Catalogue of Fears

The day that all prices in the U.S. are frozen--as frozen they seem certain to be (see p. 18)-U.S. business will enter an unfamiliar world. It won't be a world of economic liberty guided by the free play of natural forces. It will be a world without basic economic freedom whose design was traced from a pattern made by economic forces once upon a time--at some date in the spring of 1942.

Whether this new economic world will prove more trying to business than the present trying world of spiraling prices, only the future can tell. But if the Administration in Washington had misgivings and palpitations over the complications to be produced by a universal price ceiling, its fears were nothing compared with those rising in the breasts of businessmen. Already, with many ramifications as yet unforeseen, the prospective ceiling has produced a constantly growing catalogue of fears:

> Can price enforcement, every bit as big as that of NRA (different only in that this time the job will be to keep prices down instead of to keep them up be any more successful than it was in 1935? (The problem will include policing the prices of 2,000,000 retail outlets, with fifty times as many customers, selling at least as many items for over $50,000,000,000 a year).

> Prices of imported products cannot be frozen. So what will a manufacturer do whose selling costs are frozen and whose imported raw materials continue rising in price?

> Since wages cannot be frozen under present law, what will happen to a business whose labor costs rise before a new law is passed and labor prices frozen (as they must soon be, if a universal price ceiling is to continue)?

> In a rising market, such as the present, retail prices generally lag behind wholesale prices. (Example: a large department store which sold a popular-priced man's shirt at $1.39 a year ago; today it sells at $1.89, but the replacement stock that the store has already bought will have to sell at $2.19 in order to maintain the same markup--and would sell at that price by June, when earlier stocks are exhausted, if there were no intervening price ceiling.) So how will retailers survive if their margin Is drastically cut by having wholesale and retail prices fixed on the same date (which appeared to be what would happen)?

> Will the public, in so far as it has been buying to anticipate higher prices rather than to anticipate scarcity, quit buying and live for a time on its hoardings when prices are frozen? And if so, how will merchants with large inventories be hit by such a slump in buying?

> How will it be possible to enforce price ceilings in many lines of goods where, for example, stocks already bought for sale next fall are just enough different from goods now on sale to make price rises plausible?

> If price rises cease and unusable purchasing power begins piling up--as it will, unless drastically reduced by taxes and more or less forced savings--will it be practical to ration all the millions of kinds of goods which the U.S. buys?

> Will vicious black markets spring up? Will untold rackets--unrecorded cash transactions, special surcharges for prompt delivery, etc.--such as are already gaining headway, grow and flourish?

As price control chips more & more at the profit margins of the businessman whom price freezing pinches, his normal instinct to deal justly with war necessities is bound to be more & more muddied by his equally normal desire to stay solvent.

The crux of the ceiling problem is that, at some point--as the prices fixed by a free economy in the spring of 1942 become increasingly maladjusted to a rapidly changing economy--it will become totally unfair and unrealistic to expect ceilings to be enforced by anyone's patriotism, be he manufacturer, wholesaler, retailer or consumer. And at that point, whenever it comes, the final necessities of price control will have to be dealt with. Chief among these necessities: 1) complete licensing and rationing; 2) rigid Government mopping up of a large part of consumer income via taxes and compulsory (if necessary) bond sales. For the long run, Leon Henderson has the price-control headache, but Henry Morgenthau has the aspirin.

This file is automatically generated by a robot program, so reader's discretion is required.