Indications of World Recovery

A YEAR or more ago the opinion was widely held in the United States that the economic recovery of this country was retarded by conditions in other parts of the world. The domestic situation was assumed to be thoroughly liquidated, and although business still received occasional shocks or setbacks, these were believed to come mostly from abroad. Our banking crisis during the first quarter of 1933 gave a hard jolt to this assumption. Now that we have emerged from the stress of this period and seem at last to be on the road to recovery, there are indications of a reversion to our former idea that our progress is being hampered by conditions elsewhere.

In a sense this view is correct. In spite of a manifestly growing desire in the United States for economic self-sufficiency, we have not yet learned how to avoid sharing in some degree both the fortunes and the misfortunes of other countries. But the rule works both ways. If we suffer from their ills, they may also suffer from ours. As the charts on the following pages clearly show, the ups and downs of business activity have paid little attention to national boundary lines, but seem to have followed practically the same schedule on both sides of the Atlantic. Not only in the countries represented in the charts but also in most of the other countries of commercial importance, prices have been rising, speculative activity has been increasing, industrial activity has been expanding, and employment has been gaining. These may be indications of the beginning of world recovery.

In Chart I, showing the trend of wholesale prices in the United States, France and Great Britain during 1932 and 1933, the similarity of the curves is especially striking in view of the dissimilar monetary policies of these countries. In each country there was a sharp recession of prices, in terms of domestic currencies, during the first half of 1932, followed by a short-lived recovery in the third quarter, and then by a renewed decline which continued well into 1933. The second quarter of 1933 brought a rally.

In Chart II, showing the trend of prices of industrial stocks in the United States, France, and Great Britain, the curves again show similarity, but the fluctuations are less pronounced in British than in American and French securities. Moreover, while American and British stocks reached their extreme low point in June 1932, French stocks did not "make their bottom" until March 1933, when the political victories of the German National Socialists disturbed the Paris Bourse. In other important financial countries stock prices also reached their lowest point in the second quarter of 1932. They touched bottom in Germany during April, in Belgium, Czechoslovakia and Switzerland in May, and in Canada and the Netherlands in June of that year.

Chart III shows the recent trend of industrial production in the United States, France and Germany. Many people will probably be surprised to observe that the low point of industrial activity in these and other important countries was not reached in the spring of 1933, when we were having our banking holiday, but in midsummer of 1932. Industrial production reached its nadir in Austria, Belgium, Czechoslovakia, France, Sweden, and the United States in July 1932, and in Germany in August. As the British index is prepared on a quarterly basis, it is not comparable with the monthly indices of other countries; but it shows that British industrial activity was also at its low point in the summer of 1932. The drop in the United States production curve in the first quarter of 1933 was obviously due to the banking crisis.

We are still too close to the events noted in these pages to permit us to draw final conclusions, but we may at least say this much:

1. Economic recovery, as indicated by increasing industrial activity and rising prices, is under way, and apparently on a sound basis, in the leading commercial countries of the world. 2. This recovery actually began at midyear 1932. 3. It has proceeded in similar fashion in countries adhering to widely divergent commercial and monetary policies. 4. The United States did not lead in this recovery. In the midsummer of 1932 it reached a lower depth of depression than did Great Britain, France or Germany, and from November 1932 to April 1933 its industrial production was declining while theirs was improving. In its rapid industrial upturn during April and May the United States succeeded in catching up with the procession.