Evening star., 1946-02-18
Writer Sees BowIes
As Policy Watchdog
Says Porter Probably Will Be
Less Rigid in Wage-Price Plan
BY David Laurence

The true meaning of the Govern
ment's wage-and-price policy is not ap-
parent on the surface. Actually the
language Of the new executive order
reasserts the authority of the executive
branch Of the Government to impose
both wage and salary controls overnight.
To a certain extent the authority
which was relaxed last year just after
WI day has been recovered. In a
sense, too, the administration is retrac-
ing its steps, and doing so very wisely.
because the country was approaching
state OF economic anarchy as a result
OF the responsibility of economic
groups in demanding wage increases
without compensating price increases
and the failure of Government to permit
price increases necessary to absorb in
creased costs.
Under the old order, no company
could come to the OPA to seek price
relief until six months after its price
had been tested following a wage in
crease. Then If its profits equalled or
approached It's 1868 base period. it
could get no relief. What has happened
now Is that when an industry faces a
prospective reduction Of profits to nor
NAL level 1t can begin to argue about
price relief.
Concern About Profits.
Up to now, the OPA has been denying
that it was fixing profits by requiring
price increases to be absorbed in whole
or part. But under the new formula
there is an avowed concern about profits
from the standpoint of the business
enterprise itself.
The language of the new executive
order on this point is worth examining
carefully. 1t says: THE adjustment Gn
price, to be provided, shall be such as
IN the Judgment of the price admins
traitor will be sufficient for the II
months following the adjustment, to
enable the industry, unless operating
at a temporary low volume, to earn
an average rate of profit equal as nearly
as may be to the rate of return on net
worth earned by the industry in the
peacetime base period applicable to that
industry, and, In the case of commodi-
ties which are the subject of special
statutory Requirements, to a rate of
return sufficient to satisfy such re-
quirements
The latter section refers, of course,
to transportation companies, electric
and gas utilities, and other legal mo-
nopolies whose rates are fixed by STAT
utory bodies either in States or cities.
Flexible Formula.
AS Tor industries and business gen.
orally which are In the competitive class,
there will be rush to increase prices
and get under the new plan wherever
wage increases have been or are about
to be granted. There can be no doubt
that the immediate effects will be in
f1ationary but the formula which has
been evolved is sufficiently flexible to
hold future increases in price down and
perhaps to prevent any runaway price
situation for while at least.
If the unions, which started out to
get 80 per cent increase, are content
for year or two to stay at a level
OF Is to 18 per cent increase, which they
now are getting, there may be some
chance of stabilization. IT. however, the
whole process has to be repeated in a
year or SO in order to grant the balance
OF the 80 per cent demand, the vicious
circle of prices rising and purchasing
power going down will be felt even
more keenly than today.
What has happened is that a new
principle or formula has been evolved
with Chester Bowles as the policy-maker
but with Paul Porter as the actual ad-
ministrator of the formula. Mr.. Porter
doubtless will prove less rigid than Mr..
BoWles and that's what the White House
wants; but Mr.. Bowles will be watching
to see whether his principles are being
safeguarded. 1t is not such a bad idea
to have such a check. for the imitation
dangers are greater than most people
realize
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