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New International, January 1948


Notes of the Month

The Politics of Anti-Inflation


From The New International, Vol. XIV No. 1, January 1948, pp. 5–7.
Transcribed & marked up by Einde O’Callaghan for ETOL.


As this is written, the wholesale-price index of the government’s Bureau of Labor Statistics has just reached another post-war peak. From 1939 to 1945 this official index – which studiously avoids taking into consideration realities like the black market, quality deterioration, elimination of special discounts and clearouts at reduced prices, etc. – rose by some 37 per cent. From January 1946 to last March, it upped again by 40 per cent. This was one of the sharpest rates of price increase ever recorded in this country.

Since the beginning of August at least, prices have been again rising. As Secretary of Labor Schwellenbach mildly said in his annual report to Congress: Whatever wage increases labor won during the war “generally were erased by the spiraling cost of living.” Meanwhile last year’s corporate profits are estimated at $17 billion as compared with $12.5 billion in 1946; which, in turn ...

Another thing which corporate executives do in turn, besides raking in profits, is to explain that higher wages mean inflation: when people have more money to spend, they bid up prices, etc. But this reasoning is not applied to the largest inflationary factor of this sort – the government’s military budget. Today military expenditures are greater than the total pre-war national budget! These are orders that go to create demand, directly and indirectly, such as bids up the price of every commodity.

President Truman rose to the occasion – the threat of inflation and the skyrocketing of the cost of living – with characteristic adroitness and clarity. Having, only a few weeks before, gone out of his way to denounce price controls as the instrument of a “police state” – that was 1947 – he appeared before Congress with the onset of 1948 to demand the re-imposition of partial price control on selected commodities as an anti-inflation measure.

The apparent inconsistency immediately disappears when we remember that

  1. 1948 is a presidential election year and all previous statements are by the rules of the game considered obsolete; and
  2. Truman’s demand for partial price control does not contradict his belief that this means partial police control, since the OPA found out in its earliest days that this kind of price control is unworkable and ineffective – in short, a fake.

Besides, he would have been the most surprised Missourian in Washington if the proposal had been accepted by the Republican majority. According to the newspapers, some of the GOP leaders even toyed with the idea of voting in his bastardized price-control proposal just to see Truman outsmart himself; but that maneuver proved to be too subtle for the Republican intellect.

“Better Than Nothing”

The latter, equally cognizant of the fact that 1948 is the promised year of their re-entrance into the White House, hastened to introduce and pass an “anti-inflation” bill also. As if to prove that Truman is really the lesser evil, they did not even bother to include fake price-control provisions. This conclusively demonstrated – did it not? – their more reactionary character.

Instead the new law vigorously pleaded with big business to do voluntarily that which it fought tooth-and-nail against being legally required to do: reduce prices and allocate scarce materials fairly. Even this masterly plan they had to steal from lesser-evil Truman, who had already exhausted its possibilities by two appeals to the nation’s business men to reduce prices.

This voluntaristic anti-inflation drive of Truman’s took place not long before the BLS index resumed its upward climb. This was merely an unfortunate coincidence. We are not so prejudiced as to believe that Truman’s appeals to cut prices were the cause of the upward climb.

Sternly insisting that he was still for price control (non-police-state variety), Truman signed the Republican bill without more ado. The reason given was that this bill was “better than nothing,” though nothing was better than price control; and though nobody could find anything anti-inflationary in the bill, it is obvious that to pass a bill is better than to pass no bill. This logic is derived from the famous syllogism which goes as follows:

Nothing is better than wisdom. Dry bread is better than nothing. Therefore, dry bread is better than wisdom.

This bill which was “better than nothing” immediately justified the faint praise which the President had bestowed upon it. Providing as it did for voluntary allocation agreements by industrialists (uncontrolled by the government and unenforceable by either government or business), it also had to provide that these industrialists be exempted from the operation of the anti-trust laws.

Here one of the shorter arms of coincidence reached into the picture. Meeting in Washington almost as fast as they could get there after the anti-anti-inflation bill was passed, the steel corporations got together to discuss their voluntary allocation program, serene in their new immunity from anti-trust persecution. Indeed, the president of United States Steel, Benjamin Fairless, told the press he wanted a written guarantee from the government that his corporation would really be exempt from anti-trust harassment if it enters the voluntary program.

The coincidence lay in the fact that not many days later the Federal Trade Commission was scheduled to open hearings on its charges that 101 steel manufacturing companies had conspired unlawfully to fix prices and stifle all competition in the industry.

Nor is steel the only one in the pillory. A total of 114 anti-trust cases are now pending against a roster of 1300 companies – big names in auto, meat packing, household appliances, oil, housing, etc. The list reads like a Who’s Who of American industry. The charge: monopoly practices linked up with skyrocketing price levels.

However, Truman’s foresight must be commended at this point. In his “State of the Union” message to Congress, before he signed the bill exempting the bad big boys from anti-trust worries, he had already proposed increasing the funds appropriated for the Anti-Trust Division of the Justice Department. It is obviously nothing more than even-handed justice to give trust-busters more money on the one hand, and the monopolists more immunity on the other. This is the system of checks and balances in the great American tradition.

CIO Prepares for Wage Fight

Wendell Berge, who until last spring was the head of the Anti-Trust Division, anticipated these developments in a recent magazine article (Virginia Quarterly Review, Autumn 1947):

One inevitable by-product of this post-war monopoly drive has been the number of efforts made to remove whole fields of production or economic service from the jurisdiction of the anti-trust laws ... Cartelists count upon the cessation of vigilance directed toward them ... This effort on the cartel front, however, has been duplicated and even in some respects exceeded by attempts to remove the domestic operation of many fields from the jurisdiction of the anti-trust laws upon one excuse or another.

The excuse turned out to be the fight against ... inflation. This positively invaluable kind of struggle against inflation is spreading to all fronts. General Motors President Wilson told the NAM recently that the 40-hour week is “inflationary” and a stop should be put to it instanter. GM will have the opportunity, too, since its contract with the UAW comes up for reopening of negotiations on February 28. And after a recent meeting of the Wage Policy Committee of the auto workers. President Reuther made a statement in which he suid:

The failure of both government and industry to stop inflation leaves labor no choice but to demand and win further wage increases in order to restore and maintain the purchasing power workers have lost through skyrocketing prices.

The steel union likewise is preparing for a new wage round. At the moment we will not dwell on the question: Will Reuther again fight for wage increases without price increases? We will ask another.

In the statement quoted above, Reuther also said:

Failure of the government to curb the inflation Americans are suffering under today can be attributed directly to unscrupulous political maneuvering by both the Democratic and Republican Parties. Both parties are playing fast and loose with the welfare of the people in a political chess game whose object is to see which party can win more votes on the inflation issue without doing anything about it.

Very true. Is it therefore Reuther’s conclusion that labor must break with these twin betrayers of the welfare of the people and build a party of its own? Not that we’ve heard – not out loud, anyway. Instead, we shall not be amazed to find Reuther also rooting for Truman in November. The rationalization for this, we suspect, lies in something like the syllogism we cited above:

Nothing is better than a labor party.
Truman is better than nothing.
Therefore, Truman is better than a labor party. – Q.E.D.

A logician would point out that the obvious fallacy here is the use of the word “nothing” in two different senses. Politically speaking, that is also what actually happens when the logic is put into practice: the workers get two distinctly different kinds of “nothing” – the Democratic kind and the Republican kind.

This is exactly what took place in the recent anti-anti-inflation melee.

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