Acceleration rather than structural change is the key to an understanding of our recent economic developments. Gradually the fact emerged during the course of this survey that the distinctive character of the years from 1922 to 1929 owes less to fundamental change than to intensified activity.

Forty years ago David A. Wells wrote his “Recent Economic Changes,” showing that the quarter century which ended in 1889 was a period of “profound economic changes,” which he described as “unquestionably more important and varied than during any former corresponding period of the World's history.”

Each generation believes itself to be on the verge of a new economic era, an era of fundamental change, but the longer the committee deliberated, the more evident it became that the novelty of the period covered by the present survey rested chiefly in the fact that developments such as formerly affected our old industries have been recurring in our new industries. The changes have not been in structure but in speed and spread.

Invention is not a new art. Transportation and communication are not new services. The facilitating function of finance is older than coined currency. Agriculture is as ancient as history. Competition is not a new phenomenon. None of the changes in distribution on which emphasis has been laid in the last few years is basically new. Hand-to-mouth buying is old; sudden changes in style and demand are familiar; there is no new principle in installment selling; cooperative marketing is no modern discovery; the chain store movement dates back at least 25 years. 1 But the breadth and scale and “tempo” of recent developments given them new importance.

The increased supply of power and its wider uses; the multiplication by man of his strength and skill through machinery, the expert division 007xand arrangement of work in mines and factories, on the farms, and in the trades, so that production per man hour of effort has risen to new heights; the quickening of these instrumentalities through capital provided from the surplus incomes of a constantly widening proportion of our people—all these represent an accumulation of forces which have long been at work.

The committee, like other observers, was early impressed by the degree of economic activity in these seven years. It was struck by the outpouring of energy which piled up skyscrapers in scores of cities; knit the 48 States together with 20,000 miles of airways; moved each year over railways and waterways more than a billion and a half tons of freight; thronged the highways with 25,000,000 motor cars; carried electricity to 17,000,000 homes; sent each year 3,750,000 children to high school and more than 1,000,000 young men and women to college; and fed, clothed, housed, and amused the 120,000,000 persons who occupy our twentieth of the habitable area of the earth.

But while the period from 1922 to 1929 has been one of intense activity, the committee noted that this activity has been “spotty.” Certain groups have been more active than other groups; certain industries busier than their neighbor industries, and certain geographical areas more prosperous than other areas. 2

While rayon manufacturers have worked at top speed, cotton mills have been on part time; while the silk hosiery industry, the women's shoe trade, and the fur business have been active, there has been depression in the woolen and worsted industry; while dairying has been prosperous, grain growers have been depressed. Coal mining has been in difficulties, and classes of wholesalers and retailers have been under grave economic pressure. Progress has been made toward more stable employment in seasonal industries, yet “technological” unemployment, resulting from the displacement of workers by improved machinery and methods, has attracted attention. 3

Geographical differences also were noted. The Pacific States have made an extraordinary advance; the South has rapidly developed as a manufacturing area; the East North Central Division has grown; while the New England States and to some extent the Middle Atlantic section, have developed less rapidly and have experienced some difficulties in adapting their older industries to new conditions.

However, in spite of this variability, this difference in activity as between groups and areas and industries, the rising standard of living characteristic of this period was widespread, and has reached the highest level in our national history.

Participation by the people as a whole in many of the benefits of increased productivity, which of itself varied as between different groups and geographical areas, has been one of the marked characteristics of the period. While industrial, agricultural, and commercial activity has been “spotty,” the broad social advantages of our accelerated activity flowed out the hand. For example, the highway building programs throughout the nation were not limited to the intensely active areas; good roads were extended in all directions, serving the whole population. The same might be said for education advantages, radio entertainment, personal mobility made possible by low-priced motor cars, swift and dependable transportation and communication, and numerous other facilities and services making for comfort and well-being, beyond the elemental requirements of food, clothing, and shelter. 4

This spread of higher living standards has been characteristic of our national life practically throughout our history. As a phenomenon it is not new, but in its degree and scope it has taken on a new importance.

