Evening Post. WEDNESDAY, APRIL 28, 1937. THE "INFLATION HAZE"

Evening Post, Volume CXXIII, Issue 99, 28 April 1937, Page 10

Evening Post. WEDNESDAY, APRIL 28, 1937. THE "INFLATION HAZE"

Fear of inflation is so real a tiling that it is colouring all branches'of policy discussion in the United States, and in Britain it has caused ihe Chancellor of the Exchequer to take his courage in his two hands and to put forward a City-challenging profits tax. -. In America trends are not yet so definite, but what newspapers call the "inflation haze" is occupying a good deal of the political sky—even more than in Britain. All sections are being called on to contribute to measures for the prevention or curbing of the speculation and other factors leading to the rising costs that cancel pay-increases. The old argument as to how to check speculation, without strangling enterprise, is in full swing. Into the crossfire come the "sit-down" strikers, the magnates who sit down on a monopoly or quasi-monopoly (example, aluminium), banking systems that fail to stop misuse of abundant credit for gambling instead of investment, and, last but not least, the financial policies of the United States Government. '

One symptom of the United States ferment is the Government action (announced on Monday) against the Aluminum Company of America, the head and front of an aluminium monopolistic organisation built up, in his private career, by the former Republican Secretary of the United States Treasury, Mr. Andrew Mellon. This holding company, with its children and grandchildren, has, according to the Government, "stifled competition in the entire industry." That is to say, it has raised costs and made fabulous profits. Apparently the Government's aim is dissolution of the aluminium trust, in much the same way as the Standard Oil Trust was dissolved by the United States Supreme Court (that alleged conservative institution!) about twentyfive years ago, when "trust-busting" was the business of the hour. Dissolution of monopolistic ownership is not necessarily the same thing as cheapening its commodity, but is regarded, on the Standard Oil precedent, as a step thereto. It is a step which a Democratic Administration may safely take in order to show its willingness to .tacklS "the big shots," especially if "the big shot" has been a Republican Secretary of the Treasury, and if he exemplifies in his own life and works the alliance of the Republican Party with wealth. The Aluminum Company suit may easily become a political as well as an economic landmark.

A Government can take the warpath against inflation with'more confidence if its own hands are fairly clean. Budget unbalance is one cause of inflation, and the British Government has balanced its Budget over recent years of "depression" and "recovery"; the United States Government has not. When Washington speaks of the perils of inflation, New York can easily answer: "Why not balance your Budget?" That means cutting Government expenditure on relief ("no more Santa Claus!") and cutting the Federal pay-bill ("no more jobs!"), and reducing expenditure all round —evidence of which, and of the revolt against it, is abundant in the cablegrams. Even so, no balanced Budget is hoped for before 1939. It is politically possible to take action against the Aluminum Company, but not to end Federal deficits. The remark is frequently made in America that the Administration's "desire to avoid unpopular economies is quite understandable." So is sin—arid equally difficult to cure.

Latterly a new "trend" has come into the Babel of discussion. Antiinflation is considered to be a sufficiently vigorous horse for the President—or his defenders —-to harness it to the chariot of the Judiciary Plan. Briefly, the argument is this: Inflatiqn is hardly to be prevented; it is almost sure to come; when the crisis comes, a state of emergency will arise comparable with the "depression" emergency of 1932-33; the crisis will call for the disallowed "New Deal" powers and for more, possibly for direct price-fixing to curb unrest, wherefore—sympathetic and younger Judges are needed. President Roosevelt's Secretary of Agriculture, "New Dealer" H. A. Wallace, lately said:

All of us are afraid of a repetition of the 1929 boom. . . . The Government has not sufficient power now to effectively mitigate the wide swings of the business cycle.

Some people suspect that the inflation crisis is being used to further

{lie Judiciary Plan, rather than, that iho Plan is destined to control the crisis. But the linking-up of these two great portents in the American sphere is obvious. »

Critics of the Administration poinl out that President Roosevelt has no need to wait until a crisis puts emergency powers in his hand. He has, they argue, preventive powers dependent not upon the will of Judges. The Administration may stop borrowing and balance the Budget.

The Administration needs no new legislation or Court decisions in order to economise, to raise taxes, to enforce anti-monopoly statutes [this is now being done in the Aluminum Company's case], to reduce tariffs so as to invite foreign goods into price competition with domestic products, to restrict the use of credit for speculative purposes. The Administration may even revalue the dollar, if necessary, or reduce its high valuation of gold. The last sentence touches the point that recently shook the stdck markets on both sides of the Atlantic.

Meanwhile, out of the "smouldering fear of ■ inflation" arises, in Britain, a definite act of profitstaxation, which, falling on friend and foe alike, involves far more political courage than filing an anti-monopoly suit against a political opponent. If, as the columnists say, President Roosevelt, is "apprehensive of crisis," can he rest on a machinery proposal like the Judiciary Plan; and, if not, what use will he make of the various speculation-curbing powers that undoubtedly are ready to his hand?