the nine industry groups (except the unclassified)
receives for his services the same annual income as the average wage
earner in that group, and that in the unclassified group, where lawyers,
doctors, and stockbrokers are among the most important types of enter-
prisers, the average enterpriser's labor income equals the average salary,
the figure for enterprisers’ labor income in 1925 is well over nine and a
half billion dollars. No satisfactory basis for a direct estimate of
enterprisers’ property income is available. As a rough check upon the
estimate of total property income which the nine and a half billion
estimate leaves, we may note that in 1922 the corresponding estimate
would mean a total realized property income of over 21 billion dollars,
or about 6 per cent on 353 billion dollars of national wealth.”
But this comparison is not especially useful as a check on the estimate
of enterprisers’ property income. Moreover, the check of the total
property income estimate is subject to the qualification that realized
property income is not the same as accrued property income. About
all that can be said is that the property income estimate is of an order
of magnitude which shows no striking disagreement with the estimate
of wealth.
If we take enterprisers’ labor income at nine and a half billion dollars
in 1925, all labor income represents nearly 69 per cent of total realized
income, and property income represents about 31 per cent.
Another figure of general interest is the proportion of what has been
called “earned income” to the total. “Earned income” includes
employees’ labor income and enterprisers’ profits. In both the United
Kingdom and the United States in 1924, “earned income” was about
three-fourths of the total “social accrued income.” In both countries
the proportion is larger in 1924 than before the war, the proportion for
the United Kingdom in 1911 being about two-thirds, and for the United
States in 1914 about 73 per cent, as against 76 per cent in 1924.
* As estimated by the Federal Trade Commission, Sen. Doc. No. 126, 69th
Cong., 1st Sess. p. 50.
14 As defined in footnote to Table 2.
THE NATIONAL INCOME AND ITS DISTRIBUTION 769
If we examine the year-to-year changes in the distribution of total
realized income (Table 4), it appears that the gain in the employees’
share came largely in 1919 and 1920, and that the chief change after that
was a slight rise in 1923, followed by a dip in 1925. The preliminary
estimates for 1926 and 1927 do not substantiate the contention that the
share of employees in the national income has been declining. This
share has been practically constant since 1920. The share of property—
rent, interest, and dividends—reaches its peak in 1921 and 1922, during
the postwar depression period. There has been no significant variation
since 1923. The share of individual enterprisers rose during the war,
declined sharply in 1920 and 1921, and has since then increased slightly
but is still below the prewar figure.
TABLE 4.—THE PROPORTIONS OF LABOR AND PROPERTY AND ENTERPRISERS' INCOME,”
AND THE RELATION BETweBN CoRPORATE DIVIDENDS AND NONAGRICULTURAL
WAGE PAYMENTs, UNITED STATEs, 1913–14 AND 1918–1926


(1) (2) (3) (4) (5) (6)
Corporation. Nonagri-
Total Rent, Profits dividends | cultural Ratio of
Year share of . interest, e tº e
employees | dividends withdrawn on common wage pay- dividends
stock ments to wages
(per cent)
Per cent of total realized income 1913 = 100 per cent
1913. . . . . . . . . . . . . . . . . 53 25 22 100 100 13
1914. . . . . . . . . . . . . . . . . - 52 25 23 93 95 13
1918. . . . . . . . . . . . . . . . . 54 22 24 172 157 15
1919. . . . . . . . . . . . . . . . . 54 22 24 155 176 12
1920. . . . . . . . . . . . . . . . . 57 22 21 143 228 8
1921. . . . . . . . . . . . . . . . . 57 25 18 136 179 10
1922. . . . . . . . . . . . . . . . . 57 24 19 124 190 9
1923 58 23 19 164 224 10
1924. . . . . . . . . . . . . . . . . 58 23 19 176 227 10
1925. . . . . . . . . . . . . . . . . 57 23 20 205 241 11
1926. . . . . . . . . . . . . . . . . b59 b23 b19 b230 b255 b12
1927. . . . . . . . . . . . . . . . . b59 - - - - 4 - - * * * b258
• A rough idea of the effect of using realized income instead of accrued social income in analyzing
distribution may be gained from the following estimates. Accrued social income includes additions
to surplus and certain real estate appreciation, and excludes interest on the Federal debt.
1914 1924 1925
Per cent Per cent Per cent
Proportion of accrued social income going to
Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . '• . . . . . . . 50 56 56
Enterprisers and property. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50 44 44
b Preliminary.
770 RECENT ECONOMIC CHANGES
The changes in the share of employees are largely accounted for by
changes in the two chief constituent industry groups, manufacturing
and the unclassified enterprises and occupations, labor income of which
represents over one-half of total labor income. The proportion of
realized income included in the unclassified pay rolls was less than half
the prewar figure in 1918 and has increased since, reinforcing the increase
in manufacturing in 1920 and offsetting the 1921 decline.
The fluctuations in the share going to employees show little corre-
spondence with the ups and downs of business. If money incomes of
employees are compared with total money income, it appears that the
share of employees rises in the depression period of 1921 and 1922. But
this is, in part at least, a result of differing fluctuations in different
industry groups. Agriculture, for example, has a large proportion of
property and enterprisers’ income, and the total realized income of
agriculture drops sharply in these years. It may be well, therefore,
to compare money wages outside of agriculture (salaries being ex-
cluded as being a more stable form of income) with corporate cash
dividends paid to individuals. Dividends appear, on the whole, to be
about as stable a form of income as wages. Columns (4) and (5) of
Table 4 show total cash dividends paid to individuals on common stock,
and total money wages (except in agriculture) relative to 1913, and column
(6) gives the ratio of dividends to wages. The greater drop of wages in
1921 is reflected in the increase of the ratio of dividends to wages. In
1922–23, however, estimated dividends to individuals show a continued
decline, while wages do not. Of course, stockholders’ accrued income
(that is, cash dividends plus additions to, or minus withdrawals from,
the stockholders' equity) drops sharply in 1921 (by about 90 per cent,
according to the income tax returns), even if their cash dividend income
shows only a slight decline.
But percentage shares in the national dividend are perhaps less
important from the point of view of the employee than his average annual
labor income. Table 5 shows the changes in wages and in salaries per
employee attached to industry, that is, total wages or salaries, divided
by the total number of wage or salary workers, including those who
may be temporarily out of employment. In order to facilitate com-
parison, wages and salaries are expressed as percentages of the 1913
figures, and the changes are shown both for actual dollars and for dollars
corrected for changes in the workers' costs of living.” It appears that
real annual wages per employee (that is, wages corrected for price
changes) were about the same in 1918 and 1920 as in 1913, that they
declined appreciably in 1919 and more sharply in 1921, and have risen
considerably since, though there was a setback in 1924. Real annual
salaries per employee, on the other hand, were considerably lower in
* See Chap. IX, Price Movements, p. 604; Chap. VI, Labor, pp. 430–445.
THE NATIONAL INCOME AND ITS DISTRIBUTION 771
TABLE 5.—AVERAGE ANNUAL COMPENSATION OF WAGE EMPLOYEEs, SALARIED
EMPLOYEES, AND ALL EMPLOYEEs, RELATIVE TO 1913 As 100 PER CENT, AND
NUMBER OF EMPLOYEEs, UNITED STATEs, 1913–14 AND 1918–1926
Average annual Average annual Average labor
Wages per Wage salary per sala- income per
employee ried employee employee Number N umber of
| i of wage salaried
k empl
Year Current 1925 Current 1925 Current 1925 WOTKerS pi Oyees
dollars | dollars | dollars | dollars | dollars | dollars
Relative to 1913 as 100 per cent Millions of persons
1913. . . . . . . . . . . . . . 100 100 100 100 100 100 21.9 5.
1914. . . . . . . . . . . . . . 93 92 102 101 96 94 22.5 5.3
1918. . . . . . . . . . . . . . 158 101 119 76 152 97 21.7 8.9
1919. . . . . . . . . . . . . . 173 95 136 75 168 92 22.4 8. 0
1920. . . . . . . . . . . . . . 214 103 163 79 203 98 23.2 6.7
1921. . . . . . . . . . . . . . 165 93 159 89 169 95 23.8 7. 0
1922. . . . . . . . . . . . . . 170 103 161 97 173 104 24.3 7.0
1923. . . . . . . . . . . . . . 194 114 172 102 192 113 24.9 7.2
1924. . . . . . . . . . . . . . 191 113 178 105 193 114 25.6 7.5
1925. . . . . . . . . . . . . . 198 115 183 106 199 115 26. 2 7.7
1926. . . . . . . . . . . . . . . a 201 a 118 a 190 a 109 a 205 a 119 26.8 7. 9
1927. . . . . . . . . . . . . . a 203 a 119 a 196 a 114 a208 a 122 27.3 8.3
• Preliminary.
1918 than in 1913, declined still further in 1919, and have risen every
year since, not even excepting 1921. Since 1923 they have apparently
been above the prewar level. The decline in real wages in 1919, and to
Some extent also the decline in real salaries in 1918 and 1919, were owing
to price changes, but the latter was due in part also to the temporary
war-time increase in the number of Government employees receiving
low salaries. As we should expect, wages are evidently more responsive
to price changes and business conditions than salaries. On the whole,
real wages have risen considerably more than real salaries in the interval
from 1913 to 1926, 18 per cent as compared to 9 per cent, and even since
1922 real wages have gained 15 per cent as against a gain of 11 per cent
for real salaries. The number of salary workers has, however, grown
more rapidly from 1913 to 1926 than the number of wage workers,
according to King's estimate.
It may be interesting as a comment on the development of the wage
system to note whether the proportion of total money income derived
from pensions, benefits, and compensation for accidents is changing.
The estimates for this item are not very complete, but, so far as the
available evidence goes, there is no very appreciable trend in the propor-
tion of money income taking this form. Both in 1913 and in 1925 it
was slightly less than 1 per cent.
772 RECENT ECONOMIC CHANGES
We have considered the changes in the proportion of total disbursed
income going to property. This income consists of three principal
parts—rent, interest, and dividends. While rent accounts for a gradually
decreasing proportion of the income in this period, the proportion going
to interest, after a slight drop in 1917 and 1918, rises with the increase in
Government financing and remains above the prewar figure (Table 6).
These two income streams are alike in being a larger proportion of total
income in years of poor business. Dividends, on the other hand, repre-
sent a slightly larger proportion of total income in 1921 than in adjoining
years, and a slightly smaller proportion in 1914 and 1924. The pro-
portion shows a downward trend to 1919–1922, and an upward trend
since, but the 1926 percentage is still considerably below that of 1913.
TABLE 6.-RENTS AND ROYALTIES, INTEREST, AND DIVIDENDs ExPRESSED As PER-
CENTAGES OF TOTAL REALIZED INCOME; THE RELATION OF FIXED TO TOTAL
MONEY INCOME; RETURN To RAILROAD BONDHOLDERS CORRECTED FOR
PRICE CHANGEs; AND THE RELATION OF DIVIDENDS AND PROFITS WITH-
DRAwN TO INTEREST PAYMENTS BY DOMESTIC BUSINESSEs,
UNITED STATEs, 1913–14 AND 1918–1926

(1) (2) (3) (4) (5) (6) (7) (8) (9)
|
Rents | Inter- Divi- e Divi- || Interest
est dends e Ratio of e dends | payments º
Fixed fixed Railroad b Ratio
Year money | money in- bond yields OIl * ... of divi-
- y y \nCl y a common domestic
incomes come to correcte stock business dends
(billions total for price etc., to
Per cent of total dis- of money changes” inter-
º dollars income er cent est
bursed income ) (p 'l Billions of 1925
(per cent)
dollars
1913. . . . . . . . . . . . 14.5 4. 1 6. 1 10. 1 32. 1 b1 .. 3 2.7 2.2 2
1914. . . . . . . . . . . . 15.0 4.2 5.8 10.6 33.9 b3.3 2.5 2. 3 1. 1
1918. . . . . . . . . . . . 12.5 3. 6 5.9 16. 7 32.2 — 10.6 3. 3 1.9 1.7
1919. . . . . . . . . . . . 12.7 4.3 4.9 18.6 32.5 — 8.8 2.6 1.8 1.5
1920. . . . . . . . . . . . 13.8 4.0 4.2 20. 2 30.8 1.7 2. 1 1.7 1. 3
1921. . . . . . . . . . . . 15. 7 4.8 4. 7 20. 7 37. 1 16.2 2. 2 2.0 1, 1
1922. . . . . . . . . . . . 14.7 5.4 4.0 21.7 36.8 4.6 2. 1 2.2 0.95
1923 . . . . . . . . . . . 13.4 4.9 4.5 22.8 34.0 4. 2 2. 7 2. 3 1.2
1924. . . . . . . . . . . . 13.4 4.8 4.5 24.3 34.9 4. 6 2.9 2.4 1.2
1925. . . . . . . . . . . . 13.0 4. 7 5. 1 25.3 34.1 2. 3 3. 3 2.5 1.4
1926. . . . . . . . . . . . c 13.2 c4.9 c5.3 c26. 5 c34.1 6.4 2. 7
* Data for funded debt beginning of year and interest paid on that during the year (fiscal years prior
to 1916) for Class I roads (excluding nonoperating subsidiaries) were from the Interstate Commerce
Commission. These were deflated by King's indexes to give: (1) deflated value of debt at beginning
of year, (2) same deflated by index for end of year, (3) deflated interest paid. (1) minus (2) plus (3)
equals annual return on investment. This divided by (1) equals rate of return.
b Year ended June 30.
• Preliminary.
THE NATIONAL INCOME AND ITS DISTRIBUTION 773
It would be desirable if we could compare the year-to-year changes in
the percentage of return on investment. For rents, dividends, and profits,
no satisfactory data are available to make possible such a comparison,
but for one important group of interest payments such a comparison
may be made, namely, interest on railroad bonds. There are dangers in
attempting to make corrections for price changes, but failure to make
such correction is certainly worse. Table 6 shows the rate of return to
investors in the bonds of Class I railroads (nonoperating subsidiaries
excluded) upon the par value of their investment at the beginning of
the year. The return is made up of interest received and of the change
in the purchasing power of the par value of the bonds to the income
recipients. Table 6 shows clearly that, when price changes are allowed
for, this type of investment yields anything but a stable return. The
year-to-year changes in the deflation index (cost of living of the higher
income classes) may be open to question, but it is beyond dispute that
there were losses in the years of rapidly rising living costs, and that
bondholders who invested before the rise have fared badly, while those
who invested at the peak of living costs profited considerably by the
subsequent decline. Table 6 also shows the ratio of dividends paid on
common stock to all interest payments other than payments by
government or by foreigners, when both are corrected for price changes.
The high figures in 1918–1920 and the low figures in 1921 and 1922 suggest
that, when price changes are taken into account, common stock may be
a more stable type of investment than bonds and mortgages in a period
of widespread and violent price changes.
A grouping of income streams which is less familiar than the classifi-
cation into wages, salaries, interest, etc., but of great significance for
national prosperity is shown in Table 6. The more important “fixed
money income'' streams are assembled—disbursements to individuals
which business enterprises cannot easily adjust to changes in volume of
business: money salaries, pensions, and benefits;” rents (excepting rents
and royalties in mining); and interest (short-term interest should logically
be excluded, but it did not seem worth while to attempt this exclusion).
Column (5), Table 6, gives the ratio of this stream of fixed incomes to
total money income. Two things stand out clearly: the ratio of fixed
to total money income is highest in depression years, 1914, 1921,
1922, and 1924, and the ratio has an upward trend. In interpreting
these movements, it is well to bear in mind several qualifications. The
distinction between wages and salaries is not precisely a distinction
between fixed and variable incomes, and none of the other constituent
streams of our national income falls wholly in one of these two classes.
Furthermore, an increasing proportion of corporate dividends might
properly be regarded as forming a fixed income stream. And there are
16 Total salaries and pensions and benefits less Army and Navy pay in kind.
774 RECENT ECONOMIC CHANGES
changes in the wage system in certain fields which might require a similar
qualification with respect to wages; for example, the development of
Some types of unemployment insurance. If these factors are taken
into account, the upward trend of fixed income is probably underesti-
mated. From the point of view of the individual enterprise, the dis-
bursement of a large proportion of fixed incomes is a disadvantage in
meeting the cyclical fluctuations of business. From the point of view
of a national economy, it is an advantage. The increase in proportion
of fixed incomes is a factor making for increased stability of business.
III. THE PROSPERITY OF WARIOUS INDUSTRY GROUPS
The analysis of the national income into the shares contributed by the
major industrial groups and types of industrial organization is important
because it summarizes the chief changes that have been taking place
in the structure of industry and at the same time throws light on some
of the factors which have been responsible for these changes. Moreover,
because the estimates of national income have been made by adding
together these shares, it helps to make clear precisely what is included
in the national income, and what reliance may be placed upon each con-
stituent estimate in the light of the peculiar difficulties which have been
encountered in making it.
Let us consider first the amounts of total income realized from each
industry group in 1913, 1925, and 1926, 1913 being taken as rep-
resentative of prewar conditions. These amounts and the percentages
of total realized income coming from each industry group are shown
in Table 7. The most important shifts among the industry groups which
this table shows are the declining importance of agriculture and the
increasing importance of government and of merchandising. The
proportion of income from agriculture has decreased 3 per cent in the
13-year period under review. In interpreting these changes it is impor-
tant to recognize that a change in percentage of income disbursed by a
group may mean a change in the relative importance of the physical
volume of its output. It may also mean a change in the remuneration
which a given physical volume commands, relative to that in other lines.
Furthermore a change in relative remuneration may represent either a
change in economic efficiency or a change in relative bargaining power.
This decline in agriculture is probably partly a matter of change in
relative remuneration. But it is to be expected that the relative impor-
tance of this industry, measured in physical units of output, should
decrease as the country becomes more highly industrialized. The
increase in the percentage of income disbursed by government is doubtless
partly a war phenomenon, interest payments by the Federal Government
having been multiplied more than thirtyfold. But there has certainly
been a great increase in the peace-time activity of government also.
THE NATIONAL INCOME AND ITS DISTRIBUTION 775
TABLE 7.-AMOUNT AND PERCENTAGE OF TOTAL REALIZED INCOME DERIVED FROM
EACH INDUSTRY GROUP,” UNITED STATEs, 1913, 1925, AND 1926
1913 1925 1926
Billions | Per | Billions | Per | Billions | Per
of dollars | cent of dollars cent of dollars | cent
1. Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5. O 14 8.9 11 a8.9 a 10
2. Mines, quarries, etc. . . . . . . . . . . . . . . . . . . . . . . . 1.2 3 2. 2 3 a2 .. 5 a 3
3. Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3 21 16.9 21 a 17.8 a 21
4. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.5 4 3.5 4 a 3.5 a4
5. Transportation and public utilities. . . . . . . . . . . 3.2 9 6. 7 8 a7.3 a8
6. Commercial and savings banks. . . . . . . . . . . . . . . 5 1 1. 1 1 a 1.2 a 1
7. Merchandising. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 13 12. 0 15 a2 .. 5 a 15
8. Governments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2. O 6 6. 1 7 a 6.6 a8
9. Unclassified industries and occupations”. . . . . . 7. 1 20 16.4 20 a 17.3 a 20
10. Miscellaneous income”. . . . . . . . . . . . . . . . . . . . . . 3.4 9 8. 1 10 a8.2 a 10
11 Total realized income. . . . . . . . . . . . . . . . | 35.7 100 81.9 100 a85.7 100
* Preliminary estimate.
* Group 10 includes nonmoney income from nonfarm cows, poultry, and gardens, and interest on
value of durable consumers' goods, net rentals for owned and leased homes, and net income from foreign
investments. Group 9 includes income from all business enterprises, institutions, and gainful occupa-
tions not included in the first eight groups. For further information on the make-up of each group, see
text.
The proportion of total governmental realized income disbursed by state
and local governments was not much smaller in 1926 than in 1913, 61
per cent as against 66 per cent in the earlier year. It is difficult to be
certain how far the increase in proportion of total income realized from
retail and wholesale enterprises is a matter of physical volume and how
far of relative remuneration. There is no satisfactory direct measure
of the volume of goods marketed by wholesalers and retailers, but the
fact that the percentage of income realized from the transportation group
and also from the three groups, agriculture, mining, and manufacturing, has
declined, lends color to the belief that merchandising is commanding a
larger remuneration relative to other lines for handling a given physical
volume of goods. The fact that the proportion of income realized
from the construction industry shows no appreciable change between
1913 and 1925 appears to corroborate the contention advanced elsewhere”
that the amount of construction in recent years may not have been so
abnormally large as some have supposed.
A word may be said about the other years which do not appear in
Table 7 (see Table 38, page 839). While they do not give reason to
alter materially the statements regarding the trends of changes made
above, they show certain interesting fluctuations. In 1918, when Govern-
ment war-time activity was at its height, over 10 per cent of the national
* See Chap. III, Construction, p. 219.
776 RECENT ECONOMIC CHANGES
income was derived from government. The government's percentage
was also high in 1921–22, when it was 9 per cent. In 1919, the unclassified
industries accounted for only 11.3 per cent of the national income, as
compared to 20 per cent in 1926. In 1920, the percentage for manufac-
turing was high; it was 26% per cent, while that for merchandising was
only 11.8 per cent. But these fluctuations were largely the result of
war and postwar temporary conditions.
Table 8 shows the amount and proportion of income disbursed by
corporate enterprises. As might be expected, there is an increase in the
importance of this type of organization, as an income-disbursing agency,
between 1913 and 1925. But the increase is not a striking one and the
TABLE 8.—TOTAL INCOME DISBURSED BY CORPORATIONs, BY CorpoHATIONS AND
Govern MENT, AND TOTAL INCOME DISBURSED IN MONEY IN THE UNITED
STATES IN 1913, 1925, AND SEVERAL INTERVENING YEARs
q) (2) (3) (4) (5) (6)
| “. .
| |
1918 1914 1919 1921 1923 1925
} |
1. Total income disbursed by corporations" (billions of
dollars). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13. 0 | 12.4 25. 2 23.6 28.9 31. 1
2. Total income disbursed by corporations and govern-
ment (billions of dollars) . . . . . . . . . . . . . . . . . . . . . . . . 15. 0 || 14.5 31. 3 || 29.3 || 34.6 37.2
3. Total money income (billions of dollars). . . . . . . . . . . . . 31.5 || 31. 3 || 57.2 55.8 || 67. 1 || 74.3
4. Per cent of total money income disbursed by corpora-
tions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41. 3 || 39.6 || 44.0 || 42. 4 || 43.0 || 41.9
5. Per cent of total money income disbursed by corpora-
tions and government . . . . . . . . . . . . . . . . . . . . . . . . . . 47. 5 46.3 54. 7 || 52.5 51.6 50.2
a These estimates of total income realized by United States corporations were made by industry
groups and by types of income. King has estimates of interest and dividends of corporations No
estimate of dividends or interest from foreign corporations is included in the totals given in Table 8.
For manufacturing in 1919 and 1914, and for mining in 1919, the census affords a basis of estimate
of pay roll, the number of employees in each type of establishment, for both corporations and all estab-
lishments, and the total wages for each type of establishment. It was assumed that the ratio of
corporate to all wages for each type of establishment was the same as that of the number of corporate
to all employees, and that the ratio of corporate to all wages in each of these two industry groups was
the same as the ratio of corporate to all pay rolls (including pensions, etc.). Other years were estimated
by assuming that the proportion of noncorporate pay rolls varied in proportion to the changes in the
ratio of noncorporate to total value of product (mining) or noncorporate to total operating expenses
(manufacturing). The merchandising and construction pay rolls were prorated on gross revenue from
sales. All compensation of employees in the banking and transportation and public utility groups was
arbitrarily assumed to be corporate. Since again the unclassified group is the most unsatisfactory, it
seemed the best available expedient to prorate pay roll on King's estimate of profits, a procedure which
presumably gives too small a figure, but one with an approximately correct trend.
Rents were apportioned between corporate and other enterprises on the basis of value of products
for mining, merchandising, and manufacturing, and profits for the unclassified group.
decline in proportionate importance after 1919 is greater than the net
increase for the entire period. Paradoxical as it may seem, the corporate
form of organization has disbursed a steadily increasing proportion of
income in the several industry groups taken one by one, and yet appears
THE NATIONAL INCOME AND ITS DISTRIBUTION 777
to have disbursed a smaller proportion of total income in 1925 than in
1919. The explanation appears to lie chiefly in manufacturing pay rolls.
The pay rolls of manufacturing corporations, which make up about
three-sevenths of the total income disbursed by corporations, have grown
during these six years, but not as rapidly as total disbursed money income.
We have already seen that the proportion of all realized income derived
from the manufacturing group declined some 6.5 per cent in this six-year
period, and it is not surprising that manufacturing corporation pay rolls
have also failed to grow as rapidly as total income disbursed in money.
If we eliminate this one item, the ratio of the remaining streams disbursed
by corporations to total income disbursed in money increases from 22.7 per
cent in 1919 to 23.4 per cent in 1925.
Corporate enterprises and government together accounted for about
47.5 per cent of the total income disbursed in money in 1913 and for
almost 55 per cent in 1919, but by 1925 the percentage had declined
again to about 50 per cent.
Table 9 shows the percentage of employees’ income coming from each
industry group, and average remuneration per employee by groups.
Manufacturing accounts for about 30 per cent of all employees’ labor
income, and the unclassified occupations for nearly 25 per cent. These
groups, together with merchandising, public utilities, and government,
pay out nearly eight-ninths of all compensation paid to employees. On the
average, banks appear to have the highest paid employees, with govern-
ment and the construction industry next, and agriculture at the bottom of
the list.
TABLE 9.—PER CENT DISTRIBUTION OF WARIOUS TYPEs of INCOME AND Average
ANNUAL LABOR INCOME PER EMPLOYEE, BY INDUSTRY GROUPS, UNITED
STATEs, 1925
a) || @ | @ () || @ (6)

Share of e Average Rents and gº tº Individual
employees income per royalties Interest Dividends profits
| employee | | withdrawn
Per cent Per cent Per cent Per cent Per cent
1. Agriculture. . . . . . . . . . . . . 2.7 $537 11.4 6. 0 0.0 37. 9
2. Mining. . . . . . . . . . . . . . . . . 3.3 1, 318 2.4 1 .. 8 6. 5 . 1
3. Manufacturing. . . . . . . . . . 30.5 1, 362 1.9 7.0 46.4 1. 1
4. Construction. . . . . . . . . . . . 5.4 1, 574 0.0 ... 8 1. 7 5. 0
5. Transportation and pub-
lic utilities. . . . . . . . . . . . 10. 9 1, 554 ... 2 23.2 16.8 | . . . . .
6. Banking. . . . . . . . . . . . . . . . 1.3 2, 179 0.0 8.5 4. 1 &
7. Merchandising. . . . . . . . . . 12. 0 1, 315 6.9 9.7 10. 7 29.2
8. Government. . . . . . . . . . . . 11.0 1, 585 0.0 25.4 0.0 0.0
9. Unclassified industries. . . . 22.9 1,408 7.2 6.7 13. 8 25. 1
10. Miscellaneous income. . . . 0.0 | . . . . . . 70. 0 b10. 9 b 1.5
11. All groups combined. . . . . 100.0 1, 384 100.0 100.0 100.0 100.0
a Included with dividends.
* Dividends on foreign stocks included in miscellaneous interest.
778 RECENT ECONOMIC CHANGES
It also appears from Table 9 that over two-thirds of the rents in 1925
(including here imputed interest on consumption goods) fall in the group
of miscellaneous incomes, chiefly rental value of urban homes and
that agriculture, merchandising, and the unclassified industries account
for all but 4.5 per cent of the rest. The government and the public
utility groups disbursed nearly half of all the 1925 interest payments,
and nearly 30 per cent of the total comes from banking and trade, and
from abroad. About 7 per cent comes from domestic manufacturing
and about 6 per cent from agriculture. Of dividends in 1925, nearly one-
half come from the manufacturing group, and about one-sixth from
public utilities, while merchandising and the unclassified industries
account for over 10 per cent each. Individual profits withdrawn are
concentrated in three groups, agriculture, trade, and the unclassified
industries.
A rough idea of the relative profitableness of the several industry
groups may be gained from the corporation income tax returns. Table
10 shows (1) the capital, surplus, and undivided profits or book value of
stockholders' equity for each group as of the close of the year 1926;”
(2) the cash dividends paid; (3) the net profits after paying the tax;
and (4) the ratio of profits to the book value of the stockholders’ equity.”
Mining is distinctly the least profitable of the industry groups accord-
ing to this showing, and construction the most profitable; but this
and other comparisons, so far as the mining industry is concerned, may
be vitiated by the different accounting for income tax returns in mining.
It seems probable that the rate of return in mining is actually much
higher than it appears. *
* Includes all fiscal years ended between July 1, 1926 and June 30, 1927.
19 Among the qualifications to be considered in interpreting these figures may
be noted the following: (a) The methods of valuing assets and determining such items
as depreciation expenses are not uniform. This qualification is particularly important
in the case of mining, where depletion changes and valuation of reserves may be quite
arbitrarily determined. (b) The classifications are not precisely the same as King's,
and the “all other” class has not been included with the unclassified groups, as it
includes a considerable proportion of inactive concerns. (c) The income tax data
classify a corporation according to the predominant character of its business; for
example, the United States Steel Corporation, if it renders one return, would be classed
as “manufacturing,” although it is also engaged in mining and transportation. Con-
solidated returns are permitted for combinations. (d) Only about 79 per cent of all
reporting corporations furnished balance sheets, though for the most part it was the
smaller corporations and corporations showing a deficit that failed to file balance
sheets. Balance sheets were filed by 97 per cent of corporations reporting a net
income of over $10,000. (e) Sales prices of a mining corporation to a financially
interested or parent company (and consequently its revenues) may be arbitrarily
determined.
* In my opinion, the Statistics of Income published by the Bureau of Internal
Revenue afford no indication of the profits of the mining and quarrying industries, for
THE NATIONAL INCOME AND ITS DISTRIBUTION 779
TABLE 10.-RETURN TO STOCKHOLDERS ON INVESTMENT. UNITED STATES CORPORA-
TION INCOME TAx RETURNs, 1926
q) (2) | @ (4)
Capital stock,
surplus, and Profits Ratio of profits
• e Cash - -
undivided dividends after to capital in-
profits as of end tax vestment
of year
Billions of
d Millions of dollars Per cent
ollars |
1. Unclassified group. . . . . . . . . . . . . . . . . . . . . a 16.9 a678 agº.6 5.8
2. Mining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8. 3 403 305 3.7
3. Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . 46.2 2, 544 3,640 7. 9
4. Construction. . . . . . . . . . . . . . . . . . . . . . . . . . 1. 0 55 105 11.0
5. Transportation and public utilities. . . . . . . 26. 5 1,277 1,849 7.0
6. Banking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . a8.2 a 458 a 638 7.8
7. Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12. 1 525 761 6.3
8. All others (including inactive corpora-
tions). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5 — 3 — 2.7
9. All corporations. . . . . . . . . . . . . . . . . . . . . . . º 119. 3 5,945 ºr 6.9

* The book value of the stockholders' equity as of June 30, 1927, for the banking groups is from the
report of the Comptroller of the Currency. Profits are estimated for all banks as yielding the same rate
of return on the stockholders' equity as for national banks. Dividends are estimated to bear the same
ratio to profits for all banks as for national banks. The unclassified group represents the items listed
in the tax returns as agriculture, public service, and finance less these banking group estimates.
Table 10 refers only to corporations. Table 11 shows the number of
individual income tax returns reporting profits and the amount of reported
profits in 1925.” The highest reported profits per return were in mining,
three reasons, which are noted by Mr. Copeland but not in my judgment sufficiently
stressed; they are:
1. The practice of permitting consolidated returns and classifying them according
to the character of the principal business.
2. The fact that the profits are arrived at after deducting statutory deductions for
depletion, which to a large extent do not represent any actual cost incurred; for 1925,
the total allowances under this heading were nearly 50 per cent greater than the
reported net profits in the mining and quarrying group.
3. The practice, among certain classes of mining corporations, of transferring
mine products to stockholders at cost, or other figures below fair value.
I think there is good reason to suppose that, making due allowance for these three
items, the profits of the industry for the year 1925 were 100 per cent or more in excess
of the figures quoted from Statistics of Income. I do not believe any satisfactory
conclusions can be predicated upon statistics subject to so wide a margin of error.—
Note by George O. May, Director. -
20 Profits here include labor income, and no satisfactory way of measuring rate
of return is available. The estimated number of enterprisers in each group is shown,
and the average reported profit per return. Less than half of all enterprisers in
manufacturing are apparently reporting, and only a negligible proportion of farmers'
incomes fall above the reporting limit. An unknown number of enterprisers in
column (3), which is based on King's estimates, should be transfered from Item 7 to
Item 5 in order to make King's classification comparable with the tax returns, for
King does not include taxicabs and trucking under Item 5.
780 RECENT ECONOMIC CHANGES
with banking and the unclassified group next, and agriculture at the
bottom of the list. But these figures speak only for the most profitable
portion of each group.
TABLE 11.-INDIVIDUAL ENTERPRISER's BUSINESS PROFITS REPORTED IN INCOME
TAx RETURNS, AND NUMBER of REPORTING AND OF ALL ENTERPRISERs,
UNITED STATEs, 1925
(1) (2) (3) (4)
Number of enterprisers
Business Average
Group profits | profit per
(millions of Reporting Total reporting
dollars) enterpriser
Thousands of persons
1. Agriculture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250 83 6,317 $3,010
2. Mining, quarrying, etc. . . . . . . . . . . . . . . . . . . . . 25 5 17 5, 520
3. Manufacturing. . . . . . . . . . . . . . . . . . . . . . . . . . . . 268 69 1.59 3,900
4. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 60 185 4,080
5. Transportation and public utilities. . . . . . . . . . . 84 27 28 3, 170
6. Trade. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 217 367 1,484 3,320
7. Unclassified and banking groups. . . . . . . . . . . . . . 1,598 368 1,827 4, 330
8. All enterprisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,689 || 979 9,997 3,790
According to economic theory, our industrial system, which has no
general manager to dictate how much of each commodity or service shall
be produced each year, or how much of our available human or material
resources shall be devoted to each form of production, is nicely articulated
through a scheme of pecuniary incentives. Prices and profits exercise a
guidance over production and the apportionment of resources. If too
much of any commodity is being produced, prices and profits will fall,
production will be curtailed, and resources will be withdrawn from this
type of production for want of attractive remuneration. If too little is
being produced, prices and profits will rise, and the increased remunera-
tion of resources devoted to this kind of production will attract new
employees and new capital, and output will increase. There are many
qualifications to be put upon this theory, and it is not to be expected that
the response to the guidance of price and profit will take place without
lag. In particular, it should be noted that in lines where overhead costs
are high, low profits or even losses are not necessarily incentives to
withdraw from the industry. Withdrawal may be an even more poorly
paying proposition.
As we examine each of the great industry groups of our economic
system, it will be interesting to inquire how sure and prompt appears
the responsiveness to the guidance of price and profit. We shall, of
course, be dealing with broad averages, and these may conceal a respon-
siveness of our economic system which a more detailed analysis would
bring to light. Moreover, the accuracy of the income estimates and of
THE NATIONAL INCOME AND ITS DISTRIBUTION 781
other statistical measures is probably not sufficient to yield more than
crude results. Finally, in such economic changes as the growth of govern-
ment enterprise, other than pecuniary considerations may be the
determining factor.
Another hypothesis on which recent changes in our national income
streams may throw some light is the productivity theory of the distribu-
tion of income. According to one formulation of this theory, the income
realized from (or more strictly accruing from) any industry group,
measured in dollars of constant purchasing power to the income recipients,
might be expected to vary with the physical volume of its output of
commodities or services. It will be worth while to test this hypothe-
sis also, but again it will be a test which is subject to the qualification
that our statistical measurements are not sufficiently accurate to yield
more than crude results. And perhaps it should be added that the hypoth-
esis is usually so qualified as to recognize that technological change may be
a disturbing factor.
Agriculture.—The items which go to make up the total income
disbursed by agriculture can best be seen by considering the following
consolidated statement of income, in millions of dollars, for agriculture
for the year ended June 30, 1927:
1. Revenue from sale of farm products. . . . . . . . . . . . . . . . . . . . . . . . . . 9,537
2. Farm value of farm products consumed by farm population. . . . . 2,590
3. Gross value of agricultural production. . . . . . . . . . . . . . . . . . . . . . . . 12, 127
4. Payments made to other industry groups. . . . . . . . . . . . . . . . . . . . . 3,697
5. Net current income realized from agriculture before deducting
real estate depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,430
6. Rental value to owners of farm houses. . . . . . . . . . . . . . . . . . . . . . . 161
7. Total income realized from agriculture and farm houses before
deducting real estate depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . 8,591
8. Loss from change in property value (real estate and improvements) 2,160
9. Net income account of farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,431
10. Wages and salaries (including value of board, etc.). . . . . . . . . . . . . 1,291
11. Rents paid to individuals (including other farmers). . . . . . . . . . . . 1,428
12. Interest paid to individuals (including other farmers). . . . . . . . . . . 260
13. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . 2,979
14. Net profit to owners. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,452
15. Interest on market value of owners’ equity at 4% per cent. . . . . . 1,759
16. Labor income of independent enterprisers (owners and tenants
at $540 a year, average annual wage per wage employee). . . . . 3,410
17. “Normal profit” for year. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5, 169
18. Deficit in actual profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,717
782 RECENT ECONOMIC CHANGES
NOTE.-Items 1 and 2 and the data for most of the other items are from Crops
and Markets for July, 1928. Item 4 is the Bureau of Agricultural Economics esti-
mate for operating costs plus 30 per cent of taxes, plus two-thirds of estimated interest
paid. (The proportions follow King's estimates.) Item 6 is King's 1925 estimate.
Item 8 was estimated by regions from 1925 census values and value indexes in Depart-
ment of Agriculture Circular No. 15, October, 1927. Item 10 is the Bureau wage
estimate, plus King's estimate of salaries (average for 1924 and 1925). Item 11
is the Bureau estimate for rent paid. Item 12 is one-half interest as above. Item
15 is the Bureau estimate less item 6. The number of entrepreneurs for item 16 is
King's estimate.
Items 1 and 3 do not include for the most part the value of crops fed
to livestock, since this part of agricultural production represents raw
material for further production by the industry. Item 4 includes
interest paid to banks and merchants; expenses for manufactured feed;
business taxes; fertilizer expense; repairs and replacements for imple-
ments, automobiles, and buildings; cost of supplies; and some purchases
of agricultural products from other farms. In agriculture and in each
of the other industry groups, so far as practicable, the effort has been
made to classify expenses as (a) those paid to other industry groups and
(b) those paid to individuals. Disbursed income includes only those
expenses paid to individuals plus cash dividends and other profits
withdrawn by individuals.” To include expenses paid to other industry
groups would involve double counting. As practically all of agriculture
is organized on an individual basis, additions to surplus are not easily
distinguished from new investment. All profits are treated as with-
drawn, and the whole net value produced by agriculture (before deducting
depreciation of real estate plus rental value of owner-occupied houses) is
considered as realized income.” Items 2 and 6 necessarily involve
somewhat arbitrary valuations. Consequently, item 7, total income
realized from agriculture, in spite of the wealth of statistics on this
industry, is at best a good guess. Even wages and salaries, which
are, as in most other groups, the most accurately estimated items, include
value of board, etc., received in kind, at a more or less arbitrary figure.
In spite of all possible errors, the showing can hardly be a favorable
one in 1926–27, and the deficit in most of the immediately preceding
* This statement requires some qualification as applied to certain industry
groups having interest and dividend income, but it holds as applied to the consolidated
statement for all groups combined. In the groups where corporate enterprise is
important, interest and dividends paid by one group to another have been deducted
from the gross interest and dividends paid by the group receiving these intercorporate
payments, rather than from the gross interest and dividends of the group paying
them.
* Most of the items in this estimate are subject to a considerable margin of
possible error. It is an extremely complicated problem to determine what proportion
of gross agricultural produce—corn for example—is consumed by the industry itself
as raw material for hog or other production. And the attempt to determine the
amount of payments to other industry groups is equally difficult.
THE NATIONAL INCOME AND ITS DISTRIBUTION 783
years was undoubtedly greater. If no allowance were made for loss on
real estate values due to market changes, the deficit for 1926–27 would
be converted into a surplus, but the estimated “normal” remuneration
to independent farm operators for their services (at the same rate as for
agricultural wage labor) and the 6 per cent return on value of owned
investment are modest allowances. In spite of continued agricultural
deficits, the census shows an increase in value of farm buildings between
1920 and 1925 of over 2 per cent and a decline in the number of independ-
ent farm operators of less than 1 per cent,” while crop acreage, according
to the Department of Agriculture, shows no material change. The
census value of implements and machinery does, however, show a sharp
decline of 25 per cent, which is certainly not primarily a price decline;
and the number of independent farm operators who are owners decreased
1.5 per cent, while tenant farmers increased during this five-year period.
On the other hand, in spite of the agricultural deficits in recent years,
production was probably larger in the period from 1923 to 1927, if animal
products as well as crops are included, than before or during the war, except
for 1915. An analysis of these various changes, by states and by types of
farming, would undoubtedly show a greater responsiveness of economic
activity to farming deficits, but on the whole it seems clear that agricul-
ture responds slowly and imperfectly to the guidance which price and
profit are supposed to exercise over economic activity. In part, no
doubt, this is because overhead costs are heavy and capital assets can-
not easily be converted to nonagricultural employment. In part also,
technological changes have been responsible for increased production in
spite of deficits.
Table 12 shows further facts about agriculture. As might be
expected, the proportion of total disbursed income going to individual
capitalists as rent and interest (column (1)) fluctuates inversely with the
prosperity of the industry. This item shows no upward trend, although
there has been an increase in farm tenancy since 1910. Indeed, the
amount of these rent and interest payments actually declined from about
$1,596,000,000 in 1920 to $1,386,000,000 in 1923, thus decreasing some
of the fixed charges in this overcapitalized industry.
The fact that, except during the war period, production has apparently
increased more rapidly than total income realized from agriculture,
corrected for changes in value of the dollar to income recipients, suggests
that the decline in the proportion of total national income disbursed by
agriculture is partly the result of a decreased relative remuneration per
unit of output.” How far this is due to increased efficiency, how far
23 This decline might be slightly larger, if recreational farming could be excluded.
Similarly, the increase in building values may be partly suburban. The Dakotas,
Indiana, and a number of southern states showed declines in building values, while
states with large urban centers showed increases.
24 Column (6) divided by column (7) may be said to afford a crude index of relative
remuneration per unit of output.
TABLE 12.-ANALYSIs of AGRICULTURAL REALIZED INCOME IN THE UNITED STATEs, 1913 AND 1914, AND 1918 To 1927
(1) | (2) || @ | @ | @ | @ | @ | 6 || 0 | do an
Income from agri Average annual - Total Total P it.
- - - OUG8, er capita
culture going to- earnings per wage Number * realized Index of Money money current | Per capita
worker of wage income in icul 1In COIne º - º f
workers 1913 agricul- disbursed income, income of income o
Year - (agricul- dollars tural pro- by agri- disbursed farm United
Borrowed Hired Nonagri- Agricul- g º duction.” y ag in United | popula- States
ital lab cultural t ture) (agricul- culture States tion”
Capita 9, DOT industries Ulre ture) -
Per cent of r ealized Relative to 1913 = 100 Current dollars
agricultural income
1913. . . . . . . . . . . . . . . . . . . . 17.8 15. 1 100 100 100 100 100 100 100 143 368
1914. . . . . . . . . . . . . . . . . . . . 18.4 14.9 92 98 99 99 111 97 99 141 360
1918. . . . . . . . . . . . . . . . . . . . 11.8 10.8 159 155 101 137 112 233 165 328 579
1919. . . . . . . . . . . . . . . . . . . . 12.6 12. 2 173 185 104 129 114 258 181 356 628
1920. . . . . . . . . . . . . . . . . . . . 14.4 15. 0 214 213 101 108 123 254 208 319 695
1921 . . . . . . . . . . . . . . . . . . . 22. 1 20. 2 164 180 100 87 103 137 177 196 585
1922. . . . . . . . . . . . . . . . . . . . 19. 1 16.5 170 160 96 97 114 155 187 212 601
1923. . . . . . . . . . . . . . . . . . . . 17.3 15. 3 193 167 95 108 117 175 213 239 667
1924 * * * * * * * * * * * * * * * * * * * * 17, 2 14, 8 190 168 95 111 115 182 221 251 680
1925. . . . . . . . . . . . . . . . . . . . 16.0 13.8 197 172 95 113 118 203 236 281 712
1926. . . . . . . . . . . . . . . . . . . . c 17.7 c 14.4 c.204 175 96 121 c199 c247 736
1927. c 17. 5 c 14.2 c201 | 174 95 c 122 c 196 c253 742
|
3

* See p. 759, footnote 5. The crops and animal products indexes were combined as then indicated on the basis of value added in process.
* Current income of farm population is wages and salaries in agriculture, plus “current income of farmers” (King). It includes property incomes of farmers
from investments in agriculture and other lines. Farm population for noncensus years is estimated by linear interpolation.
• Preliminary estimate.
THE NATIONAL INCOME AND ITS DISTRIBUTION 785
to decreased bargaining power, it is difficult to say. If the relation
between these two series be accepted as a crude test of the productivity
theory, it is clear that production and remuneration do not vary closely
together, though the dependence of agriculture on weather and other
uncontrolled conditions is a disturbing factor, and it may be doubted
whether the series are sufficiently accurate to offer any satisfactory
conclusions. Another interesting feature of the table is that money
income disbursed by agriculture appears to vary far more closely with
general business conditions, as reflected in total national income disbursed
in money, than it does with agricultural production.
Columns (3) and (4) show that agricultural wage earners have
probably received a steadier income than those attached to other indus-
tries,” but on the whole their wages have risen less as compared to the
prewar figure. The decline in number of wage earners since 1919 suggests
a greater mobility of labor than of capital in this industry.
One of the best measures of changes in the general welfare of the popu-
lation is the average current income per capita. Current income includes
wages, salaries, profits, income from investments both in agriculture and
other lines, and rental value of homes to owners and tenants.” While
not as well off in 1925 as in 1918 and 1919, even when price changes are
allowed for, the average member of the farm community has apparently
improved his condition as compared to 1913. An average of $281 a
year compares unfavorably with $712, the average per capita for the
entire country, but the unfavorableness of the comparison is, at least in
part, apparent only. Living costs, especially rent and food, are higher
in the city. While these averages include rental value of owned
homes and value of agricultural produce consumed at home, the value of
the housewife's services are not included, and allowance must be made
for the greater extent to which such services have been replaced in the
city by services that must be paid for in money. If we compare the
1925 averages with those of 1913,” it appears that the per capita current
income of the farm population has increased 96 per cent, while that of the
entire population (i.e., realized income) has increased 94 per cent.”
This unexpectedly favorable showing for agriculture may be partly
due to errors of estimate. We have already noted that earnings of
agricultural wage workers have lagged behind those of other wage earners.
25 As here used, the expression “employees attached to an industry” means
those actually employed plus those unemployed who look chiefly to that industry
for employment.
* No estimate for income from trucking and other nonagricultural work is in-
cluded, but some of the included wage income goes to persons not a part of the farm
population.
27 See Table 12, columns (10) and (11).
28 Using King's deflation indexes, the showing in 1925 is even more favorable,
24 per cent for the farm population as compared to 14 per cent for the entire United
States.
786 RECENT ECONOMIC CHANGES
Moreover, the proportion of gross value of agricultural output paid to
other industries is, according to the estimates, about the same in 1925
as in 1913 (consolidated Statement of income for agriculture, page 781,
item 4 divided by item 3). But farm population actually decreased
about 10 per cent during this period, so that it represented only 24 per
cent of the total population in 1925 as against 32 per cent in 1913. The
corresponding decline in realized income was from 14 to 11 per cent.
In section IV we shall see that in some parts of the country the change in
agricultural per capita income, even between 1920 and 1925, is more
favorable than that for the rest of the population.
Mining, Quarrying, and Oil and Gas Wells.-King's method of
estimating income disbursed by other industries than agriculture is
illustrated by the case of the mining, quarrying, and oil and gas well
group. Dividends and profits withdrawn (and additions to surplus)
are estimated independently of the value of products sold to other
industry groups and to individuals. The item, expenses paid to other
industry groups, is simply the difference between item 1 and item 3.
The reliability of the item “added to surplus,” which has been estimated
on the basis of income tax returns to complete the income statement, is
doubtful at best. In the case of the mining industry (where it is a minus
quantity), the opportunities for accounting jugglery are peculiarly great.
Item 3, total income produced by the industry, represents total realized
income minus the doubtful item 11, withdrawn from surplus. Except
for 1919, where the census forms a fairly secure basis of estimate, the
pay roll figures are less dependable than for manufacturing or railroad
transportation. Rents and royalties are the most doubtful items in
noncensus years. The chief problem in the case of interest and dividends,
in this and the other corporate industry groups, arises from the necessity
of eliminating intercompany payments. The following is a consolidated
statement of the income (in millions of dollars) for mining, quarrying,
and oil and gas wells, 1925:
1. Estimated value of products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,893
2. Expenses paid to other than individuals. . . . . . . . . . . . . . . . . . . . . . . 1,783
3. Total income realized from industry less withdrawal of surplus. . . 2, 110
4. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,389
5. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169
6. Rent and royalties paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . 255
7. Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,883
9. Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227
10. Cash dividends (and estimated disbursements to individual
proprietors). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 285
11. Withdrawn from surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
THE NATIONAL INCOME AND ITS DISTRIBUTION 787
NOTE.-Item 1 is based on 1919 Census and Bureau of Mines annual data, and item
11 on income tax data; other items follow King. It is possible that more accurate
data would turn the last item into an “addition to surplus.” At all events, the
relations between items 4 to 8 and item 10 (which make up realized income) do not
depend upon the doubtful income tax data.
While the condition of the mining industry has not been so deplorable
as that of agriculture, it was not a very profitable undertaking in 1925
and was distinctly less so in the four preceding years.” The bituminous
coal industry, which is one of the chief constituents of this group, is prob-
ably the most like agriculture in its failure to respond closely to the
guidance of price and profit.
A rough idea of the make-up of this group may be gained from Table
13. Except for the pay roll figures, the data are from the capital stock and
corporation income tax returns for 1925, during which year corporations
disbursed over 94 per cent of the income for this group. As already
noted, vagaries of accounting practice (for example, in the valuation of
TABLE 13.−MINING PAY ROLLS AND RETURN TO STOCKHOLDERS OF MINING COR-
PORATIONs, UNITED STATEs, 1925°
(1) (2) (3) (4) (5)
Stockholders' Reported
approximate net income Ratio of number
Industry equity in tangi- less tax and Rate of of balance sheets sº
ble assets as of reported return filed to number ğı O
end of year deficits (per cent) of income state- “...”
of dollars)
ments (per cent)
Millions of dollars

