CHAPTER V

PLOWED-BACK EARNINGS

THE increase both in dividend payments and in
plowed-back earnings during 1929 over 1928, was
not only a primal cause of the new plateau of stock
prices, but gave promise of continuing prosperity to
business for 1930. This increase should minimize
the effects of the panic, which was largely restricted
to the stock market.
When earnings are turned back into a business
it is in order to increase the rate of profits according
to the same method by which interest is compounded
on savings. There has always been a plowing-back
of earnings, but it has been especially done in the last
few years.
In measuring the average annual rate of change
in the economic movements in the United States from
1922 to 1927, inclusive, President Hoover's Committee
 on Recent Economic Changes shows that the
rate of profits, or earnings, for industrial corporations
 has increased by 9 per cent yearly, and the
rate of dividend payments for industrial and miscellancous
 corporations has increased yearly by 6.8 per
zent.
These figures imply that the increase in the average