Chemical Economics Symposium Papers presented before the Division of Industrial and Engineering Chemistry a t the 89th Meeting of the American Chemical Society, New York, N. Y . , April 22 to 2 6 , 1935.
Chemical Prices-Recent
and Future Trends
MELVIN T. COPELAND Graduate School of Business Administration, Harvard University, Cambridge, Mass.
OR two years we have been hearing conchemicals, which are sold largely on long-term contracts, tinually about inflation. We have been marketing costs are not particularly burdensome. The same told by various “experts” that drastic inconclusion probably holds true for various intermediates. It is among some of the newer synthetic products, fine chemicals, flation is practically inevitable. We also have been given a and other commodities in the production of which chemicals guarantee by no less an authority than Mr. Richberg that so are used extensively that the greatest concern over marketing long as Mr. Roosevelt is President we shall have no inflation. costs arises. Obviously some of the major conclusions to be drawn regarding the future trends of chemical prices depend upon which of Apparently some of the chemists who have been accustomed to selling heavy, bulk chemicals have been surprised these contradictory statements is right. Before viewing t h e a t the marketing costs outlook for i n f l a t i o n , encountered when they however, there are two undertook to sell new o t h e r a s p e c t s of t h e s p e c i a l t i e s . In these Scope of Symposium chemical price problem: cases they have probably (1) t h e r e l a t i o n of not made in a d v a n c e The scope of this symposium is necessarily somewhat remarketing costs to prices car e f u 1, comprehensive Btricted. No one can approach the economic problems of the studies of the methods and (2) recent trends of chemical industry without recognizing a t once that it is and costs of putting these chemical prices. really no industry a t all. It is not made up of any closely new p r o d u c t s o n the knit group of companies, as are the true industries in an Rlarlteting Costs market. In other words, economic sense. It is not, for example, held together by a The special interest of they have not applied to common product, as is the steel industry, nor by a common marketing t h e same chemists in marketing market, as is the automobile industry. p r i n c i p l es of careful costs a p p e a r s to arise Instead, the only bond from one chemical company to ananalysis a n d experiout of the fact that for other is the very tenuous one of the common usage of a chemim e n t a t i o n that they some products a lowercal process in manufacture or in refining. Today, however, apply to p r o d u c t i o n . ing of costs of producchemical processes or products touch almost all manufacturtion is not accompanied Therein p r o b a b 1y lies ing operations that are not limited simply to mechanical one of the chief reasons by a corresponding refabrication. Hence, the chemical industry in effect is someduction in m a r k e t i n g why s o m e m a r k e t i n g thing of a cross section of all industry. No one chemical costs. In fact, it somecosts are high. The task company is a complete cross section, however, and almost no times seems as though of m a k i n g s c i e n t i f i c two companies are alike. As a result, broad generalizations the savings r e s u l t i n g a n a l y s e s of marketing of an economic nature about the chemical industry become from the labors of the methods and costs is, of meaningless, if not impossible. The marketing and manucourse, essentially differchemists were swallowed facturing problems of a pharmaceutical company, for exent from the task of conup in higher marketing ample, are obviously quite remote from those of a company ducting chemical expericosts. making a heavy chemical such as sulfuric acid. This interest in ments in a laboratory. Therefore, a symposium such as the present one cannot be The same principles of marketing costs natuall-inclusive, but can deal only with typical examples or with scientific approach, howrally is much keener in such limited aspects of the whole as may be of general apsome b r a n c h e s of the ever, do apply. It is not plication and interest. chemical industry than more reasonable to exROLAND P. SOULE, Chairman in others. I n the case pect some sales manager of h e a v y i n o r g a n i c to hit upon the most 759
