The Evening Star (April 22, 1946)
ON THE RECORD —
OPA vs. national economy
By Dorothy Thompson
What has happened to the OPA was bound to happen. The OPA doesn’t work. This is not the fault of Chester Bowles or Paul A. Porter, both of whom are sincere and capable men. But they are in the position of King Canute commanding the waves to recede, and with just as much effectiveness. Within the OPA administration there has been such profound discouragement that its personnel has been quitting steadily for the past three months.
We have the habit of thinking that a government ukase can reverse the law of gravity. But it can’t. Nor can it reverse economic laws. Even in a totally controlled state-owned economy, supply and demand function. The Soviets have a black market organized by the state!
The theory has been that hourly wages could go up some 20 percent while prices would remain stable. This is possible providing there is immense production contending for the market, and other factors are stable. That is not the condition of our economy. We have a national debt of $350,000,000,000 and a proportionate increase in currency circulation. Wages are at the wartime peak, for less hours of work. Strikes cripple production. In our interdependent economy, a cessation of production in small secondary plants can hold up immense factories.
Labor is the chief item of cost in the production of most commodities. If wages go up rapidly and affect the cost of the product, the wage-earner pays for the increase as a consumer. The only way this can be circumvented is by increased and more efficient production.
The present national income is $160,000,000,000 and consumption demand is unmanageable. There is practically no butter because its price is out of all proportion to the price of cream in any other product, such as fancy cheeses and ice cream. The consumer, who is not permitted to pay more than 55 cents per pound for butter, consumes it in ice cream at the rate of 80 cents per pound, and ice cream consumption is 30 percent above the peak of the past.
The farmer pays 300 percent more for labor than he paid before the war. The lack of machinery prevents increased mechanization, and necessitates exorbitant repair costs on what he has. If his prices do not cover the cost of production with a reasonable return for his own labor, he stops producing or turns a low-price product into one with a higher price.
The pressure of demand creates the price. The per capita consumption of meat is 10 to 15 percent higher than at any point in American history. The black market has. obtained all but a monopoly in meat, because people can and will pay for meat above the ceiling price.
Used cars, even with ceilings, bring fabulous prices. My six-year-old auto’s ceiling is within a few dollars of what I paid for it. If a new car costs the buyer 40 percent more, he will still strike a good bargain.
Textiles and shoes are in abundance, but do not find the open market because of price. If consumers will line up before the most fashionable shoe store in America in a rush to buy footwear from $18 to $50, who is going to offer $3 shoes? Tire same with cheap shirts and underclothing. The only answer is production and a price level consonant with cost and demand.
Housing is short because materials are short. But lumber is exported to Latin America, where it fetches higher prices. Wood pulp for paper has to be taken from our forests because the Scandinavian exporters find the price here below that in Sweden.
The answer to the food problem is rationing. This country is overfed while a quarter of the globe faces famine. Rent controls must be maintained, but the States will act under popular pressures.
Prices on the whole cannot be kept down in the present situation. To try to do so is to create a new criminal class of black-market profiteers.
Prices cannot be controlled by decree. The answer is more goods, wages keyed, not to consumer prices, but to production, elimination of irrational industrial practices, marketing and consumer co-operatives to reduce middle-man charges, 10-year waivers of taxes on new homes for rent, reduction of cost of government itself, and every incentive to create activity, with economic penalties on speculation. Our policies effect the reverse. The way to make money in real estate today is not to build houses, but to buy and sell old ones; the way to make money in food is not to raise it, but to corner it. Increased prices to farmers mean increased purchases of the products of industry. Increased prices to speculators mean increased cost of crime.
Government and trade unions which misread the situation should have insisted on wage stability until reconversion and high-level production. Instead, we raised wages and crippled production. And no Office of Price Control can overcome the results, nor will new wage raises (and new strikes) do anything except push the spiral further.