Characteristic also has been the rise in the use of power—three and three-quarters times after than the growth in population—and the extent to which power has been made readily available not alone for driving tools of increasing size capacity, but for a convenient diversity of purposes in the smallest business enterprise and on the farm and in the home.

Factories no longer need cluster about the sources of power. Wide-spread interconnection between power plants, arising out of an increasing appreciation of the value of flexibility in power, and made possible by technical advances during recent years, has created huge reservoirs of power so that abnormal conditions in one locality need not stop the wheels of industry. 5

The increasing flexibility with which electricity can be delivered for power has enabled manufacturers and farmers to meet high labor costs by the application of power-driven specialized machines; and power in this flexible form has penetrated into very section of the United States, including many rural areas. The survey shows that as a nation we now use as much electrical energy as all the rest of the world combined.

Through the subdivision of power the unskilled worker has become a skilled operator, multiplying his effectiveness with specialized automatic machinery and processes. Thus the unit cost of production has been reduced, the drudgery eliminated from much unskilled work, and wages maintained or actually increased.

This acceleration of forces and its resultant rising standard of living have been facilitate by a continuing supply of funds.

In the breath of the sources from which capital and credit have been available and in the quickening method of their use, may be observed again the changes in speed and spread of our recent economic activity.

In former periods the savings funds of the American people were not alone adequate for our capital requirements. In periods of business expansion the demand for funds pressed heavily upon the supply.

The reverse has been found to be true in the period under review. For the largeer part of this period not only the earnings and savings of the people supplied the additional capital for financing the rapid development of industry, but in addition they furnished several billions of dollars for loans to foreign countries. 6

Stimulated by the urge for funds to finance the vast production program of the United States during the World War, the number of share holders in the country's business enterprises has, it is estimated, grown from about two million to more than seventeen million; and out of increasing incomes these investors have continued to pour their savings into the stream of credit.

During the later months of the period covered by the survey a new tendency has been observed. Investors, as well as a large body of speculators, have invested through the Stock Exchanges not only their savings, but the proceeds of loans secured through banks and brokers, until the-credit structure of the country has been sufficiently weighted to indicate a credit stringency, resulting in an abnormally high rate for call money and an appreciable increase in the rate of interest for business purposes. The consequences of this process can not be measure at this time, but they are factors in the problem of maintaining economic balance which will be touched on later in this report.

Meanwhile industry has been able to reduce its requirements for short-term credits from the banks through issuance of securities. The preference for permanent methods of financing business reflected in the relatively small increase in commercial loans of banks in recent years, as contrasted with the increase in security holdings and collateral loans.

Imports of gold early in the period covered by the survey which tended to make credit easier; the growth of savings in spite of increased spending; the popular confidence in the financial structure, especially in the Federal Reserve System, and the power of the System to move available credit to the places where it is needed, mark a great advance during these seven years.

There has also been an increase in the velocity of the turnover of credit, due to improved transportation and communication, scientific control of inventories, the continuation of the simplification movement, and our accelerated turnover of commodities. Business has thus developed a new degree of economy in the use of credit, which may be set down as another characteristic of the period.

The period under review is perhaps too brief for a definite judgment, and we are as yet too close in point of time to get an accurate perspective, but the committee feels that in the field of price relationships, wages, and the cost of living is to be found one of the striking and significant developments revealed by the survey, and one which more than any other gives these years their distinctive character.

Contrasting two periods of our comparatively recent economic history will perhaps serve to make clear the significance of these factors.

According to the best available statistics, in the period between 1896 and 1913, the wholesale price level rose on the average 2.3 per cent a year, but wages rose only a little more; so that their purchasing power advanced only 0.5 per cent a year. In the period from 1922 to 1927, prices declined on the average 0.1 per cent a year, while the purchasing power of wages rose 2.1 per cent a year. 7

In this latter period the fortunate synchronizing of a high wage level and a stationary cost of living created a phenomenon, new in degree, which had widespread influence on the economic situation, and which will bear close study in its details.