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FIGURE
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TREADS OF COV’LIODITIES
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OF WHOLESALE PRICES OF ALKALIES AND F~GWRE 3. INDEX
-
effective and economical method of marketing, without careful analysis and controlled experimentation, than it is to expect a production manager to hit upon the best chemical process to be used in a given inatance. Tn the absence of comprehensive scientific data on the marketing operations of cliemical companies, a few general observations will be made about the factors which often cause marketing costs to be high and which may tend to check reductions in prices to consumers. The possible influence of antiquated marketing methods and chaotic conditions in the field of distribution will not be discussed as cause5 for high marketing costs, for there is no evidence available regarding the prevalence of these conditions in the chemical industries, Certaiii other circumstances, however, undoubtedly influence the costs of distributing certain chemical^ and thus may have an effect on prices. In the first place, sales vork is largely direct, labor. Selling robots have not yet been perfected and not many chemicals can be distributed by “nickel-in-the-slot” machines. In factory work inany of the major economies are effected by labor-saving machines or processes, or by better handling of inanimate materials. Where t,he operations are largely handwork, however, economies come with greater difficulty. For analogous reasons, savings in the labor costs of marketing are not eaqily attained. In the second place, many products are constantly competing for a share of the consumer‘* dollar and for a portion of the time and interest of the merchants who handle the products, This calls for continual sales pressure. Khen a new process is perfected, it often depends for success commercially upon large-scale operation, which in turn necessitates an expansion of the market for the product. That increase in drmand usually can be secured only hy more intensive sales mork, not, merely by lowering prices Furthermore, when a new product is put upon the market, an extensive program of education is ubually required to acquaint consumers with its merits and to overcome the inertia irhjcli i s natural to most human beings. ]Then ethylene glycol, for example, was offered for sale a< an antifreeze solution, the public did not bpontaneously flock to garages and filling stations to have the radiators of their cars filled .ir.ith this wonderful new solution. On the contiary, an expensive program of education and sales proiiiotion was necessary to develop the market. Moreover, once the market was built up, it could be held against the competition of other antifreeze solutions only by constant saleb promotion mork. The elimination of all the waoteful and un . economic practices that probablyexist i n marketing chemicals will be accomplished, hon-e%er,not by decrying them, but b y careful scientific study and experimentation. It is only by such meam that we can hope to achieve a substantial reduction in marketing costs.
Recent Trends of Chemical Prices About 1925 a -\vorld-mide decline began in FERTILIZERS the prices of numerous raw commodities, such as
JULY, 1935
INDUSTRIAL AND ENGINEERING CHEMISTRY
lead, zinc, silver, rubber, silk, wool, and petroleum, In many of these industries schemes of one sort or another were tried for checking artificially the downward trend of prices but without avail. Larger and larger stocks were accumulated in the hands of producers, and in 1929and 1930 the world markets collapsed. In the deflation of raw commodity prices, technological improvements in processes and in synthetic competitors played a part. Financial, economic, and political conditions in more or less remote parts of the world as well as in the major industrial countries exerted an even more potent influence. In the United States the prices of manufactured goods generally declined more slowly and less drastically than the prices of basic raw commodities, and from the index numbers the prices of chemicals appear to have been more stable than the average of general commodity prices. In this country the index number for the average prices of thirteen raw commodities that enter extensively into world trade fell from 110 in 1925 (using 1926 as a base) to 36 in 1932. The index number for the wholesale prices of all