Coal. . . . . . . . . . . . . . . . . . . . 2,444 – 28 — 1 101 1, 205
Metal. . . . . . . . . . . . . . . . . . . 1,378 22 2 67 | . . . . .
Oil, gas, and nonmetal . . . . 2, 160 177 8 84 | . . . . .
Quarrying. . . . . . . . . . . . . . . 271 27 10 86 | . . . . .
All other. . . . . . . . . . . . . . . . 1,372 — 10 — 1 60 593
All mining indus-
tries. . . . . . . . . . . . 7, 625 188 2.5 78 1,798
a Stockholders’ equity in tangible assets for the several mining groups is cash, accounts and notes
receivable, inventory, real estate, buildings, and machinery, less accounts and notes payable, bonded
debt, and mortgages. These balance sheet items are from the capital stock tax returns. Each corpora-
tion was required to file a separate capital stock return, whereas, in the case of the income tax, consoli-
dated returns are permitted. Column (2) is based on corporation income tax data. Columns (2) and
(5) are not directly comparable. Column (2) is considerably less than reported net profits (see Table
14), which is not available for the subgroups.
29 Mining corporations follow the practice of paying out considerably more
in dividends than they earn in book profits as reported to the Bureau of Internal
Revenue, this withdrawal of capital presumably representing, in a rough way, deple-
tion of reserves. Possibly this practice serves to mislead investors, and possibly the
unprofitableness is a matter of book-keeping valuations or nominal sales prices by
subsidiaries of vertically integrated holding companies. At all events, this unprofit-
ableness of the industry does not appear to have discouraged production, which
has shown a sure but unsteady growth. (See Tables 14 and 29.)
788 RECENT ECONOMIC CHANGES
reserves) are responsible to an unknown degree for the showing with
regard to profits. The table strongly suggests that coal mining, which
is distinctly the most important constituent industry, has been much
less profitable than the average, while oil and gas and quarrying corpora-
tions have been doing fairly well, but different rates of return are partly
owing to the varying proportion of income statements for which balance
sheets are available.
One further feature of the mining income statement deserves a word
of comment. The proportion of total pay roll going to salaries is only 9
per cent, whereas in manufacturing it was over 22 per cent in 1925.
In part at least, this reflects an industrial organization in which the
individual worker receives less in the way of supervision, and the rôle of
management plays a relatively smaller part, than in other forms of
corporate enterprise.
Several important phases of the development of the mining industries
are shown in Table 14. A large proportion of the disbursed income goes
to employees, slightly larger now than before the war. This proportion
is smaller for mining than for manufacturing, 75 per cent as compared
to 85 per cent for the latter. On the other hand, the return to hired
capital (rent and interest) is larger than in manufacturing and even
than in transportation, the percentage for the transportation group
being only 13.3 in 1925. The importance of this item is interesting
because of the high risks in this industry, as is also the fact that both
royalties and interest on loans (which are largely short term) vary from
year to year with the conditions of the industry. While the average
annual earnings per wage employee attached to the industry also fluc-
tuate considerably from year to year, mining wage employees in recent
years, according to King's estimate, have been better off in comparison
to prewar conditions than have those in all nonagricultural industries,
in spite of considerable unemployment. This improvement has not
attracted employees into the industry, the estimated number showing
no material change in 1926 from the prewar figure. But averages are
likely to be misleading. Earnings in certain portions of the bituminous
coal industry have not been such in the last few years as to attract
new workers.
The growth of mineral production in relation to profits has been noted.
It is interesting to compare the growth of production with total income
realized from the industry, corrected for changes in value of the dollar
to the income recipients. The year-to-year changes here show a much
closer correspondence than in the case of agriculture, but the trends
show a wide divergence. Production has apparently grown much more
rapidly than deflated income. This suggests that here also the decline
in proportion of the total national income disbursed by this industry,
as compared to 1913, is partly a matter of money remuneration per unit
TABLE 14.—ANALYSIs of INCOME REALIZED FROM THE MINERAL ExTRACTIVE INDUSTRIES,” UNITED STATEs, 1913–1914 AND
1918–1927
Cash
dividends
and profits
withdrawn
Average annual wage
per wage employee
Nonagri-
cultural
industries
Mining
Per cent of total income realized from
mineral extractive industries
Relative to 1913 = 100
Number of
Wage
workers in
the mineral
extractive
industries
(thousands
of persons)
:
6
:
100 100
87 92
175 159
177 173
227 214
167 164
151 170
218 193
185 190
194 197
d205 d204
d188 d201
100
98
96
100
101
102
Mineral
extractive
industries,
total real-
ized income
in 1913
dollars
Relative to 1913 = 100
Corporate
Production profit after
index” deducting
income tax
(mines,
quarries,
and wells)
(millions of
dollars)."
100
94
123
109
124
102 * * *
110 70
151 9
143 41
150 266
161 305
165
• For qualifications on the validity of data from income tax returns, see note 19. p. 778. * See footnote 7, p. 761.
Year
Wages and
salaries
Rent and
interest
7
8
:
7
1
:
1
1
5
1
4
:
1
4
:
19.
16.
1
3
:
Preliminary estimate.
e Corporation income tax returns
g
790 - RECENT ECONOMIC CHANGES
of output. These results diverge from what the productivity theory,
as formulated above, might lead one to expect, but technological change
and discovery in this field have been disturbing factors.
Manufacturing.—From the point of view of volume of realized income,
manufacturing is the most important of the nine industry groups, and,
apart from the unclassified industries, the most complex. About half
of the revenues which it collects from other groups it pays out to these
groups again as expenses. Of the total realized income (item 3 minus
item 15) labor received nearly 85 per cent in 1925. Salaries were 22.6
per cent of total pay roll, indicating a large attention to managerial
activities. The preponderant importance of the corporate form of
organization is evidenced by the profits items, as is also its more con-
servative management as compared with mining. The following is a
consolidated statement of manufacturing income (in millions of dollars)
for 1925:
1. Revenue from sales to others than manufacturing enterprises. . . 36,347
2. Expenses and dividends paid to other industry groups. . . . . . . . . 18,215
3. Net value produced by manufacturing (total realized income
plus additions to surplus). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18, 132
4. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,898
5. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3, 180
6. Pensions, benefits, and compensation for accidents. . . . . . . . ... * * ~ * 206
7. Rents and royalties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205
8. Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 271
9. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . 14,760
10. Net profits credited to individual stockholders and enterprisers. 3,372
11. Corporation cash dividends to individuals. . . . . . . . . . . . . . . . . . . . 1,958
12. Individual profits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146
13. Total dividends and profits disbursed to individuals. . . . . . . . . . . 2, 104
14. Corporate Savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 178
15. Individual savings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
16. Total added to surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,268
Note.—Item 1 was estimated by adding to the census “value added in manufac-
turing” the value of minerals (mining statement), agricultural products sold (Bureau
of Agricultural Economics), value of imports of crude materials and foodstuffs and
semimanufactured goods, and deducting the values of the chief raw products
exported without manufacturing. Items 14 and 15 are from income tax data; other
items are based on King's estimates.
In view of the wide differences among the types of enterprise which
make up this group, some analysis of the chief constituent classes seems
desirable before considering the changes which manufacturing income as a
whole has undergone in the last few years. A rough attempt to apportion
manufacturing disbursed income in 1925 among 11 classes of establish-
ments is shown in Table 15. Much the largest group is that of metals
3.
TABLE 15.-MANUFACTURING INDUSTRIES IN THE UNITED STATEs: 1925 REALIZED INCOME, 1926 RETURN ON STOCKHOLDERS'
EQUITY, AND GROWTH IN VALUE ADDED 1919–1925, BY GROUPs of MANUFACTURING INDUSTRIES”
(1) (2) (3) (4) (5) (6) (7) | (8) (9) (10) (11)
1925 | 1926
Per cent
Divi- Value Stock- Profi ::::::: Ratio of
Pay rolls Fº 8 dº Total, added in hº Cash * of profits
and _ ] Interest realized manu- divi- - income to
- royal profits . as of deduct
pensions ties with- in COIne factur- end of dends ing tax State- stock-
drawn ing (re- year ments | holders'
lative to with equity
1919 = tabu- (per
100) lated cent)
Millions of dollars Millions of dollars *
1. Food products, beverages, tobacco. . . . . . . . . . . . 1, 213 38 59 308 1,618 103 6,058 327 482 87 8.0
2. Textiles and textile products. . . . . . . . . . . . . . . . . 2, 215 40 34 196 2,485 98 4, 397 185 99 94 2. 3
3. Leather and leather products. . . . . . . . . . . . . . . . . 477 4 6 42 529 84 868 33 40 96 4.6
4. Rubber and rubber products. . . . . . . . . . . . . . . . . 256 6 12 12 286 102 853 41 44 86 5.2
5. Lumber and lumber products. . . . . . . . . . . . . . . . 1,305 9 23 121 1,458 112 2,710 124 95 91 3.5
6. Paper, paper products, and pulp goods. . . . . . . . 352 5 10 67 434 117 1,444 56 101 95 7.0
7. Printing and º: * * * * * * * * * * * * * * * * * * * * * 733 38 8 97 876 162 1, 509 122 177 88 11.7
8. Chemicals and allied products. . . . . . . . . . . . . . . . 678 18 38 352 1,086 120 9,090 545 824 88 9. 1
9. Stone, clay, and glass. . . . . . . . . . . . . . . . . . . . . . . 625 2 6 84 717 151 1,682 102 156 91 9.3
10. Metal and metal products. . . . . . . . . . . . . . . . . . . 4, 851 27 69 735 5,682 115 15,654 890 1,472 92 9.4
11. Other manufactures. . . . . . . . . . . . . . . . . . . . . . . . . 1, 579 18 6 90 1,693 91 2,009 119 50 88 7.6
12. Total manufactures. . . . . . . . . . . . . . . . . . . 14, 284 205 271 2, 104 || 16,864 111 46, 274 2, 544 3, 643 90 7. 9
• In attempting to apportion the estimate of income in manufacturing to the chief constituent groups of industries (columns (1) to (5)), census data
were used in the case of pay rolls and pensions, and rent; and income tax data in the case of interest and dividends. s a more detailed classification is
available in the case of the census, the income tax classification was used. The census data were grouped as follows: 1, Food and tobacco manufactures;
2, textiles and their products; 3, leather and its products; 4, rubber and its products; 5, lumber and wood products, except pulp goods; 6, pulp goods, paper,
and paper products; 7, printing and engraving; 8, chemicals; 9, stone, clay, and glass manufactures; 10, iron and steel, other metals, machinery, motor vehicles
and their bodies, and locomotives; 11, other transportation equipment, musical instruments, railroad repairs, and miscellaneous manufactures. Following the
income tax classification, ship construction was omitted, although it is included with manufactures in King's estimates; but this is a small item, less than one-
half of 1 per cent of all value added in manufacturing. The census data so grouped are only roughly comparable with the income tax data, since the former refer
to separate “establishments,” while in the latter a highly integrated corporation as a whole is put into the class in which the bulk of its output falls. Moreover,
the income tax returns refer to corporations only, while the census includes all types of enterprise.
The procedure followed was to prorate King's estimates for pay roll, rent, interest, etc. on appropriate data. Pay roll was prorated on the census
data for wages. Factory rent in 1919 for each of the 11 groups was estimated from rents for those constituent industries having a value-product (that is,
value added by manufacture) of over $100,000,000, the unassigned portion of total rent being distributed on the basis of value added. Value added in 1925
and 1919 was then used to estimate 1925 factory rent by groups, and King's estimate of total rent was prorated on these estimates. Interest was prorated
on the income tax item interest paid, less interest on Government bonds received. Profits withdrawn was prorated on cash dividends less dividends received.
Column (6) is based on the census, and columns (7) to (11) are from the corporation income tax returns.
For qualifications on the validity of data from income tax returns, see note 19.

792 RECENT ECONOMIC CHANGES
and their products. This group includes, in addition to raw and semi-
finished metal products, machinery, motor vehicles, and locomotives.
The textile and textile product industries disburse nearly half as much
income as the metals group, while food, beverages, and tobacco manu-
factures, and lumber and wood products manufactures make up two
groups, each about one-third the size of the metal industries. It is to be
expected that the miscellaneous group of “all other manufactures”
should rank highest in the proportion of income disbursed to labor, and
lowest in that disbursed to capital, for it includes many small-scale
enterprises which do not make use of elaborate plant and equipment.
The leather, lumber, rubber, and textile industries also show a large
ratio of pay roll to total income. The chemicals group is at the other
extreme, petroleum refining and gas plants, with their heavy capital
investment, being the two largest constituents of this group. The
food, beverages, and tobacco group also shows a relatively high pro-
portionate return to capital. The highest proportionate return to hired
capital (that is, ratio of rent and interest to total realized income) are
in the rubber and food industries, the former actually showing a larger
return to hired than to owned capital. Accounting practices are far
from uniform in this field, and any attempt to compare rates of profit is
necessarily hazardous. But some of the vagaries of individual account-
ing are moderated by assembling figures for a large number of enterprises,
and such a comparison for corporations is offered for what it may be
worth. Printing and publishing have apparently been the most profit-
able, and their value product has grown the most rapidly, while the
textile industries were least profitable in 1926, according to this showing,
and their value product declined between 1919 and 1925.
Although manufacturing is commonly thought of as a type of business
involving heavy capital investment, it is evident that property receives
only a small proportion of total realized income. The share of hired
labor has been over 80 per cent since the war. It showed a sharp drop
in 1921, then rose again in 1922 to 86 per cent, and has since declined,
except for 1924, but is still distinctly above the prewar level. Labor
evidently bore more than a proportionate burden in the depression of
1921, but certainly did not do so in the 1924 decline. The increase
in the share of hired labor over the prewar figure is at least partly
accounted for by the increase in average annual earnings of wage workers,
which doubled in 12 years. But annual earnings have risen since 1922,
while labor's share has fallen. This paradox is hardly resolved by noting
the movement of prices. Manufactures’ sale prices for many products
declined after 1923. All these circumstances point to an increase in the
efficiency of management and improvement in processes of production
during the last few years. The return to borrowed capital represents
a small and declining proportion of total realized income, though there
THE NATIONAL INCOME AND ITS DISTRIBUTION 793
TABLE 16.-ANALYsis of INCOME REALIZED FROM MANUFACTURING INDUSTRIES,
BY TYPEs of INCOME RECIPIENT, UNITED STATEs, 1913–14 AND 1918–1927
Average annual
Divi- Wage per wage Total Manu-
dends employee Manufac- manu- facturing
Share Rents, and turing facturing corporate
of em- royalties, fit produc- realized profits
ployees interest pronus tion income after de-
Year with- * - -
. drawn Manu- Nonagri- index" (1913 ducting
facturing cultural dollars) tax
industries (millions
| - of
dollars)b
Per cent of total realized income! Relative to 1913 = 100
1913. . . . . . . . . . 80 4 16 100 100 100 100 | . . . . .
1914. . . . . . . . . . 79 5 16 90 92 92 93 . . . . .
1918. . . . . . . . . . 83 2 15 168 1.59 119 132 is a e º 'º
1919 . . . . . . . . . . 85 2 13 180 173 116 124 a e e º º
1920. . . . . . . . . . 88 2 10 235 214 120 131. . . . . . .
1921. . . . . . . . . . 84 3 13 149 164 92 103 * * * * *
1922. . . . . . . . . . 86 3 11 167 170 120 115 2, 528
1923. . . . . . . . . . 85 3 12 200 193 141 137 3,419
1924. . . . . . . . . . 86 3 11 193 190 132 132 2,649
1925. . . . . . . . . . 85 3 12 200 197 148 134 3,640
1926. . . . . . . . . . c84 | c.3 c 13 c206 c204 154 • * * | * * * . .
1927. . . . . . . . . . * - - * * * e tº º c203 c201 151
a See footnote 7, p. 761.
* Corporation income tax returns.
• Preliminary estimate.
are temporary rises in bad years, 1914, 1921, and 1924. The war time
increase of prices no doubt is partly responsible for this decline, which is
chiefly in the interest payments going to bondholders—a fixed return
that has not increased at the pace set by the other income-producing
shares. The recent growth in the proportion of income disbursed to
stockholders is a further evidence of improved efficiency, but it has not
yet brought this share back to the prewar figure. There was a setback
in 1924, but the growth of dividends, and of profits as shown by the
income tax returns, does not confirm the theory that prosperity has been
profitless.
Average annual wages per wage employee have kept close pace with
annual wages of all nonagricultural wage workers, so far as their general
trend is concerned, but they have fluctuated more widely. The 100
per cent rise above the prewar figure represents a distinct increase in the
purchasing power of labor income, but Security against year-to-year
fluctuations has certainly not been achieved.
A comparison of the year-to-year movements of the physical volume
of manufacturing production with those of total disbursed income,
measured in dollars of constant purchasing power to the recipients, shows
794 RECENT ECONOMIC CHANGES
a fairly close agreement on the whole. The dip in the income index in
1919 is greater than that in the production index, while the 1922 rise in
the latter is considerably greater, and so also is the dip of production
in 1924. The longer-time movements do not agree so well. Deflated
income rises more steeply to the 1918 peak, and from 1923 to 1925 it is
only slightly above the war-time level, while production is distinctly
higher. The rapid growth of ouput after 1921 seems a fairly convincing
confirmation of the view that there has been a great improvement in
efficiency, and suggests that while manufacturing accounts for about the
same proportion of our national income in 1925 as in 1913, its importance
in terms of physical output has increased relative to other industries,
while its relative remuneration per unit of product has declined.
Construction.—The construction industry occupies an intermediate
position between mining and manufacturing on the one hand and agri-
culture on the other, in that between one-half and two-thirds of the value
of its output is produced by individual enterprises and other noncorporate
forms of organization. As data for estimating both wages and profits
withdrawn by individual enterprisers are not very satisfactory, the
estimate is probably less accurate than that for agriculture. The return
to borrowed capital is an extremely small part of total realized income
in this industry—less than 1 per cent (except in the depression year
1921). This is presumably associated with the fact that the investment
in fixed property for this industry is smaller than its current assets. The
following is a consolidated statement of construction income (in millions
of dollars) for 1925:
1. Corporate revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,306
2. Individual revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,670
3. Gross value of construction work. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,976
4. Expenses paid to other industry groups. . . . . . . . . . . . . . . . . . . . . . . . 3,408
5. Net value product of construction (realized income plus additions
to surplus). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 3,568
6. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,251
7. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
8. Interest (other than that paid to banks) . . . . . . . . . . . . . . . . . . . . . . . 30
9. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,570
10. Profits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 998
11. Cash dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
12. Enterprisers’ profits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 819
13. Total profits withdrawn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 889
14. Business savings (added to surplus). . . . . . . . . . . . . . . . . . . . . . . . . . . 109
... NoTE:—Data furnished by Willford I. King.
THE NATIONAL INCOME AND ITS DISTRIBUTION 795
While salaries were only 11.4 per cent of total pay roll in 1925, a
figure but slightly larger than for mining, it must be remembered that a
large part of the reward for supervisory services is included in individual
enterprisers’ profits. This labor income element in individual profits
also accounts for the fact that individual profits withdrawn are more than
10 times corporate cash dividends, although corporate enterprises did
half as much business as the other types of enterprise.
The proportion of total realized income going to employees varies
from year to year in a somewhat irregular manner, and shows a slight
downward trend. The 1925 figure, 84.7 per cent, is somewhat smaller
than the corresponding percentage for manufacturing, but a fairer com-
parison would again involve allowance for enterprisers’ labor income.
This would bring the proportion of labor to total realized income up to
over 92 per cent, if we assume that the cash return to individual capital
corresponding to corporate dividends bears the same ratio to value of
construction by noncorporate enterprise as dividends bear to value of
corporate construction. Labor income is probably a more important
item in construction than in any of the other important industry groups,
except perhaps the unclassified industries.
The average annual labor income per wage employee attached to the
industry has risen more rapidly than has that for all nonagricultural
industries, according to King's estimates. The fluctuations in wage
income correspond on the whole with those of the volume of construction
business, which was small during the World War and showed a rapid
recovery from the postwar depression. The number of employees has
varied in response to the fluctuations of wage income, but, according to
King, the postwar increase in number of employees” still leaves a smaller
number attached to the industry in 1927 than in 1913. This suggests,
among other things, more regular employment and the resort to machine
methods, but the estimates of pay rolls and number of employees may
well be seriously in error. If the dependent estimates of average annual
wages are to be relied upon, wage labor income has risen somewhat less
rapidly than union labor costs per hour and both have outstripped the
costs of materials since 1921.
Apparently the construction industry has been more profitable in the
last few years than the average for all industries, if the income tax figures
for corporations are to be depended upon as an index.” As already
noted, the capital investment figures are incomplete, and they may be
less complete for this industry than for others, but the indications are
that construction has been fairly profitable.
30 In this connection it should be borne in mind that the basic data for estimating
pay rolls and number of employees (and consequently average annual wages) are far
from satisfactory, so that these estimates are subject to the possibility of appreciable
€I"I'Or.
31 See Table 10,
TABLE 17.—ANALYSIs OF INCOME REALIZED FROM THE CONSTRUCTION INDUSTRIES, UNITED STATEs 1913–14, AND 1918–1927
q) || @ | @ | @ (5) (6) (7) (s) || 0 (10) (11)
Divi- Average annual w
dends per *: º
Total and Total tº
pay roll Interest profits Union Number of Index of Index of realized .
with- wages per Wage wholesale physical income in ".d S º
Year | drawn hour in employees, prices of | volume of 1913 *
| Const Nonagri- building construc- building construc- dollars, i. p
onstruc- cultural trades” tion materialsº tion construc- ***.
tion e º * tion (mil-
industries (1919 = tion lions of
Per cent of total realized 100)b (1913 =
- - dollars)"
income, construction 100)
Relative to 1913 = 100
1913. . . . . . . . . . . . . . . . . . 76, 8 ... 8 22.4 100 100 100 100 100 100
1914. 62.0 1. 3 36.7 71 92 102 100 93 91
1918. . . . . . . . . . . . . . . . . . 83. 1 ... 6 16.3 160 159 126 53 174 - - - 51
1919. . . . . . . . . . . . . . . . . . 78.7 ... 6 20. 7 169 173 145 72 204 100 68
1920. 76. 4 ... 8 22.8 216 214 197 F7 264 80 61
1921. . . . . . . . . . . . . . . . . . 75, 7 1.4 22.9 194 164 200 57 172 85 64 º e -
1922. 76. 6 , 9 22. 5 195 170 187 73 169 120 87 37
1923. 76.3 . 9 22.8 206 193 207 78 192 121 96 67
1924. 70.5 ... 8 28.7 216 190 224 82 181 129 116 84
1925. 73.4 .9 25.7 219 197 233 98 179 159 132 107
1926. d75.4 d. 8 d23.8 d229 d204 248 97 176 158 105
1927. d73.8 d. 7 d25.5 d235 d201 253 95 164 158
a United States Bureau of Labor Statistics.
* Columns (6) and (8) expressed as relatives to 1923 were combined with weights of 6 and 4, respectively, to give an index of building costs. The dollar
volume of construction was deflated by this index.
volume of building materials produced, constructed by the writer, expressed as relatives to 1923 were combined with weights of 50, 25, and 25, respectively,
to make the index of the physical volume of construction.
* Corporation Income Tax Returns.
d Preliminary estimate.
Deflated dollar volume, volume of floor space in construction contracts (Dodge), and an index of physical
#
THE NATIONAL INCOME AND ITS DISTRIBUTION 797
No index of physical volume of construction is satisfactory. The
Composite index here offered shows a fairly close agreement in year-to-
year changes with the total disbursed income measured in dollars of
constant purchasing power to the income recipients. But if the physical
volume index is to be relied upon, realized income measured in these
corrected dollars has risen more rapidly than physical output. Probably
this means, in part at least, an increase in the equipment of buildings
with modern conveniences not represented in the physical volume index.
In part also, it may be a reflection of the strong bargaining position which
this industry occupies in our economic organization. The increase in
wage rates and the high returns are consistent with such an hypothesis.
Privately Operated Transportation, Communication, and Electric
Power Industries.—This group does not include the production and
distribution of gas, which is included in mining and manufacturing, nor
utility enterprises operated by the government. And a number of other
privately operated utilities are treated in the unclassified group—pipe
lines, water works, local carting and storage, and taxicabs. Yearly
data for steam railroad transportation and for telephones and telegraphs
are such as to make possible fairly accurate estimates of realized income
for these industries. Census data at five-year intervals are available
for street and electric railways, and for electric power. Except for the
decennial census, the information about water transportation is about as
unsatisfactory as that for merchandising and the unclassified industries
discussed below.
The income statement shows a relatively small proportion of the total
revenue for this group paid out to other groups. The proportion of
total pay roll going to salaries is high as compared to other groups, 30
per cent in 1925, indicating the importance of managerial and technical
labor and the keeping of records. The large return to borrowed capital
is also characteristic of this group, dividends and additions to surplus
being not much greater than rent and interest. The policy with regard
to cash dividends is evidently conservative, if 1925 is at all typical.
The following is a consolidated statement of income for the transporta-
tion and utilities group (in millions of dollars) for 1925:
798 RECENT ECONOMIC CHANGES
1. Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,601
. Expenses and dividends paid to other industry groups. . . . . . . . . . 4,526
2
3. Net value produced by industry group (realized income plus
addition to surplus). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,075
4. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,545
5. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,482
6. Pensions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
7. Rent paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
8. Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897
9. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . 6,008
10. Net profits for group credited to individuals. . . . . . . . . . . . . . . . . . . 1,067
11. Net cash dividends paid and profits withdrawn by individual
enterprisers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 709
12. Added to surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358
Note.—Item 1 represents railroad, express, and net Pullman revenues; telegraph
and telephone revenues estimated from Interstate Commerce Commission reports of
revenues for 1922 and 1925, and 1922 census figures; electric power revenues esti-
mated from revenues of companies reported in the Electrical World, 1922 and 1925,
and 1922 census; water transportation revenues estimated from King's estimate
of pay roll and the 1923 Federal Trade Commission estimates of revenues. Item
12 is based on income tax returns; other items are based on King's data.
Before proceeding to an analysis of the recent changes in the income
streams for this group, it may be well to survey the realized income of
the different constituent industries for 1925. It appears from Table 18
that steam railroads account for over 55 per cent of the total realized
income and of wages and interest. The large figure for dividends of
electric light and power companies suggests a less conservative policy
for this rapidly expanding industry than that followed by other utilities.
Water transportation is next to steam railroads in importance, though
the incomes from power and street railways and telephones are nearly
as large. The chief peculiarities of these industries are the large pro-
portion of disbursed income going to labor in the case of water trans-
portation, the express business, and the Pullman Co., and the large
proportion going to capital in the case of electric power. The table also
shows the rate of earnings on the book value of stockholders’ equity for
several of the groups, but it may be doubted whether book valuation is
a reliable basis on which to calculate percentage of earnings, except in
the case of the railroads.
The proportion of total realized income going to labor is lower for the
transportation and utilities group of industries than for manufacturing
or mining, on account of the large investment of capital. Property
received about one-third of the total realized income in 1913, and a quarter
in 1925. It is interesting to note, however, that if we prorate the deficit
THE NATIONAL INCOME AND ITS DISTRIBUTION 799
TABLE 18.—INCOME REALIZED FROM SEVERAL PRIVATELY OPERATED TRANSPORTA-
TION AND PUBLIC UTILITY INDUSTRIES IN THE UNITED STATES IN 1925, AND
RETURN ON STOCKHOLDERs' Equity, 1926
(In millions of dollars)

a) || @ | @ () | @ | @ | Q) (8)
Book Ratio
Rents value of pro-
Total is a Total of stock- | Pro-
and Inter- | Divi- - > fit to
share of realized holders fits,
royal- est dends | . - stock
employees e income equity, 1926
ties Jan. 1 (per
1926 cent)
1. Steam railway companies 3,076 0 539 287 3,902 a 11, 503 a809 7. O
2. Pullman company. . . . . . . . 34 0 0 5 39 b168 b14 8.5
3. Express companies. . . . . . . . 116 3 0 1 120 c38 c2 5. 8
4. Telegraph companies. . . . . . 99 5 3 15 122 d395 d15 3. 8
5. Telephone companies. . . . . 452 7 50 88 597 e1, 209 e155 12 8
6. Electric light and power
companies. . . . . . . . . . . . . 275 O 166 238 679 | . . . . . .
7. Street and electric railways 475 3 128 65 671 | . . . . . .
8. Water carriers. . . . . . . . . . . . 566 0 11 10 587 | . . . . . .
9. Total. . . . . . . . . . . . . . . . . . . f5,093 f 18 f897 709 f6, 717 | . . . . . .
a Class I steam railways.
o Pullman Co. profits for fiscal year ended July 31, 1926, book values as of July 31, 1925, annual
reports.
• American Railway Express Co., annual reports.
d Western Union Telegraph Co., annual reports.
* American Telephone & Telegraph Co., annual reports.
f Cf. income statement for transportation and utilities group, items 4 plus 5 plus 6; 7; 8; 3 minus 12.
Data are furnished by Willford I. King.
for agriculture as between estimated normal return to the independent
enterpriser's labor and that to his capital, the proportion of net realized
income of agriculture going to property is nearly 36 per cent in 1926—a
larger figure even than that for the public utility group. The increase
in proportion of labor income for the public utility group to nearly 83
per cent in 1920 and its decline since, and the converse changes in pro-
portion of property income, reflects the more rapid rise of wages than
of rates before 1921, and their subsequent more prompt and rapid
decline. Table 19 shows the proportion of labor to total income for the
whole utility group, and indexes of hourly wages and transportation rates
for steam railroads. Hourly wages probably fluctuate less widely with
changes in business conditions than wages per unit of performance. The
railroad transportation rate index here shown is subject to the limitation
that it makes no allowance for changes in composition of traffic as
between those kinds bearing high, and those bearing low, rates. The
continued decline in proportion of disbursed income going to labor in
the last few years may be due to an increase in operating efficiency and
to additional investment. As might be expected, during a régime of
rising prices, the proportion of return to borrowed capital declines until
800 RECENT ECONOMIC CHANGES
1920. The rise in this proportion from 1920 to 1922 is partly due to the
decline in income disbursed to labor, but interest-bearing obligations
have shown growth throughout the entire period.
TABLE 19.-ANALYSIS OF INCOME REALIZED FROM PUBLIC UTILITY ENTERPRISEs, BY
TYPEs of INCOME RECIPIENT, UNITED STATEs, 1913–14, AND 1918–1927
i Average annual g
s & Steam railways
Rent Divi- wages per wage
Total * | dends employee | -------
| royal- |
share of ties and Number
employ- Il d profits Nonagri- of wage | Average
Year €eS interest with- Utilities cu ltural employ- wages Rate
! drawn indus- ees, utili- per index
tries ties hour (1913 =
- | (1916 = 100) a
Per cent of total income Relative to ; 100)
realized from utilities 1913 = 100
Iola 67 19 14 100 100 100 * * * 100
1914. . . . . . . . . . . . . . .' 66 19 15 95 92 | 101 * * * 101
1916 * * | 100 101
1918. . . . . . . . . . . . . . . 77 13 10 180 1.59 105 ſ 162 124
1919. . . . . . . . . . . . . . . 79 12 9 189 173 | 112 - 200 143
1920. . . . . . . . . . . . . . . 83 10 7 236 214 119 239 154
1921. . . . . . . . . . . . . . . 80 13 7 184 164 . 117 - 236 182
1922. . . . . . . . . . . . . . . 78 14 8 174 170 - 116 | 217 171
1923. . . . . . . . . . . . . . . 79 13 S 197 193 | 117 215 161
1924. . . . . . . . . . . . . . . 77 14 9 192 190 116 220 162
1925. . . . . . . . . . . . . . . 75 14 11 205 ig iio 223 iso
1926. . . . . . . . . . . . . . . b73 b 14 b13 b211 b204 111 | 223 : 158
1927. . . . . . . . . . . . . . . * * * * - - - - * & s º b212 b201 1 10 227 . s
a See Table 20, footnote a.
* Preliminary estimate.
The average annual labor income per wage employee attached to
this group of industries rose more rapidly up to 1920 and then declined
further than the annual wages of all nonagricultural wage employees, so
that since 1921 the net increase over 1913 has been only slightly greater
in the utility group than in other lines. The declines in depression years
are only slightly less marked than for all nonagricultural wage workers,
1924 showing a definite setback in the upward movement since 1921.
The fact that annual labor income in the utility group apparently rose
from 1921 to 1923, while wage rates in the railroad industry declined,
suggests a fuller employment of labor. Conversely, the declines in 1921
and 1924 appear to be declines largely in employment, and labor was
presumably less fully employed in 1925 than in the peak year 1920. The
number of wage employees attached to the industry fluctuates somewhat
similarly to average annual earnings, except that it has declined con-
siderably since 1923. The growth in annual earnings and decline in
THE NATIONAL INCOME AND ITS DISTRIBUTION 801
number of employees in these last few years may mean a change in type
of employee.
No satisfactory general index of production for this group of utility
industries has been constructed, but we may compare realized income of
two subgroups, measured in dollars of constant purchasing power to the
recipients, with the production indexes for these two subgroups. Col-
umns (1) and (2) of Table 20 show these data for steam railroads. It is
to be expected that the physical volume of traffic should rise more rapidly
TABLE 20.—RAILROAD AND ELECTRIC PoweR WOLUME OF SERVICE AND DEFLATED
INCOME; AND RETURN To RAILROAD STOCKHOLDERs, UNITED STATES, 1913–14,
AND 1918–1927

(1) (2) || @ @ (5) || @ (7)
Electric power
Total Capital companies
income Index of stock and e Net ºº
realized railway surplus IIlCOIne of stock- Total
Year from rail- traffica of Class I of Class I holders' realized Produc-
roads (1913 railroads railroads” olders income tion
dollars) as of Jan. 1 equity, (1913 index"
Class || | dollars) |
(per cent)
º 4 + 3 c
º Millions of dollars *:
1912. . . . . . . . . . . . • * * 96 | . . . . . . . - - - - - - - - 100 100
1913. . . . . . . . . . . . 100 * 100 | . . . . . . . d486 - - - - 108
1914. . . . . . . . . . . . 96 . 95 d 8,728 d351 d4.0 116
1917. . . . . . . . . . . . - - - w - - • * - - - - - - - - - - - - - 127 220
1918. . . . . . . . . . . . 106 127 9,949 287 2.9 124
1919. . . . . . . . . . . . 98 116 10,643 448 4.2 123 - - -
1920. . . . . . . . . . . . 106 129 10,013 431 4.3 129 315
1921. . . . . . . . . . . . 96 98 10,228 314 3.1 164 - 295
1922. . . . . . . . . . . . 100 105 10,341 370 3.6 196 348
1923. . . . . . . . . . . . 110 126 10,370 555 5.4 225 407
1924. . . . . . . . . . . . 107 118 10,716 558 5.2 278 435
1925. . . . . . . . . . . . 107 124 11, 141 701 6. 3 303 487
1926. . . . . . . . . . . . - - - 131 11, 503 809 7.0 553
1927. . . . . . . . . . . . - - - 125 11,921
* This index of physical volume of railroad traffic was compiled from three Interstate Commerce
Commission series: (1) originating tons of revenue freight; (2) ton-miles of revenue freight; (3) passen-
ger-miles. Weights of 4, 4, and 2, respectively, were applied to the figures expressed as relatives to
1919. The railroad rate index represents operating revenues divided by the traffic index, and expressed
as relatives to 1913 as 100 per cent. The index of average hourly compensation of railroad employees
is from Interstate Commerce Commission figures. -
* Columns (3) and (4) are from the Interstate Commerce Commission. Nonoperating subsidiaries
are excluded. The available data on income and stockholders’ equity are only approximately compar-
able, partly because the balance sheets are only for concerns in operation at the end of the year and
partly because of lack of uniformity in methods of handling depreciation.
• Represents kilowatt-hours produced according to the censuses for 1912, 1917, and 1922. Other
years are by interpolation on data from the Geological Survey, published in the Survey of Current
Business.
d Fiscal year ending June 30.
802 RECENT ECONOMIC CHANGES
than deflated income during the war years. The discrepancy decreases
after 1920, but traffic continues on a higher level than income, relative
to the prewar figure. The yearly fluctuations agree fairly well except
for 1925. The increased return on investment (column 5) and the
declining or constant rates (Table 19) suggest a considerable improve-
ment in operating efficiency, as well as in volume of traffic.
Columns (6) and (7) of Table 20 show deflated realized income for
the electric power industry, and kilowatt hours produced by central
stations. In this rapidly developing industry, output has increased
considerably faster than realized income.
Banking.—The banking group includes only those enterprises doing a
commercial or savings bank business. Revenue and expense statements
are available yearly for national banks, and balance sheets for all banks,
which afford a better basis for estimating realized income than is available
for any of the other nine industry groups. The least reliable income
item for this group is “interest paid to individuals,” since it is difficult to
separate this from interest paid to other industry groups. Banks follow
a conservative practice with respect to the payment of dividends, so
that the total income is considerably larger than disbursed income,
some 16 per cent larger in 1925. The following is a consolidated income
statement (in millions of dollars) for banking for the year 1925:
1. Interest on earning assets and miscellaneous income (includes some
interbank interest on deposits). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,074
2. Interest, etc., and dividends paid to other industry groups. . . . . . . . . . 1,690
3. Net value product of industry (realized income plus additions to
surplus) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,384
4. Total pay roll. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 596
5. Interest paid to individuals on savings accounts. . . . . . . . . . . . . . . . . . . 329
6. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925
7. Net profit to individual stockholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 459
8. Cash dividends paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 170
9. Added to surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289
NoTE.—Based on King except for items 1 and 9 which were estimated by
following his methods.
The percentage of estimated total realized income paid to labor
shows an increase in the war period, a falling off in 1922, followed by a
gradual and partial recovery. The 1922 decline was relative only, for
even pay roll increased as against 1921; both pay roll and average
annual earnings have grown steadily since 1914. The growth of average
annual earnings for this group outstrips that of all the others. It
began with a modest figure, $925, but in 1926 was nearly $2,250 per
annum, according to King's estimates.”
* Data for estimating number of employees are not very satisfactory.
É

TABLE 21.-ANALYSIS OF INCOME REALIZED FROM THE BANKING GROUP, UNITED STATEs, 1913–14 AND 1918–1927
(1) (2) (3) (4) (5) (9) || @ | @ @ do an
|
- - - Average salary per Total real- nº º
Salaries Interest | Dividends salaried employee Number of ized income stock. Profits Dividends . º
Year employees, in 1913 lº, º: O
* All banking dollars, equity aS For year beginning CK-
Bankin & º º on July 12 holders’
Per cent of total income realized g industries banking uly July 14 º:
from banking (per cent) a
Relative to 1913 = 100 Millions of dollars
1913. . . . . . . . . . . . 35 38 27 100 100 100 100 | . . . . . 0 - 9 * tº e e tº º
1914 36 39 25 99 102 103 99 2,046 127 114 6. 2
1918. . . . . . . . . . . . 50 35 15 157 119 111 82 2,258 240 136 10.5
1919. . . . . . . . . . . . 56 33.5 10.5 187 136 120 79 2,357 282 148 12.0
1920. . . . . . . . . . . . 55 31 14 203 163 131 84 2,618 216 158 8. 3
1921. . . . . . . . . . . . 57 26 17 214 159 140 105 2,795 184 166 6.6
1922. . . . . . . . . . . . 53 28 19 215 161 143 126 2,848 204 179 7.2
1923. . . . . . . . . . . . 53 29 18 218 172 151 131 2,876 196 164 6.8
1924. . . . . . . . . . . . 54 30 16 226 178 153 135 2,917 224 165 7.7
1925. . . . . . . . . . . . 54 30 16 236 183 157 140 2,970 249 174 8.4
1926. b54 b30 b16 b242 b190 163 3,090 252 181 8.2
1927. . . . . . . . . . . . b55 b30 b15 b244 166 3,239
a Columns (8) to (11) are from the Report of the Comptroller of the Currency.
b Preliminary estimate.
804 RECENT ECONOMIC CHANGES
There is no satisfactory index of the physical volume of production
of banking Services. The estimated number of employees may give
Some indication of this growth, though the estimate does not rest on a
Secure basis, and in so far as efficiency of bank operation has increased,
it would suggest a smaller increase in services than has actually taken
place. For the year-to-year changes it is probably a more satisfactory
measure, though even here it is far from what might be desired. Cer-
tainly number of employees varies in little relation to the amount of
realized income, measured in dollars of constant purchasing power to the
recipients during the war, when the latter actually declined. Since 1920
they have risen together.
While the proportion of disbursed income going to stockholders in
dividends falls off in 1914 and 1924, it actually increases in 1921 and 1922.
With the rapid increase in salaries, the ratio of dividends to total income in
1925 is smaller than before the war. For national banks we have a
complete and fairly statisfactory record not only of dividends but of the
amount and rate of profits. The failure of dividends to drop in 1921 and
1922, when profits declined sharply, is striking evidence of the extent to
which dividends have become a fixed charge upon this industry. The
fiscal year 1924 appears to mark the inauguration of a more conservative
policy with respect to dividends than that which had been inherited from
the exceedingly profitable postwar years. The rate per cent of profit upon
the book value of the stockholders' equity at the beginning of the fiscal
year reached its peak in the fiscal year 1920, dropped sharply to about
6.5 per cent in the year ended June, 1922, and has since suffered declines
from an upward trend in 1924 and 1927. For a public service industry,
the accounts of which are carefully regulated, banking appears to be
fairly profitable.
Wholesale and Retail Trade.—The approximate relations among the
various income streams for merchandising in 1925 are shown in the
income statement for this group of enterprises. A large proportion of
total revenue from sales is paid to other industry groups; for the whole-
sale trade alone the proportion would be much higher. The doubtful
item, additions to surplus, is small, so that practically the whole value
product of the group represents realized income. Pay roll is slightly
less than half of this total, while dividends and profits withdrawn are
over 40 per cent of realized income. The large item, profits withdrawn
by individual enterprisers, includes labor income to an extent not accu-
rately determinable. The size of this item indicates the predominance of
individual enterprise in this field. None of the items in this statement
rests on a very secure basis, except perhaps corporate dividends. The
following is a consolidated income statement (in millions of dollars)
for mercantile enterprises in the year 1925:
THE NATIONAL INCOME AND IT'S DISTRIBUTION 805
1. Gross revenue from sales (retailers only). . . . . . . . . . . . . . . . . . . . . . 53,487
2. Expenses (cost of goods sold, etc.) and dividends paid to other
industry groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41, 115
3. Net value product of industry group (realized income plus addi-
tions to surplus). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,372
4. Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 358
5. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,292
6. Rent paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 735
7. Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 374
8. Total expenses paid to individuals. . . . . . . . . . . . . . . . . . . . . . 6,759
9. Net profit credit to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,613
10. Cash dividends to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 440
11. Individual profits withdrawn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,798
12. Total withdrawals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,238
13. Added to surplus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
NOTE.--Data furnished by Willford I. King.
No separate estimate of total income disbursed by wholesalers and
retailers is available for 1925. In 1923, according to the Federal Trade
Commission, retailers produced $6,100,000,000 of accrued income as
against $2,500,000,000 produced by wholesalers.” Total sales in 1925
were $23,400,000,000 for wholesalers, according to King, and $53,500,000,-
000 for retailers. Practically 60 per cent of the wholesale sales were
estimated to be by corporations as against 67 per cent of the sales in
the retail trade.
Table 22 shows that the share of disbursed income going to employees
has been gradually increasing, though since the 1922 peak it has fallen
off slightly. One factor making for this increase has been the integration
of industry; individual enterprises have given place to hired employees.
In 1913, corporate sales were only one-fourth of the total, while in 1925
they were over one-third. This increase has been most rapid in retailing,
where labor is a more important factor. In 1913, corporate sales repre-
sented 30 per cent of the wholesale business and only 20 per cent of the
retail business, according to King's estimates. The decline in the pro-
portion of realized income going to labor since 1922, while average annual
wages were rising, is reminiscent of a similar situation in manufacturing.
In absolute amount, both the share of employees and that of borrowed
capital increased during these years, but dividends and profits withdrawn
have increased more rapidly. In some lines the margin between whole-
sale and retail prices has widened, but the rapid growth of profits (which
on the whole have expanded along with dividends and individual with-
33 Sen. Doc. No. 126, 69th Cong., 1st Sess., pp. 320, 324.
S06
RECENT ECONOMIC CHANGES
TABLE 22.—ANALYSIs of INCOME REALIZED FROM WHOLESALE AND RETAIL TRADE,
UNITED STATEs, 1913–14 AND 1918–1926
Average wages Total
Rent Divi- per wage employee i. 8, d Mercan-
* | dends realized Deflated tile cor-
Share | royal- Number income . poration
* and Non- e index of
of em- ties, g of wage in 1913 * profits
e profits agricul- retail
ployees | inter- e Merchan- employ- | dollars, after de-
Year with- 4 & tural trade” &
est dr dizing $ ees, mer- merchan- ducting
8, WIOl indus- * & º
e chandiz- dizing tax
tries g * * * *
lDg (millions
of
Per cent of total realized Relative to 1913 Relative to 1913 = dollars)b
income from trade = 100 100
– -- -- ------ - ---- – –––.--
1913. . . . . . 43 10 47 100 100 100 100 100 |
1914. . . . . . 44 10 46 105 92 103 105 97
1918 . . . . . . 44 10 47 143 1.59 109 102 90
1919 . . . . . . 43 9 48 167 173 112 104 96
1920. . . . . . 48 8 44 195 214 117 99 96
1921. . . . . . 49 10 | 41 186 164 118 108 102 s & s
1922. . . . . . 51 10 39 176 170 133 119 115 629
1923. . . . . . 49 9 42 186 193 153 146 127 854
1924. . . . . . 48 9 43 195 190 149 149 132 725
1925. . . . . . 47 9 44 195 197 155 - 158 139 900
1926. . . . . . c49 10 c41 c208 c.204 159 - - - m e a 761
1927. . . . . . * * * c202 c201 167 :
|
a Deflated index of retail trade is the writer's index (see Harvard Business Review, January, 1929)
deflated by the United States Bureau of Labor Statistics index of living costs, rent excluded.
b Corporation income tax returns.
• Preliminary estimate.
drawals) must be due in part to a more rapid turnover of capital and the
increased efficiency of distribution. -
Perhaps the chief fact of interest about average annual wages per
wage worker in this industry is its stability, if King's estimates may be
relied upon. Annual wages for merchandising rose more slowly during
the war than in other lines, but declined only slightly in 1921 and 1922,
and have since increased steadily. The net increase over prewar is
about the same as in all nonagricultural employments, according to King.
No satisfactory index of the physical volume of goods handled by
middlemen is available. If retail trade, corrected for price changes, is
to be relied upon as a rough upper limit index of such goods handled
(and the physical volume of business handled by the wholesaler has almost
certainly grown less rapidly than that of the retailer), realized income of
middlemen, measured in dollars of constant purchasing power to their
recipients, has increased more rapidly. This tends to confirm the
suggestion already made that the increased proportion of total national
income disbursed by this industry group represents an increased remuner-
ation per unit of goods handled; for which increase a partial explanation
may be found in the increase in hand-to-mouth, small-order buying by
retailers.
THE NATIONAL INCOME AND ITS DISTRIBUTION 807
Federal, State, and Local Governments, and Government Enterprises.
While data for estimating income from governmental activities are far
from Satisfactory, these estimates are probably more reliable for year-
to-year comparisons than those for any other industries except manu-
facturing, banking, and railroad transportation. In the statement,
item 1 is simply a crude estimate to show the order of magnitude of all
government revenues; item 5 includes interest on war loans. No item
is included in these estimates for profit or loss in government enterprises;
the total realized income is simply salaries plus pensions, etc., plus
interest paid to individuals. The following is a consolidated income
statement in millions of dollars for governments, 1925:
1. Approximate total revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 130
2. Paid to other industry groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
3. Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,338
4. Pensions, benefits, and compensation for injuries. . . . . . . . . . . . . . . . 813
5. Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 979
6. Total realized income disbursed by industry group. . . . . . . . . . . . . . 6, 130
NoTE.—Data furnished by Willford I. King, except for item 1.
As might be expected, the proportion of realized income going to labor,
past and present, is high for this industry group, 81.1 per cent as compared
to 84.7 per cent for manufacturing. And Table 23 shows that it was
considerably higher before the war than it is to-day, the decline being
accounted for by the increase in the Federalinterest-bearing debt. During
the war, payments to labor increased rapidly, bringing the proportion
of total realized income going to labor up to over 90 per cent. While
payments to present employees are classed as salaries, because the labor
contract is of a relatively long duration, it is probably better to compare
the trend with urban wages. The average annual salary to government
employees rose steadily, even during the depression years, but had not
caught up to average annual nonagricultural wage income until 1926.
The number of employees reached a minimum after the war peak in
1922 and has grown without setback since. The proportion of all
income disbursed by municipal and other local governments naturally
declined during the war but has increased since 1918, so that the pro-
portions were not far from the same in 1925 as in 1913 for the several
types of government organizations. x - -
While government realized income per capita, in dollars of constant
purchasing power to the income recipients, has fluctuated since the war,
it was nearly as high in 1926 as in 1919 and shows an upward trend since
1920, which is likely to continue. Table 23A shows the distribution of
income in 1925, by types of income and by divisions of government, and
the Federal and local income in 1913. In 1925, interest comes to 21 per
808
RECENT ECONOMIC CHANGES
TABLE 23.−ANALYSIS OF INCOME REALIZED FROM FEDERAL, STATE, AND
LOCAL
Governments, UNITED STATEs, 1913–14 AND 1918–1927
Salaries Interest Average annual s
labor income per— City,
village, State G
Wage | Federal and and Number Govern-
employee dis- school county of gov- ment d
gº in non- bursed district dis- º: realize
Year Per cent of total In eIl agricul- income dis- bursed employ- income
- s eIIl- b d i €68 per
income realized tural Ulrse 1In COIſle -
ployee indus- income capita
from government t us (in 1913
Iſles dollars)
. º - - Relative
Relative to 1913 Per cent of total income
e to 1913
= 100 | realized from government = 100
—r---------- - - - - ------- ------ - - - - - - - - - - ----- - ––– T-- --
1913 89 11 100 100 34 i 53 13 100 20
1914. 89 11 103 92 33 54 13 104 21
}
1918. . . . . . . . . 91 9 122 1.59 72 23 5 277 39
1919 . . . . . . . . . 83 17 134 173 67 27 6 215 33
1920. 80 20 156 214 55 37 8 145 24
1921. 81 19 168 164 50 | 40 10 143 29
1922. 80 20 174 170 46 43 11 139 32
1923. 81 19 179 193 * | * 11 140 31
1924. 83 17 183 190 39 | 48 13 142 31
1925. 84 16 191 197 39 . 49 12 146 31
1926 . . . . . . a85 a 15 a 206 a 204 148
1927. . . . . a86 a 14 a 214 a 201 150
a Preliminary estimate.
TABLE 23A.-DISTRIBUTION OF INCOME FROM Gover NMENT BY DIVISION OF GOVERN-
MENT AND TYPEs of INCOME, 1913 AND 1925
(In millions of dollars)
1913 1925
Item | Cities, Cities,
Federal villages, Federal State villages,
Govern- and Govern- govern- || Counties and
ment school ment ments school
districts districts
Pay roll. . . . . . . . . . . . . . . . . . . . . . . . . . 474 868 1,287 257 229 2, 565
Pension. . . . . . . . . . . . . . . . . . . . . . . . . . | 173 10 584 93 78 58
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . 17 175 499 51 19 410
Total. . . . . . . . . . . . . . . . . . . . . . 664 1,053 2,370 401 326 3,033
cent of income realized from Federal Government. While city and other
local governments devote a small sum annually to pensions and benefits,
there has been a considerable increase in this item. The pension item
for the Federal Government refers exclusively to the Army and Navy and
THE NATIONAL INCOME AND ITS DISTRIBUTION 809.
Veterans' Bureau. While Federal Government interest and pre-war
pensions have been on the decline since 1922, pay roll is on the increase
and all items for the other divisions of government have shown a con-
sistent growth since 1913.
Unclassified Enterprises and Occupations.—All business enterprises,
institutions, and “gainful” occupations, not classified with any of the
eight groups already considered, have been lumped together as “unclassi-
fied.” Many of these enterprises could best have been put into one of
these eight groups, if adequate information about them were available,
particularly certain transportation and financial enterprises. This
group, then, represents the no-man's-land of income statistics. The
basis for estimating pay rolls and rents is extremely unsatisfactory, and
the same is true of the interest payments and profits of individual
enterprisers.
The income statement for 1925 makes clear the importance of labor
and of individual enterprisers for this group. The following is an income
statement (in millions of dollars) of unclassified enterprises and occupa-
tions, 1925:
Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 117
Salaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,614
Rent paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 767
Interest paid to individuals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257
Corporate cash dividends to individuals. . . . . . . . . . . . . . . . . . . . . 572
Individual profits withdrawn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 125
Total realized income. . . . . . . . . . . . . . . . . . . . . . . . . . . . ... 16,452
The proportion of salaries to wages is high, but far from all of salaries
represent supervisory labor, since teachers in private institutions and
ministers are included. While some enterprises have heavy invest-
ments and pay a large proportion of income to capital, other enterprises,
like churches and colleges, disburse chiefly labor income. Moreover,
some employees are employed directly by families. Some idea of the
kinds of profit-making enterprises included may be gained from Table 24.
Public service enterprises—professions, amusements, hotels, etc., and
brokerage houses make up the bulk of these concerns. King estimates
that there were 9,444,000 persons who looked to this unclassified group
of enterprises and occupations for gainful employment in 1925: 6,033,000
wage workers, 1,587,000 salary workers, and 1,824,000 independent
enterprisers. -
The proportion of total realized income going to employees decreased
during the war, but has since risen steadily, except for a slight check in
1925, to about two-thirds of the total. The percentage of total realized
income going to borrowed capital (rent and interest), on the other hand,
810 RECENT ECONOMIC CHANGES
TABLE 24.—ANALYsis of TYPEs of UNCLASSIFIED ENTERPRISEs, 1925
(Income tax returns)
.
Corporations net income Reporting individuals
: |
Reported
|
Reported &
grOSS net income Busine
income less tax Th d U18 fi SS
deficitsa OUIS8, Il Cl8 prol tS
of returns (millions
of dollars)
Millions of dollars
|
1. Local transportation, cartage, and storage . . . t 612 25
2. Miscellaneous transportation and public
utilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * * * * * * & tº & b27 b84
3. Public service: Professions, amusements,
hotels, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,849 146 288 1, 244
Finance: |
4. Stock and bond brokers. . . . . . . . . . . . . . . 6,654 485 s = e i s s = < *
5. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,980 58 & g & e º e º “
6. Other, multiplied by 16% per cent (fol-
lowing King) . . . . . . . . . . . . . . . . . . . . . . . 161 14 e s e I e = * * *
7 Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8, 795 557 c38 c222
8. “All other” (exclusive of inactive corpora-
tions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 322 3 43 152
9. Total “unclassified” returns. . . . . . . . . 12, 578 731 396 1,702
10. Estimated total profits (King). . . . . . . . . . . . . . . . . . . . . 731 $ tº a 5, 123
• Net income, less deficit and tax, equals profits, less tax-exempt interest and dividends received.
* Includes individual enterprisers in transportation and public utility group.
• Includes individual enterprisers in finance group.
rose during the war and has gradually declined since. The proportion
disbursed in dividends and profits withdrawn has fluctuated similarly
to rent and interest.
Average annual wages in the unclassified occupations rose less rapidly
during the war, according to King, than in all nonagricultural groups,
and though they have risen steadily since the war they are still behind
other wages in the increase over 1913. A similar and more striking
discrepancy appears in the estimates for average annual salaries.
Columns (7) and (10) in Table 25 show total realized income relative to
1913, corrected for price changes, and the number of all persons, including
independent enterprisers, attached to the unclassified group for gainful
employment. Up to 1920, deflated income increased more slowly than
number of persons. Between 1920 and 1922, deflated income grew
rapidly, so that in 1922 both series were about 4 per cent above the 1913
figures. And since that time, income has continued to grow more rapidly
than number of persons attached to the group.
2.
TABLE 25.-ANALYSIs of INCOME REALIZED FROM THE UNCLASSIFIED INDUSTRIES AND OccupATIONs, UNITED STATEs, 1913–14
AND 1918–1927
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10)
Dividends
Share of Rents, and Average annual wage per Total Average annual salary Total
royalties, Total number of -- T - -º -
employees interest profits wage employee b f l per salaried employee realized
withdrawn . €r O * º income in
Year emp Oyees an en er- 1913 dol-
in the prisers l
tº ars, un-
N - unclassified attached to classified
Per cent of total income realized Unclassified * | industries unclassified | Unclassified All
º cultural in- - e º º - & grOup
from unclassified group grOup - industries industries industries
dustries
Relative to 1913 = 100
1913. . . . . . . . . . . . . . . . . . . . . . . 60 8 32 100 100 100 100 100 100 100
1914. . . . . . . . . . . . . . . . . . . . . . . 61 8 31 97 92 108 106 99 102 101
1918. . . . . . . . . . . . . . . . . . . . . . . 50 10 40 126 1.59 63 71 122 119 65
1919. . . . . . . . . . . . . . . . . . . . . . . 53 9 38 145 173 63 71 124 136 59
1920. . . . . . . . . . . . . . . . . . . . . . . 56 8 36 162 214 80 86 139 163 67
1921. . . . . . . . . . . . . . . . . . . . . . . 62 7 31 164 164 102 102 140 159 90
1922. . . . . . . . . . . . . . . . . . . . . . . 60 8 32 170 170 103 104 147 161 105
1923..... . . . . . . . . . . . . . . . . . . 61 7 32 177 193 107 106 151 172 109
1924. . . . . . . . . . . . . . . . . . . . . . . 65 6 29 179 190 131 124 153 178 127
1925. . . . . . . . . . . . . . . . . . . . . . . 65 6 29 186 197 136 128 158 183 134
1926. . . . . . . . . . . . . . . . . . . . . . . a66 q6 a 28 a 189 a 204 143 132 a 160 a 190
1927. . . . . . . . . . . . . . . . . . . . . . . a68 a6 a 26 a 189 a 201 157 143 a 162 196
* Preliminary estimate.
812 RECENT ECONOMIC CHANGES
Miscellaneous Income.—There remain a number of income streams
not directly connected with any domestic industry. Two of these items
represent cash receipts, and three are valuations of commodities and
services consumed in whole or in part by the owners or purchasers. The
following statement shows estimates of miscellaneous income (in millions
of dollars) for the years 1925.
1. Income from urban gardens and poultry and cow keeping. . . . . . . . . . . . . . . . 243
2. Imputed interest on consumers' stocks of goods other than real estate. . . . . 3,000
3. Rental value of urban owned homes (less depreciation and maintenance). . 1,760
4. Rent paid to individuals for leased urban homes (less depreciation and
maintenance). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... • e s = • * * s • * * * * * * * * * * * * 2,517
5. Interest paid to individuals on long-term foreign investments. . . . . . . . . . . . . 419
Total miscellaneous realized income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,939
Items 1 and 2 are presumably the least accurate, while item 5 is at
least more accurate than the other four, although it cannot command a
high degree of confidence. Item 1, income from village poultry, gardens,
and cows, has been declining in relative importance and is only slightly
larger than in 1920. Allowing for price changes and growth of population,
it has declined absolutely. There has been a rapid growth in the rental
TABLE 26.—ANALYSIs of MISCELLANEOUS REALIZED INCOME, UNITED STATES,
1913–14 AND 1918–1927
Index of per -
capita in- Interest on
come from Ratio of investment - -
poultry, rental value in durable Net income
gardens, and of owned consumption f om foreign
Year cows not on urban homes goods other investment
farms (1913 | to rent paid than homes (millions t Of
dollars) for leased (millions of j
relative to homes current
1913 as 100 dollars)
per cent
| |
Per cent
1913. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 86 1,070 –90
1914. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i 100 85 . 1, 116 –85
1918. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 80 2, 302 — 26
1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 79 2,740 – 17
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 76 3,717 — 8
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 75 3,015 — 7
1922. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 74 2,596 354
1923. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 82 73 i 2,834 369
1924. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 71 | 2,923 390
1925. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 70 3,000 419
1926. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 83 69 3,022 a 410
1927. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 84 a68 a 3,051 a 410
o Preliminary estimate,
THE NATIONAL INCOME AND ITS DISTRIBUTION 813
value of durable consumption goods, the automobile representing the
largest of the consumer's investments in new types of mechanical and
other modern devices. The ratio of rental value of owned urban homes
to contract rents shows a very considerable decline. Net interest on
investments abroad has changed from a minus quantity to an important
and steadily growing item in the national income.
IV. HOW THE SEVERAL PARTS OF THE COUNTRY HAVE FARED84
We have seen that the United States as a whole has been enjoying
an era of great prosperity, but that this prosperity has been far from
evenly distributed among the various industries and occupations, and
territorial specialization suggests that different parts of the country
have fared very differently. In fact, most of the country has been less
prosperous than the region which contains most of the population and
receives most of the income. It will be helpful in interpreting the
analysis of income for the several regions into which the Bureau of the
Census has divided the United States, if we consider first the distribution
of income in 1919,” as estimated by Leven. Since the prosperity of a
region is largely a reflection of the prosperity of its industries, it would
be desirable to know what proportion of its income comes from each
industry group. Leven's estimates do not lend themselves to a complete
answer to this question, but a partial answer will suffice for the purpose.
Table 27 shows the percentage distribution of population in 1920 and
of total realized income in 1919, by regions. It also shows for each region
the percentage distribution of income received from various sources.
Over 40 per cent of the population, and nearly 50 per cent of the income,
are concentrated in the eight Middle Atlantic and East North Central
states, which comprise only about one-ninth of the total area. On the
other hand, the South Central and Mountain states, which include nearly
half the area of the country, received less than one-fifth of the national
income in 1919. The prosperity of the United States, measured in
income, is largely determined by the prosperity of its northeastern corner.
The predominance of agriculture in the income for four of the other
regions, the West North Central and the Southern states, makes it
easy to see why these parts of the country may have fared differently
from the country as a whole. -
One other fact, brought out by Table 27, is of considerable interest.
The income is even more highly concentrated than the population.
Per capita income is highest in the Pacific and Middle Atlantic
states. New England and the East North Central states also have
34 See Chap. II, Industry, Part 3, p. 206.
35 A prewar year might be preferable to 1919, but no analysis is available for
such a year. Since Leven's regional estimates were made, the national totals have
been revised, hence Table 27 disagrees slightly with previous tables.
TABLE 27.-PER CENT DISTRIBUTION of 1919 REALIZED INCOME RECEIVED FROM VARIOUS Sources For UNITED STATES AND
NINE CENSUS REGIONs (PER CENT OF ALL INCOME)
(Based on Leven's estimates)
É

