The Lumber Trade California and Some Suggestions

(Continued from Page 14) statement that we have over production with the contention that reducing the purchasing po\,\rer of millions, is desirable. An individual manufacturer, looking only at his own problem, feels that if he reduced wages he might be able to stimulate sales. He could if all the rest of the world remained unchanged, but it wouldn't. Other employers would alike reduce wages, and sales, instead of being stimulated would remain the same or decrease."

This conclusively proves that wages and the employees are a vital factor to be considered in any adjustment of conditions in the lumber, or any industry. They are an important contributing factor to general prosperity, hence must be considered ir-r any plan.

The lumber industry has been a development of individualism. Originally it started in the woods with a strong back and a pair of oxen. It developed its leaders from this school of hard knocks and only strong individualists were able to survive. Later, another type of individualist developed---one who was made successful by the rapid growth of the country and established his name prominently before the public and consequently has a lot of pride in maintaining his personality and identity. The industry has always been cursed with the defects of this method oi developing leaders, where might, passion and pride ruled more than reason. Today we are still suffering from this heritage which must be set aside and the cold, calculating facts of reason substituted in its place.

What plan will accomplish this and bring order out of the present "self-devouring" condition of industry, will properly include our three objectives and the relation of wages. Obviously, it must be a plan fair alike to the public, the operator or dealer and the employee, consequently, they must have a voice directly or indirectly. There are many plans before the public today; surely some good can be found in some of them and be applied to our lumber industry here in California.

Gerrald Swope, president of the General Electric Corp., has presented a plan to the electric industry, the salient Ieatures of which embrace our requirements. It is a national plan and at present more particularly adapted to a specialized industry controlled by a comparatively small group of operators. It could, however, be adjusted to our California lumber industry. It proposes, in brief, the compulsory organization of industry into really effective trade associations; the adoption of uniform compensation, insurance and pension measures for the protection of industries' workers. It would operate under Federal supervision with standard actounting and cost methods, administered by a general board composed of three members representing the cooperating companies, three, their employees, three, the general public. Mr. Swope asserts that:

"It tends to put all domestic corporations on a parity for domestic business; provides for standard forms of financial reports, places on organized industry the obligation of coordinating production and consumption and of a higher degree of stabilization."

Mr. W. C. Cornwell, economist of S. J. Bache & Co., in an article published in the Financial World of September 2, in considering the question, "Would the Soviet plan help us", points out that if capitalism is to survive, it must find some means "to restrict the chaos of competitive economic life", "self-devourment", and advances the suggestion that all business, large and small, be organized under one central control, business control, not political or Government control. He proposes industry, itself, establishing boards to supervise the issuing of licenses by the Government, and that no business be allowed to operate without a license and without conforming to wise rules carefully formulated, which must be obeyed under threat of withdrawal of license.

In these two plans lies the germ of a solution to our present "setf devouring" condition. They offer us a method to eventually rationalize the industry. Rationalization is defined as the process of associating together individual undertakings or groups of firms in a close form of amalgamation with the altied objects of increasing efficiency, lowering costs, improving conditions of labor, promoting industrial co-operation and reducing the waste of comoetition. these objects being achieved by various means which unification alone makes in full measure available-the regulation of the production of an industry to balance the consumption of its products; the control of prices; the stabilization of employment; the economic organization of distributors.

We must frankty recognize the fact that a bargaill t'l.rust he rnade; that for the right to organize the tumber industry effectivelv. we must offer to the public safeguards against exploitation. The Sherman Act in some form is here to stay. The rrublic will require this or something akin to it. It is human nature for one mall or group of men, when thev get control of an industry, to altow their good judgment to be blinded by vision of still greater profits and to unreasonably and unjustty boost the price to the consumer.

In this respect a legally supervised organization would eventually be a distinct advantage to the industry. If the average yearly net return of the average lumber operation in California for the past trr/enty years was computed it is doubtful if it woutd average over 6 per cent on the invested capital. Our public utilities have certainly done better than that and enjoyed a security not approached by general business.

Would it not be better for the lumber industry to operate within a fixed margin of net profit, say limited to 12 per cent, to average 7 per cent, than to continue to waste its timber resources and put forth the tremendous effort it does-making a large profit one year and losing most of it the next two, and eventually having to take the cost out of its employees, thus aiding and abetting the vicious swing of the cycle, destroying the security of the wagt and salary worker, his home and hopes and adding to the general "under consumption" of industrial products.

Is business afraid to take the only remedy in sight? Is it acting just as it did when the Workmen's Compensation Irrsurance Act was proposed? Then it could only see chaos in this governmental control, yet in a year after enactment, it acknowledged it as a most beneficial act.

Specifically, it is proposed that definite action be takeu to organize the California lumber industry, under State control, by:

(l). The establishment of a License Bureau-properly supervised by a commission composed of representatives of the industry, the public and its employees.

All distributors of lumber to be licensed by the Bureau. Every licensee to be required to operate under the regulations as developed by the Bureau. No one allowed to operate without a license. Licenses to be granted to all engaged in business on January 1, 1932. After that date, only those who could establish facts justifying the necessity of yard in the chosen location. Such facts to be liberallv considered by commission in favor of public interest.

(2). That a defilite program of rationalization be adopted by the industry. Such program to accomplish our three objectives; l. A profitable price; to be secured by the establishment of a price schedule--developed on a scientific basis of mark-up over mill costs plus transportation to particu- lar trade zones. Such mark-up to be determined by a study of average operating -costs obtained through standard cost accounting practice required by commission in all yards. Maximum profit 12 per cent, obtainabte in efficient yards. Wages and salaries to be established by commission.

2. Promote sale and use of lumber by establishing intensive advertising and research work by lumber trade associations, available to all yards, optional to individual efforts. To make this effective operating costs would, of necessity, have to be kept down to keep industry on competitive basis with other industries.

3. Establishment of a proper relationship of distributing units to demand, through rationalization. Mergers to be encouraged to relieve territories with too many yards.

To accomplish this, action must be taken by the industiy as a whole. Work should be started novr' so as to be ready to present to the legislature in 1933 for legal enactment. For immediate retiel a voluntary organization along this line, might be formed, pending the final enactment by legislature. It is possible that the whoti building material _field-lumber, -cement, sash and doors, roofing, etc., must eventually be included in this regulatory method.

It is not claimed that this will immediately make the industry prosperous-a general and world condition netds adjustment, poj- sibly along similar lines, before this may occur, but it is contended that the lumber industrv in California cah put its house in order and in s.o doing will bring nearer the days of prosperity and pos- sibly point the way for others to follow. That it musi recognize the possibilities presented by the decline in population growth;-that it must recognize that there are limits to the rate of expansion. limits we cannot pass without insuring over production, thit there must be timits to the number as well as the size of business units. that we can continue to operate in anv field at a fair income retrrrn: and these must be adjusted in our indusfry before we can enioy any prosperity, irrespective of the present depression or future pros- perity of the nation at large. Otherwise the disease of "self-devourment" will continue to the bitter end-industry suffering the same fate as the dog, or if industry does not find a cure, may bi Sovietism will be tried.