Woodbury High School - Warrior Yearbook (Woodbury, CT)

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VALEDICTORY ESSAY Stanley T. Lusas “Depressions In all sciences, natural phenomena are governed by certain natural laws. Economics is a science and one of its fundamental laws is the law of supply and demand. The term Supply means the amount of goods or services that people are willing to sell. The term Demand means the amount of goods or services that people are willing to buy. If the supply is decreased while the demand remains the same, the price will go up. The fluctuations in the price of eggs at different times of the year offers a good illustration of the workings of this law. Except in cases of an absolute inon-oply of a necessary good, the law of supply and demand works just as inevitably as the law of gravitation. This was not evident in the Middle Ages because people lived in a continual depression. They worked hard from dawn until dusk with a few crude tools to produce the simple necessities of life. Yet they were satisfied because they had never known anything better. Manufacturers were men who had a house, workshop, and garden. They usually produced all the necessities of life themselves. In most trades no article was produced until there was an order for it, so there was little chance of over-production. When not engaged in the manufacture of goods, the apprentice helped about the house or garden so there was less chance of unemployment than at present. People rarely starved except in famines. With the invention of the steam engine, it was more economical to move machines into large factories, and people began to work these machines. At the same time the application of new machinery to farm labor made it possible for fewer laborers to produce all the necessary foods. But disadvantages have come also. The factory employees cannot work about the house or garden when not working in the factory because there are not enough jobs of that sort to go around. It is impractical for them to try to raise their own food for this can be done much more cheaply by the laborers on the farms. They are wholly dependent on their wages for their livelihood and when their wages stop they face starvation. Factories can be shut down and surplus goods can be stored for future use, but idle laborers cannot be placed in cold storage or in a state of suspended animation. They have to eat and they must have clothing and shelter. Labor is the most perishable of all commodities. War has always been followed by periods of depression. War takes laborers from peace time industries where they are creating wealth and causes a scarcity of labor in industries. The prices of goods and labor immediately rise. When wars are over, the return of laborers to the peace time industries is bound to create such an oversupply that the price of labor will be forced down below the normal level. At the same time the capital which has been invested in war time industries is not available and there cannot be the same demand for labor. In this connection, the wish to hire laborers is not a demand because the desire which is not backed up by cash or credit can have no effect on the market. The hopelessness of trying to make the defeated nation pay the expenses of a war is well shown by the situation in Europe today. A nation cannot pay debts of any kind unless it creates wealth and no nation at the present time can create wealth without the opportunity to carry on international trade. The lack of trade, credit, or good will on the part of any nation automatically affects the trade of other nations and so the depression is spread until it is international in scope. The inflation of money or stock helps bring about depressions because people will borrow money or obtain credit when money will buy a lot and try to pay it back when it will buy very little. If they succeed, they ruin the creditors or make them unwilling to loan money except at high rates of interest. Since most all of our business is done on credit, this has a bad effect on all industries and since people who have insurance policies and savings accounts are creditors indirectly. it is easy to see that we cannot ignore the welfare of creditors any more than we can the welfare of debtors. A great many causes have been given for economic depressions, but there is really only one explanation; this is, the fundamental characteristics Page Eleven

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ENIOR CLASS ELECTIONS Most popular girl—Margaret Smith Most popular boy—Robert Fray Best looking girl—Margaret Smith Best looking boy—Robert Fray Best boy athlete—Robert Fray Best girl athlete—Maude Eyre Most conceited—Robert Fray Class Humorist—Stanley Lusas Class baby—Maude Eyre Laziest—Harry Hull Class pessimist—Helen Belz Class Optimist—Robert Abbott Biggest bluffer—Raynall Coley Most bashful—Sigurd Lovdal Most musical—Candace Thompson Most literary—Robert Abbott Teacher’s pet—Harry Hull Best dressed girl—Margaret Smith Best dressed boy—Frank Matula Most quick tempered—Helen Belz Class pest —Raynall Coley Noisiest—Stanley Lusas and Maude Eyre Most studious—Elizabeth Martin Quietest—Oscar Johnson ■M Page Ten

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of human nature. Nature has given all animals, including man the instinct of self-preservation; the urge to look after oneself first. This usually expresses itself in selfishness and is the main cause of trouble. Everyone wants to gain wealth without working for it. Since wealth must be produced by someone, people try to get rich at the expense of someone else. For this reason they engage in wild speculation. They water stocks, and practice questionable kinds of advertising. Manufacturers and farmers produce all they can although they know that the market cannot absorb the total production; they do not care as long as they can sell their goods at the highest possible price. Yet when someone becomes financially unsound they find with alarm that their trade is affected. Unrestrained speculation develops a mob psychology that creates fictitious values. People come to the conclusion that a stock is good because they see others buy it. They, therefore, rush to buy it without investigating its earning power. The supply of the stock is limited and the demand is great. The price rises to fabulous heights. The illusion keeps on until some stockholder calmly reasons out the situation and com s to the conclusion that the stocks are not worth the price asked for them. He hurries to sell his shares even at a lower price than they are quoted. If enough stock-holders do this the price drops sharply and everyone stampedes to get rid of their stock. A crash takes place and the price of stocks drops to less than their real value. The corporation issuing the stock finds that it cannot attract investors, their capital drops, and they discharge employees. Then there is a period of business stagnation, followed by a slow recovery and normal times again. But man never learns from such experiences and repeats his mistakes again and again. Speculation itself, however, is not necessarily an evil. The experienced speculator investigates the earning power of the stock and pays only the price that the stock is really worth. Thus, if only experienced speculators bought stock, the result would be to stabilize prices, rather than upset them. It is the small investor with a desire for making profits and little or no knowledge of the stock he is buying, who creates a demand that cannot be permanent, and sends the price of stock up beyond where it should be. How impossible it is to evade the law of supply and demand is soon evident to all beginning students in economics, but rarely, if ever, to pol- iticians and those entrusted • with law making powers. Whenever a considerable surplus of a commodity is produced, the surplus is stored. The manufacturer, finding that he cannot sell his goods, closes his plant until the surplus is used up. His employees, finding themselves without money, buy less goods than formerly. Others industries selling to these employees are affected and have to lessen their production, and the number of unemployed is consequently increased. The farmers, finding that the factory workers have little momy, have to lower their prices for food. As the unemployment continues and the production of farm products is not lessened, prices have to drop still further. The farmer then finds it hard to pay his taxes, mortgages, interest or loans. Thus everyone suffers by unemployment in industry. If our politicians seek relief in a high tarriff, other countries cannot sell their goods here, and consequently have less money to buy goods and the depression spreads beyond the limits of our country. There have been many cures proposed for depression. Socialism and Communism have been proposed to replace Capitalism. The ideals of these systems are very worthy but they will work only in theory. They assume that an individual will work as hard for the state or nation as he will work for himself. This is not true because of the innate selfishness of human beings. If there is no personal incentive to work, everyone will try to dodge their share of work and responsibility. Russia has succeeded so far because the people have been kept in a state of patriotic fervor by their leaders. The very bad treatment which they received from the government under the Czar and the hostilities of other countries since then have made it much easier to keep the Russian workers in the proper frame of mind. The return of beer and the repeal of the 18th Ammendment are no cures for a depression for the simple reason that they do not affect the causes. The manufacturer of beer may raise the price of grain for the time being, but other countries without prohibition have suffered more from the depression than the United States. Prices cannot be fixed by legislation. The Dutch and British controlled the total production of rubber a few years ago. They stored up their rubber and refused to sell except at an exceedingly high price. People everywhere began economizing on rubber or using substitutes. Meanwhile rubber was still being produced at a great Page Twelve