We hear it said in many, many ways as a truism that an increase in the price is needed to bring out additional supplies. If that were true, I do not know to what inflationary heights prices would have had to go in the last war to bring out an additional volume of production. I have charted here what happened to production and wholesale prices beginning in 1913 and carrying down to 1922 (chart 24). The peak of production was reached, as far as the war period is concerned, just about the time we got into the war. From that time on, despite this enormous lift in the prices that took place (54 percent by 1918; 81 percent by 1920), production, as I indicated before, went INDEX NUMBERS, 1913-100 225 200 175 150 125 100 75 CHART 24 PHYSICAL VOLUME OF PRODUCTION PRICES • AND WHOLESALE Wholesale Prices Production INDEX NUMBERS, 1913-100 225 1914 1913 1915 1916 1917 1918 1919 1920 1921 SOURCE US Bureau of Labor Statistics: Economic Tendencies in the United States, F.C. Mills. D.D. 39-293 up in that year only 0.3 percent and subsequently actually decreased. There was a tremendous diversion, such as is going on now, from civilian products to war products, but the total volume of production did not go up. There are some price increases which will bring out a greater supply, but as far as the truism which has been accepted in some circles is concerned, that there is a necessity for inflation of prices in order to stimulate production, nothing in the records as far as production is concerned verifies that, and I would be glad to rest on that particular case. I want to take up now what happened to wage earners and lowsalaried workers in the last war. Chart 25 shows the cost of goods purchased by them, all items. In 1913, the average was about 70 (1935-39=100). By December 1916 it had gone up only 16 percent to a level of 82. By June 1920 it had gone up approximately to 150. There was a precipitous drop that year [indicating], and if in order to get a reduction in the cost of living following the war, we had again to go through the hell we went through in that deflationary period, the outlook would not be very promising. I want to take up several groups of goods purchased by wage earners and low-salaried workers in the current period, and you will notice from chart 26 that food has gone up 13 percent, rent 1.4 percent, clothing 3.9 percent, house furnishings 6.6 percent, fuel and electricity 4.9 percent, and miscellaneous about 3 percent. Now, most of this increase has been since March 1941. Of the increases, food has gone up 7.6 percent since March, house furnishings have gone up 3.6 percent, and clothing 1.2 percent. I have some figures on the retail cost of that food (chart 27). Of course, food and clothing represent over 50 percent of the buying of CHART 25 60 1913 1914 1915 1916 1917 1918 1919 1920 1921 1922 1923 1924 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 UNITED STATES DEPARTMENT OF LABOR BUNE AU OF LABOR STATISTICS INDEX 160 140 120 100 во 60 families with incomes of $1,000 or less, and 42 percent of all the American families are in that group. Now, here it is shown that all foods went up 13.5 percent, that fruits and vegetables went up 21 percent, that cereals and bakery products have gone up 2.7 percent, meats 11 percent, and dairy prod ucts 17.9 percent. This chart is intended to indicate the shape of things to come. It compares what has happened to wholesale prices and what has happened to retail prices in the same commodity. This shows that there is a lag from the time the wholesaler pays an increased price and the time when that price eventually finds its way into the retail price paid by the wage earner. I have taken sugar as an example, and you will see that the wholesale line is up 13.7 percent, whereas the retail price of sugar is only up 11.6 percent. On butter the wholesale price is up 50 percent, only 37 percent of which has been reflected at retail. Canned pink |