United | New Middle | * West south East "* | Moun- º
States England | Atlantic North North Atlantic South South tain. Pacific
Central | Central Central Central
1. Total income realized from agriculture. . . . . . . 18. 3 4.6 4.8 15, 6 36.7 26.8 35. 5 35. 3 30.2 18.5
2. Rent, interest, and dividends paid, and
profits withdrawn (except agriculture). . . . . 25. 5 29. 6 33.5 23.4 18. 1 21.4 17.4 21.8 19. 1 26.7
3. Construction (pay roll). . . . . . . . . . . . . . . . . . . . 2.0 1. 8 1.9 2.5 1. 7 2. 1 1.4 2. 2 1.7 1.9
4. Mining (pay roll) . . . . . . . . . . . . . . . . . . . . . . . . . 2. 1 ... 2 2. 5 1. 8 1. 3 2, 6 3. 5 2. 2 7. O 1.0
5. Manufacturing (pay roll) . . . . . . . . . . . . . . . . . . 20.3 32.5 25.2 26.2 10. 1 14.9 11.9 7.7 8.4 15.9
6. Other nonagricultural (pay roll) . . . . . . . . . . . . . 25. 1 24.6 26. 1 23. 3 24.8 25.5 23.5 24.4 26.7 29. 1
7. Miscellaneous income". . . . . . . . . . . . . . . . . . . . . 6.7 6. 7 6.0 7.2 7.3 6, 7 6, 8 6.4 6.9 6.9
8. Total realized income. . . . . . . . . . . . . . . . . . 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Per cent distribution of total realized income in 1919 and of population as of Jan. 1, 1920, among the census
regions (per cent of United States)
9. Total realized income. . . . . . . . . . . . . . . . . . . . . . 100 8. 2 26.7 22.2 11.2 9. 6 4. 7 7.4 3. 2 6.8
10. Population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 7. 0 21.0 20.3 11.9 13.2 8.4 9.7 3.2 5.3
Per capita realized income in 1919—United States and nine census regions
11. Per capita realized income. . . . . . . . . . . . . . . . . $614 $715 $781 $669 $582 $445 $345 $469 $634 $793
a Includes income from urban cows, gardens, and poultry; imputed rent of owned urban homes and farmers' homes; and imputed interest on value of durable
consumption goods in hands of consumers.
THE NATIONAL INCOME AND ITS DISTRIBUTION 815
high per capita incomes, while the per capita incomes in the Southern
states, where the negro population is a large part of the total, are low.
In analyzing the national income into income received in each of the
nine census regions, it has only been possible to assign about 60 per cent
of the total income. We shall treat this assigned portion as an index of
the income for each region, and consider the regions in order. The chief
Omissions in this index are a part of property incomes, and wages in
mining (other than coal), public utilities, trade, government (except the
schools), and the unclassified occupations, but in a sense these items are
included indirectly, since the indexes for the nine regions were adjusted so
that the combined index for the entire country would agree with the
estimate of total realized income.”
* So far as possible, the methods developed and employed by Maurice Leven,
in Income in the Various States, 1919–1921, have been followed, but the limitation
of time has made it necessary to adopt various short cuts and to deal with only a
part of the national income.
Because of the lack of classification of much of the basic income data on a geo-
graphical basis, it has only been possible in the time available to apportion about
60 per cent of total realized income to the nine census regions. The omitted items
include: pay rolls in mining other than coal, in the transportation and public utility
group, in government other than the public schools, and in merchandizing and the
unclassified industries, and nonmoney incomes from property. About half of the
money income from property is reported to the Bureau of Internal Revenue, and so
only half of the estimated money income from property is included.
The national totals for 13 yearly series were apportioned to the nine census
regions. These series fell into two groups: those having to do with agriculture, and
those having to do with other types of income. The index of income for each dis–
trict was made up by apportioning King's estimates for agricultural and nonagri-
cultural income on the basis of these apportioned series. Five of the series referred
to agriculture: (1) value of agricultural products—King's estimate of value of crops
sold or eaten by the farm population plus the estimated value of crops fed to stock,
used for seed, and wasted (two-year moving average of the Department of Agri-
culture estimate for fiscal years, Crops and Markets, Vol. 4, p. 252) plus value of
animal products (King); (2) feed, seed, and waste cost as listed in (1) plus King's
estimated cash feed cost; (3) expenditures for implements and autos and other ma-
chinery (King); (4) fertilizer expense (King); (5) interest paid to banks and merchants
(King).
Following Leven's method, the apportioned items (2) plus (3) plus (4) plus (5)
were deducted from (1) to approximate agricultural income for each region. The
balance includes in addition to wages, rent, interest (to individuals), and profits,
certain expenses which might have decreased the total current value product by 8
to 10 per cent.
Item (1) was apportioned by prorating on the value of crops and animal products
estimated by Leven 1919–1921 and by the Department of Agriculture thereafter.
Item (2) was prorated for 1924 on an estimate of its chief constituents for that year—
cash, feed costs (census); value of wheat, corn, and oats not shipped out of country
where grown; apples not marketed; Irish potatoes used for seed; other potatoes not
sold prorated on total value of sweet and Irish potatoes separately; value of peaches'
wasted prorated on total value; value of hay and forage not sold prorated on total
value, and dairy products not sold prorated on number of calves under one year of
816 RECENT ECONOMIC CHANGES
It will be possible with each of these regions only to treat the region
as a whole, but it is well to remember that none of these regions is par-
age (census). The data, except the two mentioned census items, were from Crops
and Markets. For 1919, 1920, and 1921, item (2) was apportioned on the basis of
Leven's estimates of feed and seed cost. This is the largest deduction item, and
the percentage geographical distribution probably varies more from year to year
than in the case of items (3) and (5). But none of these items shows a wide geo-
graphical variation from year to year, and the labor of making separate yearly esti-
mates was so great that it seemed wise that the percentage of item (2) assigned to each
region for the other years should be determined by interpolation. The fact that the
results obtained by this process for 1920 and 1921 do not differ greatly from those
which are obtained by using Leven's figures lends some support to this rough procedure.
The percentage distribution for item (3) for 1924 and 1925 was based on the
census value of implements and machinery. For item (5) an estimate of agricultural
loans and mortgages held by commercial banks and of interest rates charged as of
December 31, 1923, formed the basis for the percentage distribution in 1923 and
1924. This estimate the Bureau of Agricultural Economics was kind enough to
make, the basic data being from an unpublished study in which a questionnaire was
answered by about one-half of the commercial banks of the country. The dis-
tribution of these two items for the other years was determined by interpolation.
The distribution of fertilizer costs in 1919 and 1924 was that of the census. The
1920 and 1921 distributions were from Leven. For the three cotton-growing regions
the other years were estimated on the basis of Department of Agriculture data for
tons sold and their fertilizer price index. The percentages of total fertilizer expense
for other regions were determined by interpolation and the totals adjusted to King's
figures.
Finally, King's estimate of the net current income realized from agriculture was
apportioned to each region by prorating it on item (1) minus items (2), (3), (4), and
(5). The results of this method cannot be compared directly with Leven's regional
estimates because the estimates of net current income realized from agriculture
have been revised. The percentage distributions are compared for the three years
in the following table:
|
1919 1920 1921
-
Leven's | Present | Leven's | Present Leven's | Present
estimatel estimatel estimatel estimate estimatel estimate
| |
; - d
New England. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 3 3 4 4
Middle Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . | 7 7 9 9 11 10
East North Central. . . . . . . . . . . . . . . . . . . . . . 19 18 20 20 19 19
West North Central . . . . . . . . . . . . . . . . . . . . . . 23 22 18 19 16 16
South Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . 14 15 13 13 12 13
East South Central. . . . . . . . . . . . . . . . . . . . . . 9 9 8 8 9 9
West South Central . . . . . . . . . . . . . . . . . . . . . . 14 - 15 14 14 13 13
Mountain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 5 6 5 6 6
Pacific. . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . 7 7 9 9 10 10
Total United States. . . . . . . . . . . . . . . . . . . . . . to on loo 100 100 100
The other items employed in constructing the geographical income indexes are:
(6) bituminous coal wages; (7) anthracite wages; (8) manufacturing wages; (9)
THE NATIONAL INCOME AND ITS DISTRIBUTION 817
ticularly homogeneous, and were each state in any one region considered
separately, we might expect to find as wide divergences among those
states as we shall find among the several regions that go to make up
the United States. - *
construction wages; (10) bank salaries; (11) teachers’ salaries; (12) salaries, except
agriculture, banking, and government; (13) one-half of property and entrepreneurial
income received in money—agricultural rent, interest, and profits being excluded.
Item (7) falls entirely in the Middle Atlantic region. Item (6) for this region is
wages as reported to the Pennsylvania Department of the Interior. The total for
the other seven regions (New England's figures being zero throughout) is prorated
on Leven's wage and salary estimate for 1919–1921 and on value of coal produced
(Bureau of Mines estimate) for the next four years. The 1926 figures for each of
the seven regions were estimated on the basis of percentage increase in tonnage over
1925, and the total was adjusted to King's wage estimate. (8) King's estimate
of manufacturing wages for census years was prorated on the census figures for each
region. For other years the percentage distribution was determined by interpola-
tion. (9) Construction wages in 1925 were estimated on two bases: (a) relative
wage rates on the 1919 base, relative construction dollar volume, and Leven's estimate
of wages and salaries in 1919 (in this estimate it was assumed that the percentage
change in profits and nonlabor costs per unit of output from 1919 to 1925 was the
same for all regions); (b) Leven's 1919 estimate, relative wage rates, and relative
physical volume of construction. In the final estimate (a) was weighted two and
(b) one. Wages were estimated for other years by interpolating on the basis of dollar
volume of construction in each region. The dollar volume and physical volume
estimates for five regions throughout, and for two other regions (East and West South
Central) for part of the period, were based on figures furnished by the F. W. Dodge
Corporation. Other dollar volume figures (especially for the Mountain and Pacific
states) were based on urban building permits and physical volume figures on num-
ber of permits, on building sand and gravel sold and on cement shipments (Bureau of
Mines).
Item (10), bank salaries, was apportioned to regions on the basis of estimated
salaries for those regions for fiscal years ended June 30, 1920, 1922, 1924, and 1926.
These estimates were based on national bank salaries, and total assets of national
and all banks for each region. The percentage distribution for each calendar year
was determined by interpolation. The estimates for item (11), salaries of teachers
and executives in public, elementary, and secondary schools, were based on data for
total salaries by states and average salaries for the United States for fiscal years
ended June 30, 1918, 1920, 1922, 1924, and 1925 from the Bureau of Education.
Totals for calendar years and the percentage distributions were estimated by inter-
polation. Item (12) was prorated on income figures from the Bureau of Internal
Revenue for wages and salaries, and item (13) on figures for income from business
partnerships, rents and royalties, interest, dividends, and fiduciary income.
The apportioned items (6) to (13) were then totaled, and King's estimates for
nonagricultural realized income were apportioned on these totals. The apportioned
totals of agricultural and nonagricultural income were added to make the indexes
of total realized income. The percentage distribution of nonagricultural income
may be compared with Leven's distribution of nonagricultural current income.
It appears that the three regions in the northeastern part of the United States have
consistently larger percentages according to this crude apportionment than they do
according to Leven's more accurate apportionment, presumably because they have
a larger proportion of the higher money incomes which are reported in the income
818 RECENT ECONOMIC CHANGES
CHART 3.−REALIZED IN COME OF CHART 4.—PER CAPITA REALIZED
THE NEW ENGLAND REGION, INCOME AND COST OF LIVING;
1919–1926. (1919–1925 NEW ENGLAND REGION, 1919–
AVERAGE = 100 1926. (1919–1925 AVERAGE =
PER CENT) 100 PER CENT)
| NDEX NUMBERS INDEX NUMBERS
(1919-2s Av = too) - (1919-2s Av =loo)
| 5 O 2 5o
*
*
bebits-y/
Z
º
,-- Total
h 2^ jº / N
*e o Per Capita Income
>/N-L--f * * * *. tº a Z \ **
I OO F-Zaw _º-ºper. too 34––AP-Ha-1- —4–
‘. Z N->. s
**. .* / Cost of Living
“...“value Added in Nºlfr.
5 O - 5 O
O O
1919 '2O 21 '22 ’23 '24 '25 1926 1919 '2O ’2 '22 ’23 '24 '25 1926


New England.—New England is like the more prosperous parts of
the country in receiving a large proportion of its income from manufac-
turing, in having a dense population, and a high per capita income in
tax returns, a discrepancy which probably does not invalidate the year-to-year com-
parisons, which are the chief point of present interest. The following table shows
the per cent distribution of total realized income, 1919–1921: -

1919 1920 1921
| - -
Leven's | Present | Leven's | Present | Leven's | Present
estimate estimate lestimate lestimate lestimate lestimate
-
New England. . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 9 10
9 10
Middle Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . 27 27 28 29 30 31
East North Central. . . . . . . . . . . . . . . . . . . . . . 22 23 23 23 21 22
West North Central . . . . . . . . . . . . . . . . . . . . . . 11 11 10 9 9 8
South Atlantic. . . . . . . . . . . . . . . . . . . . . . . . . . 10 9 9 9 9 8
East South Central. . . . . . . . . . . . . . . . . . . . . . 5 4 4 4 4 4
West South Central. . . . . . . . . . . . . . . . . . . . . . 7 7 7 6 7 6
Mountain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 3 3 3 3
Pacific. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 7 7 7 8 8
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THE NATIONAL INCOME AND ITS DISTRIBUTION 819
1919. Less than 5 per cent of the income comes from agriculture.
But New England's income in the last few years has not grown as rapidly
as the income of the country as a whole. Chart 3 compares the index of
realized income with debits to individual accounts in eleven centers.
The income peak in 1920 is higher than that of debits, but after 1923
income increases only slightly, while debits rise with the growth of specu-
lation. Chart 4 shows a per capita income index, and an index of urban
living costs for wage earners (Boston and Portland). Between 1919 and
1923 there is an apparent gain in per capita income, corrected for changes
in prices in this predominantly urban community. But thereafter,
when price changes are allowed for, per capita income has probably been
about constant. Value added in manufacturing, that is, revenue from
sales less cost of materials, is a rough index of accrued income produced by
manufacturing. According to the census, this actually declined nearly
6 per cent between 1923 and 1925 in New England. Value added in the
manufacture of boots and shoes (other than rubber) declined about 13
per cent in these two years, and this item for cotton goods manufacture
declined 25 per cent. In 1923, these two industries accounted for 13
per cent of all value added in manufacturing in New England. Evidently
New England has been losing in competition with other parts of the
country, and can hardly be said to have been prosperous during the past
few years.
TABLE 28.—INCOME INDExEs AND RELATED DATA, NEw ENGLAND REGION, 1919
TO 1926
(1919 = 100 for all items except as noted)
1919 1920 1921 1922 1923 1924 1925 1926
Index of total realized income. . . . 100 126 107 108 118 116 120 a 125
Debits to individual accounts in &
eleven centers (relative to 1919
as 100). . . . . . . . . . . . . . . . . . . . . . 100 109 102 105 117 121 137 146
Total population July 1 (thou-
sands). . . . . . . . . . . . . . . . . . . . . . . 7, 355 (7,450; 7,568 7,668; 7,777 |7,894; 7,986 8,092
Farm population Jan. 1 (thou-
sands). . . . . . . . . . . . . . . . . . . . . . . . . . . . . 626. . . . . . . . . . . . . . . . . . . . . . . | 658 . . . . . .
Index of per capita income. . . . . . . 100 124; 104 104 112 108 110 a 114
Index of urban cost of living (Bos- |
ton and Portland). . . . . . . . . . . . . 100 114 101 92 93 93 94 97
Millions Millions Millions Millions
of dollars of dollars of dollars of dollars
Value added to all manufactures. . 3,231 | . . . . . 2, 376 | . . . . . 3, 125 | . . . . . 2,936 | . . . . .
Value added to boots and shoes
(except rubbers). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188 | . . . . . 164 | . . . . .
Value added to cotton goods. . . . . . . . . . . . . . . . . . . . . . . . . . . 332 | . . . . . 251 | . . . . .
a Preliminary estimate.
The Middle Atlantic States.—The three Middle Atlantic states,
New York, New Jersey, and Pennsylvania, with about one-fifth of the
820 RECENT ECONOMIC CHANGES
CHART 5.—REALIZED IN COME OF CHART 6.—PER CAPITA REALIZED
THE MIDDLE ATLANTIC RE- INCOME AND COST OF LIVING;
GION, 1919–1926. (1919–1925 MIDDLE ATLANTIC REGION,
AVERAGE = 100 1919–1926. (1919–1925 AVER-
PER CENT) AGE = 100 PER CENT)
! NOEX NUMBERS | NOEX NUMBERS
(ſele-25 Av. = loo) (1919-25 Av. = too)
| 5 O | 5 O
Agricultural Income 2^
Debits.</
&
• . . Z
Realized incomeº 2^ Per Capita Income L^
><}^ - “ ,’ N.
2 * AS Y
"Cost of Living
4. Added in Mfr. N
5 O - 5 O
O O —
1919 '20 21 22 '23 '24 '25 1926 1919 '20 '21 '22 "23 '24 '25 1926
total population in 1920, received one-quarter of the national income in
1919, and probably as much as 30 per cent of the total in 1926. Chart
5 shows the growth of realized income, and of debits to individual
accounts in 20 centers. In spite of the rapid rise of the latter since 1923,
the total percentage increase of income since 1919 is greater than that
TABLE 29.—INCOME INDExES AND RELATED DATA, MIDDLE ATLANTIC REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)
* * 1921 1922 1923 1924 1925 1926
|
|
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. 116 84 61 62 56 76 75
Index of all other realized income. . . . . . . . 100. 119 111 113 127 134 141 152
Index of total realized income. . . . . . . . . . . 100. 118 109 110 124 131 138 148
Debits to individual accounts in twenty
centers (relative to 1919 as 100) . . . . . . . 100. 101 86 99 100 109 129 138
Total population July 1 (thousands). . . . . . 22, 101:22,417|22,81523, 131|23,496.23,897|24, 23824,597
Farm population January 1 (thousands) . . . . . . . . . 1,893 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818 . . . . . .
Index of per capita income. . . . . . . . . . . . . . 100. 116 106 105 117 121 126 133
Index of urban cost of living (Buffalo, New
York, Philadelphia, Pittsburg, Scranton) 100; 114 100 94 95 96 98 98
Value added to all manufactures (millions
of dollars). . . . . . . . . . . . . . . . . . . . . . . . . . . 8,431. . . . . . . 6,443 . . . . . . 8,596 . . . . . . ** s & º - - -

THE NATIONAL IN COME AND IT'S DISTRIBUTION 821
of debits. The per capita income index and an index of the cost of
living for wage earners in five cities (urban income represents over 95
per cent of all income) are compared in Chart 6. The spread between
the two lines increases each year, and we may fairly conclude that per
capita income, corrected for price changes, has shown a pretty steady
growth, with scarcely a setback even in depression years. Clearly this
growth has not been due to agriculture, which has shown a decline of
realized income in every region during the eight-year period. And Chart
5, seems to show almost as clearly that manufacturing has not been
responsible for the growth of income that has occurred. Presumably
the explanation is to be found in the other industry groups (except
mining), transportation, banking, construction, trade, government, and
the unclassified industries.
East North Central Region.—The East North Central region, or the
states of Ohio, Indiana, Illinois, Michigan, and Wisconsin, is both a
CHART 8.—NONAGRICULTURAL
INCOME, DEBITS AND VALUE
CHART 7.—TOTAL AND AGRICUL– ADIDED IN MANUFACTURE;
TURAL INCOME; EAST NORTH EAST NORTH CENTRAL RE-
CENTRAL REGION, 1919–1926. GION, 1919–1926. (1919–
(1919–1925 AVERAGE = 100 1925 AVERAGE = 100
PER CENT) PER CENT)
| N DEX NUNABERS - INDEX NUN/IEERS
(1919-25Av = too) 1919-25 Av. = 1 Oo)
| 5 O | E O
N -
~, - Non-Agricultural Income •
\ Total Pealized º Debits ...9%
A \ ,” look _{*
| OO W Z. z’ 2.2'N 2%
W e
J.’ /*. N.
2^ 2 * * º, N .*
----~~ ".. .”
TºAgricultural |r Corne ‘... .*-value Added in Mfr
5 O 5 O
O O
1919 '2O '2) '22 '23 '24 '25 1926 1919 '2O '2) '22 "23 "24 "25 1926


highly industrialized territory and one in which agriculture is important.
Its per capita income was not so high as the older portion of the North in
1919, but it received about 22 per cent of the country's income.
822 RECENT ECONOMIC CHANGES
CHART 9.—PER CAPITA REALIZED CHART 10,-TOTAL AND AGRICUL-
INCOME AND COST OF LIVING; TURAL REALIZED INCOME;
EAST NORTH CENTRAL RE- WEST NORTH CENTRAL RE-
GION, 1919–1926. (1919– GION, 1919–1926. (1919–
1925 AVERAGE = 100 1925 AVERAGE = 100
PER CENT) PER CENT)
| NDEX NUMBERS |NDEX NUMBERS
(ele-2s Av =loo) (1919-2s Av = too)
| 5 O | 5 O


Agricultural Income
^-Cost of Living
^ _T * ~...~ R ſ: A s
ea] 1zed InCOme * * * * *
Z/N N. A | OO \\ -
|- \|X-4T
>Per Capita Income N.” *-
5O 5 O
O - O 4. º &
1919 '20 '2| "22 '23 "24 "25 | 926 1919 '2O ‘2 | ’22 23 24 25 1926
Chart 7 compares the index of total realized income and that for
income realized from agriculture. Total income has apparently grown
steadily since 1921, though not so rapidly as in the Middle Atlantic
region. Since 1923 it has been above the 1920 peak. Agricultural
income remains at about 60 per cent of the 1919 figure from 1921 to
1924, and then rises to about 80 per cent of the 1919 income in 1925 and
1926. Nonagricultural income and debits to individual accounts in 24
centers are compared in Chart 8. The fluctuations of the two curves
are fairly similar, except for the last two years when debits rise steeply
toward the income curve, reflecting the growth of speculative activity.
Prior to 1925, debits have a much more gentle upward trend than the
nonagricultural income index. Manufacturing appears more nearly
to have kept pace with the growth of nonagricultural income than in
the Middle Atlantic states, but here, too, other lines (mining not included)
must be looked to to account for the growth of income. -
The per capita income index is compared with an index of the cost of
living in five cities in Chart 9. While this cost index is far from satis-
factory as a measure of price changes for all classes of income recipients,
it suggests a very considerable gain since 1922. Farm population
- *:
THE NATIONAL INCOME AND ITS DISTRIBUTION 823
declined between 1920 and 1925, but agricultural income declined still
more, so that per capita agricultural income fell 14 per cent in these five
years, while nonagricultural income per capita of nonfarm population
rose 4 per cent. The East North Central region has prospered, but the
prosperity has not included the agricultural part of the community.
TABLE 30.-INCOME INDEXEs AND RELATED DATA, EAST NoFTH CENTRAL REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)

1919 || 1920 1921 | 1922 1923 || 1924 || 1925 1926
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 97 59 58 63 67 78 a80
Index of all other realized income. . . . . . . . 100 118 99 108 129 132 140 a 147
Index of total realized income. . . . . . . . . . . 100 115 93 101 119 122 131 a 137
Debits to individual accounts in 24 centers º
relative to 1919 as 100. . . . . . . . . . . . . . . . 100 116 91 96 109 109 124 132
Total population July 1 (thousands). . . . . . 21, 301|21,637|22, 130|22,459|22,889|23,386|23,789|24, 208
Farm population January 1 (thousands). . . . . . . . . 4,914 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4, 511
Index of per capita income. . . . . . . . . . . . . . 100 113 90 95 111 111 117 a 121
Index of urban cost of living (five cities). . 100 116 102 93 96 97 99 100
Value added to all manufactures (millions
of dollars). . . . . . . . . . . . . . . . . . . . . . . . . . . 7, 116|. . . . . . 4,913] . . . . . . 7,639. . . . . . . 8,262 . . . . . .
* Preliminary estimate.
West North Central Region.—The West North Central region
includes the following states: Minnesota, Iowa, Missouri, the Dakotas,
Kansas, and Nebraska. In 1919, agriculture accounted for over one-third
of its total realized income. It is not surprising, therefore, that the
income of the region is slightly less in 1926 than in 1919, although there
has been a steady increase since 1921. Chart 10 shows indexes of total
realized income and of agricultural income. The latter slumped even
more in 1921 than total income, and in 1926 was less than 80 per cent of
the 1919 figure. There is a rough agreement in the movement of debits
in 20 centers and nonagricultural income (Chart 11).
The per capita income index is shown in Chart 12. While urban
living costs in three cities are an unsatisfactory basis for judging the
extent to which price changes have been responsible for the decline after
1920, they suggest a gain in per capita deflated income in 1920–1923,
followed by a somewhat smaller decline. If we consider agricultural and
nonagricultural income separately, it appears that the former, per capita
of farm population, actually increased by 5 per cent from 1920 to 1925,
owing to the exodus from the farms, while nonagricultural income, per
capita of nonfarm population, declined about 10 per cent. On the whole,
it is clear that this region, which had in 1919 a lower per capita income
than any other, excepting the three Southern regions with large negro
population, has not shared to any considerable extent in the general
improvement shown by the United States considered as a unit.
824
RECENT ECONOMIC CHANGES
CHART
11.-NONAGRICULTURAL
REALIZED INCOME AND DEBITS;
WEST NORTH CENTRAL RE-
GION, 1919–1926.
AVERAGE = 100
PER CENT)
! N DEX NUMBERS
(1919-25Av =loo)
(1919–1925
| 5 O
…” Debits -
2” \ as * <
| OO sº
N. sº
N=== Non-Agricult A
on-Agricultura
-" Income
5O
O
1919 '2O 21 '22 "23 '24 25 1926
CHART 12.-PER CAPITA AND COST
OF LIVING REALIZED INCOME:
WEST NORTH CENTRAL RE-
GION, 1919–1926.
AVERAGE = 100
PER CENT)
|NDEX NUN/ESERS
(1919-2s Av = too)
| 5 O
| OO
O
1919
Z
'2O
<-Cost of Living
N.
’21
Per Capita Income
"22
'23
’24
"25
(1919–1925
1926
TABLE 31.-INCOME INDEXES AND RELATED DATA, WEST NoFTH CENTRAL REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)
*––
1919 1920 | 1921 | 1922 || 1923 || 1924 || 1925 1926
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 78 43 61 59 81 79 a78
Index of all other realized income. . . . . . . . 100 108 94 96 101 102 105] a 109
Index of total income. . . . . . . . . . . . . . . . . . . 100 97 75 83 86 95 96 ag7
Debits to individual accounts in 20 centers
relative to 1919 as 100. . . . . . . . . . . . . . . . 100 105 83 85 95 97 106 105
Total population July 1 (thousands). . . . . . 12,495|12, 581|12,680|12,750 12,842||12,941||13,021||13, 108
Farm population January 1 (thousands). . . . . . . . . 5, 172 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,924
Index of per capita income. . . . . . . . . . . . . . 100 97 74 82 84 91 92 a 93
Index of urban cost of living (three cities).. 100 116 103 96 96 97 100
98.
* Preliminary estimate.
The South Atlantic Region.—Delaware, Maryland, the District of
Columbia, the Virginias, the Carolinas, Georgia, and Florida, make up
the South Atlantic region.
The per capita income of this region in
1919 was $445. This was lower than that of the West North Central

THE NATIONAL INCOME AND ITS DISTRIBUTION 825
CHART 14.—N ON AG RIC UL T U R AL
CHART 13.—TOTAL AND AGRICUL– REALIZED INCOME, DEBITS, AND
TURAL REALIZED INCOME; VALUE ADDED IN MANUFAC-
SOUTH ATLANTIC REGION, TURE; SOUTH ATLANTIC RE-
1919–1926. (1919–1925 GION, 1919–1926. (1919–1925
AVERAGE = 100 AVERAGE = 100
PER CENT) PER CENT)
! NDEX NUNWBERS -
(1919-25 Av =loo) - §§ º*;
1 so TN | SO
“A
Q
Agricultural Income -"
e - " Nor-Agricultural Income
Total Z ... “
Realized InCOme / • * º
... • * \ Z \" '•. .*
| OO \ zº- oo Hº-A º º
Z ". e” • * >>."
\ ,’ N •. :- Debits
gº b * * g
2^ N } Z
N \ , ºr Added in Mfr.
5 O 5 O
O
§ e t ſº g º O *
states, but the region drew a smaller percentage of its income from agri-
culture and a larger percentage from manufacturing. It received about
one-tenth of the national income for this year.
The indexes of total realized income and income realized from agri-
culture are shown in Chart 13. Total income in 1923 and 1924 was
about the same as in 1919, and nearly 20 per cent higher in 1925 and
1926. Agricultural income has been about one-half the 1919 figure since
1921, rising slightly above 50 per cent in 1923 and in 1925–26. Debits
in 16 centers and the nonagricultural income index move similarly from
year to year, except that income has a steeper trend (Chart 14). Much
has been said of the growth of manufacturing in this region, but value
added by manufacture has hardly kept pace with the growth of non-
agricultural income. The manufacture of cotton goods has not fared
as badly as in New England, but value added by the industry was
9 per cent less in 1923 than in 1919, and 17 per cent less in 1925. This
industry represented about one-sixth of all value added in 1919. Lumber
and timber products manufactures, which represented about one-twelfth
of the total, have similarly declined; while tobacco (cigars and cigarettes),
with about one-tenth of total value added in 1919, shows an increase of



826 RECENT ECONOMIC CHANGES
value added of nearly 60 per cent between 1919 and 1925. The sharp
rise of nonagricultural income in 1925 is probably in part owing to the
Florida boom, which increased the volume of property and salary
incomes received in that state.
A per capita income index and an index of the cost of living for wage
earners in seven cities are shown in Chart 15. If other living costs have
moved at all closely with these, income per capita corrected for price
changes was probably below the 1919 level until 1925. The rise in
1925 and slight decline in 1926 suggest the rise and fall of the activity
in Florida. Agricultural income per capita of farm population fell 28
per cent from 1920 to 1925, and nonagricultural income per capita rose
2 per cent.
TABLE 32.-INCOME INDEXES AND RELATED DATA, SouTH ATLANTIC REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)
1919 1920 1921 1922 1923 1924 1925 1926
–– --- – t ------
Index of total income
realized from agri- -
culture . . . . . . . . . . . . . 100 81 50 45 58 47 52 a 53
Index of all other real-
ized income. . . . . . . . . 100 113 100 103 117 121 145 a 148
Index of total realized
income. . . . . . . . . . . . . 100 104 85 86 100 99 117 a 120
Debits to individual
accounts in 16 centers |
relative to 1919 as
100. . . . . . . . . . . . . . . . . 100 1 11 90 87 98 97 | 114 117
Total population July 1 |
(thousands). . . . . . . . . 13,892 || 14,098 14, 397 || 14,616 14,884 15, 185 15,418 15,676
Farm population Jan-
uary 1 (thousands). . . . . . . . . . 6,417 . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,661 | . . . . . .
Index of per capita |
income. . . . . . . . . . . . . 100 102 82 82 93 91 106 a 106
Index of urban cost of i
living (seven cities)... 100 112 100 90 91 91 || 93 94
Millions Millions Millions Millions
of dollars of dollars of dollars of dollars
Value added to all
manufactures. . . . . . . . 1,859 | . . . . . . 1,242 . . . . . . 1, 796 . . . . . . 1,983
Value added to cotton |
goods. . . . . . . . . . . . . . . 314 | . . . . . . . . . . . . . ! . . . . . . | 287 . . . . . . 260
Value added to lumber
and timber products. 156 | . . . . . . . . . . . . . - * * * * * | 132 . . . . . . 126
Value added to tobacco -
(cigars and cigarettes) 177 | . . . . . . . . . . . . - e - - - - - 229 - - - - - e. 280
| | -
* Preliminary estimate.
East South Central Region.—The East South Central states, Ken-
tucky, Tennessee, Alabama, and Mississippi are probably a little better
off to-day than they were in 1919, when the per capita realized income
was only $345. Agriculture is the predominant industry, but other lines
THE NATIONAL IN COME AND IT'S DISTRIBUTION 827
CHART 15.-PER CAPITA INCOME CHART 16.—TOTAL AND AGRICUL-
AND COST OF LIVING; SOUTH TURAL REALIZED INCOME; EAST
ATLANTIC REGION, 1919–1926. SOUTH CENTRAL REGION, 1919–
(1919–1925 AVERAGE = 100 1926. (1919–1925 AVERAGE = 100
PER CENT) PER CENT)
| NDEX NUMBERS
§º (1919-25 Av. = loo)
| 5 O | 5 O
M
\
\-Agricultura Irvcorne
\
2^* of Living \, Total Realized Irºcorne
º NYN. | OO {\ ,'N.
| OO * *-7 º - Z Yv
^ Isſ- - - * * Z
Sºme Mºs 2’ **~!---, *N
SPer Capita income W Z
V
5 O 5 O
O Q — s g & g g
1919 '2O ’2| '22 '23 ’24 25 1926 1919 2O 2I 22 23 24 25 1926


have grown considerably in the last few years, and total realized income
was about 12 per cent higher in 1926 than in 1919 or 1920 (Chart 16).
Agricultural income, however, was lower in 1922 than in 1919 by about
32 per cent, and has continued at about that level except for 1925.
Nonagricultural income and debits in 10 centers are compared in Chart
17; the yearly fluctuations of debits are greater for the most part, but
the general upward trends of the two curves since 1921 are very similar.
Per capita income and an index of living costs in three cities are shown
in Chart 18. If other living costs for the district have varied approxi-
mately as those in this index, per capita income corrected for price
changes was low in 1920 and 1921, and in 1925–26 was above the 1919
level. The farm population declined about 10 per cent between 1920
and 1925, so that agricultural income per capita of farm population rose
by 6 per cent. As in the grain-raising region of the North Central West,
nonagricultural income per capita moved downward, though in this
case by only 3 per cent. All this suggests that, while urban income has
grown rapidly with the expansion of industry, that expansion has been
insufficient to absorb the influx of population from the farms and main-
tain the earlier income standard.
828 RECENT ECONOMIC CHANGES
C H A R T 17. —NON AGRICULTURAL CHART 18.-PER CAPITA INCOME
IN COME AND DEBITS - EAST AND COST OF LIVING; EAST
SOUTH CENTRAL REGION, SOUTH CENTRAL REGION,
1919–1926. (1919–1925 1919–1926. (1919–1925
AVERAGE = 100 AVERAGE = 100
PER CENT) PER CENT)
| N DEX NUMBERS | NDEX NUM BERS
(1919-25 Av = too) (1919-25 Av = i oo)
| 5 O | 5 O


*
gº *
\ sº | OO 24—, Y-
*
,’ .* Debits Per Capita |
Non-Agricultural º ^*-Cost of Living
SO EO
O O * * & -
1919 ’2O *2] "22 ’23 '24 "25 1926 1919 '2O 2] ’22 23 24 25 1926
TABLE 33.-INCOME INDExES AND RELATED DATA, EAST SouTH CENTRAL REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)
|
1919 1920 1921 | 1922 || 1923 || 1924 1925 | 1926
Index of total income realized from agri- :
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 80 55 69 65 66 78 a67
Index of all other realized income. . . . . . . . 100 112 98 107 119, 124 132 a 141
Index of total realized income. . . . . . . . . . . 100 99 81 92 98. 101 111 c 112
Debits to individual accounts in ten centers
(relative to 1919 as 100). . . . . . . . . . . . . . 100 109 85 88 106 107 120 125
Total population July 1 (thousands) . . . . . . 8,867 8,919 8,993 9,043 9, is 9,184. 9, 246 9, 309
Farm population January 1 (thousands). . . . . . . . . 5, 183] . . . . . . . . . . . . . ! & e º 'º e < * * g s & e e 4,632 . . . . . .
Index of per capita income. . . . . . . . . . . . . . 100 : 80 90 95. 98 106] a 107
Index of urban cost of living (three cities). 100. 112 101 92 93. 93 96 96
* - - -
* Preliminary estimate.
West South Central Region.—The West South Central region, which
consists of Arkansas, Louisiana, Oklahoma, and Texas, is like the West
North Central and East South Central regions in drawing more than
one-third of its income from agriculture in 1919. And the story is
similar. Total realized income was only 7.5 per cent higher in 1926
THE NATIONAL INCOME AND ITS DISTRIBUTION 829
CHART 1 9 —TO TAL, A G R IC U L-
TURAL, AND NONAGRICULTURAL CHART 20.-PER CAPITA IN COME
REALIZED INCOME, AND DEBITS; AND COST OF LIVING; WEST
WEST SOUTH CENTRAL RE- SOUTH CENTRAL REGION,
GION, 1919–1926. (1919–1925 1919–1926. (1919–1925
AVERAGE = 100 AVERAGE = 100
PER CENT) PER CENT)
INDEX NUMBERS | NDEX NUN/? EERS
(1912-25AV =loo) (1919-25Av = i oo)
| 5 O ! SO
N
SS d
Nº. 23
:-º. *-TS.23. 2’ S.-Cost of Living
ecºzº %2 ** | OO * N- |
*Tºyºtº- \Lºir-
". . . * * 7
\ tº-1, - Per Capita Income
\ /
\ A
W.
5 O 5 O
Total Realized Income
- - - Agricultural Income
© º º ſº e º 'º º Debits
- Non-Agricultural Income


O O
1919 '2O "21 "22 "23 '24 '25 |926 1919 '2O '2ſ "22 '23 '24 "25 1926
than in 1919. Agricultural income was about 15 per cent lower in 1923
than in 1919, and has since declined (Chart 19). Nonagricultural
income apparently fell less in 1921 than it had risen in the preceding
year and in 1926 was about 15 per cent above the 1920 peak.
Debits in 15 centers and nonagricultural income agree approximately
as to trend, but debits fluctuate more widely. Per capita income declined
more in 1921 than urban living costs (Houston and New Orleans—Chart
20), and the rise since has apparently not been sufficient to bring per
capita income back to the 1919 level, price changes being allowed for.
And in 1919 the per capita income was lower than in any other region
except the East South Central. In part, this poor showing is owing to a
rapid growth of population, 13 per cent in the seven years as against 11
per cent for the country as a whole, a growth which is suggestive of immi-
gration from across the border. In contrast to the East South Central
and West North Central regions, agricultural income per capita of farm
population declined about 10 per cent between 1920 and 1925. Non-
agricultural income per capita declined still more, 14 per cent. Clearly
the West South Central states have not been particularly well off during
the last few years.
830
RECENT ECONOMIC CHANGES
TABLE 34.—INCOME INDEXES AND RELATED DATA, WEST SouTH CENTRAL REGION,
1919 TO 1926
(1919 = 100 for all items except as noted)
|
1925 1926
.
1919 1920 1921 | 1922 | 1923 || 1924
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 90 51 65 87 87 75 a 76
Index of all other realized income. . . . . . . . 100 112 102 101 105' 112 122 a 129
Index of total realized income. . . . . . . . . . . 100 103 81 86 97 102 102 a 107
Debits to individual accounts in 15 centers
(relative to 1919 as 100). . . . . . . . . . . . . . 100 121' 93 99. 104 104 11s 122
Total population July 1 (thousands) . . . . . . 10, 16310,316|10, 538|10,687|10,882; 11, 10511,287|11,479
Farm population January 1 (thousands). . . . . . . . . 5, 228 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,736|. . . . . .
Index of per capita income. . . . . . . . . . . . . . 100 101 78 82 91 93 92 a 95
Index of cost of living (two cities) . . . . . . . . 100 112 102 96 95 95 97 97
* Preliminary estimate.
('HART 21.--TOTAL AND AGRICUL- C H A R T 22.--—NON AGRICULTURAI,
TURAL REALIZED INCOME;
MOUNTAIN REGION,
1919–1926. (1919–1925
AVERAGE = 100
PER CENT)
|NDEX NUMBERS
(lete-25 Av = too)
REALIZED IN COME AND DEBITS;
MOUNTAIN REGION,
1919–1926.
(1919–1925
AVERAGE = 100
PER CENT)
|NDEX NUN/EERS
(1919-25Av = i oo)


5 O
Agricultural income
AM Non-Agricultural Income
Total S2.
Realized In Corne Dº- %- / \ Jº * ---
- sº *
look-e-A- 2+ too; k 2T _P
* -
— — —” / T-TSA-2. Debits
SO 5 O
O tº 0. O
1919 '2O '2| 22 '23 ‘24 '25 1926 1919 '20 2. ‘22 – 23 24 '25 1926
The Mountain Region.—Montana, Idaho, Wyoming, Utah, Colorado,
New Mexico, Arizona and Nevada comprise the Mountain region, a
large and sparsely populated area, with less than four persons to the
square mile in 1920. While the per capita income, at $634, was higher
than for the South and the Central West in 1919, only 3.2 per cent of the
THE NATIONAL IN COME AND ITS DISTRIBUTION 831
CHART 23.−PER CAPITA REALIZED -
INCOME AND COST OF LIVING; CHART 24.—TOTAL AND AGRICUL-
MOUNTAIN REGION, TURAL REALIZED INCOME;
1919–1926. (1919–1925 PACIFIC REGION, 1919–1926.
AVERAGE = 100 . (1919–1925 AVERAGE = 100
PER CENT) PER CENT)
| NOEX NUMBERS 1NDEx NUNA BERS
(1919-25Av = Too) - (1919-25 Av = Too)
| 5 O - - | E O


A
Z Y-Agricultural Incorne
,’ \
\ Total
* - * * \ | Realized income
—zºº-ºost of Living \
N.
“TTN=s=== M-H / >,
Per Capita Income
F sº sº NS Æ
5 O 5 O
%3 ’2O '21 '22 "23 '24, 25 1926 §s '2O 21 '22 "23 °24 25 1926
national total was received in this region. Agriculture, a considerable
proportion of which is animal husbandry, accounted for 30 per cent of the
income of the Mountain region in 1919, and manufacturing pay rolls
less than 9 per cent.
Chart 21 shows that total realized income of the region increased
approximately 23 per cent from 1921 to 1926 and was in the latter year
about 6 per cent above the 1920 peak. As in the other regions, agricul-
tural income in 1925 and 1926 was considerably below the 1919 figure,
though in this region it was higher than in the years 1921–1924. Non-
agricultural income and debits in 11 centers are compared in Chart 22.
Both show a growth of about 20 per cent from 1921 to 1926, but debits
fail to reach again the 1920 peak, while income is slightly lower in 1926
than in 1924. Whether this 1924 peak in nonagricultural income shows
anything but an inaccuracy in the index may be questioned. An analysis
of the index shows it to be owing to the salary and property income
items assigned to regions on the basis of income tax data, which suggests
a possible shift in the residence of the property income receiving classes.
The per capita income index drops to 85 per cent of the 1919 figure in
1921–22, rises to 94.5 per cent in 1924–25, and then declines slightly to
92 in 1926, while the cost of living for wage earners in Denver in 1926 is
832 RECENT ECONOMIC CHANGES
95 per cent of the 1919 figure (Chart 23). As in several other regions,
the per capita agricultural income rose from 1920 to 1925, while non-
agricultural income per capita of nonfarm population declined, the former
being 105 per cent on the 1920 base in 1925, and the latter 88 per cent.
TABLE 35.-INCOME INDEXEs AND RELATED DATA, MoUNTAIN REGION, 1919 TO 1926
(1919 = 100 for all items except as noted)
1919 1920 | 1921 | 1922 || 1923 || 1924 || 1925 1926
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 99 65. 62. 69 70 89 a85
Index of all other realized income. . . . . . . . 100 107 102 104. 115 124. 119 a 122
Index of total realized income . . . . . . . . . 100. 104 91 91 101 107. 110 a 110
Debits to individual accounts in eleven
centers (relative to 1919 as 100). . . . . . . 100 124 95 97. 106 105 114 114
Total population July 1 (thousands) . . . . . . 3, 298] 3,371 3,478 3, 551 3,646 3, 754, 3,842|| 3,936
Farm population January 1 (thousands). . . . . . . . . 1, 1681. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,012 . . . . . .
Index of per capita income. . . . . . . . . . . . . . 100. 102 86 84 91 94 94 a 92
Index of cost of living (Denver) . . . . . . . . . . 100 113 101 95. 95 94 95 95
i
* Preliminary estimate.
Pacific States.—The Pacific states, California, Oregon, and Washing-
ton receive a considerably smaller proportion of their income from agri-
culture than any other region west of the Mississippi and south of Mason
and Dixon's line, and a slightly larger proportion in the form of manu-
facturing pay roll. Less than 7 per cent of the total national income is
received in this region, but the per capita income of $793 was higher
than for any other region in 1919.
Chart 24 shows the indexes of total and agricultural realized income.
The former shows nearly as rapid a growth since 1921 as in the Middle
Atlantic states, while agricultural income declines steadily from 1920
to 1924, and rises distinctly in 1925 only to fall slightly again in 1926.
Debits in 14 centers and the nonagricultural income index are shown
in Chart 25. The latter shows a slight gain even in 1921, while in 1925
and 1926 it rises less rapidly than debits, presumably because speculative
activity has considerably influenced the rise of debits. Evidently manu-
facturing has had little to do with the rapid growth of income in this
region. The increase shown by the income index is largely the result
of growth in the property and higher salary incomes, and may well be
due in part to a shift in the residence of persons receiving these classes
of income.
The per capita income index rises distinctly above the index of cost of
living for urban wage earners in four centers after 1921. Agricultural
income per capita of farm population apparently fell about 29 per cent
between 1920 and 1925, while nonagricultural income per capita of non-
farm population rose about 12 per cent. The urban population has
clearly been prosperous during the past few years.
THE NATIONAL INCOME AND IT'S DISTRIBUTION 833
CHART 25.-NONAGRICULTURAL
REALIZED INCOME, DEBITS, AND
VALUE ADDED IN MANUFAC- CHAR. T. 26.-PER CAPITA REALIZED
TURE; PACIFIC REGION, INCOME AND COST OF LIVING;
1919–1926. (1919–1925 PACIFIC REGION, 1919–1926.
AVERAGE = 100 (1919–1925 AVERAGE = 100
PER CENT) PER CENT)
|NDEX NUMBERS |NDEX NUMBERS
(ſele-2s Av = too) (e19-25 Av. =loo)
| 5 O | 5 O
*
2^
Nor-Adricultural Income <!
9 2.
º:y e º º º 2Nººst Of Living
º Debits Z *
| OO He * > zº | % | OO AZ N- >=
º N. º sº sº sº º Aº * *
,' yº-º-º: y 24. Capita Income
/ *e * -: º
‘...].`-Value Added in Mfr.
SO 5O


O
19
O
1919 '2O '21 '22 "23 '24 '25 1926 19 '20 21 22 (23 '24 25 1926
TABLE 36.-INCOME INDEXES AND RELATED DATA, PACIFIC REGION, 1919 To 1926
(1919 = 100 for all items except as noted)

1919 | 1920 | 1921 | 1922 || 1923 || 1924 || 1925 1926
Index of total income realized from agri-
culture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. , 112 82 65 66 57 80 a 73
Index of all other realized income. . . . . . . . 100 120 121 126 146 155 161 a 164
Index of total realized income. . . . . . . . . . . 100 118 113 114 130 136 145| 6146
Debits to individual accounts in 14 centers
(relative to 1919 as 100). . . . . . . . . . . . . . 100 124 105 108 128 131 145 159
Total population July 1 (thousands). . . . . . 5,492 5,635| 5,846, 5,986| 6, 170 6,382 6,553| 6,731
Farm population January 1 (thousands). . . . . . . . . 1,014 . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,030| . . . . .
Index of per capita income. . . . . . . . . . . . . . 100 115 106 104 116 117 121 a 120
Index of urban cost of living (five cities) . . . 100 113 103 97 97 97 98 97
Value added to all manufactures (millions
of dollars). . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 289. . . . . . . 944. . . . . . . 1, 397 . . . . . . 1,414. . . . . .

