The Lumber Tra de Calilornia and Some Suggestions

Bv H. G. Lanick

The Lumber & Builders Supply Company, Soluno Beach, Colifornio

"No industry can be successful if it does not control its production in relation to the market demand and does not secure effective control over the distribution and marketing of its products."- Mr. Legee, forrner head of the Farm Board.

"Nothing more is needed to make us aware that this is no mere business depression we are experiencing, but a fundamental and far-reaching revolution in the basic conditions and concepts of our business structure. To understand their significance requires a complete shake-up of our ideas."-From the "Business Week," respecting the proposal of the Federal Farm Board that every third row of cotton be destroyed.

While the foregoing excerpts from the business press would properly serve as a text upon which any thoughtful bu-siness man might base a line of serious thought, it seems to the writer that they are as much applicable to the lumber trade, as to any other branch of industry. And there is probably not a lumber dealer in the State of California who has not lain awake of nights saying to himself very much the same words.

The present condition of the lumber trade, its lack of coordination and team work, the burden of individual thought and responsibility resting upon every pair of shoulders, as well as both national and financial conditions in general-seems naturally to call to mind a third quotation: situation of the lumber business today that give a name for this condition and after his medical dictionaries, he furnished the descriptive of the situation and called it

"The time has come," the Walrus said, "to talk of many things; Of shoes and ships and sealing wax, of cabbages and kings." and to bring Lewis Carroll up to date, one might add "the lumber industry."

Any study of our problems must necessarily fall into three main divisions, namely: What are actual conditions? How did they get that way? What road will take us out of the wilderness. In the space of a single article the ground can only be roughly surveyed, but that survey as taken by one oI the industry, may, it is hoped, bring forth the opinion of others, so that in the end at least a workable vision may be obtained as to the manner in which the business we are all concerned may be firmly put upon its feet. One day a wel1, able-bodied dog took sick, and while he could eat and had food about, was unable to assimilate the food and finally died after having consumed all the fat and flesh of his body through absorption.

This so resembles the the doctor was asked to searching Webster's and only word he could find "self-devouring."

Does not this fittingly describe the situation where lumber is being sold at below cost, without any regard for overhead, much less profits, making it necessary for the lumber companies to draw on their surplus in order to keep operating? The length of time they last will just depend on the size of their surplus-and the ultimate answer is bankruptcy.

Surely a remedy is to be found. Apparently a palliative will not effect a cure-a basic change is needed. With atl industry strug- gling with this same "self-devouring" situation, it's up to every industry to find its particular solution, and the lumber distributing business of California can find a cure for its owu troubles, if it will.

While the study of economics reveals nearly alt industry has basically the same problem, "over production" or "under consumption," the California tumber business has additional ills that occur regularly-in good or bad times-and the prir-rcipal one is uncontrolled, senseless price cutting. occurring evetr in prosperous times. Relief coming to' general business conditions will not relieve this factor. The writer has watched this cycle running from a "profitable price to less" for years and has come to the very definite corrctusion that basic corrditions need a change.

A1l the different schemes of price control have failed through irrherent defects, r-rotabltr:

1. The votuntary gentlemen's agreement, through lack of effective disciplinary measures (prohibited by law) always necessary to control some gentlemen.

2. The penalty plans through being illegal and subject to prosecution.

3. The various allotment plans, through the blight of stagnation (1ack of initiative) they place on lumber sales pronrotion, allowing wood substitutes to take the business to the ultimate loss of lumber volume. We have only to mention the advance of the cenrent industry in the past decade and the future well laid plans of the steel and aluminum industries in the Home Building field to emphasize the seriousness of this.

The new so-called modern merchandising plans involving financing and construction will only be successful to those using them for HOME building as long as their competitors do not engage in the same competitive methods. What one can do, however, all can do and as soon as they all use the same method the industry will again be leveled on a price competitive basis as vicious as ever.

Digress for a moment and consider a few facts; find out what the future holds forth-it is well known the per capita consumption of lumber has been falling for some yearsi that the lumber- and building industries' present share of the consumer's dollar is about 4 per cent (San Francisco's census), that the substitutes have nearly entirely displaced some of the largest industrial uses of lumber, and this ground lost cannot be regained.

The largest field for lumber sales is HOME building and here a very serious restriction appears for the long pull in the limitation of the growth of future population. Dr. E. O. Baker, senior economist of the United States Department of Agriculture, is quoted as authority for the statement that, "The birth rate'in the United States is decreasing so rapidly that despite the increasing populaion, the total number of children born annually is now declining, according to the census. Five years hence, therefore, if the present downward trend in births continues, and the immigration laws are not altered, the flow of people, so to speak, into the nation, including immigrants, will be no larger than the number of births today. The number of births today is only sufficient to maintain a stationary population of about 140,000,000 having the present age at death of 59 years. Although this average age at death may increase slightly, it is unlikely that the United States will ever have over 160,000,000 unless the number of births or of immigrants increases. It is unlikely this stationary condition will be reached before 1960, and whether the population will afterward decline is dependent not only on the birth rate but also or-r the immigration policy."

The outlook for the immediate future is summed up in an article in the Financial World: "Cor-rsideration of the various factors involved in the situation points to the conclusion that, broadly speak- ing, the building indusiry is unlikely to lead the way oui oi the present depression but will find its stirnulation in the re-establishment of an upward trend in other specific industries and in the general level of prosperity of the country."

In the light of these facts it is very evident that the lumber industry must analyze the situation and determine the objectives it desires to accomplish-most obviously:

1. Establish a profitable price.

2. Promote the use and sale of lumber.

3. Develop a proper ratio of distributing units to demand (through distribution). Every community now has more units than it can profiably provide volume for.

The quotations cited in our opening paragraphs point the way- we must have a comptete "shake-up of our ideas" and work along the lines of gaining "effective control over distribution." In doing this we must also consider relation of wages to the problem of "over production." Economics develop the facts that between 1900 and 1930 general industrial production increased nearly 80 per cent, that wages increased about 40 per cent and leisure increased only 13 per cent. .Tohn E. Rovenskv, Vice-President of the Bank of America, New York, in an article in Nation's Business, writes in this connection:

"Low wages will not heln. Many believe that wage reductions are part of the solution. I doubt it. It is difficult to reconcile the

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