WHAT'S. THE ECONOMIC OUTLOOK?

Experts warn clouds massing
behind bright sunshine of boom

ANADIAN bankers and gov-
ernment economists gener-
ally are forecasting another

boom year for Canada. But
they are also warning of in-
flation pressures due to a too-
quick expansion.

Prime Minister St. Laurent
himself cautions against a
booming boom. The country’s
economy, he said recently in
Toronto, will probably be cut
back this year to the level of
the past five-year average—
a sizeable shrinkage and a fore-
east of lengthening unemploy-
ment lists.

The big debate is over the.

government’s “tight money”
policy. How this affects liv-
ing standards is seen in rising
prices, fewer and more expen-
sive houses, a steep rise in
bankruptcy of small businesses
and rising unemployment,

The Bank of Montreal notes
that the “tight money” policy
“has been less than wholly
effective (as) evidenced by
the tendency for prices to
rise.”

The same bank also declar-
ed in December, examining the
State of our economy:

“Some clouds can already
be detected on the horizon.
In the United States the view
is commonly held that there
may be a levelling out in the
upward trend in business ac-
tivity in the latter half of 1957,
while in. Europe there is an
economic crisis that may ad-
versely affect Canadian ex-
ports of industrial raw mater-
ials.”

But in Canada, the bank
sees our economy in a strong
position this year.

The Gordon Commission al-
so forecast a steady growth
— provided, it stressed, we
don’t get into another war or
another depression.

There’s the big “if.”’ Can-
ada’s economy is so interlock-
ed and dependent upon the
U.S. that what happens there
can be multiplied here.

8 it %

So
say?

Most of them talk of a con-
tinuing boom, with only a
slight levelling off. But other
authoritative sources are not
so optimistic.

A group of leading econom-
ists of Chicago’s University of
Illinois have concluded that

what do the experts

1957 will see “a substantial
business recession.”
In examining the major

economic indicators the econ-
omists say that although a re-
cession did not appear in 1956,
the factors making for a de-
cline have been “reinforced”
in 1957. :

This analysis is supported
by the AFL-CIO Economic
Policy Committee, which has
predicted a job crisis which

will reach serious proportions
by 1960. This union group
cites as one factor the popu-
lation trends which shows that
the number of young people

joining the U.S. labor force
in the next few years will
soon reach a rate of a million
a year,

VY. Lewis Bassie, director of
the Illinois University econ-
omic bureau declares:

“Looked at in broad per-
spective, the one decisive fact
about the current business
situation is that we are riding
the crest of a great post-war
boom.

“In many ways, -the situa-
tion resembles that of the late
1920’s: the time lapse since
the end of the war; the wors-
ening position of the farmer;
the decline in housing starts,
the heavy financing of con-
sumption on credit; the opti-
mism in the stock market; and
the disturbed conditions in
money and markets.”

He notes that although this
broad view does not in itself
indicate when a downturn in
the economy may come, an
analysis of the five main fac-
tors which brought the present
“boom” does indicate a 1957
decline. And this is how he
sees developments:

Housing: “. . . Government
experts predict a further de-
cline in home-building in 1957
even if over-all activity re-
mains high. The decline would
accelerate a general recession.”
(This situation also obtains in
Canada.)

Autos: “.. | All things con-
sidered, the probabilities de-
finitely favor a further de-
cline in auto sales rather than
any recovery. With just a
moderate decline in real dis-

‘posable income, volume might

be down 10 to 15 percent next
year.”

Inventories: “. . . Business
inventories have moved to a
position of moderate surplus
in relation to the flow of goods
to consumers. They are con-
tinuing up in the face of re-
latively stable demand. This
demand cannot long continue;
so inventories must definitely
be counted a negative fac-
tors

Business capital outlays:
“|. . Capacity is already suf-
ficient to produce all that con-
sumers can buy plus an incre-
men for inventory plus a
large military program plus
unprecedented additions to
capacity. The question _ is,
how much capacity should be
added in 1957 with growth in
the economy at a comparative
Standswill 43622

Government programs: “. . .
In the event of greater inter-
national disturbances, of
course, changes in the (gov-
ernment- programs could dom-
inate. the entire economic pic-
ture. ... For the present fore-
cast, it is assumed that this
item will hold to its current
level,”

Bassie concludes: “All the

highly variable segments of

the private economy are vul-

nerable at’ the present time

and all will go down together

as soon as a decline gets un-

der way.” >
Eo ce

The Labor Research Bureau
of New York, noting that Bas-
sie is a highly rated forecaster,
says “his reasoning is sound,
but he can still be far off on
timing.”

The bureau gives its own
analysis, based on the assump-
tion that the boom will con-
tinue through most or all of
1957: :

+ It will do so by virtue
of further expansion of debts
by tens of billions of dollars,
further building of inventor-
ies, further jumps in capacity
while civilian consumption
barely moves. The “vulner-
abilities’ which many are
pointing to with alarm will be
raised to a more acute pitch,
more difficult to resolve ex-
cept via the drastic route of
an economic crisis.

