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JUNE 9,
1923
THE
MUSIC TRADE
REVIEW
9
CONVENTION OF MUSIC INDUSTRIES CHAMBER OF COMMERCE—(Continued from page 7)
rious influence is responsible. That thing has
become a mania until it is itself a serious
obstacle to prosperity.
"In the British Parliament a few weeks ago
the head of the Labor Party offered a resolution
with a preamble in which was set forth that
•1,300,000 persons were out of work and receiv-
ing unemployment doles in that country, that
the housing situation was bad, and various other
features of the very trying situation which
exists in Great Britain were recited, followed
by a declaration that those conditions afforded
proof that the capitalist order of society had
broken down, ancl that Parliament should pro-
ceed to prepare plans for gradually having the
Government take over the industries and estab-
lish socialism. That may sound to you like
rather shallow and superficial reasoning, but
there is a great deal of it in the world to-day,
and a good many people are influenced by it.
"I wonder how many really are. Sometimes
I am disposed to be pessimistic, and to think
that perhaps we ought to give more serious
attention to such agitation than we do. And
then, again, someone makes a cheerful remark
that makes me take heart. Down in New York
we have had a new after-dinner speaker this
last Winter; you may have heard of him—Will
Rogers. He said the other night that we
ought not to take the agitators too. seriously.
According to him, what the Americans are
thinking about is not what is going to become
of Europe or any abstract social question, but
the question where they are going to park
their cars.
Keeping Industrial Balance
"The great problem of modern business is to
keep the industrial organization in a balance.
We have developed a very highly organized,
highly specialized system, in which everybody
does some one thing and depends upon supply-
ing his own wants by exchanging products and
services with others. And it is a wonderfully
effective system when it is all in order and in
balance and running smoothly, but it is much
like a great machine in which every part is
dependent upon every other part.
"Moreover, it is a great voluntary system. It
is a go-as-you-please system. Everybody is ex-
pected to find his own place in it. There is no
overhead authority to tell anyone where he
s-hall go, or what he shall do, or what he shall
get for what he does. All that is for mutual
agreement, and people have more or less trou-
ble in arranging matters to their mutual satis-
faction. It isn't any wonder, when you come
to think about it, that there should be some
confusion, sonic jostling and friction, some lost
motion and working at cross purposes. We had
several big strikes last year, and that was not
very good for business, but all that is incidental
to personal liberty. We live under a regime
of liberty, and that is the reason why every-
thing doesn't run like clockwork.
"A state of prosperity is a state of balanced
industry, and we don't have it completely for
very much of the time. We are usually either
rising to it or falling away from it. We know
that in order to get the best results from an
individual industry all its departments must be
in right relations to each other, and it is ju: t
the same with the industrial organization as
a whole.
"There is normal equilibrium which must be
maintained throughout industry in order to have
prosperity. All business in the last analysis
consists of an exchange of goods and services,
and you cannot have a free and full circulation
'of goods, or full activity in the industries or full
employment of the people, unless the various
branches of industry are in such relations to
each other .that the products of each industry
will be taken and consumed by the people in
the other industries.
'We have had an illustration of that in the
last two years. Our relations with Europe are
chiefly through our exports of agricultural
products, and the great falling off in these ex-
ports as agriculture in Europe recovered from
the war caused a heavy decline in the prices
of farm products. The prices of farm products
fell off much more than the prices of the
things the farmers had to buy, and this resulted
in a curtailment of purchases by the agricultural
population which affected all the other indus-
tries. Before the war Europe was the center
of a great system of international trade.
Western Europe, densely populated and heavily
industrialized, was constantly sending out great
quantities of manufactured goods and receiving
in exchange raw materials and foodstuffs. The
war disrupted those exchanges. Russia was a
great source of raw materials and foodstuffs
and constituted a great market for goods, and
that trade has almost ended. It might be
thought that the United States would have bene-
fited by the disappearance of Russia, which was
a rival exporter of agricultural products, but
the situation of the American farmer has not,
on the whole, been improved by the war. The
countries of Western Europe were able to pay
for agricultural products from Russia with their
own manufactures, but they cannot make that
exchange with us.
World Interdependence
"The interdependence of the whole world is
illustrated by the relations between India and
Russia. They had little direct trade, but India
is a great tea-producing country, and Russia
before the war was a great tea-consuming
country. Russia did not buy tea direct from
India, but from England. India before the war
sold tea to Great Britain and took her pay
largely in cotton goods made in Lancashire.
Great Britain sold tea to Russia and took pay
in raw materials and food. The inability of
Russia to buy tea of India reduced India's pur-
chases of cotton goods from Lancashire, so
that in 1921 Lancashire had the worst year in
the cotton goods industry since the American
Civil War, and the inability of England to sell
cotton goods cut down her purchases of Amer-
ican cotton, with the result that raw cotton fell
from 43 cents per pound in 1920 to 11 cents in
1921, and that loss in purchasing power to our
Southern States affected all the industries of
this country.