commodities, as compiled by the United States Department of Labor, fell from 104 to 65. The Bureau of Labor index for chemical and drug prices dropped from 102 to 74, and the weighted index number for chemical prices published by Chemical and Metallurgical Engineering dropped from 100 to 81. Thus during the period from 1925 to 1932, according t o these indexes, the prices of basic raw commodities were off 67 per cent; those of commodities generally were off 38 per cent; and the prices of chemicals were off 27 per cent on one index and 19 on the other (Table I, Figure 1). Although the index numbers for chemical prices showed the greater stability during the period of deflation, all chemical prices did not pursue the same course. The following examples illustrate the contrasts in the trends of prices for various chemicals. The recent world decline in raw commodity prices began about 1925. The starting point varied between industries. In the case of numerous chemical prices, the 1926 quotations were above those for 1925. Hence 1926 will be used as the focal year in these comparisons, and the presentation will be simplified by giving chiefly percentages based on annual averages. Sulfuric acid holds a dominant position in the chemical industry (Table 11, Figure 2). The price of sulfuric acid advanced 7 per cent in 1927-28 and has since remained unchanged. The price of sulfur, which strongly influences the price of sulfuric acid, has been stationary for an even longer period. The price of hydrochloric (muriatic) acid rose 18 per cent in 1927-28 and has since shown no decline. Nitric acid also advanced in 1927-28, but slumped back part way in 1929. Since 1929 it, too, has been stationary at 1 per cent over the 1926 level. The index for nitric acid prices has limited significance because of the fact that it is used so largely in the plants where it is manufactured. Only a small percentage of the total output is sold commercially and the market price quoted is for nitric acid in carboys. At present a large part of the nitric acid produced is made by the oxidation of ammonia, for which the cost of production has been substantially reduced in recent years. Aqua ammonia is taken as an index for ammonia prices. The price of aqua ammonia was 38 per cent lower in 1926 than in 1925, and after some fluctuation it declined farther, until in 1933 it was 26 per cent lower than in 1926. Bleaching powder was unchanged from 1926 to 1930; then it dropped off until it was 12 per cent cheaper in 1932 (Table 111, Figure 3). Caustic soda prices were more sensitive; they declined gradually until in 1931 they were 21 per cent below the 1926 figure. Soda ash prices were off 19 per cent between 1926 and 1931. Trisodium phosphate, benefiting from the use of new furnace methods, was 38 per cent lower
TABLEI.
761
TRENDS OF OTHERCOMMODITIES
COMPARISON O F P R I C E
CHEMICALS AND
(Index numbers, 1926 = 100) Chem. R.
Index for Prices of 13 Raw CommoditiesQ 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934
Bureau of Labor Index For wholesale For prices prices of all of chemicals commodities and drugs
110 100 90 86 83 60 43 36 45 57
104 100 95 97 95 86 73 65 66 75
120 100 97 96 94 89 79 74 73 76
$i&fg$ Index for Prices of Chemicalsb 100 100 96 95 96 92 84 81 82 84
Copeland M. T “ R a w Material Prices and Business Conditions,” supplementedby h i t h h o unpublished data. b This index has been adjusted from a 1927 base t o the 1926 base. Q
TABLE 11. INDEX OF WHOLESALE PRICES OF ACIDSAXD AMMONIA
1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 a
HzSOaa
HCla
HNOaa
NHaOHb
95.9 100.0 104.1 106.9 106.9 106.9 106.9 106.9 106.9 106.9
96.8 100.0 108.6 118.3 118.3 118.3 118.3 118.3 118.3 118.3
92.4 100.0 101.4 102.5 101.4 101.4 101.4 101.4 101.4 101.4
160.1 100.0 79.0 99.5 94.3 94.3 80.3 76.8 74.1 74.1
U. S.Bureau of Labor Statistics.
b Computed
from price quotations in Chem. &: Met. Eng.
TABLE111. INDEX OF WHOLESALE PRICES OF ALKALIESAND FERTILIZERS Bleaching Powdera 1925 1926 1927 1928 1929 1930 1931 1932 1933 1934 Q
b
96.1 100.0 100.0 100.0 100.0 100.0 95.4 87.5 88.7 95.0
Soda Asha 100.0 100.0 96.2 95.5 94.1 94.1 81.2 82.6 63.7 86.0
Caustic Sodao
Sodium Nitrate9
100.0 100.0 96.2 92.2 92.2 92.2 78.9 81.5 86.3 81.3
101.1 100.0 97.9 87.5 84.6 81.4 77.7 62.2 51.2 51.9
Trisodium Phosphateb
1oo:o
100.0 102.5 105.3 88.1 78.1 77.3 62.1 64.5
U. S.Bureau of Labor Statistics.
Computed from price quotations in Oil, Paint Drug Reptr.
