Evening star., 1941-05-25
Discusses Weaknesses
of Price Control
By OUen L. Scott.

his TROUBLES Will grow, YET IL Ile leGS
go, he is lost.
Mr. Henderson's troubles will grow
from the fact that large and powerful
groups in the United States do not want
done, except in theory what he is charged
with dong President Roosevelt directed
Mr.. Henderson to prevent an inf1ation-
ary rise in the level of prices on the
ground that such rise is dangerous.
But, to prevent imitation, a price con-
troller must first of all have a voice in
policies that determine the amount of
income in the hands of the public, and
a voice in policies that determine the
volume of goods that are going to be
available to people who have money
they want to turn into goods.
Except in theory, Mr.. Henderson has
neither.
Workers are out to get, and are getting,
higher wages. Never have wages been
higher and never have weekly pay en-
velopes been filled with more dollars
than today. Likewise, farmers are out
to get and are getting higher prices.
They have induced Congress to under
write a price level for their main prod
ucts that is guarantee of prosperity
as measured in terms of dollars
This means that workers and farmers
will have more dollars to spend than
ever before. They have what almost
amounts to a Government guarantee
of prosperity.
At the same time, armament demands
are beginning to cut into the volume Of
goods that dollars can buy. One 20 per
cent cut in automobile production, to
start August !, already is scheduled.
Another cut, of the same amount, is
very probable. Output of household
equipment of all kinds-refrigerators
washing machines, pots and pans, among
other things-is almost certain to be
limited. There simply isn't aluminium
and copper and steel enough to fill the
demands Of war industry and the de-
mands of consumers seeking to spend
their dollars.
1t is right here that Mr. Hendersons
basic difficulty will lie.
The reason is that he has the respon-
sibility of keeping prices under control,
but he lacks the power to limit the dol
lars in the hands of individuals and the
power to direct industry to increase its
capacity for producing so that there
might be enough for both war and civil
ian demand.
One estimate is that during the next
II months there will be at least $6,000.-
100000 in individual purchasing power
running around loose, looking for things
to buy that won't be available. The in
evitable result of an increase in the
supply of dollars running head on into
a decreasing supply of goods is price
rise.
Initiation is the one sure way of reg
ulating demand for goods that cannot
be filled by the available supply of goods
Mr. Henderson is more aware than any
one else of the problem he faces. Up to
this time he has been unusually success
full in limiting price increases by we'll
timed orders that caused key industries
to place ceiling on basic prices. But
there are literally thousands OF ways in
which price rises can occur in spite Of
official controls of formal sort. The
problem, basically, is one of mathematics.
If there are more dollars seeking goods
than there are goods into which those
dollars are to be translated, the irresist-
ible tendency is for prices to rise so that
the dollar supply will fit itself into the
supply of goods.
Mr.. Henderson and others in the New
Deal have sought for the past year to
induce some of the key industries to
increase plant capacity so there could be
a great increase in the volume of goods.
Industry as whole, resisted this advice
on the ground that it would result in an
over-supply of plant after peace had
been restored Now, when there is the
beginning of a clash between defense
demands and civilian demands for avail
able materials, it is too late to solve the
immediate problem by a program of
expansion.
This leaves control of the dollar supply
as the remaining avenue of price control.
But neither Congress nor the admin
istration is ready to tackle this problem,
as it must be tackled if prices really are
to be controlled. On the one hand,
there Is administration acceptance of
wage increases and farm price increases
that results in a breaking supply
of dollars. On the other hand there is
refusal by both the administration and
by Congress to accept a tax program that
would pull away surplus dollars so they
will not be available for spending
X y X
Workers and farmers prefer to trv to
enjoy larger income by increasing their
purchases of goods. Their efforts to
spend the dollars they are receiving
almost inevitably will lead to pressure for
rising prices that cannot be controlled
merely by seeking to order price ceiling
or to frighten industry into price control.
The British and the Germans have had
a considerable success with their plans to
avoid imitation.
That success lies largely in the willing
ness of those nations to control the
volume of income. The Germans exer-
else that control through government
regulation of wages and through a sys-
tenn of taxes and special assessments that
keeps the volume of income fairly we'll in
line with the volume of rationed goods.
The British exercise their control
through a very high tax system that
reaches down into the lowest income
groups to drain off surplus income.
Owing to the fact that the average
British and German workman normally
enioys little more than a subsistence