The World's Crisis

Far beyond the thunder and lightning of the Little Rock crisis, the free world's major nations were caught up last week in a problem that nags more lives than race segregation or conflict between states' rights and federal powers. The problem: inflation. The U.S. Bureau of Labor Statistics announced that its consumer price index had edged upward for the twelfth month in a row, with an August rise of .2 lifting the index to a record high of 121.0 (the 1947-49 average = 100) as compared with 116.8 a year earlier. Because of the relentless upcreep in prices, factory workers' average real wages actually shrank by nearly 1% from August 1956 to August 1957 despite an increase of $2 a week in take-home pay. And the U.S. inflation record, measured against the global scale (see chart), was moderate indeed.

Surging Confidence. This sobering set of facts adds up to something close to a world crisis, as President Eisenhower made clear last week in a speech to the 68-nation World Bank and International Monetary Fund. "In all our lands," said the President, "there is a surging confidence that steady economic growth can be a reality--that the good things of life can be made available in a growing stream to all our peoples." But to achieve this aim, nations must foster stability as well as growth, i.e., they must combat the "worldwide phenomenon" of inflation.

Disclaiming any idea of advising trained economists on "technical issues," Ike set forth some "commonsense aspects of the matter that we must squarely face." No economy, he said, can satisfy all "personal and governmental demands and desires" at the same time. "The world may try through financial and monetary devices to obtain more from its economic resources than can be produced, [but] in reality this cannot be done." If an economy is asked to "carry more than it can," the results will be rising prices and -- if inflation runs on unchecked -- depression. "It may be well occasionally to recall the old story about the dog that jumped off the bridge to get the bone he thought he saw in the water, and thereby lost the bone he was carrying in his mouth."

In the fight against inflation, said the President, governments must curb their own demands upon the economy -- "a difficult task in this day of heavy defense outlays" -- and follow credit policies that promote stability. But government measures alone cannot win the fight unless nations avoid "the costly error of overpaying ourselves for the work we do." Payments for "productive efforts of all sorts," i.e., profits as well as wages, should rise in step with productivity, not outrun it. Here Ike echoed a theme he had voiced in his State of the Union address last January: labor and business, as well as government, should restrain their demands.

Continuing Vigil. To some economists last week it seemed that inflation in the U.S. was just about licked. Noting declines in industrial expansion rates and stock-market prices in the U.S., Sweden's Per Jacobsson, managing director of the International Monetary Fund, told the World Bank-IMF conference that the U.S. "has arrested its inflation" (see BUSINESS). And Harvard Economics Professor Sumner H. Slichter, a "limited inflationist," noted critically that in putting "stability ahead of growth," the Eisenhower Administration had made "the most important economic decision since the Roosevelt Administration decided to aid workers in bargaining with employers."

The two top officials concerned with managing the U.S. economy both spoke up for the tight-money policy. Treasury Secretary Robert B. Anderson in a speech to the World Bank-IMF meeting noted that the U.S. is "gaining in the battle of inflation," but stressed "the continuing vigil we must keep to attain economic growth along with, and based on, sound money." Federal Reserve Chairman William McChesney Martin warned that nations yielding to inflation "will not have a higher standard of living but a lower one."

Unmistakably agreeing with Anderson and Martin, the American Bankers Association, meeting in Atlantic City, voted a resolution calling upon the Government to keep up its fight against, inflation. In a speech to the bankers, U.S. Steel Corp.'s Board Chairman Roger M. Blough urged a two-point anti-inflation program to supplement Government policies: 1) efforts by management and labor to increase productivity, and 2) restraint by both to keep wage rises from outpacing productivity. In effect, Blough was restating Dwight Eisenhower's theme: in a free economy, the Government cannot defeat inflation without help from business and labor. And help is urgently needed.

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