The increasing tendency toward price stability, both as between classes of commodities and in the price experience of individual commodities, was a characteristic of the period under review, tending toward a more equitable basis of exchange of products among the various groups. Price fluctuations seem to have been held within narrow limits during this period by a combination of factors; a more complete background of statistical information making possible better judgment regarding supply and demand on the part both of producers and consumers; prudence on the part of management; cost reductions by technicians, skill on the part of bankers, an enlightened attitude on the part of labor, and the expansion of foreign markets.

Relative price stability has involved a change in the direction in which business men look for profits. Profits made from the fluctuations 011xivof individual commodity prices, and from changes in the relation among prices, have tended to diminish.

Whether the price relationships of recent years prove to be transitory or permanent, they represent to-day a huge gain which is reflected in all parts of the economic organism. It is a development too new to permit of dogmatic interpretation but the committee believes that this decreasing variability in prices at a time when the productivity per hour of labor has been greatly increased, and the demand for goods has been greatly stimulated, is one of the most significant factors disclosed by the survey.

The widening gap between wages and the cost of living—wages increasing while the cost living was stationary—may be assumed to have contributed definitely to the degree of prosperity which has characterized the period as a whole. With rising wages and relatively stable prices we have become consumers of what we produce to an extent never before realized.

The factors in this situation appear in part to be accidental and in part the consequences of an advanced economic point of view.

In the early postwar period much of the press and many employers demanded a “liquidation” of labor. It was freely declared that business could not settle down until wages were brought back to prewar levels. Labor had enjoyed a higher standard of living and naturally opposed wage cuts.

This might have precipitated a period of serious strife, had it not been that leaders of industrial thought, watching the trend of affairs, noted that the result of the continuance of high wages was that the dammed-up purchasing desires which had been held back during the war on account of the national economic program, burst forth and not only the high wages which were being currently earned but accumulated savings as well were poured into the channels of commerce.

They were quick to grasp the significance of the power of the consumer with money to spend to create an accelerated cycle of productivity.

They began consciously to propound the principle of high wages and low costs as a policy of enlightened industrial practice. This principle has since attracted the attention of economists all over the world, and while it is in no sense new, its application on a board scale is so novel as to impress the committee as being a fundamental development. 8

The committee finds, from study of the fact-finding survey on which this report is based, that as a people we have become steadily less concerned about the primary needs—food, clothing, and shelter. We have long since lost all fear concerning our food supply, and so we no longer look on food as a luxury or as a primary source of pleasure. American food standards have risen, but we hear little of the “high cost of living,” and the slogan of the “full dinner pail,” is obsolete. We wear less clothing; more rayon and silks, less cotton and wool. Our wants have ranged more widely and we now demand a broad list of goods and services which come under the category of “optional purchases.” 9

The rapidly increasing number of families in the United States having a considerable margin of earnings available for “optional consumption”—optional in the sense that this portion of the income may be 013xvisaved or spent, and if spent the manner of its spending may be determined by the tastes of the consumer or the nature of the appeals made to him by the industries competing for his patronage—presets of the marked characteristics of the recent economic situation. It is the personal or individual expression of the gap between rising wages and the relatively stable cost of living, referred to at the beginning of this section.

Closely related to the increased rate of production-consumption of products is the consumption of leisure.

It was during the period covered by the survey that the conception of leisure as “consumable” began to be realized upon in business in a practical way and on a broad scale. It began to be recognized, not only that leisure is “consumable,” but that people can not “consume” leisure without consuming goods and services, and that leisure which results from an increasing man-hour productivity helps to create new needs and new and broader markets.

