The Press TUESDAY, NOVEMBER 12, 1946. Decontrol in U.S.A.

Press, Volume LXXXII, Issue 25030, 12 November 1946, Page 6

The Press TUESDAY, NOVEMBER 12, 1946. Decontrol in U.S.A.

One of the most interesting and ! perhaps fateful of post -war eco- ; nomic movements has been given I its last impetus by President Truman’s announcement, over the week-end, that all wage controls I will be abandoned and all price ceilings, except over sugar, rice, and rents, which may go “ free ” later. The Republican victories will be supposed to have tilted the i beam; but it may with as much reason be supposed that, if the elections had run the other way, the decision would have been the same. The decay of price control, which, with its complement, control of distribution, had never been very effective in the United States, goes back to the end of the war, or even ■ before, and advanced rapidly. The immediate post-war rush to kick down rationing was significant, Q and significantly followed by the failure of Congress to renew OPA powers in good time. The dilatory or obstructive politicians were warned that they were encouraging producers to hold consumption goods off the market; the midsummer meat famine verified the warning; Congress was sufficiently startled by the fact, and by popular reaction, to pass a mutilated bill, which Mr Truman vetoed; and the “ price holiday ” which ensued was ended by the passing of a new bill, so obviously and gravely defective as to signal the virtually certain breakdown of the system. Only cne thing could have saved and ■ restored it: a Democratic victory . which would not merely preserve the nominal Democrat majorities but make them real ones by destroying the link-up of dissident ; Democrats with the Republicans. ■ And this, on the face of it, was impossible. The President, therefore, ; faced a situation- in which either hostile Republican majorities or scarcely less unmanageable Repub.-lican-Democrat combinations would prevent him from reconstructing effective controls. He took his first step in pure expediency when events immediately demonstrated the futility of the new act. He lifted the meat controls and an- ‘ nounced that the whole programme under which controls were already being relaxed would be speeded up. I The elections may have hastened the end a little; they could not 1 have delayed it long. The question now is whether prices will run away—or whether they will do the other thing and : fall away. The alternative is not an absurd one. The riddle of the American economic situation, in which opposing tendencies are apparent, is which of them will take charge, in the long run rather than in the short. The strongest case for the continuing work of a soundly reconstructed OPA is that it would have given the Administration the instruments necessary to prevent either from taking charge—to prevent a new upward spiral or a slide heavy enough to check production and cause unemployment. The problem of the Administration, working with Republican majorities for the next two years, is to devise alternative instruments, if and as they are needed. The greatest danger of an upward spiral is presented by the immediate facts. Although production of basic commodities is at peak, or nearly, consumer markets are still short. In free markets, therefore, prices must tend to rise. Recent wage adjustments notwithstanding, official figures show that, while nominal wages are at’ their highest level since 1941, real wages are at their lowest, measured against retail price levels 13 per cent, higher than a year ago. The likelihood of a fierce, widespread drive for higher wages cannot be denied. In proportion to its success, wholesale and retail prices would be forced up again, for the balance generally considered to have been reached after the recent adjustments would be upset. There is no predicting the course and length of such an insane chase, though the ultimate result would be sure enough —a collapse Danger of that kind can be avoided by sense and restraint, among workers, among employers, in Washington. If it is avoided, the opposite, deflationary tendencies will begin to gather head. They are already evident in such developments as the fall in grain prices, the sequel to decontrolling meat, in the break in cotton prices, and in the huge inventory stocks figures, which suggest that consumer shortages are partly, at least, artificial. If consumer resistance to high prices, already observed in certain fields, is hardened by short-run rises, the market reaction may be to release stocks quickly at shorter prices; and that is the way that deflation begins, making buyers- hold off for still lower prices, contracting orders, slowing production. That, however, is more speculative than the fact that a downward turn in American basic prices, of which there are signs, would tend to pull counter prices back into parallel. How to get them down steadily and fairly, without jarring effect on the whole producing and distributing system, is at least as difficult a problem as how to hold back the wild horses of inflation.