The Wilmington morning star., 1943-12-07
The Case For Subsidy
Is Not Clear Cut Issue
Continued from Page One)

The use of subsidies to stabilize
food prices in war time must be
Justified, if at all, on such broad
81 ound of public interest. 1t may
te, of course, that a particular
subsidy is wrongly designed, is I'M
necessary, or is badly admins
tered. If so, it should be re-ex-
arnjned. But the large question is
whether subsidies are necessary in
order to stabilize prices in war
time, and whether the stabiliza-
ton of war time prices is so de.
81, able that the expenditure is
justified.
That subsidies are necessary
and that they can be effective has,
believe, been abundantly demon
STATED by the experience of Great
Britain, Canada. the United States
and indeed of every country which
as stabilized prices. Of the four
teen products which are recog-
nized in the British food index,
eleven products representing 80
per cent in weight, are subsidized.
Prices in the United Kingdom
have remained remarkably sta
Bile; no one, l think, would argue
that this could have been done if
Parliament had outlaWed food sub
s'dies. Our own experience in the
past few months since subsidies
have been used is by no means
unimpressive. The fact of the mat
ter is that we have had a SUBJ
stantial success.
The question then IS whether
stabillzing the cost of essential
foods is worth the money and the
bother of subsidies and of the
whole machinery, inevitably COM
plicated and no doubt too COM
plicated, of price control. If, as is
the case, the alternative is to set
in motion spiral of general wage
and general price increases, can
any one doubt that the subsidies
and the bother of price control
are the lesser Of the two evils?
Surely it is worth a lot of mon
ey and a lot of bother to the ma
ton not to have to take our minds
off the war in order to deal WITH
countless wage disputes. to deal
with the grievances of government
employees, pensioners, small bust
ness men, who would be caught in
the spiral of rising prices, to face,
as we should have to, a continual
rehabilitation of costs on war con-
tracts and of estimated govern
ment expenditures. Let no one for.
/ get that the government itself is
planning to spend about thirds
of the national income, and that
wages are roughly one-half the
national income. To unstabilize the
wege structure generally would
unsettle profoundly the whole cal
culation on which the war effort
is based. 1t is already hard enough
to have to deal with the unsettle-
ment due to special pressures here
and there.
There are many, I realize, who
are troubled by the idea that mon
ey spent on subsidies can help to
control the effects Of the initiation
/ which results from enormous gov
eminent expenditures. They are
forgetting that we are in the abb
situation, then obviously a gov
eminent itself is a principal con-
sinner.
If we were not in this abnormal
eminent subsidy to hold prices
would be inflationary in that it in
creased the popular purchasing
4 power by the amount of the SUBJ
sidy. The critics would then be
quite right. Blu. in our present
situation the government itself is
rot only a great consumer, but it
mas an unlimited supply of pur-
chasing power Therefore, the
more the government has to pay
for what it buys. the more infla-
tionary money Il will issue to get
what it needs the less it has to
pay, because prices are kept,
Gown, the less i1flationary money
it has to put into circulation.
For this special reason and in
these special circumstances, sub
sides which prevent a general rise
Of prices are, if correctly admin
/ istered, contra inflationarv. The
cost of the subsidies is more than
Washed out by the mucn greater
saving which comes from the gov
ecnment's not having to pay high
err prices for goods and for labor.
We all ask ourselves, naturally,
whether these so-called consumer
subsidies, once establihed, can ev-
er be discontinued. My view IS
that of all types of subsidy, they
would be the easiest to discontinue
| when the war is over. The reason
| is that when civilian production Is
fully under way again, the volume e
of it will be so great that we snail
have a buyers and not, as we
have today, a sellers marKet. IN
buyers market we shall nave
no pressure to protect the con
surner because prices will be 1au-
ing. The pressure will come from
the other direction, from the pro-
ducers. ,r,..
This is a bridge we can cross
when we come TO 1t.
II