The increasing interest in the fine arts and in science; the increased sales of books and magazines; the increase in foreign travel; the growing interest and participation in sports of all kinds; the domestic pilgrimages of some 40,000,000 motor tourists who use more than 2,000 tourist camps; the greatly increased enrollment in our high schools and colleges; the motion picture theaters and the radio—all these reflect the uses of increasing leisure.

During the period covered by the survey the trend toward increased leisure received a considerable impetus. The work week was shortened in the factory by better planning and modern machinery, and the work day was shortened in the home by the increased use of time-and-labor-saving appliances and services. 10

Few of the current economic developments have made such widespread changes in our national life or promise so much for the future as the utilization of our increasing leisure.

The service functions are not new, but few of the developments revealed by the survey are of greater potential significance than the accelerated growth of our service industries—travel, entertainment, education, insurance, communication; the facilities of hotels, restaurants, delicatessen stores, steam laundries, and public libraries, to mention but a few.

An evolution which has been going on for centuries has only recently been revealed as a mass movement. We now apply to many kinds of 014xviiservices the philosophy of large-scale production. We have integrated these services and organized them, and we have developed the new philosophy to such a degree in recent years that we now have what might be termed “mass services.” These have helped to create a new standard of comfortable living in the United States, and have afforded employment for millions of workers crowded out of agriculture and the extractive and fabricating industries.

It was, in fact, the timely development of “mass services” which saved our country from a critical unemployment problem during recent years.

No serious cyclical fluctuations have characterized the period under review, 11 so that the unemployment due to the business cycle has not been marked; but it has become evident that unemployment can arise as a result of industrial efficiency as well as of inefficiency. In the latter case we have seasonal or intermittent unemployment; in the former case what has come to be known as “technological” unemployment resulting from the introduction of new machinery and processes. The survey seems to indicate that the time has come to devote continuing attention not only to the problems of cyclical unemployment but also to this newer problem of “technological” unemployment if we are to forestall hardship and uncertainty in the lives of the workers. 12

Where progress may be working an advantage to the people as a whole, it inevitably works temporary hardship upon certain classes—those skilled workers in a trade, for example, whose work is taken over by machines. This is a serious aspect of the problem of unemployment. It involves, in many instances, learning new trades, and, in most instances, the loss of time in securing other jobs. Yet from a broad social point of view, while it works hardship on those workers displaced by the introduction of machinery or improved processes, the social gain is real and permanent.

Such economic transformations are not so much changes as readjustments, due to the progressive needs of modern society, and to the necessity of taking advantage of the modern developments in science. They have arisen in agriculture as well as manufacturing and transportation, and they have affected employers as well as employee. There is nothing new about these problems; the accelerated rate of readjustment is what has recently engaged the attention of wage earners and management.

As has already been intimated, the acceleration of technological shifts in production and consumption would have resulted in much more serious unemployment if workers had not been absorbed in the newly expanded service industries which both create and serve leisure.

It is obvious, of course, that the economic position of this nation is in no slight degree due to our possession of abundant raw materials and sources of power, to the fact that our domestic market is so large, and that there are no trade barriers between the States of our Union. We can exchange goods without stopping them for inspection or the payment of duties between States. We can effect their transfer without the barriers of differing languages or customs. Advertising is peculiarly effective because we have so great an area with a common language which enables us to talk to all the people and to develop national consumption habits, which in turn make possible large-scale production.

This fortuitous situation should be borne in mind as an important factor in both the speed and the spread which have characterized our recent economic development.

The balance which has been maintained between consumption and production is nowhere better shown than in the fact that wages have been rising, and that there has been no striking increase of unemployment in a period marked by the broadest technological advancement which we have yet known.

