How Recovery Was Set Back
ULMER, MELVILLE J.
How Recovery Was Set Back The Economics of Recession and Recovery. By Kenneth D. Roose. Yale. 280 pp. $4.00. Reviewed by Melville J. Ulmer Chairman, Department of Economics, the American...
...It remained above 6 million until 1941...
...Essentially, this study documents and substantiates the more generally held opinions of economists concerning the causal factors at work in this period...
...It examines in minute detail, and with considerable technical skill, the recession and revival of 1937-1938...
...But in 1936 and 1937 prices were rising appreciably...
...The "soundness" of the dollar was enhanced, for prices tobogganed in late 1937...
...Although unemployment was still deplorably high, concern over inflation prevailed...
...The highly vocal impatience of business with an unbalanced public budget grew to a deafening pitch...
...Typically, as the American economy nears full employment, inflationary tendencies develop, as they did in 1936 and early 1937...
...It recalls the principal problems and policies of the New Deal—many of which, though in altered form, are still with us...
...And the stage was set for the business decline which occupies Professor Roose's study...
...Reviewed by Melville J. Ulmer Chairman, Department of Economics, the American University For roughly one hundred years, economists have probed the mystery of the business cycle...
...There were other factors in operation, to be sure, but there can be little doubt that, if the Government had expanded its "pump-priming," business activity would have continued upward...
...But the New Deal was faced with the strenuous opposition of the business community...
...Reserve requirements of the banks were increased, interest rates were heightened, and the fiscal policies of the Federal Government were reversed...
...It might appear that the 1937-1938 recession was Government-sponsored...
...The Federal deficit was eliminated—and, with it, recovery...
...The brain trust acted accordingly, albeit reluctantly...
...The segment of economic history described, however, is of unusual and timely significance...
...New Deal programs beginning in 1933 had succeeded in reducing unemployment from about 12 million to roughly 6 million in early 1937...
...Superficially, it was...
...Taxes were boosted and the rising trend of public spending halted...
...This is a poser not yet solved, within the framework of conventional controls, by either economists or public administrators...
...Theories have proliferated in astounding number, and empirical studies—stimulated by America's greatest student of business cycles, the late Wesley C. Mitchell—have also abounded...
...The Economics of Recession and Revival is a book in the latter tradition...
...The dilemma is how to pour off the grease without losing the bacon, how to push back prices without also lowering incomes and employment...
...Nor does anything in Professor Roose's factual account of the events in 19371938 seem to offer a solution...
...But unemployment swiftly grew to 10 million...
...In addition, it was balked by a formidable problem in the technique of economic planning...
...Fundamental to this improvement were rising expenditures on public works and a slowly advancing Government deficit, coupled with easy money...
...In any event, in late 1936 and early 1937 money was subtracted from the stream of purchasing power by public authority, and subsequently incomes dropped and so did profit prospects, investment, residential construction and retail sales...
...The conclusions reached are not startling...
Vol. 38 • March 1955 • No. 12
