Gordon Haskell Archive | Trotskyist Writers Index | ETOL Main Page
From Labor Action, Vol. 13 No. 31, 1 August 1949, p. 2.
Transcribed & marked up by Einde O’Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).
|
Condensed from a talk delivered by news commentator Gordon Haskell over radio station KPFA-FM (Berkley [sic!], California). Gordon Haskell is heard by residents of the San Francisco Bay Area over this station every Thursday evening at 7:45 – 101 on your dial. |
President Truman’s mid-year economic report, submitted in July, boils down in large part to a plea to businessmen to have faith in our economic system. In effect, he proposes that the way to avoid a depression is for all to act just AS IF the American capitalist economy is bound to keep on expanding; and if this is done, then it WILL keep on expanding.
Something of the same idea was expressed by President Roosevelt toward the beginning of the depression which lasted from 1930 to 1940 when he said: The only thing we have to fear is fear itself. In the words of Truman’s report, it becomes: “... if in every field of action we do the things that are consistent with a strong and growing economy, we will have a strong and growing economy.”
And he calls for “initiative, ingenuity and courage.”
Now two things are true about, this economy theory of AS IF: (1) it is perfectly true that the economy would keep on expanding IF the businessmen always acted on the assumption that it would always continue to do so; and (2) it is impossible for businessmen, in the nature of this economic system, to act in this way.
Let’s pretend that YOU are one of these energetic, ingenious and courageous businessmen. To make it more fun, let’s say you aren’t some small struggling grocer or pants manufacturer, but the president of a giant electrical-appliances concern.
You read the president’s report, and you’re all for it. So you call in your board of directors and suggest that they act along the lines proposed by the president of the United States.
Your concern is strategically placed in the program. Your plants could use a lot of new machines to bring them up to date. You have a number of new inventions available which you haven’t used yet. You don’t have any plants in the underdeveloped parts of the country, so you can. help there too. And, as the saying goes, when it comes to conveniences and labor-saving devices for the American home, that’s your corporation’s first name.
The board of directors calls in your sales head, and that’s where the trouble starts.
He informs the assembled gentlemen that for the past six months sales have been falling off drastically. Just two months ago your concern entered the market with a new type of vacuum cleaner which was years ahead of the competition. But sales didn’t: pick up much. Your dealers are cutting their orders, and have already instituted sales on your products which cut their margins of profit below what they have been for years.
They are sitting tight, using up inventory, and replacing it at about 60 per cent of what they used to buy. They inform, your sales manager that even to maintain their present level of orders, you are going to have to cut prices. 15 per cent, and to increase sales they will have to be cut from 20 to 25 per cent.
All right, you say, let’s take a smaller profit. Let’s cut prices 20 per cent if we can sell much more at that level. The board of directors calls in their cost accountants to find out what this will do to profits.
They inform the board that even counting on a drop in the cost of materials, such a procedure would result in a considerable drop in net profits. They point out that by curtailing production in your less efficient plants, and by speeding up the work in your most efficient ones, you can make a higher profit by maintaining prices, or dropping them only 5 per cent and producing 60 per cent of your capacity, than by cutting prices drastically and producing 100 per cent.
Further, your experts point out that any new investment in plant is quite uncalled-for. If the economy as a whole takes an upturn and sales increase, it might make some sense to buy some new machinery. But until that actually happens, any such investment will cut your profits this year even further.
They advise the board to wait and see what happens before plunging into investments which can’t be justified by present conditions.
But, you point out to the board, we must have FAITH. If we cut production and everyone else does the same, there will be a depression. The president says everyone should act as if the economy is going to expand, and then it WILL expand.
We have a few million dollars in a contingency reserve. Why not spend it to buy some machinery and build a new plant in Alabama? That will keep things going for a while. Then, if our competitors and everyone else do the same things are bound to pick up and we’ll be better off in the long run.
In the meantime, let’s keep up full production and store the stuff we can’t sell. When things pick up, we’ll be in a good position to meet the demand.
The chairman of the board of directors looks around the table for comment.
“There seems to be a misunderstanding,” says Mr. Morebucks the banker. “This corporation is neither a philanthropic foundation, nor has it been created to balance the economy of the nation. Of course, we all have faith in our free economy of private initiative, than which there is no greater. But it just happens that the interests I represent have bought the stocks and bonds of this corporation in the expectation of receiving a reasonable return on their investment. The line of action you have proposed here this morning would drain the corporation of its reserves, tie up its current funds in unsalable inventories, and generally bring about its ruin.
“We are practical men, not economic theorists, and business is business. I therefore move that production schedules and prices be placed at a level which will bring in the maximum surplus this year, and that we use our contingency fund to maintain the level of dividends we have been paying for the past two years. In addition, that we institute a program of economy and intensified effort by our employees with a view to cutting our excessive labor costs to a minimum.”
After a brief silence, the board votes unanimously to endorse Mr. Morebucks’ motion – and to find a new president who may not be quite as energetic, ingenious and courageous as you are, but who has the advantage of being sane in their eyes.
Now, that’s just a little story I’ve invented. But it comes pretty close to what is actually going on today in every business concern with declining sales.
We live in a profit economy, in which it is every corporation for itself, and may the bankruptcy courts and the creditors take the hindmost. That holds when it comes to increasing prices in a period of scarcity, and it also holds when it comes to cutting production, speeding up the work and resisting wage demands when production catches up with the amount of money people have to buy goods.
The trouble with Truman’s whole report is that when he talks about the opportunity business has to provide all the things the American people need, he is not talking in terms which make sense in a system in which the factories and mines and railroads are owned by individuals and are operated for profit.
He is speaking of social needs, not of needs backed up by dollars. And these social needs can become a real economic factor only in an economy in which production and exchange are organized and planned for the purpose of meeting the needs of human beings, not in an economy driven by the profit motive.
Gordon Haskell Archive | Trotskyist Writers’ Index | ETOL Main Page
Last updated: 2 June 2021