Oakland Tribune/August 30, 1936
Dorothy Thompson Considers Consumer Consciousness in United States Hopeful Sign
Best Distribution of Income, She Writes, Lies in Constantly Growing Enjoyment Of Goods and Services Wages Will Buy
Over the last week-end reports of the revenues of numerous Eastern railroads were made public. It was revealed that the New York, New Haven & Hartford had gross passenger revenues for July 15 per cent higher than they were in July of last year. The Baltimore & Ohio reported an increase of 22 per cent. Both statements are representative of the experience of railroads all over the country. Doubtless some of the increase is attributable to better general business conditions, but the companies are ready to admit that a large part of it comes from the lower fares which went into universal effect in June by order of the Interstate Commerce Commission. The Southern and Western railroads which took the initiative and voluntarily decreased their fares two years ago have shown a steady and quite amazing rise in revenues ever since.
Key To Prosperity
The experience of the railroads is an illustration of the soundness of the theory that has been consistently held by the economists of the Brookings Institution of Washington, namely, that the key to prosperity in this country, and to the more equitable distribution of wealth, is simply the consistent handing on to the public of the benefits of technological progress, in the form of lower prices.
“Increased efficiency makes possible lower prices, while the profit incentive should insure the actual reduction of prices. The greatest profit to the business enterpriser is derived through giving the masses the most for their money. The gains resulting from increased technological and operating efficiency are passed on to consumers, through the medium of price reductions. If, for example, productive efficiency in general should increase 100 per cent over a period of, say, 25 years, costs—other things being equal—would be cut in two, and prices would be reduced proportionately. Thus each dollar of monetary income would purchase progressively increasing quantities of goods. The expanding demand required to take the increasing quantities off the market would be automatically created by the reduction of prices.
“This method of expanding purchasing power does not, like wage increases, threaten insolvency to those who follow it. On the contrary, it is conceived to be the road to increasing profits. Instead of running counter to the principles of competition, it is the essence of competition . . .Retail prices remained practically stationary from 1922 to 1929 . . . The methods of disseminating the benefits of technological progress through persistent reduction in prices were largely in suspense during the post-war expansion period.”
The above quotation is from “Income and Economic Progress,” published by the Brookings Institution, and it contains two important statements. The one affirms the theory of capitalistic enterprise and the other reveals that this theory was not put into practice when capitalism was supposed to be strongest—during the boom years. The two statements taken together reveal that the real enemies of capitalism in the past have not been the Socialists, or Communists, whose power until now has been negligible, but the capitalists, themselves, who have often been traitors to the fundamental thesis upon which their system rests.
If we are not to abolish capitalism altogether, as a few people begin to desire, or put it under complete governmental control, as other groups demand, then the issue will be increasingly one of low prices versus high prices. So far no administration has faced the issue and framed its political practices, whether they concern taxes, or social insurances, or a thousand other matters, with this question clearly in mind. With all the talk about the radical innovations of the New Deal, and the difference between this administration and its predecessors, in this particular they have not been dissimilar, and Roosevelt has merely continued the policy of many who preceded him.
That policy has been the protection of high prices. A series of Republican administrations protected the demand of a part of industry for high prices; Mr. Roosevelt logically carried that process farther by protecting the demands of farmers and laborers for higher prices for their products. Sooner or later the result is a stalemate.
The people who suffer most acutely from this kind of economic theory are the middle and white collar classes, the people engaged directly neither in industry nor agriculture, but who dispense services of one kind or another. And as it happens, they are one of the largest groups in the country. They are schoolteachers, housewives, garage men, government employees, barbers, clerks, journalists, doctors, lawyers, ministers—all the people who are neither farmers, manufacturers, nor industrial workers capable of being organized into trade unions.
The Bookings Institution concludes:
“The wage increase method of disseminating the benefits of technological progress would not extend to more than 40 per cent of the population. In contrast, price reductions benefit the entire population. Assuming that price equilibrium may be re-established by the wage increase methods, it nevertheless at the sacrifice of wealth production.
“Whatever temporary benefits might thus be conferred, it is a method which, if pursued as a long run policy, can result only in stationary or declining standards of living.”
Mr. Hoover’s research committee, which reported to him in 1933 on social trends, found that between 1919 and 1928 more than 1200 mergers had involved the disappearance of more than 6000 independent enterprises. Theoretically, these monopolies should by increasing efficiency and lowering costs have lowered prices. But that was not in fact, their result. On the contrary, and with, of course, some exceptions, they sought higher profit—for both labor and capital—by maintaining higher prices, thereby frustrating the play of forces in capitalist enterprise.
There are outstanding example in industry to the contrary—the automotive industry, for instance, which because of its policy requires no tariff to protect it. The constant reduction in prices has resulted in Americans owning more automobiles per capita than any people in the world. We do not in contrast have the best standards of housing by any means, because the materials which enter into housing, as well as labor, taxes, inflated land values and high mortgage rates, have the effect of monopoly.
A large part of England was rebuilt in the last few years because mortgage money could be gotten at 3 to 3¾ per cent. That hundreds of thousands in this country will buy houses at a price is illustrated by the growth of the trailer industry, at this moment the fastest growing manufacturing enterprise in the country. A hundred and fifty thousand Americans are not buying trailers because Americans are nomads, but because the trailer offers them at this moment the best return for their money, everything considered. They get more for their money from the trailer factory than they do from Mr. Tugwell’s Resettlement Administration.
Probably the most persistent of all illusions is that a man’s income is measurable in dollars. The real distribution of income lies in the constantly increasing enjoyment of goods and services; not in the amount of the paycheck, but in what it will buy. We pay for waste, for bureaucracy, public and private, for monopoly, for racketeering and for business fear. But there is a growing consumer-consciousness in America, and it is one of the hopeful signs of the times, for it is the basis—and the only basis—for real class collaboration. We have workers, and we have employers, but as consumers we are really The People.