"We have seen in this country in the last
eight years the balance in industry disturbed
several times. We had during the war what we
regarded as a high state of prosperity, although
we ought to have known that there was some-
thing wrong with a prosperity based upon war.
War is not a good basis for enduring pros-
perity.
"We came out of the war upon a very high
level of wages and prices, and it is easy to see
how that came about. The war created a
practically unlimited demand for labor and ma-
terials. The banks felt under obligations to
grant credit freely, both to enable people to
subscribe freely to the government bond issues
and to support industry. So here was a prac-
tically unlimited demand for labor and mate-
rials, backed by practically unlimited credit, all
brought to bear upon a limited amount of labor
and materials. The banks extended credit freely
on the general theory that they must do it in
order to increase production. And so long as
there was any slack in the industries it did
increase production, but after you have every
man at work and every machine running, that
is about all you can do to increase production
immediately. When you reach the stage when
the only way one employer can increase his
output is by stealing labor from another em-
ployer, every effort to drive the machine harder
simply drives up wages and prices. You reach
the point then where inflation begins, and where
additional supplies of credit do harm to the
industrial situation rather than good. Up to
that point additional supplies of credit are ef-
fective in increasing production, and up to that
point there is comparatively slight increase of
wages or prices—no more than a normal and
healthful recovery, such as belongs with a state
of full activity. But when you reach the point
where the industries are operating at capacity,
you enter upon a state of inflation that is general.
"And it is not easy for producers or mer-
chants or bankers to tell just when that point
is passed. A merchant naturally wants to buy
all the goods he can sell, a manufacturer wants
to make all the goods he can sell, and a banker
is anxious to satisfy the wants of his customers
so far as he can safely do so. But if a com-
petitive situation were developed, and the aggre-
gate of the goods, which the merchants arc
trying to buy and the manufacturers are trying
to make, exceeds the capacity of the industries,
then if the banks all lend freely to their cus-
tomers they are simply financing a rise of wages
and prices.
Upward Price Trend
"We are all familiar with the fact that once
prices are started upward many influences de-
velop tending to carry them higher. Both con-
sumers and merchants buy more heavily on an
advancing market; there is a tendency to carry
larger stocks, and if there is any difficulty
about getting orders filled they are made larger
in the expectation that they will be cut down,
or duplicate orders are given in different places.
That tends to exaggerate the apparent scarcity;
it is misleading to producers and prompts them
to take steps to enlarge capacity, by ordering
more equipment and perhaps enlarging their
works, all of which increases the general state
of pressure. The whole situation is artificially
stimulated; the amount of business in sight is
above normal—that is to say, it is above the
average volume that can be sustained. If buy-
ing for a time is above the average required to
supply the actual consumption of the commu-
nity it is perfectly certain that later on it will
fall below the average. And if prices, under
that stimulated buying, for a time are above
the average level, it is certain that when buy-
ing falls off prices will fall below the average.
"No doubt it would be a fine thing to stabilize
business, but everyone must help do it, for it is
what the great body of the people do in the
management of their own affairs that makes the
general state of business what it is.
"All of this is pertinent to the present busi-
ness situation. We have had a great recovery
in business during the past year. For one thing
the position of the farmers is better than it was;
their purchasing power has improved. It is not
fully restored, but it is better than it was. An-
other factor in the improvement has been the
amount of work that has been needed to be done
to make up the deficit caused by the war. We
fell behind in housebuilding during the war.
There has been and is yet a great shortage of
dwelling houses over the country, and we have
had a great revival of housebuilding. There
is scarcely another industry in which activity
affects so many other industries as housebuild-
ing. It stimulates, on the one hand, the build-
ing material industries and, on the other hand,
all the housefurnishing industries.
"The railways fell behind in cbnstruction
work during the war. They did not keep up in
the replacement of equipment, and meantime
there are 14,000,000 more people in the United
States than there were in 1913. And so the
railroads have been under the necessity of
letting large contracts for equipment, and of
planning for more tracks and terminals. It is
estimated that 22 per cent of the products of
the iron and steel industries last year were
taken by the railroads. The automobile indus-
try made a great recovery last year, and this
year it is beating all records, and the sale of
automobiles is almost as good a sign of the
times as the sale of musical instruments.
Business Recovery
"There has been a recovery of business all
along the line. When prices began to fall in
1920 buyers held off as they always do to see
how low they would go. Consumers have
economized and dealers have worked off their
stocks until the public needs to buy and dealers
need to stock up. That is the situation which
has brought about this revival of business.
(Continued on page 12)