Those High Prices

The U.S. was getting angry. It was a cold and considered anger directed against the high price tags on U.S. store shelves. By last week most U.S. citizens were wrathfully hunting a scapegoat.

Was it Big Labor? Big Labor's successful strikes in 1946 had helped to build the pressures which blew the lid off OPA and the ceiling off prices. Government statistics showed that Big Labor's weekly income had more than kept pace with prices since 1941 (see chart below). Big Labor had won these gains at the expense of unorganized workers, old-age pensioners, and professional and white-collar workers.

But Labor argued that since May 1945 price rises had exceeded wage gains (see chart, col. 3). Food prices, which make up 43% of the average budget, had zoomed past all wage increases. Labor had won a higher living standard during the war and seemed determined to keep it.

Sacred Idol. Was business the villain? Despite manufacturers' pleas of higher production costs, of less-than-full production, many companies showed lush profits for 1946 and the first quarter of 1947 (although many were operating on dangerously thin profit margins). Business had answered the President's plea for voluntary price reductions with piddling action to date. The C.I.O.'s Phil Murray accused industrialists of "actual racketeering" and "organized robbery."

Was the Government to blame? Harry Truman jumped into the argument. His hands were not spotless. He had encouraged Labor to clamor for higher wages after V-J day. At the same time, he tried to keep prices hammer-locked. The paradox stalled production. Like most politicians, he had bowed before the sacred idol of support for farm prices, which would keep a floor under food costs until 1948.

The President arrived at his press conference with the warnings of his economic advisers ringing in his ears. They had told him that the threat of recession was growing. But the President protested that he was powerless to act.

Moral Suasion. New price controls were impractical now, he said. So were excess profits taxes. So were buyers' strikes. In answer to a question, he agreed that his only weapon was "moral suasion."

Then, with his ear cocked to the political front, he directed his "moral suasion" toward business. Business, he said, had wanted free enterprise. Now let's see them make it work. He went further. He hinted strongly that if business did not bring prices down, he would back Labor's demands for another round of wage boosts.

The President's attack, and his oversimplification, would help little. Business, for its part, seemed ready at last to accept its share of responsibility. It now seemed prepared to grant reasonable wage increases--to insure uninterrupted production--without raising prices. It looked as though the pattern would work out at around 10 to 15-c- an hour. Washington heard that Big Steel would hold its price line, despite such an increase. In Detroit, General Motors agreed to a year's contract with an average 15-c--an-hour hike for 30,000 electrical workers, with the implication that price rises would not follow.

Spartan Cure. But business could not do the job alone. It was not solely responsible; it could not alone effect a cure. One suggestion this week recognized that fact. In Columbia, S.C. for the unveiling of his portrait (see cut) before the state legislature, Elder Statesman Bernard Baruch outlined an all-out attack on the problem from all fronts. His Spartan prescription:

"We cannot achieve our purpose with the present hours and limitations on work. . . . Unless we work we shall see a vast inflation. . . . But if we adopted, wholeheartedly, a 5 1/2-day, 44-hour week with no strikes or layoffs, to Jan. 1, 1949, the result would be electrifying. Production would flow smoothly; a sense of security would return to worker and employer; and the reaction upon the economy of the world would be deep and lasting. . . . The more we produce, the less will be the cost of living; the more things we can buy."

Baruch's specific demand for a 44-hour week, if taken up, would spark heated controversy. But his basic thesis was incontrovertible : on the efficiency and fruitfulness of continued U.S. production lines depended the future economy of the U.S.--and of the world.

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