* Preliminary estimate.
W. THE IN COMES OF THE HIGHER AND LOWER INCOME CLASSES
How have the different income strata of population fared? There
is no satisfactory method of answering this question fully from available
834 RECENT ECONOMIC CHANGES
income data. But it is possible to separate from the rest of the national
income that portion which is reported to the Bureau of Internal Revenue,
and to estimate the number of persons who are dependent upon that
income. This will not throw much light on the distribution of income
among the lower and middle income classes. But it will enable us to
determine the average per capita income of the bulk of the population.
Moreover, it will throw some light on the question as to whether the
distribution of income has been getting less or more nearly equal. Since
we can estimate the proportion of total population dependent on the
income reported for income tax purposes for each year, we have a basis
for comparing the income distribution of different years.
The income tax data include certain items which are not properly
regarded as a part of realized income (capital gains from sale of assets
and profits from sale of real estate and securities). These items, more-
over, fluctuate erratically from year to year. Table 37, column (1) shows
total reported income with these items omitted. And in column (2) are
given the estimated number of persons claimed in the returns as depend-
ing on “realized” money income.” Because the tax returns include
* Estimates of the number of persons claimed as dependent upon income reported
in the Federal individual income tax returns were first made by the Federal Trade
Commission for 1917–1923. The method here employed for this purpose consists
in calculating: (1) number of head-of-family tax returns; (2) number of single returns;
(3) total personal exemption; (4) total dependents claimed; (5) total number of
persons claimed as dependent on reported income. (1) equals number of joint returns
of husbands and wives, and returns of husbands whose wives file separately, plus
number of single heads of families, male and female, plus one-half the number of
community property returns. (2) equals “all other” returns, male and female.
(3) equals (1) multiplied by personal exemption for head of a family plus (2) multi-
plied by single person's personal exemption. (4) equals total personal exemption
and credit for dependents minus (3) divided by credit allowed for each dependent.
(5) equals (4) plus (2) multiplied by the number of joint returns of husbands and
wives and returns of husbands whose wives file separately, plus number of all other
returns except returns of wives filing separately.
With regard to the accuracy of this method of estimate, the following
points should be noted: (a) No incomes under $5,000 are classed as community
property incomes. Hence, beginning with 1920, a part of the “wives filing separate
returns” may represent community property returns under $5,000. This would
tend to an underestimate of (1) and an overestimate of (4) and (5). (b) Estates
filing returns are treated as living persons, which would tend to an overestimate
of (5). (c) Some personal exemptions, owing to change of status or death, are for
less than one year. Hence (3) tends to be overestimated, and (4) and (5) under-
estimated. (d) In the higher income groups, the deduction for personal exemption
and credit for dependents may be omitted, thus tending to an underestimate of (5).
On the whole, the tendency is toward too small an estimate, perhaps by as much as
1 per cent, but this error is not likely to affect greatly the accuracy of the analysis
based on these estimates. Indeed an error in this direction presumably acts as a
partial offset to whatever under-reporting of income there may be. A further possible
source of error lies in the fact that the income tax statistics for net incomes of less
than $5,000 are based on samples, and are not exhaustive statistics. Lorenz curve
TII E NATIONAL INCOME AND ITS DISTRIBUTION 835
little of the nonmoney income included in King's income estimates,
total national income disbursed in money appears to be the best conception
of the national income to employ for purposes of comparison. This is
shown in column (3) and total population in column (4).
TABLE 37.-MONEY INCOME AND PopULATION OF THE UNITED STATES AND OF THE
CLASS SUBJECT TO THE FEDERAL INCOME TAx, 1918–1926

(1) (2) (3) (4) (5) (6)
Total º
º Dependent money Total (1) -- (3) (2) + (4)
(billions of population income population
...) | (millions) (billions of (millions) P
O118.I'8 dollars) er cent
|
1918. . . . . . . . . . . . . . . . . . . . . . . 17. 5 10.8 51.9 104.3 33.6 10.4
1919. . . . . . . . . . . . . . . . . . . . . . . 21.4 12. 3 57.2 105.0 37.5 11.7
1920. . . . . . . . . . . . . . . . . . . . . . . 25.7 17.3 65. 5 106.4 39.2 16. 3
1921. . . . . . . . . . . . . . . . . . . . . . . 22.9 14.8 55.8 108. 3 41. 0 13.7
1922. . . . . . . . . . . . . . . . . . . . . . . 23.9 15.5 59.0 109.7 40. 5 14.1
1923. . . . . . . . . . . . . . . . . . . . . . . 28. 1 17. 9 67.1 111.4 42.0 16. 1
1924. . 28. 1 16.8 69. 6 113.4 40. 3 14.8
1925. . 22, 3 9.3 74. 3 115.0 30. 1 8. 1
1926. . . . . . . . . . . . . . . . . . . . . . . 23. 1 9.3 77. 9 116.4 29. 6 8.0
1924 over $3,000. . . . . . . . . . . . 17.8 7.3 69. 6 113.4 25.5 6.4
1924 over $5,000. . . . . . . . . . . . | 10.3 2.0 69. 6 113.4 14.7 1.8
1925 over $5,000. . . . . . . . . . . . 12. 2 2. 3 74. 3 115.0 16.4 2.0
1926 over $5,000. . . . . . . . . . . . | 13.2 2.6 77. 9 116.4 - 17.0 2.2
• Income reported to the Bureau of Internal Revenue, excepting capital net gains and profits from
the sale of real estate and securities.
The table also shows the percentage ratios for reported to total
money income, and for number of persons dependent on reported income
to total population (last two columns).
It is difficult to compare one year with another when the data are in
this form. But it is possible in 1924, knowing what proportion of the
national income the richest 1.7 per cent of the population receive, what
proportion the richest 6.4 per cent receive, and what proportion the
richest 14.8 per cent receive, to estimate mathematically what proportion
of the income is received by the richest 10 per cent. And on the basis of
the analysis of this year, we can also estimate the proportion of income
going to the richest 10 per cent in other years. These estimates are
shown in Chart 27.
If the distribution of income in any year were equal, any 10 per cent
of the population would receive just 10 per cent of the income. Hence,
points were plotted, using both column (2) and estimated total number of persons
other than dependents, and the rating of the several years as to deviation from
equality was not very different in the two cases.
836 RECENT ECONOMIC CHANGES
CHART 27.-APPROXIMATE PERCENTAGE OF MONEY IN COME OF THE
UNITED STATES RECEIVED BY THE WEALTHIEST TEN PER CENT
OF THE POPULATION, 1918–1926
40 PERCENTAGE OF INCOME RECEIVED

3.
5.3
32
5
3
2
4.
32
3.
S0—
— 29
.9—
20
-
|O
-
|
%
8
|9|| 1919 1920 19
2
| 1922 19
23
192.
4.
5
92 19
26
the excess of the proportion of income over 10 per cent received by the
richest tenth of the population in any year measures the inequality of
distribution in that year. It is possible that the errors in these estimates
are so great as to make one year appear to have a more nearly equal
distribution than another, when actually it has a less nearly equal
distribution.” But the available evidence certainly does not tend to
confirm the theory some have advanced that the distribution of income
was more nearly equal during the war, and has since tended in the direction
of increasing inequality. Roughly, it would seem that 1920 had the most
nearly equal distribution, and 1921 the least. The years 1923 and 1924 are
of more nearly equal distribution than most of the others, while 1919 to
1922, excepting 1921, are at the other extreme. The years 1918, 1925,
and 1926 fall between these extremes. The year-to-year variations in
approach to equality are more prominent than any trend.
In the section on the distribution of income among the different
industry groups we considered the per capita income received by persons
living on farms. Only a small proportion of the total income of the farm
* The data refer only to the deviations from equality of distribution for the
richer portion of the country. It is possible, of course, for the deviation from equality
to be greater for the richer portion of the country, say in 1921 as compared to 1920,
and for the reverse to be the case with the poorer portion.
THE NATIONAL INCOME AND ITS DISTRIBUTION 837
population is reported in the income tax returns, and by making allowance
for this overlap of farm income and the income statistics of the Bureau
of Internal Revenue” it is possible to estimate the income of the bulk
of the nonfarm population, i.e., all the nonfarm population whose income
fell below the legal reporting limits. Both because of price changes
and because of changes in the income-tax reporting limits, the figures for
different years are not comparable. In 1920, the average per capita
income, received in money by that part of the nonfarm population which
was not dependent on income, reported to the Bureau of Internal Revenue
was about $596. There were radical price changes and minor changes in
the tax law between 1920 and 1921. The average money income for the
bulk of the nonfarm population was about $470 in 1921, $478 in 1922, and
$528 in 1923. There was no change in the requirements for filing returns
in these three years, but prices declined some between 1921 and 1922,
and rose slightly between 1922 and 1923. Apparently, therefore, there
was a considerable gain in money income, corrected for price changes,
between 1921 and 1923. In 1924, which is not comparable with either
the preceding or the following years because of changes in the law, average
per capita money income of the bulk of the nonfarm population was
approximately $541. The fact that the deflated per capita income for
the entire population rose in 1924, in spite of the mild recession of business,
makes it seem probable that the increase from $528 to $541 was not
entirely owing to changes in the law. The same law applied to 1925
and to 1926. Average money income for the bulk of the nonfarm
population was about $603 in 1925 and $625 in 1926. On the whole,
these figures are consistent with the view that this part of the population
has enjoyed an increasing income since 1921. But in interpreting
these figures it must be remembered that they refer to total money
income, not to consumed income, and that the upper income limit is
too high to throw much light upon the condition of the lower income
classes. We cannot say with certainty whether a smaller proportion of
the population in 1926 than in 1920 falls below any given minimum
standard of living.
39 The estimated overlap equals agricultural money income other than wages,
multiplied by reported profits in agriculture, divided by money profits in agri-
culture, that is, total estimated profit less value of agricultural products consumed
by farm population.
Midyear farm population estimates (made by linear interpolation between census
data for 1920 and 1925) and population dependent on reported incomes were deducted
from total population and an estimate of overlap was added. Estimated overlap
equals farm population multiplied by number of reporting enterprisers in agriculture,
divided by estimated number of enterprisers in agriculture. If these methods
of estimating overlap are at all accurate, the overlap of income is less than 2 per
cent of the money income of the bulk of the nonfarm population, and the population
overlap is less than 1.5 per cent of the bulk of the nonfarm population.
838 RECENT ECONOMIC CHANGES
VI. SUMMARY
Judged by growth of national income, the last few years have been an
era of great prosperity for the country as a whole, with slight recessions
of business in 1924 and 1927. During this period the per capita realized
income has considerably exceeded all previous records, even when price
changes are allowed for. In this respect the condition of the United
States stands in marked contrast to that of England.
But when the various regions of the country are considered separately,
it appears that only a part of the United States has enjoyed this pros-
perity—the Middle Atlantic, the East North Central, and the Pacific
states, an area which includes less than one-half the population and
receives somewhat more than one-half the national income. The rest
of the country can hardly be said to have prospered during these years.
New England's manufactures have waned, and the South, the Middle
West, and the Mountain states have suffered with the depression of
agriculture.
There is little satisfactory information on the question as to distribu-
tion of national income among the different income classes. The evidence
we have examined shows nothing that would indicate that the upper
income classes have enjoyed either more or less than their accustomed
share of the national income in recent years. The per capita income of
the bulk of the urban population has apparently increased considerably,
and the decline of farm population since 1920 has probably resulted in
a commensurate increase in per capita income for the agricultural
community, price changes allowed for. Average annual labor income of
salaried employees, measured in dollars of constant purchasing power,
has risen steadily since the war, and the growth in deflated annual wages
per employee has grown still more rapidly. The rise of salaries has
apparently been most marked in banking, and of wages in the construction
industry.” The share of stockholders and of individual enterprisers in
total realized income in the past few years has fully held its own, and there
is little reason to believe that prosperity has been profitless. Neither does
it appear that the share of employees in the national dividend has been
declining in recent years.
The growth of national income has been in spite of the depression in
agriculture. And while the increase in the income realized from the
mineral extractive industries has kept pace with the increase in total
income, an important part of this industry group, coal mining, does not
appear to have been particularly profitable. The manufacturing and
public utility industries have prospered, but have been accounting for a
declining proportion of total income. The growth of national income
40 In this connection, attention is again called to the possibility of error in both of
these estimates because of the inadequacy of the basic data.
THE NATIONAL INCOME AND ITS DISTRIBUTION 839
by industries is conveniently summarized in Table 38. The income
disbursed by governments is naturally a smaller proportion of the total
income to-day than during the war. A considerable and increasing
TABLE 38.-PER CENT DISTRIBUTION OF ToTAL REALIZED INCOME AMONG THE
SEVERAL INDUSTRY GROUPS, UNITED STATEs, 1913–14 AND 1918–1926

-
1913 www.wwwºwn 1923 * 1927; 1928
| --~~~~ |
Agriculture”. . . . . . . . . . . . . . . . . . . . 14|| 14| 19| 19| 15| 11| 11 11| 11 || 11 || 11 10; 10
Mining, etc. . . . . . . . . . . . . . . . . . . . . 3 3 3. 3 3 3. 3 3 3 3 3
Manufacturing. . . . . . . . . . . . . . . . . . 21, 19 24 24, 26 21. 21 23| 21 21| 21
Construction. . . . . . . . . . . . . . . . . . . 4 4 : 3. 3 3. 3 3 4 4 4
Transportation, etc. . . . . . . . . . . . . . 9 9 9. 9| 10, 10. 9 9 8 8 8
Banking. . . . . . . . . . . . . . . . . . . . . . . 1 1 1 i 1 i 1 1 1 1 1 & e & -
Merchandising. . . . . . . . . . . . . . . . . . 13, 13 11 12 12 13 13 14|| 14 15| 15, 14 15
Governments. . . . . . . . . . . . . . . . . . . 6 6|| 10. 9 7 9 9 8 8 7 8
Unclassified industries. . . . . . . . . . . 20, 21 12, 11 13. 1s 10 1s 20, 20 20
Miscellaneous income. . . . . . . . . . . . 9| 10| d 9 10 ii 11| 10| 10| 10| 9
Total income. . . . . . . . . . . . . 100 100 w w 100 100 100 100 100|| 100 100
}

* Includes rental value of farmers' homes owned.
proportion of our national income comes from foreign investments.
Merchandising and the large group of unclassified industries and occupa-
tions have contributed more than proportionately to the recent growth of
national income, as have the smaller groups, banking and construction.
Several significant facts regarding the nature and functioning of our
economic system are brought out by the analysis of income: The two
great impersonal forms of economic organization, corporations and
governments, now disburse nearly one-half of our national money income,
and during the war the proportion was even higher. There has been an
appreciable increase in the proportion of total money income which may
be called “fixed incomes”—salaries, interest, and rents—a change making
for the increased stability of business conditions. The financial policy
of corporations has come to be of such a character that cash dividends
approximate the nature of fixed incomes to a marked degree, and fluctuate
scarcely more on the whole with business conditions than nonagricultural
wage payments. The responsiveness of output and of the employment
of labor and capital assets to price changes, notably in agriculture, is
not very prompt. Improved technique and efficiency of operation have
apparently been associated with a more rapid growth of output of goods
and services than of income (measured in dollars of constant purchasing
power to the income recipients) in several industry groups—mining,
electric power, and, for a part of the time, railroads and manufacturing.
Changes in technique and probably in bargaining power must be reckoned
as important factors in determining the distribution of income among the
different industries.
A REVIEW
BY WESLEY C. MITCHELL
I. THE MAZE OF ECONOMIC CHANGES AND A CLUE
The preceding chapters form a moving picture of the economic
changes now going on in the United States. They show scenes from
real life registered from various angles by a group of skilled observers.
Starting with a survey of the kinds and quantities of goods American
families are consuming, the scene shifts to the work people are doing in
factories and mines, on construction jobs, railways, ships and farms.
Another shift focuses attention upon the activities of labor organizations
and of management. Then come the impersonal records of price fluctua-
tions, capital accumulations, banking and international dealings. The
close links into the beginning—it shows the inflow of incomes which
enable American families to sustain their varied consumption.
This record presents striking contrasts. Consumption as a whole
has increased, but the consumption of certain great staples has shrunk.
While trade at large has flourished, certain branches have languished—
notably ship building, the railway equipment industry, and agriculture;
in less measure the textile, coal and shoe trades. Pay-roll disbursements
of factories have expanded, but manufacturing employment has dimin-
ished. Business profits have been large, but so also have been the
number of bankruptcies. Great quantities of gold have flowed into the
country, but wholesale prices have sagged much of the time. Income
as a whole has grown larger, but important sections of the country have
made little gain, and important occupations have suffered loss.
Impressionistic writers often disregard such diversities of fortune.
One can paint a glowing picture of American prosperity which empha-
sizes the triumphs of mass production in automatic factories, the success
of large-scale farming with power machinery, the rapid spread of chain
stores, the co-operation of labor unions in enlarging output, the economy
of high wages, our new position in international finance. Or one can
paint a picture of average and subaverage performance by ordinary
men struggling with difficult circumstances and ending in discourage-
ment or failure. Both pictures may be true to life, so far as they go.
Both are easy to make—one has only to select from the abundant
materials those which harmonize with the chosen theme. Both are
easy to understand because they show no incompatible elements. But
neither picture satisfies an observer who uses his eyes.
841
842 RECENT ECONOMIC CHANGES
A just picture is neither easy to make nor easy to understand after it
has been made. Trustworthy general impressions must be based upon
study of what is happening in different geographical sections, in different
industries, business enterprises, labor organizations, markets, professional
societies, trade associations, and Government bureaus. No individual
is equipped to gather and to analyze all of the evidence which should be
canvassed. For that there is needed the critical skill of engineers,
business executives, public officials, bankers, economists, statisticians,
labor specialists and agricultural experts. Even in his own department,
each of these men finds diverse developments. Often there is a striking
contrast between average current performance and exceptional achieve-
ments which are important more for what they promise in the future than
for what they represent in the present. At times, national totals or
averages can be drawn up to summarize the general situation as seen from
Some angle; but the very estimators who present such figures emphasize
the differences hidden in the general results. And when the contribu-
tions of numerous specialists have been assembled in one volume, there
still remains the task of assimilating all the elements—of understanding
the picture as a whole.”
The best clue to the maze of recent economic changes is supplied by
economic history. What has been happening in the United States is the
latest phase of cumulative processes which have dominated western
life since the Industrial Revolution got under way. Powerful as these
processes are, they were appreciably influenced by the sudden outbreak
of the war and by the sudden return of peace. By changing the condi-
tions amidst which the old influences worked, these world shocks con-
tributed to strange results.
II. THE CONTINUING FORCES.–SCIENCE AND ECONOMIC CHANGE
The nineteenth century brought an unprecedented increase in the
number of Europeans, an unprecedented spread of Europeans over the
* Not that all factors which have affected the economic fortunes of the United
States in recent years are adequately presented in the survey. We have had to shape
our inquiries according to our means. Little is said about the enormous advantages
which this country, in sharp contrast to Europe, enjoys from the absence of internal
tariff barriers, or about the mixed effects of the tariff upon imports. The influence
of Federal, state and local taxation is mentioned here and there; but it is not syste-
matically discussed. Previous inquiries had shown how difficult it would be to get
conclusive data concerning the economic reactions of the Eighteenth Amendment;
with the limited time and money at our disposal it seemed futile to scratch the skin
of that controverted issue. Immigration restriction is dealt with incidentally; it
merits far closer analysis than we have been able to provide. But even with these
omissions and others of less moment, we have a rather bewildering array of factors
to set in order.
A REVIEW 843
earth, and marked changes in their relation to other peoples.” These
multiplying numbers, moreover, gradually attained a higher level of
material comfort than the mass of their progenitors had ever enjoyed.
These great changes in the fortunes of mankind were made possible
by the application of science to the work of producing, transporting,
manufacturing, and distributing goods. Increasingly wide and exact
knowledge of natural processes underlay the invention of the steam
engine, the locomotive, the steamship; the smelting of iron with coal;
the improvements in mining and metallurgy; the development of the
telegraph, Ocean cable, telephone, dynamo, transmission line, radio; the
industrial applications of chemistry and biology, the increasing precision
of work, the system of interchangeable parts, the progress toward auto-
matic mechanisms, the linking of machines into continuous processes
for mass production; the rise of the oil and rubber industries; the per-
fecting of the internal combustion engine, the automobile and the
airplane. *
In the course of the century, a technique of material progress was
developed. Science spread from its ancient stronghold of mathematics
into a systematic study of the most varied phenomena, including the
phenomena of living processes and consciousness. The industrial appli-
cation of scientific discoveries was secured by the rise and differentiation
of the engineering professions. From the parent stock of military
engineers there developed in turn civil engineers, mechanical, mining,
marine, Sanitary, gas, chemical, electrical, efficiency and production
engineers—each group trained in the fundamental sciences and experi-
enced in industrial practice. Business men were prompt to see the profit
which could be drawn from the use of the new methods. Indeed, the
Industrial Revolution had been preceded by a Commercial Revolution.
* Prof. Walter F. Willcox has kindly supplied the following estimates of the popu-
lation of the world in millions of persons. He thinks that his figure for the number of
Europeans outside of Europe in 1900 is probably too low.
1800 1850 1900 1925
- – ---------- –
f
Population of European origin:
In Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 266 401 475
Outside of Europe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 50 100 164
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 316 501 639
Population of non-European origin. . . . . . . . . . . . . . . . . . . . . 609 777 994 1, 107
Total world population. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 813 1,093 1,495 1, 746
Rates of increase from 1800 to 1925:
Population of European origin. . . . . . . . . . . . . . . . . . . . . } 215 per cent
Population of non-European origin. . . . . . . . . . . . . . . . . | 82 per cent
Total world population. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 15 per cent
844 RECENT ECONOMIC CHANGES
Encouraged by the gradual expansion of demand, business leaders had
been reorganizing methods of producing, transporting and distributing
goods to Secure greater efficiency. But this quiet process was enor-
mously stimulated by the “great inventions” and the numberless inven-
tions which followed. For these technical improvements not only
increased efficiency more than mere reorganization of old processes
could do; they also widened the markets at surprising speed and thus
created ever larger opportunities for the business organizer to seize.
Not only did the new technique enable men to produce more from
their known resources, it also brought distant resources within reach and
discovered new treasures which were turned to human use. Vast new
granaries were developed in the Mississippi Valley, Argentina and
Canada; vast new ranges for cattle and sheep stretched from Texas to
Montana and over much of Argentina and Australia. The textile mills
of England were fed cotton from the South Atlantic and Gulf states,
Egypt and India; silk from China and Japan; wool from Argentina and
Australia; coarser fibers from Mexico and the Philippines. European
soils were replenished from Chilean nitrates. Iron ranges of great
extent were found in North America; copper came from Michigan,
Montana, Arizona, Utah, Chile and Peru; gold flowed from Brazil,
California, Australia, Alaska and South Africa; petroleum pools were
found dotted over the globe. Most important of all for the new tech-
nique, coal deposits, surpassing those of England in extent, were developed
in Europe and America. Science enabled the generations which applied
it to tap energy from the sun, accumulated through millions of years.
As research, engineering and business enterprise were developed, so
also was prospecting. The world was combed over as never before by
men with piercing eyes and long plans.
By no means all the increase in efficiency took the form of a net
gain in current livelihood. To use the technique founded on science,
men had to build machines, factories, railways, roads, warehouses and
sewers. In developing new resources, they had to dig mines; to break
the prairies and fence in farms; to make homes in strange habitats. And
this work of re-equipping themselves for making consumers' goods was
never done. Every discovery put to use on a commercial scale meant a
new equipment job, often of great extent. But after all this work on
the means of production was done, there remained an ever larger flow
of the things men eat and wear, house and amuse themselves with.
The net gain in ability to provide for their desires brought men the
possibility of raising their standard of consumption, of reducing their
hours of work, of giving their children more education, of increasing
their numbers. They took a slice of each of these goods, rather than
all of one. They worked somewhat less hard as the decades went by:
they raised their standards of consumption appreciably; they established
A REVIEW 845
compulsory education and reduced illiteracy; they added to the popu-
lation. Any one of these changes might have been made on a larger
scale had not men taken their gains in various forms.
The pace at which the sciences grow, and the pace at which their
discoveries are applied to the work of the world, keep changing. In any
given field of scientific discovery or commercial application, a period of
revolutionary changes is followed by rapid expansion as the new discovery
is fitted into the existing body of knowledge or the existing structure of
industry; then expansion tends to slow down. One after another, many
of our leading industries have gone through this cycle of changes since
1800. In any given decade in any given country, some parts of its
economic mechanism were being made over, some parts were growing
steadily, some parts were changing little. Hence the growth of industry
as a whole has been less unsteady than the growth of its component
parts. The pace has not been uniform, however; even from the national
viewpoint there have been periods of more rapid and less rapid
advance.
Population growth also has its changes of pace. The nations which
lead in science and industry have been increasing their numbers more
slowly of late than in the earlier part of the nineteenth century. This
change is explained by experts as so many modern changes are explained—
it is attributed in large part to the practical application of scientific
knowledge. From a critical study of European evidence, Sir William
Beveridge concludes: “The practice of birth control, that is to say, the
deliberate prevention of fertilization, suddenly increased about 1880, not
because there was then any change of economic conditions making
restriction of families suddenly more desirable than before, but because
the means of birth control were perfected and the knowledge of them
was spread, both by those interested in their sale and by disinterested
propagandists.” That may not be all of the story, but, whatever its
causes, the reduction of the birth rate meant that as men acquired more
knowledge they absorbed a smaller share of the gains from applied science
in propagating their kind, and thereby increased the possibility of
shortening hours and of raising the standard of living.
The whole process of gaining new knowledge and putting it to use
has had to make headway against other human interests—particularly
man’s interest in getting the better of his fellowmen. Business friction,
class struggles, and national wars check science and the peaceful arts;
they impoverish the participants and usually injure the bystanders as
well.
3 “The Fall of Fertility among European Races,” Economica, March, 1925, No.
13, p. 20.
846 RECENT ECONOMIC CHANGES
III. THE WAR AND ECONOMIC CHANGES
Of the checks which economic progress has suffered since the Indus-
trial Revolution began, the gravest was inflicted by the war of 1914–1918.
For all the great nations which lead in science and industry were directly
involved in this desperate struggle, and all the lesser nations on the
same cultural plane were either belligerents or harassed neighbors of the
belligerents. Never had warring powers mobilized their brains and
brawn, their industrial equipment, and their financial resources so
skillfully to harm the persons and property of their enemies. Of the
damages inflicted and suffered, we need here note only such items as
help to account for the postwar changes in American conditions and
practices.
The elaborate equipment for attack and defense demanded by up-to-
date standards of military efficiency meant that every soldier at the
front had to be served by several workers behind the lines. In desperate
haste, each belligerent organized its industry and trade to produce a
maximum output of military supplies and the indispensable minimum of
goods for civilians. A large part of the most efficient workers had to
be withdrawn from production and others hurriedly trained to take their
places. Old factories had to be remodeled for war uses and new plants
built that would serve no peace-time purpose. Governments had to
intervene on a grand scale in operations where private initiative had
been deemed more effective. Long-run advantages and deliberate
planning had to be sacrificed to immediate needs. Despite prodigies
of energy on the part of many leaders and devotion on the part of the
masses, the industrial changes of the war were attended by enormous
wastes, in addition to the wastes which the reorganization was intended
to effect.
In finance the war brought even wilder confusion than in industry.
Monetary and banking policies were dictated, not by the economic
interests of peoples, but by the pressure of circumstances. Specie
payments were suspended in several countries almost immediately.
Wholesale prices, wages, and costs of living, in terms of the irredeemable
paper currencies, underwent fantastic fluctuations, and made necessary
awkward schemes of government control. Millions of people had much
of their property quietly confiscated through no fault of their own, and
thousands grew suddenly rich not by virtue of Service. Taxes mounted
to heights which seemed unbearable, but public debts swelled faster
still. No rule of rational finance could be followed when it ran counter
to the plea of necessity. -
The latest estimates indicate that “the war carried off in round num-
bers thirteen million mobilized men.” The war is charged further with
a large share of responsibility for the ten million deaths during the
influenza epidemic of 1918, and the scarcely less destructive epidemics
A REVIEW 847
which followed in Eastern Europe. Census figures show that the total
population of Europe declined more than ten millions between 1910 and
1920. The loss from 1917 to 1920 must have been considerably greater.”
Thus the war left Europe with fewer people; these people were less
well-nourished, less able-bodied, less self-reliant; their industrial equip-
ment was in poor physical condition and in good part useless for peace-
time production; their soils were depleted from the lack of fertilizers;
they had sacrificed a large part of their farm animals; they had laid
waste considerable stretches of land and ruined many towns. When
peace returned, they faced the task of demobilizing their soldiers and
war workers, releasing their government controls, reorganizing their
industrial forces, and restoring their capital equipment while prices were
still fluctuating violently, and while political prospects, domestic and
international, were most uncertain. Economic welfare in Europe had
received a setback indeed.
The economic position of the United States improved greatly in
comparison with Europe's during the war. But that was more because
European losses were staggering than because American gains were
spectacular.
Business in this country recovered from depression in the second half
of 1915 with remarkable rapidity, thanks largely to war orders. Then
we had a year of intense business prosperity in 1916, followed in 1917–18
by the hectic economic activity which prevailed among all the belligerents.
If taxes were heavy, current profits were very large. Nor were the gains
confined to the profit-making classes. Wage rates may not have kept
even pace with the cost of living, but employment was full and there
was a widespread reduction in standard working time between 1914 and
1920, which Dr. Leo Wolman estimates at five hours a week.
Listing the deductions is a more complicated matter. There was an
uncommonly large share of haste and waste, as well as of profits, in war-
contract work during 1915 and 1916. Though we were not forced to
suspend specie payments, our whole system of prices suffered convulsions
almost matching those of the Civil War. In 1917 we sought to mobilize
all our economic resources in a hurry for military ends, and had to demo-
bilize the war workers, as well as the army, in 1919. Our railways
declined in efficiency. We poured millions into war plants and ships
that had to be scrapped after the armistice. We took about 5,000,000
of our best producers out of civilian life. We lost 116,000 soldiers and
sailors, and shared in the influenza epidemic of 1918. These costs were
real, and must be considered in any accounting of the economic effects
4 Walter F. Willcox, “Military Losses in the World War,” Journal of the American
Statistical Association, September, 1928, Vol. XXIII, pp. 304–5; and “Population
and the World War,” ibid., June, 1923, Vol. XVIII, pp. 699–712.
848 RECENT ECONOMIC CHANGES
of the war just as much as the profits which the war brought to
American business enterprises.
Even if items which cannot be expressed adequately in dollars were
Set aside, it would be exceedingly difficult to strike a balance between the
war gains and the war losses. That task is not attempted here. But
it is proper to note the fluctuations in the country’s “real” income during
the war, that is, income in dollars of constant purchasing power. These
figures, given in Chapter XII, are estimates based on the critical study
of a vast mass of materials; they have been made and revised with scru-
pulous care; they are probably the most reliable, as well as the most
inclusive, index of changes in the economic position of the average family.
In the last full year before the war, a year which began with brisk trade
but ended in dullness, the per capita income of Americans, taken at the
retail prices of 1925, was $621. (See Chapter XII, Table 1, column 6.)
Starting with this figure as 100, per capita income shrank to 97 in 1914,
rose to 99 in 1915, to 106 in 1916, remained constant at that level in
1917, and then declined to 105 in 1918. On this showing, we were far
from impoverished during the war; but our economic progress was not
remarkably rapid.”
Nor can we close the reckoning of the war's influence upon real
income with 1918, either in the United States or in other countries. The
readjustment of economic activities to peace is one of the costs of war.
And that readjustment is more than a matter of beating swords into
ploughshares. In proportion as the belligerent nations had succeeded
in mobilizing all their economic resources for war, not only their govern-
ments, but also their business enterprises and individual citizens had to
reorganize their plans after the armistice. The business mistakes made
during this period of confusion are largely chargeable to the confusion
itself. Other countries found the process of readjusting even more
* The showing is less favorable if we take the everyday conception of income
as including only sums received in money. On this basis, the per capita figures,
expressed in dollars of 1925 purchasing power, run as follows:
|
Per capita Relative
income income
1913. . . . . . . . . . . . . . . . . . . $551 ! 100
1914. . . . . . . . . . . . . . . . . . . 530 - 96
1915. . . . . . . . . . . . . . . . . . . 543 99
1916 . . . . . . . . . . . . . . . . . . . 582 106
1917. . . . . . . . . . . . . . . . . . . | 573 104
1918. . . . . . . . . . . . . . . . . . . { 5:51 100
|
The chief items omitted in these figures and included in those underlying the text
discussion are farm products used by the families which produce them, the rental
value of houses owned by their occupiers, and interest on the value of semidurable
consumers' commodities in the possession of families.
A REVIEW 849
difficult than did the United States. All our allies made matters worse,
as did we, by committing economic blunders in 1919 for which they
paid in 1921. What happened is sketched briefly in the next section.
But here we should note that income in the United States sank in the
early years of peace. Indeed, average real income per capita in the
United States during the eight years of war and postwar readjustments,
1914 to 1921, was less than the per capita income of 1913. That is not
a record of prosperity.
IV. PEACE AND THE ECONOMIC CONVULSIONS OF 1919–1921
Readily as they had accepted the economic regulations and restric-
tions imposed during the war, the American people threw off the yoke
eagerly after the armistice. The “dollar-a-year” men returned to their
offices; the munitions plants closed and their workers dispersed; the
Soldiers in training camps and in France were sent back to their homes
as rapidly as might be. Government price-fixing ended, and everyone
was at liberty to charge what he could get for his goods. The rationing
of raw materials, the granting of transportation “priorities,” the conser-
Vation program, the Federal regulation of imports and exports, and the
Government control over shipping stopped at various dates. When the
Transportation Act of February, 1920, provided for returning the rail-
roads to private control, practically nothing was left of the war-time
mobilization.
It was not “business as usual,” however, to which Americans returned
in 1919, but business as dominated by postwar conditions. Early in the
year there was grave uncertainty regarding the trend of affairs. Whole-
sale prices declined from December to February or March; there was
much loose talk about the necessity of “liquidating labor;” the prevailing
business attitude was one of “watchful waiting.” But, early in the
Spring, signs of eager demand for consumers’ goods began to appear. In
April, Federal Reserve agents reported that “the business community
has given up the thought that it may profitably await a further consider-
able reduction in prices . . .” In July, the Bureau of Labor Statistics
wholesale price index (as then constituted) jumped from 207 to 219, and
business boomed.
The extraordinary demand for goods, which produced this sudden
transition from hesitation to feverish activity, came partly from foreign
countries. The underfed European populations bid eagerly for our
foodstuffs; also they were short of raw materials for their mills. Aided
by American credits, governmental and private, they could pay for what
they needed. So the physical volume of exports and their prices rose
together. The value of shipments to Europe reached nearly $5,200,000,-
000 in 1919, 25 per cent higher than the preceding record, and double the
6 Federal Reserve Bulletin, May, 1919.
850 RECENT ECONOMIC CHANGES
money value in any year since then. The removal of restrictions upon
foreign trade enabled our other customers also to buy in proportion to
their respective needs. The increase in the value of total exports over
1918 reached $1,771,000,000.
Domestic demands were scarcely less keen. Economies in consump-
tion, partly voluntary and partly forced, had been practiced widely in
1917–18. Hence there was need for buying more than the customary
quantities of clothing, household furnishings and other semidurable
comforts. Ordinary building had been discouraged during the war as a
nonessential industry, and there was pressing call for more houses.
Crops in 1918 had been but moderately good; stocks had been kept low;
numerous branches of civilian production had been purposely restricted.
High prices were asked, for the current supply of finished commodities
soon proved inadequate. But for a time customers were willing to pay
almost any price for prompt deliveries. Employment had been full for
three years, soldiers commonly had substantial sums due them when
mustered out, new jobs were readily had at high money wages, everyone
seemed tired of economizing.
Under these circumstances, 1919 developed into a great trading year.
Interest rates remained fairly low until late autumn; the Treasury was
floating its great Victory loans that summer and wanted easy money to
facilitate subscriptions. Orders for goods from merchants, contractors
and manufacturers promised a continuation of good times. A run-away
market developed on the New York Stock Exchange for industrials.
Paper profits, present and prospective, seemed very high.
But 1919 was a poor year from the point of view of production. The
harvests, indeed, turned out well; there was a large yield of wheat and
there were fair crops of corn and cotton. It was in mining and industry
that the record was bad. The following collection of indexes of produc-
tion, in Table 1, made on unlike plans by different investigators, all agree
in showing that output in physical terms was decidedly less in 1919 than
in the preceding years. By strenuous effort we had kept production at
a high level in 1917 and 1918, despite the withdrawal of more than a
million men from our mines and factories. In the first year of peace,
when many of these men got back to work, efficiency declined. These
indexes of physical production confirm and are confirmed by the estimates
of per capita income in dollars of constant purchasing power. The
figure for 1918 had been $651. For 1919 it was $611.
More insight into the nature of the industrial inefficiency of 1919 is
provided by the indexes from the censuses of manufactures presented in
Chapter II. The most significant figures for the present purpose relate
to productivity per wage earner. Of course one expects average produc-
tivity per worker to rise gradually in a country which keeps abreast of
technical progress. Such an advance we find from 1899 to 1909—the
A REVIEW - 851
index of productivity per worker in this period runs 100 in 1899, 104 in
1904, and 110 in 1909. We may explain the relapse to 108 in 1914 by
the business depression of that year. But the further decline to 104 in
the boom year 1919 must mean that both management and labor were
deplorably lax. Probably it means also that, during the war, we had
neglected our industrial equipment for civilian production and made but
few improvements in method.
TABLE 1.-INDEXES OF PHYSICAL PRODUCTION IN THE UNITED STATES BY YEARs:
1913–1919
Harvard Indexes of Physical
Index of Production Ind f Ind ial Volume of Production
ndex of Industria ‘‘Normal” = 100c
Production, Standard
Statistical Company,”
in Basic Industries,
Year Federal Reserve
Board revised, a ‘‘Normal” = 100
1919 = 100 Mining Manu- Agricul-
facture ture
1913. . . . . . . . . . . . . . . . . . 96 106 102 102 94
1914. . . . . . . . . . . . . . . . . . 86 92 95 91 106
1915. . . . . . . . . . . . . . . . . . 96 100 99 98 1 10
1916. . . . . . . . . . . . . . . . . . 114 116 108 112 96
1917. . . . . . . . . . . . . . . . . . 116 114 112 109 101
1918. . . . . . . . . . . . . . . . . . 110 105 110 104 100
1919. . . . . . . . . . . . . . . . . . 100 95 95 98 101

• Includes 4 types of metal production, 2 types of textiles, 3 types of fuel, 4 types of animal and
2 of vegetable foods, lumber, cement, leather, newsprint and 3 types of tobacco products—22 series in
all. See Federal Reserve Bulletin, May, 1924, p. 422.
* Includes 39 series of production or consumption data—a somewhat more inclusive list than the
Federal Reserve Board’s “basic industries.” “Secular trend is eliminated and correction made for
normal seasonal variation.” See Statistical Bulletin of the Standard Statistical Company, April 21,
1924, p. 28.
c The indexes, originally made by E. E. Day, in their latest form. See W. Floyd Maxwell, “The
Physical Volume of Production in the United States,” Review of Economic Statistics, July, 1927, p. 143.
The business boom of 1919 developed with extraordinary quickness,
and in rather extreme form, the internal stresses characteristic of such
episodes. A rapid expansion of commercial loans reduced the reserve
ratios of the Federal Reserve banks below 50 per cent in October. On
November 3, the New York bank raised its rediscount rate. Stock
prices tumbled promptly. But as usually happens in booms, commercial
activity continued to expand for some months after the stock-market
collapse. The further expansion of commitments added to the accu-
mulating tension. Though the other Reserve banks followed the example
of New York in raising their rediscount rates, the Reserve ratio continued
to sag. By February, 1920, the figure was below 43 per cent, and there
it remained for several months of growing uneasiness. Meanwhile, prices
at wholesale climbed unsteadily to 247 in May—an advance of 54 points
on the prewar base since the dizzy rise had started in March of the
852 RECENT ECONOMIC CHANGES
preceding year. Then came the turn. Slowly at first, soon rapidly,
prices gave way. In half the time it had taken prices to rise 54 points,
they dropped 68 points.”
At the close of the Civil War, wholesale prices had fallen from 216
in January, 1865, to 158 in July—a drop of over 25 per cent in six months.
That fall produced no grave crisis. The business community had
expected the greenback dollar to appreciate in gold when the Confederacy
collapsed. Grant's successes against Lee and Sherman's march to the
sea gave timely warning of what was coming, both at the front and behind
the lines. Because business men prepared for the worst, keeping com-
mitments and inventories at a minimum, the country passed through this
sudden fall of prices with extraordinary success.
The corresponding drop of prices in 1920–21 caught the business
community in a different frame of mind and in a different technical
position. Perhaps if the fall had come soon after the armistice, when
many expected it and almost everyone was cautious, it would have
passed off much as in 1865. But prices had risen in 1919, the volume
of trade had expanded, profits had been high, the preliminary warnings
of the Federal Reserve banks had been ineffectual, and, when the turn
came, many business enterprises were caught with heavy inventories and
heavy future commitments. So the fall of prices, which started gently
enough, was accentuated by the efforts of embarrassed houses to turn
commodities into cash. Every price decline made the financial position
of overexpanded enterprises worse, reinforced the fears of insolvency
and the pressure for liquidating indebtedness, thus increased the pressure
to realize upon stocks of goods, and so forced prices lower still.
Three favorable factors prevented this crisis from degenerating into
a panic. Though European demand for our goods declined somewhat
from the high level of 1919, the demand from other countries scored a
more than compensating increase. The total value of our exports
exceeded $8,228,000,000 in 1920–which still stands as the record figure.
Second, retail demand from domestic consumers remained active to the
end of the year. The Federal Trade Commission estimates total retail
sales as nearly 35 billion dollars in 1919 and over 38 billions in 1920.”
Third, and probably most important, the Federal Reserve System, with
its organization of banking reserves, enabled our banks to meet the
7 Here the latest form of the Bureau of Labor Statistics index on the 1913 base is
used. See Indez Numbers of Wholesale Prices on Prewar Base, U. S. Department
of Labor, 1928, pp. 7, 8.
* See Wesley C. Mitchell, Gold Prices and Wages under the Greenback Standard,
Berkeley, Calif., 1908, p. 23. The index used is the unweighted median of the relative
prices of 92 commodities.
* See National Wealth and Income, Senate Doc., No. 126, 69th Cong., 1st Sess,.
Washington, 1926, pp. 306–313.
A REVIEW 853
emergency needs of business far more effectively than in previous crises.
There was no such suspension of payments by banks, no such refusal of
credit to solvent enterprises, as in 1893 and 1907.
The net resultant of the complex of forces was a drastic financial
liquidation, which presently produced, and was then aggravated by, a
severe industrial depression. Business enterprises, fearing for their
solvency, canceled orders freely; enterprises in a less precarious condition
bought hand-to-mouth on the falling markets; concerns which had been
making up stocks of raw materials reduced their working forces instead .
of buying new stocks. Discharges mounted month by month, until the
number of unemployed in 1921 alarmed the nation.” In consequence,
retail buying fell off—by 7.6 billion dollars, according to the Federal
Trade Commission. Thus one of the timbers which had shored up
business in 1920 gave way under the prolongation of the strain. A second
support failed; other countries were suffering misfortunes like our own,
so that our exports dropped 3.7 billion dollars, 45 per cent, below the
preceding year.
Amidst these unfavorable circumstances, business losses swelled to
prodigious figures. The rise of prices from the middle of 1915 to May,
1920, had rendered money-making overeasy. Speculation in commodities
had been encouraged; the penalties for inefficient operation and risky
financing had been relaxed. The numbers and the liabilities of bank-
ruptcies had declined to half their prewar levels. Thus, when prices
began their precipitous fall, the American business community contained
a dangerously large proportion of weak enterprises. Despite the extra-
ordinary efforts of bankers, supported by the Federal Reserve System,
to prevent avoidable failures, business mortalities trebled between 1919
10 President Harding called a Conference on Unemployment, of which Mr. Hoover
was chairman. For a committee of the conference, the National Bureau of Economic
Research made a fact-finding study, published in 1923 under the title Business Cycles
and Unemployment. In this report, the best estimates we could make of the extent
of unemployment in 1921 were summarized thus:
“There seems good ground for believing that, in actual diminution of em-
ployment, the depression of 1921 was almost twice as acute as that of 1908 and at
least twice as acute as that of 1914–15.” William A. Berridge (p. 59).
“The figures show that the depression brought about a reduction in the number
employed in every industry except the hand trades, and the trivial increase in that
one field is scarcely sufficient to keep pace with the growth of population. The
reduction in all industries amounted to about 4,000,000 workers, or nearly one-
seventh of all persons employed at the crest of the 1920 boom.” Willford I. King
(p. 86).
The new estimate, given in the chapter on labor in the present report, states
the “average minimum volume of unemployment” at 4,225,000 in 1921 as compared
with 1,305,000 in 1920. These figures are not inconsistent with the earlier ones; for
they give averages for years on a minimum basis, whereas King used quarterly
data and attempted to reach a maximum figure.
854 RECENT ECONOMIC CHANGES
and 1921. Liabilities increased more than fivefold.” What happened
to the bulk of enterprises is perhaps best indicated by the reports of
corporations to the Internal Revenue Office, though even these official
returns must be accepted with reservations. As the following table
shows, more than half of the corporations reported that they lost money
TABLE 2.--—CoRPORATE INCOME TAx RETURNS”

| |
Percentage Total net Total deficit Net income
reporting income of of corpora- f all -
Thousands corporations |tions report- ° ***P Ort
Year of corpora- reporting ing no net ºng Corpora-
tions r eport- net incomes income tions
1ng e Net No * (millions of (millions of (millions
1 In CO II) e IIl COIIle dollars) dollars) of dollars)
(1) (2) (3) (4) (5) (6)
1916 341 61 39 8,766 657 8, 109
1917. 351 66 34 10,730 630 10, 100
1918. 3.18 64 36 8, 362 690 7,672
1919. 320 65 35 9,411 996 8,415
1920. 346 59 41 7,903 2,029 5,874
1921. 356 48 52 4, 336 3,878 458
1922. | 383 56 44 6,964 2, 194 4,770
1923. 399 58 42 S, 322 2,014 6,308
1924. . . . . . . . . . . . . . . . . . 4.17 57 43 7, 587 2, 224 5,363
1925. 430 59 41 9, 584 1,963 7,621
1926. 455 57 43 9, 673 2, 169 7,504
1927b . . . . . . . . . . . . . . . . . . 453 55 45 8,068 2, 311 5,757
|
a From Statistical Abstract of the United States, 1926, pp. 190, 191, and Statistics of Income, Treasury
Department, 1925–1927.
b Preliminary report, based on returns filed to August 31, 1928.
in 1921. If we subtract the deficits of the losers from the net incomes
of the concerns which admitted making money, we find that the balance
of profits falls from eight billions of dollars in 1919 to less than half a
billion in 1921. Probably that statement exaggerates the drop in net
corporate income. But it is safe to say that, in the course of the drastic
readjustment, a considerable fraction of the accumulated war-time profits
was swallowed up.”
* Dun's figures, as given by the Statistical Abstract, are as follows:
Number of com-
mercial failures
Aggregate liabilities Average
in millions of dollars liabilities

