Freedom's Test

Millions of U.S. consumers grew alarmed and indignant last week. Cigarettes jumped a penny a pack.

The Administration, gradually unshackling the economy, had taken the controls off cigarettes, along with copper, aluminum, rice and most processed foods. Cigarette makers promptly took advantage by boosting prices. Fuming smokers scarcely noticed that the price of copper jumped from 24 1/2-c- a lb. to as high as 32-c---even though this might hit their pocketbooks harder.

Chain Reaction. The copper rise set off a chain reaction. Brass producers raised their prices to keep pace. Auto-parts makers warned Detroit that they would have to revise their price lists. The price of artillery shells, bomb fuses and many another military item bought by the Defense Department was sure to go up. Were these sudden price increases an abuse? In the case of copper producers, it scarcely seemed so. The profits of the coppermen have been dwindling, squeezed between higher labor costs and the ceilings. Moreover, at a time when domestic producers have been frozen at 24 1/2-c- a lb., the U.S. fabricators have been paying the world price of 36-c- a lb. to Chile, for copper produced mainly by U.S. companies there. But the companies in Chile got only the domestic price of 24 1/2-c-; the rest went to Chile as a sort of bonus for not selling its copper to Russia or its satellites. With a 12-c- spread between the U.S. price and the world price, domestic producers had raised their prices closer to the world price. But if copper prices got too high, competing metals--notably aluminum--would grab still more of copper's markets.

Cigarette makers had a case, of sorts, but not if one looked only at their profits. In 1952 all of them, with the exception of Philip Morris, managed to boost their profits or hold their own. But the tobacco men argued that their profit per sales dollar was way down.

Did all this mean more inflation? For the moment, it apparently meant some. Last week the new cost-of-living index (TIME, Nov. 6, 1950), embracing 300 items instead of the 225 in the old, actually showed a .2% drop. But the figures were six weeks old. A more sensitive index, that of the daily prices of 22 spot commodities, had risen 2.3% since Dwight Eisenhower's State of the Union speech announcing decontrols. These rises had not yet been reflected in retail prices, but would soon boost some costs since there was no sign of a slackening in demand.

"Excellent Prospects." Production is still rising. The FRB's index rose two points in February to 239 (1935-39 equals 100). In the same month, auto production, the biggest since last March was at an annual rate of 6,200,000 cars. For the long pull, even the ousted Fair Dealers were feeling bullish. Treasury's ex-Secretary John Snyder, who had stayed around to help his successor, took off last week, after a White House visit, with the parting word that there were "excellent prospects for a continuing high level of production and consumption."

Nevertheless, Ike Eisenhower's policy of economic freedom was now undergoing its first test. At its simplest, that test was whether U.S. business would deserve its freedom by not abusing it.

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