in 1933 than in 1926. The price of sodium nitrate was 49 per cent lower in 1933 than in 1926. The differences in the degree of price change shown by these heavy chemicals, ranging from an advance of 18 per cent to a drop of 49 per cent during the last nine years, are the results of many variables-competition, both direct and substitutive, changes in demand, and alterations of cost factors. I n the case of sodium nitrate, for example, the agricultural depression and the struggle of the Chilean producers t o continue in existence, in the face of the competition from the synthetic producers and the by-product plants, forced the price down more or less irrespective of cost. The differences in the price trends for these various items indicate the caution that must be exercised in the use of general averages for hazarding any forecast for chemical prices. Among organic chemicals we also find marked contrasts in the trends of prices of individual products. I n the coal-tar field between 1920 and 1930 the price of phenol fluctuated much more violently than did the prices of aniline oil, naphthalene, and toluene. Under the pressure of the large stocks carried over from the war days, the price of phenol was very low in 1921. I n 1922 and 1923 the price advanced 300 per cent and then declined steadily until 1931 when it was 28 per cent below the 1926 average (Table IV, Figure 4). Curi-
762
IYDUSTRIAL AND ENGIKEERING CHEMISTRY
FOL. 2 1 ,
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t i o n of d i s t i l l e d m e t h a n o l . The price of methanol fell after 1923until in 1926 the import duty was increased by presidential proclamation / / 0 from 12 to 18 cents a gallon. During the firat eight months of 1926 the price in New York wab 100 65 cents a gallon. After the increase in the tariff duty the price rose to 85 cents for a few a0 months. By the end of 1927, however, it was doxx to 50 cents, and by 1932 down to 32.5 80 cents, a decline of 62 per cent from the high p o i n t i n 1926-27. T h e a v e r a g e a n n u a l price was 44 per cent lower in 1932 than in 1926. FIGURE4. INDEX OF WHOLESALE PRICESOF COAL-TAR PRODUCTS Butyl acetate has assumed large commercial importance only during the last decade. I n 1923 the production was 1,800,000 pounds; in 1925, 16,400,000 pounds; and in 1929, 38,700,000 pounds. I n January, 1925, the price of butyl acetate was $2.40 per gallon; in January, 1934, 80 cents a gallon-a decline of 662/3per cent. The average annual price fell 45 per cent between 1926 and 1934. S u / p h b r B/ocfi i '192-5 1926 ' -Ethylene glycol has risen in commercial im/927 /925 /929 /930 /93/ portance even more recently. I n 1922 the proFIGURE 5 . IKDEX OF WHOLESALE PRICESOF DYES duction was only 10,000 pounds and in 1924, 100,000 pounds. I n 1927 i t a m o u n t e d t o ously enough, after the wild fluctuations of the preceding dec11,700,000 pounds and has increased substantially since that ade, the price of phenol has been absolutely stable for the date, The price of ethylene glycol declined 25 per cent belast four years. The price of aniline oil has behared much tween 1926 and 1933. like the price of some of the heavy inorganic chemicals, and Enough figures have been cited to show what divergent in 1933, its low year, it was only 7 per cent below 1926. courses the prices of various chemicals have followed. At Toluene by 1931 was off 17 per cent from the 1926 level and one extreme we find sulfuric acid, hydrochloric acid, nitric naphthalene was down 18 per cent. In general, all four prodacid, indigo, and sulfur black, where there has been practically no change in prices during the last six or eight years. ucts have shown greater stability since 1926 than they did The prices of several of the other products have declined only from 1920 to 1925, when the peace-time readjustments, the depression of 1920-21, and radical developments within the 20 per cent or less. Sodium nitrate, methanol, and butyl industry resulted in abnormal price variations. A study of the prices of coal-tar dyes is beset with special difficulty. Most of these dyes were imported from Germany TABLEIV. IXDEXOF WHOLESALE PRICES~ OF COAI.-TAR before 1914. Under the stimulus of the higher prices resultPRODUCTS ing from the shortage of the supply, our own war requireAniline SaphthaPhenol Oil lene Toluene ments, and other factors, a dye industry was established in this 113.7 103.5 100 2 78.1 country. As production got under way, prices declined and 100.0 100.0 100.0 100.0 there was a strong downward trend from the famine peak in 86.6 92.1 100.0 84.4 76.2 94.2 102.7 89.6 the war years until about 1925, after which some advance 70.1 91.4 81.8 116.0 7 4 . 8 9 1 . 