1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,451 113 $17,561
1920. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,881 295 33, 230
1921. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,652 627 31, 926
* Mr. George O. May, one of the directors of the National Bureau who has
intimate knowledge of such matters, points out some of the uncertainties which
becloud these figures.
During the period of the excess-profits tax, profits were affected by several unusual
factors.
For example, war contracts were let in many cases on highly profitable
terms, with the thought in mind that a major fraction of the profits would be recouped
A REVIEW
855
TABLE 3.−A CONSPECTUs of
BUSINESS ConDITIONS IN 17 Countries, 1919–1921
Country
1919
1920
1921
United States.
* * * * * * * * * * * * * * * * * * * *
European allies:
England. . . .
* * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * *
• a s = e s = e º e º sº s e s m e º e s
& º & º & e º g = * * * * * * * * * * *
e e º a tº s a e º a sº e < * a s a e º a
South American powers:
Argentina. . .
Brazil. . . . . .
• * * * * * * * * * * * * * * * * * * *
• * * * * * * * * * * * * * * * * * * *
* * * * * * * * * * * * * * * * * * * *
Central powers and Russia:
Germany. . .
Austria. . . . .
Russia. . .
* * * * * * * * * * * * * * * * * * * *
Revival, prosperity.
Revival, prosperity.
Depression, revival,
boom.
Mild depression, re-
vival.
Revival, prosperity.
Revival, prosperity.
Prosperity.
Revival, prosperity.
Depression, revival.
Revival, prosperity.
Prosperity.
Prosperity.
Depression, revival,
prosperity.
Prosperity.
Depression.
Depression.
Depression.
Prosperity, recession,
depression.
Prosperity, recession,
depression.
Prosperity, recession,
depression.
Recession, depression
Prosperity, recession.
Prosperity, recession,
depression.
Prosperity, recession.
Prosperity, recession,
depression.
Boom, recession, de-
pression.
Prosperity, recession,
depression.
Prosperity, recession.
Prosperity, recession,
depression.
Prosperity, recession,
depression.
Prosperity, recession,
depression.
Depression.
Slow revival.
Depression.
Depression.
Deep depression.
Depression, re-
vival.
Depression, panic.
Depression.
Deep depression.
Depression.
Depression.
Depression.
Depression.
Depression.
Severe depression.
Depression.
Depression.
Revival, Spring.
Revival.
Depression.
Rearranged from Willard L. Thorp, Business Annals, National Bureau of Economic Research, 1926,
p. 86.
through the
tax.
plans for future expansion and charged as current expenses.
One of the chief reasons why the profits reported in 1917 were so much larger
than in 1918 is that in the former year the tax was retroactive.
On the other hand, large sums were spent for advertising or other
Hence there was
less opportunity in 1917 than in 1918 to enter into transactions which would reduce
taxable income.
In comparing 1917 with later years, it should be noted also that the
law has been made more liberal to the taxpayer in important respects; for instance,
by allowing discovery depletion and by increasing depletion allowances at large.
Finally, there is little duplication of income in the returns, but much duplication
of losses.
That is, the net-income figures exclude dividends received from other
corporations; but if one corporation loses money and fails, it will report its loss directly,
and other corporations which are its creditors or stockholders will also report what
they have lost by its failure.
Hence the figures in the last column of the table over-
state the fluctuations in net corporate income, while the figures in column 4 under-
state them.
856 RECENT ECONOMIC CHANGES
Though the boom of 1919, the crisis of 1920, and the depression of
1921 followed the pattern of earlier cycles, we have seen how much this
cycle was influenced by economic conditions resulting from the war and
its sudden ending. These influences were world-wide. If American busi-
ness men were betrayed by postwar demands into unwise courses, so were
business men in all countries similarly situated. Table 3, based upon a
critical study of business conditions by Dr. Willard L. Thorp, gives a
conspectus of conditions in seventeen countries, classified according to
their relation to the war. It shows that the course of business affairs
in the United States from 1919 to 1921 was almost exactly paral-
leled by the course of affairs in the leading European allies, in
four great British dependencies on four continents, in the two European
neutrals studied, in two South American nations, in Japan and in China.
Each of these thirteen countries had its ordinary supplies for civilian uses
gravely restricted during the war; to each peace brought a hectic season
of activity (mildest in Italy); each suffered a recession in 1920 and a
depression in 1921. In only three countries does the record differ
widely from that of the United States, and these are countries where the
fortunes of war and peace had an opposite cast. Russia's internal
troubles kept her economic life in disorder. Germany and Austria
suffered depression in 1919–1920 while their victorious opponents enjoyed
prosperity, and emerged into revivals in 1920–1921 while their opponents
were liquidating postwar booms. Not until this liquidation was finished
did economic life resume its independent way. Even then, factors
arising from the war continued to exercise an important influence.
W. FACTORS AFFECTING AMERICAN FORTUNES IN 1922–1927
Among the factors which have shaped economic developments in the
United States since the first postwar cycle ended its wild career, we may
note first certain unfavorable conditions which business has had
to surmount.
Conditions in Other Countries.—Prosperity in other countries to
which it sells its products tends to beget prosperity in the producing
nation. Similarly, depression in foreign markets reacts unfavorably
upon domestic business. These international influences gain in scope
and energy as nations are drawn closer together by improvements in
transportation and communications. Hence the business annals of the
nineteenth century show a secular trend toward increasing similarity
of economic fortunes among trading nations. Though capable of meeting
most of its own needs and separated from the other leaders in commerce
by broad oceans, the United States feels the reflex influence of business
conditions in every country with which it deals on an appreciable scale.
A REVIEW 857
Prosperity here is heightened by active foreign demand for our products,
and depression abroad is an unfavorable factor in our home affairs.”
Such prosperity as the United States has enjoyed since 1922 owes
less than usual to foreign stimulation and support. Table 4, a con-
tinuation of Table 3, shows that few countries have fared so well as we
in the last six years. Compared with most of the nations represented,
if not judged by the standard we like to set for American prosperity,
the United States has been well off.
Department of Commerce figures support this inference from business
annals. After an extraordinary fall from 1920 to 1921 or 1922, the
value of American exports and imports began to increase again. But
imports increased at the more rapid rate. In 1919–1921, the value of
our imports made only 56 per cent of the value of our exports. In 1922–
1927, this percentage rose to 86. That figure is decidedly higher than
the prewar average of 78 per cent in 1910–1914. When 1913 records
are taken as 100, the averages for 1922–1927 show the following changes:*
The physical volume of imports has increased 66 per cent.
The physical volume of exports has increased 33 per cent.
The prices of imports have increased 31 per cent.
The prices of exports have increased 38 per cent.
The dollar values of imports have increased 117 per cent.
The dollar values of exports have increased 81 per cent.
If we grant that the real goal of economic effort is to secure goods
for meeting human wants, it follows that a country's gains from inter-
national trade consist of its imports. Exports represent costs—prices
paid for the goods desired. In this sense, the fact that our imports
have grown faster than our exports means that the outside world had
increased its contribution to our economic welfare more rapidly than
we have increased our contribution to the economic welfare of other
countries. But from the business point of view, the preceding figures
mean that by enlarging our purchases more than our sales we have
stimulated trade in other countries more than other countries have
stimulated trade here.”
* See Willard L. Thorp, Business Annals, National Bureau of Economic Research,
1926, pp. 73–100.
14 See Commerce Yearbook, 1928, Vol. 1, pp. 86 and 91.
* The percentage changes in our imports and exports have varied widely from
one class of commodities to another and from country to country. It is solely to the
broadest features of our foreign commerce as a whole that the statements in the
text refer. It should be noted also that the discussion is confined to the merchan-
dise factor in international dealings. A fuller discussion covering “invisible” as
well as visible items may be found in Chap. XI, Foreign Markets and Credits.
858
RECENT ECONOMIC CHANGES
TABLE 4.—ConsPECTUs of BUSINESS FLUCTUATIONS IN 17 COUNTRIES 1922–1927
Country
1922
1923
1924
United States. . . . . . . . . . . . .
European allies:
England
Italy. . . . . . . . . . . . . . . . . . . .
British colonies:
Canada. . . . . . . . . . . . . . . . .
South Africa
Australia
India. . . . . . . . . . . . . . . . . . .
* * * * * * * * * * * * * * *
European neutrals:
Revival, prosperity.
|
Depression.
Revival.
Depression.
Depression, revival.
Depression.
Revival (slow).
Depression.
|
Prosperity, recession.
Depression.
Prosperity.
Depression, revival.
Prosperity (moderate).
Revival.
Revival.
Revival (slow).
Mild depression,
vival.
Iſe-
Depression (lessening).
Prosperity.
Prosperity (moderate).
Recession.
Prosperity (mild).
Recession (mild).
Revival.
Sweden. . . . . . . . . . . . . . . . . Depression, revival. Revival. Prosperity (mild).
Netherlands. . . . . . . . . . . . . . Depression. Depression. Revival.
South American powers:
Argentina. . . . . . . . . . . . . . . Depression. Depression (lessening). Revival.
Brazil. . . . . . . . . . . . . . . . . . Depression (lessening). Revival. Recession.
Oriental powers:
Japan . . . . . . . . . . . . . . . . . Depression. Depression. Depression.
China. . . . . . . . . . . . . . . . . . Depression. Depression. Depression.
Central powers and Russia:
Germany. . . . . . . . . . . . . . . Revival, recession. Depression. Revival, check.
Austria. . . . . . . . . . . . . . . . . Recession (uneven). Depression. Depression (financial).
Russia. . . . . . . . Depression, revival. Revival, recession. Depression, revival.
1925 1926 1927
United States. . . . . . . . . . . . . Prosperity. Prosperity, slight re- || Mild contraction.
cession at close.
European allies:
England. . . . . . . . . . . . . . . . Depression. Depression. Revival.
France. . . . . . . . . . . . . . . . . Prosperity. Prosperity, recession. Depression, revival.
Italy. . . . . . . . . . . . . . . . . . . Prosperity. Recession. Depression.
British colonies:
Canada. . . . . . . . . . . . . . . . . Revival, prosperity. Prosperity. Prosperity.
South Africa. . . . . . . . . . . . Prosperity. Prosperity (mild). Uneven prosperity.
Australia. . . . . . . . . . . . . . . . Revival, prosperity. Prosperity. Prosperity.
India. . . . . . . . . . . . . . . . . . . . Prosperity (mild). g Depression. Revival.
European neutrals: }
Sweden. . . . . . . . . . . . . . . . . Prosperity (mild). Prosperity (uneven). Prosperity.
Netherlands. . . . . . . . . . . . . . Prosperity (mild). Prosperity (mild). Prosperity.
South American powers:
Argentina. . . . . . . . . . . . . . . . Prosperity. Recession. Revival. .
Brazil. . . . . . . . . . . . . . . . . . Depression. Depression. Depression.
Oriental powers:
Japan. . . . . . . . . . . . . . . . . . Depression, revival. Depression. Depression.
China. . . . . . . . . . . . . . . . . . Depression. Depression. Depression.
Central powers and Russia:
Germany. . . . . . . . . . . . . . . Revival, recession. Depression, revival. Revival.
Austria. . . . . . . . . . . . . . . . . . Depression. Depression, revival. Revival continued.
Russia. . . . . . . . . . . . . . . . . . Prosperity, recession. | Prosperity. Prosperity.
A REVIEW 859
Further, unless the most inclusive of statistical indexes are grievously
in error, our domestic business as a whole has grown faster than our
foreign business. Comparisons like those just given, which credit
exports with an 81 per cent increase, show that on the basis of 1913
records as 100:
The dollar volume of the average national income per year in
1922–1926 increased 121 per cent.
The dollar volume of average yearly bank clearings outside of
New York in 1922–1927 increased 175 per cent.
So, too, the Department of Commerce finds that the value of manu-
factured goods produced in the United States has grown much faster
since 1919 than the value of manufactured exports. Indeed, the fraction
of these products exported in 1925 was smaller than the prewar average.”
In particular, American prosperity has been marred by agricultural
depression, and agricultural depression has been due in part to foreign
conditions.
The war brought an increased export demand for American bread-
stuffs and meat. When the United States entered the struggle, and
millions of tons of shipping were required for transporting our army to
France, there was further reason for avoiding the long hauls of food from
Argentina, Australia and India. There was danger also that enlistments
would reduce our harvests. One of the first war measures of the Govern-
ment was the creation of a Food Administration. In other industries,
price-fixing meant setting of maximum prices; Congress itself set a
minimum price of $2 a bushel on wheat, and authorized the President to
raise the minimum higher if need be.
Farmers responded to these war demands as fully as they could.
According to the census returns, they had increased the area harvested
by 28 million acres between 1899 and 1909; between 1909 and 1919 they
added 37 million acres. Yields are always at the mercy of the weather;
but the Harvard index of physical production in agriculture shows an
* Exports of manufactured goods in relation to domestic production, in mil-
lions of dollars, are shown in the following table.” The value of materials enter-
ing factories is necessarily approximate, and hence is expressed as a maximum or
minimum.

Materials Value added Export
Year excluding by manu- Total value
duplication, facture Value Per cent
1919. . . . . . . . . . . . . . . . . . . . . . . 12, 500–14, 500 24,800 38, 300–40, 300 5,449 || 13.5–14. 2
1921. . . . . . . . . . . . . . . . . . . . . . . 8,000– 9, 400 18, 330 26,300–27, 700 2,722 9.8—10.3
1923. . . . . . . . . . . . . . . . . . . . . . . 11, 500–13, 200 25,850 37, 300–39, 100 2,625 6, 7– 7.0
1925. . . . . . . . . . . . . . . . . . . . . . . 12,000–13,500 26,800 38,500–40,000 || 3,079 7.6— 8.0
a From Commerce Yearbook, 1928, Vol. I, p. 93.
860 RECENT ECONOMIC CHANGES
acceleration in the rate of growth when averages are taken for several
years. This index rose 5 points on the 1899 basis between 1904–1908
and 1909–1913, 12 points between 1909–1913 and 1914–1918, and 2
points more between the war period and 1919–1921—though the last
year was one of poor crops.
Thus the war left American agriculture with expanded facilities for
production. And the good times had lasted long enough to let even
this occupation, which must wait upon nature, base its finances on the
unstable prospect of continued high prices and high profits. In the
corn belt, the regions where wheat growing was expanding, and in certain
tobacco-planting sections, farm lands had risen to prices unheard of
before, and thousands of enterprising men had bought all the land they
could acquire by stretching their credit to the utmost.
The imperious needs of underfed Europeans had swelled our agri-
cultural exports in 1919 to more than 4 billion dollars—much more than
the war-year figures. Even in 1920, agricultural exports were valued
at nearly 3.5 billions. But then came a sudden fall in the foreign demand.
The total value of agricultural exports shrank in 1921 by 1.3 billion
dollars, and in 1922–1927 it fluctuated about an average lower than that
of 1921–1.9 billions as compared with 2.1.
For this shrinkage in exports it is easy to account. Price reductions
are a large part, but not all, of the story. After demobilization, European
farmers could get all the labor they required; gradually they restored
their depleted stocks of farm animals and their accustomed use of
fertilizers. Also there were fewer European mouths to feed in 1920
than there had been in 1917, or even in 1910. Thus Europe became less
dependent on foreign countries for food than it had been during the war.
Second, shipping became superabundant, freights fell to very low levels,
and the world's commerce slipped back toward its old channels. The
United States lost most of its war-time advantage from a short haul.
Third, our competitors in food production—especially Argentina,
Canada and Australia—were expanding their output of meat and cereals
vigorously. With cheaper lands, they could make things most uncom-
fortable in world markets for farmers in the United States. Finally,
cotton crops were small in these years, mainly because of the boll weevil,
and the high level of prices made it difficult for the impoverished countries
of Europe to buy the quantity needed to furnish employment in their
factories and cotton fabrics to their people.
Reckoned in physical units, our agricultural exports remained above
the prewar levels in 1922–1927. But they fell below the levels to which
American farmers had adjusted their output in 1917–1920. To sell
even these reduced quantities, they have had to accept prices which in
most cases were low in comparison with the prices of other commodities.
A REVIEW 861
TABLE 5.—DOMESTIC ExpoRTs of AGRICULTURAL PRODUCTs FROM THE UNITED
STATEs, BY AvH.RAGES OF PERIODs of YEARs

Physical quantities of
Val f
Total value alues of exports of exports of
Calendar years of agricul-
y tural exports
(domestic) e g & º
Five grains Cotton Five grains Cotton
Millions of Millions of Millions of Millions of Millions of
dollars dollars dollars bushels bales
1909–1913. . . . . . . . . . . . . . . . . . 966. 5 88.1 541. 7 112.9 8.5
1914–1918. . . . . . . . . . . . . . . . . . 1,842.8 386.8 511. 1 315.2 6. 1
1919–1921 . . . . . . . . . . . . . . . . . . 3, 221. 1 638.4 936, 0 358.9 6.4
1922–1927. . . . . . . . . . . . . . . . . . 1,942. 1 288 . 6 855. 3 191.6 7.8
Sources: Commerce Yearbooks.
Monthly Summary of Foreign Commerce.
Foreign Commerce and Navigation of the United States.
Table 5 shows the basic facts concerning exports. Table 6, comparing
production and exports, is even more illuminating. More than in average
prewar years, American farmers, with their increased output, had to
depend on the domestic markets. They fared ill, and their hard times
created more difficulties for other American industries than the prevalence
of depression in foreign countries.
TABLE 6.-PRODUCTION OF AGRICULTURAL PRODUCTS IN THE UNITED STATES AND
PROPORTION ExpoRTED, BY CENSUs YEARs
(In millions of dollars)

Agricultural | Domestic Value of Export of
products exports P P
Year excluding of agri- er cent manufac- manufac- er cent
º a º exported tured food- |tured food- exported”
duplication cultural
stuffs.” stuffs
and seeds products
1899. . . . . . . . . . . . . . . . . . . 3, 450 b818. 7 23.7 1,700– 1,900 312 16.4–18.4
1904. . . . . . . . . . . . . . . . . . . 4,600 b843. 0 18. 3 2, 250— 2, 550 296 11.6—13.2
1909. . . . . . . . . . . . . . . . . . . 6, 100 903, 2 14.8 2,950— 3, 450 281 8. 2–9.5
1914. . . . . . . . . . . . . . . . . . . 7,500 1, 114.0 14.9 3,750— 4,350 374 8.6–10. 0
1919. . . . . . . . . . . . . . . . . . . . . 15,700 4,096.0 26. 1 9,500–10,900 1,963 18.0–20. 7
1921. . . . . . . . . . . . . . . . . . . 9, 200 2, 114.9 23.0 6, 250– 6,950 685 9.9—11.0
1923. . . . . . . . . . . . . . . . . . . 11,300 1,820. 5 16.1 7, 200–8,000 583 7.3— 8.1
1925. . . . . . . . . . . . . . . . . . . 12,400 2, 136.2 17.2 8,000– 9,000 574 6.4— 7.2
Sources: Commerce Yearbooks and Agricultural Yearbooks.
a Maximum and minimum figures are used because the value of materials entering factories must be
estimated from imperfect data.
b Values for calendar years estimated by averaging the values for the two adjacent fiscal years ending
June 30.
The Prime Factor Making for Prosperity.—Past experience has
taught us that a period of depression will presently be followed by a
business revival. But when this revival will come, and whether it will
862 RECENT ECONOMIC CHANGES
develop into full-blown prosperity, are matters which the past does not
tell. Each cycle has its own special features which require special expla-
nations. How the United States managed to attain a higher per capita
income in 1922–1927 than ever before, though conditions in most other
countries were not favorable, and though its basic industry, agriculture,
was depressed, is the outstanding problem of the cycles of 1921–1924,
1924–1927 and 1927 to date.
The preceding chapters give many partial answers to this question.
All these answers may be condensed into one: Since 1921, Americans
have applied intelligence to the day's work more effectively than ever
before. Thus the prime factor in producing the extraordinary changes
in the economic fortunes of the European peoples during the nineteenth
century is the prime factor in producing the prosperity of the United
States in recent years. The old process of putting science into industry
has been followed more intensively than before; it has been supplemented
by tentative efforts to put science into business management, trade-union
policy, and Government administration.
Concrete instances of technical improvements in many mining,
metallurgical, and fabricating processes are given in the chapters on
industry. The remarkable results achieved are demonstrated statisti-
cally from census data showing output per worker. Similar, though
less striking, instances appear in the chapter on construction. Without
help from any extraordinary invention, the railroads also have attained a
higher level of operating efficiency.” In farming there is an intriguing
report of new machines and new methods coming into use. Here too,
the record of average output per worker shows considerable gains.
All this means that since 1921 Americans have found ways of produc-
ing more physical goods per hour of labor than before. They have
received larger average incomes because they have produced more com-
modities and services.” That is true in the aggregate, although not all
17 Dr. Julius H. Parmelee, director of the Bureau of Railway Economics, has
kindly furnished a backward extension of the “index of railway operating efficiency,”
mentioned by Professor Cunningham in a preceding chapter. The yearly averages,
on a 1920–1924 base, run as follows: 1920, 99.7; 1921, 95.3; 1922, 96.5; 1923, 103.5;
1924, 104.8; 1925, 109.4; 1926, 113.5; 1927, 115.2; 1928, Jan.-Nov., 118.1.
18 Increased productivity per man at work does not necessarily mean larger real
income per head of the population. In some industries the output per worker rises
in periods of business depression when total output falls; because the less efficient
hands have been laid off; because the men kept on the pay roll are afraid of discharge
when new jobs are scarce and so work harder than usual; because only the best-equipped
or best-managed plants can keep running at all, or for other reasons. As will
presently be shown more at length, the number of men at work in two of our great-
est branches of industry—farming and manufacturing—has been reduced. But
the reductions in numbers at work have not offset the increases in output per remain-
ing worker, even in these branches. There remains a net gain in realincome per capita
for the whole country.
A REVIEW 863
who have contributed to the increase in physical production have shared
in the increase of real income. The important exceptions to the general
rule will be discussed presently.
The reality of the gains made by improving the technique of farming,
railroading, manufacturing, and building seems to be established beyond
question. There is room for doubt only concerning the pace of recent
progress in comparison with earlier spurts of technical improvement.
Comparisons between output per worker in later years and in 1919 often
show sensational gains. But that is largely because 1919 made a wretched
record of physical inefficiency. According to Chapter II, Industry, the
census of manufactures places this year below 1914, and still further
below 1909, in output per worker. The above-cited estimates of national
income per capita in dollars of constant purchasing power confirm this
showing, and so do index numbers of physical production in Table 1.
Nor does 1921, a year of severe depression, afford a satisfactory basis
of comparison. Thus it is difficult to measure the technical progress
of 1922–1927, with the data now available. It is still more difficult to make
reliable measurements for earlier years, when censuses were taken at
longer intervals and fewer supplementary figures were published. But
doubts whether the rate of improvement in the past six years is unpre-
cedented are not of great moment. It remains clear that the Industrial
Revolution is not a closed episode; we are living in the midst of it, and the
economic problems of to-day are largely problems of its making.
While the details of the latest technical advances always possess
thrilling interest, perhaps there is more of promise for the future in the
chapters on recent changes in economic policy. The efforts to apply
scientific methods to such matters are in an early stage of development.
The sciences which underlie these efforts—psychology, sociology,
economics—are far less advanced than physics and chemistry. The
experts who are making the applications—personnel managers, advertis-
ing specialists, sales directors, business economists and statisticians—are
less rigorously trained than engineers. It is even harder to measure the
results they achieve than to determine what difference a new machine
makes in unit costs. Nor are business executives so generally convinced
of the practical value of the rather intangible services which the new
professions can render as they are of the indispensability of engineering
advice. Yet it is conceivable that applications of the social sciences,
now in their tentative stage, will grow into contributions of great moment
to economic welfare. Certainly the chapters in this report on market-
ing, management and labor show that many enterprising business con-
cerns and some enterprising trade unions are trying new policies, and
often getting results which they deem good.
Perhaps none of the changes reported here will prove more important
in the long run than the change in the economic theories on which the
864 RECENT ECONOMIC CHANGES
American Federation of Labor and certain outside unions are acting.
That organizations of wage earners should grasp the relations between
productivity and wages, and that they should take the initiative in press-
ing constructive plans for increasing efficiency upon employers, is not
wholly without precedent; but the spread of such ideas and the vigor with
which they are acted on by large organizations must startle those who
have believed that trade unions are brakes upon economic progress.
Scarcely less significant is the report from the employing side. Our
investigators believe that the art of business management turned a corner
in 1921, cultivating since then more skillful understanding of the whole
situation and nicer adjustment of means to the immediate environment.
Numerous corporations and some trade associations are maintaining
research bureaus of their own. Among the managerial devices experi-
mented with, are co-ordinated staffs in place of one “big boss,’’ bonus
payments to executives and “incentive wages” for the rank and file,
Operating budgets, forecasts of business conditions, close inventory
control, personnel management and employee representation. Most
of these devices are attempts to understand and to utilize the psycho-
logical forces which control human behavior, or the economic forces
which control business activity. “There is today not only more produc-
tion per man, more wages per man and more horse power per man;
there is also more management per man.” 19 Marketing—traditionally
the part of business in which native shrewdness, experience and “personal
magnetism” have been held all-important—even marketing is being
permeated by applied psychology. Costly investigations of “consumer
appeal,” of advertising “pull,” of “sales resistance”—the very terms
* On this passage Colonel M. C. Rorty comments as follows:
One of the most significant results arising from improvements in the science of
management has been an increasing ability to secure from large units or “chains”
the type of individual efficiency that a few years ago could be secured only in the
Small organization working under the direct supervision of a competent employer-
owner. Under the older type of organization there was a gain in efficiency with size,
up to the point where the reductions in costs, through ability to specialize and func-
tionalize the work of a larger group of workers and the increases in process, purchasing
and selling efficiency under larger scale operation, began to be more than offset by a
reduced general efficiency due to the inability of the employer-owner to maintain
close contacts with the members of the enlarged organization. Recent developments
in management methods, and in accounting and statistical control, have apparently
broken down these former economic limitations on the size of the individual organ-
ization or “chain,” with the result that practically all types of business and industry
are now open to efficient large-scale corporate control. If this tendency persists,
it may represent a fundamental economic change having very far-reaching conse-
quences. The field of operations for the independent owner-manager will be steadily
restricted, and the young man of capacity and intelligence will have to look forward
more than ever before to a career in which, except by some rare combination of good
fortune and adaptability to circumstances, he will continue throughout to be a sub-
ordinate worker in a large corporation organization.
A REVIEW 865
would have been unintelligible to our fathers—show that sales managers
are trying to base their planning upon factual studies of human behavior.
And the rapid spread of chain stores and of installment selling show that
marketing methods are no more standing still than is industrial technique.
By the side of these rather definite changes in trade-union and in
business policy, we may set the influence of certain general ideas which
have gained wide currency in the last few years.
First, there is the spirit of caution, manifested in minimizing future
commitments, in hand-to-mouth buying by merchants, in efforts to keep
down inventories or to pass the need for keeping large stocks on to the
concern from which one buys. This lesson is taught afresh by every
great crisis. The staggering financial losses of 1920–21 enforced the
old moral emphatically; the sagging course of commodity prices has kept
it in mind, and the increased operating efficiency of producers and rail-
roads has made possible close scheduling of merchandise transactions.
The Florida land boom and the stock-market adventure of 1928 indicate
the course American business might have taken in the absence of all
restraint.
Associated with the prudence which has tempered enterprise is a more
systematic effort to learn from experience. Here there seems to be a
new emphasis, if not a new practice. Most can be learned from experi-
ence when it is exactly known, and seen in relation to its environment.
The most exact records of economic experience are statistical in form.
Since the war, an increasing number of officials, publicists and business
men have fostered the keeping of better statistical records, and have
analyzed past experience as a guide to future planning. Every reader
must realize that, without the aid of the new statistics which this wide-
spread effort has provided, the present survey of recent economic changes
would be more imperfect than it is. What is of use in providing a factual
basis for determining economic trends at large is not less useful in deter-
mining the factors which affect the success of private enterprises.
More publicity concerning business operations and closer co-operation
among business enterprises should also be noted as characteristic of the
day. These are features of American practice which impress all our
foreign visitors; the older rules of secretiveness and rivalry seem to have
maintained themselves more rigidly in other countries. Perhaps the
growth of trade associations and the expansion of their programs is the
clearest evidence of the new attitude. No doubt every industry has its
recalcitrants who, for one reason or another, refuse to play on the team;
but certainly there is a marked increase of readiness to join co-operative
programs of research and publicity, to interchange trade information, to
standardize products where standardization is good business, to consult
about methods and practices—in short, to treat the industry for many
866 RECENT ECONOMIC CHANGES
purposes as a unit in whose prosperity all members have a common
interest, and to inspire good will in the public by open dealings.
Fourth, belief in the economy of high wages has become prevalent
among the abler business executives, much as belief in increasing pro-
ductivity has become prevalent among the abler trade-union leaders.”
To find a market for the wares turned out by mass production and urged
on consumers by national advertising, it is patently necessary to have
corresponding purchasing power in the hands of consumers. Since
studies of the national income have demonstrated that wages constitute
by far the largest stream of personal income, it follows that wages per
man—or rather, wages per family—must be increased as production is
expanded. Perhaps most people would have accepted this argument in the
abstract at any time in the last hundred years. But many employers
in the past would have retorted with the assertion that high wages
undermine the moral stamina of the masses. To-day such talk is far less
common in the United States. Not only do many business executives
admit the general principle that paying high wages is good policy; they
are ready to assume what they consider their share of the responsibility
for putting the principle into practice.
The share of Government in recent economic changes has not been
made the subject of a separate chapter. But the service of one public
agency, the Federal Reserve System, is treated in the chapter on banking,
and the services of the Departments of Commerce, Agriculture, and
Labor in collecting and diffusing knowledge are mentioned in several
places. If the prime factor making for prosperity has been the applica-
tion of intelligence to the day's work, then Government agencies must be
credited with an indispensable, though indirect, part in what has been
accomplished.
Further, our Federal Government has of late years manifested a
more intelligent attitude toward problems of economic organization than
it has manifested in the past. To treat business enterprises as agencies
for performing social services, to facilitate their operations, and to hold.
them to this conception of their function, is a policy exceedingly difficult
to carry out. It requires a delicate combination of constructive inter-
vention at some points and of clearing away obstacles at other points.
No one can say that this policy has become characteristic of Government
in all of its dealings with business, any more than one can say that the
doctrine of high wages is accepted by all employers, or the theory that
increased productivity benefits labor is accepted by all trade-unionists.
Yet no one who has watched Federal policy, as practiced by the numerous
agencies which have to deal with economic issues, will question that a
change has occurred. Efforts to check extortion have not ceased; but
more regularly than in the past they are accompanied by active efforts
20 The rise of this idea is sketched in Section VII, p. 885.
A REVIEW 867
to heighten the efficiency of what are judged to be legitimate enterprises.
Farmers and exporters are not the only beneficiaries.
To repeat: all of the changes making for prosperity which have been
recalled in this section, together with many others noted in preceding
chapters, can be summed up under a single head—applying fresh intelli-
gence to the day’s work. From the use of abstruse researches in pure
science to the use of broad economic conceptions and the use of common
sense, the method of American progress in 1922–1928 has been the old
method of taking thought. Peace let us turn our thoughts to common
matters, the hard times of 1921 spurred our efforts, and the complicated
consequences our efforts produced have kept us thinking.
WI. HARD SHIPS CAUSED BY INCREASING EFFICIENCY
Among the consequences which improvements in industrial technique
or in business methods produce in an individualistic state, are hardships
of various kinds. The victims are partly business competitors who are
a bit slow in adopting new methods; partly industries or geographic
regions affected indirectly; partly individuals who find their services
no longer needed. To follow all the complicated difficulties produced
by recent economic advances in the United States is out of the question;
but a few chains of cause and effect may be traced link by link. For
the queer mixture of prosperity and depression noted at the outset of this
chapter is due largely to the pressure which some group's growing
efficiency puts upon other groups.
Reductions in Unit-costs, Prices, and Profits.-The technical
advances of recent years in the United States have been largely advances
in the direction of more economical production. A greater volume of
goods has been turned out at lower costs per unit. Now larger supplies
sent to market tend to depress prices.
In most periods of prosperity this tendency has been more than
offset by an increase in demand. The cases have been few indeed when
the index numbers of wholesale prices have failed to rise in the prosperous
phase of a cycle. And there are clear marks of the standard reaction in
our period. The Bureau of Labor Statistics index number advanced
from 91.4 in January, 1922, to 104.5 in March, 1923. On the mild
recession of that year it reversed its course and declined to 94.9 in June,
1924. When business picked up again, the index began to climb once
more, reaching 104.8 in March, 1925. From that point it receded
unsteadily to 93.7 in April and May, 1927. Judged by prewar standards,
these fluctuations have about the average amplitude.” The remarkable
fact is that prices sagged through the prosperous year 1926. Taking the
21 Here I am using the enlarged Bureau of Labor Statistics index on the 1926
base. See Monthly Labor Review, July, 1928. For a comparison of the amplitudes
of prewar and postwar cycles in wholesale prices, see Table 11, p. 893.
868 RECENT ECONOMIC CHANGES
whole period from 1922 to 1927, the trend has been a gently declining
one. Prices at wholesale have fallen at the rate of 0.1 per cent per
annum.”
Monetary factors, which are often held responsible for changes in
wholesale price levels, can scarcely be held responsible in this case.
In 1922–1927 international gold movements added $760,000,000 net to
our stock, and “earmarking” operations took less than $200,000,000 of
this sum out of monetary use. The banks suffered no stringency;
indeed they increased their other investments, because commercial
borrowers asked less credit than the banks would have been glad to lend.
So far as domestic conditions are concerned, business activity and the
easy money market might have combined to produce a vigorous advance
of prices.
But, though the fact is commonly overlooked, the course of prices
cannot be explained in any commercial nation of these days by domestic
conditions alone. Commodities subject to international trade on a
considerable scale cannot long maintain prices higher in one country
than in another by margins which exceed costs of carriage and handling,
plus import duties. Price fluctuations in different countries are tied
even closer to each other, as a rule, than actual prices; for though import
duties may establish a considerable spread between market prices in
two countries, these duties are not subject to very frequent change.
Shipping charges have been particularly low in the period under review,
so that this factor has interfered less than usual with market uniformity.
Even countries with inconvertible currencies are bound to the world
system of prices, and to its fluctuations, through the rate of exchange.
It is true that a large proportion of the articles dealt in on wholesale
markets, in such a country as the United States, are not exported or
imported on an appreciable scale. But economists have long since
shown that the prices of different goods prevailing in any country at any
time are closely related to each other through the channels of supply
and demand. Domestic prices thus constitute a system, in the sense
that a change in the price of any commodity affects, and is in turn affected
by, changes in the prices of a host of other goods. The statistical aspect
of these interrelations is briefly developed in the preceding chapter on
price movements. Since all domestic prices are thus related to each
other, and since a considerable fraction of these prices are related to
foreign prices, changes in the general level of wholesale prices in any
one country must be related to the changes taking place in the wholesale
price levels of other countries.
The validity of this conclusion has been statistically demonstrated.
For example, comparisons covering the 20 years 1890–1910, based on
American, English, French and German wholesale indexes of unlike
*See Chap. IX, Price Movements. '
A REVIEW 869
construction show strict conformity in the major movements and pre-
vailing conformity in the minor movements also.” Even during the
war, when commerce was so greatly hampered, American prices in gold
followed the gyrations of European paper prices reduced to a gold
basis.” Again in the first postwar cycle, the conformity discussed above
in general business conditions in a long list of countries was matched by
conformity in the course of wholesale prices, so far as index numbers
are available to show what happened.
That a similar conformity of wholesale price fluctuations in various
important countries marked the period 1922–1927 appears from the follow-
ing charts, which show index numbers for 15 countries on a prewar base,
with the paper-money entries reduced to their gold equivalents. It will
be noted that the curves, which spread unusually far apart during the
war, have approached each other again. This tendency is most marked
in the countries where prices had diverged most widely from the average
course. Also it will be noted that prices in the United States pursue a
middle path. They run on a lower level compared with the prewar base
than prices in some countries, and on a higher relative level than in other
CHART 1.--INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
GREAT BRITAIN AND FRANCE, 1922–1928.
INDEX NUMBER
2OO - | |
- United States (1913=100)
• France (1913=100)
––– Great Britain (1913 = 100)
| 80
/* -
* / N
| 60 ^
| 20 * Hºw Tº. # *...*
| OO
1922 1923 1924. 1925 1926 | 927 1928
23 See Chart 8 in the writer's Business Cycles, Berkeley, California, 1913, p. 121.
Index numbers including substantially identical lists of commodities in the United
States and England, the United States and France, and the United States and
Germany, show scarcely closer agreement than the standard series made from diver-
gent list.
24 See “International Price Comparisons. History of Prices during the War.”
War Industries Board, Price Bulletin No. 2, Washington, 1919.

870 RECENT ECONOMIC CHANGES
CHART 2.-INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
NETHERLANDS, SWEDEN AND GERMANY, 1922–1928.
O INDEX NUMBER
[ I -
- United States (1913=100)
e is is is ſº º g º ºs Sweden (1913 = 100)
----- Germany (1913=100)
180H; ––– Netherlands (1915-100)—
| 6 O * tº gº tº e * ee **----- •- “..º-+ 7~ *e *e
{ \ . . / |\ ,-º-º:
~ \Alz / |\ ^XX….. ... ,--...}^.
/ -2. A 2CNTC Nº.3%.A.”’’ \
A-" S-Z -4S rº, uſ sº
| 4O w sº **—a SZS-2s_*
~N~7 'N. …~"Sºz.
_/’ \ j - *--...”
v
|2O
! OO -
1922 1923 1924 1925 1926 1927 1928
CHART 3.−INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
BELGIUM AND ITALY, 1922–1928.
INDEX NUMBER
2OO | |
- United States (1913-100)
--- Belgium (Apr. 1914-100)
e e º ºs e g º e Italy (1913-100)
| 80
| 6 O
14 O
| 20
| OO -
1922 1923 1924 1925 1926 | 927 1928

A REVIEW
871
2OO
| 80
| 6 O
| 4 O
INDEX NUMBER
AUSTRIA AND SWITZERLAND, 1922–1928.
CHART 4.—INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
T |
- United States (1913 = ſoo)
--- Austria (Jan.-June 1914 - loo)
“*Switzerland(July 1914 -loo)
| 20
8C)
| 923
| 924
1925
| 926
%/or Zºeperſoaprior ſo January, /927, Zr, Zorezzºzdex n0/8er
for.5W//zer/aza has been emp/oyed. Beginning w///, /a/7/ary,
/92ZŽhe * ofºcia//7dexzomber&as been 2/offed.
CHART 5.—INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
r CANADA, INDIA AND SOUTH AFRICA, 1922–1928.
O INDEX NUMBER
| 927
| 928
| 8C)
| 6O
As.
& Tº \,--"
| T -
– United States (1913 - loo)
——- Canada (1913 = 100)
——“India (July 1914 = 100)
- South Africa, quarterly
A Z-TV”.
**
(191O = IOO)
-
| 4 O
~.
N.Z. Y.A
L^
*~
| 20
•e:
-4.
* /7 nea/cºnghe ºrder rºwmher zor/zaffa Zo a yo/a/Agºs, f//cf/afforzs/ave been .
measured with reference ſo he pre-wargo/dva/eofherſpee(3244cemfs). Aropº/,
appreclahomſºhego!dva/ſe offhe rupee accoupfs for he répid rise in ſhe index mumber
forſada in 424.7%rupee/as beinaforepre-warpathy since%pſember 1924
1922
| OO
1923
1924
| 925
| 926
1927
| 928


872 RECENT ECONOMIC CHANGES
countries. Of course, market fluctuations in this country have influenced
Quotations in every other nation; but they have also been influenced by
the latter quotations. It seems a fair inference from these charts, with
their convincing evidence of a common bond among the changes in price
levels of different nations, that prices in this country could not have
risen rapidly in 1922–1927 unless the forces behind the local advance
had been powerful enough to pull world markets up.”
CHART 6.-INDEX NUMBERS OF WHOLESALE PRICES IN UNITED STATES,
JAPAN AND AUSTRALIA, 1922–1928.
INDEX NUMBER
22O As | I
– United States (1913 - (OO)
tºº ºn tº gº tº tº AUstralia (July 1914 - 100)
& —— Japan (1913 - 100)
2005 | \
\ A A
\, f \ z \ \
r V 'N / J \
\ M \
| 80 ...". \
... ', \ e
~ | ZTV 2^*~|~\ *
...*.** \,...ſº: Yº: * *... \ * ‘...!
| 6O * º - *::: *4- *: **e £ººk
tº : TV, N

