Cycles - Edward R. Dewey

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of the Union Pacific and Central Pacific tracks at Utah in 1869, when western lead ores were made available to market. Two trends are shown, the present trend projected tentatively to 1960. Ratio scale.

      IV

       Trends in Some Other Industries

      During the thirties when panaceas were sought on every hand for the then prevailing depression, hopes were expressed time and again that a new industry would spring up to absorb the unemployment slack. “Something like automobiles” was the comparison frequently heard. No industry capable of fulfilling the expressed hope appeared. Nor does it seem probable that one will appear on today’s postwar scene with enough drive to take up whatever slack in employment may develop in the late forties or early fifties.

      It is true that we have a number of relatively new industries. It is equally true that a number of them hold promise of great national service, and eventual large expansion. But from what we know of trends, we are now able to understand that industries follow an orderly pattern of growth, just as do all other organisms. They do not spring full-blown upon the world. Any great industry that can function to create impressive employment in the immediate postwar years is with us right now. It is already on the scene, with an established rate of growth subject to our examination. Furthermore, while these industries offer interesting careers, they are forging ahead with methods that usually produce more material with less human effort than do the processes of older competitors.

      What about the various chemical industries, for instance? These are a group of industries hailed as the probable savior of the nation’s future, a new frontier that will indefinitely extend the nation’s progress to ever higher standards of living. Figure 1 provides an answer for one such industry — rayon. Rayon may be viewed as perhaps typical of the young chemical industries. Ignore its wartime distortions, and observe the basic trend. It has a gratifying and interesting course of growth lying ahead of it. Its owners will doubtless make money. But it seems doubtful if they will create any phenomenal amount of extra employment. The fact is that practically none of our chemical industries makes for a volume of direct employment as compared to industries of analogous dollar sales volumes founded in an older era. There are technological reasons involved.

      Fig. 1. U. S. Rayon Yarn Consumption, 1911-1945

      A trend is shown, projected tentatively to 1960. Ratio scale.

      Suppose we consider aircraft. Aircraft was a baby industry before the war; war gave it the status of a munitions industry, and airplanes were turned out as flying platforms for bombs, in numbers limited only by our capacity to build and fly them. To appraise the prospects of the aircraft industry in postwar days we need only glance at the trend line in Fig. 2. Allow for a 100 per cent margin of error on the side of underestimate, and we would still have to conclude that following the war the aviation industry would revert to very youthful dimensions. That is just what began happening in late 1945. The two million people it was able to employ in wartime were reduced to a tenth (or less) of their number by the middle of 1946, for the purposes of building peacetime planes.

      Fig. 2. U. S. Aircraft Production, 1914-1944

      A trend is shown, projected tentatively to 1960. Ratio scale.

      Charts showing the trend lines for some of our other younger industries suggest a similarly orderly growth — allowing for due cyclic interruptions of the kind we shall later discuss.

      Some industries, like radio manufacturing and electrical refrigeration, are not so young in point of trend as some might suppose. They were already slowing markedly in their rate of growth before the war; replacements had become even then an important factor in maintaining volume; and, after a postwar spurt, the volume of sales will probably not be sufficient to break established growth patterns.

      Fig. 3. U. S. Electric Energy Production, 1907—1945

      Data for 1907, 1912, 1917, 1919; annual thereafter. A trend is shown, projected tentatively to 1960. Ratio scale.

      Fig. 4. Value of U. S. Natural Gas Production, 1882-1943

      Data are adjusted for the purchasing power of the dollar, 1926 = 100. A trend is shown, projected tentatively to 1960. Ratio scale.

      Fig. 5. U. S. Petroleum Production, 1859-1945

      Data for 1859, 1860, 1865, 1870; annual thereafter. Two trends are shown, the present one projected tentatively to 1960. Ratio scale. What we really have here is first the illuminating-oil industry upon which was superimposed the motor-fuel industry.

      On the other hand, natural expansion still lies ahead in the production of electric energy, natural gas, petroleum, and paper and wood pulp. And industries like electronics and certain branches of chemicals are still almost in their infancy.

      The chart on page 49 is adopted from an idea originally proposed by Roger Babson, to indicate only suggestively — and not with any degree of measured accuracy — the relative positions of a large number of our industries, in terms of their comparable age, or present rate of growth.

      Fig. 6. U. S. Paper and Wood Pulp Production, 1839-1944

      Data decennial 1839-1900, quinquennial 1909-1919, biennial 1919-1929, annual thereafter. Data for 1839-1899 estimated from value figures. A trend is shown, projected tentatively to 1960. Ratio scale.

      It provides occasion to reiterate that organisms differ greatly in the time they require for reaching maturity. There may be as much variation between two industries, or two corporations in the same industry, in the time span they require for growing from infancy to maturity, as there is between different kinds of animals and different populations.

      The younger industries shown on this composite chart have, in the rapid rate of growth that characterizes youth, a resiliency that may allow them to face the downsweep of postwar cycles with greater aplomb than some of the industries that have reached ma. turity — for reasons indicated in Chapter I.

      Fig. 7. U. S. Tobacco Production, 1839-1945

      Data decennial 1839-1870, quinquennial 1870-1895; annual 1898-1945. A trend is shown, projected tentatively to 1960. Ratio scale.

      On the other hand, many mature industries, like steel, have managed to build up large financial reserves to carry through lean days, on a scale which young industries have not managed to emulate. Building of comparable reserves has been difficult for today’s younger industries like aircraft, which have had their first taste of prosperity in a period of heavy wartime taxation.

      Now that we have dealt with trends, we are ready to inquire into the cycles that accompany trends.

      To distinguish accurately a trend as it is manifested in the life of the nation’s industry, or business, we must first know the cycles.

      Suppose, for instance, that a corporation is enjoying a period of relatively high sales volume, compared to its experience of five years previous. Is this volume the result of its normal rate of growth — a growth proceeding at a relatively rapid rate, because the corporation is young? Or is it rather the result of an upsweep that is cyclic — a temporary gain that will be heavily compensated for later? To what extent may the

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