4 8 1 . 8 91.8 occurred. I n addition to the abnormal price curve which re12.4 81.8 95.6 82.6 sulted from those conditions, changes also were taking place 12.4 97.4 86.5 85.7 7 2 . 4 92.9 108.0 85.7 Hence the of dyes used in industry. in the variety and type 100,5 72.4 110.5 85.7 recent trend of dye prices must be interpreted with that back0 U. S. Bureau of Labor Statistics ground in mind. The two dyestuffs sold in largest volumeindigo and sulfur black-have had notably stable prices TABLE V. INDEX O F wiHOLESALE PRICESa O F &"E$ during the last few years (Table V, Figure 5 ) . In 1927-28 Sulfur Sulfur indigo rose 7 per cent and for the next six years showed no Black Indigo Black Indigo change. Sulfur black was 16 per cent higher in 1927 than in 96.0 118.5 1930 1925 101.7 107.1 the preceding year, but it lost most of that advance in 1928 100.0 100.0 1931 101.7 107.1 1926 116.2 100.0 1932 101.7 107.1 1927 and since 1929 has been steady at 2 per cent above 1926. 108.7 106.4 1933 101.7 107.1 1928 1929 101.7 107.1 1934 101.7 107.1 The prices of azo dyes have in some instances been stationary * C. S.Bureau of Labor Statistics. during the last ten years and in other instances have shown moderate declines. The prices of these coal-tar products have shown much the OF WHOLESALE PRICESOF ALIPHATIC TABLEVI. IKDEX same range of variation since 1926 that was shown by the COhlPOCNDs heavy inorganic chemicals, with the exception of sodium niButvl Ethylene Butyl Ethylene trate. The degree of change of these coal-tar products ranged Nethanola Acetitea Glycola Methanola Acetateb Glycol" 1925 94.4 1930 67.5 87.4 75.1 from an advance of 7 Der cent to a decline of 28 Der cent. For illustration of'price trends among the aliphatic corniii! i:ji: ti$!! Ti:: 6.Sfi6 . 11 6R 35 . '2' 29.7, :g!t Zz.2 9PO4 .n8 7? A7 . 72 1933 pounds methanol, butyl acetate, and ethylene glycol hare 14'26
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. L _ _ _
~
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acetate, however, have fallen 40 to 50 per cent within the last ten years. The exigencies of the sodium nitrate situation already have been indicated; in that instance world influence dominated the market. In the case of the aliphatic compounds, the sharp drop in prices has been typical of the development of large-scale production and marketing of new products. Once the initial development period is over, it is to be expected that the prices of these new products will become much more stable. TABLEVII.
COMPARISON OF PRICES AND WAGE RATESOF MONSANTO CHEMICAL COMPANY Prices
of
Index of Av. Hourly Wage Rates
100.0 99.0 95.0 98.1 87.9
100.0 100.0 99.3 99.6 104.0
Index 1926 1927 1928 1929 1930
Index of Prices 1931 1932 1933 1934
82.6 80.2 74.1 74.0
Index of Av. Hourly Wage Rates 103.7 106.1 104.2 121.6
next ten years the prices of chemicals generally are not likely to advance as rapidly as the general commodity index rises. Certain chemical products which have shown extraordinary price rigidity are likely to lag behind the general price advance. In the case of various synthetic products, further improvements in methods of production and the savings to be made with increasing sales volume probably will tend to check price advances. The chemical industry, however, will not be able to dodge those influences which a t the present time seem certain to cause the cost of living a t least to double during the next ten years or thereabouts, possibly much sooner. Given time to become effective, the changes that have been made in our currency and credit situation since March 4, 1933, are sufficient to bring about a rise of that magnitude. If our government deficit continues to increase indefinitely, if the Government succeeds in creating shortages in the supplies of enough commodities, or if more rabbits continue to come out of the hat in Washington, the cost of living may eventually increase much more than 100 per cent. The devaluation of the dollar was undertaken on the naive theory that prices would rise immediately in the same proportion that the gold content of the dollar was diminished. Although that rise has not yet taken place, it will come in the course of time. Unfortunately, however, it will follow rather than cause business recovery. Business will continue to improve, by spurts, despite the many restrictions that have been and are being imposed by the Government. With a larger volume of trade, more and more firms are likely to have recourse to the banks to borrow funds with which to finance inventories and pay rolls. That will stimulate price advances. As prices and wages rise, more money will be borrowed from the banks, and the rate a t which prices rise will be