ºf 2^\ ^^ -L-
| 20
OO
| 922 1923 | 924 1925 | 926 | 927 | 928
* The index numbers used in the charts are as follows:
United States—United States Bureau of Labor Statistics. Revised index shifted to
1913 equal 100.
Great Britain—“Statist” index number, 1913 equal 100. From January, 1922, to
April, 1925, original value of the index was deflated by the exchange rate, New
York on London.
France—Index number from the Bulletin de la Statistique Générale de la France, deflated
by gold parity value, New York on Paris, 1913 equal 100. Values for June, July,
and August, 1928—new currency values now published in the Monthly Bulletin
of Statistics of the League of Nations.
Netherlands—Official index compiled by the Central Bureau of Statistics. The
index was originally computed on the base 1901–1910, and has been shifted to
the 1913 base in the Monthly Bulletin of Statistics of the League of Nations.
From January, 1922, to April, 1925, the original value of the index was deflated
by exchange rates, New York on Amsterdam.
Sweden—Compiled by Kommerskollegium, 1913 equal 100.
A REVIEW 873
Thus the reduction in unit costs, and the increase in the supply of
wares turned out by improved methods, combined with international
forces to keep the American price level from rising buoyantly in the
active years of our period, as it has done in most periods of prosperity.
Presumably, the international factors have been more potent than the
domestic factors in producing the results. Yet we may count the reduc-
tions in cost by industrial leaders and the increases in output among
the manifestations of efficiency which have contributed to the difficulties
of making money in this period.
Sagging prices make it harder to conduct business with profit because
many of the expenses of an enterprise are fixed by long contracts or by
understandings hard to alter, and cannot be cut to offset a reduction in
selling rates. Above, we noticed how the rapidly rising prices of the
war and of 1919 swelled paper profits and reduced bankruptcies. Also
we noted how the sudden fall of prices in 1920–21 turned profits into
losses and swelled bankruptcies. In 1922–1927, we find an intermediate
result. Concerns in the van of technical progress have done handsomely.
But the prices at which they could market their large outputs with
profit to themselves have meant loss and even failure to less aggressive
rivals. Dun's statistics of commercial failures yield the annual averages
shown in Table 7. The average number of failures in 1922–1927 has
Germany—1924 through 1928, new index number, 1913 equal 100. Source: Wirt-
schaft wnd Statistik.
Belgium—1922 through 1926, April, 1914 equal 100, gold basis. Series compiled by
Ministry of Industry and Labor Statistics. Deflated by gold parity value—
New York on Brussels. Values for 1927 and 1928 published on the new currency
base.
Italy—1922 through 1927, gold basis. Gold parity value, New York on Rome,
used to deflate series compiled by Chamber of Commerce and Industry of Milan,
1913 equal 100. 1928 values quoted on new currency base.
Austria—For 1922 kronen prices were deflated by gold parity values. 1923–1927,
gold basis, January–June 1914 equal 100, as published in the Statistische Nach-
richten. New series begins in 1928. The value for January, 1928, is identical
with the value of the former series.
Switzerland—For 1922 through 1926, Dr. Lorenz index number, July 1914 equal 100.
From January, 1927, new official index number used. From January, 1922, to
October, 1924, the original value of the index was deflated by the exchange rate,
New York on Berne.
Canada—Dominion Bureau of Statistics—1913 equal 100.
Japan—Bank of Japan, 1913 equal 100. From January, 1922, to August, 1928,
the original value of the index was deflated by exchange rate, New York on
Yokohama.
South Africa—Official index number compiled by Census Office, 1910 equal 100.
Australia—Commonwealth Bureau of Census and Statistics, July, 1914 equal 100.
India—Official index number of wholesale prices at Calcutta, compiled by the Depart-
ment of Statistics, July, 1914 equal 100.
874 RECENT ECONOMIC CHANGES
actually exceeded the number in 1921, but the total and the average
liabilities have grown smaller.
TABLE 7.-CoMMERCIAL FAILURES
Annual averages
Millions of dollars of Average liabilities in
Thousands of failures liabilities thousands of dollars
1919–20. . . . . . . . . . . . . . . . . . . . . . 7.7 204 27
1921. . . . . . . . . . . . . . . . . . . . . . . . . 19.7 627 32
1922–1927. . . . . . . . . . . . . . . . . . . 21.5 513 24
Source: Commerce Yearbook, 1928, Vol. I, p. 51.
“Profitless prosperity,” like so many popular paradoxes, combines
an element of truth with an element of falsehood. One expects a period
of unusually rapid increase in efficiency to be a period of more than usual
inequality of profits. This expectation has been borne out by the experi-
ence of 1922–1927. As a whole, corporate incomes reported to the
Internal Revenue Bureau and summarized in Table 2, have been
large in the latest years for which we have data; but they have not
equaled the records of 1916–1919.
Whether the enterprises which have lagged behind in cost reductions
and in earnings are mainly smaller enterprises, as has been contended, is
less sure. Of course this contention tends to become true with the lapse
of time, for the simple reason that the exceptionally profitable enterprises
grow exceptionally fast. The profitable enterprises of to-day tend to
become the large enterprises of tomorrow. But Dr. Thorp's section of
the chapter on industry shows that there is no close relationship between
large size and low unit-cost, or between large size and high rates of
profit. It seems to be middle-sized enterprises, rather than small ones,
which have felt the severest pressure. But the facts, as the census shows
them, are complicated and cannot be adequately presented in a brief
statement.
The Competition of New Products and New Tastes.—Scarcely less
characteristic of our period than unit-cost reductions is the rapid
expansion in the production and sale of products little used or wholly
unknown a generation or even a decade ago. Among consumers’ goods,
the conspicuous instances are automobiles, radios and rayon. But
the list includes also oil-burning furnaces, gas stoves, household electrical
appliances in great variety, automobile accessories, antifreezing mixtures,
cigarette lighters, propeller pencils, wrist watches, airplanes, and what
not. Among producers’ goods we have the truck and the tractor compet-
ing with the horse and the mule, reinforced concrete competing with
A REVIEW 875
brick and lumber, the high-tension line competing with the steam
engine, fuel oil competing with coal, not to mention excavating machines,
belt conveyors, paint sprayers, and “automatics” of many sorts compet-
ing with manual labor.
Changes in taste are in large part merely the consumers' response to
the solicitation of novel products, effectively presented by advertising.
But that is not all of the story; the consumer is free to choose what he
likes among the vociferous offerings, and sometimes reveals traces of
initiative. In what other terms can one explain the changes in diet
pointed out in the first chapter? Americans are consuming fewer calories
per capita; they are eating less wheat and corn but more dairy products,
vegetable oils, sugar, fresh vegetables and fruit. More families than
ever before are sending their sons and daughters to college—surely that
is not a triumph of “high-powered” salesmanship. Young children,
girls and women, are wearing lighter and fewer clothes. The short
skirt, the low shoe, the silk or rayon stocking, “athletic” underwear,
the soft collar, sporting suits and sporting goods, have an appeal which
makers of rival articles have not been able to overcome. And, in a sense,
every consumers’ good, from college to candy, is a rival of every other
consumers’ good, besides being a rival of the Savings bank.
“When the makers of one product get a larger slice of the consumer's
dollar, the slices left for the makers of other products get smaller.”
This way of accounting for the hardships met by certain long-established
industries in 1922–1927, such, for example, as the leather and woolen
trades, is popular and sound, so far as it goes. But it does not take
account of the fact that desire for new goods, or the pressure of install-
ment purchases once made, may lead people to work harder or more
steadily, and so get more dollars to spend. Presumably the enticements
of automobiles and radios, of wrist watches and electric refrigerators,
of correspondence courses and college, have steadied many youths, set
many girls hunting for jobs and kept many fathers of families to the
mark. Also a considerable part of the country's former bill for intoxi-
cants has been available to spend in other ways. How much allowance
we should make for these factors nobody knows. All one can say with
assurance is that consumption per capita has increased in volume to
match the increased per capita output of consumers’ goods taken alto-
gether. Yet the increase in consumption has not been rapid enough to
prevent shifts in the kind of goods bought from pressing hard upon the
makers of articles waning in popular favor.
So too in the realm of producers’ goods. Despite the active building
campaign, the lumber industry has had hard sledding. Coal mining has
not prospered, and can attribute part of its difficulties to other fuels,
water power, and more economical ways of burning coal itself. Breeders
of draft animals have found their markets cut into by motor vehicles.
876 RECENT ECONOMIC CHANGES
Railways have lost traffic to trucks and omnibusses—though the loss in
freight tonnage is held by Professor Cunningham to be less than the
public supposes. Steam-engine builders have had to change their
products or reduce their output. It is not necessary to multiply
examples; most technical improvements reduce the demand for some
other good, and so create difficulties for those who supply the latter.
Geographical Shifts in Industry and Trade.—Just as definite a gain
may be made in productivity by shifting factories to better locations, or
by reorganizing channels of supply, as by installing automatic machines.
Besides the drift of cotton manufacturing to the South, of which everyone
thinks, and the more recent drift of shoe manufacturing to the West, the
chapter on industry shows a prevailing tendency toward geographical
decentralizing of production. The proportion of the output of many
goods coming from the old headquarters is on the decline. The chapter
on agriculture indicates a parallel development in farming. The cotton
belt is stretching west, the wheat belt west and northwest; the dairying
and the market-garden areas are moving in various directions. Finally,
the chapter on marketing shows a concentration of trade in cities and
towns at the expense of villages.
Doubtless these changes are to the advantage of those who make
them. If they proved unprofitable, they would be abandoned. But
it is equally clear that we have here another feature of increasing efficiency
which brings losses as well as gains. New England may not lose as much
as North Carolina and St. Louis gain from the shifts in the cotton and
shoe trades—that is a question of the totals. And New England may
devise new ways of using its labor, its capital, its manufacturing sites,
and its ingenuity, more profitable than the old—necessity is often the
mother of invention. If these efforts succeed, they may create fresh
difficulties felt elsewhere. Similar truisms might be recited concerning
the other cases in point. But whatever happens in the future, we must
not let the dazzle of the high lights blind us to the sectional shadows.
“Technological Unemployment.”—Among all the hardships imposed
by increasing efficiency, most publicity has been given to the decline in
the number of wage earners employed by factories. That is a matter
of the gravest concern in view of the millions of families affected or
threatened by the change, and in view of their slender resources. To it
special attention has been paid in this investigation.
The new phrase coined to describe what is happening, “technological
unemployment,” designates nothing new in the facts, though the numbers
affected may be large beyond precedent. Ever since Ricardo shocked
his rigid disciples by admitting that the introduction of “labor-saving”
machinery may cause a temporary diminution of employment, economists
have discussed this problem. Granting Ricardo's admission, they have
nevertheless held that, in the long run, changes in method which heighten
A REVIEW 877
efficiency tend to benefit wage earners. English experience since
Ricardo's day seems to bear out this contention. The power looms,
which put an end to hand-loom weaving after tragic struggles, have not
reduced the number of British workers employed in weaving, or cut their
average earnings. The railways, which displaced the old mail coaches
and carters, have not reduced the number of transport workers or made
them poorer. And the new trades of building and caring for the elaborate
modern equipment must not be forgotten. There doubtless are cases
in which improvements in methods have caused what promises to be a
permanent reduction in the number of persons employed in an industry.
By defining industry narrowly, these cases can be made numerous. But
the broad result plainly has been that the industrial triumphs of the
nineteenth century increased the demand for labor and increased its
rewards. “Labor-saving” machinery has turned out to be job-making
machinery.
To recall these familiar facts should not diminish by one jot our
rating of the hardships suffered by men who are thrown out of jobs.
They and their families often undergo severe privation before new employ-
ment can be found; the new jobs may pay less than the old or be less
suitable; too often the displaced man never finds a new opening. Tech-
nical progress is continually made at cost to individuals who have com-
mitted no fault and committed no avoidable error of judgment. No
organized plan has been evolved for preventing such hardships, aside
from the schemes devised by some trade unions for tiding their members
Over mechanical revolutions in their crafts. The nations have left the
remedy to “natural forces;” they have trusted that the expansion of
production, which improvements bring about, will presently open new
places for the displaced workers.
The problem of what happened in the short period 1922–1927, then,
is to find how many wage earners were displaced in that time, how many
of the displaced found new jobs promptly, and what these new jobs were.
To answer these questions accurately would require far better data than
are to be had. There are few branches of statistics in which the United
States lags further behind the leaders than in statistics of employment.
What we have been able to learn comes to this:
Starting with the 1920 census of occupations and reckoning forward,
it is estimated that by 1927 there had been an increase of about 5,100,000
employees 16 years of age and over, who looked to nonagricultural
occupations for a living. The figure allows for the fact that some 860,000
persons had left the farms to seek livelihoods elsewhere, and the more
than offsetting fact that the number of pupils over 15, enrolled in schools
and colleges, had risen by 1,430,000 between 1920 and 1927.
Of the 5,100,000 net additions to nonagricultural job seekers, a few
turned to mining and allied occupations; 100,000 entered public services,
878 RECENT ECONOMIC CHANGES
over 600,000 engaged in construction work of some sort, nearly a million
attached themselves to “transportation and communication,” 1,400,000
became mercantile employees, and more than two and a half millions took
to miscellaneous occupations in hotels, restaurants, garages, repair shops,
moving-picture places, barber shops, hospitals, insurance work, profes-
sional offices, and the like. Manufacturing is the only large occupational
group, aside from farming, to show a decline. There the number of
employees fell from about 11,200,000 in 1920 to about 10,600,000 in
1927—a drop of 600,000. (See Chap. VI, Labor, Section IV.)
All these data are estimates of the net changes in numbers of persons
“attached to ” the occupations in question. They show that American
wage earners met “technological unemployment” in manufacturing
mainly by turning to other ways of making a living. The decline from
1920 to 1927 in the number of persons actually at work in manufacturing
enterprises is put at 825,000, but the number of unemployed among the
people who depended on factory work for a living increased only 240,000
between 1920 and 1927, according to the best figures available. If
these estimates are approximately correct, then some 585,000 of the
workers laid off by factories had taken up other occupations. That is,
71 per cent of the workers displaced had attached themselves to new
trades by 1927.
Adopting a new occupation, however, does not guarantee getting a
new job. The surplus workers from our farms and factories who hunted
for fresh openings increased unemployment in other fields. The expan-
sion of business, particularly the expansion of miscellaneous and mercan-
tile occupations, made places for perhaps four and a half million new
wage earners. But the supply of new jobs has not been equal to the
number of new workers plus the old workers displaced. Hence there
has been a net increase of unemployment, between 1920 and 1927, which
exceeds 650,000 people.
The number of the unemployed has varied from year to year with
cyclical changes in business activity. It surpassed all previous records
in the depression of 1921; it declined rather slowly in the revival of 1922;
even in the busy year 1923 it remained higher than in 1920; it rose in
the mild recession of 1924, declined on the return of activity in 1925–26,
and then mounted again in 1927. The final estimates presented in the
chapter on labor may be summarized as follows:
A RE VIEW t 879
TABLE 8.—ESTIMATED Aver AGE MINIMUM VolumE OF UNEMPLOYMENT IN THE
UNITED STATEs, 1920–1927
Y Nonagricultural wage Average minimum Percentage
€3.I.
and salary earners number unemployed unemployed
1920. . . . . . . . . . . . . . . . . . . . . . . . 27, 558,000 1,401,000 5. 1
1921. . . . . . . . . . . . . . . . . . . . . . . . 27,989,000 4, 270,000 15.3
1922. . . . . . . . . . . . . . . . . . . . . . . . 28,505,000 3,441,000 12. 1
1923. . . . . . . . . . . . . . . . . . . . . . . . 29, 293,000 1, 532,000 5.2
1924. . . . . . . . . . . . . . . . . . . . . . . . 30, 234,000 2,315,000 7.7
1925. . . . . . . . . . . . . . . . . . . . . . . . 30,941,000 | 1,775,000 5.7
1926. . . . . . . . . . . . . . . . . . . . . . . . 31,808,000 1,669,000 5. 2
1927. . . . . . . . . . . . . . . . . . . . . . . . 32,695,000 2,055,000 6.3
It must be emphasized that these figures are merely the best estimates
which it is possible to make from the scattered and imperfect materials
available. They are subject to considerable margins of error. They
minimize the seriousness of unemployment. Finally, even as minimum
figures, these estimates do not profess to show the high points reached
by unemployment in bad seasons—they give only yearly averages.
One may wonder at the versatility, initiative and mobility of Ameri-
cans, as evidenced afresh by their prompt shifting of occupations on so
great a scale in recent years. One may wonder also at the rapid expan-
sion of the trades which have absorbed some five million employees in
Seven years without reducing wage rates. But one must not forget that
these shiftings have been compulsory in large measure; men have been
forced out of farming and forced out of factories as well as pulled into
automobile services, shops and restaurants. And the employment
balance is on the unfavorable side. While our economic progress has
meant larger per capita earnings for all workers taken together, it has
imposed severe suffering upon hundreds of thousands of individuals.
The Domestic Difficulties of Agriculture.—It was noted above that
American farming owes part of its difficulties in 1922–1927 to reductions
in foreign demand and increases in foreign supply. It must now be
added that fresh difficulties have been created for farmers by changes
in domestic demand, and by the successful efforts of farmers to increase
their own efficiency as producers.
Chapter I shows that, all in all, the standard of living has been
rising in the United States of late. But Americans have been eating less
food per capita than once they did. The greater diversification of diet
has been advantageous to dairymen, market gardeners and fruit growers;
but the bulk of farmers have lost more than they have gained from the
changes. Americans have also been wearing less clothing than formerly,
and that hurts the market for cotton planters and wool growers. More-
over, there has been a shift from cotton and woolen fabrics toward silk
and rayon. Finally, the goods on which American families have spent
880 RECENT ECONOMIC CHANGES
freely—automobiles and their accessories, gasoline, household furnishings
and equipment, radios, travel, amusements and sports—are goods in
which little agricultural produce is used.
To make matters harder, the firmness of wage rates in the flourishing
industries has forced farmers to pay relatively high wages for such hired
labor as they have needed. Taxes on farm property have risen in every
year covered by the record. While the prices farmers had to pay for
operating supplies and equipment, as well as for consumers’ goods,
dropped sharply in 1921, they did not drop nearly so much as the prices
which farmers received for their products. Fluctuations in the two
sets of prices since 1921 have redressed the inequality only in part.”
It is a grave error to think of American farmers as the passive but
complaining victims of calamity. Chapter VIII shows that they have
exhibited as vigorous a capacity for self-help as any other large section
of the community. The qualities which enabled their forerunners to
subdue the wilderness reappear in the efforts of the present generation
to work a way out of the postwar tangle.
But agriculture is a business of very slow turnover. Agriculture
is also an extrahazardous business, which depends for results on averages
over a series of harvests. The dislocations it faces at present are partly
the result of continuing secular trends, rather than cyclical fluctuations
which reverse themselves every few years. And agriculture is a business
in which millions of producers are working each on his own account. A
concerted policy is exceedingly difficult to organize. What one farmer
does to help himself often makes matters harder for other farmers. That
is the aspect of the farm problem which requires attention here.
The individual farmer, hard pressed by low prices and high fixed
costs, has tried several ways to better his fortunes. One way alleviates
the lot of other farmers, whether it turns out well for himself or not. It
is to give up farming. Dr. C. J. Galpin estimates that there was a net
decrease of farm population amounting to 460,000 persons in 1922,
perhaps a larger number in 1923, 182,000 in 1924 when city jobs were
harder to get, and 479,000 in 1926. We have already noticed Dr. M. B.
Givens' estimate that in 1920–1927 upwards of a million migrants from the
farm sought other occupations. So far as reduction in number of
workers goes, there is a close parallel between the record of farming and
of manufacturing.”
* See the latest Department of Agriculture indexes in Chapter VIII, p. 548.
* Commenting upon this passage, Dr. E. G. Nourse suggests that this shrinkage
in the number of farm workers seems likely to continue. Agriculture bids fair
definitely and permanently to lose numbers as a result of changes in technique. The
new branches of farming which are growing up take many less hands than are dis-
placed in the old staple lines. Thus the industry as a whole is giving up workers
to other callings.
A REVIEW 881
This considerable shift in population has been accompanied by a
much slighter decline in the area of land cultivated. The abandonment
of poor farms has unquestionably been accelerated by hard times, though
we lack comprehensive data to show on what scale. On the other hand,
wide tracts of former waste lands have been reclaimed and wider tracts
of former cattle ranges have been brought under the plow. The net
outcome of these contrary movements is perhaps best shown by the
Department of Agriculture's report of the acreage in 19 principal crops.
From 351 million acres in 1919, the area declined unsteadily to 342
millions in 1924, rose above 350 millions in 1926, and then shrank by
three-quarters of a million acres in 1927. t
But the smaller numbers of workers left on farms, cultivating slightly
less land, have increased their output—again paralleling developments
in manufacturing. The Department of Agriculture's index showing
“mass of crop production” mounted from 100 in 1919—a year of fair
harvests—to 102 in 1922, 104 in 1925, and 106 in 1927. If these figures
were reduced to a per capita basis, the rate of increase would be decidedly
greater. Of course, every farmer who has enlarged his output has
contributed his mite toward keeping down prices. Agricultural depres–
sion had forced the individual farmer to meet his narrow margins above
cost by raising more units to sell, and selling more units has tended to
make these margins narrower still.
Increased productivity per worker in agriculture has been achieved
in the same way as increased productivity per worker in manufacturing—
by putting more intelligence into the work. For decades, agricultural
experiment stations, colleges, state bureaus, farm papers, and the
Department of Agriculture in Washington have been actively seeking
to learn and to teach better methods of farming. From drainage to the
choice of crops, the breeding of stock and the building of fireplaces,
scarcely any feature of farming as a technical process, as a business
enterprise, or as a way of making a home but has been studied intensively
and written up extensively. Slowly the lessons have been learned by an
increasing number of farmers and farmers' wives. The pressure of
hard times speeded up the application of knowledge to practice, despite
the fact that hard times cut down the farmers’ ability to accumulate the
capital which many of the changes require.
One of the conspicuous changes in methods of farming has reacted
most unfavorably upon the demand for farm products. The number of
tractors in use on farms is estimated to have increased from 80,000 in
January, 1918, to 380,000 in 1922, and 770,000 in January, 1928. This
change has been accompanied by a decrease in the number of horses
and mules on farms from about 26,400,000 in 1918 and 1919 to 20,100,000
in 1928. An even greater decline was occurring at the same time in the
number of horses and mules in cities. A not inconsiderable branch of
882 RECENT ECONOMIC CHANGES
animal husbandry thus lost much of its market. What was worse, at
least 15 to 18 million acres of hay and grain land lost its market also.
To get a just impression of the versatility farmers have shown in
coping with their difficulties, one must turn back to the chapter on
agriculture, or even to the books there cited. That with all their courage
and ability they have not yet succeeded in regaining their former measure
of prosperity, must be ascribed partly to the slowness of agricultural
processes themselves, partly to the halting recuperation of Europe and
its reactions on other countries, and partly to the fact that increasing
efficiency has added to the supply of farm products or cut down the
demand.
Agricultural depression has not been confined to the United States.
In many other countries, the tillers of the soil have been engaged in a
similar struggle with unfavorable conditions of supply and demand.
Their efforts to make up for the relatively low prices received for their
products by marketing larger quantities, and their compulsory retrench-
ments of expenditure, have reacted unfavorably upon the fortunes of
American farmers, just as the similar actions of American farmers have
made conditions harder for them. Round a good part of the globe, the
productivity of agriculture has been rising, while in most of the leading
industrial nations other branches of production have grown slowly if
at all. The effect upon prices in the great world markets has been
striking. The demand for agricultural products as a whole is inelastic
compared with the demand for many industrial products. That is, a
relatively small increase in the current supply of foodstuffs, the great
agricultural staple, brings a relatively large decline in market prices.
Hence the change in the international balance of agricultural and non-
agricultural output has created a difficult situation for farmers, even in
the few countries, like the United States, where production in other lines
has increased rapidly.
What has been the net effect of all the factors, domestic and foreign,
influencing the economic fortunes of American farmers, is hard to ascer-
tain. The preceding chapters on agriculture and on national income
present the facts from various angles. That is desirable; for no simple
summary of so complicated a situation can be adequate. But perhaps
the following figures, which purport to show the changing relations
between the average per capita incomes of farmers and of the whole
population, are as significant as any which might be chosen.
Though the estimates from which these percentages are drawn
(columns 10 and 11 of Table 12 in Chap. XII) are the best results our
investigators have been able to get from the available data, they are
subject to an uncertain margin of error. That the figures differ in
certain respects from what most people, including our investigators
themselves, would expect to find is not seriously disturbing; for expecta-
A REVIEW 883
tions in such matters are notoriously biased by cases which have
impressed our minds because of their striking character.
TABLE 9.—ESTIMATED PER CAPITA INCOMES OF AMERICAN FARMERS As PERCENTAGEs
OF ESTIMATED PER CAPITA INCOMES OF THE TOTAL POPULATION, IN VARIOUs YEARs
Prewar years Postwar years
1913. . . . . . . . . . . . . . . . . . 39 per cent 1919. . . . . . . . . . . . . . . . . . . 57 per cent
1914. . . . . . . . . . . . . . . . . . 39 per cent 1920. . . . . . . . . . . . . . . . . . . 46 per cent
1921 . . . . . . . . . . . . . . . . . . 34 per cent
1922. . . . . . . . . . . . . . . . . . 35 per cent
… 36 per cent
1924. . . . . . . . . . . . . . . . . . . 37 per cent
1925. . . . . . . . . . . . . . . . . . 39 per cent
On the face of these returns, American farmers gained greatly in
relative economic status between the beginning and the end of the
war, though, even at their peak, agricultural incomes per capita remained
far below the national average. The catastrophic drop from 1919 to
1921 wiped out all of this gain and considerably more. If our estimates
are reliable, by 1925 farmers had won back to their prewar position in
comparison with average per capita incomes in other occupations, but
they were by no means so well off as in 1919–20. Unfortunately, the data
for similar computations in years since 1925 are not yet available.
Even if these results be accepted as probably more reliable than
general impressions, they do not represent adequately the farmer's
relative position in the national economy. In particular, they show
nothing of the financial entanglements into which many of the most
enterprising American farmers were drawn in the flush years. A man
may make as good a current income now as before the war and still be
far worse off, if he is carrying a greatly increased load of debts. And
quite apart from that, the not unfavorable income comparison which
1925 makes with prewar years is due to the use of shrinking per capita
figures for farmers and swelling per capita figures for the total population.
An industry which keeps up its per capita quota of the national income
because thousands of workers withdraw from it cannot be regarded as
flourishing.
VII. THE INTERRELATIONS AMONG ECONOMIC CHANGES
The Factors Already Discussed.—So far, the contrasts noted at the
outset of this chapter between the economic fortunes of different income
groups, different industries, and different sections of the United States in
1922–1927, have been traced to three factors—or rather to three great
complexes of factors. (1) Foreign conditions on the whole have been
none too favorable to American business, and they have been eminently
884 RECENT ECONOMIC CHANGES
unfavorable to American agriculture. Important branches of industry
have enjoyed a large increase in foreign sales; but had Europe been
prosperous, American prosperity would have been less “spotty” and more
intense.” (2) Such prosperity as we have enjoyed has been earned by
many-sided and strenuous efforts, in which millions of people have shared,
to improve our technical methods, our business management, our trade-
union policy, and our Government administration. (3) While increasing
efficiency has added to real income, it has put pressure, often rising to
severe hardship, upon competitors, direct and indirect. The factory
hand competing with the “automatic” machine, the horse farmer
competing with the tractor farmer, the lumber industry competing with
the cement industry, the New England cotton mill competing with the
North Carolina cotton mill, the independent retailer competing with the
chain store, the clothing trade competing with the makers of automobiles
and radios for slices of the consumers' dollars, have had a hard time.
This analysis is not simple, but it is still too schematic. There is
no hope of learning and telling the whole story in realistic detail. Yet
one further factor of great moment and two sets of “economic reactions”
must be introduced before a summing up is attempted.
Retardation in the Growth of Population and Its Effects.-The
additional factor to be taken into account concerns population growth.
In sketching the main lines of nineteenth century experience, it was
noted that the fruits of the tree of applied knowledge can be consumed in
several ways. One way is to increase population as fast as the tree
increases its yield. If that course is pushed to the limit, there can be no
reduction of working hours and no advance in the standard of living.
The latter gains are contingent upon keeping the growth of population
slower than the gain in productive efficiency. And before the close of
the century the European stock had sensibly reduced its birth rate.
This reduction of birth rates has been going on during our period in
most of the states of the Union. The decline seems to be more rapid
than the decline in death rates. Moreover, first the war and then legis-
lation restricted immigration. The chapter on labor sums up the results
in the following way:
28 Once more the reader is reminded that this summary deals only with broad
features. Important details, passed by in silence here, are brought out in the pre-
ceding chapters.
A REVIEW • 885
Net immigration A
into the United *: per
States yea
Prewar period
July 1, 1907–June, 30, 1914. . . . . . . . . . . . . 4, 645, 590 663,656
War and early postwar period
July 1, 1914–June 30, 1921 . . . . . . . . . . . . . 1, 253,652 179,093
Quota—restriction period
July 1, 1921–June 30, 1927. . . . . . . . . . . . . 1, 873, 311 312, 219
:
Combined, the birth-rate and death-rate changes and the changes in
migration reduced the average annual increase of population from
1,800,000 in 1920–1925 to 1,545,000 in 1925–1928.
The retardation in population growth has affected the whole social
situation profoundly in ways which concern the student of sociology and
politics quite as deeply as they concern the economist. It will be long
before the full effects upon national life become clear. But certain
prompt economic consequences must be noted.
At the close of the war, when a fall in the price level like that of 1865
was expected by many, business executives frequently said that the first
task of reorganization was to “liquidate labor.” The great buying
campaign of 1919 and the accompanying uprush of prices caused a
postponement of this program. For a time it was hard to get men
enough, even at rising rates. When prices fell precipitously in 1920–21
and unemployment was rife, the moment to insist on wage reductions
seemed to have come. But the trade unions offered strenuous resistance,
despite the number of the temporarily idle. Their resistance was more
effective than it could have been had not the growth of population been
retarded for some years. The prices of labor were cut, to be sure, but
not cut as much as the prices of consumers’ goods. Hence, when employ–
ment became tolerably full again toward the close of 1922, wage earners
found themselves in possession of relatively large purchasing power.
Then the economic advantages of a broad consumers' market began to
appear. Employers discovered that their inability to “liquidate labor.”
had been fortunate for themselves, as well as for their employees. The
doctrine of high wages found conspicuous champions among the business
leaders, and their formulations favored its spread. Discoveries in
science, as well as in practical life, have often been made thus by observ-
ing the consequences of a thwarted effort.
In most periods of prosperity, wage rates lag somewhat behind living
costs on the rise. The indications are that these paradoxical “prosperity
losses” to wage earners have not cut much figure during 1922–1927.
Wholesale prices have Sagged slightly, and living costs have advanced
886 RECENT ECONOMIC CHANGES
but little. Though the percentage of unemployment has risen since
1923, wage rates have been firmly maintained on the whole, if not
increased somewhat.
This result also must be ascribed in part to the relatively slow increase
in the number of job hunters. Had there been no legal check on immi-
gration in 1922–1927, unemployment would have attained large pro-
portions, and the difficulty of maintaining wage rates would have been
greater.
Moreover, it seems sound to ascribe a part of the gains in technical
efficiency, which have been so characteristic of recent years, to the high
price of labor. An employee to whom one pays high wages may repre-
sent low labor cost. But if he is to be so efficient as to be cheap, he must
be provided with good equipment and aided by good management.
More horse power per man and better management per man, to twist
Mr. Dennison's flexible phrase, are needed to secure more production
per man; and more production must be had per man when more wages
are paid per man.
All this discussion on a per capita basis is proper; to make clear how
proper, consider the effect of retardation in population growth upon
aggregate production and wealth. Had there been no reduction in birth
rates and no restriction of immigration, the United States would contain
several millions more people than it does. As large or a larger fraction
of the greater population would be “engaged in gainful occupations,”
and, despite more unemployment and a less advanced stage of industrial
technique, the workers would probably be producing a greater volume
of goods. Thus, the national income would be rising faster than it is;
but per capita income would be growing slower than it is. Since birth-
rate restriction seems to be voluntary, and since immigration restriction
certainly is, we must conclude that Americans are preferring to raise
the economic level of average life rather than to maximize national
wealth.
Mutually Moderating and Mutually Intensifying Reactions.—The
two sets of economic reactions still to be noted may be thought of as the
mutually moderating effects of factors opposing each other, and as the
mutually intensifying effects of factors working in the same direction.
Like the set of economic reactions already discussed—the pressure
exerted on competitors by those who increase their own efficiency—these
moderating and intensifying effects arise from the basic feature of eco-
nomic organization. Though modern Society accepts the principle of
individual responsibility, each individual gets his money income wholly
by serving others, and gets his real income mainly by consuming goods
other people have made. Thus everyone depends both on the buying
power of other consumers and on the efficiency of other producers. And
what is true of every individual is true, mutatis mutandis, of every business
A REVIEW - 887
enterprise. These intricate relations of interdependence tangle the skein
of economic causes and effects beyond the present power of man to
unravel. Every development is the net resultant of numerous causes
and also the cause of numerous effects. But though we can not disen-
tangle all the crisscrossing influences of the factors which have shaped
American fortunes in 1922–1927, we can follow certain of their salient
reactions upon each other. -
To take first the moderating effects of opposing factors: Ameri-
can prosperity in 1922–1927, in nonagricultural lines, would have been
decidedly greater had the six million American farmers been flourishing.
Every man thrown out of work has subtracted an iota from the national
dividend and an iota from the demand for goods. Every business that
has failed has made a tiny difference in our ability to provide for our
wants and to market our products. The United States as a whole would
have been better off if all foreign countries had enjoyed fortunes equal
to its own.
On the other hand, the farmers would have been in far worse plight
if the majority of Americans had not been receiving relatively large
incomes, and if American factories and railways had not been highly
efficient as servants of agriculture. So too, the unemployed would have
been more numerous, and their difficulties in getting new jobs greater,
had the country suffered from industrial depression. Finally, other
countries would have been worse off, had we not been in position to
import freely, and to make large loans.
There can be no doubt about the reality or the importance of these
reactions of hardship in diminishing prosperity, and of prosperity in
diminishing hardship. But there seems to be no way of measuring such
complicated influences with the data available.
Clearer still are the effects of one favorable development in reinforcing
other favorable developments, and the corresponding intensification of
misfortune by misfortune. In this period and in our country, the former
set of cumulations has been more in evidence than the latter. And it
is necessary to bring these reactions of favorable developments upon
each other into the foreground of our final picture. For we cannot
understand any single factor in the situation, such as increasing techno-
logical efficiency, the rising standard of living, the relatively stable price
level, the large volume of construction, the abundance of capital and
credit, or large income disbursements, without noting how other factors
favored its development.
Take, for example, keener intelligence applied to the day's work,
which increased the physical output of goods. That has meant the
possibility of larger average real incomes per capita. To distribute
these goods, market experts cultivated the desires of the people for a
freer and more varied consumption; they developed plans by which the
888 RECENT ECONOMIC CHANGES
eager could satisfy wants before they could pay. A sound monetary
and banking system provided the requisite currency and credit to run
this whole process of producing and distributing a swelling river of goods.
Price fluctuations were held within narrow limits by a combination of
prudence among business men, unit-cost reductions by technical experts,
skill on the part of bankers, and the course of foreign markets. This
relative stability of prices reinforced the pressure upon all parties to
exercise caution, calculate closely, and watch costs; it also helped to
keep world prices relatively stable. Since prices were not buoyant,
business enterprises had to maintain a high level of efficiency in order
to make profits, and that fact intensified the application of intelligence
with which this paragraph started. By the aid of the reinforced effi-
ciency, it has been possible to pay high wages and salaries, meet interest
and rental charges, distribute liberal dividends, and still retain large
surpluses for protecting or expanding business ventures. The large
income disbursements provided the purchasing power to which the market
experts appealed for the purchase of the increased physical output of
goods. Meanwhile, the considerable profits reaped by the large number
of efficient enterprises made them eager to grow. At the same time,
prosperous families wanted better housing; prosperous communities
wanted larger schools; prosperous states wanted hard-surfaced roads.
So the routine business of providing current income was supplemented
by an exceptional volume of new construction to provide industrial
equipment of all kinds, office buildings, single dwellings, apartments,
hotels, theaters, schools and highways. That required capital running
into billions of dollars. The demand was met without strain from the
surpluses of business enterprises and the savings of individuals whose
higher standards of living had not absorbed all of their money incomes.
And of course the construction work, as it proceeded, enlarged the market
for a vast variety of goods, and enlarged the disbursements of income.
So one might go on indefinitely, tracing the fashion in which each of
the prosperity-producing factors in the situation has increased the
activity out of which it grew, and thus promoted conditions which
heightened its own efficiency. The broad facts, however, are patent.
And no elaboration would lead to a convincing evaluation of what credit
belongs to any single factor taken by itself. Drop out any of the develop-
ments recalled in the preceding paragraph, and the process as a whole
would be altered. It is just as impossible to say what high wages, large
construction, skillful marketing, railroad efficiency, or abundant credit
contributed to prosperity, as it is to say how much agricultural depres–
sion, technological unemployment, or the lingering troubles of Europe
have diminished the prosperity which might have been attained but
for these drawbacks.
A REVIEW 889
Net Effects upon Average Per Capita Income.-Reasons were given
above for accepting the estimate of per capita income, expressed in
dollars of constant purchasing power, as the most inclusive, and probably
the most reliable, summary of the net results flowing from all the myriad
changes which affect the economic welfare of the country's people.
Accordingly, we return to these figures as the best general conclusion of
the whole investigation. Two series of figures are given. The first
shows income received in money; the second “disbursed income”—that
is, money receipts plus the value of income yielded by homes occupied
by their owners and by household goods, the value of farm produce
consumed by the producers and minor items of similar nature. The first
series corresponds closely to the common conception of income, but the
other is a better index of economic welfare. The following comments
refer to the second series.* -
TABLE 10.—PER CAPITA INCOME IN THE UNITED STATES ExPRESSED IN 1925 DOLLARS
Income Disbursed
received in income
money
1913. . . . . . . . . . . . . . . . . . . $554 $621
1917. . . . . . . . . . . . . . . . . . . 579 656
1919. . . . . . . . . . . . . . . . . . . 510 611
1920. . . . . . . . . . . . . . . . . . . 520 600
1921. . . . . . . . . . . . . . . . . . . 500 576
1922. . . . . . . . . . . . . . . . . . . 557 625
1923. . . . . . . . . . . . . . . . . . . 616 679
1924. . . . . . . . . . . . . . . . . . . 628 697
1925. . . . . . . . . . . . . . . . . . . 647 71.4
1926. . . . . . . . . . . . . . . . . . . 659a 733a
a Preliminary.
From the trough in which the war and the war-dominated cycle of
1919–1921 left the country, Americans raised their average fortunes
to the prewar level in a single year of reviving activity. A second year
of great gains left the old records far behind. Since 1923, progress has
been steady, but less rapid.
Unless these figures are very far in error, not only absolutely but also
relatively, the final verdict upon the years 1922–1926, and presumably
upon 1927 and 1928, for which the income record is yet incomplete,
* The difference between income received in money and disbursed income appears
to be decreasing rapidly in relation to total income, with some indications of an
absolute decrease as well. Presumably this change is explained, in part, by the
increasing percentage of the population that lives in rented quarters.-Note by
M. C. Rorty, Director.
890 RECENT ECONOMIC CHANGES
must be that they brought good times to the majority of our people—
though by no means to all.
VIII. BUSINESS CYCLES IN 1921–1927
The Question whether Business Cycles Have Been “Ironed Out.”—
A final characteristic of the last few years in the United States is the
relative stability of business. It is not by oversight that little is said
about business cycles in the preceding chapters. In statistical parlance,
the conspicuous feature of recent economic changes is the rising trend in
output per worker and average income, rather than cyclical fluctuations.
The United States has not had a genuine “boom” in business at large
since 1919; it has not had a “commercial crisis” since 1920, or a severe
depression since 1921. Violent contrasts of economic fortune are
found; but they run side by side in different industries. Violent changes
in certain activities have occurred from year to year; but they have been
localized industrially or geographically, like the rise and collapse of the
Florida land speculation. Even the “bull market” on the New York
Stock Exchange, which has reached such heights in 1928–29, seems not
to have infected business in commodities. For the country as a whole,
both current opinions and statistical indexes indicate that production,
transportation and distribution have been maintained for the last few
years on a high, but not exceedingly high, level, with brief periods of
contraction, to which the term “depression” seems scarcely applicable.
This relative stability has encouraged optimists to say that “the
business cycle” has been “ironed out” in the United States; that our
last cycle ended in 1921, and that we need not fear a serious reaction in
the future. The forecast in this statement we may leave for the future
to test, reserving our attention to what has already happened.
The validity of the optimistic view depends on the meaning attached
to the term “business cycles.” If no fluctuation in economic activity
be counted a cycle unless it includes a boom, crisis, and severe depression—
as these vague terms are commonly understood—then it is true that the
United States has had no business cycle since 1919–1921. But on that
interpretation, “the business cycle” was “ironed out” in the United
States before the war. From 1909 to 1913 the oscillations in general
business activity were notably moderate. Nor was that the first stretch
of rather uneventful business years either in this country or elsewhere, as
Dr. Willard L. Thorp's collection of Business Annals shows. However, a
discussion of recent changes in business cycles is of little use when con-
ducted in such vague terms. Not unless the amplitudes of successive
cycles can be measured and compared, is it possible to reach definite
conclusions.
How This Question Can Be Answered.—For some time the National
Bureau has been engaged in making such measurements. Though
A REVIEW 891
designed for a larger purpose, they can be applied to the present problem.
All the statistical series representing changes in economic activities by
months or quarters, for as many years as possible, are being collected for
several countries and analyzed on a uniform plan, to find how they behave
during business cycles. From these materials we may select the leading
American series which cover several prewar cycles, add a few especially
significant series covering a briefer period, and arrange the measurements
to answer the question in hand.
The first step, in measuring the amplitudes of cyclical fluctuations in
statistical series, is to fix a set of “reference dates” marking the beginning,
peak, and ending of the general business cycles in each country dealt
with. These dates show the year and month of successive cyclical
revivals and recessions. They are determined roughly by a study of
business annals and made more precise by a study of what statistical
data are available from case to case. (2) Each series is then broken into
“reference-cycle segments” on the basis of the reference dates. (3)
The average value of a series during each reference-cycle segment is
computed, and the original data are turned into percentages of these
averages as 100. This use of percentages, or relatives, makes it possible
to compare the fluctuations of the same series in different cycles and of
different series in the same cycle. It eliminates the greater part of the
secular trends of the series, but retains what may be called the “intra-
cycle trends.” (4) The relatives are examined to see whether they show
appreciable seasonal variations. If so, the seasonals are determined and
eliminated by methods which need not be described. After this step has
been taken, a series is in shape to have its cyclical behavior measured in
various ways.
The measurements of present concern relate to the amplitude of the
rise from the early trough in a cycle to the peak, and of the fall from the
peak to the subsequent trough. Such figures are given in Table 12.
Though the basic chronology is furnished by the list of reference dates,
the low, high, low turning points given in the table are those found in the
several series. Most series lead or lag behind the revivals and recessions
in general business. To diminish the influence of random fluctuations,
we use three-months averages centered, instead of actual standings in
the single months when a series touches its peak or trough.
The Duration of Prewar and Postwar Cycles in General Business.--
Before examining this table in detail, it is well to see how recent business
cycles in the United States compare with their predecessors in respect to
duration. Table 11, giving the reference dates used in marking off
cycles in general business activity over a period of 73 years, provides the
necessary data.
Of course, there is an element of the arbitrary in fixing the beginning
and end of these cycles so definitely as the table pretends to do. In
892 RECENT ECONOMIC CHANGES
dealing with a single series, one commonly, though not invariably, finds
clearly marked cyclical turning points. But in a collection of different
series these points never all fall in the same month. Yet some month
within the period when most series touch bottom and turn up, or reach
the peak and turn down, must be selected as a marker, even though its
claim to represent the turn of the general tide may be no better
than that of several neighboring months. The uncertainty which
month to select is greatest when business continues active or dull on much
the same level for a considerable time before it declines or rises. One of
the most difficult problems presented by the whole list of reference dates
in Table 11 is when to date the recession in the latest cycle covered.
November 1926, was finally fixed upon, though almost equally good cases
can be made out for several other months ranging from April, 1925, when
wholesale prices began receding from their peak, to March, 1927, when the
operating revenues of railroads began to decline. Our practice in such
cases is to choose a date as near the end of the nearly level stretch as the
data justify.
TABLE 11.-STANDARD REFERENCE DATES FOR BUSINESS CYCLES, UNITED STATES
Expansion Contraction Duration in months
Ex- | Con- Full
Revival High Recession Low pan- trac-
º - cycle
S1 OIl tion
January 1855 to June 1857 July 1857 to December 1858 30 18 48
January 1859 to October 1860 November 1860 to June 1861 22 8 30
July 1861 to April 1865 May 1865 to December 1867 46 32 78
January 1868 to June 1869 July 1869 to December 1870 18 18 36
January 1871 to October 1873 November 1873 to March 1879 34 65 99
April 1879 to March 1882 April 1882 to May 1885 36 38 74
June 1885 to March 1887 April 1887 to April 1888 22 13 35
May 1888 to July 1890 August 1890 to May 1891 27 10 37
June 1891 to January 1893 February 1893 to June 1894 20 17 37
July 1894 to December 1895 January 1896 to June 1897 18 18 36
July 1897 to June 1899 July 1899 to December 1900 24 18 42
January 1901 to September 1902 October 1902 to August 1904 21 23 44
September 1904 to May 1907 June 1907 to June 1908 33 13 46
July 1908 to January 1910 February 1910 to January 1912 19 24 43
February 1912 to January 1913 February 1913 to December 1914 12 23 35
January 1915 to August 1918 September 1918 to April 1919 44 8 52
May 1919 to January 1920 February 1920 to September 1921 9 20 29
October 1921 to May 1923 June 1923 to July 1924 20 14 34
August 1924 to October 1926 November 1926 to December 1927 27 14 41
Average duration
19 cycles, 1855 to 1927, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25. 4 || 20. 7 || 46. 1
13 cycles, 1885 to 1927, . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.8 | 16. 5 || 39.3
Accepting these decisions, we find certain peculiarities in the duration
of recent cycles. (1) The World-War cycle brought a period of activity
A REVIEW 893
exceeded in length only by the expansion phase of the Civil-War cycle.
The subsequent contraction lasted only eight months, and is matched in
brevity only by the contraction which preceded the Civil War. These
two segments produce the longest full cycle the country has experienced
in a generation, though it falls far short of three earlier cycles covered
by the table. (2) The first postwar cycle was correspondingly brief—29
months as against 52. Its period of expansion was the shortest in the
record, less than a third of the full cycle. On the average, the phase of
expansion lasts appreciably longer than the phase of contraction. (3) The
cycle of 1921–1924 represented a return toward the average duration
and the average relations of the two phases. But it still fell five months
short of the average for full cycles since 1885—a more representative
figure for current experience than the average which includes the Civil
War and the prolonged depression of the 1870's. (4) A still closer
return to the average appears in the last cycle. The reference dates
make it 41 months long, or 1.7 months longer than the preferred average.
The prosperous phase is an unusually large fraction of the whole; but,
as said above, the date for recession in this case is hard to fix.
So far as durations go, then, business cycles have reverted to type
after the aberrations of the war. Of course that historical fact does not
justify anyone in counting upon 40-month cycles in the near future,
for the table shows that cycle lengths are “subject to change with-
out notice.” -
Conformity of Different Activities to the Standard Cyclical Pat-
tern.-If business cycles are in process of being “ironed out,” as time
passes we shall find an increasing number of series which do not undergo
cyclical contractions. Twenty series are included in Table 12. How
many of them show all the recessions in recent years which Table 11
shows for general business? And what series depart from this standard
pattern? The answers may be given in schedule form.
Ten series conform to the standard cyclical pattern throughout the period since
1914.
One series (interest rates on commercial paper) passed through two cycles during
the war, but has conformed closely since 1919.
Two series (bank clearings outside of New York City and liabilities of bankrupt
concerns) skipped the mild recession at the end of the war, but have conformed closely
since 1921.
One series (exports of merchandise) has only three cycles since 1914, instead of
the standard number four. But this series did not conform with regularity before the
war, presumably because the volume of merchandise which the United States can
sell abroad depends more upon business conditions in foreign countries than upon
business conditions at home.
Three series (the index number of farm prices of crops, cattle and hog receipts at
Chicago) have the standard number of cycles, but the dates of their turning points
are erratic. Such is the usual case with agricultural series, for the weather changes
which exert such an influence upon farm prices, fodder crops and the marketing of
894 RECENT ECONOMIC CHANGES
stock, seldom run a course parallel to general business activity for several years in
SUlCCCSS1C)Il.
Three series skipped the cyclical decline of 1926–27—anthracite coal production,
dividend disbursements by industrial corporations, and number of shares sold on
the New York Stock Exchange. Hog receipts had turned downward in 1923 and
cattle receipts in December, 1924. All the other series in our sample, 15 out of 20,
suffered a fall beginning in some month between April, 1925 and March, 1927.
The test here applied to determine whether the behavior of a given
series conforms to the standard cyclical pattern is rather exacting.
Unless a series rises within the period labeled expansion in Table 11,
and falls within the period labeled contraction, it is set down as failing
in conformity. A change in this practice will be called for if the effort
to smooth out business cycles succeeds gradually. For in smoothing
out these cycles the stage should come when alternating phases of
expansion and contraction will be reduced to alternating accelerations and
retardations of a rising secular trend. A cycle will remain; but it will
be so attenuated that the statistician will have to measure it in varying
rates of increase, not in plus and minus items. Even now such measure-
ments are useful. They prove that general business conditions exercise
some influence upon processes which skip cyclical declines. If the
measurements in Table 12 were made into average rates of change per
month, they would show a higher degree of conformity to the standard
cyclical pattern than is credited here. But so long as fundamental
business factors, like employment, bank clearings, wholesale prices,
physical production, new construction, and railroad revenues continue
to exhibit actual declines, we have not attained the acceleration-retarda-
tion stage. What progress toward that stage can we claim?
The Amplitudes of Prewar, War and Postwar Business Cycles.—
A sharp picture of each of the last five cycles in the United States, against
a background of prewar experience, can be drawn from the amplitude
entries in Table 12. Thirteen of the twenty series cover seven or more
prewar cycles, and conform passably in timing to most or to all of the
standard reference cycles since 1914.
(1) In the last prewar cycle, February 1912 to December 1914, the
amplitude of the rise was relatively slight. Imports and immigration
are the only series among the thirteen which rose more than the prewar
average.
The contraction promised for a time to have the same gentle char-
acter; but it was aggravated by the outbreak of the war in July 1914.
Even so, the amplitude of the fall failed to reach the prewar average in
Seven of the thirteen series. Of course male immigration from the
belligerent countries was severely checked by the call to the colors; that
is the only series in which the decline was much greater than usual.
All in all, the cycle was exceptionally mild.
(2) In the war cycle, January, 1915 to April, 1919, the rise exceeded
the prewar average, except in anthracite coal shipments, immigration,
A REVIEW
895
TABLE 12.-AMPLITUDE OF THE CYCLICAL FLUCTUATIONS IN LEADING AMERICAN
TIME SERIES DURING PREwAR, WAR AND Postwar BUSINESS CYCLES
The amplitudes are expressed in percentages of the average value of a series during each business
cycle. Seasonal variations are eliminated.
Dates of cyclical turning standing at Amplitudes of
points cyclical turning cyclical
points fluctuations
& e Rise
First High Last | First High Last Rise | Fall and
low low low low
fall
Indez of General Business.
American Telephone and
Telegraph Company. -
Prewar cycles. Average of 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88. 5||110. 6| 87. 2, 22. 1 || 23.4 45. 5
Last prewar cycle. . . . . . . . . . . . . . May ’11 || Jan. '13 || Dec. '14 || 96 ||109 81 13 28 41
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 | Nov. '16 |Mar. '19 || 76 |110 86 34 24 58
Postwar cycles. . . . . . . . . . . . . . . . Apr.” 19 |Mar. '20 || July ’21 | 98 |117 77 19 40 59
Aug. 21 June '23 July ’24 || 75 |117 87 42 30 72
Aug. '24 || Oct. '26 || Dec. '27 | 82 |105 92 23 13 36
Indez of Industrial Employment.
Jerome and Bureau of Labor
Statistics.
Prewar cycles. Average of 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.4|106.3| 96.3| 16.9| 10.0| 26.9
Last prewar cycle. . . . . . . . . . . . . . . Jan. '12 | Feb. '13 || Jan. '15 97 ||103 95 6 8 14
War cycle. . . . . . . . . . . . . . . . . . . . Feb. '15 | Feb. '17 | Feb. '19 | 84 || 108 95 24 13 37
Postwar cycles. . . . . . . . . . . . . . . . Mar. '19 June '20 | Jan. '21 | 101 |116 76 15 40 55
Feb. '21 June '23 July '24 || 82 ||109 91 27 18 || 45
Aug. '24 |Mar. '26 Jan. '28 94 |104 93 10 11 21
Immigration, male. -
Prewar cycles. Average of 14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.7|159.8| 62.9|103.1| 96.9|200. 0
Last prewar cycle. . . . . . . . . . . . . . Aug. '11 || July ’13 | Feb. '15 64 208 18 ||144 |190 334
War cycle. . . . . . . . . . . . . . . . . . . . Mar. '15 Sept. '16 ||Nov. '17 | 77 |168 21 91 ||147 |238
Postwar cycles. . . . . . . . . . . . . . . . Dec. '17 | Jan. '21 |Mar. '22 105 |179 26 74 | 153 |227
Apr. '22 July ’23 || Aug. '25 | 28 |248 46 |220 202 |422
Sept. '25 | May ’26 June '28 76 |121 77 45 44 89
Indez of Industrial Production,
revised. Includes Mining. .
Standard Statistics Corpor-
ation.
Prewar cycle. . . . . . . . . . . . . . . . . . Jan. '11 || May ’13 ||Nov. '14 || 74 |114 74 40 40 80
War cycle. . . . . . . . . . . . . . . . . . . . Dec. 14 || Oct. '16 || May ’19 || 59 |113 87 54 26 80
Postwar cycles. . . . . . . . . . . . . . . . June '19 Mar. '20 | Apr. '21 | 95 |119 78 24 41 65
May ’21 May ’23 June '24 | 66 |119 91 53 28 81
July ’24 Sept. '26 || Dec. '27 | 79 |108 96 29 12 41
Pig iron production. Daily aver-
age.
Prewar cycles. Average of 9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.9|127.4| 72.4| 67.6| 55.0|122.6
Last prewar cycle. . . . . . . . . . . . . . Aug. '11 | Feb. '13 || Dec. '14 || 76 125 63 49 62 |111
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 July ’18 May ’19 || 48 |116 68 68 48 116
Postwar cycles. . . . . . . . . . . . . . . . June '19 |Mar. '20 July ’21 | 89 |140 39 51 | 101 152
Aug. '21 June '23 July ’24 || 34 ||143 69 ||109 74 183
Aug. '24 Sept. '26 || Dec. '27 | 63 |117 86 54 31 85
Anthracite coal shipments.
Prewar cycles. Average of 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72. 1 126. 1 | 82.5| 54.0| 43.6| 97.6
Last prewar cycle. . . . . . . . . . . . . . Aug. '09 || Aug. '12 | Feb. '14 || 78 |124 84 46 40 86
War cycle. . . . . . . . . . . . . . . . . . . . Mar. '14 July ’18 |Mar. '19 78 |127 67 49 60 || 109
Postwar cycles. . . . . . . . . . . . . . . . Apr. '19 July ’20 July ’21 | 98 |116 92 48 24 72
Dec. '21 | Dec. 722 |Mar. '25 | 99 || 139 94 40 45 85
No cyclical decline since 1925.
896
RECENT ECONOMIC CHANGES
TABLE 12.-AMPLITUDE OF THE CYCLICAL FLUCTUATIONS IN LEADING AMERICAN
TIME SERIES DURING PREwAR, WAR AND Postwar BUSINESS CYCLES
(Continued)

Dates of cyclical turning
Standing at
Amplitudes of
& cyclical turning cyclical
points points fluctuations
First * Last First g Last º Rise
low High low low High low Rise Fall and
- fall
Cattle receipts at Chicago.
Prewar cycles. Average of 15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65. 1|140. 5, 78.7| 75.4| 61.8|137.2
Last prewar cycle. . . . . . . . . . . . . July '12 || Apr. '13 ||Nov. '14 || 95 |116 52 21 64 85
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 Sept. ''18 |Mar. '19 42 |148 ||100 (106 48 || 154
Postwar cycles. . . . . . . . . . . . . . . Apr. '19 || Dec. '19 July ’21 96 (126 75 30 51 81
Aug. '21 | Apr. '23 ||Nov. '23 || 76 120 81 44 39 83
Dec. '23 || Dec. '24 ||Nov. '25 | 81 | 115 86 34 27 61
Live hog receipts at Chicago.
Prewar cycles. Average of 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55.8|144. 6 67.4 88.8 77.2|166. 0
Last prewar cycle. . . . . . . . . . . . . Jan. '13 Sept. '13 ||Nov. '14 || 87 141 71 54 70 | 124
War cycle. . . . . . . . . . . . . . . . . . . . Dec. 14 || Oct. '16 Sept. '17 | 61 |140 59 79 81 | 160
Postwar cycles. . . . . . . . . . . . . . . Oct. '17 |Mar. '18 Apr. '20 | 57 |138 63 81 75 156
May ’20 Aug. '21 | Feb. 22 || 67 | 124 88 57 36 93
Mar. '22 July ’23 Feb. '27 | 80 ||148 69 68 79 147
Wholesale prices. Bureau of
Labor Statistics index number
for all commodities.
Prewar cycles. Average of 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94.7|106.4 98. 6 11.7 7.8| 19.5
Last prewar cycle. . . . . . . . . . . . . June '11 Sept. '13 || Dec. '14 || 95 || 103 98 8 5 13
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 Sept. '18 || Feb. '19 || 63 |133 |126 70 7 77
Postwar cycles. . . . . . . . . . . . . . . Mar. '19 May ’20 | Jan. '22 97 |124 70 27 54 81
Feb. 22 Apr. '23 June '24 92 |106 96 14 10 24
July '24 |Mar. '25 | May ’27 96 |105 94 9 11 20
Farm price of crops index. De-
partment of Agriculture.
Prewar cycles. Average of 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89.0|115. 5 85.0| 26. 5. 30.5 57.0
Last prewar cycle. . . . . . . . . . . . June '11 || June '12 July ’13 | 86 120 83 34 37 71
War cycles. . . . . . . . . . . . . . . . . . . Aug. '13 |Mar. '15 Sept. '15 82 |110 92 28 18 46
Oct. '15 Mar. '18 || July ’18 || 59 |143 |116 84 27 | 111
Postwar cycles. . . . . . . . . . . . . . . Aug. '18 June '20 July ’21 || 98 ||145 47 47 98 || 145
Aug. "21 || Aug. '25 | May ’27 | 83 |115 95 32 20 52
Operating revenues of Class I
railroads.
Prewar cycles. Average of 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 ||109 94 30 15 45
Last prewar cycle. . . . . . . . | Feb. '12 || May ’13 ||Nov. '14 || 88 ||109 87 21 22 43
War cycle. . . . . . . . . . . . . . . . . . . . Dec. 14 || Aug. "18 Mar. '19 | 66 ||142 118 76 24 || 100
Postwar cycles. . . . . . . . . . . . . . . Apr. '19 Sept. '20 Jan. '22 81 |119 89 38 30 68
Feb. 22 || May ’23 || Aug. '24 87 |116 96 29 20 49
Sept. '24 | Feb. '27 | Dec. '27 90 ||107 90 17 17 34
Bank clearings outside of New
York. Daily average.
Prewar cycles. Average of 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76. 8 115. 5| 94.8| 38.7| 20.7| 59.4
Last prewar cycle. . . . . . . . . . . . . May ’11 || Jan. '13 ||Nov. '14 | 88 |110 90 22 20 42
War cycle. . . . . . . . . . . . . . . . . . . . Dec. 14 Sept. '20 | May ’21 || 47 |157 |100 |110 58 167
Postwar cycles. . . . . . . . . . . . . . . June '21 || May ’23 June 24 77 |113 |105 36 8 44
July '24 || Dec. '25 Jan. '27 | 81 |105 97 24 7 32

A REVIEW 897
TABLE 12.-AMPLITUDE of THE CYCLICAL FLUCTUATIONS IN LEADING AMERICAN
TIME SERIES DURING PREwAR, WAR AND POSTw AR BUSINESS CYCLES
(Continued)
Dates of cyclical turning standing at Amplitudes of
oints cyclical turning cyclical
p points fluctuations
|
e e Rise
First High Last | First High Last Rise | Fall and
low low low low
fall
Bank clearings in New York City.
Daily average.
Prewar cycles. Average of 16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67.2|137.6 76. 1 70.4| 61.6||132.0
Last prewar cycle. . . . . . . . . . . . . . May '11 || Oct. '12 Sept. '14 || 86 |121 64 35 57 92
War cycle. . . . . . . . . . . . . . . . . . . . Oct. '14 | Dec. 16 Mar. '18 || 37 |123 94 86 29 115
Postwar cycles. . . . . . . . . . . . . . . Apr. '18 |Mar. '20 || Oct. "21 | 66 |120 78 54 42 96

