CHAPTER IX

INCREASED CONSUMPTION AND PROSPERITY
ACCEPTED AS AN OUTGROWTH OF LOWER
COSTS AND HIGHER WAGES

Leaders of industry, by accepting and applying the principle
 of increased productive efficiency as the underlying
factor for determining wages, found a way by which, even
in the face of the depression that continued after the breakdown
 in 1921, rates of pay of industrial workers might be
maintained or increased without the impairment of profits
or returns to capital. Fundamentally, this new policy did
not have its origin in any humanitarian considerations, but
arose from the realization that if prosperity was to be revived
 there must be a corresponding expansion in domestic
consumption.
Europe was impoverished, and, urgent as were her
needs, she could not buy our goods except through the proceeds
 of loans or credits extended by the United States.
In the period 1921-1922, the bases for giving either public
or private credit abroad were very limited. The payment
of war debts to this country had not been arranged.
Almost all the leading foreign nations were still on a depreciated
 paper basis; budgets had not been balanced, and
private industry had not been rehabilitated since the war.
As a consequence, the possibilities of European purchasing
power were very limited. It was, therefore, evident that
American prosperity must be stimulated and maintained,
for a considerable time, at least, on the basis of its own resources.
 From this situation came the practical working
procedure that advances in wages would make possible

30)