SOME BUSINESS
PROBLEMS OF
TODAY
An Address Before The Cham
ber Of Commerce of Char
lotte, N. C., March 15th,
1922 By Angus Wilton Mc
Lean.
When invited to address this gath
ering <rf representative buaia?" ~-n
*v" +V- T~* industrial
section of the Carolines, and when the
subjects appropriate to the occasion
passed in mental review I naturally
felt impelled to select, a subject which
I thought would appeal peculiarly to
business men, even though I thereby
assumed the risk of fatiguing some of
my hearers bv the detail necessarily
incident to the discussion of technical
business problems.
So much has been said in the past
two years tn respect to the causes of
the business depression through which
we have been passing, and from vhich
I now hope we are slowly emerging,
that I hesitate to discuss the matter,
lest I subject myself to the charge of
needless repetition. The subject is
so important, however, that even rep
etition may be pardoned if it serves to
emphasize the causes, and hastens the
application of effective remedies. And
so, I have come to talk to you a little
while tonight on:
Some Business Problems of Today
What I shall have to say will be in
the nature of an infprmal discussion
of what I consider are some of the
ills of business today; and some meas
ure of r elief may be afforded.
Let us consider briefly the business
conditions prevailing before the
World War, during hostilities, and
since that time.
For a long period before the out
break of the War in 1914, business
conditions throughout the world had
been constantly improving, and the
accumulation of wealth rapidly in
creasing. During this period, not
only the progressive, but the more
backward countries, had been equip
ping themselves with modern facili
ties such as railroads, ships, power,
light and traction utilities, public
buildings and other modern improve
ments of every character.
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it* unparalleled resources contributed
in a large way to this world program
.of improvement and construction.
To develop our public works, as
well as to expand our plant facilities,
both at home and abroad, during the
years before the war, we were com
pelled, like all comparatively new
countries, to borrow large sums in the
money markets of England, France,
^lollqnd, Belgium and Germany.
While we were trading with the
world on a continually ascending
scale, we remained, nevertheless, a
debtor nation, when the general bal
ance in our foreign trade was struck.
1916 and 1916, all lines of busi
ness in America were stimulated by
the war needs of the Allies, resulting
? in an increased demand in home mar
kets caused indirectly by the increase
in buying power of our own people
due to war prosperity.
In 1917 the United States entered
the War, and the War demand for our
products was not only maintained,
but was greatly augumented by the
combined purchasing power of our
own government, and the other gov
ernments associated with us in the
War.
As evidence of the expansion of
our productive capacity in fields,
mines and factories during the war,
and immediately following I may add
that the total value of all our exports
increased from two and a half billion
dollars in 1913 to over eight billion
in 1920.
It must be obvious to every intelli
gent business man that the general
?use of the business depression in
his country, which began in the sum
ner of 1920, was the expansion of our
iroductive facilities during the war,
teyond peace time needs; the falling
iff of our foreign trade as represent
id by our exports, and the consequent
'glutting" of the home markets by
?ur surplus products particularly the
Products of agriculture.
It is, therefore, obvious that to re
tore prosperity we must bring about
?me economic readjustment, either
>y (a) scrapping part of our plant
'acilities and abandoning a part of
?ur fields and mines so as to bring the
processes of supply and demand into
proper balance; or (b) expanding our
foreign trade so as to provide foreign
narkets at fair prices for the surplus
production in agriculture, and in in
1ustry generally.
No argument is necessary to con
vince the intelligent mind that we
sannot destroy a substantial portion
?f our productive facilities in fields,
nines or factories, without entailing
he most serious consequences to our
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whole industrial fabric. Such means
retrogression instead of progress. It
means desrnction of capital assets,
and the nnemploynfent of labor to
such an extent as to threaten the
welfare of the laboring classes not
only, but of all our people as well.
Expansion of Foreign Trade Moat
Oosirablo
The only alternative which can be
considered at all sound in practice and
at the same time in keeping with cor
rect economic principles, is to increase
and maintain our foreign commerce
so that our surplus production in agri
culture and in the various industries
will be absorbed at fair prices in
world markets. ~ ... ... " T
Fore*! "~--de Decline Underlying
, Causes
For the past yMTkria a half our
export trade has been declining at a
rapid rate, because (a) our European
customers have lost their buying pow
er on account of excessive war debts
and inflated currencies. South Amer
ica is unable to buy from us because
she cannot sell her products to Eu
rope and Asia. Russia with its
150,000,000 population is out of the
market so far as world trade is con
cerned.
At the present time we can export
only such raw materials and special
food products as some of the nations
are compelled to buy from us no mat
ter what the cost or inconvenience.
In 1920 our total exports were
eight billion dollars, and in 1921 they
declined to four and a half billion,
and have steadily declined every
month since.
(b) More important still is the
fact that the war has transferred us
from the position of a debtor nation
to that of a great creditor nation.
As an evidence of this change, it may
be mentioned that in 1909 the balance
of trade against the United States
was $184,000,000, and in 1919, the
balance in our favor was $4,771,000
000.
