\(/hat's Ahead for the Industry

A reproduction in part of an address given by Kenneth Smith, president of the California Redwood Association, before the spring meeting of the Lumber Merchants Association of Northern California, held at the Palace Hotel, San Francisco, March n, 1942.

Before I tell you what I think about the subject assigned to me, I want to warn you that most of you don't want to believe me correct, and therefore won't.

f wrote Bernie Barber from Washington that I was sorry for having promised to talk to you today because it would be impossible to bring you a cheerful message.

There are two roads I might take. I could point out that the total dollar volume of building in 1942 would approximately equal 1941 and soar millions above an average year. I could reiterate that there is as yet no prohibition on private residential building and quote Washington official statements that they are anxious to see private construction kept at a high level.

I could tell you of very interesting, even inspiring developments of substitutes for critical materials, such as windows using % lb. of critical metal, furnaces of onethird normal weight, and designed to use coal now and convert to oil or gas later, vitrified bath tubs made of light rveight aggregate, cleverly designed houses offering only minimum comfort now but easily and inexpensively converted after the war into highly desirable homes.

I could enlarge upon the easing of Title 6 regulations and the benefit of the increase to $5400 and extending amortization period from 20 to 25 years.

I could talk enthusiastically about the growing appreciation of real estate and particularly a home as probably the one soundest hedge against inflation.

I could practically guarantee that the farmer will buy as much, or more, lumber than in 1941 and keep right on doing it each year for the duration.

In short, by being a Pollyanna, by skipping lightly over facts and concentrating your attention on the few items that offer hope, I could build up a reasonably rosy and perfectly true story that you might enjoy hearing but which, if you relied upon it as a comprehensive and honest analysis, would completely mislead you.

I am not going to take that road.

The other road is to face the cold, hard, controlling facts, however grim and unpalatable, and try to draw from them sound conclusions as to their probable effect upon you.

If I am to be of any real service to you, it will be be-' cause f somehow find the words to convince and get you to act upon the conviction that we are engaged in a revolutionary war that is going to leave nothing as it was - that is going to change beyond recognition menmoneyall our thinkingall our conceptsbeliefsprejudiceseverything except our physical structures and may destroy them.

If you reject my conclusions and insist upon believing only what you wish to believe, you will probably swear at me for disturbing your illusions, but I will at least have the satisfaction of having done my honest best to jolt you into doing some real thinking and planning about how best to meet the cataclysmic disruption of your life that is going to result from the impact of this war upon our civilian economy.

Instead of talking about you first, let's examine the underlying key governing facts and then see what the logical effect of them will be upon you.

The end question is, "When will the war be over?" Barring internal collapse of Germany, it is not in sight for sooner than five years. Administration planning is for seven to ten years more war. Hope is that it r,vill not take more than five.

Outstanding fact which will be determining factor in effect on civilian economy is manpower. Hershey says that two million men in armed forces by end of 194210 million shifted from present civilian occupation to war work by end. ol 1942. Between 25 and 30 million ultimately (in 1943 or by middle of 1944),, on direct war work. 55/o of. all gainfully employed persons.

Second basic fact affecting civilian economy during war, and controlling fact of whole economy after war, is debt, which is limitless and determined only by length of war and extent of control of inflation. Present war commitments: 143 billion dollars. Government must borrow over and above taxes received 5O billion dollars between norv and January l,1944.

Predicted annual cash expenditure lor 1942, $58 billion. This is lo/o more than the complete over-all worth of New York State. Cash expenditure already made for war exceeds total wealth of the combined states of \['ashington, Oregon, Idaho, Montana, Wyoming, Nevada, New Mexico, Colorado, and Arkansas.

Bond sales are sagging. Have been running at less per day since the OCD exposure than they were running in January.

Third in importance in its basic effect on civilian economy is transportation-rubber situation, metals, manpower, and tremendous tonnage of material, control. At New York and San Francisco many docks are now embargoed by the railroads. Rationing of transportation is almost certain before the end of this vear.

Most alarming in its implication is the open effort of the administration to gag the press.

The one thing which is going to do more to bring the fact that we are in this life-and-death struggle is the drastic drop in living standards, even of the rich. That is going to be the result of sharply increased rationing.

There are now 52 production cut orders in effect, rang- ing from orders to cut N/o to orders to completely discontinue manufacture. In spite of predictions made by wishful thinkers and advertising saLsmen, private residential construction is already reduced to a very small volume, and will, in my opinion be completely outlawed. The order already written and rewritten some two dozen times is designed to freeze building materials in dealers' stocks or held in warehouses by speculative builderi, and to require a license before starting any new construction, private or public. It has been held up principally by the chaos caused by sixteen organizations playing for power in the housing picture, and by wrangling over whether attrition would not achieve the end and avoid the poli- tical harassment from farmers, industrialists, realiors, builders, and manufacturers of non-critical materials.

47,W prefab houses contracted. (you may be handling after the war). Government will continue to invade the housing field using failure of private enterprise to provide rental housing as the reason.

Aluminum, copper, steel, plastics, plywoods destined to dominate the housing picture after the war.

What are the probable effects of these things upon the retail lumber business? I told you last October about as well as I can today, but I don't think you were listenittg. I said then:

"No man is long visioned enough to calculate all of the changes which will be wrought upon business by the full impact of a war economy, but the retail lumber_ man is smack in the road of the Juggernaut.