Nov. '21 Mar. '23 Sept. '23 80 |110 86 30 24 54
Oct. "23 |Mar. '26 ||Nov. '26 83 |118 89 35 29 64
Building permits issued, total
values. Bradstreet's.
Prewar cycles. Average of 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62 | 123 75 61 48 ||109
Last prewar cycle. . . . . . . . . . . . . Mar. '11 || June '12 || Dec. '14 || 80 | 124 65 44 59 || 103
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 July ’16 || Dec. 18 76 |175 34 101 || 144 |245
Postwar cycles. . . . . . . . . . . . . . . Jan. '19 Jan. '20 | Dec. '20 | 17 | 141 64 || 125 77 |202
Jan. '21 | Feb. '24 July ’24 || 34 |157 90 |123 67 190
Aug. '24 || Oct. '26 July' 27 | 72 |124 79 52 45 97
Total exports of merchandise.
Prewar cycles. Average of 10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.7|129.9| 86.6 58. 2; 43.3| 101.5
Last prewar cycle. . . . . . . . . . . . . Sept. '08 ||Nov. '12 Aug. '14 | 66 |139 66 73 73 |146
War cycle. . . . . . . . . . . . . . . . . . . . Sept. '14 || June '17 | Nov. '17 | 28 |168 |106 ||142 62 |204
Postwar cycles. . . . . . . . . . . . . . . Dec. '17 June '19 || Dec. '21 || 75 | 193 45 118 148 |266
Jan. '22 |Mar. '25 | Dec. '27 | 67 || 120 96 53 24 77
Total imports of merchandise.
Prewar cycles. Average of 12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78.3|125. 1| 84. 5| 46.7| 40. 6 87.3
Last prewar cycle. . . . . . . . . . . . . . May ’11 || Dec. '13 || Jan. '15 78 |131 78 53 53 106
War cycle. . . . . . . . . . . . . . . . . . . . Feb. '15 May ’18 June '19 || 55 |144 |136 89 8 97
Postwar cycles. . . . . . . . . . . . . . . July '19 || July ’20 July ’21 | 84 |160 53 76 107 | 183
Aug. '21 Mar. '23 || Aug. '24 || 74 |128 94 54 34 88
Sept. '24 || Jan. '26 || Dec. '27 | 76 |115 94 39 16 55
Interest rates on commercial
paper. New York City. - -
Prewar cycles. Average of 17. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.7|145.6|| 71. 5. 73.9| 74.0|147.9
Last prewar cycle. . . . . . . . . . . . . Dec. '11 June '13 |Mar. '14 || 71 |135 76 64 59 |123
War cycles. . . . . . . . . . . . . . . . . . . Apr. '14 Sept. '14 || Apr. 16 || 97 |155 75 58 80 138
May ’16 Sept. '18 Feb. '19 92 |138 |114 46 24 70
Postwar cycles. . . . . . . . . . . . . . . Mar. '19 || Aug. '20 Aug. '22 || 75 |123 60 48 63 |111
Sept. '22 |Nov. '23 Oct. '24 || 86 |111 68 25 43 68
Nov. '24 || Oct. '26 Nov. '27 | 80 111 97 31 14 45
Dividend payments by industrial
corporations.
Prewar cycles. Average of 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54.0, 131.0| 68.7| 77.0 62. 3||139. 3
Last prewar cycle. . . . . . . . . . . . . . Jan. '11 | Apr. 13 | Dec. 14 | 40 |119 71 79 48 |127
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 June '17 | Aug. '19 || 52 |157 97 105 60 | 165
Postwar cycles. . . . . . . . . . . . . . . Sept. '19 May ’20 June 22 99 112 87 13 25 38
No cyclical decline since 1922.
898
RECENT ECONOMIC CHANGES
TABLE 12.-AMPLITUDE OF THE CYCLICAL FLUCTUATIONS IN LEADING AMERICAN
TIME SERIES DURING PREwAR, WAR AND POSTWAR BUSINESS CYCLES
(Continued)
Dates of cyclical turning sta Inding at Amplitudes of
points cyclical turning cyclical
points fluctuations
- - Rise
First High Last || First High Last Rise | Fall and
low low low low
fall
Number of shares sold on the New
York Stock Exchange.
Prewar cycles. Average of 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49. 8 172.9 44.5|123. 1|128.4|251 .. 5
Last prewar cycle . . . . . . . . . . . . . May '11 Sept. '11 | Dec. '14 || 69 120 26 51 94 | 1.45
War cycle. . . . . . . . . . . . . . . . . . . . Jan. '15 ||Nov. '16 || Aug. '18 12 |211 51 199 || 160 |359
Postwar cycles. . . . . . . . . . . . . . . Sept. '18 July '19 || Oct. "21 | 39 |237 53 198 || 184 |382
Nov. '21 | Apr. 22 || May ’24 || 65 |139 61 74 78 152
No cyclical decline since 1924.
- - | Fall
º Low : º Low : Fall Rise and
T1Se
Liabilities of business failures.
Bradstreet's.
Prewar cycles. Average of 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250, 9' 49.5|268. 01201. 4, 218.5|419.9
Last prewar cycle. . . . . . . . . . . . . Feb. '11 || July ’11 || June '14 ||105 64 |289 41 |225 |266
War cycle. . . . . . . . . . . . . . . . . . . . July ’14 || Jan. '20 Sept. '20 |391 37 |595 |354 |558 912
Postwar cycles. . . . . . . . . . . . . . . Oct. "20 | May ’23 || Jan. '24 ||147 59 || 146 88 |107 |195
Feb. '24 |Mar. '25 Mar. '27 | 175 65 |174 || 110 º 219
which was held at a low level by European restrictions, and commercial-
paper rates, which were affected by the establishment of the Federal
Reserve System and the huge imports of gold. The index of factory
employment scored an exceptional gain. Otherwise the spectacular
advances appear in prices and “dollar series.” The increases in physical
production, while above the average, were less striking.
The decline of 1918–19 exceeded the prewar average in five series,
which include the American Telephone and Telegraph Company’s
Indez of General Business, factory employment, anthracite shipments,
immigration (which does not fit the reference dates well in this cycle),
and number of shares sold. In the remaining eight series, the decline was
less than usual. As noted above, outside clearings and liabilities of
failures show no cyclical contraction at all in 1918–19.
Thus the war cycle was characterized by a prolonged advance to
very high levels, particularly marked in prices and dollar values, followed
by a brief and moderate reaction.
(3) The first postwar cycle, May, 1919 to September, 1921, started
from a relatively high point, because the preceding contraction had been
so moderate. When a fresh expansion began in May, 1919, it was not
possible to make large percentage gains in many lines. But wholesale
A REVIEW 899
prices, imports, and number of shares sold (the one series which had
fallen heavily in 1918–19) surpassed their average prewar rises.
The contraction was violent. Not merely wholesale prices, but
also most of the “dollar series,” employment, pig iron output, and shares
sold fell much more than they had fallen in the average prewar cycle.
Less than average declines occurred only in anthracite coal, cattle receipts,
commercial-paper rates, and New York clearings. Each of these excep-
tional cases has a special explanation.
In summary, this cycle presents a subaverage advance from a level
left high by the preceding contraction, followed by a crash of values.
On the basis of prewar experience, a bank suspension was on the cards.
The Federal Reserve System proved its strength by averting that
catastrophe.
(4) In the second postwar cycle, October, 1921 to July, 1924, recovery
from the low points touched in 1921 constituted a fair cyclical advance
without the attainment of high levels. And not a few industries did
have a brief season of exceptional activity in the early months of 1923.
In our sample of thirteen series, six rose more than their prewar averages
and seven rose less.
The contraction presents a similar picture. Six series fell more
than the prewar average, seven fell less. With two exceptions, the series
which rose little were the series which fell little and vice versa. Anthracite
coal had a less than average rise and a more than average fall, while
imports had a more than average fall and a less than average rise.
In amplitude as well as in duration, then, the cycle, of 1921–1924
marks a return to the familiar type. Before the war it would have ranked
as an average case, save that the recession from the peak was attended
by less than the usual banking strain.
(5) The latest completed cycle in American business, August, 1924
to December, 1927, is quite different in character. On the rise, only one
series in our list (the American Telephone and Telegraph Company’s
Indea of General Business) exceeds its prewar average, and that excess
is confined to the decimal column. All the other series which permit the
comparison show a subaverage advance.
On the decline two series, industrial employment and wholesale
prices, exceed their prewar averages. All the others shrink less than
usual or not at all.
Adding together the cyclical rise and the cyclical fall, we find that
wholesale prices is the only series with a total swing exceeding its prewar
average. That average is 19.5 points. The corresponding figure in
1924–1927 is 20 points.
Compared with prewar averages, then, the cycle which ended in
1927 was a mild affair. It still looks mild, if tried by severer standards.
We found the last prewar cycle to have been notably moderate. Yet
900 RECENT ECONOMIC CHANGES
only one series in our list (wholesale prices again) had a larger rise and
fall in 1924–1927 than in 1912—1914. All the other series in Table 12,
which permit the comparison, make the latest cycle even milder than the
last cycle before the war. -
To find prewar precedents for cyclical fluctuations so slight as those
of 1924–1927, we must resort to the cycle-by-cycle record of each series.
For more than half of the list, we can find one or more prewar cases
when the cyclical decline was smaller than in 1926–27. But Table 13,
which presents this comparison, shows that these individual cases are
scattered through eight different cycles. For three of the thirteen series,
prewar experience, as recorded in statistics, contains no match in mildness
for the latest decline. And two more series show no cyclical decline in
the last few years.
TABLE 1.3.−CYCLICAL DECLINES IN THE BUSINESS CYCLE OF 1924–1927 COMPARED
witH THE SMALLEST CYCLICAL DECLINEs Found IN ANY PREwAR CYCLE
CoverED BY THE AvAILABLE STATISTICs
13 American series covering 7 or more prewar cycles, arranged in order of their cyclical declines in
1924–1927.
The amplitudes are stated in percentages of the average value of the series during the cycle referred to.
Smallest cyclical decline found in
Number Amplitude a prewar cycle
Title of the series of prewar of cyclical
cycles decline in º
covered 1924-1927 Amplitude
of the Dates
decline
Liability of business failures, Brad- 8 109 101 1st quarter ’90—4th
street's. quarter ’90
Immigration, male. . . . . . . . . . . . . . . . . . 14 44 38 1st quarter '88—2nd
quarter '89
Pig iron production. . . . . . . . . . . . . . . . . . 9 31 26 Oct. '87–Feb. '88
Bank clearings in New York City. . . . . . 16 29 24 July ’95–Sept. '96
Exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 24 21 Dec. '03—Jan. '05
Imports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 16 a 21 Aug. '87–Apr. '88
Interest rates on commercial paper. . . . 17 144 29 Oct. '67—Jun '68
Indez of General Business. American
Telephone & Telegraph Company. . . 10 13 8 March '99–Dec. '00
Indez of Industrial Employment. 7 11 3 Dec. '00–Apr. '01 and
Jerome and Bureau of Labor Statis- Feb. '10–Dec. '11
tics.
Index number of wholesale prices, 7 11 4 March '00—June '01,
Bureau of Labor Statistics. Feb. '03–Oct. '04 and
- Mar. '10–May ’11
Bank clearings outside New York City. | 10 Sa 9 Nov. '99–Sept. '00
Anthracite coal production or ship-
ments. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 In One 31 March '87–Oct. '87
Number of shares sold on the New
York Stock Exchange. . . . . . . . . . . . . . 8 In One 68 June '89-March '91
a The cyclical decline in the business cycle of 1924–1927 is less than the smallest cyclical decline
in any prewar cycle covered by the record.
A REVIEW 901
The figures presented in Table 12 express most accurately the differ-
ence in amplitude between the latest cycle and its predecessors; but a
graphic presentation may be added. The charts which follow cover only
the most significant series in our sample. They differ from Table 12
in two ways. (1) The cyclical turning dates used in making the charts
are those given in Table 11 for cycles in general business, whereas the
turning points used in making the tables are those found in each series.
One purpose of this shift is to show that the cyclical pattern is not rubbed
out of business changes by stretching all the different series analyzed
upon a common time scale, regardless of the dates at which they reached
their several peaks and troughs. Of course, the apparent amplitudes
of the swings are reduced by this method of presentation, for the lowest
and highest points in no series coincide precisely with our reference dates
for revival and recession. But, though flattened somewhat in every
case, the cyclical pattern remains clear. (2) Instead of presenting only
the lowest and highest points of a cycle, the charts show also the progress
of expansion from the trough to the peak, and of contraction from the
peak to the trough. The interval between a revival and the next reces-
sion is divided into three parts as nearly equal as may be, and an average
of the relatives is made for each third. The interval between the reces-
sion and the next revival is subdivided in the same way. Thus the
cyclical behavior of a series is represented in each cycle by eight observa-
tions—its average standing in the three months centering on the revival
date, its average standing in successive thirds of the phase of expansion,
its average standing in the three months centering on the recession date,
and its average standing in successive thirds of the phase of contraction.
A ninth observation, the average standing in the three months centering
on the next revival, is added to show how cycles link into their successors.
These charts confirm pictorially the mildness of the latest cycle in
comparison with prewar averages. In some cases, however, rather
close scrutiny is necessary to establish the difference. Of course the
tables offer more precise comparisons, and when one is interested in the
movements of any single series, the use of its own highest and lowest
points is the proper procedure. But the charts make plainer than the
tables the prevalence of a cyclical pattern in business changes, as well
as the difference in this pattern from one type of transactions to another.
For example, the contrast between the conforming cycles of imports and
the nonconforming cycles of exports stands out clearly. So also does
the relation between the pattern for number of shares sold on the Stock
Exchange and the pattern for New York clearings. But charts speak
well enough for themselves.
While the evidence which has been presented in this rather technical
section is not exhaustive, it covers such a variety of economic factors,
and such important ones, as to justify a conclusion. Business cycles
902 RECENT ECONOMIC CHANGES
AverAGE BEHAVIOR of VARIOUs EconoMIC SERIES DURING PREwAR BUSINEss
CYCLES AND THEIR BEHAvior DURING THE CYCLE OF 1924–1927
The curves connect averages of relatives (based upon the average value of the series charted in each
cycle) during nine stages of the cycles in general business marked off by the standard set of reference
dates shown in Table 11. These stages are as follows: 3 months centered on the reference date for
revival; successive thirds of the period of expansion; 3 months centered on the reference dates for reces-
sion; successive thirds of the period of contraction, and 3 months centered on the reference date for the
next revival. The upper time scales show the average intervals from the center of one of these stages
to the next during prewar cycles. The lower time scale shows the corresponding intervals in the cycle
of 1924–1927.
CHART 7.—INDEX OF GENERAL BUSINESS ACTIVITY, AMERICAN TELE-
PHONE AND TELEGRAPH COMPANY.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| I I I I I T I T-
|||O H
100 H
90 H
IO PRE-WAR CYCLES
80 - –––– CYCLE, 1924-27
| | | | | l | |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-2T CYCLE
CHART 8.—INDEX OF FACTORY EMPLOYMENT, JEROME AND BUREAU
OF LABOR STATISTICS.
TIME SCALE,PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| T I I |- } I |
no – T PRE-WAR CYCLES
---- CYCLE, 1924-27
}*
|00.
90 -
| ſl l l | | | | |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE


A REVIEW - 903
CHART 9.—PIG IRON PRODUCTION.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| l I I | I I -I- |
l2O –
| |O –
100 –
90 –
80 – I
! - 9 PRE-WAR CYCLES
! ---- CYCLE, 1924-27
!
TO || 3
| ſ l f f 1 | |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE
CHART 10.-WHOLESALE PRICES, ALL COMMODITIES, UNITED STATES
BUREAU OF LABOR STATISTICS.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
--- -- I r—
| 10 H_
100 –
90 –
— T PRE-WAR CYCLES
––––CYCLE, 1924-27
80 H.
| l | 1. | f ſ |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE


904 RECENT ECONOMIC CHANGES
CHART 11.—BANK CLEARINGS OUTSIDE OF NEW YORK CITY.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
} I l I I- I I |
| 10 H
|00 H
90 H.
– IO PRE-WAR CYCLES
–––– CYCLE, 1924-27
80 -
| i l | | | | |
|
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE
CHART 12.-BANK CLEARINGS IN NEW YORK CITY.
TIME SCALE,PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| I I I | I | I
120 H.
110 H
IOOH
90 H
– 15 PRE-WAR CYCLES
80 H. ----CYCLE, 1924-27
| | I - | | 1–1 —
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE


A REVIEW - 905
CHART 13.−TOTAL EXPORTS.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| I I I | T I I T
| | O H.
100 H.
90 H
— 12 PRE-WAR CYCLES
80 – ---- CYCLE, 1924-27
| | | I I I |
REVIVAU RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE
CHART 14.—TOTAL IMPORTS.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
| y I | | T I -I |
IO H.
|OOH-
90 –
/ — 12 PRE-WARCYCLES
& ---- CYCLE, 1924-27
80 –
| | i I I | |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE


906 RECENT ECONOMIC CHANGES
CHART 15.-IMMIGRATION, MALES.
TIME SCALE, PRE-WARCYCLES
REVIVAL RECESSION REVIVAL
I I I | —I J U |
130 H.
|20 –
| 10 H
look
90 –
80 - f
f – 14 PRE-WAR CYCLES
---- 1924-27 CYCLE
TO –
| 1— | | | 1 1
REVIVAL RECESSIO REVIVAL
TIME SCALE, 1924-27 CYCLE

A REVIEW 907
CHART 16–COMMERCIAL PAPER RATES, NEW YORK CITY.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL,
| I I I | I T I
13OH
|2O H.
| |O H.
|OOH-
90 H.
80 –
14- PRE-WAR CYCLES
---- CYCLE, 1924-27
TO H
| | | ſ | 1. I - | |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE

908 RECENT ECONOMIC CHANGES
CHART 17.—NUMBER OF SHARES SOLD, NEW YORK STOCK EXCHANGE.
TIME SCALE, PRE-WAR CYCLES
REVIVAL RECESSION REVIVAL
- I I I I I I I |
15OH.
|40 –
13OH-
|20 –
| |O -
100 –
90 –
80 -
TO – / — 9 PRE-WAR'CYCLES
d ---- CYCLE, 1924-27
60 H.
| I | I | ſº I I |
REVIVAL RECESSION REVIVAL
TIME SCALE, 1924-27 CYCLE

A REVIEW 909
have not been “ironed out” in the United States. But to the recent
economic changes described in the preceding chapters we may add
another accomplishment: the amplitude of cyclical fluctuations has been
reduced. This reduction dates only from 1924, but it extends beyond
1927. With the significant exception of stock-market dealings and
closely related processes, the latest statistics indicate that the expansion
which began in January, 1928, was proceeding at a temperate pace when
this report went to press in March, 1929. Of course, that is no proof that
moderation will characterize the later stages of the current cycle or its
successors. For we can ascribe the mildness of recent fluctuations only
in part to intelligent management. Every factor which has restrained
prosperity has had its share in preventing the development of an
unhealthy boom, and so in guarding against a violent relapse. If and
when Europe regains its prewar level of prosperity, world prices rise,
and American agriculture works out of its troubles, then our skill in
controlling business cycles will be put to a severer test.
IX. HOW MATTERS STAND IN THE SPRING OF 1929
Forecasting the future is no part of the present task. But we should
not close the record without noting that recent developments may appear
less satisfactory in retrospect than they appear at present.
Even on the face of affairs, all is not well. Americans have seen more
uniformly fortunate times: for example, in 1906, when the Secretary of
the Treasury was praying that the country might be delivered from more
prosperity. The condition of agriculture, the volume of unemployment,
the textile trades, coal mining, the leather industries, present grave
problems not only to the people immediately concerned, but also to their
fellow citizens. How rapidly these conditions will mend, we do not
know. Some may grow worse.
Nor can we be sure that the industries now prosperous will prolong
indefinitely their recent record of stability. That we have not had a
serious crisis since 1920 or a severe depression since 1921 is no guarantee
that we shall be equally prudent, skillful and fortunate in the years to
come. If we are to maintain business prosperity, we must continue to
earn it month after month and year after year by intelligent effort. The
incomes disbursed to consumers, and to wage earners in particular, must
be increased on a scale sufficient to pay for the swelling volume of con-
sumers’ goods sent to market. The credit structure must be kept in
due adjustment to the earnings of business enterprises. Security prices
must not outrun prospective profits capitalized at the going rate of inter-
est. Commodity stocks must be held in line with current sales. Over-
commitments of all sorts must be avoided. The building of new industrial
equipment must not be overrapid. These and the similar matters which
might be mentioned present delicate problems of management which
910 RECENT ECONOMIC CHANGES
will find their practical solutions in the daily decisions of business execu-
tives. Perhaps errors are being kept within the limits of tolerance.
Perhaps no serious setback will occur for years to come. But we are
leaving 1921 well behind us, and there are signs that the caution inspired
by that disastrous year is wearing thin.
Whether the recent rate of progress in the arts of industry and business
can be maintained is another uncertainty. Past experience, as summed
up in the introductory chapter, suggests that the pace will slacken pres–
ently, and that years may pass before we see such another well-main-
tained advance. But that is a matter in which experience is not a
trustworthy guide. Scientific research, industrial invention and busi-
ness pioneering all lead into the unknown. They are fascinating
ventures which energetic minds will ever be trying, whether the tang-
ible rewards prove great or small. All that is certain is that whatever
progress in efficiency we continue to make must be won by the same
type of bold and intelligent work that has earned our recent successes.
APPENDIX A
FIELD INTERVIEW SCHEDULE USED IN MANAGEMENT SURVEY
The field investigators were given standard instructions for using the Interview
Schedule. The instructions included three items which the reader will find it helpful
to keep in mind when considering the various questions:
Regard the words “recent” and “recently” as meaning during the past 10 years,
with particular emphasis on the period since 1921.
Wherever the word TREND appears, give the years in which practice changed or
new developments occurred and attempt to indicate the nature and direction of very
recent changes in policy or practice, including changes which the person interviewed
anticipates in the near future.
Words printed in italics directly after a question should be used, wherever appli-
cable, as the answer, by encircling the particular words which constitute a correct
answer. But expand the answer wherever necessary for clearness.
RECENT ECONOMIC CHANGES | Company. . . . . . . . . . . . . . . . . . . .
MANAGEMENT SURVEY Location. . . . . . . . . . . . . . . . . . . . .
FIELD INTERVIEW SCHEDULE | Interviewer. . . . . . . Date. . . . . . .
Persons Interviewed - Number of
Titles years with
Names this company
IDENTIFYING DATA
A. Character of enterprise: Manufacturing, Wholesale, Mail Order, Public Utility,
Other (describe). (Note changes during recent years, giving years).
B. Products:
1. Lines of products made or sold. (Note recent changes).
2. Per cent (of total dollar volume) sold for use by “ultimate consumers”?.....
3. Per cent sold for use by “producers” (i.e., for capital or material accounts) 2..
4. Price range or sector: Top? Middle? Low? (If this question is inapplicable,
explain why).
5. Per cent of manufacturing cost spent for materials?. . . . . . direct labor? . . . . .
912
RECENT ECONOMIC CHANGES
C. History:
for and years of moves.
D. Corporate relations and control:
1. Recent corporate changes.
* * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * e s =
2. First and subsequent locations of major plant and general office, with reasons
forms recently developed, giving years).
2. Present ownership: Closely controlled?
Widely diffused?
(Note subsidiaries, mergers, or any other special
* * * * * * * * * s & e º & 8 s sº & e º is $ 5 & & e e s tº º
* * * * * * * * * * * * * * * * * * * * * * * * * * e º e º a e s is $ tº
5. Further comments regarding control.
E. Expansion: List all manufacturing, sales, and other branch plants, offices, stores,
etc.
Functions Approximate | Approximate
Date (e IIla, Illul number of number of
Location Date estab- Date abandoned º employees in employees
lished acquired or disposed g; 1919 (or when (now and
sales, general & 4.
of office, etc.) established, when dis-
€, if since then) continued)
GENERAL OBSERVATIONS OF FIELD INTERVIEWER (TO BE RECORDED
AFTER COMPLETING SURVEY)
Note your observations, citing evidence where possible, regarding such things as:
A. Tendencies toward centralization or decentralization of authority and
responsibility.
. Apparent changes in character of managerial personnel, e.g., scientist type
replacing opportunist.
. Notions of obligation or responsibility to consumers, investors, employers,
competitors, public at large, Government.
. Influence of banks and other financial houses on business control.
. Opinions regarding the value of various types of business associations, e.g.,
trade associations, chambers of commerce, employers' associations, etc.
. Opinions regarding the value of various types of business publications, e.g.,
general business periodicals, trade journals, books, and other similar
channels of information.
G. Opinions of executives regarding training for business, and relation of business
and educational institutions.
H. Does the management aim for improved results more from perfection of
facilities and methods or from increased employee skill and morale?
F
RELATIVE IMPORTANCE OF MANAGERIAL PROBLEMS
In the judgment of the ranking person interviewed, what was (or is), in each of
the years shown, the relative importance to the business of L
APPENDIX A
913

1919
1924
1928
Organizing ability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supervision of subordinate executives
Labor management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management of plant, equipment, processes. . . . . . . . . . . . . . . . . . .
Purchasing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Creation of product demand. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplying market with product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
New product development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (specify):
- - - * * * * * - - - - s s a s - - - - e = * * * - - - - - - - - - - - - - s = e s - - - - * * * * * - - - - - e sº
- - - - * * * * * * - - - * * * * * - - - - - e =
* - - - - e º & s a
- - - - - - - - - -
- - - - - - 6 º' - -
- - - - - - 8 tº s -
* - - - - a s = e -
- - - - - - - tº 4 -
- * * * * * * * * *
- - - e s e s - - -
- - - - e s - - - -
* * * * * * * * * *
• * * * * > - - - -
* * * * * * * * * *
* * * * ~ * - - - -
• * * g e - - - - -
- * * * * * - - - -
• * * * * * - - - -
I. ORGANIZATION
A. Functionalization:
1. What instances have there been of positions or departments recently estab-
lished to perform staff or functional duties—rather than to exercise
executive or “lines” control—affecting either the entire concern or certain
divisions only, e.g., manufacturing., sales, accounting., etc.? (Describe
briefly the nature of functions in each case, give year established or dis-
continued.) -
2. What instances have there been of staff positions or departments recently
established to investigate problems or carry on research, submitting
findings, but purely advisory? (Indicate scope and place in organization
and give examples of more important researches. Give year established or
discontinued).
3. Who else (position, not name) in the organization in recent years has carried
on research, and in relation to what subjects?
4. What outside research agencies have been utilized, when, and how?
5. What use has been made of the results of your own and of outside researches?
B. Co-ordination:
1. Upon what means (or combination of means) do you chiefly rely for co-ordina-
tion? (e.g., one-man control; systematic interchange of information;
occasional conferences; staff positions; established committees; executive
committee replacing chief executive for control and co-ordination; organiza-
tion chart; standard practice instructions; others—describe).
2. Which of the foregoing have been used and discontinued recently, when and
why?
3. If committees are used, what are the functions of the more important ones,
when were they established and what departments are represented in
each case?
4. Indicate for organization charts and/or standard practice instructions, if
used—
(a) By whose authority are they issued?
(b) How and by whom are they kept current?
(c) Whether they define job duties and relations?
C. Executive technique:
1. What changes have occurred in recent years in personnel of major executive
positions? (Give positions and years, but not names).
914
RECENT ECONOMIC CHANGES
6.
7.
. How many persons have been promoted within past (give years) to important
. What special means are used to prepare or qualify employees for positions of
responsibility? (Briefly describe and give history).
. What outside sources for executive and expert talent have been found most
satisfactory? (Note especially recent experience and TREND).
(a) For immediate assignment (e.g., other companies; same or other business;
college faculties; etc.).
(b) Potential (e.g., college, business or technical graduates; others).
What methods of evaluating executive ability and performance have been
tried, and with what success or results? (e.g., tests, ratings).
What special methods of remuneration for executives have been tried, when,
and with what success or results? (Recent changes).
D. Preplanning and budgeting:
1.
2
8.
9.
10.
11.
12.
How, by whom, and when are major or “master” plans of the company
determined? (Note especially use of internal and external statistics).
Are you finding it possible (or advisable) to plan further in advance than
formerly? or are business conditions enforcing (or counselling) a shorter
planning interval?
. (If systematic budgets are prepared): In what year was budgeting begun?. . .
. Is the final budget determined in conference? or by the budget officer? or by the
chief executive? or otherwise? (specify).
. Are departmental budgets divided into controllable and uncontrollable
How are revisions effected?
Is the budget used as basis for loans from banks?
Do the banks require it?
What essential changes in your budget practice have been made in recent
years, when, and why?
E. Forecasting:
1.
2
3
:
To what statistical or forecasting services does the company subscribe.”
Who (positions, not names) receive the publications of these services, and how
are they used?
. Are the amounts of material purchased, or the amounts of inventory carried,
influenced in any regular way by the predictions published by such
services?
Has such influence in the past been generally helpful?
(If new buildings have been built since 1920) was decision to enlarge based
solely on evident growth of the business, or were you seriously influenced
as to the time of expansion by predictions of such services?
Did experience later show that it had been wise to rely on such statistical or
forecasting assistance?
APPENDIX A 915
II. MANUFACTURING
A. Purchasing:
1.
5.
6.
Who (position, not name) buys major materials?
2. Who buys minor materials?
3.
4. Which is your more usual practice: To seek competitive bids? To continue
What purchasing records are maintained and how used?
purchases from tested vendors? (TREND).
Which is your more usual practice: To split orders among several vendors? To
place orders with exclusive vendors? (TREND).
What methods have you adopted to help reduce sales expenses of your vendors?
(e.g., appointments with salesmen; increased use of annual contracts; repeat
orders placed by correspondence or by telephone; other—specify).
B. Inventory control:
1. What departments or executives are responsible respectively for the inventory
2.
investment in—
Do you have established maxima and minima”
How long have you used them?
How are they kept up to date?
C. Production management:
Planning—
2. Does it include routing, scheduling, despatching?
3. What important changes have there been in recent years in the functions
or organization of the planning department or in its relation to other
departments?
Recording and costing—
1. (If “standard costs” are used): How are standard costs established for—
(a) Direct labor?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(b) Indirect labor? . . . .
3. How are standard costs used? (e.g., fiacing selling prices; prompt deter-
mination of profit and loss; standard for department heads to work to;
other—specify).
4. Are actual (not standard) costs used as check against performance of
5. Are costs (actual or standard?) used to determine cost of idleness, thus
influencing contracting for extra work?
Material standards—
1. Are you—
(b) Making greater use of generally accepted trade standards?
If so, are they mainly standards approved by the United States
Bureau of Standards?
2. What new methods of testing materials have you adopted in recent years,
and what did they supplant?
916 RECENT ECONOMIC CHANGES
Processing standards–
1. What methods are now used in establishing quality standards?
2. What recent changes in such methods have been made?
3. In what cases (if any) have the possibilities of poor product been practi.
cally eliminated through improvements in method or equipment?
4. What means are used to maintain quality standards? (e.g., eacecutive
pressure; standard job instructions; financial incentives—what sort?
mon financial incentives—what sort? inspectors; automatic inspection.
TREND).
5. In what ways have you enlisted the co-operation of employees in waste
elimination ?
Maintenance—
3. Do you schedule (a) replacements? . . . . . . (b) maintenance?. . . . . . How 2
Quantity standards—
1. What methods are now used in establishing quantity standards? (e.g.,
analysis of past records; time study—over all? or elemental? ascertain-
ment of machine speeds; motion study; other—specify).
2. Is it customary, before establishing a quantity standard, to standardize
methods and/or equipment to reduce likelihood of delays or errors?
3. What recent changes in methods of establishing quantity standards
have been made?
4. What means are used to maintain quantity standards? (e.g., eacecutive
pressure; standard job instructions; financial incentives—what sort?
mon financial incentives—what sort? mechanical handling equipment;
other—specify. TREND).
D. Output:
1. To what extent has your product per employee-hour (or on other suitable
basis) increased or decreased in recent years?
2. What have been the major causes of this change in efficiency? (e.g., mechani-
zation; process changes; layout; simplification; production control; employees’
attitude; training; labor turnover; other—specify).
E. Technical changes (in manufacturing methods or equipment):
1. What have been the major reasons for recent technical changes? (e.g., to
offset high labor costs? to meet price competition? to meet quality competi-
tion? other—specify).
2. Which of the recent technical improvements resulted from continuous research
or experimentation to improve methods?
3. Are further improvements already developed awaiting expedient time for use?
4. Do you anticipate that future advances (i.e., in next decade or two) will be
more rapid? or equally rapid? or less rapid?
5. Do you anticipate that future increases in efficiency will result principally
from technical improvements and/or from better handling of “human
element,” or other causes? (specify),
F. Extent and fullness of operation:
1. Use of facilities—
(a) Has there been in recent years marked over-expansion of this company's
facilities? . . . . . . When 2. . . . . . For what purpose?
(b) Has there been in recent years marked over-expansion of the industry
through new or enlarged plants?. . . . . . When? . . . . . . Due to what
situation?
APPENDIX A - 917
(c) What increase in output would be possible for this company without
added facilities?
(d) To what extent are present idle facilities obsolescent? (Note whether
written off, if mentioned).
(e) When (approximately) were present idle facilities purchased?
(f) What are present normal working schedules (hours and shifts), and in
what respects have they changed materially in recent years?
(g) How would working two or three shifts affect costs? -
2. As a result of recent technical changes, approximately how many employees
were (and in what years)—
3. What classes of workers, as regards types of skill, were affected in each of the
ways indicated in the previous question? ,
4. How are those who were released from company now employed (if known)?
e.g., other industries in district, especially new concerns, retail or other
concerns, etc. -
5. What effects have recent technical changes had upon the type or period of
initial training required?
6. Has there been in recent years a marked increase in the proportion of jobs so
specialized as to involve practically no carry-over of skill? (Note
examples). -
G. Personnel practice:
1. Organization—Through what changes, as regards organization, function, and
relation to other departments, has the personnel department passed in
recent years, and what is its present status?
2. Employment technique— -
(a) Who (position, not name) is responsible for selection of new employees?
(TREND). -
(b) When and how have you altered recently your personnel standards?
(regarding, e.g., sex, age, race, nationality, citizenship, religion,
physique, education, marital status, union membership, other—
specify).
(c) Which of the following aids to selection have you found practicable,
and which have you tried and abandoned? (TREND).
Interview (who does?). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tests (what sort?). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (specify). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(d) Are labor turnover figures tabulated?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How often? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How refined is the analysis?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
How used?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Are data submitted to any outside agency for comparison with other
companies?. . . . . . What? (TREND). -
3. Vocational adjustment—
(a) In following up the progress of new employees, which of these are used:
performance records; attendance records; ratings; tests (what sort?);
medical eacamination; other? (specify). (TREND).
(b) What is the practice regarding transferring from job to job or from
department to department? (TREND).
918 RECENT ECONOMIC CHANGES
(c) What systematic practice for making promotions has been developed,
when put into effect? (Describe briefly).
(d) Are employees leaving interviewed, by whom, and for what purposes?
What exceptions, if any? (TREND).
4. Training and education—
(a) What are the organization and facilities, including relations with outside
agencies, for training or advancing the educational interests of
employees? (TREND).
(b) Which of the following training means do you use: Preliminary job
training; apprentice course (what trades or subjects?); classes—
company subjects; classes—general or cultural; foremen’s conferences;
executive training courses; “flying squadron;” special training of
college men; alien education; library; company publications; other?
(specify).
(c) Which of the foregoing have been tried and discontinued? . . . . . .
When 2. . . . . . Why?. . . . . .
5. Incentives—
(a) How are job or trade differentials (for wage rates and salaries) deter-
mined? (e.g., market; union scale; job classification based on job
study; job evaluation by some special method—describe).
(b) What are the prevailing types of rates? (e.g., time; piece, bonus or
premium; etc.) (TREND).
(c) Is an extra wage paid employees upon dismissal? (TREND). Under
what conditions?
(d) What special bonuses are paid 7 (e.g., annual; length-of-service; group;
etc.)
(e) What is the practice, and how altered in recent years, regarding pay-
ment for—
Overtime?
Absences?
Holidays?
Vacations?
Transportation?
Lunches?
(f) What financial rewards are offered for employees' suggestions, and with
what results? (TREND).
6. Separations—
(a) Age of retirement.
7. Wages.
8. Provisions for workers’ security—
(a) What has been done toward regularizing employment, when and how?
& g g tº g e What are the outstanding obstacles to regularization?
(b) What has been done along the lines of accident prevention?
(c) What studies have been made of fatigue and monotony ?
(d) What company provisions are there for insurance? (Include mention
of mutual benefit associations, insurance provisions of unions, and
indicate company's part in their support).
Pensions? formal? contributory? funded? actuarially sound? reinsured?
Savings plan?
Stock (or bond) purchase plan?
Others?
9. Services for employees—Which of the following have been provided and when
—social, athletic, recreational activities; employee magazine; store, or
APPENDIX A 919
special buying privileges; loan fund; credit unions? Which discontinued
10. Joint relations—
(a) Are relations between the management and employees based upon—
Supervisory contact only with individuals?
Occasional special committees (how composed and selected)?
Employee representation plan?
When established? (Note any comments as to its effectiveness).
Union agreement? (Note comments).
(b) In what respects have joint relations altered in recent years?
11. Personnel research—What special research has been conducted, when, and
how utilized? (e.g., tests for selection and placement; application blank data
correlated with performance; rating procedure; fatigue; health; accidents;
compensation methods; labor twrnover).
III. MARKETING
A. Selling:
1. Organization—
(a) What is the structure of your selling organization? (Brief description,
showing relationships within sales department and to other depart-
ments).
(b) What structural changes have occurred in recent years?
(c) What auxiliary or functional sales activities have been performed in
recent years by special divisions of the sales organization or desig-
nated individuals? (Note when each was established and when any
were discontinued, e.g., sales promotion, sales engineering, sales
counsel ſoutside], etc.) -
(d) To what extent, and when, in recent years, have you increased or
decreased the number of missionary salesmen as compared with
regular salesmen?
(e) In what respects and when have there been changes in policy respecting
employing sales engineers for designing and engineering service,
demonstration, or installation?
2. Personnel—What are your practices, and in what respects and when during
recent years have they changed respecting methods of
(a) Selecting salesmen?
(b) Training salesmen?
(c) Remunerating salesmen?
3. Sales control—
(a) In what respects, and when in recent years, have methods of routing
salesmen been changed? (e.g., respecting permitting salesmen to
choose own routes; length of trips; other—specify).
(b) In what respects, and when recently, have the sizes of sales territories
been altered?
4. Sales costs—
(a) What methods of analyzing costs of distribution have been adopted
recently, and with what results? (e.g., by classes of product; by
920 RECENT ECONOMIC CHANGES
classes of customers; by types of salesmen; by territories; others—
specify).
(b) What per cent of total sales represented direct selling expense in 1919?
in 1924? in 1928?
5. Advertising—
(a) In what respects, and when recently, have advertising methods been
changed with respect to media used, area (e.g., local, sectional,
national, international), type (e.g., institutional or product), etc.?
(b) What per cent of total sales represented advertising expense in 1919?
in 1924? in 1928?
B. Merchandising: -
1. In what respects, and when recently, have methods of co-ordinating sales with
production been changed? (e.g., appointment of merchandise manager;
merchandise committee—how composed? other—specify; briefly describe
present process).
2. Where is responsibility now placed for—
(a) Selection of products?. . . . . . Where previously?. . . . . . When changed 2
(b) Design of products? . . . . . . Where previously?. . . . . . When changed 2
(c) Pricing of products? . . . . . . Where previously?. . . . . . When changed 2
(d) scheduling production in relation to sales? tº a tº a tº s Where previously?
(b) What objectives? (e.g., setting quotas; allocation of Sales territories;
evaluation of competition; determination of proper sales channels;
other—specify).
4. (If distribution analyses are (or were) made)—
(b) What objectives? (e.g., discovery of new uses; reaction of market to
product; other—specify.)
5. Market—
(a) What per cent of your market is local? . . . . . . Sectional? . . . . . . National?
(b) What changes in policy respecting market areas have occurred in recent
years? When?
salers?... . . . . To chain store companies. . . . . . To individual retailers?
sº tº º º is e To individual consumers?... . . . . (through your own stores or
by canvassers). Other? (specify).
(d) What changes in policy respecting trade channels have occurred in
recent years? When?
(e) Do you face competition from concerns producing similar products?
from industries making substitute products?
(f) On what basis is a share of total business sought? (e.g., territorial
advantages; product advantages; varying price sector; other—specify).
(g) What special means are used to protect from competition? (e.g.,
patents; trade marks; brands; secret processes; other—specify).
6. Trade channels—
Wholesalers.
APPENDIX A
921
Small retailers.
Department stores.
Chain stores.
IV. OFFICE MANAGEMENT
A. Functionalization: (If there is an “office manager”): What are the major functions
(TREND).
B. Control: What has been done in recent years along such lines as layout?
of work? Job study? Salary classification? Standardization and simplifi-
cation of forms? Standard instructions? etc.
C. Mechanization: What types of office equipment have been—
and scope of authority of the office manager?
1. Recently installed.
2. Reoently abandoned.
(TREND).
Routing

Supplement
1919
1924
1928
Number of employees in production (direct labor). . . . . . . . . . . . . .
Number of employees in sales. . . . . . . .
Annual sales (index number) . . . . . . . . .
Product—physical volume (state unit)
• * - - - - - - - - - - - - - - - - - - - - - -
* * * * * * * s e - - - e s a e - - - - sº s = -
s & a 2 - - - e s º a tº a • * * * * * * * * * * *
* - e º m - - - * *
- - - - - - - - - -
• * * * * * * * * *
- * * * * - - - - *
* - - - - - - - - -
* - - - - e º 'º - -
* - - - - - tº s - -
* * * * - - - e º ſº
• * * * - - - - e s
• a s e º - - - a º
APPENDIX B
ECONOMIC MOVEMENTS IN THE UNITED STATES
TABLE 1.-INDExEs of PRICEs, 1922–1927
Average annual rate
Index of change (per cent)
Wholesale commodity prices:
Index of United States Bureau of Labor Statistics”. . . . . . . . . . . . . . . . . . . — 0.1
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.3
Farm products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2
Hides and leather products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.2
Chemicals and drugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Building materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.3
Textile products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 .. 5
House furnishing goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1, 5
Fuel and lighting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.7
Metals and metal products”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Clothing”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 .. 8
Raw materials (1923–1927). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Finished products (1923–1927). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Semimanufactured articles (1923–1927). . . . . . . . . . . . . . . . . . . . . . . . . — 4.8
Indexes for minor groups, United States Bureau of Labor Statistics:"
Foods—
Meats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5. 1
Butter, cheese, and milk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Other foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Farm products— -
Livestock and poultry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.5
Grains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.5
Other farm products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 2
Hides and leather products—
Boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.8
Leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Hides and skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Chemicals and drugs—
Chemicals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.6
Drugs and pharmaceuticals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Fertilizer materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Wholesale chemical prices (index of the Oil and Paint Reporter)—
Drugs and pharmaceuticals (40 drugs). . . . . . . . . . . . . . . . . . . . . . . . . . + 4.6
Essential oils (20 oils). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.7
Crude drugs (35 drugs). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2
Building materials—
Brick. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Structural steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.4
Portland cement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Composite lumber prices (indexes of the Lumber Manufacturer and
Dealer)—
Hardwood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.9
Softwood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Textile products—
Textile products, other than cotton, silk and wool. . . . . . . . . . . . . . . . + 6.0
Woolen and worsted goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 0.0
Cotton goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Silk and rayon. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.8
House furnishing goods—
Furnishings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Furniture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.
APPENDIX B 923
TABLE 1.-INDExEs of PRICEs, 1922–1927 (Continued)

Average annual rate
Index of change (per cent)
Fuel and lighting—
Anthracite coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Petroleum products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Bituminous coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.5
Coke. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5, 6
Miscellaneous—
Rubber, crude. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —H 16.8
Cattle feed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Paper and pulp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Metals and metal products—
Nonferrous metals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .9
Iron and steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1 .9
Agricultural products, at wholesale”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.7
Nonagricultural products, at wholesale”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Index numbers of the prices of raw materials and of manufactured goods
made from these materials (United States Bureau of Labor Statistics):b
Raw materials (27 price series) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 1
Manufactured goods (70 price series). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 8
Group index numbers, wholesale prices, of the National Bureau of Economic
Research:* |
Index numbers for major groups—
Agricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.0
Nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Foreign products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —H 3.4
Domestic products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4
Products of American farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.7
All other commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
All agricultural products, excluding rubber, processed textiles,
leather, and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 8
All other commodities (i.e., industrial goods). . . . . . . . . . . . . . . . . . . . — 0.9
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 4
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.0
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.9
Animal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 2
Cultivated vegetable products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.5
Mineral products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3. — 0.9
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 .. 6
Index numbers for minor groups— |
Agricultural products—
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . i + 0.7
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 1
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Producers' goods, raw . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 1.9
Producers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.6
Consumers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.8
Consumers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Foreign'. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.0
Domesticſ. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ! + 0.8
Nonagricultural products—
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . : — 0.9
0.
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
924 RECENT ECONOMIC CHANGES
TABLE 1.-INDExEs of PRICEs, 1922–1927 (Continued)

Average annual rate
Index
of change (per cent)
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.3
Producers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Producers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.2
Consumers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.8
Consumers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6.0
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Products of American farms—o •
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.2
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Commodities not products of American farms—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Agricultural products, excluding rubber, processed textiles, leather,
and shoes—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
All other commodities (industrial goods)—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.2
Raw materials—
Agricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 1
Nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . H 0.0
Commodities not products of American farms. . . . . . . . . . . . . . . + 1.7
Products of American farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.2
Agricultural products, excluding rubber, processed textiles,
leather, and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
All other commodities (industrial goods). . . . . . . . . . . . . . . . . . . . + 0.5
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.3
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.3
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.0
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 0.1
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.6
Cultivated vegetable products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3. 1
Animal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Mineral products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.3
Processed materials—
Agricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.3
Products of American farms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Commodities not products of American farms. . . . . . . . . . . . . . . — 1. 1
Agricultural products, excluding rubber, processed textiles,
leather, and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
All other commodities (industrial goods) . . . . . . . . . . . . . . . . . . . . — 1.2
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Animal products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.6
Cultivated vegetable products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.6
Mineral products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Forest products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Consumers' goods—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 3
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Agricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . 0.
APPENDIX B 92
TABLE 1.--INDExEs of PRICEs, 1922–1927 (Continued)
Index Average annual rate
of change (per cent)
Nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 7
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1. 0
Producers' goods—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Processed materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Agricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.3
Nonagricultural products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.9
Foods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.6
Nonfoods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.6
Foods—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.0
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.6
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
Producers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.0
Producers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1. 1
Consumers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.8
Consumers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4
Nonfoods—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Producers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.6
Consumers' goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Producers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Producers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8
Consumers' goods, raw. . . . . . . . . . . . . . . . . . . . . . . . ‘. . . . . . . . . . . + 0.8
Consumers' goods, processed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Animal products—
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.6
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Cultivated vegetable products—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3. 1
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.6
Mineral products—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.3
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Forest products—
Raw materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.6
Processed materials. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Prices of commodities at the farm:
Index of United States Bureau of Agricultural Economics. . . . . . . . . . . . . + 1 .. 1
Meat animals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6.6
Grain. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.3
Fruits and vegetables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.0
Dairy and poultry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.2
Unclassified commodities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.7
Cotton. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.5
Retail food prices:
Index of the U. S. Bureau of Labor Statistics. . . . . . . . . . . . . . . . . . . . . . • . + 2.4
Meats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.2
Cereals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.2
Dairy products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.2
Retail sugar prices, index, 51 cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.0
Retail coal prices, index, 51 cities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
926 RECENT ECONOMIC CHANGES
TABLE 1.-INDExEs of PRICEs, 1922–1927 (Continued)

Average annual rate
Index of change (per cent)
Cost of living:
Index of the United States Bureau of Labor Statistics. . . . . . . . . . . . . . . + 0.7
Food. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . } + 2.6
Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Fuel and light. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Housing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | 0.0
Furniture and furnishings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 0.6
* Clothing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.2
General price level:
Index of the Federal Reserve Bank of New York. . . . . . . . . . . . . . . . . . . . + 1 .. 5
Security prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9. 1
Wages. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 2.8
Food prices, retail. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.4
Equipment and machinery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Prices at the farm. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 1
Automobile prices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.9
Hardware prices, wholesale. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.3
Rents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Realty values. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Cost of living items other than food and rents. . . . . . . . . . . . . . . . . . . — 0.3
Transportation costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 5
Industrial commodity prices, at wholesale. . . . . . . . . . . . . . . . . . . . . . . — 1 .. 8
Building costs:
Building material prices (Bureau of Standards)—
Frame buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Brick buildings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Construction costs—
Index of construction costs, Engineering News Record. . . . . . . . . . . . + 1 .. 8
Index of construction costs, Associated General Contractors of
America. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.9
Factory building costs, Aberthaw Construction Co. . . . . . . . . . . . . . . + 1 .. 4
Indexes of costs, by building types—
Indexes of the American Appraisal Co.—
Brick building, wood frame. . . . . . . . . . . . . . . . . . . . . . . . . . . +- 0.9
Frame building. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.8
Reinforced concrete building. . . . . . . . . . . . . . . . . . . . . . . . . . § + 0.4
Brick building, steel frame. . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.2

APPENDIX B 927
Footnotes For TABLE 1.
* Unless otherwise noted, the index numbers of the United States Bureau of Labor Statistics which
have been employed in the present calculations are the revised measures, on the 1926 base. For the
purpose of the present computations, the revised sub-group index numbers have been carried back one
year to include 1922.
* Computed from unrevised (1913 base) index numbers of the United States Bureau of Labor
Statistics.
* Index numbers computed by the Bureau of Agricultural Economics and the Bureau of Labor
Statistics.
* These index numbers are those begun by the Federal Reserve Board, employing the data of the
Bureau of Labor Statistics, and carried through 1927 by the Bureau of Labor Statistics. The classifica-
tions are those of the Federal Reserve Board. The classifications are arbitrary, as pointed out by the
Bureau of Labor Statistics, “Index Numbers of Wholesale Prices on Prewar Base.” They do not
agree with the classifications employed in constructing the index numbers from which the measures
in the next section have been computed.
* The measures included in this section are based upon unpublished index numbers prepared by the
National Bureau of Economic Research. The data employed are the price quotations compiled by the
United States Bureau of Labor Statistics. The index numbers are unweighted geometric means of
relatives on the 1913 base. In certain cases the classifications of commodities upon which these index
numbers are based differ from the classifications employed in the construction of currently published index
numbers in which the same group names are used. This is true of the classifications of agricultural
and nonagricultural products, producers' goods and consumers' goods, raw materials and processed
materials. A complete account of the present classifications will be published by the National. Bureau
of Economic Research.
f The goods upon which these index numbers are based are of purely domestic origin and of purely
foreign origin (or practically so), in so far as consumption in the United States is concerned. Goods
coming from both domestic and foreign sources have been omitted.
9 Among products of American farms are included goods of which part of the American supply may
come from foreign sources. There is, thus, an important difference between this group and the group
of ‘agricultural products, domestic” which is listed on p. 923.
928 RECENT ECONOMIC CHANGES
TABLE 2.—CoMMODITY PRICEs, 1922–1927
Average annual rate of change in—
Commodity
Farm price Wholesale price
(per cent) (per cent)
Agricultural products, raw:
Grains—
Wheat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.8 a + 5.2
Wheat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . b -- 3.2
Rye. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.6 + 5.0
Barley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.8 + 4.2
Corn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.7 + 4.0
Oats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.2 + 2.7
Fruits and vegetables—
Potatoes, white. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 13.6 + 13.1
Sweet potatoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.5 + 3
Grapefruit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.0
Beans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1 — 5.8
Oranges. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.2 + 0.2
Apples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.3 – 6.6
Meat animals—
Hogs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.8 + 6.9
Calves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6. 1
Cattle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.9 + 4.5
Sheep. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.9 + 1 .. 5
Lambs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.5 + 1 . 0
Dairy and poultry products—
Butter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.7 + 1 .. 8
Chickens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.4 + 2.4
Eggs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.5 + 0.8
Milk. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.6 + 2.6
Cotton and cottonseed—
Cottonseed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.3 — 7.3
Cotton. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.5 * 0
Unclassified commodities—
Hay. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.7 — 2.7
Wool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2 — 4.1
Horses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 3 | . . . . . .
Flaxseed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5 — 2.7
Other agricultural products, raw—
Rubber, plantation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 16.4
Hides. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Sugar, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.0
Tobacco, leaf. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7. 1
Silk, raw. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.3
Agricultural products, processed:
Meats—
Pork, mess. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.5
Pork, fresh. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6.4
Beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.6
Lamb. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.9
Other products, processed—
Flour, wheat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.3
Leather, side chrome. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.2
Tobacco, plug. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Leather, glazed kid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Leather, sole union backs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 0.9
Silk, spun. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5

APPENDIX B 929
TABLE 2.—CoMMODITY PRICES, 1922–1927 (Continued)

Average annual rate of change in—
Commodity
Farm price Wholesale price
(per cent) (per cent)
Tobacco, smoking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.1
Sugar, granulated, index 51 cities. . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.2
Sugar, granulated, New York. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.0
Nonagricultural products, raw:
Tin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 13.9
Lead. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.3
Zinc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.5
Wood pulp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Anthracite coal”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Copper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Crude petroleum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.8
Silver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.7
Bituminous coal". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.5
Iron ore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.4
Pig iron. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7.3
Nonagricultural products, processed:
Zinc, sheet. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5. 2
Lead pipe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.5
Wrapping paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 3
Lubricating oil, paraffin. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 1
Fuel oil, Pennsylvania. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Kerosene. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.6
Copper wire. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 0.9
Brick". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Structural steel". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.4
Portland cement“. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Lumber". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.9
Steel billets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.0
Newsprint. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.8
Gasoline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.6
Coke". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.6
|
a Hard winter, Kansas City.
b Northern spring, Minneapolis.
* The rates of price change for this commodity have been computed from indexes secured by com-
bining price quotations from a number of markets or for a number of grades.
930 RECENT ECONOMIC CHANGES
TABLE 3.—PRODUCTION, 1922–1927°