Perhaps the deepest economic significance of the new situation lies, not in the rapidity with which the service industries have grown and have become integrated, nor in the universality of their spread, but in the fact that the situation which they have created is reciprocal. Our increasing standard of living is not participated in only by those who produce our food, clothing, and shelter, but has flowed back to those in the service industries. The population as a whole can enjoy the rising standard of living—the music which comes in over the radio, the press, the automobile and good roads, the schools, the colleges, parks, playgrounds, and the myriad other facilities for comfortable existence and cultural development.

Our ancestors came to these shores with few tools and little organization to fight nature for a livelihood. Their descendants have developed a new and peculiarly American type of civilization in which services have come to rank with other forms of production as a major economic factor.

The survey has proved conclusively what has long been held theoretically to be true, that wants are almost insatiable; that one want satisfied makes way for another. The conclusion is that economically we have a boundless field before us; that there are new wants which will make way endlessly for newer wants, as fast as they are satisfied.

We have the power to produce and the capital to bring about exchange 016xixbetween the producing and consuming groups. We have communication to speed and spread the influence of ideas. We have swift and dependable transportation. We have an educational system which is steadily raising standards and improving tastes. We have the sciences and arts to help us. We have a great national opportunity.

Important as is the development of the economic side of our national life, through invention and discovery of new industries and new callings, an illustration of the potentialities of further lifting the national standard of living, without developing another invention or discovery and without creating a new want, can be drawn from a single industry—that of electrical appliances.

A home or farm wired for electricity is a different economic unit from one which is not wired. Each such home, whether in city or country, can take advantage of electricity for lighting, and on the farm an automatic water supply system makes available water at convenient spots for domestic and farm uses.

A survey of city and village homes indicates the use of electricity for many additional applications of highly specialized devices. In 1928 apparently a large percentage of the homes wired for electricity had electric flatirons; less than one-third of them had washing machines; slightly over one-third of them had vacuum cleaners; less than 5 per cent had electrical refrigerators. We are far from the saturation point in connection with any of these devices.

To take one other example, there is, perhaps, no more dramatic illustration of a rising standard of living than the growth and development of radio in recent years. This newest application of electricity has found its way into millions of homes. On January 1, 1928, there were 7,500,000 sets in use. Yet about 70 per cent of American homes are still without the radio. 13

We seem only to have touched the fringe of our potentialities.

Many influences have been at work during the period covered by the survey, welding the people of the United States into a new solidarity of thought and action. The telephone and telegraph, the automobile, the radio, and the railroads form lines of communication which have brought together East and West, South and North.

Other and less tangible influences reaching back farther into the past, but accelerated and strengthened by the experiences of the World War, have also contributed to our solidarity. Economic reorganization; the cooperation of business leaders, economic experts, and the Government; 017xxthe general spread of information; the growth of trade associations; the cooperation of labor to increase productivity; the restriction of immigration—all of these have grown in importance in peace after their stimulating by the war.

Making for solidarity has been popular education which has increased amazingly. We are spending two and one-half billions of dollars each year on public and private education—an increase of 250 per cent in a decade. Expenditures for free college and university education have increased nearly 350 per cent in little more than 10 years.

And there is another factor which has contributed to the welding process, and to the economic advancement of the nation: The broadening influence of America's creative minds—the minds of the leaders in Government and in education, in research, in management and in labor, in the press, and in the professions. To their influence we have come to look in large measure for the maintenance of our economic balance.

While ours has been a period of great economic activity and industrial productivity, and of a degree of economic stability which must be rated as high when we consider the readjustments in every department of economic life made necessary by the postwar crisis and by the transition from war economy to peace economy, and while America has a promising future, the outstanding fact which is illuminated by this survey is that we can not maintain our economic advantage, or hope fully to realize on our economic future, unless we consciously accept the principle of equilibrium and apply it skillfully in every economic relation.

The forces that bear upon our economic relationships have always been sensitive. All parts of our economic structure from the prime processes of making and of marketing to the facilitating functions of finance, are and have been interdependent and easily affected. And therein lies the danger: That through ignorance of economic principles, or through selfish greed, or inadequate leadership, the steady balance will be disturbed, to our economic detriment.

