Detroit evening times. (Detroit, Mich) 1921-1958, 1941-06-30
PiecemeaI
Price Control
Disastrous
Will Lead TO Violation
Of Free System
BY HUGH S. JOHNSON


" rapidly receding-is our
chance TO avoid one of the worst
aspects of war and the very
worst consequence in the after
math of war-price initiation.
Leon Henderson says that the
honeymoon is almost over be-
tween business and government.
He is speaking on the subject of
voluntary" price control down.
ward by industry at government
suggestion. The implication is
that. If industry is not willing to
continue sweet submissions in
the emotional ecstacy of the
moon OF mating. government
will accomplish the same pur-
pose with a covenants club.
The particular instance is the
Chrysler automobile company,
which did not rescind a price adj
vance on a new production when
Mr.. Henderson suggested it.
The company's answer is that
other price advances in all the
components and parts of its au-
tomobifes, including labor which
Mr.. Henderson did not control
downward in any honeymoon
practices, have so increased its
costs that il must advance
prices or produce either with
out profit or at a loss.
MR.. HENDERSON'S rebuttal
A'A is that companies that have
been making a handsome profit
and enjoying a substantial in
crease in volume ought TO be
willing to absorb a reasonable
increase in cost without raising
their own prices.
There is merit on both sides
of this argument. Knowing per-
sonally. intimately and for
many years. the authorities on
both sides Of it, Mr.. Henderson
and Mr.. Keller. / am sure that
neither is unreasonable, arbi-
trary or deceitful.
But that isn't the point. The
point is that attempts TO control
prices OF only a few finished
products without controlling the
prices OF their components is
cock-eyed, indefensib1e, as fuff
OF holes as a wasp's nest and as
unsound as bobtail flush.
LOR little while n great
mass-production industry,
in the presence of rapidly in
-creasing volume can absorb
great increases in labor and ma
terial cost without increasing
price. That is because one great
element in its own cost is the
relatively fixed burden of ex-
pense OF their manufacturing
and distributing plan. and or
ganization, which does not in
crease as fast as other costs.
If it can produce and sell two
or three times what it was or
gained and planned to turn out
IL can take a much smaller
profit per unit and yet turn in
larger profit on operations for
year. Every merchant, manu-
facturer and labor leader knows
this. 1t is as simple as ele-
mentary arithmetic.
But there is a distinct limit TO
these possibilities. Especially is
this limit clear when in the
very teeth of Mr.. Henderson
appeal, OPM tells the automo-
bile industry that il will have
TO reduce production certainly
by 20 per cent and possibly by
80 per cent. To my mind. as a
former automobile manufac-
turer, that is the end of the
argument. Mr.. Henderson is
rendered wrong on this point by
the unco-ordinated action OF his
colleagues.
LIE Is wrong on much more
III important point. AS this
column has repeatedly pointed
out from intense experience,
YOU can't put a ceiling" on a
few prices without putting a
ceiling" on all prices--includ-
ing labor wages-for the simple
reason that the price OF any
single thing is composite re-
suit of the price of everything.
If. before a few great seq
ments of the whole price struc-
ture comes too greatly
distorted. as they did in the
World War before our entry. we
clamp a ceiling" down on the
whole structure we can do what
Mr.. Henderson is so earnestly
trying TO accomplish. But. if we
wait until the whole pattern rs
out of killer. il can become
everlastingly and tragically too
late. 1t is still possible but
it is. even today, later than
you think.
General price control is FEAST
BILE and possible. Piecemeal
price control could result in I'M
compensated confiscation, in
violation of the free system we
say we are fighting to defend.
/ think Mr.. Henderson knows
all this. / fear this government
has been too slow and timid in
supporting him. He may not be
the greatest administrator on
earth, but he is the man on the
spot. Let's give him what he
needs 10 do this job.
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