Effect of Fluetatio?u in Eickuft
The enormous trade balance in our
favor, the unfavorable position of the
irredeemable and depreciated paper
currencies, as compared with our gold
standard, the actual and potential
depression caused by the unsettled
German reparations, and many other
causes of more or less importance,
have caused the exchanges of many
of the countires to go so far below
normal, as expressed in terms of the
American dollar, that a practical em
bargo has been created against these
countries in respect to their ability
to buy our products.
The German mark is worth now
only two per cent of normal, the
Csecho-Slovak crown ten per cent of
normal, the French franc 44 per cent
But there is a more unfavorable
factor in the situation than mere de
preciation in exchange, and that is the
fluctuation in exchange. If exchange
rates could be stabilised at any figure,
no matter at what discount from nor
mal, foreign buyers, could take the
ordinary risks of buying ahead even
at great disadvantage, but with the
present fluctuations they cannot buy
even absolute necessities except from
"hand to mouth." Recently one of
the big German bankers visiting this
country told me that there was less
risk in betting on a horse race than
in buying quantities of cotton here
for future delivery against the fluct
uations in the price of German marks.
Abnormal Gold Supply in U. S. A.
Hindrance
The outflow of gold from other
countries to the United States and
the continued issuing of irredeemable
]>aper currency in many countries has
resulted in the abandonment of the
gold standard in these countries, and
putting their currencies on an irre
deemable paper basis. This further
depreciated these currencies as com
pared with our dollar, and the natural
consequence was the slowing down of
our export trade, because it became
increasingly difficult for foreigners
to pay us in dollars.
The United States contains less
than one-seventh of the world's pop
ulation, yet it holds about forty per
cent of all the monetary gold of the
world. This abnormal condition
cannot endure for any long period of
time without militating against us in
a most serious way.
It not only seems necessary, but
highly desirable in our own interest,
as well as in the interest of the world
that there should sooner or later be a
redistribution of the gold stock, as a
most effective means of stabilising
exchange. But this redistribution
cannot take place without the co-oper
ative action of the principal nations of
the world, after the most careful
consideration of the conditions in aH
countries and having particular re
gard to the effect upon American
commerce. Perhaps the beat method
yet suggested of bringing about the
desired result is the establishment of
an international Reserve banking
system and using our surplus gold as
the basis of reserve bank notes to be
issued by the new sys&m.
IsInhImmI Actios Necessary
I d6 not believe it is possible under
-
1
the abnormal condition* now existing,
to permanently stabilise business con
ditions in our country until economic
and financial conditions are stabilised
abroad, and particularly in Europe.
This is especially true with respect to
stabilising exchange, the restoration
of the gold standard, and the stabili
sation of world wide economic and
financial affairs generally.
I submit that the only way to bring
about these results is for the nations
interested to meet in an international
conference where these questions
may be discussed in the interest of
all, and plans formulated for submis
sion to the governments involved for
acceptance or rejection.
I believe that Ambrica. should as
sume the leadership in formulating
and putting into, effect definite plans,
having for their ultimate objective
the stablization of business conditions
in those countries which are our good
customers, and, at the present time
also our debtors to the extent of
many billions of dollars.
We must assume the natural and nec
essary role of the financially strong
creditor assisting his impoverished
customer and debtor back to his feet,
in order to enable him to begin buying
again, the goods which the creditor
must sell, if he is to collect past in
debtedness and provide buyers for the
goods in the future.
It is not a national, but an interna
tional task, and the sooner we under
take it, the better it will be better for
all. The conditions to be remedied
are world wide, and the rerfiedies to
be applied must comprehend all na
tions, including Russia, Austria and
Germany.
Restoration of Buying Power of
Farmers Necessary to Business
Prosperity
There is another phase of the pres
ent business situation which I desire
to emphasise if possible: There can
be no restoration of fundamentally
sound business conditions until agri
culture is restored to a prosperous
basis, by rehabilitating the purchas
ing the purchasing power of the farm
er. This can be accomplished by
raising the prices of his products or
lowering the prices of the thinp he
must buy, so that a level of fair ex
change values may be established be
tween the things he produces and the
things he consumes. In normal times
the farmers constitute an important
part of our total domestic purchasing
power. It can be readily seen, there
fore, that when the purchasing power
of the farmer is greatly reduced,
our domestic markets become demor
alised, as has undoubtedly been the
ease in the past tUro years.
Relative Position of Farming Industry
Not Generally Understood
Unfortunately, in the past the
many handicaps under which the
farmer operates have not been fully
understood by the general public, and
consequently no comprehensive co
operation in the solution of his prob
lems has been afforded the farmer by
those engaged in other business.
Some of the handicaps which hinder
the farmer and which do not as a rule
beset those in other activities, may be
mentioned here:
(a) His fixed investment is large
and "current assets relatively small.
(b) His chief item of expense is
the cost of labor.
(c) Hia turnover is much slower.
(d) His interest burden is higher,
if he is a borrower.