If natural resources, especially the land, are wastefully used; if money in quantity is taken out of production and employed for speculation; if any group develops a method of artificial price advancement which puts one commodity out of balance with other commodities; if either management or labor disregards the common interest—to this extent equilibrium will be destroyed, and destroyed for all.

To maintain the dynamic equilibrium of recent years is, indeed, a problem of leadership which more and more demands deliberate public attention and control. Research and study, the orderly classification of knowledge, joined to increasing skill, well may make complete control of the economic system a possibility. The problems are many and difficult, but the degree of progress in recent years inspires us with high hopes.

In the marked balance of consumption and production, for example, he control of the economic organism is increasingly evident. With the development of a stream of credit t facilitate business operations, and with flexible power to energize industry and to increase the effectiveness of the workers, has come an increasing evenness in the flow of production. Once an intermittent starting and stopping of production-consumption as characteristic of the economic situation. It was jerky unpredictable, and overproduction was followed by a pause for consumption to catch up. For the seven years under survey, a more marked balance of production-consumption is evident.

With greater knowledge of consuming habits, with more accurate records of the goods consumed, a sensitive contact has been established between the factors of production and consumption which formerly were so often out of balance.

Where pools of goods once were accumulated by the manufacturer, the wholesaler, the jobber, and the retailer; where high inventories once meant distress, shutdowns, failures, and unemployment whenever the demand subsided, there is now a more even flow from producer to consumer.

Increasing skill and scientific data have made the anticipation of demand far more accurate, and by accurate anticipation the deliberate balance between and consumption has in a measure been maintained. By advertising and other promotional devices, by scientific fact finding, by a carefully predeveloped consumption, a measurable pull on production has been created which release capital otherwise tied up in immobile goods and furthers the organic balance of economic forces. In many cases the rate of production-consumption seems to be fairly well under control.

To maintain this balance, and to extend it into fields which are not now in balance with the more prosperous elements of the nation, is clearly an important problem of leadership. With certain natural resources still wastefully exploited, with great industries, such as agriculture and coal mining, still below the general level of prosperity, with certain regions retarded, there remains much to do. To bring these more fully into the stream of successful economic forces is a problem of the first order.

Our complex and intricate economic machine can produce, but to keep it producing continuously it must be maintained in balance. During the past few years equilibrium has been fairly well maintained. We have not wasted the hours of labor by strikes or lockouts. Until recently we have not diverted savings from productive business to speculation. There has been balance between the economic forces—not perfect balance, but a degree of balance which has enabled the intricate machine to produce and to serve our people.

As long as the appetite for goods and services is practically insatiable, as it appears to be, and as long as productivity can be consistently increased, it would seem that we can go on with increasing activity. But we can do this only if we develop a technique of balance. Toward such a technique the committee believes the skillful work of the economists, engineers, and statisticians who prepared the survey on which we have based the facts and interpretations expressed in this brief report, will contribute. Our effort has been to suggest a pattern by which their work may be appraised; to set up an orderly plan by which the facts may be articulated and against which later and better information may be more accurately judged. We recommend a study of the fact finding survey as a whole to all who are faced with the problems of business administration and public leadership. 14

Informed leadership is vital to the maintenance of equilibrium. It depends upon a general knowledge of the relations of the relations of the parts each to the other. Only through incessant observation and adjustment of our economy, can we learn to maintain the economic balance. 15

Underlying recent developments is an attitude of mind which seems to be characteristically American. Our nation is accustomed to rapid movement, to quick shifts in status; it is receptive to new ideas, ingenious in devices, adaptable. Our economy is in large measure the embodiment of those who have made it.

Our situation is fortunate, our momentum is remarkable. Yet the organic balance of our economic structure can maintained only by hard, persistent, intelligent effort; by consideration and sympathy; by mutual confidence, and by a disposition in the several human parts to work in harmony together.