An interesting chart was published in the last annual report of the Monsanto Chemical Company (Table VII, Figure 7 ) . This showed that between 1926 and 1933 the average price of Monsanto products fell 26 per cent whereas wage rates rose 4 per cent. In 1934, moreover, the company’s prices were slightly lower than in the preceding year, whereas wage rates jumped up to a point over 21 per cent above the 1926 average. From a price standpoint the chemical industry obviously is far from homogeneous. The improvements in technical processes, changes in costs of raw material and in other elements of production, expansion, and contraction of markets, and competitive conditions have all affected the prices of the i n d i v i d u a l p r o d u c t s t o v a r y i n g degrees. Furthermore, chemical manufacturers in numer//0 ous instances have adopted policies of price stabilization, probably in line with the theory that /o 0 demand would not respond to price reductions or in accord with the doctrine so widely promulso gated since 1930, that purchasing power should be artificially maintained. Neither of those 80 theories appears b a s i c a l l y sound. The producers of sulfur and the makers of sulfuric acid, for example, have probably underestimated the 70 elasticity of the demand for their products over a period of years, but that is another story. 60 The fact to be emphasized here is that caution must be exercised in drawing conclusions from the general indexes as t o the future trend of (825 /326 /827 chemical prices. FIGURE 6. I N D E X OF
/9PB
/929
/330
/8J/
/S32
/933
/934
WHOLESALE PRICES OF ALIPHATIC COMPOUNDS
Future Trend of Chemical Prices Since 1932 the prices of many commodities outside the chemical field have advanced. The Bureau of Labor’s index number for wholesale prices was up from 65 in 1932 to 75 in 1934. The writer’s index for raw commodity prices rose from 36 in 1932 to 57 in 1934. In the chemical field, among the products for which he has assembled prices, sulfuric acid, hydrochloric acid, nitric acid, toluene, methanol, phenol, indigo, and sulfur black dyes have remained unchanged ; the prices of aqua ammonia, sodium nitrate, trisodium phosphate, and butyl acetate have declined; and the prices of the other products h a v e a d v a n c e d , i n m o s t cases b y small amounts. As to the future, examination of chemical prices leads to the conclusion that during the
/JO 120
//O
100 so 6 0
1925
/926
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1928
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1930
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1954
FIGURE 7. COMPARISON OF PRICES AND WAGERATESOF MONSANTO CHEMICAL COMPANY
764
INDUSTRIAL AND ENGINEERING CHEMISTRY
accelerated. Directly or indirectly this will affect the chemical industry. I n addition to the ultimate influence of the tinkering with the dollar, me also have an enormous increase in the government debt, coupled with provisions whereby the Federal Reserve Banks can issue notes, or paper money, against the boiids that the Government is putting out. So far the bulk of the bonds have been taken by the commercial banks, but as business picks up the banks will have other uses for their resources and more and more of the bonds of the Federal Government probably mill be, in effect, converted into paper money. That mill give an added stimulus to rising prices. 80 long as the Government continues to spend more than its income, it is putting out bonds that can become the “security,” sooner or later, for further issues of paper money, which presently will add to the cost of living. The chemical industry, like all other industries, d l feel the effects. In viemof the uncertainty as to what the Administration nil1 do, it is impossible to prophesy how far this increase in the cost of living will go, or horn far chemical prices will rise, A further addition to our currency is being made as a result of the purchases of silver decreed by Congress. I n comparison to the expansion of our credit and currency that eventually will result from the devaluation of the dollar and the huge government debt, the silver factor is small Severtheless, it does represent a waste of our government resources; and here is a suggestion for the chemists. During the nineteenth century, as world trade grew, it was discovered that a single monetary standard was essential for international exchange, and gold proved to be most satisfactory for that standard. That meant that silver lost its standing as money in all the chief countries of the world, except China. I n the United States, hom-eTTer, the silver interests have never acknowledged that reality and during each severe depression since 1870, they have sought and succeeded in obtaining a government market. 