BELIEVES BUSINESS DEPRESSION WILL BE EXTENDED

From studying the European situation we conclude that there will be normal, pre-war market for several years, and for that very reason, I believe, business depression will be extended." Such was the interesting statement made by R. W. Babson, noted economist and statistician, in a recent interview for the CRIMSON.

"That does not mean, however," Mr. Babson continued, "that conditions will be as bad as they have been for the past few months. A little change may prevent the 'blues' and replace them by a reasonable optimism. And particularly affecting American business, you must remember that the law is working. The European war prolonged prosperity above the 'X Y' line, and the fact that goods have been selling at such abnormal prices convinces us that there will be a reaction of similar extent."

According to the chart worked out in Mr. Babson's office. American business prosperity started on its upward path in 1915, and reached its apex in 1920. The lowest point of depression will be reached in June of this year, and from then will begin a steady improvement, which will bring business back to the normal again in 1925. "In 1915," explained Mr. Babson, "we were due for a time of prosperity, but nothing like the immense growth we had. At present, however, I can see no hope for a big spurt in business."

In reply to a question as to what he thought of the condition of the European countries. Mr. Babson declared that he had felt all along that France would not collect from Germany because of the later country's poverty. The fact that France's prosperity seems to depend only on the sudden recovery of Germany, explains why we are not buying francs, Mr. Babson said.

Expects Administration to Act Wisely

Turning to the subject of trade with Russia, Mr. Babson expressed the opinion that the new Administration could be trusted to act wisely when dealing with this question, and that the United States had already come to a more advisable decision than that recently made by Lloyd George's government.

"The fall of the old regime of Nicholas," said Mr. Babson, "and the subsequent advent to power of the most radical group, was in strict accordance with the Law of Action and Reaction; and the same law that made Russia radical will cause America to become one of the most conservative countries in the world. The events in Russia need not be feared, for Lenine is beginning to see for himself that the only way he can maintain his power is by protecting the people in the rewards of their individual efforts. This, too, is the only way production can be maintained, and this he has failed to do. In striving to keep up the production of the industries of the country, and yet not weaken his regime, he has tried nationalization, socialization and communization which last is only a development ad infinitum of the principles of the first two. None of these schemes accomplish the result he had hoped for, and Taylorization--making production 100 percent efficient--served only in raising Russia's output to 25 percent of the normal. The absurdity of his last scheme--that of using the water powers of the Ural Mountains to generate free electricity for the whole country--would seem to indicate that his dreams are already falling."

Faith in Labor Unions

Mr. Babson admitted that Russia was still under the control of a most radical government, and that this government was strengthened by the continued patriotism and idealism of the people. "But there is one kind of organization," he said, "that Lenine does not control, and over which his influence does not extend. This is the labor union, and, strange to say, labor unions may be the final means of making Lenine give up the principles of Bolshevism and work along sane lines."

While endorsing Secretary Hughes' refusal to trade with a people who do not recognize "certain fundamental principles," Mr. Babson gave it as his opinion that the mere resumption of trade relations with Russia would expose the weakness of communism. For the "patriotic appeal" that Trotsky finds so useful would be then discounted, and Lenine's regime would stand or fall only on its value as a government. Since international trade is incompatible with the communistic idea, the regime would undoubtedly fall, and then the Russian people would be able to fling aside Bolshevism and adopt a sane and settled form of government.

Expects Russian Reform

"It is for this and other reasons," Mr. Babson concluded, "that my outlook on the Russian situation is a hopeful one and that I expect a reform in the methods of the present government, even if it remains in power. Whether it does that or not is in itself a problem."

The chart Mr. Babson spoke of is his own idea. Formerly prosperity and depression had been measured in business charts by the height of the "peak" reached by the prosperity and depression lines either above or below the "X Y" line of normality. But by this system, although "peaks" above and below the line succeeded each other, they were not regular, and it was impossible to predict the height of one peak from those that preceded it. While working in a Boston business Mr. Babson discovered that prosperity and depression should be measured by the area above and below the "X Y" line and that equal areas of prosperity and depression followed one another.

The "law" which Mr. Babson says changed Russia from an autocratic to a democratic country is Newton's Law of Action and Reaction. In some of Newton's original papers which he was able to obtain while in England in 1907, Mr. Babson found the claim that the time would come when this law would apply to the actions of individuals in mass. By this phrase Mr. Babson believes Newton meant "Business", and it is by the combining of Newton's law with his own business chart discovery, that Mr. Babson has created his system.