- Average annual rate
Series of change (per cent)
Raw materials:
Minerals—
Žine. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.6
Copper, mine production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.4
ead . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.7
Crude petroleum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.4
Iron ore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.6
Bituminous coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.5
Anthracite coal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.3
Silver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Crops, production—
ax8660. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 11.3
otton. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.2
Barley. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.9
Rice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.5
Hay, tame. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.0
Wheat, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4
Spring wheat. . . . . * * * * * * * . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - + 1.3
Winter wheat. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0
Oats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Corn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1
Tobacco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.2
Potatoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.9
Apples. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.9
ye. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 13.3
Crops, total value”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.0
Animal products, marketings:".
ish. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.4
Milk, New Yrok. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.9
Poultry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.9
Wool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.5
Sheep. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
Cattle and calves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Eggs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Hogs. . . . . . . . . tº s e º 'º e s tº t e = * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * — 4.1
Forest products—
Gum (rosin and turpentine). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5. 3
Distilled wood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.7
Lumber. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.4
Pulp wood. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Manufactured goods:d
Chemicals, oils, etc.—
Petroleum refining—
asoline. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +17.3
Fuel oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.6
Lubricating oil. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6.7
Rerosene. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.2
Vegetable oils, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +12.1
Cottonseed oil—
Tude . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 16.3
Refined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +15.0
Cocoanut oil—
Refined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +12.3
Crude. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.5
Stone and clay products—
Cement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.5
Face brick. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.1
Tobacco—
Cigarettes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +12. i
Manufactured tobacco and snuff. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.9
Cigars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Metals, excepting iron and steel—
Blister-copper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.5
Tin, deliveries from port warehouses. . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.9
Iron and steel—
Machine tools, new orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 10.7
Steel sheets, production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.2
Foundry equipment, new orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.0
Steel ingots, production... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.3
Pig iron, production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.1
Iron ore, consumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.3
Steel castings, new orders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.7
Lumber products—Flooring, maple and oak. . . . . . . . . . . . . . . . . . . . . . . . . + 7.2
Foodstuffs—
Slaughtering and meat packing—
Calves slaughtered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.7
Sheep slaughtered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - - - - - + 3.3
APPENDIX B 931
TABLE 3.−PRODUCTION, 1922–1927a (Continued)
& Average annual rate
Series of change (per cent)
Cattle slaughtered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.5
Hogs slaughtered. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.7
eats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.3
Lamb. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.7
Beef. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.9
Pork. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.0
Animal fats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.4
Butter. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.9
Sugar meltings (raw cane sugar). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4
Wheat flour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.3
Milk, condensed and evaporated. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.8
Paper and printing—
Wood pulp-
hemical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.4
Mechanical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2. 1
Paper, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.2
Newsprint—
anada. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 14.1
United States. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 6
Other paper— -
Paper board. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6. 2
Book paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.6
Fine paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 5.6
Wrapping paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.2
Newsprint consumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.1
Textiles—
Cotton goods—
Cotton consumption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.8
Fine cotton goods, production, New Bedford. . . . . . . . . . . . . . . . + 2.9
Total spindle hours. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.0
Cotton cloth, exports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2
Active spindles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.7
Finished cotton goods, billings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.9
Woolens—
Wool machinery activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.7
Consumption of raw wool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.3
Carpet and rug loom activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.4
Wool receipts at Boston, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.1
Knit underwear, production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8
Silks—
Silk deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10.1
Silk loom activity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7. 1
Leather and leather products— — 0.2
Sole leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Upper leather—
Goat and kid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3
Calf and kip. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.5
Cattle. . . . . . . . tº º s e e & 6 s = * * * * * * * * * * * * * * * * * * * * is s a s e s s a s = e = * — 4.5
Boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.2
Coke production, total... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.5
By-product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 8.1
eehive. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 6.6
Vehicles for land transportation—
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 4.2
Trucks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 10.9
Passenger cars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.8
Locomotives completed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 10.8
Shipbuilding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.1
Miscellaneous— -
Tires, pneumatic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 10.0
Inner tubes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.3
Crude rubber consumption, total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 6. 3
Crude rubber consumption for tires. . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.4
Electric power production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 10.5
• Monthly and annual values of most of the series from which the following rates were computed
are published currently in the Survey of Current Business or in the Federal Reserve Bulletin. Full
descriptions of the several series, with statements concerning the sources, will be found in these
publications.
b Dollar value series.
...” of the series listed in the table dealing with distribution are here employed as indexes of
roduction.
p d The general grouping follows that employed by the Department of Commerce, but the constituent
items are not the same in all cases as those entering into the Department indexes.
932 RECENT ECONOMIC CHANGES
TABLE 4.—THE DISTRIBUTION OF Goods; SUPPLEMENTARY SERIES MEASURING
MARKETING Movements, 1922–1927
- Average annual rate of
Series
change (per cent)
Animal products, marketings (Indexes of Department of Commerce)a. . . . . . + 1. 1
Fish. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.4
Milk, New York. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 3.9
Poultry. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.9
Wool. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.5
Sheep. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
Cattle and calves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Pggs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.5
Hogs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.1
Crop marketings:
Cotton products. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 9.2
Fruits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.8
Vegetables. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.5
Grains. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.6
Other shipments and receipts:”
Silk deliveries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +10.1
Steel sheets, shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 7.6
Iron ore shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.9
Finished cotton goods, shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.1
Finished cotton goods, billings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.9
Total wool receipts at Boston. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.1
Domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 2.4
Foreign. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 12.0
Livestock movements—
Sheep and lambs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.7
Cattle and calves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0
Hogs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.5
Imports, individual commodities:
Hides and skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 6.4
Goat skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.3
Sheep skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.1
Calf skins. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5.1
Cattle hides. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . – 10.7
Cotton cloth. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 19.4
Exports, individual commodities: Cotton cloth. . . . . . . . . . . . . . . . . . . . . . . . . . . + 0.2
* Fish: Fish landings in Boston, Seattle, Portland, Me., and Gloucester. Milk: Receipts in Greater
New York. Poultry: Receipts of dressed poultry in New York, Chicago, Philadelphia, Boston, and
San Francisco. Wool: Receipts of domestic wool at Boston. Cattle and calves, hogs, sheep: Receipts
in 67 markets. Eggs: Receipts in New York, Chicago, Philadelphia, Boston and San Francisco.
* Deliveries of raw silk from principal warehouses in New York City, indicating approximate con-
sumption by mills. Compiled by the Silk Association of America. Published currently in the Survey
of Current Business. Iron ore shipments through Upper Great Lakes ports. The data from which
the measures for steel sheets, cotton goods and wool have been computed are published, and the sources
are described, in the Survey of Current Business. The data on livestock movements relate to receipts
at 60 or 70 markets. They are compiled by the Bureau of Agricultural Economics.
APPENDIX B
933
TABLE 5.—CoMMODITY STocks, 1922–1927°
Series
Average annual rate of
change (per cent)
Raw materials:
Nonfood materials, for manufacture—
Textiles—
Cotton—
Total world visible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total domestic. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other commodities—
Unmanufactured tobacco (including imported types) . . . . . . . . .
Wood pulp-
Mechanical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chemical. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Crude rubber, domestic stocks. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw foodstuffs—
Cottonseed. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Corn, visible supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Barley, visible supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Raw cane sugar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rice, domestic at mills and dealers. . . . . . . . . . . . . . . . . .* - - - - - - - - - - -
Wheat, visible supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Oats, visible supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rye, visible supply. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufactured goods:
Manufactured commodities, nonfoods—
Portland cement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Steel sheets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gasoline, stocks at refineries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lubricating oil, stocks at refineries. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Kerosene, stocks at refineries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gas and fuel oils, stocks at refineries. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Newsprint paper, stocks in United States and Canadian mills
Newsprint paper, stocks at publishers, United States. . . . . . . . .
Leather, upper, finished. . . . . . . . . . . . . . . . . . . . . . tº s º º e s - a s e s e e s a e º 'º e s e
Leather, sole and belting, finished. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Manufactured foodstuffs:
Vegetable oils, refined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cottonseed oil, refined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Animal fats. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sugar, refined. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Butter, cold storage holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Condensed and evaporated milk. . . . . . . . . . . . . . . . . . . . . . . . . . . . • - - - - - -
heat, flour. . . . . . . . . . . . • . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pork products, cold storage holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beef, cold storage holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lamb, cold storage holdings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
f
+
i
:
1
i1
Business.
* The series from which the present figures have been compiled appear in the Survey of Current
Details concerning the individual series will be found in that publication.
employed by the Bureau of the Census in the construction of indexes of commodity stocks have been
used in classifying the individual series, but it is not to be assumed that the indexes of the Census Bureau
are constructed from the series listed.
The groupings
934 RECENT ECONOMIC CHANGES
TABLE 6.-EMPLOYMENT, PAY Roll, AND PER CAPITA EARNINGS IN MANUFACTURING
INDUSTRIES, 1922–1927°
Average annual rate of change in
Industry Employ- Pay rolls Per capita
ment ( º cent) earnings
(per cent) p (per cent)
Lumber and its products:
Lumber, sawmills. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.1 — 0.7 +3.5
Furniture. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.4 +2.9 +2.5
Lumber, millwork. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.3 +0.6 + 1.9
Stone, clay, and glass products:
S8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 +3. 1 +3.5
Pottery. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 5 +4.6 +3.0
Brick, tile, terra cotta. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 +2.4 —H 2.8
Cement”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.3 — 2.2 + 1 .. 1
Iron and steel and their products:
Hardware. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.6 + 1.6 +4.3
Machine tools”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.8 +3.8 +3.0
Iron and steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.2 +3.0 +2.7
Foundry and machine shop. . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.3 +-0.9 +2.2
Structural iron work". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 + 1 .. 7 + 2. 1
Stoves. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.8 — 3.5 + 1 .. 5
Steam fittings, and steam and hot water heating apparatuse — 2. 1 — 0.8 + 1 .. 3
Cast iron pipe. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.8 — 0.8 0.0
Miscellaneous industries:
Agricultural implements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1. 1 +6. 1 + 5.0
Rubber boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0 +2.5 +3.5
Electrical machinery, apparatus, and supplies. . . . . . . . . . . + 1 .. 1 +3.7 +2.6
Shipbuilding, steel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.7 —H 3.2 +2.5
*ianos and organs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.9 + 1 .. 5 +2.4
Automobile tires. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3 +3.4 + 2.0
Paper and printing: -
Printing, book and job. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1.4 –H 4.1 +2.6
Paper boxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . | + 1.0 +3.4 +2.4
Paper and pulp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 + 1.9 —H 2.3
Printing, newspapers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +3.6 + 5.6 + 1.9
Food and kindred products:
Confectionery". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . –4. 1 — 1.8 +2.4
Ice cream”. . . . . * * * * * * * * * * * * * * * * * * * . . . . . . . . . . . . . . . . . . — 2.0 +0.2 +2.3
Baking”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 .. 3 +2.9 + 1.6
Slaughtering and meat packing. . . . . . . . . . . . . . . . . . . . . . . . — 3.. 6 — 2.5 + 1 .. 2
lour. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3.8 — 2.8 + 1.0
Sugar refining, cane”. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.0 — 1.7 +0.3
Chemical and allied products:
Chemicals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.3 +3.8 +3.5
Fertilizers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2 +2.7 +2.9
Petroleum refining. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +0.6 — 0.3 — 0.9
Vehicles for land transportation:
Car building and repairing, steam railroads. . . . . . . . . . . . . — 3.8 — 1 .. 7 +2.2
Carriages and wagons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.3 — 3. 1 + 1 .. 2
Car building and repairing, electric railroads. . . . . . . . . . . . — 2.3 — 1.5 +0.8
Automobiles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . +3. 1 +3.8 +0.7
Textiles and their products:
Hosiery and knit goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.2 +4.4 +4.6
Silk goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . + 1 . 0 +4.0 +2.9
Shirts and collars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.4 — 2.7 + 1 .. 8
Dyeing and finishing textiles. . . . . . . . . . . . . . . . . . . . . . . . . . +0.6 +2.5 + 1 .. 8
Millinery and lace goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 7. 1 — 5.6 + 1 .. 6
Cottom goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.7 — 1.0 + 1 .. 7
Woolen and worsted goods. . . . . . . . . . . . . . . . . . . . . . . . . . . . — 3. 1 — 2.3 +0.8
Clothing, women's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.6 — 4.3 +0.3
Carpets and rugs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 0.4 – 0.6 — 0.2
Clothing, men's. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4. 9 — 5.5 — 1.3
Tobacco products:
hewing and smoking tobacco and snuff. . . . . . . . . . . . . . . . — Z. 6 — 0.4 +2.2
Cigars and cigarettes... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4.9 — 5.0 — 0.1
Metal and metal products, other than iron and steel:
Brass, bronze, and copper products“. . . . . . . . . . . . . . . . . . . . — 0.9 — 0.7 +0.2
Stamped and enameled ware. . . . . . . . . . . . . . . . . . . . . . . . . . — 1.0 — 1.9 — 0.9
Leather and its products:
Leather. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.3 — 0.4 + 1 .9
Boots and shoes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 2.4 — 3.5 — 1. 1
• The data from which these rates have been computed were compiled by the United States Bureau
of Labor Statistics. The rates of change in employment and pay rolls were derived from the data as
compiled; the rates of change in per capita earnings were computed from the employment and pay roll
figures. Except where otherwise noted, the rates were computed from data for the period July 1922–
December 1927.
Series begins April, 1923.
* Series begins May, 1923.
* Series begins Sept., 1922.
* Series is for 1923–1927,
INDEX
Page references to Vol. II are in boldfaced type.
A
Accidents, industrial, causes, 143
prevention, 142, 525
Accounting, for sales expenses, 533
methods of costing, 510
railways, uniformity, 265
Acquisitions, (see Mergers, Consolida-
tions, and Acquisitions).
Advertising, (see Chapter V, Section 7).
by chain stores, 543
by construction industries, 233, 253
control of, 535
ethical standards, 420
improvement in quality, 419
in newspapers, 402
in magazines, 405
in trade journals and business papers,
411
Advertising expenditures, by commodity
groupings, 414
by types of mediums, 402
Agricultural depression, causes for, 550,
859, 879
Agricultural machinery, development of
power farming, 557, 881
installment sales, 397
Agricultural products, co-operative
marketing, 375, 378, 381, 383, 579
costs of distribution, 57.7
new uses developed, 595
postwar changes in sales volume, 636
prices, postward and prewar trend,
548, 607, 623, 630, 646
purchasing power of, 76, 548, 630
Agriculture, (see Chapter VIII).
development of large-scale farming,
566, 571, 575, 580, 592
exports in postwar period, 551, 860
financing and credits, 581
future of, 599
immobility, 588
Agriculture, improvements, factor in
overproduction, 555, 881
income, 76, 548, 774, 781, 882
mechanization of, 556, 557, 561, 569,
572, 575, 590, 881
overexpansion of, 550, 553, 859, 879
production, index numbers, 448
productivity per worker, 551, 881
use of child labor, 551
(See also Farm population).
Airplanes, commercial development, 323
Airports, development, 248
Alford, L. P., 96
American Construction Council, 252
Apartment houses, construction in post-
war period, 235, 239
Arbitration, railway wage disputes, 280,
281, 282, 283
Architectural designs,
fashions, 237
Artificial illumination, see
industrial.
Associations, business, growth in, 497
Automobile industry, changes in produc-
tion factors, 149
inventory control, 509
productivity per worker, 459
real earnings of workers, 14
Automobiles, cost of operation, 74
exports, 715, 716
fashion changes, 323
increasing use of, 52, 59, 323, 338
influence on construction industry,
226, 236, 254
influence on demand for
products, 323
influence on food consumption, 28
influence on shifts in trading areas, 336
installment sales, 391
ownership by farmers, 75
retail sales terms, 61
types of purchasers, 59
(see also Motor vehicles).
changes in
Lighting,
other
935
936
RECENT ECONOMIC CHANGES
Automobiles and equipment advertising
expenditures, 416
B
Baking industry, operating costs, 189,
191
Balance of trade, correspondence of
commodity trade with foreign
credits, 744, 751
Balance of international payments of the
United States, 736
Bank clearings, index of, prewar and
1924–27, 904
Bank credit, increase in, 664, 675
influence of Federal Reserve System,
697
relation to commodity prices, 675, 677,
679, 697
Bank failures, 693
Bank investments, growth 1875–1928,
664
Bank loans, growth 1875–1928, 664
for corporation financing, 664, 681
interest rates, 659
rural, 581
(see also Loans).
Bank reserves, effect on financial situa-
tion, 677
increases since 1922, 667
Bankers’ acceptances, interest rates, 659
Banking, change in organization and
practice, 690
Banks, farm-loan, growth in South, 336
growth of branch and chain banking,
690
income and its distribution, 775, 802
influence on business management,
504, 684
reduction in number, 690
Bankruptcies (see Failures, business).
Birth control, 845
Birth rate, decline, 425, 429, 845, 884
Bonds (see Securities).
Branches, increase in, banks, 690
industrial plants, 209, 718, 751
(see also Chain stores).
Brands, use by chain store companies,
543
use on building materials, 233
Bridges and tunnels, increase in con-
struction, 248
British coal strike, 1926, 311
Brokers’ loans, 686
Budgeting, for business management,
503
Budgets, family, 15, 51, 71, 74, 78
Building (see Construction).
Building materials, changing fashions,
237, 242 -
monthly purchases charted, 231
nationally advertised brands, 233, 253
Building and loan associations, assets,
673
growth of, 227
Business activity, general, index of,
prewar and 1924–27, 902
Business cycles, comparison of prewar,
war, and postwar cycles, 891, 900
cyclical declines in cycle 1924–27, 900
duration and amplitudes, measure-
ment, 890, 891, 894
indexes of economic series, 902
influence of Federal Reserve System.
703
reduction in fluctuations, 890, 909
reflected in prices, 616
relation to size of industry, 203
(see also Business fluctuations).
Business fluctuations, after 1922 and
before, similarity, 9
conditions in 17 countries in postwar
period compared, 855, 858
indication of economic maladjust-
ments, 11
random, relation to size of industry,
200 -
(see also Business cycles).
Buying habits, changes in, after World
War, 321
shift of retail trade from small to large
centers, 331
By-products, farm, development of uses,
595
industrial, elimination of waste, 123
C
Call money rates, (see also interest rates)
657, 731
Candy trade, increase in chain stores, 365
Capital funds, accumulation of, 672, 679
construction influenced by supply of,
226
effect of Government debt reduction,
679
for corporation financing, preferred to
bank loans, 664, 681
INDEX
937
Capital investment, railways, changes in,
264
Carpets and rugs, increase in output of,
56, 69
Cement manufacturing,
production factors, 152
Censuses, Government, faults in, 29
Cereals (see Grain).
Chain banks, 690
Chain stores, brands, use of, 543
development of, 362
effects on small retailers, 538
encouraged by shifts in trading areas,
341 e
management of, 542
sales of compared with unit store
sales, 362
Charities, expenditures for, 18
Child labor, on farms, 551
City planning commissions, growth in,
230
Clocks and watches, advertising expendi-
tures, 419
Clothing, (see Wearing apparel).
Coal industry, anthracite, wages, 443
bituminous, wage rates, 440
Coastal trade, increase in ships' tonnage,
315
Collateral loans, (see also Loans), 682
Commercial construction, (see also
Construction), 102, 136, 240
Commercial paper rates, (see also Interest
rates), 643, 657, 907
Committee on national debt and taxa-
tion, England, 22
Committees, as a factor in business
management, 500
Commodity prices, (see Prices).
Common stocks, (see Securities).
Commons, John R., Director's footnote,
758
Communication systems,
influence on industry, 91
number of employees, 476
(see also Public utilities; Transporta-
tion).
Company stores, 529
Company union, (see Employee repre-
sentation).
Consolidations (see Mergers and Con-
solidations).
changes in
accelerating
Construction (see Chapter III).
as aid to stabilization of business, 219
changes in demand, causes, 225
costs, postwar trend, 638
effect on prosperity and unemploy-
ment, 220
financing of, 227
hours of work, 444
improvement in standards, 65, 233, 237
income and its distribution, 775, 794
number of workers, 477
stabilization of, 220, 225, 230, 232, 234
243
union wage rates, 434, 436
volume of, 63, 102, 136, 219, 221, 223,
229, 235, 239, 243, 248, 638
(see also Building materials; Com-
mercial construction; Housing
construction). .
Consumers' Co-operative Societies, 389
Consumers' goods, distribution, changes
in methods, 361
growth of selected industries, 53
prices, postwar trend, 629, 646
prices, prewar trend, (see also Prices),
624, 646
Consumption, an index of standard of
living, 24
Co-operation, between business enter-
prises, 865
between department stores, 541
in construction industries, 252
railways and shippers, 301
Co-operative buying, by wholesalers and
retailers, 373, 537, 539
Co-operative marketing, appraisal of
achievements, 389, 579
cotton, 384
dairy products, 375
fruits and vegetables, 378
grain, 381
growth of associations, 374
livestock, 383
tobacco, 386
wool, 385
Copeland, Melvin T., 321
Copeland, Morris A., 757
Corn farming, mechanization of, 569
Corporation farming, growth of, 592
Cost of living, food, 49
measurements of, 22
postwar and prewar trends, 625, 632,
646
938
RECENT ECONOMIC CHANGES
Cost of living, (see also Prices; Real
income; Standard of living).
Cost of operation, department stores, 370
departmentization, 533
farming, decreased by machinery, 563,
566
labor, 102, 445
marketing, 421
merchant shipping, 311, 312
railways, changes in, 292
ratios for production and sales costs,
534
reduction caused by increased effici-
ency in production, 867
relation to size of industry, 188
trend of prime cost since 1899, 102
unit costs, reduction in, 87, 104, 867
Costing, methods and uses, 510
sales, methods of, 533
Cotton, co-operative marketing, 384
trend of exports, 714
Cotton farming, mechanization of, 572
Cotton manufacturing, depression caused
by shifts in demand, 326
Country stores, shift in trade to larger
centers, 331
Credit, bank, increase in, 664, 675
rural, 581
(see also Foreign credits; Loans).
Credit unions, development of, 528
Cunningham, William J., 255
D
Dairy products, changes in consumption
of, 36
co-operative marketing, 375
Demand, consumer, changes in, 30, 80,
321, 551, 875, 879
(see also Standard of living).
Demand deposits, bank, reductions in,
669, 676
Dennison, Henry S., 495
Department of Commerce, simplification
program, 89, 116
Department stores, effects of chain store
development, 369
growth of chains, 367
installment sales, 399
management of, 539
operating expenses, 370
sales and inventories compared, 354
Depression, agricultural, causes, 550
crisis of 1920–21, 849
(see also Business cycles; Business
fluctuations).
Diet, changing content of, 30
Directors' footnotes, Commons, John R.,
758
Laidler, H. W., 389, 390, 758
May, George O., 744, 778
Rorty, M. C., 627, 677, 864
Soule, George, 268, 279, 282
Discharge, employees, process of, 522
Distribution channels, changes in, 361
selection, 537
(see also Marketing).
Diversification, of industry, by localities,
215
of products, need for simplification, 88
Dividends, changes in rates, 608, 642, 657
distribution by industry groups, 777
proportion of national income, 772
railways, 298
relation to wages, 769
Division of labor (see also Mechaniza-
tion), 86
Drug trade, growth of chains, 365
Dry goods trade, growth of chains, 367
E
Economic goods, classified as consumers'
goods and industrial goods, 397
Economic tendencies, prewar, war, and
postwar, 607, 634, 644
(see also A Review), 841
Education, expenditures for, 16
increase in school enrollment, 470
Educational buildings, increased con-
struction, 249
Efficiency, hardships caused by, 555, 867,
881
(see also Operating Efficiency).
Electric power, (see Power).
Electrical appliances, advertising expen-
ditures, 418
growth in use of, 56, 324
(see also Standard of living; Housing
standards).
Electrification, industrial, 125
rural, advance in, 576
Employee representation, development
of, 484, 529
in department stores, 542
INDEX
939
Employee savings, plans for encouraging,
527
Employee stock ownership, growth of,
488, 527
Employment, building labor, by months,
231
decrease in volume, 608
development of personnel work, 517,
541
factory, index of, prewar and 1924–27,
902
postwar trend, 639
number of workers, agriculture, 452
mercantile, 471
professions, 472
public, 471
specified industries, 450, 460, 473
selection, training, promotion and
discharge, 518, 541
stability and instability, 462, 465, 524
(see also Labor; Unemployment).
Engel’s Law, 51
Ethics, business, improvements in stand-
ards, 11, 496
Excess-profits tax, 535, 854
Executives, changes in technique, 502
methods of payment, 503
Export trade, effect of foreign credits on,
734, 752, 849
Exports, changes in commodity content,
713, 750
changes in geographic distribution, 709
in volume and amount, 636, 709,
750, 857
decline in agricultural exports, 551, 860
increase in postwar period, 849
index of, prewar and 1924–27, 905
F
Factory standards, improvement in post-
war period, 244
Failures, business, banks, 693
postwar period, 642, 693, 854, 874
“Fair return,” railways, 294
Farm-loan banks, growth in South, 336
Farm loans (see also Loans), 581
Farm population, condition in postwar
period, 547, 879
classification of, 71
family budgets, 71, 74
income, 76, 774, 781, 882
movement to cities, 72, 226, 471, 593,
880
Farm population, purchasing power, 76,
548, 630
standards of living, 70
(see also Agriculture).
Farm products (see
products).
Fashions, shifts in demand caused by, 326
Fatigue, industrial, 525
Federal Aid Highway Act, 1916, 246
Federal Aid highway system, 232
Federal land bank system, 691
Federal Reserve System, influence in
1920–21 crisis, 452
influence on bank credit, 697
on business cycle, 703, 899
on gold movements and inflation,
696
on interest rates, 659, 663, 702
on international monetary stability,
700
on stock exchange operations, 688
on time deposits, 669
Finance companies, automobile, 391
influence on installment selling, 401
Financing, agricultural, development of,
581, 584
construction, 241
corporation, 664, 681
railways, 264
(see also Banks;
credits; Loans).
Flour milling, changes in production
factors, 158
operating costs, 191
Fluctuations (see Business fluctuations).
Food consumption, changes in American
diet, 30
declining per capita requirements, 27
Food products, increasing food cost of
living, 49
advertising expenditures, 417
public regulation, 48
(see also Agricultural products).
Forecasting services, use in management,
505
Foreign competition,
products, 552, 568
Foreign conditions, effect on domestic
prosperity, 856, 868
Foreign credits, compared with move—
ments of foreign trade, 744
dominance in balance of international
payments, 737
Agricultural
Credit; Foreign
in agricultural
940
RECENT ECONOMIC CHANGES
Foreign credits, effect on American busi-
ness, 733
effect on export trade, 680, 734, 752,
849
(see also Foreign investments; Foreign
loans).
Foreign credits and foreign markets (see
Chapter XI).
Foreign investments, amount of, 725
effect on financial situation, 680
influence of interest rates, 731
publicly floated capital issues, 730
reasons for increase in, 731
(see also Foreign credits;
loans).
Foreign loans, amount of, 725
by Federal Reserve banks, 700
(see also Foreign credits; Foreign
investments; Loans).
Foreign markets and foreign credits (see
Chapter XI).
Foreign trade, compared with foreign
credit movements, 744
Foreigners’ investments, in United States
amount of, 727
Forward buying (see Hand-to-mouth
buying).
“Free gold,” 670
Free income, public expenditures for
social services, 15
Free trade, 2
Freight car performance, 286
Freight rates, changes in, 274
factor in location, 215
shipping cargo, 310
Freight train performance, 288
Fruits, car-lot shipments, 1920–1928, 45
change in consumption of, 43
co-operative marketing, 378
Fuel, consumption, improved efficiency,
79, 130, 289
pulverized coal installations, 133
(see also Coal industry).
Functionalization, business organization,
498
chain store companies, 542
department stores, 539
marketing, 330, 498, 532
personnel management, 517
production planning, 509
Furniture, increase in output of, 69
installment sales, 393
Foreign
Furniture and house furnishings, adver-
tising expenditures, 418
Futures, canned goods, decline in sales
and purchases, 349
G
Gay, Edwin F., 1
General merchandise stores, tendency
toward specialization, 340
Gold movement, effect on prices, 740
imports and exports, 667, 670
influence of Federal Reserve System,
696
to adjust trade balances, 741, 747
Government operation, railways, 257, 275,
279, 303
Government ownership,
merchant marine, 313
Government regulation, construction, 235
food products, 48
rates in intercostal trade, 317
Governments, income derived from and
its distribution, 774, 807
Grain, co-operative marketing, 381
decline in American exports, 551
in per capita consumption, 31
Gregg, E. S., 309
Gries, John M., 219
Grocery trade, increase in chain stores,
363
Group buying, (see Co-operative buying).
American
H
Hand-to-mouth buying, changes in
volume for specified industries, 344
effects, 349
history, 344
measured by volume of unfilled orders,
344
Handicraft callings, decline in, 84
Hardware and cutlery, advertising
expenditures, 418
Hard-surfaced roads, increased mileage,
338
Hazards, industrial, provision for protec-
tion of employees, 524
(see also Accidents; Unemployment).
Health, public expenditures for, 17
Heating systems, residential, advertising
expenditures, 418
improvements, 324
INDEX
941
Hoch-Smith Resolution, 578
Home ownership, 237
Horse power, measurements of industry
in terms of, 175, 456
(see also Power).
Hospitals and institutions, improvements
in, 19, 250
public expenditures for, 18
Hours of work, building trades, 444
changes in, 103, 445, 847
farming, 551
Household appliances, increase in use,
56, 68, 239, 324
Housing construction, (see also Construc-
tion; Housing standards), 63, 235
Housing standards, improvements in
architectural design, 237
improvements in construction, 65,
233, 237
sanitary equipment, 66, 238
telephones and electric wiring, 68
(see also Construction; Housing
construction).
I
Idle plants, value as index to industrial
change, 84
Immigration, changes in, 428
occupations of immigrants, 429
decline for United States, 427, 884
distribution by sexes, 428
index of, prewar and 1924–27, 906
Origin changes, 428
restrictive legislation, 426
Immigration restriction, effect on cotton
farming, 573
effect on dietary standards, 27
on food consumption, 27
on labor supply, 252, 324, 426
On Settlement of undermanned
regions, 569
On stabilization of
increases, 226, 254
on wages, 324, 886
Imports, bananas, 46
changes in commodity content, 725,
750
in geographic sources, 719
in volume and amount, 636, 718,
750, 857 -
index of, prewar and 1924–27, 905
population
Income, distribution of,
theory, 781, 785, 790
employees’, distribution by industry
groups, 777
farmers', 76, 548, 882
free, public expenditures for social
services, 15 -
money income and disbursed income,
758, 889
railroad workers, 464
real earnings, 14, 770, 848, 862
workers in manufacturing, 92,463, 639
in printing industry, 93
Income, net corporate, decline in 1920–21
depression, 853
railways, changes in, 294
relation to integration in petroleum
industry, 194
to size of company in flour milling,
191
to size of company in petroleum
industry, 192
(see also National income).
Industrial disputes, decrease in number,
490
(see also Labor relations, Strikes).
Industrial goods, replacing classification
as producers’ goods, 397
Industrial waste, (see Waste, industrial).
Industry, changes in new and old (see
Chapter II).
Inland waterways, 317
Installment sales, automobiles, 61, 391
department stores, 399
farm machinery, 582
increase in retail volume, 390, 398
Insurance, life, growth, 485
Insurance, workers’ form and extent,
485, 526
Integration, in agriculture, 580
in petroleum industry, 194
Interest and commission, paid to for-
eigners, 728
received from foreigners, 728 -
Interest payments, distribution by indus-
try groups, 777
postwar trend, 642
proportion of national income, 772
Interest rates, amounts and movements,
657
effect of Federal Reserve System in
stabilizing, 702
on construction, 227
productivity
942
RECENT ECONOMIC CHANGES
Interest rates, funded debt, railways, 298
in money centers, 731
increased stability, 662, 703
postwar trend, 643
(see also Dividends).
International trade (see Chapter XI).
Inventions, effect on economic progress,
843
Inventories, effect of hand-to-mouth
buying, 350
manufacturers’ sales and inventories
compared, 356
postwar period, 637
railways, reduction in size, 291
reductions in, by improved railway
service, 302, 343, 350
in, effect on bank borrowings, 664
retail sales and inventories compared,
352
wholesale sales and inventories com-
pared, 354
Inventory control, 350, 508
Investment trusts, development of, 688
Investments (see Capital funds; Capital
investment; Employee stock owner-
ship; Foreign investments; Securi-
ties).
Iron and steel, blast furnace operations,
154, 190
increase in production in steel industry,
79
J
Jewelry, advertising expenditures, 419
installment sales, 396
R
Rimball, Dexter S., 79
L
Labor (see Chapter VI).
average per capita income, 771
changes in type of farm labor needed,
590
division of, 86
income by industry groups, 777
prewar and postwar trends, 625,
632, 639, 770
railroad workers, 464
management of, 517
Labor, number of workers, agriculture,
452
general, 101, 167
mercantile, 471
professions, 472
public, 471
specified industries, 450, 460, 473
productivity of, 446, 850, 862, 864, 881
proportion of national income received,
766, 788, 792, 795, 798, 802, 805,
807, 809
transfer of skill, 86, 92
workers’ insurance, 485, 52
(see also Employment; Hours of work;
Immigration; Unskilled labor;
Wages).
Labor costs, changes in, 445
Labor relations, employee representation,
484, 529, 542
improvements in as a cause of Ameri-
can prosperity, 5
in building trades, 251
railways, management and labor, 279
Labor-saving machinery and equipment,
improvements in construction
machinery, 234, 242, 247
installations for material handling, 139
paint spraying, 328
time-saving element, 90
use by farmers, 553, 556, 557
(see also Mechanization).
Labor supply, effect of immigration,
252, 324, 426
factors affecting, 425, 429
Labor turnover (see Employment; Unem-
ployment).
Labor unions, coal industry, 439, 443
company unions, 484
economic policies, changes in, 481, 864
growth and decline, 479
membership by trades, 437, 482
railway shopmen’s strike, 281
railway wage disputes, 280
union-management co-operation, 6,
482, 531
Laidler, H. W., Director's footnote, 758
Land values, decline in, 584, 587
Large-scale production (see Size of
industry).
Leasing, departments in department
stores, 540
Leather products, changes in output, 55
INDEX
943
Leather tanning, changes in production
factors, 159
Libraries, expenditures for 17
Lien merchants, decline in credit to
farmers, 336
Life insurance company, assets, 673
Lighting, industrial, codes, 144
increase in intensities, 143
relation to production, 143
Livestock, co-operative marketing, 383
Loans, bank, 581, 659
brokers’, 686
collateral, 682
farm, 581
foreign, 700, 725.
Location of industry, decline in geo-
graphical concentration of specified
industries, 214
establishment of foreign plants by
- American industry, 718, 751, 753
geographical shifts, 206, 876
headquarters and branch plants, 209
influence of freight rates, 215
of Panama Canal, 316
shift from city to country, 210, 590
Locomotive performance, improvement
288
M
McFadden Act, 227
Machinery, exports, 715, 716
improvements in roadbuilding and
engineering equipment, 234, 242,
247
increased use in manufacturing, 103,
137
power plants, changes in, 91, 129
purchasing policy for manufacturing
equipment, 138, 511
use by farmers, 553, 556, 557, 881
Magazines, advertising rates, 407
circulation, 406
volume of advertising carried, 405
Mail-order business, 341, 371, 372
Management (see Chapter VII), 495
changes in type of executives, 502
improvements in, 11, 497, 862
of manufacturing, 507
of marketing, 531
organization, 497
use of committees, 500
Manufactures changes in consumption of,
51 -
production, index numbers, 448
Manufacturing, comparison of activity
among states, 206, 591
differences between urban and rural,
212
employment and pay-rolls, 463, 639
income and its distribution, 775, 790
migration of, 206
number of workers, 450, 452, 454, 456,
460, 478 -
number of workers,
distribution, 206
productivity, by industries, 456
per worker, 451
technical changes in (see Chapter II,
Part 2).
(see also Size of industry).
Market analyses, development of, 536
Marketing (see Chapter V).
changes in costs, 421
management of, 531
of farm products, 57.7
(See also Co-operative marketing).
use of functional specialists, 330, 498,
532
(see also buying habits; Co-operative
marketing; Demand; Merchandis-
ing; Sales promotion).
Material-handling equipment, 139
Materials of manufacture, increase in
total value, 102
May, George O., Director's footnote, 744,
778, 854
Meat, changes in consumption, 33
decline in American exports, 552
Meat packing and slaughtering, changes
in production factors, 158
Mechanization, difficulty of measuring,
461
effect on prices, 627
on wages, 483
of farm work, 553, 556, 557, 881
Substitution of machine for hand-made
products, 52
(see also Labor-saving machinery;
Power).
Mediation (see Arbitration).
Merchandising, changes in products after
World War, 322
(see also specific commodities).
definition, 330
geographical
944
RECENT ECONOMIC CHANGES
development as a marketing function,
328, 330, 535
Merchant marine,
tonnage, 313
Merchant shipping, surplus tonnage, 309
Mergers, and consolidations, effect on
earnings, 190
increase in, 217
railways, 299
trend in manufacturing and mining,
181
(see also Size of industry).
Migration of industry, branch plants, 209,
718, 751
from city to country, 210, 590
geographically, 206, 876
to foreign countries, 753
Mills, Frederick C., 603
Mining, income and its distribution, 775,
786
number of workers, 451, 452
productivity per worker, 457
(see also Coal industry).
Missionary salesmen, 414
Mitchell, Wesley C., 841
Monetary stability, effect of Federal
Reserve System, 700
Money and Credit, effect on business
(see Chapter X).
Mortality and morbidity rates, a factor
in food consumption, 27
an index of standard of living, 23
decline in, 23, 27, 430
Mother's pensions, 18
Motor vehicles, effect on railways, 272,
273
(see also Automobiles).
Multiple-plant companies (see Size of
industry).
Musical instruments, advertising expend-
itures, 419
government-owned
N
National Bureau of Economic Research,
objects of present survey, 12
National income and its distribution,
(see Chapter XII).
National income, amount and growth of,
757, 762, 838
compared with income of United
Kingdom, 764
with index of commodity production,
761
National income, definitions of, 757
distribution by census regions, 813, 838
by income strata, 833
by industry groups, 774, 838
by labor and property groups, 766
by rents, interest, and dividends, 772
equality of distribution, 836
New industries, growth of, 85
(see also New products).
New processes, developments, 111
New products, developments, 111, 322
(see also Demand, consumer).
New York Stock Exchange, 684, 688
Newspapers, advertising rates, 404
circulation, 403
volume of advertising carried, 403
Nourse, Edwin G., 547
O
Obsolescence, housing, 65
merchant ships, 310
products or trades, 83
reciprocating steam engines, 129
Office management, 543
Oil and gas wells, analysis of income, 786
(see also Petroleum industry).
Oleomargerine, consumption in various
countries, 40
Operating efficiency, railways, 285
(see Cost of operation).
Operating revenues, railways, changes in,
292
Organization, internal,
changes, 330, 497
(see also Functionalization; Manage-
ment).
Overproduction, of agricultural products,
553, 577, 859
Overcapacity, in American industry, 321
326, 513
types and
P
Paints and varnishes, advertising expend-
itures, 418
Panama Canal, effect on domestic trade
and location of industry, 316
influence on American shipping, 315
Panics, (see Business cycles; Business
fluctuations).
Paper and wood pulp, changes in produc-
tion factors, 162
INDEX
945
Pay rolls, manufacturing, postwar trend,
639
Pens and pencils, advertising expendi-
tures, 419
Pensions, industrial, 526
mothers’, 18 -
Personnel management, development of,
517, 541
Petroleum industry, changes in produc-
tion factors, 150
increase in production, 451
integration, relation to profit, 194
scale of operation, relation to profit,
192
Phonographs, installment sales, 394
Pianos, installment sales, 393
Pig iron industry, changes in production
factors, 154
index of production, prewar and 1924–
27, 903
Planning, business activities, 503, 509
construction improvement, 230, 244
Plant location (see Location of industry).
Plumbing equipment, advertising ex-
penditures, 418
Population, birth rate, decline, 425, 429,
845, 884
changes in age and sex distribution, 27
economic consequences of decline in
rate of growth, 885
growth and distribution, 842, 845, 846
mortality rate, decline, 23, 27, 430
movement between farms and cities,
72, 226, 471, 593, 880
relation to labor supply, 425, 429
restricted immigration, effect, 226, 254,
425, 429, 884
Post offices, reduction in number of
fourth class, 336
Poultry and eggs, changes in consump-
tion, 35
Power, increased use of, 79, 91, 102, 104,
119, 204, 250
industrial changes in utilization, 119
Power farming (see Agriculture, mechani-
zation of). -
Power plants, increase in use of central
station power, 119, 127, 244
types and efficiencies of machinery, 91,
129 -
(see also Public utilities).
Price and profit, response of industry to,
780, 783, 787
Price fixing, by Federal Government, 859
Price movements and related industrial
changes (see Chapter IX).
Prices, agricultural products, causes for
low level, 550
agricultural products, prewar and
postwar, 548, 607, 623, 630, 646
changes in relations, postwar and pre-
war, 649
collusive control in construction indus-
tries, 253
commodity, postwar and prewar trends
and comparisons (see Chapter IX).
relation to bank credit, 675, 677,
679, 697
relation to savings, 675, 677
consumers’ goods, prewar and postwar,
624, 629, 646
factors preventing increases, 678, 697
fluctuations, postwar and prewar, 609,
614
increasing margin between producers’
and retail prices, 49
measures of price displacement, 650
processed materials, prewar and post-
war, 624, 631, 646
producers’ goods, prewar and postwar,
624, 629, 646
raw materials, prewar and postwar,
624, 631, 646
reductions caused by increased effi-
ciency, 867 -
securities, causes and effects of increase,
686
indexes for selected industries, 196
postwar trend, 607, 643 º
wholesale, international comparisons.
603, 868 *
wholesale, postwar and prewar trend,
851, 903
(see also Chapter IX).
Printing industry, workers’ earnings, 93
Processed materials, prices, postwar
trend, 631
Producers’ goods, growth of selected
industries, 53
prices, postwar trend, 629, 646
prices, prewar trend, 624, 646
Production, basic economic principles of,
86
interchangeability of parts, 90
management, of, 507
946
RECENT ECONOMIC CHANGES
Production, physical volume, changes in
for selected industries, 37, 39, 45, 53,
68, 101, 448, 456, 607, 635, 850
physical volume, index of, 761
scale of, in terms of horse power, 175
in terms of wage earners, 168, 170,
178
in value of products, 168
relation to costs, 188
small scale required in certain indus-
tries, 188
Production cycles, trend toward in steel
industry, 206
Production factors, changes in
Chapter II, Part 2).
Production Standards, maintenance of
uniform output, 510
Productivity of equipment, railways, 290
Productivity per worker, attitude of
labor organizations, 864
changes in, general, 103, 447, 461, 512,
852, 862
specified industries, 147, 451
method of deriving, defects, 447, 460
Professional service, number of workers,
472
Profits, cargo shipping companies, 310
corporations, distribution by industry
groups, 778
corporations, postwar trend, 607, 640
individuals, distribution by industry
groups, 779
reduction caused by increased effi-
ciency, 867
relation to integration in petroleum
industry, 194
to scale of operation in flour milling,
191
to scale of operation in petroleum
industry, 192
(see also income; National income;
Prosperity).
Prohibition, influence on product con-
sumption, 39, 42, 47
Prosperity, affected by volume of con-
struction, 220
causes for in United States, 1, 861
interdependence of nations and indus-
tries, 887
measured by growth of national
income, 838
mixed conditions in American industry
after 1922, 322, 328, 342, 841, 867
(see
Public utilities, construction programs,
250
income and its distribution, 775, 797
mergers and acquisitions, 185
(see also Power).
Public works, improvements in planning,
244
volume of construction, 245
public expenditures for social services,
15
Purchasing, manufacturing, methods and
organization, 507
policy in purchase of industrial equip-
ment, 138, 511
railways, improvement in, 291
Purchasing power, agriculture, 76, 547,
630
changes in after 1920, 321, 845, 885
labor earnings, postwar and prewar
trends, 625, 633, 646
(see also Income; National income;
Real income; Wages).
Q
Quarrying, income and its analysis, 786
R.
Radios and equipment, advertising ex-
penditures, 416
as an advertising medium, 410
growth in demand and influence, 58,
322
installment sales, 394
Railroad Labor Board, 280
Railways (see Chapter IV, Part I).
capital expenditures, 255
consolidation, 299
employee and management relations,
279 -
financial organization, 264
freight rates, 274
Government operation, 257, 275, 279,
303
improvements in roadway and equip-
ment, 361
motor vehicle competition, 272
net income, changes in, 294
number of workers, 451, 452, 464
operating efficiency indexes, 285
passenger rates, 274
pay rolls, 464
INDEX
947
Railways, productivity per worker, 451
quality of service, 301
unification, 299
volume of traffic, 268, 449, 452
(see also Transportation).
Rates, intercoastal trade, Government
regulation, 317
joint rail and inland water rates, 317
railway, changes in, 274
for farm products, 578
simplification by consolidation, 300
shipping, conference agreements, 311
Rating scales, for employment and pro-
motion, 521, 541
Raw materials, prices, postwar and pre-
war, 624, 629, 630, 631, 646
production indexes, 635, 645
Rayon, growth in demand for, 327
Real income, effect of World War on, 848
increase in United States since 1921,
862
indexes of, 14
industrial workers, 14
wages compared with salaries, 770
(see also Cost of living; Income;
Prices; Purchasing power;
Wages).
Reclamation and reuse, 121
Recreation, public expenditures for, 17
Refrigerators, advertising expenditures,
416
installment sales, 396
Rental, of construction machinery, 235
Rents, distribution by industry groups,
777 -
postwar trend, 632
proportion of national income, 767,
769, 772
Research, industrial and business, 106,
499, 864
Resident buyers, for department stores,
540
Retail and wholesale trade, changes in
sales volume, 345, 353, 355, 357, 362,
370, 371, 373, 374, 636
income and its distribution, 774, 804
Retail trading areas, causes for widening
of, 336
changes in, 331
Road construction,
232, 244, 246
planning and finance, 246
Rogers, James Harvey, 709
improvements in,
Rorty, M. C., director's footnote, 627,
677, 864 -
Rubber tire manufacture, changes in
production factors, 149
S
Safety devices, 142, 525
Salaries, changes in salaries per employee,
770
proportion of national income, 767
(see also Wages).
Sales, billings and unfilled orders for
specified industries, 345
department stores, 355, 370
for specified types of chain and unit
stores, 362, 363, 364, 365
of co-operative marketing associ-
ations, 374
of industries, 357
of retail establishment, 353
of wholesale establishment, 355, 373
mail-order companies, 371
retail and wholesale,
volume, 636
changes in
(see also Cooperative marketing;
Demand; Installment sales;
Marketing).
Sales costs, accounting for, 533
Sales promotion, by department stores,
541 -
missionary salesmen, 414
(see also Advertising).
Salesmen, selection, training, control, and
payment, 532
Savings, employee, plans for encouraging,
527
of individuals, increase in, 672
reflected by bank credit, 675
relation to prices, 675, 677, 679
Scale of operation (see Size of industry).
Scale of production (see Size of industry).
Schools (see Education).
Science, influence on economic changes,
842, 862
Seasonal stabilization, agricultural, effect
on ocean shipping, 311
construction industries, 252
employment, 524
farm labor, 590
Securities, index of sales, prewar and
1924–27, 908
948
RECENT ECONOMIC CHANGES
Securities, prices, causes and effects of
increase, 686
increase in, 607, 643, 686
indexes for selected industries, 196
yields of bonds, 657
of common stocks, 657
Selling (see Marketing).
Shipbuilding industry, depression in, 312
volume of construction, 312 -
Shipping (see Chapter IV, Part 2).
surplus merchant tonnage, 309
tramp ships, decline in use, 311
Shipping associations, for hogs, 383
Shipping Board, 311, 313, 314
Shoe industry, changes in , production
factors, 163
hand-to-mouth buying, 347
workers’ earnings, 92
Shoes, advertising expenditures, 418
Silverware, advertising expenditures, 419
Simplification (see also Standardization).
89, 116, 536
Single-plant companies (see Size of
industry).
Size of industry, increase in size of plant,
causes, 85
large-scale farming, development, 566,
571, 575, 580, 592
scale of operation, relation to business
fluctuations, 200, 217
of operation, relation to cost, 188,
190, 194, 216
of operation, relation to prosperity,
194
small-scale production, 188
trends in scale of operation
Chapter II, Part 3).
(see also Mergers, Consolidations, and
(see
Acquisitions).
Size of orders (see Hand-to-mouth
buying).
Skill, change in demands for, 516, 590
transfer of, 86, 92
(see also Mechanization).
Soaps and cleansers, advertising expendi-
tures, 418
Social sciences, application to business,
863
Social services, public expenditure for,
15
Soule, George, director's footnote, 268,
279, 282
Specifications for purchasing and
production control, 510
Speculative credit, high interest rates,
659, 663
Sprague, O. M. W., 657
St. Lawrence waterway project, 319
Stability of industry, influenced by
construction planning, 220
relation to size, 200
Stabilization of volume of construction,
225, 243
prices, 206, 609, 614, 654
reductions in fluctuations of business
cycle, 890, 909
Standard of living, affected by public
expenditures, 15
consumption and (see Chapter I).
Europe and United States compared,
76
farm population, 70
improved by retardation in population
growth, 885
through scientific progress, 844
measured by mortality and morbidity
rates, 23
by product consumption, 24
real earnings as a measure of, 13
workingmen's families in New York
City, 32
(see also Cost of living; Demand;
Housing standards; Income; Pur-
chasing power, Real income;
Wages).
Standardization, building materials,
construction machinery, and con-
struction, 234, 243, 253
of demand, 5
of production, 80, 89, 119
reaction against product, standardiza-
tion, 329
(see also Simplification).
Statistical records, improvement in, 865
Steam power, replacement by electric
power, 125
(see also Power).
Steel industry, changes in production
factors in iron and steel, 155
Stock exchange operations, expansion,
causes, and significance, 685
Stocks and bonds (see Securities).
Street car cards, expenditures for, 410
Strikes, British coal miners, 1926, 311
decrease in number, 490
INDEX
949
Strikes, railway shopmen, 1922, 281
Sugar, increase in consumption, 41
Sugar refining industry, changes in
production factors, 160
Supply and demand, maladjustment for
farm products, 549, 577
T
Tariff, benefits, of protection, 2
influence on cost of diet, 49
Taxes, farm property, 548, 588
Technical advances, effect on economic
prosperity, 842, 867
Technical changes in manufacturing
(see Chapter II, Part 2).
Technological unemployment, 92, 469,
514, 877
Telephones, increasing use in residences,
68
Tests, use of for employee selection, 519,
541
Textile industry, hand-to-mouth buying,
347
Textiles, advertising expenditures, 417
changes in output, 55
Thorp, Willard L., 167, 179, 188
Time deposits, banks, increase in, 669,
672, 676
Time money rates (see also Interest
rates), 657, 731 -
Time studies, for production standards,
512
Tobacco, co-operative marketing, 386
Tobacco products, increase in chain
stores distribution, 366
shift in consumption, 54
Toilet goods, advertising expenditures,
419
Tourists’ expenditures, a factor in the
balance of trade, 737, 743, 751, 752
Tractors, farm, increasing use of, 553,
556, 557, 881
Trade associations, influence OIl
standards of construction, 233
Trade channels (see Distribution
channels).
Trade journals, as advertising mediums,
411
Trade unionists, German, 5
(see also Labor unions).
Trade unions (see Labor unions).
Trading areas (see Retail trading areas).
Training, employee, in department stores,
541
in industrial plants, 520
Tramp ships, decline in use, 311
Transportation (see Chapter IV).
changes in volume, 636
effect on food consumption, 47
improvements, effect on industry, 91,
302, 343, 350
income and its distribution, 775, 797
number of workers, 476
Transportation Act of 1920, provisions,
275, 280, 294, 299 -
Two-family houses, volume of construc-
tion, 235, 239
U
Unemployment, caused by technical
advances, 514, 877
effect of age, 522, 527
effect of size of companies, 203
methods for registering, 466
time lost by the nominally employed,
466
volume of, prewar and postwar, 466.
853, 879
(see also Employment).
Unfilled orders, compared with billings
for selected industries, 345
postwar trend, 637
Unification (see Mergers, consolidations
and acquisitions).
Unions (see Labor unions).
Unit stores, effect of chain store growth,
362, 369, 538
(see also Country stores; Department
stores; General merchandise
stores).
Unskilled labor, decline in immigration,
428
wages, 437
(see also Labor).
V
Vacuum cleaners, installment sales, 395
Valuation, railways, 294
Variety stores, increase in chain stores,
366
Vegetable oils, change in consumption of,
39 -
950
RECENT ECONOMIC CHANGES
Vegetables, car-lot shipments of 1920–
1928, 46
change in consumption of, 43
co-operative marketing, 378
W
Wages, as measure of labor situation, 430
coal mining, 439
economy of high wages, 523, 866, 885
establishment of standard differentials,
522
farm labor, 548
high level in America, 4
in building trades, 251
postwar and prewar trends, 102, 103,
632, 770
railways, disputes between labor and
management, 280
relation to dividends, 769
union rates in building trades, 434
in selected industries, 432
unskilled labor, 438
use of incentives, 523, 542
(see also Purchasing power;
income; Standard of living).
Washing machines, installment sales, 394
Waste, industrial, diversification of prod-
ucts as source of, 88
effect of World War, 846
elimination of, 81, 119, 511
Water consumption, compared for
Europe and United States, 69
Watson-Parker Bill, 282
Wearing apparel, advertising expendi-
tures, 418
fashion changes and their effects, 326
installment sales, 396
output, value 1914–1925, 55
Real
Welfare work, employee, 529
Wheat farming, mechanization of, 561
Wheat pools, co-operative marketing,
growth, 381
White-Jones Shipping Act, 314
Wholesale and retail trade, changes in
sales volume, 345, 353, 355, 357,
362, 370, 371, 373, 374, 636
income and its distribution, 774, 804
Wholesale prices (see Prices, wholesale).
Wholesale trade, adversely affected by
changes in trading areas, 341
effect of chain store growth, 373
hand-to-mouth buying, 349
new management problems, 537
sales and inventions compared, 355
situation 1919–1928, 372
Wolman, Leo, 425
Wool, co-operative marketing, 385
Woolen and worsted industries, depres–
sion caused by shift in demand, 326
Workers' insurance (see Insurance).
Workers’ investments (see Investments).
Works council (see Employee represen-
tation).
World War, building shortage caused by,
63, 220
effect on business conditions in 17
countries, 855
on consumers’ buying habits, 321
on economic progress, 846
on home ownership, 237
on inland waterway traffic, 317
on labor management, 517
on mass production, 80
on mechanization of the farm, 557,
561, 572
on shipping tonnage, 309
Date Due


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