Evening star., 1938-02-19


The statement DV'o LAWRENCE
Is IN itself amazing because it does
not disclose what the Presidents rea-
son for issuing it happens to be.
Certainly it cannot be assumed that
Mr.. Roosevelt believes the entire busi-
ness world is just waiting with bated
breath for master minds" at WASH
inston to indicate which cadgets in
business and industry should be turned
on and which should be turned off
so as to achieve the vague objectives.
The President, in effect, says some
prices are too high and some prices
are not high enough. Who is to say
which Is which? No specifications
are given. The whole statement re-
veals a lack of knowledge on the part
OF government of the way prices are
made in competitive economy like
our own. It ignores the reasons why
demand springs up and why it dies
down. It brushes aside the greed of
business men for as much profit as
the traffic will bear and the over
zealousness of labor leaders to raise
wages as high as they can so as to
keep their membership enthusiastic
about paying dues.
Impact Of Forces.
Then there is the impact of group
against group. economic force against
economic force. Thus Mr. Roosevelt
says the bituminous coal industry, for
example, must not raise prices so
high as to drive consumers to using
other kinds of fuel. But that's pre-
cisely what will happen when there's
no ceiling to prices and when there's
no restraint on the biggest item in
the whole thing-labor costs
Nobody tells capital when its profits
are too high and nobody tells labor
when it Is overreaching itself. And,
above all, nobody can effectively tell
the New Deal itself when it is in
creasing taxes so much as to bog
down the whole economic structure.
To no small extent. recent price rises
have been due to tax increases. The
pay roll taxes. imposed suddenly and
arbitrarily for laudable purpose
social security-came with such force
this last year as to cause economic
indigestion. The present recession is
due in large part to the imposition of
$1,000, 100000 year in pay roll taxes,
thus withdrawing from purchasing
power two and three times that sum
which would normally be used to keep
goods moving and demand increasing
So all these groups in the Nation
Is well as the Government itself
operate on a do-as-you-please basis,
and the final crack-up is price chaos
and economic disequilibrium. Now
comes an official statement from on
high telling the business world prices
are too high in some cases and too
low in others. Such tactics may be
good moral suasion, an interesting
attempt to focus for educational pur-
poses the attention of business on the
unwisdom Of bad price policies, but it
Is q safe bet that very few business
men will be able to find out by read
ing the official pronouncements Just
what the administration Is driving at
or exactly what they themselves are
now supposed to do
Goal Is Desirable.
The goal is, Of course, desirable.
Prices should theoretically never get
out of line. Wage increases should
be made gradually and not pre-
cipitately. Output should not be re-
stricted unduly when demand can be
foreseen. Panic and fear should be
taboo. In other words, everybody
should do the right thing at the right
time.
But when such a sermon on what
might be termed economic behavior
ism Is preached it is very difficult to
know by what mechanism of direct
or indirect control the objectives can
be reached.
Maybe the Presidents idea is that
ne must attempt to express in tech
nical statement the administrators
viewpoint on prices because he has
heretofore dealt with the subject more
or less loosely and in what has been
criticized as unsound economics. If
this Is the purpose, then the latest
statement will be received as a straight
ening out Of the record.
The idea OF a balanced price struc-
ture" Is reminiscent of what Herbert
Hoover used to call an economic
balance" 1t is an economic ideal and
rarely . reality. though occasionally
we have periods Of prosperity which we
think are balanced relationships be-
tween production and demand but
which later turn out to be abnormal
and merely the excrescence of some
series of circumstances like a post
war boom or European stimulus due
to an armament race or other un-
natural demand for raw materials.
II ever anything proved that there
was need today in America for direct
collaboration on the part Of the i'm
portant groups, capital, labor, manage
ment, agriculture and government, it
Is the complicated statement just
Issued by the President on the sub
ject Of prices. Granting that the edict
Is 100 per cent sound. it does not an
swer the single vital question, but
how can 1t be achieved?"
tcopyrisht, 1o3s.)