The New Inflation

All over the U.S. last week, the prices of meat and many other products rose with a rush that was painfully like the burst of inflation in 1948. Booming industrial production sent metal markets soaring: copper jumped 2-c- a Ib. to 22 1/2-c-; nickel was up, and even magnesium, which hadn't shown a rise since 1943, moved up 1-c- a Ib.

With steel mills running at better than 100% capacity for the eighth consecutive week, the wildest commodity of all was steel scrap. Top-grade scrap climbed to $46 a ton last week, a 48% advance in three months, to hit an alltime high. At week's end some big buyers dropped out of the market to wait for lower prices. But many industrial purchasing agents predicted that most metals will be high and scarce for the rest of the year. The Dow-Jones commodity futures index, which reflects traders' ideas of coming prices, pointed to still more rises. Last week the index went to 148.06, its highest mark since August 1948.

For some, the new inflation spelled trouble. Harvard Economist Sumner H. Slichter urged the Government to clamp the lid on mushrooming consumer credit, now at a near-record $18.6 billion, and admonished businessmen to "exercise caution in the accumulation of inventories." Slichter thought, however, that if employment stays up, the current level of business might easily last for nine months to a year longer.

General Motors Corp.'s Charles E. Wilson was even more optimistic. In a speech before Washington's National Press Club, he charted the path which the U.S. should follow to realize the full benefits of the new industrial society it has created. As a starter, he contradicted critics who charged that the 4-c--an-hour wage increase per year in G.M.'s new five-year labor contract will add fresh fuel to inflation. The increase is neither inflationary nor deflationary, he stated: "Unit costs are not increased, since productivity is assumed to increase [about 2 1/2% a year] at least as fast as hourly wages." The worker is thus given a fair share of the fruits of technology.

To produce more, with the same amount of human effort, by better machines and organization, is a sound economic and social objective, said Wilson. Both G.M. and the U.A.W., he added, accept the principle. Another cardinal principle of free enterprise is to earn good profits by efficiency and progress, and not by "just collecting a toll . . . Some [people], reluctant to face competition, seem to use free enterprise talk as a cloak for a little extra selfishness."

Added Wilson: the U.S. must work out "an American solution of the relations of labor and industry, and not attempt to adopt the philosophy of class conflict from Europe ... on the one hand, or the cartel thinking of noncompetitive reactionaries on the other ... If the people of our country really understand this principle [of increased productivity] and stick to it, and are willing to work for the things they would like to have just as they have been willing to do in the past, I have no worries about our country being able to stand the costs of pensions, insurance and high wages."

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