Evening star., 1948-03-15
Defense Of Price Rise
For Steel Is Found
In Federal Reports
Economic Council Memos
Quoted to Show Increase
Wus Not Unreasonable
By David Laurence 9

Inc HQnlIl1SLTdClOn EOuIcQ Out
over the week end many thousands
Of words in three lengthy memo
randa on the subject Of steel prices
and imitation.
Few people will have q chance
TO read those technical explana-
tions or analyses. Yet in those very
statements are contained the basic
issues Of public or private control
of business-operating industry by
political policy as contrasted with
natural forces under the laws Of
profit and loss, supply and demand.
Just about a month ago the hull
labaloo started over the increase
by some steel companies of prices
in semi-finished steel products. The
politicians saw good chance to
hammer away at big business.
Promptly investigations were Or
dered. Now come the official facts
and the official Interpretation Of
those facts.
The official reports by the admin
istration now concede that the steel
companies did not make a general
increase in steel prices, that the
increase affected only certain semi
finished products and that the
amount of the increase was small
fraction of total sales.
No COllusion Is Found.
The administration likewise con-
cedes that there Is as yet no EVIL
dence of collision in price-making
because steel is what is known as
q price leadership" industry where
in the largest producer fixes his own
price and others follow suit as a
matter of protection in a COM
petitive world.
The administration comedies also
that steel during the war, being
sharply controlled, was not able to
advance its prices as much as did
other businesses. The Council of
Economic Advisers reported to the
President on this point:
I'm broad terms, the published fig
ures collated by the Department
Of Commerce support the claim Of
the steel industry that steel prices
have been raised less since 1889
than the prices Of manufactured
products in general and much less
than agricultural prices have risen.
The price increases in steel have
also been less than the increases
in steel wages and the cost of most
materials"
AS to profits, the Government
points out that while the steel in
dustry earned more dollars numeri-
cally in 1947 than in prewar years,
the rate of return on the investment
was not only less than 1t was 16
years ago but was one-third less
than the rate earned by manufac-
turing corporations as a whole in
1947. AS to ratio Of profit to
each dollar of sales, the steel COM
panies are earning less than in the
1920's and half what the ratio was
In 1929.
Broader Picture Emphasized.
Likewise the Government points
out that the present rate of re-
turn on investment is based on
book value which is much less than
1t would be on the cost of repro
duction of plant facilities today.
But even though the steel industry
is described in the official reports
as having pursued policy of |
moderation in price e-making," even |
though its rate of profit on in
vested capital and the rate of profit |
on sales are not exceptional" the
Presidents economic council still
says 1t was not economically sound
to make the recent price increase.
The council says:
1.-THE issue Is not whether the
steel industry Is guilty of prof1teer-
ing. 1t Is whether, in the interest
Of the health of individual COM
panies, it was necessary in this way
to add to the inflationary pressures
of the economy at this time"
In other words, businesses must
disregard the financial facts of life,
the necessity for earning enough
money to secure capital for eXpan-
sion and to preserve market for
its securities and must Look at the
broad political repercussio1 IS. That
Is not novel approach for radicals
to express but it would gain far
more adherents as a matter of pub
lie policy If the same administra-
ton, the same Commerce Depart
ment and the same Council Of
Economic Advisers would now ana
lyze in some more thousands of
words the demand of the Electrical
Workers Union for third round of
wage increases. This demand is be-
ing made despite the fact that Gen.
eral Electric recently reduced its
prices and played the role of public
benefactor in the imitation contro-
versy just as the administration
wanted 1t to do.
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