4 s a reeult, in January, 1935, the United States Government held J755,000,000 in silver, in addition to its subsidiary coinage, and more is still being bought by order of Congress. Very few people want to use silver cartwheels as money; consequently paper certificates are issued, which really depend for their value not on the silver but on the government credit behind them. The large amount of government funds tied up in this stock of silver and the expenses of storing it represent merely a costly political sop. I n the industrial field, some silver is used for the manufacture of tableware and ornaments. A considerable quantity also is used in the manufacture of motion picture films. A s yet, however, the silver producers seem never to have tackled the job of developing new industrial markets to take the place of a decadent monetary market-consequently, the political pressure to have the Government provide a market in hard times. I n view of the success which has been achieved by chemists in other directions, I have little doubt that if they undertook to do so, they could develop new opportunities for utilizing silver in the chemical and metallurgical fields that would provide a profitable market for the normal output of silver in the United States and perhaps for the Government’s silver elephant. Here then is a challenge for the chemists. If they will solve the problem of creating an industrial market to take the place of the monetary market for silver. they will confer a great favor upon the American people by removing the abnormal silver influence from politics in future periods of business depression. To return to the subject of chemical price trends, In the immediate future it will be helpful if the prices of certain products that hare been overstabilized are reduced to reestablish workable price relationships between various commodities. Once businev gains more headway, as the writer
VQL. 27, NO. 7
is confident it will despite its handicaps, prices may be expected to rise, gradually a t first, then a t a more rapid rate. It seems probable, however, that the prices of various chemical products will continue to show divergent trends. RECEIVED May 2, 1935
d
1 JOSEPH J. MLEPN Klein, Hinds & Finke, New Yorlr, N, Y
OW, to whal extent, and in which directions has the New Deal influenced or affected depreciation and obsolescence in the chemical and allied industries? ‘Yew Deal,” as the expression will be employed in this paper, connotes bhat body of legislation and executive orders which is popularly associated with the program of President Roosevelt, but which, in reality, at least in the strictly economic field, had its genesis in the preceding administration. In general, the New Deal, i n our present limited sense, means the attempt to substitute a planned economy, founded on knowledge and research in the physical and social sciences, for the laissez faire and the muddled and haphazard strivings of past generations. The shortcomings of the attempt, due to many complicated factors, some inherent in human nature itself, should not be charged to the Administration. The terrible mess which it inherited, and for which only blind partisans would blame the immediate predecessor administration rather than homo sapiens, was in the making since long before the Great War. If the present Administration is a t all censurable, let it be said that blame is due primarily to failure to appreciate that it was undertaking an impossible program in point of time. We may wonder whether the President does not sometimes, as he ponders the scene and the burdens which are his, think of himself as a modern Atlas, or whether he ever recalls to mind Tantalus and the ever elusive water which he stooped to drink, or in darker moments Sisyphus and his endless and futile task of rolling the huge rock up the steep hill in Hades only to have it continually roll back again. “Depreciation” is the physical wear and tear of productive equipment, due to use, analogous to “depletion” in the field of natural resources. ‘Qbsolescence,” while related to depreciation, is to be differentiated from it chiefly because the former factor is associated with decreased value due not t o physical exhaustion or destruction but rather to comparative dis-utility due to improvements in the arts which produce a competitively more economic device or t o changes in demand for a given product. I n this paper, reference to annual or other charges for depreciation, following the pattern which prevails in federal revenue legislation and administration, means the charge for decreased value of capital assets due to