"Private home building in large volume is ,out, for the duration (almost certainly three or more years). Defense housing volume will be good throu gh lg4Z, at least, but will be increasingly concentrated in large volume sales and will be less profitable. Farm busineis is the only kind likely to stay good throughout the war, outside of the lumber requirements of essential war industries.

"Many of our keenest analysts believe it inevitable that thousands of lumber dealers will fail during the war and the post-war readjustment era. Certainly the yard which relies mainly upon the contractor is in for hard sledding.

"Obviously the dealer in best position is the man who has been selling the consumer. He handles (or controls) nearer to l0o/o of all the material needed. If anyone can go ahead it will be he. Further, he is accustomed to selling, instead of bidding, and he can turn back to the development of new consumer business in small volume sales-the often despised ,,over the counter" trade.

"fn ,California there is a tremendous back yard volume waiting for the enterprising dealer. Most new home owners will have the money and the urge to fence and beautify. Benches, pergolas, lath houses, barbecues, seats, gates, fences, garden materials storage, compost bins, retaining walls, raised gardens, screen houses, terraces, tables, plant shelters, do not need priorities nor use scarce items (except nails, which, I think, are only temporarily scarce.)

"The repair and maintenance market will reward energetic selling for the same reason. Also the remodel market, except as it may be limited by shortages of met_ al accessories.

"The farmer will be a beneficiary of inflation and able to improve his property. Dealers who cater to farm trade have a better opportunity than most city dealers, although heavy defense construction and defense hous_ ing will continue for another year. The so_called 'country dealer' has always been closer to his trade than his city contemporary and will do better under war conditions.

"Whether city specialty yards catering to ,mainten_ ance' or catering to 'industrials' will fare well or ill will depend largely upon the degree of industrial acti_ vity in their cities.

"fn the general retail lumber field, two major types of dealers have been evolving for some time: The 'minimum s€rvice' wholesale type catering on price to large volume contractors, and the .merchant' type selling to the consumer. The war will accelerate this change. Some will learn to sell what can be sold and stick around. Some will decide to wait until the war is overand not last that long.

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"Yards with able merchandising minded personnel and owners with exceptional resourcefulness, selling ability, and courage, will be needed to meet the challenge of a war economy. So the answer to what war will do to you lies in how you meet it !"

Recently two surveys were made to try to find out what retail dealers in the middle west and east are thinking and doing. It disclosed that ffi/o to 70/o is farm, remodeling and maintenance, that many thought they could keep going on it, and that many dealers were adding new lines such as wallpaper, housewares, and general hardware. These surveys also revealed a strong trend to direct consumer selling.

A less pleasant confirmation is that since then more than 25 lumber and building materials dealers in California have folded.

The government estimates that 87/" of. all lumber being consumed this year is for war, either directly or indirectly. The peak of buying is expected by June or July-after that volume of consumption is expected to decline progressively and consumption for 1944 and,later to be about 3/7ths of. 1942. Of this, about ffi/o will be for boxes and crating.

What reason do these facts leave for assuming that the retail lum'ber industry will not be badly hurt and even, if the war lasts long enough, practically eliminated. You have been witnessing the impact of war upon 200,000 car and tire retailers; upon San Francisco builders and gold miners. How do you imagine that you are going to escape the impact of the drastic shift of manpower, lowered standards of living, inadequate transportation, draining off of purchasing power, shortage of material, and bureaucratic control of to whom you sell and at what price?

The answer is that you are not. The only question is whether you face the facts and get your feet braced or close your mind to facts and go on expecting tomorrow to be like today until disaster overtakes you.

Most intelligent and well-informed people are concerned about the political and economic consequences of this war. They fearwe may lose our cherished liberties instead of preserving them. Whether warranted or not, these fears are very real.

American business must make absolutely certain that the democracy we are struggling to preserve will be worth living in when the smoke of battle has cleared.

After we have fiyst made every contribution we can to the winning of the vrar, the highest patriotism rests in doing our level best to keep the regular wheels of our economy tut'ning-to keep everything going that can be kept going compatible with the diversion to war first of energy and effort that contribute to winning it.

We may lose the peace. There is grave danger that we will never in history be rid of the bureaucratic control of business; that we may, and our children may, live under absolute totalitarian control. But even if we know that will be the end result, we still have no choice but to exert every energy and spend every dollar of treasure to preserve at least the forms of our Republic in order to alford the opportunity in some better day to restore the practice and spirit of a truly representative form of government.

'We can win this war only by burning away the fat lethargy of the American soul-only by achieving a stark realism of what all-out war means in sacrifice and work.

We can win the peace only by a courageous acceptance now and for the rest of our lives of the responsibilities of citizenship which we have so long shirked.

If we fail in either then Ichabod will be written on the lintel as the epitaph of the American Way of Life.

Big Attendance Expected.at Reveille

All indications point to a big attendance at the 10th annual Reveille of Central and Northern California lumbermen to be held at Hotel Oakland, Oakland, on Friday evening, April24.

General Chairman Tom Branson reports that all the committees are functioning smoothly and that the ticket sale is well up to expectation.

Charlie Gartin, entertainment committee chairman, says his committee is lining up a show that will be woith coming to see and hear.

Normen Cords, chairman of the golf committee, asks that entries be sent to him, care Wendling-Nathan Co., ll0 Market Street, San Francisco. The golf tournament will be held at Sequoyah Country Club, Oakland, on Saturday morning, April25.