+ This will mark the sec-
ond consecutive year with
little or no rise in per capita
production occurring during
its course, signifying stagna-
tion in living standards, and
as productivity rises, a corres-
ponding increase in unemploy-
ment. An official of the U.S.
National Industrial Conference
Board, says: “We anticipate a
rise in unemployment in 1957
about equivalent to the nor-
mal entrance of new recruits
into the labor force.”

+ Militarization and rising
international tension are count-
ed on to keep the pot boiling
in 1957, with all the atten-
dant dangers to the public.
Obviously, the American peo-
ple would greatly prefer to
seek jobs building much need-
ed schools, hospitals and low-
cost homes, and making goods
for rapidly expanded trade
with the socialist world, the
latier a process which made
considerable headway in 1956
throughout the capitalist world
except in the U.S. Also, mili-
tarization is given as the ex-
cuse for not easing the tax
burden on the people.

+ The long war-and-arm-

ament inspired boom hag caus-
ed foes to point with scorn
and ill-grounded friends to
discard Marxist economic an-
alysis. But the fact is that
the various symptoms of ap-
proaching crisis observed by
financiers and their econom-
ists constitute a striking con-
firmation of the basic sound-
ness of the Marxist science.
_ Capitalist economy, with all
lS new features, remains sub-
ject to internal contradictions
which impose an aliiernating
cycle of booms and crises.
Wars, armaments, and the
lesser forms of intervention
characteristic. of state mon-
opoly Capitalism affect the
timing of this sequence sub-
stantially, but cannot conjure
it out of existence.

Prizewinning letters

Each week the Paci-
fic Tribune will present
a book to the writer of
the most interesting, en-
tertaining and_ topical
letter published on this
page. Contributors ‘are
urged to keep their let-
ters to a reasonable
length,

The prize-winning let-
ter in our last issue was
written by A. E. Phil-
lips, North Vancouver;

Judge by records

ARTHUR WRIGHT, Van-
couver, B.C.; One would think
with so many senior citizens
representing us at Ottawa,
that old age pensioners would
get a break. But when one is
sitting at Ottawa, at $6,000 a
year or thereabouts, it’s easy
to forget the thousands of old
people who never aspired to
public office but have done
their stint in making this
country what it is.

Now another election is in
the offing and no doubt we
shall be hearing a lot about
what they intend to do for us
old folks — if they are re-
elected, of course.

Let’s judge them by their
records, which in most cases
are not impressive. I don’t ex-
pect to live long enough for
most of them to keep their
promises. My vote will go to
the man who has done some-
thing more for our senior citi-

“OPEN FORUM

lie vehicles forbidding sa

zens than come before As
every few years to repeat rig
promises he made in the f
vious election. |

Help British too) |

H. E., White Rock, Bl)

hear a lot of people comple
ing about the govern) {
bringing these Hunga™

over and paying their way

I don’t look at things”
way. uy t

What I do see as unfel
that the government 18 He
ing to bring over these ie
garians without putting al 1
through all the red tape Oe |
isn’t willing to do the %¢
thing for all the British %.
ple who are lining up 4.
here. Why can’t the 82
ment cut the. red tape '
them and pay their way: 4
should - the Hungarians" 1
preferred treatment? il] \

Please don’t spit | |

ANTON POPOWICH, |),
couver, B.C.: There’s a 1)
talk about the need fot
forcing anti-litter law5. |
while we’re about it whi
enforce the law against
ting on the sidewalk, wh!
a disgusting and filthy }!
Seagulls have more
for our sidewalks.

There are signs in oul »}

to spit. There should bef]
lar signs in all public 7)

ings and at street corn”

well. |
= |

Boos U.S. President
Herbert Hoover, whose
unpopular Republican ad-
ministration was swept out
of office by the first Roose-
velt landslide in 19332,
thinks that the American
economy shows signs of a
depression “agony.”

Since the Canadian econ-
omy today is tied even clos-
er ta the American econ-
omy than it was in the twen-
ties and thirties, Hoover’s
opinion is of more than
passing interest to Cana-
dians.

Big U.S. federal budgets,
Hoover told the third Na-
tional Reorganization Con-
ference at Washington, will
produce “a depression thati
will curl your hair,’ if they
are continued.

“Mine has already been
curled once, and I think -I
can detect the signs”? Hoo-
ver, said.

“The obvious sign of in-
flation is the advance of
prices, wages, and the cost
of living. :

“But another sign is the
temperament of some of our
economists. Again you hear
the same expressions as in

Sign of the times '

t

HERBERT HOOVE? |

the inflation period off =
years ago, that ‘we art ;
a new economic era, 4°
the oJd economic law BS
outmoded.’ i FS

“T just suggest to you f '
even in a partially fre? 4 —
onomy, unless we cut” |
flation on its way ups
man economic law wall
turn with a full equiPh”
of hair curlers.” ;

FEBRUARY 8, 1957 — PACIFIC TRIBUNE—