(e) He has to take- the chances of
adverse weather conditions and the
ravages of insect pests, with no means
of insuring the risk.
(f) In periods of depression he is
the chief sufferer.
The recent breakdown in prices
took place in the fall of 1920 after
our farmers had produced their crops
at the highest cost in the history of
the world. They were compelled to
harvest and market their crops while
labor was still high. Other industries
such as manufacturing enterprises
shut down their plants in whole or
in part, and thus reduce the loss, but
the farmer could do no such thing.
He had to continue to pay inflated
prices for what he needed while the
prices of his own products had been
deflated until they were far below the
cost of production.
He had been bound to put his pro
ducts upon the market when they
were harvested without regard to the
ability of the market to absorb them
at living prices.
The commodity panic, through
which we have been passing, has im
posed losses upon all business enter
prises,but ithas been more disastrous
to the farmer and stock raiser, than
? to any other class.
Cotton, that cost thirty cents to
produce in 1920 sold as low as ten
cents per pound- Up to a few months
ago corn was selling on the farms in
the great grain growing states of the
west at twenty cents per bushel, so
that much of it was burned for fuel,
and more of it left in the fields to
rot. Cattle and sheep in the great
live stock sections of the West were
selling at one-fourth of former prices.
For awhile it seemed as of the great
blive stock industry in the West and
Southwest would bo wiped out.
Estimates made by the U. S. De
partment of Agriculture show that
the farmers lost nine and a half bil
lion dollars in crop values alone in
1921, as compared with 1919. Their
loss 1 hi depreciation of land values
and other fixed assets was also very
great.
In September last, I sau[ in Wash
ington a large sheep-raiser from one
of the Rocky Mountain States. He
told me that he had just sold five
thousand lambs in the Omaha market
which netted him only 85 cents a
piece after paying freight and other
costs of marketing- He said that
upon his arrival in Washington early
that morning he stopped at a hotel
for breakfast and ordered one lamb
chop,, for which he paid 90c. I told
the gentlemen that his experience re
minded me of something that occurred
down in my country a few years ago.
A farmer f^om my county shipped
three car loads of cantaloupes to is
commission merchant in New York.
In about ten days he received the
returns showing the various charges *
paid such as freight, drayage, insur
ance, commissions, etc., and also a
check for two dollars and ninety-two
cents, the net proceeds of the three
immediately returned the check with
cars. He was so disgusted that he
the following inscription written
across the face thereof: "Charge the
balance to stealage, damn you, and
take it all."
Duty of Business Men to Aid in
Solving Problems
You business men who are here
tonight are ever alert to improve the
business conditions \in your city.
There are many business organiza
tions of a similar character in the
various towns and cities of this
country.
These organizations, including your
own, have contributed in a large
measure to the general business pros
perity of the nation, but there is one
field in which all have failed to meas
ure up to their full duty. I do re
fer to the failure to take a more active
part in improving agricultural condi
tions in your communities, and in
the country generally. Your intelli
gent minds cannot faft to grasp the
fact that the prosperity of every In
dustry and every man in your city
ancl community is absolutely depend
ent upon the prosperity of the farm
ing industry, yet you have not always
given the same amount of your time
and ability in a constructive effort to
solve the difficulties confronting the
farmer that you have given to the
solution of problems in connection
with other business activities. Of
course, you have not been wilfully ne
glectful, but rather inadvertent to the
necessity of devoting more of your
time and energy to the upbuilding of
the real key industry of all.
There are many complex problems,
affecting the production and market
ing of the crops, which still press for
satisfactory solution?problems by
the way which the farmers cannot
solve promptly and effectively with
out the helpful counsel and active
support of those who have had special
training in business organization,
marketing technique and financial un
dertakings generally.
Our business men should not be too
deeply engrossed in their own private
affairs to join the fanners of their
communities in working out plans,
whereby the costs of production
might be lowered and better prices
obtained, through the application of
better marketing facilities, including
modern warehouses, and a system of
long term credit at reasonable inter
est rates. Let us not forget at the
moment that the effect of the recent
unprecendented "slump" in the prices
of farm products, has brought about
a serious crisis in the agricultural
industry in this country, and that it
is to the interest of every good busi
ness man to contribute his part to the
solution of the problems involved, so
that prosperity may be restored in
every line of business activity.
War Finance Corporation Aids In
I should like to call your attention
to one way in which the bankers of
| this country may render immediate
asMstance to the farmers in a finan- .
cial way.
In normal times our crops were
marketed in a few months after being
harvested. This was stringing illus
trated in the case of cotton. In the
cotton year 1910-1911?81 per cent,
of the exports moved within within
the flrst five months of the season.
Within the past two years only about
50 per cent, of "the exports moved in
the same period.
The abnormal credit and exchange
conditions in Europe which we have
been discussing have brought about a
complete change in methods of mar
keting abroad. Our European cus
tomers are unable to buy and pay in
gold for large quantities of our pro
ducts in a short period of time. Con
sequently longer time credits are nec
essary and American producers must
(Continued on page 8.)
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